Popularity of Bank Foreclosures Growing Among Homebuyers and Investors

by on Foreclosure Rates

With bank foreclosures at such high levels in many parts of the country that the amount of new foreclosures every month is actually higher than the amount of homes sold on the open market, many homebuyers and investors are changing the way they buy real estate.

The rising rate of bank foreclosures has been both a symptom and cause of the current slowdown in the housing market. During the past decade, investment in real estate in many parts of the country was rampant, and people bought up homes as fast as they could, often times using risky loan packages known as adjustable rate mortgages. ARMs were very attractive for homebuyers looking to sell quickly and profit on the booming market, since they offered low introductory costs. However, as the market slowed, many of these buyers ended up being unable to flip their properties, and instead were left with monthly mortgage payments given to steep rises and fluctuations every month. As a result many were unable to keep up with their mortgage payments, and their homes became foreclosures for sale at auctions.

However, the slow market and sheer volume of bank foreclosures that have come onto the market in recent years led to a situation in which there were more homes being sold through foreclosures than were being bought, which led to many of these properties simply being awarded to the bank lenders who issued the defaulted loans in the first place. So now, in states across the country, especially those with booming foreclosure markets like Florida, Colorado, California and North Carolina, banks are in possession of more properties than they know what to do with.

However, it is not the business of banks to sell real estate. Bank foreclosures are something of a burden for them, and now many of them are selling these properties for below their actual value simply to make some money back on them and reclaim part of the money lost on the delinquent loan. This has led to many investors becoming keen on this situation, and now bank foreclosures are in demand properties, since they can often be purchased for anywhere between 10 and 50% below their true value.

With homes on the open market at already low prices, this creates an opportunity for discounted home purchase unlike any other. Homebuyers and investors everywhere are making incredible purchases on properties in in-demand areas that have the potential to have huge value once the market turns around. Some of the most popular areas for buying bank foreclosures recently have been Boston, Los Angeles and Chicago, where investors are reporting huge deals.

As the foreclosure boom presses on, it is inevitable that more and more buyers will turn to the growing foreclosures market to buy real estate. Interestingly, buying up the surplus homes on the market will also be key to the market’s ability to rebound. Foreclosures bring down the home value of other properties around them, so buying them up will help raise their value and the value of the properties around them. Investors and homebuyers would be wise to look into bank foreclosures if they are seeking low prices.