Buying Foreclosures – Factor in Some Equity For Your Trouble
It is interesting to me how agents make things sound so “easy” in their desire to make a commission. Recently, I had an experience with an agent who was working with a couple looking to buy a foreclosure property. This couple, being in their early 50s, already had the experience of buying and selling a few homes. These empty nesters were looking to get closer to work and simplify their lives by reducing their long daily commute.
While the couple and I were talking about the renovations that would be needed to bring the property up to the neighborhood standards and regain value, the agent chimed in that it “wasn’t a big deal.” She said that if the owners–who were planning to live in the property during most of the renovation–couldn’t do the work themselves, they could “just hire someone.”
Yes, that’s true. If you can’t do the work yourself, hire someone else. But it is not that simple or easy. Do not discount the fact that your life will be in turmoil if you are living in the home during major renovation work. You have got to pay for this work and keep a close eye on the finances. If you know this and are still willing to take on that situation, you should factor in some equity for your trouble.
Knowing exactly what it would take to get that property back up to it’s full market value, the price I recommended paying was less than what the agent considered a good deal. Agents tell me I’m out of my mind. Well, call me crazy. But a sales agent gets in and gets out, and gets their commission, and never gets their hands dirty. In my world, they bring no substantial value to the deal of cleaning up the foreclosure mess we are in.
It’s we the buyers who are stabilizing the market, cleaning up the glut of vacant, rundown houses and recovering neighborhood home values. Oh and by the way, they dropped the price of this home last week. And it’s still too high a price for the amount of work to bring it up to a reasonable neighborhood standard. Stay tuned…
Tags: agent commission, buying foreclosures, home equity, homebuyer advice, Renovations, sweat equity
This entry was posted on Friday, January 30th, 2009 at 9:50 am and is filed under Advice for Homebuyers. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
