Lately, I’ve been thinking a lot about first-time homebuyers. (What with all the industry and media attention focused on the impending deadline of the First time Homebuyer Tax Credit, it’s hard not to.) First-time buyers are the ones who, even in a traditional market, often need the most help negotiating the purchase of their home. For them, even under the best of circumstances, the process can be overwhelming. Because they have little or no first-hand knowledge of the many ins and outs of the home-buying process, enlisting the services of a knowledgeable real estate agent can be a real benefit.
Of course, today’s market is anything but traditional. In Central Oregon, like much of the country, distressed-property inventory accounts for a good chunk of the entry-level market. In Bend, for example, of the 209 Residential Single-family-residence listings under $200,000 active as of Jan. 20, 97 listings (46 percent)were short sales and 40 (19 percent) were bank-owned properties. In total, 65 percent of available homes under $200,000 are distressed. Sixty-five percent!
That means there’s a good chance the first-time buyer in Central Oregon will consider buying a short sale or bank-owned property. In fact, that’s the segment of the market perhaps most likely to purchase a distressed property. It’s also the segment least likely to understand the potential pitfalls of the distressed-property purchase.
Unfortunately, as many buyers have learned the hard way, this can be a disastrous combination: Because not only do many first-time home buyers not know the right questions to ask, but they may not even realize that there are questions to ask.
However, in a distressed-property sale, there are many, many questions that need answering. Even the most basic premise — for example, that the seller of the property holds title to it — cannot be assumed as fact. When banks are participants in real estate sales, the game is played very differently.
We are all forced to play by their rules, whether those rules make sense or not (and you better believe the rules are designed to benefit the bank, not the buyer). For example, when a bank is involved the selling a property, the contract you will be required to sign will, in all likelihood, be provided by the bank and written so as to indemnify the seller (i.e., the bank) of every imaginable liability while penalizing the buyer (you) for any number of perceived shortcomings. Traditional timelines may be thrown out the window (for example, a lender who is also a seller or is providing third-party approval, as in a short sale, may take 10 months to come to a decision or may require you to complete your purchase in a matter of days — or else).
The seller of a home listed as a short sale may not, in fact, be a candidate to receive short-sale approval. The listing agent of a foreclosure property may not have ever set foot on that property and may have no knowledge of any material damage to the home or the property itself since the bank is exempt from completing the seller’s property disclosure.
The list goes on.
Consequently, oftentimes the purchase of a distressed property is no walk in the park — especially if it’s a short sale. Yes, the process can be immensely rewarding (there are still some great deals out there), not to mention extremely satisfying (remaining persistent in the face of a tough challenge can be very empowering). But for a first-time buyer to try to pursue the purchase of a distressed property without fully grasping what they’re undertaking is fool-hardy.
So, please, before you head down that road, make a conscious decision to do so. Then, if you’re up to the challenge, do your homework:
• Educate yourself (there’s a wealth of information on the subject)
• Find an experienced Realtor® familiar with distressed-property sales
• Hire a trustworthy, thorough home inspector
• Learn everything you can about that property and its history from anyone who might know anything (even if it means interviewing neighbors, who can provide invaluable insights).
Then , once your offer has been made, please, please, be patient (this is definitely one instance where it’s not only a virtue, it’s a necessity). Make sure you understand EVERYTHING a bank requires you to sign. Ensure that all your financial ducks are in a row, and don’t miss any deadlines.
Finally, when all is said and done and you’ve been handed the keys to your new home, congratulate yourself on making the most of this market’s rare opportunity.
About the Author:
Lisa Broadwater, GRI, CDPE s a Central Oregon-based real estate professional who specializes in listing and selling homes, especially in Sisters, Tumalo, Redmond and Bend.