Reports this week from the Federal Housing Finance Agency highlighted falling home prices nationwide. The drop in prices is attributed in large part to the continual flood of foreclosures hitting the market. Foreclosures and other distressed homes are being listed at prices far below market median prices for non-foreclosed properties.
People considering rent to own homes or entering into a lease option agreement can be encouraged by this news. More home sales are being generated by foreclosures, and this takes attention and buyer demand away from non-foreclosed homes. Foreclosures sell for nearly 30% below market on average and many are in need of repair and refurbishment. This situation puts pressure on the balance of the non-foreclosed homes listed for sale.
The pressure creates longer sales cycles and forces sellers to drop prices in order to compete with foreclosures. As home sellers become more desperate to attract buyers, rent to own home listings become a more attractive alternative sales channel.
Homes for sale by owner or for sale on the MLS may linger with no buyer bids for extended periods of time. These homes are excellent candidates for a rent to own home agreement. The seller can finally have a motivated tenant and future buyer actively involved in obtaining the home. Buyers of rent to own houses benefit by locking in their low purchase price now, before prices start to go up again.
As home listing cycles continue to extend and non-foreclosed home owners have trouble attracting buyers, it is the perfect time for renters to start approaching sellers with the lease option offers or a rent to own home proposal.
Further supporting the rent to own home buyer, the National Association of Realtors announced the median price of all previously owned homes, foreclosed or not, is now about $156,000. That's the lowest median home price in nine years, well before the latest housing price bubble began to inflate.
While foreclosures will continue to enter the market over time, they do not always make the best candidates for rent to own homes. Foreclosures are owned by banks or governement entities who must sell them off quickly. These owners are not usually receptive to a rent to own home agreement. However, foreclosures can offer low prices and good opportunities for people who can negotiate a low enough price to cover reconditioning, an affordable payment, plus qualify for a mortgage loan.
A better value solution for many home buyers today is rent to own homes. And thanks to foreclosure inventory, home prices are at terrific low levels and allow a lease option or rent to own agreement to fit a wide variety of buyer budgets.