Foreclosure homes have a reputation for being down at heel properties that require extensive renovations. However it is also possible for foreclosures to be mansions or luxury apartments, that even if they require a little work will be worth well into six figures.
An article in realtor.com has highlighted the fact that foreclosures priced in excess of $1 million have been in high demand and as a result there have been bidding wars and these properties are selling at a premium. Some of these high-end homes have simply been abandoned by homeowners who have chosen to walk away from a property with negative equity. Often these owners have more than one home and lack any substantial emotional connection.
These types of owners tend to view walking away as being a business decision rather than a personal failure and it can represent a great opportunity for potential buyers. In spite of this opportunity, such properties represent a greater risk due to the high price tags and even luxury homes will have details that need improving. Even though banks typically make improvements and repairs to luxury properties before listing them they are more likely to be low cost quick fixes so it pays to get an inspector who has experience in the luxury market.
If your home inspector does find any flaws in these types of properties then it’s less likely that a bank will pay for it as opposed to giving you a discount, as banks usually want to sell these types of homes as seen. Another thing to bear in mind is that the more luxurious the home, the more expensive the repair is likely to be.
In the past it was possible to get substantial discounts on foreclosure properties but nowadays if a home is in reasonable condition, as most luxury properties are, then this is far less likely to happen and it’s more likely that you will be competing with other buyers including all cash buyers. This year foreclosures worth in excess of $1 million were selling for an average of 3% above the listing price and making too low of an offer on a home could lead to you losing it completely. At the same time a bidding war can often lead to buyers paying in excess of a property’s true worth so it’s a good idea to have a budget and to stick to it.
Foreclosure properties tend to come with a greater amount of paperwork so be prepared for some delays or hire a real estate agent who is experienced in luxury foreclosures.