InvestingInProperties.com

  • Facebook
  • Google+
  • Twitter

  • Current Events
  • Financing Property
  • Locating Property
  • Build Your Team
  • Fixing
  • Rentals
  • Resources
    • Real Estate Investment Calculator
    • Mortgage Calculator
    • ROI Calculator

The Current State Of REO Properties

Foreclosure dumps and the small property investor

As foreclosed homes for sale continue in a rapid pace, REO (“real estate owned,” by banks who have completed any given foreclosure process) buys from large hedge reo propertiesfunds such as the Blackstone Group over the last few years have created a de facto wholesale-retail environment for these formerly bank-owned properties across the U.S. Though not getting as much press in the past year, buying a foreclosed home, thousands of times over, remains a mainstay of hedge fund buy-ups. States like New York that require legal proceedings for each and every foreclosure home, are now working through their years of backlogged homes that banks wanted to foreclose on. As they come out the other end, so to speak, of the legal process, they promptly go on the market for sale. Small property investors thus have to compete head to head with large hedge funds who are well-capitalized, and can easily offer all-cash for any and all properties they purchase. This is not so easily done with smaller investors. And this gives the hedge funds quite a leg up in the buying process. In addition, it also explains why they have been monopolizing the foreclosure buying industry in this country for several years now.

Making it simple for banks

These large hedge companies will purchase a property (or thousands at a time), and take the foreclosure in as is condition. This makes things very simple for any sellingreo properties bank to make a deal with them. The hedge fund then hires renovation specialists, and they come in to do their thing right after the purchase is completed. These specialists will do the very simplest, most basic repairs to make the home livable – and attractive to a prospective tenant. Fresh paint jobs inside and out, and kitchen cabinet and appliance upgrades are the mainstays of these quickie rehabs.   Then the homes are placed on the market as rentals only. In this way, hedge funds are willing to wait out the current tepid pace of the resale estate market until it comes time to unload their holdings. (In fact, some large hedge funds have been slowly beginning to do so to realize quick profits on their poorest performers.)

All-cash deals are preferred

When banks place huge inventories of their foreclosed properties on the market, reo propertiesyou can be assured that all-cash deals are there preference. The safety of the all-cash deal, in which hedge funds tend to be the winners in locking up these properties over the small homebuyer who requires some form of mortgage financing, as well as the speed of the transaction, make it much more worthwhile for the banks to unload their property inventory at deep discounts. In addition, all-cash deals usually don’t require the bank to make any repairs…that is, the buyer is purchasing a property in strictly “as is” condition. Thus, the buyer is taking the inherent risk of finding some major defect with a property – and being placed in the position of having to fix it (at possibly at an exorbitant cost). Naturally, all-cash buyers make very lowball offers to protect themselves in case of this occurring.

The newly created wholesale-retail real estate market

As I’ve noted in a prior article here, hedge funds have just recently been starting to unload some of their poorer performing rental properties back onto the market to capitalize on the currently improving state of the real estate market. This creates areo properties de facto wholesale-retail environment. The hedge funds buy up large amounts of bank REO’s for all cash, do the least amount of repairs necessary, and then convert these homes into rentals. In this way they are acting as the wholesalers of the residential real estate industry. After holding them a few years, they now look to take their gains by placing at least some portion of their portfolios back on the market for either single family homebuyers to acquire, or for small mom and pop investors to purchase. In this fashion they are acting as the retail merchants of the real estate business. Either way, they don’t care much about the communities their properties are located in. And this ultimately can have a deleterious effect on many communities around the country that have been plagued with large percentages of their housing stock ending up as foreclosures over the last several years.

 

photos courtesy of quickenblog.com, newsone.com, auroragov.org, infrawindow.com, newgeography.com

Email, RSS Follow

Filed Under: Current Events, Featured Tagged With: bank owned homes for sale, best investment property advice, best property investment advice, buying a foreclosed home, buying foreclosed properties, foreclosed homes, foreclosed homes for sale, foreclosure homes, foreclosures, hedge funds, investing in real estate, investmennt property advice, investment properties, investment property information, investment property strategies, investment property tips, investments, property investment advice, property investment information, property investment strategies, property investment tips, property investor, real estate investing, real estate investing advice, real estate investing information, real estate investing strategies, real estate investing tios, real estate owned, rental property, rental property information, rental property strategies, rental property tips, rental propetrty advice, REO, REO properties, small property investor

Join 3 other subscribers

Investing Video Picks!

Recent Posts

  • The Right Questions To Ask When Renting A House
  • How Does Equity Work? Things You Should Know
  • How To Rent Out A House Successfully: The Ultimate Guide
  • Positive Cash Flow In Real Estate 101: Definitive Guide
  • 8 Questions to Ask When Buying a House

Copyright © 2021 investinginproperties.com

About · Terms of Use · Sitemap · Contact

This website uses cookies to ensure you get the best experience on our website. Learn more.