foreclosure ((c) Ariel Skelley)
Think foreclosed homes are always ramshackle properties with overgrown lawns, boarded-up windows, and hordes of squatters? On the contrary, they can also be mansions on the beach or stately apartments at the top of a Four Seasons Hotel that, even in their "distressed" state, are worth well into the six figures.
In fact, foreclosures priced at more than a $1 million have been in such high demand lately, they've been creating bidding wars and selling at a premium.
So what's the story behind these high-end abandoned abodes? Many represent strategic choices by homeowners to walk away from an underwater investment property. Because these owners often have more than one place, they don't have as much of an emotional connection to each one.
"Luxury owners view it as a business decision and not as much as a personal failure," says Bruce Ailion, an Atlanta-based Realtor and attorney. It's a business decision for them, but an opportunity for you!
But buying a foreclosure, especially a high-end one, isn't for the faint of heart, since its high price tag makes it a heftier risk. So if you're curious about what it takes, here are some tips on doing it right -- and some current listings that will get you salivating.
Weigh repairs and improvements carefully
Even high-end homes have flaws that must be fixed. And while banks will typically make repairs and improvements to luxury foreclosure homes before listing them, they may make low-cost fixes that could conflict sharply with the character and value of the home -- so keep an eye out for things such as cheap carpet or crummy appliances. Also, try to get an inspector with experience in the luxury market.
"Just as you would not have your Ferrari worked on at the corner garage, you should not choose just anyone to evaluate a complex home," Ailion says. And if you or an inspector finds an issue, know that banks are less likely to pay for it than to give you a discount to take care of it. "Banks typically want to sell these properties as is," Ailion says. And the more high-end or custom a home, the more expensive those repairs will be.
Skip the lowball offer
The days of getting a 50% discount on a property because it's bank-owned have passed. If the home is in good condition -- as luxury homes tend to be -- you'll likely be competing with investors and all-cash offers.
"Banks are a lot less motivated to make deals happen than they were in 2008, when they just wanted to get things off their books," says Ryan Wright, CEO of DoHardMoney.com, which provides financial services to fix-and-flip real estate investors. In fact, this year foreclosures worth more than $1 million were selling at an average of 3% above asking price!
Bottom line: If you have your eye on a home, know that haggling too hard may get you knocked out of competition.
But don't overpay, either
While lowball offers don't behoove you, neither does overpaying. So don't get sucked into going over budget to win the property.
"Oftentimes there are bidding wars on these properties, and we'll see buyers pay upward of $600,000 more than what the list price is," says Alexandria Carlson, an associate broker with Engel & Volkers in Scottsdale, AZ. Know what your limit is, and stick to it: Foreclosure or not, if you end up paying more than the property is worth (or than you can afford), you're getting a bad deal.
Find the right Realtor(s)
Since there's a ton of extra paperwork involved with buying a bank-owned property, smooth the process by working with a Realtor experienced in foreclosures. And since luxury properties have their own peculiarities, you're best off getting someone with experience in both areas: foreclosures and the luxury market. And if you can't, consider hiring two agents that can work as a team for you and split the commission.
Here's a sample of some of the high-end foreclosures available now:
451 Mashta Drive, Key Biscayne, FL
List price: $8.9 million
This nine-bedroom, seven-bathroom, Mediterranean-style estate is on the water with a private dock and ocean access.
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132 E. Delaware Place, Apt. 6302, Chicago, IL
List price: $5.9 million
This 7,000-square-foot duplex has stunning city views and is located at the top of the Four Seasons Hotel -- easily near fine dining.
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List price: $4.9 million
This 7,400-square-foot residence in Pelican Hill Estates has six bedrooms and 7.5 bathrooms. And check out that pool!
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50 Bellevue, Ave., Piedmont, CA
List price: $3.9 million
In addition to five bedrooms and 4.5 bathrooms, this home has a library and ballroom -- what debutante could resist?
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2515 Mercedes Drive, Fort Lauderdale, FL
List price: $3.5 million
This waterfront, four-bedroom, 7,700-square-foot home needs work, but it has a private boat dock and an elevator. Apparently, stairs are optional in this multimillion-dollar home!