Do Foreclosure Properties Always Sell Under Market?

"Foreclosed properties sell way below their market value," per Foreclosure Times.com. This is the kind of myth that spreads quickly, and often to the detriment of the investor or buyer.

A lender may buy or take a property back below market, but will price the property as near as possible to local market values in order to recoup their loss. Why would it do otherwise? An example: A Long Beach property where the total loans taken out were approximately $580,000. The property in my CMA analysis had a market value of $645,000-$650,000 in early 2007 if certain improvements were made before going on the market. Eventually, the property was on the market for 6 months, did not sell, even at $599,000, and went into foreclosure. The tax records show the lender took it back for $400,000 (the seller originally bought it for $475,000 about one year prior.) Two months later in October 2007, according to the tax records, it sold for $650,000 to a new owner. That was not an undermarket price.

Another example is an upgraded single family home in Palmdale which was first listed for $399,000 and eventually dropped to $279,000 and still did not sell. After going into foreclosure, the asset management company recently listed it for $329,000.

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