By Gino Blefari, President & CEO, Intero Real Estate Services, Inc.
A boomerang buyer is the name given to a homeowner who’s gone through foreclosure or short sale and re-enters the market through a new purchase. When you think about the massive effect of the 4.8 million borrowers who lost their homes to foreclosure since the market collapse, you begin to see the magnitude of impact boomerang buyers could have on sales.
How do we know they’re returning? While there’s no official research showing hard statistics on the number of boomerang buyers, CNN published a story this week with plenty of examples. One broker they spoke with said he worked with 12 boomerang buyers last year and expects that number to double in 2013.
Some may say this doesn’t make sense. How do borrowers who foreclosed just a few years ago qualify for another home loan? How has their credit score recovered so quickly?
Some of the buyers interviewed in the CNN story had foreclosed as recently as 2010, but others in the market today may have foreclosed a few years prior to that. Experts say it takes an average three to seven years for a score to recover from foreclosure or short sale. A secret to fast-track success is to pay all other bills on time and continue the habit after foreclosure as this alone can speed up recovery.
During the downturn, a lot of owners made a calculated decision to “strategically default” or walk away. These are families that looked at the big-picture housing situation and their underwater mortgages and decided it made more financial sense to get out.
Because of this, it’s not surprising to see more of this type of defaulter getting back in the market. After all, these were owners at heart. These were people who wanted to own their home and probably planned the whole time to buy again.
Boomerang buyers are yet another interesting element to the current state of the market. It’s nice to see terms like this and “positive equity,” “multiple bids” and “IPOs” coming back to the vernacular in real estate reporting.
There are some great triumphs happening. Just as we watched the horrible details of the market fallout unfold, let’s highlight these stories as wins along the way back up.