Many homebuyers are looking for a deal and often the best deals may be in the purchase of a foreclosure or short sale, but do you have the patience to buy a distressed property?
According to the National Association of Realtors foreclosures are selling at, on average, a 22% discount and short sales at a 17% discount. Sounds good? The downside is that these short sales are anything but short and foreclosures can have title issues and condition problems which can delay the sale. In both kinds of transactions you are at the mercy of the bank. This is where the patience comes in.
In the KCM Blog they talk about something called Patience Equity:
"Does that mean that you shouldn't consider a distressed property? Not necessarily. Just understand that there is an additional cost to purchasing a foreclosure or a short sale: the cost of time. For some, the 17 or 22 percent discount is well worth the extra time they must spend on the transaction. We like to call that savings your ‘patience equity'. Patience equity will require you to be patient however. Realize going into the deal that there will be obstacles to overcome and make sure you give your real estate professional time to overcome these challenges. Again, patience equity will require your patience."
If you are under a time crunch or are not prepared to be patient while your real estate agent and attorney iron out the problems, then you may be better purchasing from a regular seller. However, if you have enought patience equity to buy a foreclosure or buy a short sale, you may end up with a great deal where you are already on the way to building financial equity.
