Sales of foreclosed homes are exploding amid the housing downturn as banks price properties at prices to get them off the books quickly. The surplus of foreclosed properties is at all-time high and the troubled lending industry is cutting prices to where they have to be in order to attract buyers.
The homes are attracting bargain hunters from coast to coast. In Phoenix, Arizona a single family home that was sold just two years ago for $190,000 closed at $45,900, and the bargain basement priced home doesn’t seem to be much of an exception. Government assisted programs that pay banks back for part of their losses with little transparency to consumers are occurring in markets all over the country.
Nationally, nearly half of all homes being sold are foreclosed properties. Another estimated 20% are short sales in which banks cooperate with sellers taking a loss on the mortgage owed.
With more than 4-million homes already foreclosed across the country, lenders are saddled with a growing inventory of foreclosures. The inventory is only forecast to climb over the next few years. Housing Predictor forecasts that at least another 3.6-million properties will be foreclosed through 2010 alone.
There is more of a risk buying a foreclosure since lenders require that properties sell “as is.” Replacing paint, carpet and appliances are common. Pitfalls also include high repair costs from structural damage, including roofs, foundations and mold.
In Fort Meyers Beach, Florida real estate Broker Lee Reeves has a 2-bedroom condominium unit listed for just $18,000 by a bank trying to unload it. “These are the best prices that we’ll see during my life-time,” said Reeves, whose 55 and specializes in marketing foreclosures.
Another 1-bedroom condo hotel room foreclosure is for sale at just $10,000 in Fort Meyers. However, buyers are reluctant to purchase it at that bargain basement price since condominium association fees run at $450 a month, and the condo development is more than $750,000 in debt, as a result of the high level of foreclosures in the development.
Investors, retirees and first-time buyers make up the majority of foreclosure buyers willing to go the extra mile to get a deal. The inventory of foreclosures is expected to rise in the next few months as moratoriums put in place by big lenders expire, and more than 3-million adjustable rate mortgage payments increase for homeowners during the year.