Abundance of Bank Owned Foreclosures Fuel Home Sales

by Donald Hanz on REO Properties

It is the season for house buying as prices of properties and interest rates are at their lowest level brought about by the flood of bank owned foreclosures in the housing market, according to industry experts.

Experts said that first-time homebuyers and investors are lured to the housing market by low home prices and interest rates and tax incentives. They attributed the low home prices to an abundance of foreclosed properties available on the market. In Phoenix, Arizona, the median home price was $68,000 by the end of February.

However, Arizona State University’s Real Estate Center director Jay Butler cautioned homebuyers about venturing into foreclosure real estate as the market is froth with risks that may cause them to lose their investment.

According to Arizona Regional Multiple Listing Service Chief Executive Officer Bob Bemis, two-thirds of houses for sale are bank owned foreclosures.

This information is supported by Realty Executives real estate agent Brett Barry who said that foreclosed properties and short sales, homes that are placed on the market valued less than the total mortgage the homeowner owes to his lender, accounted for more than half of listings. He added that the increasing number of REO properties is creating an unpredictable climate in the housing market.

Barry advised potential homebuyers to always arrange their finances before closing a sale to have a leverage when negotiating with homeowners. Experts recommended getting into the purchasing game with cash in hand or a prequalified loan.

Most banks will require potential homebuyers to fill out applications for loans. And banks may reduce closing costs for homebuyers who will take out loans through them.

Barry pointed out the competition for heavily discounted bank owned foreclosures properties that giving earnest money will be an advantage for potential homebuyers. He claimed that earnest money will only reinforce the sincerity and interest of the homebuyer to make a purchase.

Meanwhile, Sun American Mortgage Co. senior loan officer Reg Gustin said that not all bank owned homes are worth the price that homebuyers paid as they find out too late that they have to shell out big amount of money to make the houses livable. He said that the Federal Housing Administration’s 203K loan program includes funds for home refurbishing and most homebuyers find appealing the $346,250 loan cap and 3.5 percent down payment. However, he pointed out that the total loan amount should include the repair costs for bank owned foreclosures.