According to the Move.com survey, one out of eight (12.1%) homebuyers today plan to purchase a home as an investment property, compared to 5.6 percent seven months ago(1). Of those interested in buying a home for investment, 15.8 percent were men and 8.1 percent were women.

Foreclosure buyers, accounting for 25.3 percent of consumers interested in purchasing a home, are a major source of potential investment activity for today’s housing market. Forty-two percent (42%) of potential foreclosure buyers regard their purchases as investments, while 57.6 percent plan to live in the foreclosed home themselves. Foreclosure investors, according to the Move.com survey, intend to convert their foreclosures into rentals (13.2%), fix them up for re-sale (11.3%), or house a family member until the home can be sold at a profit (17.4%). Of the forty-two percent interested in purchasing a foreclosure as an investment, survey respondents ages 35 to 49 (52.6%) were by far the largest demographic.

Expected Profits Gained From Purchase Discounts and Appreciation

The Move.com survey found foreclosure buyers expect to profit from both deeply discounted purchase prices, as well as healthy appreciation rates over five years. Most foreclosure buyers (58.2%) expect to pay 20 percent or less than market price for a foreclosure, while 38.5 percent expect a 25 percent or greater discount. While, 73 percent expect their properties to appreciate ten percent or more in five years, 28 percent expect their purchases to appreciate 20 percent or more during that same investment horizon. According to the Federal Housing Finance Administration’s Purchase Index, homes have appreciated an average of 15 percent nationally since 2004(2).

According to the Move.com survey, the most important reasons motivating prospective home buyers and investors to purchase a house include concerns that prices are as low as they will go (23.6%) and desire to take advantage of foreclosure bargains (18.7%). The second most important reasons motivating property purchases include taking advantage of the great selection of homes for sale in their community (21.2%) and concern interest rates will rise (14.2%).

“This latest Homeownership Survey validates what many had hoped to see in the housing markets — affordable prices and ample inventories are restoring the appeal of real estate to investors while providing opportunities for first time home buyers to enter the market,” said Move, Inc., Chief Revenue Officer, Errol Samuelson. “In today’s environment, regardless of whether you’re an investor or interested in purchasing a home to live in yourself, residential real estate is a more attractive investment today for many than it has been in recent years.”

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First Time HomeBuyers, Shifts in Motivation, and Affordability

It is that appealing sight that makes a long lasting effect on the visitor as they walk into the magnificent edifice you created. If your house creates such impression, it will not be difficult selling at higher price more than similar houses in the neighborhood. And that it will be sold faster than others in the neighborhood.

How do create a lasting curb appeal?

Take care of the exterior frontage view of your house: this includes

• Your lawn: is your lawn still a healthy sight from a long view? Is it an eye sore for anyone interested? To get a good curb appeal you need to mow the lawn, have it trimmed and nurtured. Be sure that the plant beds are thoroughly trimmed. Sometimes you need to drive out of your house to take a good look at your lawn.

• Repairs/ cleaning: another thing that one will look at to create a curb appeal is to do any necessary repairs on the windows and the doors. Do some major cleaning of the house. Get rid of all dirt including spider webs. Change the bulbs, and have everything clean and neat to appeal to those interested in it. Make sure that fences, walkway and driveway are rightly fixed and repaired.

• If you are really keen of getting the house sold on time and at good money, this is paramount for you to do. Paint the exterior, this would brighten up the house and create the first impression. Be careful to choose the color that appeal to both sexes. So that you don’t get any visitor discomfort able with your colors.

• Get a third party: if you are going to attract buyers into your property, you need to get an objective view of the house from a third party. Get somebody you know can give you a candid opinion, to take a long view of the curb appeal you have created. And to give an objective view of the house. Work on his corrections again and again until you have almost spotless appeal.

• Make your house appealing even at night: don’t make the mistake that what you created during the day will be same at night. Curb appeal should be enticing both in the day and at night. To get the most of this appeal at night you need to have a string of low voltage lighting at the right points in your house. This can bring out the beauty and quality of the house to any interesting buyer. You can embroider this with a decorative street lamp or beautiful light fixtures.

• Don’t forget the rear view of the house: buyers can be diligent to view the house from the rear view. So be sure you complete your task by getting the backyard appealing. Doing this will definitely get you a quick response if you think of selling the house.

