Are Lenders Finally Accepting That They Must Unload Their Inventory?
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.
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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!
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.
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.
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.