Foreclosures are rough on the economy and a devastating experience for homeowners, but they also bring a small bit of good news: cut-rate deals on homes that would otherwise be out of many buyers’ price ranges. This is especially true when beachfront property can be scooped up for a song, which is happening in many parts of Florida, California and other seaside locales. Some of the best bargains found along U.S. shores right now can be found in Naples, Fla., Corpus Christi, Tex. and Vero Beach, Fla. Experts warn prospective buyers that they should never buy property sight unseen, however, even if it is on the beach. For more on this continue reading the following article from TheStreet.
The U.S. foreclosure crisis has cast a cloud over parts of Florida, California and other sunny locales, but a study shows there’s big silver lining: cut-rate home prices in some beachfront communities.
"It’s a good time to buy foreclosures in beachfront communities, because prices are so low in many locations compared to where they’ve been in the past," says Daren Blomquist of RealtyTrac, which recently compiled a list of "Best Beach Towns for Foreclosure Bargains."
RealtyTrac studied beach communities around the country to find those where "distressed" properties — short sales, bank-owned homes and the like — sold for the biggest discounts during the first quarter compared with what nondistressed properties fetched. All communities that made the list had at least 100 distressed-property sales during the quarter.
Blomquist says he’s not surprised plenty of beachfront communities have lots of distressed properties; high-end homes represent the foreclosure market’s fastest-growing segment.
RealtyTrac found that 10,046 $2 million-and-up distressed homes sold in America last year — a 764% increase from 2007.
"What that indicates is some homeowners who may have been better off or able to forestall foreclosure for a period of time eventually got sucked into [the crisis] as the bad U.S. economy continued," Blomquist says.
The expert also thinks some beachfront homes have fallen into foreclosure because of so-called "strategic defaults." That’s when a homeowner has the money to keep paying mortgage bills, but decides not to because the property’s value has dropped below the loan’s unpaid balance.
Regardless of why a property goes into foreclosure, Blomquist recommends exercising caution when buying one in a beachfront town. After all, many distressed properties fall into disrepair before the bank seizes them.
"You don’t want to buy a beachfront foreclosure sight unseen — a mistake many investors make," Blomquist says. "Even though the property might be far from your home, you want to either go there yourself or have someone you trust check it out before you buy."
Here’s a look at the five communities that top RealtyTrac’s "Best Beach Towns for Foreclosure Bargains" study:
Fifth-best bargain beach town: Charleston, S.C. ?
Average foreclosure discount: 34.4%
The most-populous locale on RealtyTrac’s list, the 665,000-person Charleston area combines beach access with big-city amenities, making the community a good choice not just for vacationers, but also for retirees.
"Charleston offers more of a well-rounded, city experience," Blomquist says.
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Some 530 distressed properties sold there during the first quarter, accounting for 20.4% of the city’s entire real estate market.
Distressed homes also sold for just $159,065 on average — a 34.4% discount over nonforeclosure sales.
Fourth-best bargain beach town: Santa Barbara, Calif.
Average foreclosure discount: 38.8%
Called "America’s Riviera," this beachfront community some 110 miles northwest of Los Angeles has long served as a playground for the rich and famous.
Late President Ronald Reagan had a ranch there, spending many of his vacations in 220,000-population Santa Barbara while in office.
Celebrities from Charlie Chaplin to Oprah Winfrey have also owned mansions in the area, which sits between the Pacific Ocean and the Santa Ynez Mountains.
Still, Santa Barbara had 537 distressed-property sales during the first quarter, representing 46.8% of all transactions.
Distressed homes sold for 38.8% less on average than regular properties, but still fetched a hefty $274,077 average price.
"You’re not going get the really low-priced properties in Santa Barbara that we found in other beachfront communities," Blomquist says, "but you will get a very prime location. You’ll be right next door to celebrities, and you should be getting a great investment over the long term."
Third-best bargain beach town: Naples, Fla.
Average foreclosure discount: 40.4%
Located on the Gulf of Mexico some 110 miles west of Miami, Naples offers access to not just beaches, but also to the Florida Panther National Wildlife Refuge, Big Cypress National Preserve and other recreation areas.
But Florida’s real estate bust and foreclosure crisis has hit the 316,000-population Naples area hard — making for good real-estate deals.
Some 560 distressed properties changed hands in Naples during the first quarter, accounting for roughly one home sale in six.
Distressed homes fetched an average of $156,148 — a 40.4% discount when compared with regular transactions.
"It’s very unlikely that you could find vacation property as low-priced any where else as you can in Naples," Blomquist says.
Second-best bargain beach town: Corpus Christi, Texas
Average foreclosure discount: 44.4%
Blomquist says this Gulf of Mexico city’s inclusion on RealtyTrac’s list is "a bit of a surprise."
After all, the 416,000-population metro area had neither a big price run-up during the real estate boom nor a big bust afterward.
That’s partly why Corpus Christi had just 152 first-quarter distressed-property sales, the fewest of any community on RealtyTrac’s top-five list.
Still, distressed homes sold there for just $78,851 on average during the period — a 44.4% discount from nondistressed sales.
"There aren’t many foreclosures in Corpus Christi, but if you can find one, they’re selling at good prices," Blomquist says.
Consumers who buy Corpus Christi homes can enjoy a wealth of beachfront attractions, from Padre Island National Seashore to Arkansas National Wildlife Refuge. You’re also just some 160 miles north of the U.S.-Mexican border.
Best bargain beach town: Vero Beach, Fla.
Average foreclosure discount: 45.1%
This city on Florida’s Atlantic Coast takes the No. 1 spot in RealtyTrac’s study thanks to huge discounts and a good selection of distressed properties.
Nearly 230 distressed homes sold in the 130,000-population area during the first quarter — 21.5% of all sales.
And the average distressed home sold fetched just $93,188, 45.1% less than the typical nondistressed property.
"The low prices in Vero Beach are a reflection of what we’re seeing in a lot of Florida towns," Blomquist says. "Prices are extremely low compared to where they were five years ago."
Buyers will find lots of great beaches and tourist attractions within driving distance. That’s because Vero Beach is in the heart of Florida’s "Treasure Coast," just 100 miles southeast of Orlando and 140 miles north of Miami.
This article was republished with permission from TheStreet.