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Foreclosures 101 A Perfect Alignment

Posted by Internet Guru
August 31, 2009

Real Estate is a commodity just like anything else in our society and when the prices get too high, just like the stock market it adjusts down to where the majority of buyers believe that there is value. So, when real estate is high, few buyers buy and when real estate is priced below the comparables, more people buy. If you buy and you’re an owner occupant and you plan on staying in your home say 5 to 10 years, then the markets ups and downs don’t concern you so much.  However, if you’re a speculator and you buy near the top of the market and the values peak then turn down, you could be holding a commodity that is worth less than what you paid for it. And that doesn’t make a very good short term investment.

So, exit strategies when buying properties are pretty important. Now in our recent market many speculators and home owners, have extended themselves by buying expensive properties with the expectation of continued appreciation, and owner occupants with poor credit and no money down, used short term arms (Adjustable Rate Mortgages) and went out on a limb and got involved with property that they also hoped would continue to appreciate. And so, because of all this speculation, we have the highest amount of foreclosures then ever before.

However, because property values turned down, and property owners were not able to sell their properties, their arms reset and left them with higher interest rates and larger payments that they couldn’t meet. These circumstances have left first time home buyers and investors with an enormous opportunity to make some money with these foreclosures. Now given that money in real estate investment is made when you buy the property, it’s a great time to buy property at a discount with very low interest rates. The only thing that is challenging us right now is the exit plans. And so now with the amount of present inventory, it’s imperative that you purchase at a low price and that you sell at a low price compared to properties that are for sale in your area. So, it’s always best to price a property at a price that is less expensive than the other properties are going for in your particular area.

Foreclosures have been around forever, only now there are just more of them. In 2004 the number of foreclosures was 2% of the total sales in the U

S.  During the first quarter of 2008 in Stockton California, 72% of its sales were in foreclosures. In Las Vegas during the first quarter of 2008, 45% of the properties closed were in foreclosures. So, you can see why there is so much interest in foreclosures.

What happened to create this situation? People with poor credit and bad credit were given loans for property when they shouldn’t have gotten them in the first place. In California they were actually qualifying people at 22times their annual earnings instead of 3times which is normal. They were hoping that the appreciation would continue and that they could get out of the property with a fistful of money and use it for a down payment in a more affordable market. However, the market lost its steam and property values dropped and these buyers were stuck with a property that many times were worth less than what they paid for them. When their loans reset, they couldn’t make the payments. Investors also bought homes hoping that they could ride the gravy train and earn a lot of money for being at the right place at the right time.

Many people are walking away from their homes and they’ve actually got good credit and can afford the payments. However, their thinking is, why make payments on a property if it isn’t worth what I paid for it, and it might take several years for the property values to come back. So they are just letting their property go into foreclosure. This brings us to a great opportunity for the investor who knows what they are doing. Let me underline that. Every once in a while the planets are aligned and everything is in sync for a stupendous opportunity. That’s what’s going on in real estate today.

(ArticlesBase ID #1175647)

http://www.realtybonanza.com

Article Source:http://www.articlesbase.com/business-opportunities-articles/foreclosures-101-a-perfect-alignment-1175647.html

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