Most real estate markets across the country are in a steady state of recovery, with home prices still rising and foreclosures falling closer to pre-recession levels. But in other neighborhoods, signs of distress linger and a fair number of vacant homes still languish unsold for lengthy periods.
If markets are tepid, it's due to "weak fundamentals," according to Daren Blomquist, a vice president at RealtyTrac, which follows real estate trends throughout the nation.
Ironically, some areas that are facing better job numbers are simultaneously experiencing a surge in foreclosures. Typically, these are jurisdictions where homeowners, taking advantage of legal protection, are able to resist foreclosure for a considerable time.
Assuming the area where you plan to buy is facing a belated wave of foreclosures, he says you might benefit in terms of price.
However, he urges those interested in purchasing a foreclosed property to exercise caution, because many bank-owned homes stand vacant for a lengthy period before they're put up for sale.
"During the foreclosure process, many homeowners let their homes deteriorate. And others engage in active destruction," Blomquist says.
In many cases, bank owners do a thorough inspection and restoration of foreclosed properties. But other such homes are sold "as is."
Here are a few pointers for buyers:
-- Look for a healthy discount on a vacant home offered "as is."
Rob Birkeland, a real estate broker and realty company co-owner, says homebuyers contemplating the purchase of a foreclosed home, especially one that has been empty for a month or more, can often expect a substantial discount, up to 30 percent, off the current market value.
But Birkeland, who's affiliated with the Council of Residential Specialists, cautions potential buyers of vacant homes to carefully assess the property and garner as much information as possible about its previous occupants before committing to its purchase.
Birkeland, who's sold homes since 1997, has observed many issues with vacant houses -- including major problems affecting their plumbing, heating or cooling systems. He's also witnessed malfunctioning appliances that the owners left unfixed when they moved away.
"The biggest problem is deferred maintenance," he says.
-- Attempt to learn about the previous owners of a foreclosed property.
Obviously, it can be hard to learn about a foreclosed home, because its previous owners have moved away and its institutional owners are resistant to passing on details.
"The bank will shut up, because it doesn't want to make any legal representations about the property and who lived there," says Merrill Ottwein, a real estate broker and past president of the National Association of Exclusive Buyer Agents.
Ottwein says your best sources of information are often neighbors, who usually have a wealth of information to offer about the former residents and the work they did, or failed to do, on the house in question.
-- Think through the idea of doing a "pre-inspection" of a vacant home.
If the property you like has gone unsold for a lengthy period, you're likely nervous about hidden problems. In fact, you might wish to wait to make an offer until you know more. In such cases, Ottwein advises you to consider hiring a home inspector for a preliminary look.
He tells the true story of clients who spotted a bank-owned house with excellent curb appeal, including a well-pruned yard. But the buyers wanted to know more before making a bid. They polled the neighbors, who noted that the property's previous owners repeatedly hired plumbers to resolve a mysterious problem. To probe the issue, the couple paid a few hundred dollars for a preliminary home inspection. This revealed that the sewer drain in front of the house had filled with roots and would have to be replaced -- a costly proposition.
"Knowing this, they were immensely grateful that they could walk away without buying that pig in the poke," Ottwein says.
"If you decide to go through with the purchase, the pre-inspection will let you bid based on its findings. Or you can pass on the purchase without complications," Ottwein says.
-- Make sure the utilities are on when the inspection is done.
Dorcas Helfant, a past president of the National Association of Realtors, says cost-conscious banks that own foreclosed property sometimes shut off utility service to the vacant homes they own, including gas, electric and water. But lack of utility service poses a challenge to home inspectors.
"There's no point to doing an inspection when the utilities are off because you can't determine if the cooling, heating and plumbing are working correctly," she says.
Helfant strongly recommends that buyers hire a home inspector to check out a vacant place, if not before their offer is submitted, then after. And even if you have to pay to get utility service restored, she says it's worth the expense.
-- Shape your bid for a foreclosed home in the context of the local market.
Before you make an offer on a foreclosed home, "the key is to take a careful look at the recent sales history of the surrounding neighborhood," Ottwein says.
Ask your real estate agent to examine at least three similar properties that have sold in the immediate area in the past three to six months, adjusting for differences, such as a second fireplace or a larger garage.
Clearly, you'll want to take a home's condition into account when judging its market value. But Ottwein cautions against seeking an oversized discount just because the property went through foreclosure and sat vacant for a spell.
"You have to consider the current market and find out whether there are rival bidders. If there are lots of foreclosures in your area, a nice discount is possible. But it's never an absolute certainty," he says.
(To contact Ellen James Martin, email her at email@example.com.)