Savvy investors are always the first to jump in a potentially profitable housing market and a new survey indicates things are heating up.

More than 12 percent of homebuyers today plan to purchase a home as an investment, compared to less than half, only 5.6 percent, just seven months ago, according to a recent Move.com Homeownership Survey.

Foreclosure buyers account for 25.3 percent of consumers interested in purchasing a home and 42 percent of potential foreclosure buyers regard their purchases as investments, while 57.6 percent plan to live in the foreclosed home themselves.

“This latest Homeownership Survey validates what many had hoped to see in the housing markets — affordable prices and ample inventories are restoring the appeal of real estate to investors while providing opportunities for first time home buyers to enter the market,” said Move, Inc.’s chief revenue officer, Errol Samuelson.

Interest rates below 5 percent for much of the year and low home prices, which may be at or near market bottom, are also bringing investors back to the fold.

The new and improved home-buyer tax credit, no longer just for first time home buyers, can also be a boost for those taking the practical approach to investing by buying their own home first.

The survey of 1,004 consumers, conducted from October 16 to 18 this year, found:

• Foreclosure buyers are confident they will profit from discounted purchase prices, as well as healthy appreciation rates over the next five years.

• Most foreclosure buyers, 58.2 percent, expect to pay 20 percent or less than market price for a foreclosure, while 38.5 percent expect a 25 percent or greater discount.

• Expectations are high — 73 percent expect their properties to appreciate ten percent or more in five years, 28 percent expect their purchases to appreciate 20 percent or more.

Given the current market of flat and falling home prices, that may sound like high hopes, but RealtyTrac.com explains that lenders want to unload overhead-heavy inventories of repossessed and foreclosed home.

That forces lenders to list their homes below market and offer properties at a discount, giving the buyer some built in equity.

• Foreclosure buyers intend to convert their foreclosures into rentals (13.2 percent), fix them up for re-sale (11.3 percent), or house a family member until the home can be sold at a profit (17.4 percent).

In some markets, especially resort and vacation rental markets, where rents are higher, conditions bode well for investors who want to enjoy positive cash flow as they wait for equity to build.

“If you find a well priced property located in a healthy rental market and are able to manage and monitor the property and maintain a positive cash flow from the onset for a unit used strictly for income purposes, rather than being held with the expectation of price appreciation, this could be a good time to become a landlord,” said Nancy Osborne, chief operating officer of Erate.com, a Santa Clara, CA-based financial information publisher and interest rate tracker.
Broderick Perkins

(Crain’s) — A company formed to develop a 102,000-square-foot shopping center in Glenview has filed for Chapter 11 bankruptcy protection, thwarting a mezzanine lender’s plan to auction off the company’s stake in the project.

Central Park Development LLC had pledged its membership interest in the development at 600 Milwaukee Ave. in the north suburb as collateral for a $5.2-million loan from a subsidiary of lender CF Capital Partners Inc. The financing helped the developer launch construction last year, just months before the economy plunged.

Chicago-based CF Capital scheduled an auction for last Monday to sell the ownership stake in the partially built project, according to a public notice. But Central Park blocked the auction by filing for protection from creditors Monday in U.S. Bankruptcy Court in Chicago.

Mezzanine lenders typically hold such auctions only when a loan is in default, but the notice did not say why CF Capital was selling the stake. CF Capital Principal John Cadden declined to comment.

Northbrook-based Central Park member Hyun “Steve” Kang could not be reached for comment, and Mr. Kang’s attorney did not return a phone call.

Central Park picked a tough time to launch the project, as retailers nationwide have closed stores and scaled back expansion plans. Locally, the retail vacancy rate in the third quarter rose to 11.7%, the highest level since 1994, according to CB Richard Ellis Inc.

But news of the proposed retail project’s troubles still surprised Glenview Director of Development Mary Bak, who said the village thought the development was progressing, even though Mr. Kang hadn’t signed any tenants.

Central Park acquired the nine-acre development site in March 2008 for nearly $8 million. Fifth Third Bank was the main lender for the proposed retail project, providing Central Park a $20.7-million construction loan and a $2.8-million line of credit.

The construction loan was to mature Sept. 6 but was extended two months, to Nov. 6, according to property records. The line of credit comes due in March. A bank spokesman declined to comment.

