Foreclosure Tours, Big Discounts Sell Homes in the Midwest
Next stop? Cincinnati.
According to The Cincinnati Enquirer, the trend -- in which Realtors organize groups of prospective buyers to view short sales and foreclosures -- also is catching fire in more traditionally stable markets in the Midwest.
And for one local agency in Cincinnati, the tours actually are helping to sell homes.
At Exit Realty West, foreclosure outings are an integral part of their sales efforts, and foreclosures and short sales generate about half of the company's business. In the county, foreclosure sales make up about 32 percent of all home sales in 2010.
Is it just that the sales technique is working or are the home buyers really getting a bargain?
The tours are also yielding sales in Cincinnati because consumers are getting a significant discount that eclipses other areas across the nation. In May, Ohio led the nation for the highest percent of savings on foreclosure properties, a whopping 42 percent, reports RealtyTrac.
According to the data, the average home sales price was $154,367 in Cincinnati, while the average sales price of a foreclosed property was $85,390.
A broker with Exit Realty said that most foreclosures in the area are overpriced and they usually sell for 20 to 30 percent below market value, or at half the price if substantial work is needed on the home.
While touring the homes together, participants sniff out the potential pitfalls of a home -- whether it's musty carpeting, a broken awning or the lasting stench of smoke.
But for buyers, sometimes the trickiest part is calculating how much the property is worth.
That's why, before the tour begins, Exit Realty holds a class to educate buyers on the financials, and how to account for the cost of repairs generally needed for foreclosed -- and often times abandoned or neglected -- homes. Those include fixes for mold and plumbing problems, as well as surface touches, like new carpet and painting.
Participants also learn how to make an offer on a foreclosed property and, once in a while, they use that knowledge on the spot.
While a closeup look at the condition of the properties and a calculation of repair costs turns many away, it's not unheard of, before the tour ends, for one of the home shoppers to have already made an offer.
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