Buyers Pursue Cheap Foreclosures in Droves

Price levels are incredible, what other word can be used to describe what is happening? Lenders who have an abundance of inventory are selling homes at prices not seen in a decade. Investors, first-time buyers, retirees, and move-up buyers are taking full advantage. Deals can be found everywhere - from newer built homes on the valley's fringes to fixer-uppers in central Phoenix to Scottsdale luxury homes to old condos in Mesa.

Keep in mind foreclosures have their own set of issues: bidding wars (yes, they are back!), financing issues, repair costs. On the flip side the prices we are seeing were unthinkable just a few short years ago.

About half of available inventory is bank-owned homes or homes banks are fixing to take back. The number is expected to increase in the upcoming months.

How do you find foreclosures? Through a real estate agent and on most internet sites.

Before you buy, check out the neighborhood, especially the street the home sits on. How well is your desired home priced against the competition? Are there alot of empty homes? Check out the schools and road. Buy the ugliest home on the block.

A very hot segment of the market is in homes under $100,000, mainly found in the west valley, south Phoenix, and in Pinal County, areas that have been clobbered by the downturn..

Homes with the most physical damage and highest foreclosure rates with provide the most opportunity. Banks are not in the business of owning real estate, and they certainly don't want to pay for repairs, therefore they are going to discount the home accordingly.

Condition of foreclosures vary: every once in a while they are completely turnkey and ready to move in, but that is the exception rather than the rule. Some have been stripped of appliances, light fixtures, and even bathroom vanities.

For best results when dealing on the buying side, it's best to write "clean" offers without alot of contingencies or demands, i.e. that you must sell your home before you can buy this one. Banks would rather wait for another buyer to come along without holdups, and they are certainly drawing them out.

More and more buyers are using cash, as the ability to obtain financing has become immensely more difficult. 30% if sales in January were cash, up from 19% a year ago. For buyers that plan on occupying the home, FHA loans are available with 3.5% down payment. The program limit is currently $346,000. The house must be considered "livable", which means there cannot be broken windows, peeling paint, missing flooring, or mold, among other things. These loans typically do not provide for renovations, although there is a 203(k) loan which can accomplish this. With this type of loan the renovation expense is added onto the purchase price of the home.

Other financing help may be on its way. Arizona is supposed to receive $121 million next month, a portion of which will help buyers purchase foreclosure homes. This aid is coming from the Neighborhood Stabilization program through the federal government. The city of Phoenix plans to use a portion to give qualifying buyers $15,000 to cover down payment or closing cost assistance on buying a foreclosed home.

Investors have reentered the market in a big way. If bought right a home can be fixed up in 4-6 weeks and ready to resell as a profit. Be sure to keep an eye on other foreclosures, that you are not undercut.

Foreclosure prices have been a blessing for first-time buyers, who have previously been priced out of the market.

Last month, foreclosure sales climbed to about 70% of all valley resales, a figure that may alarm current homeowners.

The good news is that these homes must be fixed-up and resold, so better days lie ahead for everyone, as the market moves forward to recovery