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Foreclosure sales account for 26% of sales in 2010

Realtytrac, the leading online marketplace for foreclosure properties just released statistics for the fourth quarter, 2010.

Foreclosures are down

Sounds promising until you read deeper into the report. Foreclosures accounted for 26% of the overall market nationwide, down from a record high of 29% in 2009.  It’s great to see the decrease, but that is still a staggering percentage of the overall market!

Overall home prices get dragged down also…

When bank owned properties were just a small portion of the market (less than 10%), their sales prices were viewed as an aberration. One bank sale didn’t really affect the values of other homes in the neighborhood. But, when the percentage of REOs increased, it started to negatively affect the values of other homes (see my previous post: What is lurking in the shadows). In the report by Realtytrac, Washington foreclosures sold for an average of 30% less than their Fair Market counterparts.

Lower Prices = More Investors

As the sales price ratio of REO : FMV sales increases, so does the investor activity. That’s when the smart money begins to show up. To put it into perspective, if you could buy something for 70 cents on the dollar, wouldn’t you be interested too?

But what if prices continue to decrease?

Savvy investors know that it’s nearly impossible to buy at the absolute bottom of the market. In fact, they tend to buy as the market is still going down (but they anticipate that it is just about to hit bottom and begin the incline). Contrast that with the general public who tend to buy when the market is going up (but don’t realize that it is just about to peak and start to decline).  If you take the long term approach to investing, who do you think will end up ahead in the long run?

More Foreclosures = More Renters

The sad but unfortunate result of a foreclosure is that somebody just lost their home.  But, they still need a place to live. The reality is that families who have lost their home to a short sale or foreclosure end up renting a similar, yet smaller home than what they just came from.  This presents an opportunity for smart investors, especially when they can purchase properties for 70 cents on the dollar!

He Who Hesitates…

I have been working with some investor friends for the past month or so.  We have seen 3 homes that they felt would be perfect opportunities for them as rentals.  Unfortunately for them, others felt that way as well. My clients lost out on all 3 of the homes to buyers who were faster at pulling the metaphorical trigger.  They now know that if it feels right to them that they need to act fast, even in this market.

What are your thoughts? Would you like to become a savvy real estate investor? Call or email me for a list of bank owned properties in your area.

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