Foreclosures Good For BuyersJul 7 2010
During the first three months of this year, foreclosures accounted for a third of all home sales and sold at about a 30 percent discount. The homebuyers purchasing those properties paid 27 percent less compared to sales of non-distressed homes. Home foreclosure sales include short sale properties and repossessions, transfers from borrowers to banks are not included. Bank repossessions, known as REOs, required lower prices than short sales did at 34 percent less than a conventional sale. Pre-foreclosure sales averaged 15 percent less than conventional sales.
A leading factor in the lower cost of foreclosed homes is that many remain in poor condition while on the market as the previous owners typically are unable or unwilling to keep up with the home maintenance. However, during economic downturns, much like the one we are experiencing right now, upscale homes in more comfortable neighborhoods go into foreclosure as well. The idea that foreclosures only take place in unfavorable neighborhoods is not always true. It is possible to find beachfront homes and condos in affluent neighborhoods when shopping in the foreclosed market. Generally, mortgage lenders are trying to keep a fair amount of foreclosed and conventional homes available to their clients in an attempt to offer options. The financial effects of multiple foreclosures in a single neighborhood can possibly have a huge impression on conventional sales, bringing the cost down in some areas. If you’re the type of buyer who enjoys providing a home with a little TLC, buying foreclosure might be for you. In some cases, if you’re willing to put in a little extra work you can enjoy low interest rates and fast appreciation. Good finds are available in the foreclosed market but a good purchase requires research, prep time, persistence and patience.