The Legend of Foreclosure Hollow
Ahhh Foreclosures…the Holy Grail of the housing market. Dreams of buying a house for $.50 on the dollar…painting it…maybe slapping on some paint and some landscape and voila! You’ve flipped your way to riches or at the very least are renting out a home with massive equity. "Hey, I’ve watched Flip That House...that’s EASY" is the battle cry. With the recent burst in foreclosures we’re hearing bout daily, one would expect that these homes are just sitting there waiting for you throw your hat in right? Not quite.
Facts Always Get In the Way!
I’ll oversimplify here but the bottom line is that when properties are foreclosed upon, a gaggle of them end up being owned by the mortgage company/bank that held the loan on the property, i.e. the loan was made to John Doe using the property as collateral, Mr. Doe didn’t pay, and through the foreclosure process, let’s say that Wells Fargo Mortgage ended up taking title to 123 Party Street. Banks don’t like owning homes. (These properties are called REO or Real Estate Owned). Banks and Mortgage companies are…well…banks, not real estate firms and property managers. Now, as the foreclosure count ratchets up, these firms are in the uncomfortable position of owning far more of these often distressed properties. (I’ve yet to see someone take special care to leave the place spotless and undamaged when they’re being kicked out for not paying). Now with page after page of REO’s rotting by the day, no staff to help manage the liquidation process/paperwork, and the emotional hangover of properties now LOSING value in the market vs. gaining monthly…the time is right to strike.
Part II Coming Soon: How Foreclosures Get Sold…and What You Can Do To Get Some O’Dat Action