Colleen Kelleher, wtop.com
OCEAN CITY, Md. – Buyers thinking about jumping into the foreclosure and short sale real estate market in resort areas need to adhere to the old adage of “buyer beware” and need a lot of patience, real estate brokers say.
“It’s really what you see is what you get,” says broker Bernie Roache of Century 21/New Horizon in Ocean City.
Foreclosed properties are sold in whatever condition the previous owner left them in. Buyers cannot make sales contingent on home inspections as they can in the traditional sales market.
“You need to do pretty good due diligence to make sure you know what you’re getting when you buy them. Often there’s a lot of work necessary to bring the property back up to the condition you’d want it to be in,” Roache says.
Foreclosures and short sales take months, something that can be difficult for traditional buyers to stomach.
“If you want to buy a foreclosure or short sale, you have to have patience,” says long-time Ocean City real estate broker Bud Church of Coldwell Banker/Bud Church Realty. “This is not going to be a 30-day sale.”
“You put the money down, you don’t know if you have it or not until the very end,” Roache says.
If you are willing to tough it out, it can be worth it. A one bedroom, one bath condo recently sold for $55,000.
“The good news is for somebody that’s a prudent buyer who takes the time to research the market, there are some excellent buys out there,” Church says.
Of course, not all foreclosure deals are accepted.
In one case, two adjacent lots just outside of Ocean City came up for sale. The owner of the property next door wanted to protect his investment so he offered a cash sale for well over the asking price and offered to settle in a week. The bank refused.
“I can’t remember the exact numbers but I think they were asking $185,000 for these lots,” Church said. “He [the buyer] said, ‘Offer them $220,000 each, cash and settle in a week.’ He offered quite a bit above the asking price. The bank would not sell them the property because they were afraid he was an investor. They rejected his offer. That same scenario is happening all over the country today.”
The complexity of short sales makes the buying process a lot longer.
Short sales Church and Roache have handled have taken six months.
Why? The lenders required a lot more documentation.
“The problem is it gets to be a really bureaucratic process getting it to closing,” Roache says. “I believe it’s because it’s something new to them [lenders and bankers]. They are finding their way through it. They don’t have any standard procedures, and it goes from desk to desk where new sets of eyes look at it and start all over again.”
Roache says there isn’t a lot of “cross shopping” by people looking to buy a second home. Buying foreclosed and short sale properties tends to be a niche market because the sales do take so much time.
If you opt to pursue a foreclosure in any resort market, Church says you want to make sure the property is financially stable. For example, if you are buying into a building where only two of 50 units have been sold, ask lots of questions.
“Who’s going to carry the building? Is the bank going to carry it and pay the condo fees and the assessments of the building until the rest of them get sold?”
Maryland condominium disclosure law also will help with any sale, whether it’s a foreclosure or a traditional sale.
“When it first came out, I thought it was a bunch of baloney, but, boy, I’ve become a believer in the condominium disclosure,” Church says.
The answers to questions condominium associations have provide will give you an insight into the property’s financial stability and its future repair and replacement costs.
“Are there any liens against the property? Are there any special assessments against the property? Are there any lawsuits against the property? Does the roof need to be replaced? Does the parking lot need to be replaced? All of those, particularly in today’s market, are excellent questions,” Church says.
Katie Barlow and Cassie Hom assisted with this story.
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