Investors buying foreclosures? Is this a good thing or a bad thing?

By
Real Estate Agent with Keller Williams of Central PA East

One on my respected colleagues on Active Rain, Renee, posted a very thought provoking blog (at least thought provoking for me) at http://activerain.com/blogsview/1582335/las-vegas-nv-area-reo-is-not-disappearing-it-s-just-emerging-as-another-life-form-

This post which is followed by others comments had me asking, "Investors buying foreclosures before the bank takes them back - is this good for the marketplace or bad?"

As both a realtor and investor, I probably have a built in bias, but here are my thoughts and I would be interested in your thoughts and viewpoints. I am also sure the process for these properties being sold vary from state to state, so I will talk about Pennsylvania and what I know in my state. Properties in which lien holders foreclose are sold at a County Sheriff Sale. At the Sheriff Sale the attorney for the lien holder reports the upset price or the price that must be bid in order for the property to be sold. The lawyer then basically gives the costs of expenses which is the opening bid. For example, property 123 ABC Street, Anywhere, PA. Upset price is $98,000. Opening bid is $2354.26. The question is, "Will anyone bid $98,000? If someone does there may be others who also bid. It basically becomes an auction style sale from this point forward.

If an investor purchases this property and he or she has done homework to make sure the lienholder buying the property is in first position, then there is probably equity in the property. If the property does not sell at the Sheriff Sale, then it eventually will become an REO and most likely will return to the market in the future.

Now the question is, "If an investor purchases the property and it does not become an REO, is this good for the market place or bad?" As I have already stated, "I believe it is a good thing." Here are my reasons why:

  1. Investors who are buying the properties are helping bring stability back to the marketplace.
  2. Investors are either cleaning the properties up or rehabbing them to make them more habitable.
  3. Investors are helping keep the market from plummeting more. We have been hearing for some time that prices are more affordable today than for many, many years.
  4. In the long run, having a more stable market will benefit the most people. People who already own homes do not want to see their home prices continue to decrease.
  5. Investors are often more locally situated and may know the true value more than outside area realtors offering BPO's to banks.
  6. The market place actually sets the value when the investor relists the home and a buyer decides to buy it.
  7. Any buyer is free to go to the Sheriff Sale to purchase a property. However, for the average buyer, these sales are too risky and therefore, they choose not to purchase in this manner. No home inspection is allowed and often the buyer of these property may not have been inside the home. It is being bought sight unseen.

If an investor buys or the bank offers it as an REO, is there a difference to the marketplace? I am not sure there is. I am not sure that a buyer is adversely impacted either way. I know that an REO or an investor owned property is one I prefer to have my buyer clients interested in, rather than a short sale.

What do you think?

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Living in Lancaster Group

 

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Cal Yoder

Your Homes for Sale in Lancaster Agent

Keller Williams Realty Lancaster

1630 Manheim Pike

Lancaster, PA 17601

Office Phone: 717-735-1145

Cell Phone: 717-413-0744

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Rainmaker
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Michael J. Perry
RE/MAX Associates of Lancaster, PA. - Lancaster, PA
Lancaster Relo Specialist

I'd say a good thing as long as they improve the area by rehabbing the property !!!!!!!!!!!!!!!!

Apr 05, 2010 04:00 PM #1
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Renée Burrows
Savvy Home Strategies Realty, LLC-REALTOR®-Estate-Probate - Las Vegas, NV
Las Vegas Real Estate Broker - www.urLVhome.com

Thanks for the mention!!  I agree with your assessment!  Too many buyers are passing up investor trustee sale flips because they appear to be overpriced but in reality I believe that is what our market is trending towards :)

Apr 05, 2010 05:24 PM #2
Rainmaker
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Cal Yoder
Keller Williams of Central PA East - Lititz, PA
Homes For Sale in Lancaster PA - 717.413.0744

Agreed Mike.

Glad to mention you Renee. It is worth doing.

Cal

Apr 05, 2010 05:56 PM #3
Rainmaker
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Andrew Mooers
MOOERS REALTY - Houlton, ME
Northern Maine Real Estate-Aroostook County Broker

Waiting on any real estate is a mistake..study the market, negotiate the best deal. In a foreclosure sale, not the world is on board and the emotions of bidding it up might make it more expensive to wait. Have lots of buyers who after the fact say " I didn't know they would sell it that low". They did not make offers, load up the offer gun and start shooting. This is the time to buy and rates..woo hoo, those won't stay that low and it's like two extra scoops of ice cream with that warm pie..of your favorite kind.

Apr 05, 2010 07:25 PM #4
Rainmaker
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Cal Yoder
Keller Williams of Central PA East - Lititz, PA
Homes For Sale in Lancaster PA - 717.413.0744

Andrew,

Can I stop by for the pie and ice cream?

Cal

Apr 05, 2010 07:32 PM #5
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Valerie Sagheddu
Apostle Art Home Staging & Design - Stroudsburg, PA
~Home Staging Professional, Poconos, PA

We are currently rehabbing our 3rd property. Improving the neighborhood one house at a time! We are still buying in a traditional manner with a realtor...my husband hates all the wheeling and dealing and we have been quite successful with our current strategy. It did take loosing 2 other properties to other investors to get this one, but that is ok because we got a GEM!...definately worth the wait.

Staging is the key to our success so any investor/flipper/rehabber, whatever you want to call it, should definately consider alowing for it in their budget!

Apr 06, 2010 08:25 AM #6
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Renée Burrows
Savvy Home Strategies Realty, LLC-REALTOR®-Estate-Probate - Las Vegas, NV
Las Vegas Real Estate Broker - www.urLVhome.com

Very cool to hear the success stories here!

Apr 06, 2010 05:47 PM #7
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Todd Clark
Keller Williams Realty - Beaverton, OR
Broker - Beaverton, Oregon Real Estate Expert - (503) 524-9494

I think it all matters what perspective you look at it from. I tend to think investors buying the properties as a good thing. It gets money flowing in a community, it makes the property and the surrounding properties worth more when they are fixed up and last but not least, it possibly gives a first time home buyer a home they can buy on a loan. (Since a lot of foreclosures are in such condition they can't be loaned on)

Apr 06, 2010 06:04 PM #8
Rainmaker
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Cal Yoder
Keller Williams of Central PA East - Lititz, PA
Homes For Sale in Lancaster PA - 717.413.0744

Valerie,

Thanks for your story. I am glad it is working well for you guys.

Renee,

Always appreciate your comments.

Todd,

Thanks for your thoughts.

Cal

Apr 07, 2010 09:20 PM #9
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Rainmaker
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Cal Yoder

Homes For Sale in Lancaster PA - 717.413.0744
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