The Rise in Owner-Occupants Buying Foreclosures

In the past year, the number of owner-occupants purchasing foreclosed properties at auctions has nearly doubled. A major government policy change last August is responsible for this spike. The shift also shows that the limited housing supply is pushing more buyers to consider auctioned distressed properties. Innovations and transparent processes have made these auctions easier for owner-occupants and local community developers.

A recent March 2023 survey showed 15% of distressed property buyers on the Auction.com platform were owner-occupants. This is a big jump from the 8% in February 2022. Dwayne, a Maryland resident, shared that he and his wife live in a home they purchased through Auction.com. They even have a section of their home rented out.

Different regions saw varying levels of owner-occupant buyers. The Central region led with 18%, followed by the Northeast, which had 17%, and the West at 16%. The Southeast had the lowest at 8%.

Government Policy’s Impact

The U.S. Department of Housing and Urban Development (HUD) introduced a policy in August 2022. This policy set up a 30-day “first look” auction. Only nonprofits, government entities, and owner-occupants could bid during this period on properties backed by the Federal Housing Administration (FHA).

Lopa P. Kolluri, from HUD, emphasized the policy’s importance. She mentioned that this helps in a market where high home prices and low affordable housing supply exists. Auction.com started these first-look auctions in August 2022. They immediately saw results: 8.2% of all properties were available for these auctions in the next quarter. The number kept rising, reaching 11.5% by the second quarter of 2023. In these auctions, 95% of properties went to owner-occupants.

The Gradual Change

While most first-look auction properties still sell to non-owner-occupants, there’s a noticeable rise in owner-occupant buyers. Laurie Goodman from the Urban Institute had predicted this. She suggested that expanded first-look auctions could help more owner-occupants get distressed homes.

The Benefits of a Clear Process

Buying a distressed property can be challenging. Poor property conditions, financing issues, and dealing with current occupants are some hurdles. But technological advancements have made auctions more transparent and user-friendly. Jennifer, a respondent from Wisconsin, praised Auction.com for its simple and safe bidding experience.

The Role of Local Developers

Sites like Auction.com aren’t just helping owner-occupants. Local community developers are also benefiting. These developers can handle bigger renovation projects and often pay in cash. They also assist current occupants in moving out smoothly. According to a March 2023 survey, many of these developers provide options like transition assistance to current occupants.

For example, Han Zhang, an Auction.com buyer in California, rents out to a previous owner. He keeps the rent reasonable for the tenant.

Many Foreclosures End Up With Owner-Occupants

Many homes sold at auction are renovated and then sold to owner-occupants. Auction.com data from 2018 onwards shows 77% of renovated homes were sold to owner-occupants. This equates to over 101,000 homes. Of these, 40,000 are in areas with low incomes or minority populations.

These renovated homes often sell at affordable prices. On average, the resale price was $256,040 over the last five and a half years. Even with rising costs in 2022 and 2023, these homes remain more affordable than the national average.

[1] Based on information from an article on HousingWire, sponsored by Auction.com.