Boston Foreclosures and Distressed Properties – Bargains vs Money Pits

In a recent report published by the City of Boston, it was reported the neighborhoods with the highest foreclosures in 2011 (70% of the foreclosures in the Boston area) were Dorchester, East Boston, Hyde Park, Mattapan, and Roxbury. East Boston had the lowest percentage at 13%, while Mattapan and Roxbury tied at 25%. The average for the entire city was only 7%. These numbers represent a unique opportunity for home buyers to purchase foreclosed and distressed properties. Since banks and lenders are eager to get these properties off of their books and recoup their money, home buyers may have the chance to invest in a foreclosed or distressed property for much less than market value.

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But before a home buyers jumps on the chance to get a foreclosed or distressed property, they need to examine how much renovations and repairs will cost. Historically foreclosed and distressed properties are usually in disrepair since the original homeowners had to vacate their homes. Banks and lenders may not spend the money to make repairs or keep the yard maintained, so these costs must be figured into the final purchase price. This may not always be the case, but many times a home buyer will have to put money into a foreclosed or distressed home in order to resell it or make it suit their tastes to live in.

Renovations and remodeling projects can run from just a few hundred dollars to several thousand. A typical kitchen remodel in Boston averages from $10,000 to $40,000. A bathroom remodel in Boston averages between $1,500 to $4,500. Buyers may be able to save money by doing the bulk of the work themselves, but this takes skill and time. Major structural repairs can also cost home buyers several thousands of dollars. A new roof or roof repair, updating or repairing the heating and cooling system, and any structural repairs can tack on several thousands of dollars to the purchase price of a foreclosed or distressed home. A home inspection is a wise step before they make an offer.

On the flip side of the coin, purchasing a foreclosed or distressed property can be an investment opportunity. If the buyer can get the home for less than market value and not face any major repairs or remodeling projects, this type of property can be a good bargain. Purchasing a foreclosed or distressed property in one of the five neighborhoods in Boston which have the highest foreclosure rates may also be a wise investment. The real estate market is showing signs of a slow improvement and by getting a property now when list prices and loan rates are still low may bring a substantial return on the buyer’s investment when the real estate market fully recovers.

Like all real estate transactions doing research and knowing exactly what is involved as far as repairs and remodeling will help buyers make an informed decision about purchasing foreclosed and distressed properties in the Boston area. What may look like a good deal, may in fact be a money pit. But if the property is in good shape and the price is low, this type of property can be a good bargain.

Table courtesy of City of Boston Real Estate Trends 2011.

 

HIGH-FORECLOSURE

NEIGHBORHOODS

MEDIAN

WITHOUT REO SALES

MEDIAN

WITH

REO SALES

%DIFF.

MEDIAN

%REO

SALES

DORCHESTER

$255,000.00

$244,450.00

0.04

0.18

EAST BOSTON

$252,750.00

$245,000.00

0.03

0.13

HYDE PARK

$242,000.00

$239,000.00

0.01

0.17

MATTAPAN

$233,000.00

$215,000.00

0.08

0.25

ROXBURY

$250,000.00

$230,000.00

0.09

0.25

FIVE NEIGHBORHOODS

$250,000.00

$240,000.00

0.04

0.19

CITYWIDE

$369,500.00

$362,000.00

0.02

0.07

Phil Ganz (354 Posts)

Philip D. Ganz is a Boston Mortgage Broker and Boston Home Loan specialist. For information, expertise, consulting, or advice about home loans, refinancing mortgages, or commercial property loans, contact Phil with no obligation: 617-529-9317


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