Whether you are a home buyer or investor buying real estate foreclosures you will want to know if the bank owned properties that you are looking at to make offers on are a good deal, right? So, what does a good deal look like when you are staring it in the face? There are three levels of market research you need to conduct to answer this question.
Someone looking to buy a home to live in should first consider what the best home is for them and their family.
These baseline features have more to do with location, school districts, commute time, style of the home, yard size, etc.
Investors will have slightly different criteria.
They are interested in the appeal to the type of renters they are interested in, comparable rent levels in the area, area vacancies, operating expenses, the amount of real estate taxes and any deferred maintenance.
Once these mission critical elements have been met then you will want to get the best value.
The first question to be asked by any buyer is what is the immediate future prospect for median home values in the market area? Are prices stable, rising or falling? Why is this important? Most buyers would prefer to buy in a market where the value of the asset they are buying will at least be protected from an immediate drop in value.
This should be one of the first questions to ask your realtor.
Can they provide you with this information backed up by statistical analysis? Insist on more than just their opinion.
Even the best buyer's agent has a bias to think optimistically and tell you that things are better than they really are.
This is not because they deliberately wish to mislead you but it is what they believe from all of the misinformation and unsupported opinions they receive from their associates and brokers.
Larger lenders often have a market report by each county around the country that gives them a viewpoint supported by data about this high level view of the market.
The next market survey to pay attention to is the area or neighborhood review.
This is data that any realtor in your local multiple listing service has access to.
Not all realtors understand or use this data effectively, relying instead primarily on a comparative market analysis or CMA.
While the CMA is also important you first want to know how the foreclosed homes for sale you are looking at compare to the most heavily traded homes in the area.
You will want to know if the inventory in the area is increasing or decreasing, are market times increasing or decreasing, what is happening to median prices, what is the ratio of pending sales to active listings, how does that compare to last year or last quarter? What is the ratio of foreclosure listings and sales to standard pre-owned home sales or new construction.
Many markets today are experiencing the fact that foreclosures and bank owned properties comprise the most significant market share of inventory and sales and thus are the price setters for all homes in the market.
If this is the case it may be that all other sellers are gauging their price based upon what they bank sellers are doing and you can more easily expand your search for a good deal to other homeowners.
The last and most individual level of foreclosure market analysis is the individual CMA.
You should ask your realtor for such an analysis of each home that you wish to consider making an offer on.
This report should be very tightly focussed on a short radius surrounding the property and be closely aligned to the age, building area, number of bedrooms and baths.
lot area, condition and style of the home you are interested in.
For smaller markets and slow markets it will be necessary to expand the radius of research somewhat but you want to know in advance that your target purchase has a reasonable chance of appraising for at least the amount you wish to offer.
Having a good understanding of the local market environment will pay big dividends and help you recognize that good deal when you see it.