Open House by Jim Woodard

Purchasing a foreclosed home is still an attractive option for many buyers, but overall their appeal is diminishing, according to a recent survey.

Currently, the most active seekers of a foreclosed property are first-time buyers, investors, homeowners wanting to trade up to a larger home and renters wanting to become homeowners. Harris Interactive conducted the survey, as commissioned by Trulia.com and RealtyTrac.

Foreclosed homes offer a significant opportunity to many consumers, particularly investors, the survey report noted. Nearly one in four adults (23 percent) are at least somewhat likely to purchase a second home or investment property. Of these prospective buyers, 92 percent are interested in buying a foreclosed property.

The expanded housing tax credit, including a $6,500 credit now available to current homeowners, has boosted the interest level for the purchase of a foreclosed property. This activity will likely increase over the next several months, the report projected.

About 24 percent of homeowners are at least somewhat likely to trade up to a larger home in the near future, and 88 percent of those buyers would consider a foreclosed home. Renters are showing particularly strong interest in acquiring a foreclosed property, with 54 percent expressing interest in purchasing a distressed property.

"Consumers expect to get a lot more for their dollar when purchasing a foreclosed home. Nearly two out of three adults expect a discount of 30 percent or more when buying a foreclosed property," the survey report stated. "Some expect up to 50 percent or more.

"Even during the darkest economic times, dreams don't die. Foreclosures are providing never before seen opportunities for new segments of home buyers. It allows renters to become first-time buyers and investors to grab great deals."

The most active and qualified buyers in today's market are highly interested in foreclosers. "That's not surprising given the discount that often comes with a foreclosed purchase," said Rick Sharga, senior vice president of RealtyTrac. "It is surprising that consumers cited hidden costs as the biggest negative aspect to a foreclosed home purchase. Most bank-owned foreclosure sales include the same title protections and other safeguards that are in place for non-forecloser sales.

"As myths such as this are put to rest and consumers take more time to educate themselves on the process of purchasing foreclosures, they will be able to take advantage of the bargains that currently exist in the real estate market," Sharga said.

Q: Will home prices increase in 2010?

A: A recent survey of Realtors shows that 72 percent think home prices will either stay the same or increase in the next six months.

The study also included a survey of consumers. About 41 percent of homeowners believe the asking price of their home should be 10 percent to 20 percent higher than their Realtor recommended. Conversely, 62 percent of home buyers think homes are generally overpriced. No surprise there.

"Our fourth-quarter survey shows that Realtors believe the home-buyer tax credit has driven sales and stabilized home prices, at least for now," said Louis Cammarosano, HomeGain's general manager. "The vast majority of Realtors expect home prices to remain the same or increase during the first half of 2010."

Q: Are there substantial risks in signing up for a reverse mortgage?

A: Reader Joe Demetrius sent a particularly interesting e-mail on that subject. Here is part of that message:

"In a recent column, you noted that predatory practices are still commonplace in reverse mortgages. While closer legal scrutiny of incentives for yield spread premiums is certainly a step in the right direction, I think it is important to realize that protecting seniors from abuse by fee-hungry salesmen is often an unfair fight because sound reverse mortgage decisions require a huge upfront investment of time and energy by everyone involved in the decisions.

"Children and other relatives of seniors contemplating a reverse mortgage often don't have the time to learn, distill and communicate reliable information to others in the decision-making group. As a result, confused seniors, even after counseling, often defer to the "wisdom" or "expertise" of their banker-salesman. The results, quite often, are less-than optimal for seniors. This is quite tragic, of course, because seniors needing a reverse mortgage are exactly those who can least afford to pay a 'yield spread premium' amount (an extra high fee for charging the customer more than the normal amount)."

Demetrius has written an e-book on this subject. His phone number is 336-286-3528.

To find out more about Jim Woodard and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

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