Boomerang Buyers are Back

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When the housing bubble burst before the Great Recession ended in 2009, about ten million American homeowners were thrown into foreclosure. It’s nine years past, and experts agree that
close to two million of these Americans are ready to buy again.

These prospects are termed “boomerang buyers,” and they are essential to the economic wellbeing and recovery of the real estate market. They’ve experienced foreclosures, bankruptcies, short sales and general hardships over the last nine years, but they’ve learned a great deal about the importance of good credit history, home prices, interest rates and mortgages.
Most are in their 40s and 50s. Known as Generation Xers, they have re-established their credit and understand the real estate and financial processes surrounding home ownership. But most importantly, they will do whatever it takes to be able to buy a home again.

If they experienced a foreclosure, they typically had a seven-year wait before they could qualify for a new mortgage through Fannie Mae and Freddie Mac. If the foreclosure was part of a bankruptcy, they had to wait four years. If they went through a short sale, where their mortgage holder was willing to accept less than what was owed and agreed to accept a sales price at or below the appraised value of the home, they had to wait two years before eligibility for another Freddie Mac or Fannie Mae loan.

If they were seeking a Federal Housing Administration loan after a foreclosure or short sale, there was a three-year wait. However, some homeowners who experienced a foreclosure because of a 20 percent cut in their salary or pay could have qualified for a new mortgage after just one year through the FHA’s Back to Work program.

Some are eager and motivated; others are skeptical and afraid.

For those afraid, perhaps the rapidly rising home prices along with rising mortgage rates are barriers. They lost their home once to foreclosure and don’t want to risk it again by getting too far over their heads in debt. In addition, the low inventory means slim pickings in finding their dream home…again. Once happy and satisfied in their first home, they may have too much emotional stress to try to recapture the perfect home.

Stricter lending regulations add to the burden. In the pre-recession real estate market, it was not uncommon to buy a home with no down payment and interest-only payments for the first five years. Lenders are much more stringent now. A new mortgage application must prove less risky and any low credit scores will negatively affect the outcome. Pure fear may keep some buyers from rebounding into the market.

As always, education and knowledge are vital for these prospective buyers to feel at ease on their way back to home ownership. That’s where a good real estate professional comes into play. Regardless of their hardship, many of them feel forgotten! Most marketing to potential homeowners in mass media outlets is geared toward Baby Boomers, born in the 1940s to mid-1960s, or Millennials, born in the early 1980s to early 2000s. Just tune in to network television ads touting home ownership and you will likely see a young married Millennial couple or Baby Boomers who appear financially content. Countless real estate professionals may be missing out on a tremendous selling opportunity with boomerangers.

According to a major real estate website, “Members of Generation X are the only generation to buy more homes last year than the previous one.” Plus, these Xers are savvy and patient and want a real estate agent who is dependable, reputable and successful. Adweek magazine reports that Generation Xers rely heavily on social media, networks and online reviews when researching agent selection and the local market. Generation X is also hyper linked to their children, and above all, they want their children’s futures to surpass their own successes. Homeownership is paramount to stability for them, much more so than other generations.

Successful Realtors could find boomerang buyers still renting, instead of buying again. Skittish, they may be hesitant to jump back into homeownership, so sharing information on the loan process and how to get the lowest down payments will ease their minds. Local, state and national down payment assistance programs may make it easier for them to afford a home.

A word of caution: many boomerang buyers feel they are ready to buy another home, but still have issues to resolve. Mortgage companies are quite forgiving when it comes to clients. But patience is required in the meantime, not just to get rid of credit history baggage, but to qualify for the best mortgage with the lowest interest rate and terms possible.

If you’re a boomerang buyer, consult with real estate and financial professionals early in the home ownership process to get your toe back in the water. ■

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