Nearly two-thirds (65 percent) of potential homebuyers surveyed by Realtor.com this month say they are likely to buy a home that’s been through the foreclosure process, compared with 25 percent in October 2009.
The vast majority of those looking at real estate owned (REO) properties planned to live in them — only 6.9 percent of potential homebuyers said they were looking to buy a foreclosure as an investment, down from 13.2 percent in October.
The "unexpected interest" in foreclosures is a result of reductions in supply, expectations that home prices will rise, and changing attitudes towards foreclosures, said Steve Berkowitz, CEO of Realtor.com operator Move Inc.
The survey found that most (56 percent) Americans are concerned that a backlog of foreclosures that lenders are expected to bring to the market will lower home values.
"As lenders begin processing their distressed inventories and releasing them for sale at the local level, we look to them to move carefully and monitor conditions so recently gained home values aren’t diminished," Berkowitz said in a statement.
In February, Realtor.com announced that through agreements with a variety of data providers including banks, it had begun identifying for-sale listings that have completed the foreclosure process.
Homes that are still in the foreclosure process or that have been repossessed by lenders are not displayed on Realtor.com unless they have been advertised for sale in a multiple listing service.
Users who search Realtor.com for "foreclosed" properties will see homes that have been repossessed by banks (often referred to as real estate owned or "REO" properties), for example, but only those that have been listed for sale in an MLS.
Listing portals that partner with companies that mine public records for foreclosure filings often display information about "distressed properties" that are in some stage of the foreclosure process, but that may or may not be for sale.
The survey found prospective foreclosure buyers expected to receive a discount of 10 to 30 percent, which is in line with the average discount of approximately 29 percent reported by Lender Processing Services in a March report, Realtor.com said in reporting the survey results.
More than half of all prospective foreclosure buyers (56 percent) expected their purchases to appreciate 10 percent or less over five years, or 2 percent a year.
Thirty-five percent of those surveyed feared that they or someone they know will face foreclosure in the next year, down from 52 percent in March 2009. Fear of foreclosure was greatest among those earning less than $30,000 a year and slightly higher among nonhomeowners (38.6 percent) than homeowners (33.6 percent).