Who Wants To Buy A Foreclosure? Real Estate Investors, Trade-Up Buyers, and Renters

(MoneyWatch)  Who wants to buy a foreclosure? Fewer people than you might imagine.

RealtyTrac, an online marketplace for foreclosures, and Trulia, a search engine for real estate listings, said that overall interest in buying a foreclosure declined to 43 percent from 55 percent, according to the results of a new survey.

In a conference call this morning, Trulia co-founder and CEO Pete Flint said that 81 percent of Americans have a negative view of buying foreclosures, due to hidden costs, the perceived risk and the feeling that the home could lose value, a number he called "bleak." In May 2008, just 69 percent viewed the purchase of foreclosures negatively.

But interest in foreclosures among real estate investors, trade-up buyers and renters remains strong.

According to the survey:

• Nearly a quarter of all adults would buy a second home, and of those 92 percent said they would buy a foreclosure.
• About 24 percent of homeowners are at least "somewhat likely" to trade up to a larger home. Of that group, 88 percent would consider buying a foreclosure.
• Fifty-seven percent of renters said they are at least somewhat likely to buy a distressed property. But younger renters feel even better about foreclosures: 61 percent of renters aged 18 to 34 and 65 percent of renters aged 35 to 44 would consider buying a foreclosure. Just 40 percent of renters aged 55 and older would consider a foreclosure.
• When real estate investors, trade-up buyers and renters are interested in foreclosures, it's because of the possible discounts available. Sixty-five percent of adults expect a discount of at least 30 percent when buying a foreclosure. Forty-three percent of those living in the Northeast expect a discount of at least 50 percent when buying a foreclosure.
• According to the survey 95 percent of buyers are willing to spend money to fix up their foreclosures, with 55 percent willing to spend at least 20 percent of the purchase price. In a separate survey, Trulia found buyers of a property willing to spend up to $30,000 for various items, including new paint, carpet, mechanical systems and appliances.

"Even during the darkest economic times, dreams don't die. Foreclosures are providing never before seen opportunities for new segments of home buyers and allowing renters to become first time buyers, allowing investors to grab great deals and allowing families to trade up to larger homes." said Flint. "Until unemployment levels off and starts to get better, we expect foreclosures to continue to play a big role in the 2010 housing market."

Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask. She blogs about money and real estate at ThinkGlink.com.