Carlsbad, CA · Member since 2010 · 1k+ posts · 1k+ votes
Hello all,
So I was talking to a realtor this morning and I asked him why there weren't more properties coming on the market as compared to last year. He mentioned that some banks are actually fixing up the properties themselves and then listing them back on the market at or just below the market value. He said part of the reason for this was because banks were getting such bad rep because of the condition of the properties they were selling and how it was affecting the whole neighborhood.
If that's the case that banks are fixing the properties themselves, that can't be a good thing for investors looking for undervalued properties.
Have you guys noticed in your area that foreclosures have slowed down considerably and some banks are fixing the properties themselves?
Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
14y
Banks and GSEs (Fannie/Freddie), collectively 'financial institutions' (FIs) manage their REO inventory to minimize costs and maximize sales proceeds. I agree with Luis that this practice isn't new. I've been aware of it since 2004... but only with low repair dollars spent. In other words clean up and paint up to sell, not rehab. What is new are some local government enforcement efforts regarding FI property and (related) the extent of some of the FI repairs.
Directly from Fannie Mae's (Federal National Mortgage Association) latest Form 10-Q is this: "Neighborhood stabilization is a core principle in our approach to managing our REO inventory. In the first nine months of 2011, we completed repairs to approximately 69,300 properties sold from our single-family REO inventory, at an average cost of $6,122 per property. Repairing REO properties increases sales to owner occupants and increases financing options for REO buyers." The wording used in this document doesn't exist in other SEC filings prior to the end of 2011Q3.
So in select areas on select properties, FIs are initiating repairs and ultimately saving taxpayer dollars... at the "expense" of an investor's next rehab project.
Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
14y
One thing I forgot to mention. Fannie Mae inventory was 122,616 properties at September 30, 2011. Dispositions (sales) in the first 9 months was 192,313 properties. So fixing up 69,300 properties in 9 months of 2011 represents repairs to roughly one third of the properties sold by this GSE. This is not insignificant. Neither is their stated $6,122 per property average. This number, $424M in property fixup, I believe is included in the sales expenses of $1.227B over the first 9 months of 2011. There isn't a line item specifically for these repairs.