Buyers Willing to Forego Foreclosed Property Repairs
Demand for foreclosed properties is heating up in certain markets where the supply is shrinking at increased speed.
For example, Arizona is a very hot market right now, says Brent Taggart of Green River Capital. In popular areas such as Phoenix “listed homes are getting multiple offers and selling fast.”
A new twist, Taggart says he has never seen before during the 16 years he has been working in the mortgage business, is a desire to purchase these properties in an “as is” condition. He finds that homebuyers are purchasing assets as is because they prefer to make repairs themselves.
Historically in a buyer’s market private, individual buyers would negotiate with the seller in an effort to lower the sales price and expand property improvement options before loan closing. Investors on the other hand, as a rule, would rather take upon themselves all needed repair costs and negotiate the sales price based on potential property improvement demands.
Today, mostly due to the crisis and the recession, observes Taggart, the mindset of buyers has changed even though individual buyers still have the upper hand. “It was not done this way in the past.” any homebuyers choose to acquire a property in “as is” condition and take charge of repairs and renovations for a number of reasons.
“People have been saving so they are able to put a certain amount down and do the repairs at their own taste,” he says.
In fact, various customer trend reports are showing the average American is concerned about debt reduction and saving.
A recent National Foundation for Credit Counseling poll showed the greatest financial regret for 53% of the roughly 2,200 customers who participated is habitual overspending. It far outweighed other concerns such as inadequately saving at 18%, or not having bought a house at 10%.
Findings from a survey conducted by the Consumer Federation of America and the American Savings Education Council earlier this year revealed that 66% spend less than their income and save the difference. As a result they “have sufficient emergency saving to pay for unexpected expenses.Up to 42% have “a savings plan with specific goals.”
The 66% rate however is lower compared to 71% in 2011 and 73% in 2010 because the recession has not ended for millions of American families, but it has changed their spending habits.
Extended foreclosure timelines are affecting borrowers’ behavior. “Homeowners are calling to inquire about short sales and deed-in-lieu. They prefer to not be in default.” These changes have created a market for cash buyers and REO-to-rentals, he says. “I’m optimistic about where the REO market is headed.”