Austin Kilgore | 01.07.09  www.dsnews.com

Despite the glut of foreclosed homes on the market, fewer people said they would be willing to buy one, and an overwhelming majority expect a discount of at least 25 percent on a foreclosure purchase, according to a survey commissioned in November by RealtyTrac and Trulia and released this week.

Compared to a similar survey conducted seven months earlier that showed 54 percent of Americans would consider purchasing a foreclosed home. Seven percent fewer people, 47 percent, now said they would consider buying a foreclosed home.

In the April, 2008 survey, 69 percent of American adults felt there were negative aspects of purchasing a foreclosed home, such as hidden costs, risky process, home losing value and personal connection with foreclosure. In the most recent survey, that number jumped to 80 percent.

The survey also showed consumers expect considerable discounts. More than 75 percent of survey respondents said they should pay at least 25 percent less for a foreclosed home, and 30 percent said they expected a discount of at least 50 percent less than a comparable home not in foreclosure.

“What’s significant about our findings is that just as the market is being flooded with more foreclosures, home buyers are more hesitant to buy them. Pete Flint, co-founder and CEO of Trulia, said. “Misinformation around foreclosures abounds and that’s dangerous for the market and for homebuyers.”

RealtyTrac SVP Rick Sharga said more consumer education about foreclosures is needed.

Being that the sale of foreclosed properties has been on the rise due to the increased inventory and discounts available on foreclosed homes, it is somewhat counterintuitive — although not totally unexpected — that consumers are more hesitant to purchase a foreclosed property,” he said.