Subscribe to meAccording to a recent article in RISMedia, buyers’ interest in purchasing foreclosed homes is up. No surprise here. Foreclosed homes are at the heart of our housing crisis in the US. In some areas, foreclosure sales make up a large percentage of the sale activity; getting the foreclosure inventory off the market is sure to bring good news for our economy.
The article says first-time homebuyers are a big part of the foreclosure market. Between 50 and 60 percent of foreclosure sales are going to first-time homebuyers (many first time home buyers will be taking advantage of the $8,000 tax credit available to them through the US government stimulus plan); another 30 percent is probably going to investors who are reselling them at another discount or hanging onto them as rental properties. Most of the financing for foreclosures is cash from investors and FHA loans for first-time homebuyers.
But, are foreclosed homes good deals? The answer is: it depends. Think about the lending climate in recent years. Purchasers of homes tended to borrow higher percentages of their home’s value, so that left the borrower little equity in the home. If the borrow fell behind and ultimately got foreclosed upon by the lender as the lender recovered the home, the lender’s investment in the home (the loan balance and legal costs for the foreclosure) may be so high that once the home hits the market for sale the price may not be a very good deal for a buyer. The RISMedia article confirms this as one of the contributors to the article states, “In some cases, people are overestimating what they might expect in the form of a discount on a foreclosure property.”
Another issue that hampers the “deal” associated with purchasing a foreclosure is correctly estimating the cost for repairs. According to the article, more than 50% of purchasers of foreclosed homes underestimated the costs to repair the home.
So, what’s the deal with foreclosures? They are a great place to look if you want a deep discount. But remember: they may not always be a great deal and you should accurately estimate your costs. Other sources of discounted homes can be pre-foreclosures and short sales. And you should be sure to not overlook the motivated home sellers that are currently in the market.
You may also want to consider my ”Hot List” which tracks some of the best deals available in the Greenville area. The “Hot List” is updated weekly and is available on www.GreenvilleHomeSearchOnline.com.
(Aaron Cole, the author of this information, is the creator of HomeSOLDin60TM, the simple six-step process that guarantees a home seller the best chance of getting the best price in the shortest time. To learn more about Aaron’s 60-Day Home Sale program, visit www.HomeSOLDin60.com or contact him at (864) 616-1504.)