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How to Use Foreclosure Data to Identify Investment Opportunities

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By Elaine Zimmermann

RISMEDIA, May 17, 2011—In the current complex housing market, it is critical for real estate professionals to evaluate their individual markets for short-term and long-term real estate investment potential for their clients. In every fluctuating housing market, there are opportunities. The real estate professional who has a command of these nascent opportunities will be a sought-out source for advice-hungry buyers.

Home value shifts combined with employment levels and income growth can determine the short-term and long-term potential of a market. Ingo Winzer, President of Local Market Monitor, states that ”in over-priced markets, the momentum of home value changes is more important than income growth in determining future home values.”

But home values and employment data in geographic areas as large as cities or SMSA are irrelevant to investors. Sophisticated purchasers need information for areas no larger than zip codes to make informed decisions.

How can a real estate professional provide information to investors that will spotlight homes with the greatest probability for strong near term and long term appreciation?

Home valuations at zip code level compared with the foreclosure inventory for that same zip code can render a glimpse into the vibrancy of housing in any zip code.

The quantity of foreclosure homes in any area gives a better picture of the employment in the area compared with city-wide employment figures. An area with less than one foreclosure per 10,000 dwellings indicates low unemployment for that zip code—even if pockets within the same city are experiencing high unemployment.

By comparing the asking price for foreclosures in a zip code to similar non-foreclosure houses in the same zip code, real estate professionals can gauge the short-term and long-term investment opportunities for that zip code. If there is no greater than a 20 percent difference between the two, the area will recover quickly. The smaller the percentage of difference, the more quickly that zip code will rebound.

To contact Elaine Zimmermann, email elainezimm@aol.com. For more information visit www.foreclosuresUS.com.

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