Where are all the REOs and distressed property notes?
Investors and the media have been reporting a major decline in available and sold distressed properties. So where are the deals today? Or is this the end of the line for high- volume, megabucks being invested in foreclosures and non-performing mortgage notes?
Somebody Hit the “Easy Button,” Please!
Yes, there is more competition for foreclosures and distressed bank assets out there today but that doesn’t mean there isn’t a ton of opportunity for those who know where to find it.
It is true that markets like San Diego have seen the percentage of distressed sales dive to an incredible low of just 14% of total transactions but, while this makes for sensational headlines, the truth is that in many other California counties they make up as much as 62% of sales. And California isn’t even the state with the biggest surge in foreclosure filings anymore.
Other states are seeing new foreclosure filings triple!
Super-Sized Hedge Funds Aren’t Putting Smaller Investors Out of Business
There might be a number of billion dollar hedge funds out there infuriating smaller investors at auctions and creating a frenzy as they sky rocket the price of new REO listings in bidding wars, but the bottom line is they are barely making a dent in inventory.
As of June 2012, out of 7,316 U.S. banks, REOs on hand had dropped to just $35.5 billion, which may not seem like much and could easily be absorbed quickly.
However, as of the end of June this was dwarfed by over $100 billion in residential mortgage which were 90 days plus delinquent. Combined with new defaults and those already deemed non-accrual that’s a gargantuan pool of non-performing residential mortgage loans topping $238 billion.
While short sales have been making up an increased percentage of sales and have diverted some properties from becoming REOs, new reviews showing that improperly approved short sales have already cost the FHA over $1 billion in losses. And with flaws found in more than 70% of files, this means they could quickly become rare again.
The Bottom Line?
Hundreds of billions of dollars in all types of distressed property notes are out there for the picking. The trick is to tap into the hard data that reveals who has these off-market assets and get the direct contact information for the asset managers who can cut deals on them.
Luckily, the “easy button” for that is right here…