Spring Real Estate

Foreclosures: Courage And Work

By Shelley K. Schwartz

If you believe what you hear from real estate veterans, there’s never been a better time to take advantage of fire-sale prices in the foreclosure market.

A sign showing a foreclosed house is seen in Glendale, Calif., Monday, August 20, 2007. Foreclosure filings rose 9 percent from June to July and surged 93 percent over the same period last year, with Nevada, Georgia and Michigan accounting for the highest foreclosure rates nationwide, a research firm said Tuesday, Aug. 21, 2007. The filings include default notices, auction sale notices and bank repossessions. The figures are the latest measure of the ailing housing market, which has seen defaul
Kevork Djansezian

Indeed, despite government efforts to bail out homeowners, the number of residential foreclosure filings continues its upward ascent across much of the country, creating a rare opportunity for educated investors to build instant equity.

"It’s getting better from an investor’s perspective," said Rick Sharga, spokesman for RealtyTrac.com, an online foreclosure marketplace.

"There’s more inventory coming on the market and it appears to be coming on at lower prices."

Sizing Up The Market

Distressed properties have long appealed to investors who are looking to buy cheap -- and aren’t afraid to roll up their sleeves.

In most cases, buyers can purchase such homes for 20 percent to 60 percent off their potential market value.

"This is a market where somebody who does their homework can save significant money on a home purchase and create a nice investment opportunity on a longer-term basis," Sharga said.

Investors entering the market today, however, will have to employ a different strategy than those who came before.

"If you’re looking for something to buy and hold, investing in a foreclosure is a very reasonable thing to do right now," said David Wyss, chief economist for Standard & Poor’s. "If you’re thinking about a quick flip, forget it."

Sharga agrees.

"What’s fundamentally shifted about this market is that it used to be suited for investors who were looking to buy, renovate and sell," he said. "Now, we’re looking at people who can afford to buy and hold, either with the notion of turning a property into a rental unit or sitting on the property until the market rights itself again."

Indeed, certain segments of the residential real estate market have taken a hit over the last three years as would-be buyers sit on the sidelines waiting for prices to bottom out, particularly in cities like Miami, Boston and Los Angeles that benefited most from the housing bubble.

Nationally, existing home prices are projected to decline 1.2 percent in 2008 to a median of $216,300, and then rise 3.2 percent to $223,200 next year.

Making Money From Foreclosures

At the same time, the number of foreclosure filings –

default notices, auction notices and bank repossessions