First Time Home Buyers: Foreclosures’ Where It’s At
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I’ve noticed something over the past year in the real estate market, and thought it would make a great topic on the blog.
A lot of the First Time Buyers I’ve worked with recently have been buying foreclosures and short sale homes. I know that these homes are about 50-60% of the entire market sales lately, but it got me thinking: why are so many new home buyers purchasing foreclosures?
It finally hit me last month.
The market got so hot during the years between 2000 and 2005, that property values went through the roof. Now that prices have come down, we are seeing a lot of people not being able to sell their homes for what they owe. See my article on foreclosures for more info.
Since these homes went back to the banks, they have been selling for cheap, because the conditions of these properties are less than desirable.
A $200,000 house in 2004 could be going for $140,000 now. And because of these inflated prices from years past, the only way to get a house under $200,000 is usually buying it after the bank has foreclosed.
Bottom line: these are the homes that first time buyers are purchasing because they are the ones that these new buyers can afford.
Unfortunately, there are going to be more foreclosures in the next couple years, as ARMs adjust and the job market continues to decline little by little. But if you can buy one of these cheap homes, you’ll be better off in the end.
Make sure you get an inspection on a Foreclosure, since they can be vacant for a year or longer, and may need a lot of work to be livable.
When you do get the inspection, your inspector should give you pictures of the problem areas similar to the ones listed below.
Leaky Valve could be a bad sign
Old concrete steps may need to be replaced
So, if you’re looking to get into this Buyer’s Market, then start saving money and get your hands ready to fix up some vacant homes.
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Steve, this is a great post! I would also agree that inspections are going to be very critical when dealing with a foreclosed property. Your buyers are going to have to rely on there inspection, therefore I would argue that it is very important that your inspector is a good one! Try to verify a couple of different items with your inspector: 1. find out there history (i.e. are they full time or part time inspector) 2. Ask if they take continuing education classes on a regular basis? 3. Make sure that they are a very throw inspector (most properties will take on average of 2 ½ to 3 hours). If they are complete with there inspection in ½ hour you might want to find a new inspector!