A new wave of foreclosures is expected to be coming as banks work through huge backlogs of distressed properties on their books. So what does this mean for buyers and sellers this year?
An article at Bankrate.com recently highlighted how foreclosures may be impacting your customers, including:
1. Confusing the perception over price.
As Louis Cammarosano, general manager at HomeGain, says in the article, “Sellers think their home is worth more than it really is, and buyers think the prices are too high.” Distressed properties are widening the gap between seller and buyers’ perceptions over price. Why the discrepancy? Sometimes real estate professionals don’t include foreclosures and short sales when showing comparable sales data to home sellers but that might skew the picture.
2. Questioning locations.
Buyers might see a home they like in a neighborhood with several foreclosures and short sales nearby, which may then make them reluctant. However, if investors are snagging up properties in the area, buyers might get more confident about their purchase.
“Investors are interested in neighborhoods that were beat up by foreclosures and that have other redeeming features that they then believe will be the first to bounce back,” says Stephen Israel, president of Buyer’s of Edge Co. in Bethesda, Md. Homes near public transportation, highly ranked schools, and shopping and amenities could offer good "bounce-back" values, he adds.
3. Removing urgency.
The Federal Reserve has taken the rare step of vowing to keep key interest rates low through late 2014. The result? Many buyers are waiting on the sidelines, believing they’ll be able to snag homes at an even lower price and still take advantage of a historically low interest rate.
"The perception that prices could go lower, a lot of foreclosures in the pipeline and (the expectation) that rates will remain low -- that's certainly keeping some people on the sidelines," Cammarosano says. But interest rates and prices can change quickly.
Source: “How Foreclosures Affect Buyers and Sellers,” Bankrate.com (March 27, 2012)