In the early 1980's, when someone was talking about REO they probably meant REO Speedwagon not a home owned by a bank. Yep, back in the day when many of my friends and relatives were buying their first house, few thought a foreclosure home was a good deal. There was a section in the paper at the time for HUD homes. They were all dumps in the minds of buyers. It was deemed "too risky" to buy a bank owned home. Better to leave those houses for an investor.
In 1981 when REO (the band) was tearing up the charts with the now oldie but goodie rock tune, "Keep on Lovin' You", interest rates were 17%. That's not a typo...Seven-TEEN percent! Geez...it's a wonder anyone bought a house in the 1980's!
Back in the days of big hair and parachute pants, first time buyers had to scrimp on hairspray to save for a down payment AND closing costs. Sellers might pay a point or two to help bring down the interest rate but they rarely wanted to pay closing costs AND points. So a first time buyer needed to have thousands to put down on their first home.
There was no internet back then either so with REO belting out "Take it on the Run" on the cassette player, buyers would traipse around town with the Sunday open house ads looking to find a home. When they stopped in to talk to a friendly REALTOR®, there was no required agency disclosure. The buyers were supposed to instinctively know that the agent worked for the seller. Almost all agents were under contract to work in the best interest of the seller in those days no matter how nice the agent seemed to treat the buyer.
And believe it or not, despite all the cards stacked against them, many, many people bought their first homes in the early 80's-It was the American Dream after all!
FLASH FORWARD to TODAY
When someone is talking REO now, they are more than likely talking about Real Estate Owned by a bank. These foreclosed homes are no longer thought of as dumps for investors to deal with; they are opportunities. These homes are sold as-is but many are in amazing condition and at tens of thousands less than the homes sold for just a year or two ago. I have even seen some of these properties that are even new construction homes.
Can you say affordability? It is off the charts when you consider a foreclosed home! Check out this video which explains the 239% Affordability Index currently in the Twin Cities. (The music isn't rock, but the information rocks!)
Today, interest rates continue to hover around 5%. FIVE percent guys...Your parents, aunts and uncles signed documents agreeing to over 300% more than the rate available in this market. What an opportunity for a buyer today!
In this internet age, first time buyers can prescreen houses online with photos, virtual tours and more. Less driving and more time viewing the homes you really want to see!
Now first time buyers are in the driver's seat when it comes to representation too. You can hire a REALTOR® to represent your interests-Usually at no cost too! Since the early 1990's, buyer's representation has become a wonderful opportunity for home buyers to hire an agent to represent their interests. The seller still pays a commission which is split by both agents so there is no additional cost to have your own agent working for YOU!
And in 2009, first time buyers get an unprecedented $8000 tax credit to boot! This program isn't going to last forever but if a first time home buyer (or someone who hasn't owned a home in the last three years) buys a home between January 1, 2009 and November 30, 2009, they will get an $8000 credit on their taxes. There are a few details and restrictions (read more here) but most first time buyers will get to take advantage of this program.
First Time Buyers--What are you waiting for?
If you are the fence about buying your first home, thinking their might be a better opportunity coming, think again! This is a great time to be a first time home buyer. People who bought homes in the early 1980's did okay even with all the disadvantages they faced. First time home buyers today have opportunities only dreamed of when REO was on the Top 40 charts. Don't miss out...It won't be long before your best chance at the American Dream is just a retro memory!
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Copyright 2009 Teri Eckholm http://www.terieckholm.com/
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