Why do foreclosures often sell for less?

Let me give you a little tour of a South Sacramento bank-owned property. Why do foreclosures often sell for less? Beyond any stigma for being “bank-owned” and banks pricing these properties to move quickly, there is a very obvious reason why these REOs sell for less. They’re often not in very good condition – at all.

This is a very typical foreclosure scenario, so it’s no wonder why arms-length sales are usually not comparable and tend to sell for more. They’re usually in better condition and they come without a “distressed” nature.

By the way, what do you think of the bathroom. Is that mold? What is it?

My client did give me permission to share this video, by the way. If you have any questions, let me know. Give me a call at 916.595.3575, shoot me an email, or catch me on Facebook.

Comments

  1. says

    Ryan,
    Great video. In my area, we definately have these types of properties too. They have conditon issues, as you said, and would not make good comparables. On the other hand we also have foreclosures that are in good condition requiring no work to be done. The owners were victims of various things including the slow economy and company downsizing. With this last type of home, depending on how many there are and how much of the market they make up, we have to use them, which as everyone knows brings down values. Until the inventory of foreclosures are depleted they will continue to have a negative impact on the market.

    • says

      Thanks so much, Tom. You’re right about some foreclosures being in pristine condition. That is very true. Usually Realtors pick up on that in their marketing too. In the Sacramento area, it seems that REOs in good condition usually tend to be newer properties (though there are some thrashed new ones too).

  2. says

    I inspected 2 split level houses today, about a mile apart from each other in a far Northern suburb of Minneapolis. They were similar in size and built around the same time.

    The foreclosure was actually in much better shape. I agree that usually its the other way around, but not always…

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