Home buyers not so typical

According to statistics from the local MLS services, about 35 percent of home sales during the past year have involved either bank-owned post-foreclosure properties or HUD foreclosure resales. And in the vast majority of those sales, the property is sold to the buyer on an “as-is” basis. Most of these homes needed a minimum of several thousand dollars in repairs.

So who is buying these houses?

The answer is, in most cases, not the typical owner-occupant purchaser in pursuit of the American dream. Most of these houses are not in good enough condition to qualify for placement of a conventional home loan, and without that financial assist, most buyers are unable to purchase.

In addition, few “retail” home buyers have the vision to see the diamond in the rough. Instead, most retail buyers need a home they can occupy immediately.

Most are being bought by investors who are pursuing one of two strategies:

● They are buying these “ugly ducklings” at wholesale prices, then rehabbing them to new-home standards. Once complete, they offer them for sale at prices below what a typical buyer would expect to pay for a home with comparable features.

I saw an investor-owned rehab in Stone Mountain recently that might as well be brand new. It has three bedrooms, two full baths, a fireplace, garage and a privacy-fenced backyard. Upgrades included new granite countertops, high-end faucets and fixtures, and all new lighting throughout. In addition, the HVAC system is less than a year old, and the house is under a one-year warranty. All this for only $93,000.

The wholesaler said that because he had acquired the house from a lender for only $33,000, he was able to build in a reasonable profit for himself and still offer the home to an owner-occupant for a remarkable price.

● Other investors are buying now and making only the minimum repairs needed to make the house safe and livable. They avoid major system repairs when possible, hoping to rent for several years and watch the market recover.

Both strategies are viable. Whichever strategy they choose, there are specific characteristics these investors seek. Next week, we’ll examine them.

John Adams is a broker and investor. He answers real estate questions on radio station WGKA (920 AM) every Saturday at noon. For more real estate information, visit www.money99.com.

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