Rich Von has more than a decade of experience in purchasing and flipping over 1700 distressed properties. During this time, Rich Von has lived through an economic rollercoaster, observing that the economy can have an extremely discernible impact on the real estate industry. Below, Rich Von answers a few questions about the effect of tough economic times on American homeowners.
Q: Why are so many houses remaining on the market for years at a time?
Rich Von: Mostly, it’s the fact that the properties are not priced right—or there is something wrong with them (structurally) that requires significant investment to bring them back to market standard. Plus, with such a high unemployment rate in our country, many would-be homeowners simply can’t qualify for a mortgage, decreasing the number of potential buyers. This has all contributed to creating a stagnant market.
Q: Many homeowners are now “underwater.” What does that mean?
Rich Von: A homeowner becomes “underwater” when he or she owes more on a home than it is worth. The homeowner can’t sell until home values increase, unless he or she can afford to pay the bank that owns the mortgage the shortfall, or difference between sales price and amount the bank is owed. In this case, of course, many homeowners negotiate “short sales” with the bank—whereby the bank waives the shortfall and promises not to pursue the owner for the difference.
Q: But isn’t this the best time to buy a new home, with interest rates so low?
Rich Von: The fact that interest rates are at an all time low makes it a great time to buy; but because of the Great Recession of 2008, banks are wary—which makes it very difficult to qualify for a home loan. Gone are the days of stated income—today, you need a full time job and the ability to document that you can really afford the mortgage before a bank will loan you money to buy a house. So, yes, interest rates are low, but it’s tough to qualify for those interest rates—which is why the number of renters in our country has grown, and will continue to grow, so dramatically. And one more thing—for those that qualify for mortages— many are not buying more expensive properties—but are instead choosing to refinance and make improvements on their existing homes.
Q: Has the increased number of foreclosures have a negative impact on the real estate market?
Rich Von: Yes, these foreclosures have flooded the market with properties for sale. Making matters worse, these properties often sell for low dollar amounts, lowering property values overall in these neighborhoods.
Rich Von points out that the real estate market has always been cyclical, so this downturn is likely to change in the coming years. Meanwhile, renters are in a great position to buy, with interest rates and home costs at all-time lows, concludes Rich Von.
Rich Von is the Operations Manager of Von Vesting, a full-service distressed property business. Along with partners Tiffani Von and Kale Flagg, Rich Von and the team at Von Vesting specialize in sourcing, purchasing, comping, performing title checks, and selling distressed properties. Rich Von and Von Vesting have contributed to the revitalization of areas that were in need of an economic boost.