Most realtors recommend sprucing up a home before putting it on the market, because a nicer looking home sells quicker. The same theory permeates the foreclosure, or REO (bank owned real estate), sector.
A recent study undertaken by a national field service company that works on REO properties not only confirmed what was at most a belief among realtors, but accentuated the difference between rehabbed and nonrehabbed properties. The number of days on market decreased significantly from an average of 222.8 days to 69.8 days from properties not rehabbed to properties rehabbed.
Banks used to pay to rehab properties before putting them on the market. What happened? The time it takes for a property to go into foreclosure was 7 months in 2008, has increased to 18 months today. With increased costs on this side, as well as down spiralling prices, banks cannot get their price points back. The banks ran out of funds.
To sell to a HUD/FHA buyer, the only way to finance a HUD owned property is an FHA loan. For an FHA loan, a property has to meet minimum standards. In other words, a move-in property, not one that is "as is".
Who is doing the rehab work today? Fortunately there are investors who can pay cash for these properties and then do the rehab.
The bottom line is, if you want to sell a property (foreclosure or not), the property has to look good in today's market.