Are Investors returning to Real Estate? –

Several clients are interested in REOs (Real Estate Owned foreclosures) hoping to snag a great buy in this down market. This week, while researching two neighborhoods hit especially hard with REOs, I noticed a few interesting signs that show investors returning to the market.

First, several REOs closed escrow at prices higher than the asking price. This could be a sign that some homes are listed below market value. It could also mean that investors who want to leverage this down market will make a fair offer in an effort to avoid wasting time in a bidding war. Investors know this down market won’t last forever.

Second, REOs appear to be selling quicker, as good deals should. Prices have been dropping and may have reached the point of becoming compelling. Investors think long-term and often look at the market holistically. They’ve see the drop in available rentals, they’ve seen the drop in home prices, they see the opportunity for positive cash flow and future equity … they strike.

Last, several REOs were purchased with cash. As the market begins to improve, cash purchases drive a stronger return for investors. The hotter the market, the more likely investors will use other people’s money in the form of a loan. Cash sales of REOs could mean that investors believe the market is improving but not yet the hot market of years past.

So what does this mean for the person or couple looking for a good deal on a primary residence? It means competition, not just from other homebuyers but also from investors who want to make a quick deal. Competition means that prices will likely stabilize or even increase a bit. With investors in the market, low-ball offers become less effective. Homebuyers should determine an offer that is fair enough to be considered. If you really like a home and plan to own it for a good length of time, you may want your offer to not only be fair but also somewhat compelling.

The goal is to help you purchase a home you want, at a fair price that builds equity for you in the future. I hope you’ll search for a Realtor that enjoys doing research and provides the data and insight you need to make decisions that are best for you.

Happy House Hunting …