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1) Price is usually set by the agent & seller, not bank – The agent and seller often create a very low asking price in order to attract buyers. The bank is normally unaware of the asking price; however, the bank has the final say in what an acceptable offer will be. Since the bank has the power to ultimately accept or deny offers, their lack of price awareness often leads to the process taking longer than anticipated. The bottom line is that the buyer needs to remain positive and patient throughout the entire process, sometimes even for months.

2) Loans owned by 1 bank usually better than 2 – If the seller has loans owned by two different banks it is a lot more difficult to approve the short sale. This is something the agent or the buyer cannot control; it simply depends on the willingness of the bank or banks involved. While the reasons are beyond the scope of this guide, buyers should know that when the seller only has loan(s) with one bank the short sale often becomes more buyer-friendly. A savvy Realtor can let you know this type of information.

3) Lowball offers get slow or no response – Remember that the bank is typically unaware of the pricing during a short sale. When lowball offers stream into the bank they are often scoffed at and rejected, giving the prospected buyers little or no feedback. Surprisingly, it may also take painstakingly long to hear back even on good offers due to the high volume of transactions lenders are inundated with these days.

4) Agent must check comparables before submitting offer – The agent must be sure to check recent home sales in the area to give buyers a better idea of the properties that are selling. This will give the agent and the seller appropriate grounds for an asking price that will be more likely to be approved by the bank. Checking comparables will also give the buyer a better knowledge of what price homes in the neighborhood are selling for and ultimately make them a more informed homebuyer.

5) Don’t hang your hat on the property – Short sales aren’t necessarily “short.” It can sometimes be a very long process. Don’t get your hopes up for just one property, keep your options open and continue to actively look at multiple properties. Buyers must remain optimistic, the right property will come along. In most areas it is completely legal and risk-free to have multiple offers out at any given time with the proper contingencies.

6) Sellers with other properties or too strong of financials may not qualify for short sale and/or may be asked to pay the difference – Sellers that own more than a handful of properties or have an extremely large net worth will probably not be eligible for short sale. In some cases the seller will be asked to pay the difference of the sale. The seller might even need to sign a promissory note stating that they will pay back all or most of the debt. This has virtually no effect on the buyer as long as the seller cooperates.

7) “Approved” prices are quickest – It is important to remember that short sales are not always timely; however, making an offer on an “approved short sale” can be a quicker process. An “approved short sale” has a price that has already been given the green light by the bank. This could be due to the fact that another interested buyer made an offer that was approved, but didn’t end up buying the property. These types of short sales are some of the most highly desirable.

Some banks look want strongest buyers, some want strongest offers – The bank has all the power in approving short sales. The bank can pick the most appealing buyer, which may mean different things to different banks. Some banks may prefer the buyers with large down payments while others just want the highest price regardless of down payment. Many buyers want to know if they will get a deeper discount for an all cash offer. This is very hard to predict and one will never really know until they make an offer. As long as the buyer is surrounded by a good team we would advise them to do just that.

9) Repairs are seldom done, credit is more frequent – If there are improvements that need to be made on a home, even if they are necessary to get a loan, it is often unlikely that they will be done. Typically there is some sort of credit issued and the buyer must take the responsibility of fixing anything that is broken.

10) When you get approval, must close on time – During a short sale there is no leniency with the closing escrow date as there often is in a traditional sale. During a short sale, exceptions are rarely made and the buyer must close on time. Because of this, it is important to take care of all loan paperwork immediately after opening escrow. We’d advise buyers to be extra prepared and try to have the loan finalized a few days in advance of the closing date. If there is going to be an issue that will prevent closing on time, a request for an extension will need to be made immediately. If the request is made early enough, many banks will grant an extension but don’t just assume it will happen.

Conclusion
Short sales can be a great opportunity to find your new home at a competitive price. A Short sale could also be a major headache that lasts for months. It is important to have a good understanding of the factors that lead to a successful short sale to make it an enjoyable and profitable experience. We hope that these tips will help you to remain positive and optimistic throughout the process.

About the Author:Todd Foust is the chief marketing executive for the FOUST Team at C21 Discovery; one of the top-selling real estate teams in Southern California. He specializes in Orange and Los Angeles Counties and operates one of the areas most informative real estate websites. To contact him or learn more about Anaheim real estate, please visit FOUSTonline.com.

About the Author: Jennifer McNamara works as a creative marketing contributor/manager for the FOUST Teams public relations division. She is a Southern California native and specializes in translating complicated real estate knowledge into user-friendly information for local homebuyers.

Contact Kerry at kj@BestofUs.com
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