Homebuyers are showing high interest in buying foreclosed homes but are also worried about hidden costs and whether they have been well maintained, according to a new report.
More than half of U.S. adults say they are at least somewhat likely to consider purchasing a foreclosed home in the future, compared with the 47 percent of U.S. adults who indicated the same in November 2008, according to a study conducted by Harris Interactive.
Jill Landsman, spokeswoman for the Northern Virginia Association of Realtors, said that the stigma of purchasing a foreclosed home is declining in the current market.
“Some foreclosed properties actually have bidding wars,” she said. “The existence of the foreclosed listings is the new frontier for homebuyers.”
Rick Sharga, vice president of marketing for the online foreclosure-tracking Web site Realtytrac, said that first-time homebuyers comprise a large part of the current real estate market. He estimated that between 50 and 60 percent of homebuyers right now are first-time homebuyers, and about 30 percent are investors.
Peter Flint, chief executive officer of the real estate search site Trulia.com added that consumers are aware of potential problems with buying foreclosed properties, but many first-time homebuyers are “prepared to make some compromises” with respect to the length of the process and fixing up damaged properties, for example.
Indeed, though overall consumer interest in buying foreclosed homes has increased, according to the study, it also found higher levels of negative sentiment around purchasing foreclosed properties.
In November of 2008, 80 percent of U.S. adults felt that there were negative aspects to purchasing a foreclosed home. That number rose to 85 percent in May. Among those 85 percent, 71 percent cite hidden costs as their top concern, 46 percent believe the process is risky and 31 percent are concerned that the home will lose value, the report said.
Younger people comprise a large chunk of the market right now, and they’re probably more willing to take on houses that need work than are more mature homeowners, Sharga said.
Potential homebuyers should simply ask the bank if it’s willing to make the repairs, which could remedy one source of the concerns surrounding foreclosed properties, Landsman suggested.
“Our Realtor members are surprised about the deals they’re getting,” she said. “What was one family’s poison turns out to be another family’s medicine.”
The survey — other findings
» Two-thirds of U.S. adults between the ages of 18 and 44 (66 percent) would consider purchasing a foreclosed home, compared with a little more than one third of those ages 55 and older (38 percent). Respondents ages 45 to 54 fell in between, with 53 percent indicating that they would be at least somewhat likely to consider a foreclosed property.
» Current renters (68 percent) are more likely to consider purchasing foreclosed home than current homeowners (49 percent).
» U.S. adults with children under 18 living in their household also show an increased likelihood to consider foreclosure properties, with 66 percent indicating they would be at least somewhat likely to purchase one, compared with 49 percent of those without children under 18 in the household.
Source: Trulia/Realtytrac/Harris Interactive
