OfflineHow does the government bailout money and low inventory effect us as investors? Is it true the banks make more if they foreclose on the property instead of selling it? How do we counter these moves and find good deals?
Thanks,
Greg
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The low inventory affects us investors by making it very competitive to actually find a good deal. This I know by personal experience. It means that two years ago you could target all REO's that had been on the market more than 90 days and make low ball offers.... and now if a good deal hit's the MLS, it has 10 offers within 24 hours. That's where I live. We have to work hard and keep looking to find good deals.
And the whole idea about banks making more money if they foreclose is not always true. Occasionally it's true if... they bought inventory from another bank that did not get bailed out, but went out of business instead. Then they paid pennies on the dollar and so they don't care if they foreclose. If the homeowner had mortgage insurance, then the insurance pays if it goes to foreclosure, so again they don't care. Many banks have lost a LOT of money by all these foreclosures.
Many banks are now working now with homeowners to do short sales because it does cost less, and it keeps someone in the property so there is less chance of vandalism. Empty homes often get torn apart, making the loss even more. They still lose with a short sale, but the costs of taking a property to the trustee sale are higher.
That is my understanding of what's been going on in the market.