Can you briefly explain how foreclosures present such a great opportunity to real estate investors?
For about two years now, the U.S. housing market has been slowing with both new and existing home sales experiencing a tremendous downturn. Compounding/driving the issue, the sub-prime mortgage debacle has over-leveraged homeowners unable or unwilling to pay their increasing house payment when their variable rate mortgages “reset”. As property values decline, homeowners find themselves with no equity and no escape: unable to pay their mortgage, unable to refinance. The result is a foreclosure rate not seen in recent memory. Realtytrac statistics show the 2nd quarter 2008 foreclosure rate up 121% vs. 2007, and continuing to rise. The report also shows that one in every 171 U.S. households received a foreclosure filing during the quarter. When lenders complete the foreclosure process and take possession of these properties, they become REOs (Real Estate Owned). The accelerated rise of REO inventory has put pressure on lenders to liquidate these homes quickly.
