5 ways sellers can compete with foreclosures

By Scott Van Voorhis of Bankrate.com

Risky foreclosures could help savvy sellers

The cloud over foreclosures comes with a silver lining for homeowners who are seeking an edge when they sell real estate in a strong buyers market.

The good news for sellers is that foreclosures look risky again. Savvy sellers — or those who have equity and are current on their house payments — could turn the tables and
use the robo-signing follies to their advantage, experts say.

“I am not seeing buyers afraid (yet) to buy a foreclosure,” says Elizabeth Weintraub, a real-estate broker in Sacramento, Calif. “They should be.”

The robo-signing controversy has led to a slowdown in foreclosures. The lull is likely temporary, and sellers’ advantage from a drop in foreclosures is potentially fleeting, with many markets still flooded with distressed properties, says Katie Curnutte, a spokeswoman for Zillow.com. There might even be a boomerang effect later this year after banks get back up to speed with auctions, she says.

Here are tips for home sellers who want to take advantage of a rare lull in the foreclosure crisis.

1. Sell sooner rather than later

If you don’t have to sell in this market, don’t. But if you must, take the plunge now.

Sure, the slowdown in foreclosure activity could mean less competition now. But you should account for a boomerang effect: The number of foreclosures is expected to skyrocket later this year.

2. Get your story out

Foreclosure sales used to be rare. But in some markets, they now comprise 20% to more than half of all sales.

If you are a long-term homeowner who has kept up on your mortgage payments, you must deliver that message. This is your key advantage over a lower-priced foreclosure, especially in light of the robo-signing mess.

Buyers will know from whom they are buying the home —no title issues here. You can get this point out tactfully in your ads with phrases such as “long-term ownership” and
“been in the family for decades,” Weintraub says.

3. Do your homework

Savvy buyers will come in with a stack of comps, or comparable properties, and many of them will be rock-bottom foreclosures. Provide your own market analysis, which can help highlight the challenges facing foreclosed properties.

The first report should be of comparable homes sold in the past few months, with foreclosures broken out separately, if mentioned at all, says Jim Kimmons, broker-owner of
Gallery Realty of Taos, N.M. The second should detail homes on the market now. This will help you frame the decision on favorable terms: Buyers should consider homes like yours instead of foreclosures.

4. Price aggressively without undercutting foreclosures

The aim is to sell your home, maybe with a small gain. Forget about making a killing. Few homeowners who are current on their mortgage can match a foreclosure price.

But buyers are still looking for low prices. Look at what other nondistressed properties are selling for in your neighborhood and set your price below them. Drive home the point that the price is the price — with foreclosures, a bank can take a better offer until the day of the closing, Weintraub says.

5. Burst those foreclosure fantasies

Many buyers haven’t a clue about what it takes to buy a foreclosed home. In many cases, individual buyers don’t stand a chance because they compete with investors who are ready to pay cash, Kimmons says.

If buyers or agents don’t know this, enlighten them.

“There is a significant percentage of buyers (who) could not buy a foreclosure if they wanted to,” Kimmons says.

 

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