Housing Crisis Upside: Bargains for Everyone

This 960-square-foot, three-bedroom home in Chicago was purchased by the current owners in 2005 for $185,000. It first went on the market in August for $284,500 and is now listed with Inter-City Realty for $99,000. The company advertises: "Owner motivated. Make an appointment today."/Courtesy Inter-City Realty.

Banks, overall, are getting better about getting foreclosed properties on the market as they finally establish a set of local brokers to move the homes, said Glenn Kelman, the president and CEO of online realty company Redfin.

But Kelman also warned that consumers shouldn't expect much in the way of frills when they buy a bank-owned home.

This 4,400-square-foot mansion in Cincinnati needed some repairs. It sold for $38,416 at auction even though it was valued at $274,500. /Courtesy www.Bid4Homes.com

"They're not going to fix anything for you. You're going to have to buy it as is," he said. That, he said, can be "a nightmare."

Lashinsky knows of foreclosed homes that were purposely trashed by their previous owners. In one case, a San Francisco Bay-area home had its plumbing ruined after soon-to-be-evicted homeowners poured concrete into the home's sinks, toilets and drains.

"That's not an unusual example," Lashinsky said. "When people are frustrated and irritated, they say, 'I'm getting kicked out, I'm going to do whatever I want.'"

When buying a bank-owned home, such problems can hit a buyer by surprise. Unlike other home sellers, the banks, he said, are not required by law to disclose the home's deficiencies.

Skip the Bank, See an Investor?

The easiest way to figure out which homes are bank owned is to ask a real estate agent or use online sites, such as Redfin and ZipRealty, which allow would-be buyers to search for foreclosed properties.

This three-bedroom home in Jacksonville, Fla., was valued at $87,000 but sold for $9,750 at auction./Courtesy www.Bid4Homes.com

"If you know what you are doing, you can get a great deal. If you don't, it can be a huge waste of time," Kelman said.

Often the buyers of bank-owned homes are investors who then resell the properties. But just because an investor got to a home before you did, doesn't mean you won't still get a good deal, said Lisa Lauroesch, the vice president of business development at the online auction company Bid4Assets Inc. in Silver Spring, Md.

An investor purchased this Detroit multifamily home from a bank, made some repairs and then resold it for $8,000. /Courtesy www.Bid4Homes.com.

Investors, she said, will sometimes renovate homes and, though they sell them for higher prices than what they paid the banks, their listing prices may still be dramatically lower than the home's previous sale prices, Lauroesch said.

She cited a partially renovated, multifamily home in Detroit recently listed on her company's Web site, Bid4Homes.com. In 2006, the six-bedroom duplex sold for $42,000. After being foreclosed, the house was sold by the bank to an investor who later resold it to someone else for $8,000.

"$8,000 is still a good deal, regardless of what the person bought it from the bank for," Lauroesch said.

Selling Fast... or Trying To

Lauroesch said that it's also generally faster to buy a home from an investor than from a bank.

Investors, she said, "are interested in turning over these properties. They're very efficient."

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