According to Campbell Surveys, 47 percent of all home sales currently are on distressed properties. A distressed property is one that is either in the foreclosure process or has been foreclosed on. Homeowners executing a pre-foreclosure sale and banks prefer the quick cash of an investor to waiting 30 to 45 days (or longer if the borrower applied for a loan through a bank) for a buyer using financing to buy the home. Investors bought 23% of all homes sold in the past year, 3 out of 4 of them paying cash. This is causing downward pressure on home prices since investors with cash are typically paying 10 to 20 percent less than someone who would by the house as a primary residence, and cash-in-hand right now speaks loud to someone facing foreclosure.
Is this a concern? I think it is right now, but, those homes being bought by investors now will be resold at or near market price, usually within 6 months of being bought by the investor. So the market will correct itself, it will just take a bit longer. And being full-value sales home values may increase faster than we think.
If this shows anything, it’s if you are looking to take advantage of a foreclosed home, or one in foreclosure or being sold as a short-sale, have your ducks in a row and have your financing in place before you place an offer. If everything except the appraisal and title work has been done a purchase loan can usually be closed in 14 days or less.