Mortgages & Creative Financing

Are Lenders Finally Accepting That They Must Unload Their Inventory?

89 Articles Written

Before I get started on this weeks commentary, I’d like to thank BiggerPockets member Richard Warren for posting the article, “Bank of America to release homes” on the BiggerPockets Bulletin.

Want more articles like this?

Create an account today to get BiggerPocket's best blog articles delivered to your inbox

Sign up for free

While the title is pretty straight forward, there is a great deal of information within, about what is happening throughout market. Several points that I believe are critical include:

    Point 1 — Lenders have too much inventory!

    It appears that the rate and number of foreclosures has caught up with Bank of America and I suspect many other lenders.   I have been saying for the last couple of months that lenders are going to have to start releasing their “shadow” inventory this year as they just took too much in throughout last year, especially in the later part of 2009.  And, while this article talks about Vegas, I am starting to see it play itself out in other areas.

    For instance, in the Baltimore market I am seeing more offers being accepted and more counters, at prices that all but guarantee significant profits for the investors making the offers.  Low ball offers don’t appear to be as offensive as they were last year.

  • Point 2 — Short sale time-frames will be reduced!

    While it boggles the mind that a short sale can take up to 6 months, we all know that historically, this seems to be the de facto standard.   Apparently it doesn’t have to be, as some lenders have figured out how to get a short sale completed in is little as 30 days.  The significance of this is that as least some lenders are heeding what the Government is pushing — accelerating the short sales process as a method to smooth the transition for homeowners, who otherwise would end up being put out in a foreclosure, and to protect overall community property values.

  • Point 3 — We are not out of the woods… Yet!

    And finally, as almost everyone has been saying, housing prices have not hit bottom and there is good reason to believe that even in those areas that appear to being doing well, there is evidence that we may experience a “double-dip” recession regarding property prices.  Know your market and act accordingly.

What does all of this mean to you and me?


First, don’t get over confident and get sucked into “best and final” offer scenarios where you end up above your maximum offer.  Stick to your guns.

Second, don’t get over confident and think for a minute that you are better then this market.  Make sure your offer price locks in your profit regardless of what the market does.  Don’t count on anything but your great purchase price and ability to extract the equity as cash.  It is the only way to proceed.

Third, don’t get over confident and rely on just one method of acquiring properties (say like purchasing REOs)  If you haven’t learned how to navigate the short sale process, now would be a good time to learn.  If the above article and Government actions are any indicator, short sales will be a major property disposal method by mid-summer.  Don’t get left behind!

Overall, this year looks to be shaping up for real estate investors on many fronts.  If you are sitting on the sidelines or twiddling your thumbs you are going to miss some great opportunities.

Peter is an active and successful real estate investor in the Baltimore Maryland region for the past 8 years and is one of the founders of The Club Mastermind a real estate investing coaching program focused on local coaches helping investors to perfect their game.

    Neil Uttamsingh
    Replied almost 10 years ago
    Peter, Nice article. As a regular reader of many of these articles, I find the investment strategies practiced in the U.S. really interesting. In Canada, main stream real estate investors seem to not have as many tools in the toolbox. ‘Tools’ here representing real estate investment strategies, of course. Joe Investor is Canada usually just practices the buy and hold strategy. Regardless, really like the article. Sorry for the off topic rant. 🙂 Regards, Neil. .-= Neil Uttamsingh´s last blog ..How NOT to creep someone out when raising Joint Venture Money =-.
    Replied almost 10 years ago
    It will be a welcome event to see some inventory come onto the active market in the Bay Area of California. We have seen our inventory levels drop to be only about 35% of what is was just last year. Multiple offers are now becoming the norm and as a result prices are on the rise. Sounds great until you consider the number of distressed mortgages and where these will eventually end up. I am a huge advocate for the short sale process and applaud and financial institutions (Wachovia/World Savings) for implementing policy to enable short sales to move quickly.
    Replied over 9 years ago
    I’ve seen some REO’s come into my market (Massachusetts) lately just being dumped at 40-50% of value right off the bat…no questions asked. Not all of them, but much more than it used to be (list high, drop, drop, drop, hold, drop, etc.)… I have a feeling this will increase some as the spring and summer months roll on…
    Peter Giardini
    Replied over 9 years ago
    Matt… this is a common occurance in many markets. Even Fannie and Freddie are becoming more willing to accept offers that work for investors. The Bottomline… investors need to keep making offers that work for them and not let the banks/lenders talk them up off of their numbers. Best of luck… and thanx for commenting. Pete
    I have been finding that in the past few months the short sales are getting approved faster. I have banks calling me before listing a home as a short sale with a few approvals in under 30 days. I am not sure if it is blind dumb luck or a sign that things are changing.