More Investors Purchase Foreclosed Houses for Sale in Cash

by Peter Vernon on Foreclosure Crisis

More investors now purchase foreclosed houses for sale in cash, as competition for bargain-priced foreclosures become fierce. More people now are getting interested in investing in distressed properties, prompting cash-rich buyers to fight the competition with cash.

According to sales figures from the National Association of Realtors, homes purchased with cash accounted for 26 percent of all home sales in January, a sharp increase from 18 percent in January 2009. There were also a number of owner-occupant buyers who paid in cash, but it was the investors who dominated cash sales in January.

With cash payments, investors can make more profits from buying cheap homes for sale as they will not pay interest charges and other borrowing costs. Their purchase offers are also more favored by banks and other sellers. They also typically get the properties they want at the auctions.

The percentage of investors who purchase foreclosed houses for sale, as opposed to owner-occupant buyers, has also been surging. In January, the percentage of house purchases made by investors jumped up to 17 percent, up from 15 percent in December and from 12 percent in November.

Evan Spinrod, a resident of San Francisco, said he has been buying bargain-priced homes for his rental business, which has grown to 21 units in four states. He has not been paying interest to any bank because he buys in cash. He added that a lot of homes have been selling at prices below their construction costs.

Leonard Baron, a professor of real estate at San Diego State University, has also entered the real estate business. He has purchased three houses in San Diego over the past several months. He paid in cash for the properties, priced between $100,000 and $130,000, and has been renting them out at a profit.

Lisa Johnson of Massachusetts said many home builders have stopped building new homes, and instead are buying bargain-priced single-family units and condos that they fix and resell.

In Phoenix, Tanya Marchiol has been buying about 70 low-priced homes a month in cash for her firm Team Investments. She said that cash helps her negotiate prices.

In Chicago, Jim McClelland plans to buy around 150 entry-level houses in the metro area this year to add to his portfolio of around 300 properties.

All in all, these investors advise people with investment cash to purchase foreclosed houses for sale now because of the quality of inventory available and the low level of prices.

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