Another option is a real estate owned property. If you’re buying an REO, the foreclosure process has already occurred and the bank owns the home. Investors can find out about REOs through real estate agents who specialize in them. But a caveat with REOs is that lenders and the companies that service the loans for these properties are now overwhelmed by the number of properties coming back and can’t respond to an offer as quickly as a buyer would like. In addition, banks may not want to hold on to these properties, but they’re also not willing to give them away for pennies on the dollar, says RealtyTrac’s Sharga. Lenders also try to get rid of homes through auction, but novice investors shouldn’t attempt this method, experts say. You often have to show up at the auction with enough cash to buy the property on the spot, often can’t inspect the home in advance, and the current owners might very well refuse to leave.Websites such as USHomeAuction.com and RealtyBid.com promote auctions and, in some cases, do online auctions of homes nationwide.
Of course, some investors might be inclined to sit out a while longer so that they can get an even better deal in the event the market worsens. But real estate experts warn against this. At this point, it’s any man’s guess. ”If one waits just for prices to bottom out, it doesn’t guarantee that interest rates will be low with good terms,” says West, the Los Angeles broker. “But if the buyer purchases now and just rides the cycle, even if the property lowers in value at some point, it’s not a realized loss unless the buyer sells it while the market is down.”
Homeownership Contest 2008
Though the housing market is hitting a rough patch, to say the least, the road to greater wealth still starts at home. In every issue of BLACK ENTERPRISE, the Black Wealth Initiative section highlights our Declaration of Financial Empowerment, which begins with Principle No. 1: I will use home ownership as a foundation for building wealth. It’s a critical starting point because home equity (the value of the home minus the mortgage debt) constitutes the largest share of household net worth—some 32.3%, according to a 2000 census report.
Given the real estate headlines, it might be tempting to remain on the sidelines and put off home ownership for another day—but don’t count yourself out. You too can find your way to solid ground and a home of your own. Enter the 2008 BLACK ENTERPRISE Home ownership Contest and win a cash award toward the purchase of your first home. Last year, Elena Borneman won $10,000 toward her mortgage on a $140,000, three-bedroom home.
Contest entry forms will be accepted from July 14 to Aug. 29, 2008. Entrants must be planning to purchase a home by the end of this year and qualify for a mortgage. Applicants are also required to write a brief essay discussing their journey to home ownership. To enter, go to blackenterprise.com/homecontest.
States with the Most Foreclosure Filings, May 2008
1. Nevada, 118
2. California, 183
3. Arizona, 201
4. Florida, 228
5. Michigan, 353
6. Georgia, 378
7. Colorado, 388
8. Massachusetts, 406
9. Ohio, 410
10. New Jersey, 467
# = Ranking No. below ranking signifies1 foreclosure for every X homes.
This story originally appeared in the July 2008 issue of Black Enterprise magazine.