Jeremy Flanagan signed the closing papers on his first foreclosure purchase two days after Valentine’s Day, and he’s already fallen in love with the place – and its below-market price tag.
“It was in the zip code area I was looking for and it showed that the bank was owed much less than the house would appraise for,” he said of his new Fayetteville, Ark., home. “I bought the house for about $13,500 under the appraisal value.”
The property Flanagan purchased is a new home that was foreclosed on while it was still being built. The foreclosing bank used its own capital to finish construction on the home and then listed it for sale on the market. Flanagan saw the for-sale sign and picked up a flier, but the asking price was over his budget. Then he noticed the same property was also listed as a foreclosure, giving him a big advantage over other potential buyers.
“After finding the house listed on RealtyTrac I approached the bank directly with the information provided and brought the price down $10,000,” he said. “I used the amounts for the bank liens listed on RealtyTrac to let the bank know I had the figures on how much they had invested in the property. It helped me negotiate with a stronger position than if I didn’t have that information.”
Flanagan approached the foreclosing bank directly to negotiate a lower purchase price. It took two weeks to arrive at a price acceptable to both parties and close the deal. He found out in addition to the amount the bank lost on the foreclosed loan, it also sunk an additional $40,000 into finishing construction on the property. But even with that extra amount Flanagan knew he had room to submit an offer below the asking price.
Flanagan estimates his final purchase price was about 7 percent below full market value, a substantial bargain in this college town that is home to the University of Arkansas and located in the foothills of the Ozark Mountains. The home should retain strong resale value given that it’s located in a city that was named one of the top 100 “Best Places to Live” by CNN Money Magazine in 2006 and has consistently ranked among the top 10 places for doing business in recent years, according to publications such as Forbes and Inc. magazines.
“In the past I had worried whether or not I had truly gotten a good deal on my home purchase. I know I got a great bargain on this one,” he said, noting that this is his fourth home purchase. “I wish I had known about (the foreclosure market) sooner and I could have found deals like this with my earlier purchases.”