This isn’t a story about the three little pigs and since all of the houses are brick you don’t have to worry about them being blown over. Instead it is a story about choices that buyers in today’s market have to consider every day. All of the houses are in the same Northern Virginia neighborhood.
The first house is new construction. When you walk in the door of the model you can’t help but be impressed. With granite counters, hardwood floors, soaring ceilings and much more it is everything today’s homebuyer could ask for. The builder is offering the “deal of the century” if you buy today and can deliver your new home in 45 days. The base price of the home is $628,000 and the builder is offering $15,000 in closing cost incentives.
The second home is a resale property and the owners have been in the home close to 2 years. They had many of the builders upgrades installed when they bought the home and have put up curtains or blinds in all of the bedrooms, installed a deck off the main level and have nicely landscaped the yard. The owners can move whenever you are ready just make them an offer. The resale property is listed at $799,000 and is offering 3% of the sales price as an incentive.
The last house is an REO (foreclosure). It is has of the upgrades of the builders model and a fully finished walk-out basement. The landscaping is done, the yard is fenced and the blinds are on the windows. It could use a good cleaning and a fresh coat of paint. The property is vacant and winterized and you will have to buy it “as is” but it is still covered by the builder’s structural warranty. The list price for the REO home is listed for $480,000.
Now this would seem to be an easy decision for a buyer. The REO property is almost $150,000 less and a professional cleaning and painting crew won’t set you back anywhere near that amount. But wait, a little additional digging in the tax records turns up that the last sales of the builder’s model have actually ranged between $500,000-$543,000. So the differential in price between the REO property and the builder’s model is not really $150,000 but closer to $25,000. So now what do you think about the REO property?
With many Northern Virginia buyers thinking that REO properties must be the best buy, this example shows you that the answer isn’t that simple. If you are looking in an area where you have a choice between new, resale and REO, there may be a better deal in a new property (in this neighborhood the resale property is clearly overpriced.) So don’t be fooled into jumping headfirst into the murky water of REO properties without the help of an experienced buyer’s agent. You don’t want to discover later that there was a better deal on a brand new home just down the street.
More Information on Northern Virginia Foreclosures