Release Real Estate Investors
Free investors and let the free market work its magic!
You know that I am very convinced of the tremendous opportunities that the bank foreclosure (REO) market offers us. More millionaires will be minted during the next five years than at any other time in history.
In the US, more than two and a half million homes are in some form of foreclosure process by some estimates. Some economists forecast another eight million foreclosures in the next four years. Historically, more than half end up going to the bank. So they become a bank foreclosure sale; They will be purchased at a deep discount when listed.
Guys and girls who own rental properties, who buy and sell for a living or for fun, and who like to play with real estate and make money in the process, have the capital needed to carry out an REO buy and repair. They have the knowledge to see how the investment can pay off.
The current $850 million stimulus package offered no incentives to the actual demographic that is willing to get their hands dirty and get us out of this mess. If they want their mortgage foreclosed, let’s start the process and let’s speed it up so that this recovery doesn’t take any longer than necessary.
No amount of loan modifications or the numerous foreclosure moratoriums promoted by Fannie Mae/Freddie Mac and other banks forced to play along because they are receiving TARP money will stop this flow of REOs, which I expect to triple in number by the summer of 2009 in Southern California.
Realty Trac sees only one in five foreclosures being actively marketed. Lenders aren’t even trying to sell them. If that’s true, why are all these piling up houses empty? Does the owner still live free? Whatever it is, the banks are sitting on top of all these nonperforming assets and waiting to be bailed out. Where is our rescue?
I am right? Are you seeing what I’m seeing? Houses that seem to hang around after the foreclosure sale with no marketing activity? Do you know someone who is still in their home months after receiving a foreclosure notice?
The long-term effects of bank bailouts are ominous; sets a bad trend. The banks are in much worse shape than one thinks; How will you deal with these 3,000,000+ foreclosures? We know that more than half of loan modifications go wrong. When will the banks ask for more again?
This REO rush will last longer than most people think and we must stop the wave of foreclosures. More specifically, we need to get foreclosed properties (owned by the bank or REO) off the open market in order for prices to stabilize. The problem is with the house. We don’t need to build roads and reroof the National Mall. We need to:
1. Guaranteed federal down payments for a silent second. Make it easier for everyone to buy houses
2. Do away with the 4 house limitation rule for investors and capital reserve requirements.
3. Make the FHA loan (203K) eligible for investors.
4. Eliminate vendor seasoning requirements in 3-6 months
5. Authorize simple assumptions for all loans
6. Recover accelerated financing for bank REOs. Let Lenders Fund Their Own REOs
7. $15,000 federal income tax credit for any buyer who purchases a REO or short sale property
8. Make the purchase free of capital gains tax for a period of seven years from the date of purchase
9. Take the capital gains problem a step further and reduce the general capital gains tax rate from 15 percent to 8 percent.
10. Force banks that have been receiving TARP funds (and will receive more) to lend 75 percent of the money they are receiving.
First-time homebuyers often lack the capital and desire to fix up the property, and are often scared off by the REO buying process.
The answer isn’t in the first-time homebuyer, as NAR and Washington would have us believe, which is why they offered that $7,500 first-time homebuyer credit (loan) last year. The answer lies in the real estate investor.
Washington needs fixers and flippers for a living. They just don’t know it yet.