Central Park owes Fifth Third, its largest creditor, $10.3 million, according to the bankruptcy petition, while the CF Capital subsidiary, Catfish Glenview LLC, is owed $6.2 million.

By Andrew Schroedter

Steps to Foreclosure

Foreclosure is the act of claiming the title or forcing the sale of real property in order to satisfy a defaulted mortgage loan. If you are falling helplessly behind on mortgage payments, avoiding foreclosure should be a top priority. It is important that you are aware of the mandatory steps that your lender must take before foreclosure can occur so that you can adequately prepare yourself for alternatives to foreclosure. This guide discusses those steps to foreclosure.

Notice of default

If you miss a mortgage payment, your mortgage lender will likely send you a letter reminding you that a payment was due. This letter may take a more serious tone than what other collections notices might take. Known as a notice of default, this letter will let you know how much you are behind, and what to do to restore your mortgage loan to a current status. If you receive a notice of delinquency, this is the same letter and should be treated with the same level of urgency.

Anytime you have difficulty making your mortgage payment, contact your lender to discuss it with them. It is important that they know that you are making arrangements to get caught up. A good faith effort on your part can frequently delay foreclosure proceedings and extra month or more depending upon your lender. Once you receive a notice of default, now is the time to take corrective action. If you know that you will not be able to afford the home, consider prepping the home for sale immediately. Selling a home may take longer than you have time. In addition, many buyers will hold out or demand greater discounts if they know the home is in foreclosure. Putting it on the market now will generally give you more options.

If you feel that you can afford the home but just need some help to get caught up, contact your lender to request assistance. A workout arrangement can frequently allow you to restore the loan to current status. Forbearance is a common remedy that can delay or temporarily reduce payments so that you can reestablish current payment status.

Notice of Acceleration

A notice of acceleration is required under most states’ laws to give you the opportunity to satisfy the loan balance in full to prevent foreclosure. Once you reach this stage, it may be too late to seek workout arrangements or other means for restoring the loan. This is official notice that the lender wants to terminate the mortgage loan. They are announcing that they intend to take ownership of your home unless you can pay the entire loan balance in full. This is a 30-day warning that you must pay the debt in full. In other words, you can bet that lender has committed to foreclosure by this point. If you make it to this point, you should take any steps to speed up the sale of the home, including price reductions. You may or may not receive a summons advising you of a court action taken by the lender to proceed with foreclosure as this is not required in all states. You commonly will receive no such summons if the foreclosure is based on a deed of trust.

If you have received a notice of acceleration and do not have a realistic opportunity to sell the home, you should take immediate action. If you think you can afford the regular payments on a permanent basis, it is probably worth the effort to make another plea to your lender for a workout. Be prepared to prove that you can reasonably afford to keep the home.

Notice of Sale

Your lender is required to send you a notice of sale once a time and date of the intended sale of your property is established. Once a notice of sale has been delivered, you only have up until that point to remedy the situation. The sale date is the date that you will no longer have any legal claim to that property. If you are able to sell the home on your own, you must close with the buyer before the foreclosure sale date. If you wish to file bankruptcy to prevent foreclosure, you must do so prior to the sale date. Once a sale has been announced, most lenders will no longer consider alternatives to foreclosure other than a sale that you initiate with a buyer. If you are able to find a buyer on your own, you must either convince the buyer to close prior to the sale date, or you must convince the lender to postpone the sale until after the closing date that your buyer requests. Otherwise, foreclosure can occur.

One last ditch effort that you can take is to offer the lender the deed in lieu of foreclosure. Although technically a foreclosure, the credit impact could be slightly less damaging since you are voluntarily giving up claim to the property. This really is a last resort since you are giving up your biggest investment.

Public Auction

If the property is sold at auction as a foreclosed property, your financial obligations may still not be over. Many foreclosed properties are bought by real estate speculators that pay substantially less than the property is worth. If the sale price is less than the loan balance, you may still receive notices after the sale alerting you to a deficiency that is still owed. Even though you lost the home, you could still owe money once auction fees and attorney fees are added to the remaining loan balance.

Remember the two rules to foreclosure:

1. Never wait and allow a lender to foreclose on your home.
2. Never wait and allow a lender to foreclose on your home!

You have other options that can allow you to avoid foreclosure if you act soon enough.