Foreclosures are the hot topic in today’s real estate market. Most people that I talk to are of the notion that the best buys to be had in today’s market are homes that have gone back to the banks. In some cases, that is true, but as in all real estate, you have to look at each prospective property case by case.
I am just now closing on one REO (Real Estate Owned or a foreclosed home) where my client made an outstanding buy on a great little home....about 20% below what the same house sold for last year. However, it is my experience that this case is the exception. Most homes that go through a full foreclosure end up getting stripped by the homeowners who lost them. The lenders often just adjust the price somewhat and put them on the market "as is".
We are also not seeing the lenders deal much yet. This is because their portfolios are not full yet, so the holding of these REOs are not effecting their lending business. For every dollar that a lender has in a foreclosed loan, they must set aside matching dollars from their lending pool to protect the investors of that foreclosed loan. When the number of dollars rise to a certain level, it can hurt the lender’s ability to loan and cut into their profits even further. It is then that you see lenders selling off their REO inventory to free up those reserves. We are not there yet, so lenders are holding tight on what they are willingto take on their REOs.
A new wrinkle in this REO market is that the lenders after 7 or 8 months on having a property on the market are sending them to auction. Interestingly enough, many of those homes end up selling at auction for more that its lowest list price. It would seem that the buyers who attend these auctions get caught up in winning bidding battle and often pay more than the same home can be bought for in the regular market. But, they do get the brag to their friends that they bought a foreclosure! There are also industry concerns that those homes bought through the auction process may not have the protection of full title insurance.
With rolled back prices, great interest rates and lots of options, there is no doubt that this is a great time to buy. ! If you would like to explore adding to your real estate portfolio, give me a call. I’d be honored to put my 37+ years of experience to work for you and prove that "Experience is not expensive, it is priceless!"
# posted by
Viki Benbow @ 1:53 PM
