As I worked my REO market report last month, I meant to write this blog. Good thing I keep a blog diary of ideas :)
REO is not going away in the Las Vegas Valley. It is just emerging as another life form. A more expensive life form that I have dubbed the "Investor Trustee Sale Flip." AKA "Corporate Owned," "Investor Owned", etc. What this means (in a nutshell) is that individuals and investors and investor pools are purchasing properties at the "foreclosure sales" (or trustee sales as they are known here) and the properties are not "going back to the bank."
They are going in the hands of trustee sale purchasers who may do several things: live in them owner occupied, rent them out for a long term hold or rehab and flip or just flip.
SO if you are drooling over a property in your neighborhood that you want and you know it is in foreclosure and are waiting for it to hit the market, you may want to think again. It may not hit the market in the form of a traditional "REO listing". It may hit the market in the form of the flip or not at all if it ends up being rented out or owner occupied.
The investor trustee flip usually commands a higher sale price than REO on the resale market. Welcome news for neighborhood homeowners...........not so welcome news for buyers looking for a "bargain."
Time to fish in a new pond!
Renee, that's the new game in town. They'll turn around and sell them with "owner" financing to yet another group of un-qualified buyers with a hefty down payment required and the process which we're trying to resolve will probably repeat in another 3 to 5 years. My quote goes something like "He with the most cash wins." Sometimes you don't have to leave the pond, just change your bait!
Kevin: AMEN To that. If we see a shift in inventory increases you are SPOT on with your assessment.
Renee - I've seen this around my area too, which as you mentioned the neighbors/homeowners are happy, but the buyer's are not. Although a majority of the "flips" are selling for top dollars because so many buyer's have given up on short sales and at this point if they want to qualify for the tax credit they need to find a standard sale.
And once again . . . the cycle continues. Rather than having the prices come down to more affordable terms, so that average homebuyer Joe and Jane can purchase a home, the investors, et al, get them first.
I am not sure if the investors are causing the shift. In our area, we have sheriff sales where properties in foreclosure are auctioned off to the highest bidder. What impacts whether an investor buys the property is what the banks determine as the upset price. This is the price at which they are willing to sell. Banks have decided they want to release more inventory into the system or are getting more realistic BPO's and therefore investors are buying them. We can complain about this, but any buyer is welcome to attend these sales and bid. The average buyer is not willing to accept the risk which is inherent in these sales, so an investor does accept this risk. The market value is set by what a buyer is willing to pay. At lest buyers have some other human being to negotiate with in purchasing the property and do not need to wait for months to get an answer.
Cal
Renee,
Thanks for this post. It has been thought provoking. Actually the more I think about this, this is good news. This is bringing stabilization to the marketplace. This is a good thing, not a bad thing. Yes, buyers want the best deal possible, but we have all been hearing that the affordability of homes is at the lowest it has been in years. What we all do not want is a market which continues to drop in price. This may be good for buyers, but in the long run this kind of market hurts us all. The best market is stable and slowly increases in price. What we had from 2004-2007 was out of control and in reality, not a stable market. We are returning to something more stable.
Cal
We need these kind of buyers right now... they know what they want and they have the money to make it happen.
Renee, I'm seeing that here as well. Some have gone the route of lease options. If these buyers wait, they will lose out. As the saying goes, CASH is king.....or queen. :D
This is happening here, too. I watch the foreclosures and alert my buyers that one might be coming up, only to see it rented or rehabbed and listed at more than I expect.
The real estate wheel is being re-invented as we speak!
Renee the boat may have left the dock for those lookng for bargains. Nobody wanted them a year ago when they were cheap.
Michelle: I agree with your assessment 100%
Carla: You are right. December this was all do-able. I turned down a Realtor referral because timeframe (tax credit) plus price range was unreasonable. I would rather turn stuff down and save my reputation.
Cal: Again, I agree with you 100% about stabilization!
Georgina: And there are no emotions involved :wink:
David: Same here +OWC HOWEVER that is pretty rare
Virginia: Yep!!
John: Well no one wanted them two years ago. Our market shifted to a seller's market last spring!
Renee,
Flippers are returning to the Vegas housing scene, is what I hear and see. Not entirely a bad thing so long as they rehab properties first, dragging up values.
We haven't seen these buyer's in my market yet. However banks do tend to choose cash offers over 1st time home buyer financing offers.
Esko: Dragging up values (snickering at that one after a long day!) I bet it creates a little challenge with you in the UW sector if it is flipped too quick!
Julie: Yes they do!
Renee - I think this is probably good for the market. it always helps to have more buyers with money and homes in better condition to keep property values up.
Larry: It's definitely good for our market. As long as all of economic situations remain stable!