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As always, the real estate market is transforming. There are still good deals on short sales and foreclosures but not as good as they were a few months ago. Buyers and sellers are adjusting to the realities of the new market. Sellers of traditional resales and lenders trying to unload foreclosures or short sales are aligning prices in a way that is eroding the deep discounts that investors once sought out from bank owned properties.
In parts of the country, as much as half the inventory is distressed houses. In the recent past, investors going after distresses house were able to obtain prices dramatically below traditional resales and these deep discounts are still available today. However, not on the scale they once were. Today, you are more likely to pay for what you get. If the previous owner trashed the place, taking the fixtures with them, a deep discount will apply. If they left the place in good shape, no deferred maintenance, and the place hasn’t deteriorated from sitting empty, the price going to be close to what comparable sales are going for.
The answer is conducting due diligence just as any savvy investor should on every purchase. However, one fact from the past remains true today. Most lenders have little or no idea what shape these houses are in. They rely on the listing agent to determine that and set the selling price. This can present a problem obtaining the best price on REO.

investors are confident enough to make purchases without a third party inspection. Today, that formal inspection is becoming the only way to communicate problems with the property to the seller that the listing agent overlooked. With vacant foreclosures, even the most experienced investors are need to have an inspection performed with the utilities turned on.
With a slowly dwindling inventory of foreclosures, short sale properties are becoming more attractive from an investment point of view. Banks have reduced the time it takes to reach a decision. Also, because the distressed owners are still in the house, there is less deferred maintenance and deterioration from standing vacant.
Deals on distressed properties remain one of the best opportunities for investors. However, you need to be more cautious as banks continue adjusting to the new realities of the marketplace.

All the Best,
Peter Vekselman

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