Buying Foreclosed Homes Is An Art
In this world beset by subprime mortgage meltdowns, the art really worth it lies in buying foreclosed homes. For doing this is no easy task. Naïve investors may tend to lose money while they may think they are getting away with the purchases of their lives. Only experienced investors can play this game with some finesse.
Although, many people have been playing this game for long, very few have kept abreast of the myriad of factors that can convert the so-called cheap purchases into losing propositions. The last two to three years have been quite educative in this respect. It was in 2005 that many homebuyers devised their game plans to invest in homes through adjustable rate mortgage (ARM) loans accessed from the subprime mortgage lending market in the US.
Obviously, they could not have taken the loans from the prime mortgage lending markets due to the various procedural requirements required for them as per law. So they took recourse to obtain the funds to buy the homes from the subprime mortgage lending market. In the case of the latter, no such procedural requirements obstructed their path. They had thought their game plans as perfect investment strategies. But where are these people today?
Well to say the least, their game plans backfired on them and heavily at that. The two years following 2005 were catastrophic for them. The reason was that factors unknown and unseen were at work in the background chipping away at their seeming gains. These factors were in the form of the change in the exchange rate market of the premier status enjoyed by the US dollar, which lost heavily. These factors also included a steep across the board drop in the sale prices of homes in the US. The third such concomitant factor caused the maximum damage to the creditworthiness of these investors. It came in the form of a steep climb in the interest rates levied on their subprime ARM loans. These three factors, when they heavily attacked simultaneously with their combined firepower, were enough to swiftly sink the ships of these investors in one mortally sweeping blow. Almost all of them could not stave off this powerful attack and were simply blown away. The homes they had so optimistically invested in 2005 went into foreclosure as they didn't have sufficient income at their disposal to pay off the loan dues as per the amortization schedules. The irony of the situation was that there were no takers for these foreclosed homes. This was because in most of these cases the sale prices of the homes had dropped below the total outstanding lien and other dues on them. New investors, both domestic and foreign, simply dropped out of sight. The former did so because there were better prospects than buying foreclosed homes not worth it. The latter did so, because the US dollar was so weak that they thought better to invest in other countries.
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