7/1/2008

The Truth about the Current Foreclosure Market.

A foreclosure property is a home that has been repossessed by the lender because the owners failed to pay the mortgage. Thousands of homes end up in foreclosure every year. Foreclosures happen for a number of reasons. Many people lose their homes due to job loss, illness, divorce, death, etc. As a matter of fact, over 80% of bankruptcy filings are as a result of the aforementioned issues and many bankruptcy filings are in direct response to a last gasp effort to hold onto one’s home. In recent years with the easy money that came from Wall Street to Main Street through mortgage lenders, we expect foreclosures to reach record highs.
With all of the negative media directed towards mortgage lenders as the reason for the foreclosure rates rising, the real truth is that if the easy financing was never made available in the first place by Wall Street, this situation would have never existed. Nor would the rapidity appreciating real estate market of the past had happened. Home prices would not have risen as much due to the fact that there would not have been as much demand for real estate.
Many wise consumers are electing to not sell their present real estate holdings, however many are looking to take advantage of real estate home prices as they are declining, and in this authors opinion, this is the time to buy. Because of the mass media, many investors are looking to the foreclosure market for opportunities. Also because of the mass media, many “traditional” home buyers are afraid to purchase in the face of all of the bad news when in truth, the time to buy is on the dips.
It is wise to be cautious when considering a foreclosure as a purchase decision. Many experts advise inexperienced buyers to hire an expert to take them through the process. There are many challenges associated with purchasing a foreclosed upon property. Real estate was never intended to be an investment vehicle with a “get rich quick” mind set. We have seen many so called “investors” in recent years enter the real estate market with the mentality of “flipping” real estate. Real estate has always been a decision that should be made with a long term time horizon for the disciplined purchaser of real estate.
When favorable real estate purchasing opportunities appear on the market, they do not “sit” on the market very long. The number one key to taking advantage of purchase opportunities is to have your financing pre-arranged. This allows an investor to rapidly commit to a property and a distressed seller is more likely to accept a proposal from a purchaser if they are certain the transaction will close. We recommend to our clients the following. One, be pre-approved to purchase before one finds the opportunity and second, work with a real estate professional that is familiar with the current market.