The government, in an effort to help stabilize the housing market, is allowing real estate investors to buy foreclosed homes in bulk at greatly reduced prices. The first wholesale sale is scheduled for homes in the hardest-hit areas of the country, including Nevada, California, Arizona, the Atlanta area, the Chicago area and South Florida. These homes are being sold in bulk on the condition that they are held and leased by investors, not sold for a specific period of time.
Lenders are looking for ways to reduce their housing inventory. Bank of America announced that it would test its own pilot program in which 1,000 struggling homeowners in New York, Arizona and Nevada will be able to surrender their homes to the bank in lieu of foreclosure and stay in their home for up to 3 years while renting. from the bank at or below current rental prices. After the 3-year period, the bank also plans to sell these houses to investors.
If you are an investor with tons of cash, buying real estate in bulk looks very appealing. Rental rates rose as the spate of foreclosures sent landlords into rental properties in record numbers. Hoping that trend will not only continue but explode, Wall Street has taken notice and Hedge Funds are looking at bulk real estate as the next big investment for their clients.
These bulk real estate investment programs are promoted as a way to force a bottom into the housing market, thereby stabilizing it. But what does this mean for the average Joe? Is owning his own home destined to become a thing of the past?
Let’s look at some national housing facts:
- According to RealtyTrac, a provider of real estate data, there are nearly 650,000 foreclosed properties owned by lenders.
- 710,000 are projected to be in foreclosure proceedings, and
- According to the Mortgage Bankers Association, approximately 3.25 million more borrowers are delinquent on their mortgages and are in danger of losing their homes to foreclosure.
That’s a lot of real estate that is or will be owned by lenders. Banks are not in the business of owning real estate. They need to get these houses off their books. Selling these houses wholesale seems attractive to them. But it is the best way to stabilize the real estate market. The National Association of Realtors (NAR) doesn’t think so. They would rather see home ownership become the norm and the only way to do that is to expand the availability of financing for qualified buyers. We are already starting to see mortgage money becoming more available.
Unfortunately, many qualified homebuyers are afraid to buy in this market. Here are several reasons why you should buy a house now:
- Interest rates are at record lows
- Homes are more affordable than they have been for years.
- Builders are offering deep discounts.
- There is a large inventory of homes available.
- It’s a buyer’s market, you’re in control
- Mortgage money is available
