What was the hottest trend in real estate during the last year has slowly become not so popular. Investors were jumping at the chance to buy foreclosed homes to either rent out or sell for a substantial profit. However, foreclosure sales are currently down 20% from last year.
The high number of available foreclosures has caused a ripple effect in the general real estate market. Homeowners wanting to sell their homes are faced with long waits for a sale because the lower cost of foreclosures make them more attractive to potential buyers. Homeowners hoping to compete with foreclosed properties are now lowering their asking prices creating a false market value. Many of the homes that have not been foreclosed on yet are now being sold to investors through short sale. The listing prices for these homes are much lower than what the banks will accept. Prospective buyers are not getting a true sense of what homes are worth and are holding out for even lower prices.
Investors know how long it can take to buy a house that is in default and are going for the lower priced homes not in distress. They get the house much quicker, and it is in better condition. Many homes that have been foreclosed on have been torn apart inside. They are sold “as-is” and require a lot of work before they can be inhabited or sold for a profit. It is in their best interest to buy a home that requires little to no repair, lease it out for a while and then put it on the market when things improve.
Homeowners wanting to sell right now are at the disadvantage. Not only is the market low from the housing crash, the availability of very low-cost homes makes it hard to compete. Unless you bought your home when the price was low, you may want to consider hanging on to it for a while.