Three major banks are freezing foreclosures, and in turn, are giving distressed homeowners extra time (often months) to remain in their homes and stall the process of being removed from their home.
However, this new development also is threatening to gridlock already fragile home sales in a fragile market.
REOs (“Real Estate Owned”) properties comprise nearly 40% in the Florida market, and actions taken by Bank of America, GMAC, and JP Morgan Chase could prove to be a major blow to this battle-hardened segment of the residential real estate market.
Right now, REOs are one of the few types of property that is selling. As this process gets slowed, the housing recovery will further be delayed. However, for investors, there is a small silver lining. The window of opportunity to continue picking up deals at historically low prices will be extended. For investors getting started, that means more time to learn the ropes. And for experienced investors, it’s simply more time to do what they already know is working.
As reports of foreclosure sales that are being stopped in their tracks before closing, buyers are being shut out as the banks try to resolve issues brought on by “robo-signers” and unverified paperwork.
Many banks have put the brakes on foreclosure proceedings after it was discovered that personnel had been signing thousands of legal documents monthly without verifying case details. These documents contained critical details to each property, such as the amount owed and owner of record. The fallout from this discovery has opened the floodgates, with people nationwide asking if the paperwork is tainted by forgery and fraud.
There is no definitive consensus on when this issue will be cleared up. As it plays out, a slowdown in the bargain basement prices from bank-owned properties will further depress existing home sales. And so one of the hottest techniques in real estate investing now runs the risk of going cold.
So, what’s the best way to proceed in the face of the unknown? Educate yourself. This fiasco sheds light on why it’s so important to stay up-to-date on industry issues. Things can change at any time, and the successful investor is always prepared to change directions to move with market conditions.
This is why I emphasize “transaction engineering”. Once you have the tools and confidence to work directly with homeowners and craft creative solutions, you hold the key to your own destiny. When the banks falter, you can keep going. When the market changes, you can be excited to take advantage of new opportunities. Most importantly, you get the staying power to remain in the business and build a portfolio for the long-term.
Are you prepared for anything the market can throw at you? If not, take a step in the right direction and learn how to successfully invest without bank interference by “becoming your own bank!”. On October 23-24, I’m hosting the REI Rainmaker Retreat, an event focusing on alternative financing where you can learn how to succeed in a troubled economy. You’ll learn how to leverage creative financing, notes, seller financing, subject-to, and more.
The window of opportunity for great deals has been extended, but it won’t last forever. It’s time to take control of your future, and I hope you’ll join us.