In a letter to investors obtained by American Banker, Freddie Mac informed real estate investors what while “we want to work with investors in our market area…we are not considering any…significant discount pricing [on REO properties].” The GSE noted that most real estate investors who want to purchase REO properties in bulk are “interested in purchasing at 40-60 cents on the dollar below current list price.” The GSE is not interested in selling at these rates[1]. In June 2011, Freddie Mac held 60,569 REO properties, and although the Obama administration has floated the idea of selling these properties to investors, critics fear that the result of selling at a discount would create more negative pressure on home values. These critics, included the National Association of Realtors (NAR) and Radar Logic, both of which warned that home values would fall and taxpayers would suffer while the “investors” (actually large financial institutions), would be able to buy property at substantial discounts that would not, ultimately, help get owner occupants into homes.
NAR advocated “expanding financing opportunities, bolstering loan modifications and short sale efforts and enhancing the efficient disposition of [REO] properties,” according to a statement by NAR president Ron Phipps[2]. Phipps added that individual sales should be incentivized rather than bulk sales and also suggested the formation of a lease-to-own program administered by “local investors or nonprofits that are familiar with the specific needs of their local markets.”
Do you agree that Freddie Mac should not sell in bulk at a discount?
Thank you for reading the Bryan Ellis Real Estate Letter!
Your comments and questions are welcomed below.
[1] http://www.dsnews.com/articles/freddie-mac-offers-reo-bulk-sales-2011-09-16
[2] http://www.mortgageorb.com/e107_plugins/content/content.php?content.9729
I agree that the Investors should not be given a discount on any kind of purcase of these properties. It is them and their Elk that drove the business to the pitts and we are all suffering. Everytime I try and buy a property the answer is No, No just because I’m a Realtor. NO, NO A THOUSAND TIMES NO. As a matter of fact, they (the bank investors) should be required to pay more!
The Atlanta area has taken a huge hit, lets face it. After inspecting homes for HUD and seeing the deplorable shape many even new homes are in, it is ammassing there are still folks trying to “flip” some of these homes. HUD has sold a bill of goods to many small investors, even larger ones. Years ago unscrupulus auto sales would put sawdust in a cars transmission to let it work for a test drive. Well once off the lot, that car turned into a good boat anchor. same with some HUDS. We have seen two year old former 300-400$ homes with all plumbing gone, all heating and A/C gone. even the entire kitchen , gone!Very sad. Sure put another 100K in it and its now worth 200K. At least the property taxes are lower.
In this day and age, there’s absolutely zero excuse for not making these homes readily available to both investors and end users through an auction style website. The entire BPO system is archaic. Homes should be listed with Realtors for a specified amount of time, say 60 days. The broker earns commission by entering the property details on the website, making sure the property is available for inspection and by assisting winning bidders. It would also be their responsibility to note which homes would qualify for mortgages and which wouldn’t due to required repairs. Reserve prices can be set but at no more than 50% of AVM. With a 60 day due date, investors will make their best offers as the due date approaches. Prices will reflect true value rather than government intervention prices. We need to remove the glut of unsold foreclosed homes and such a system would be the fairest way to do it.
These guys need to be more open to negotiating and discounting these proerties to investors. I have bid on several properties unsuccessfully. They need to reevaluate their objectives a little bit I understand that they want to sell to owner occupants every time but a property that is in need of repairs is rarely an ideal situation for any owner occupants. Too bad they do not have anyone in theor office with some common sense (maybe they do but they are just shackled by all the government rules and regulations). I can have a property in tip top shape in a few weeks and have a happy homeowner in there, They need to let us investors do what we are experts at and stop trying to micromanage something that they know next to nothing about, they are delaying the market recovery and frustrating the heck out of investors. Groooooooowl idiots just turned down a offer today and I was in for 10k more than I should have been by trying to strecth my numbers and take a big risk. Totally unreasonable, they just seem to read from a prompter like our favorite son president. We need to talk to the people that are typing in the words on the prompter I guess? I wonder who that might be?
In my neighborhood and Experience, it is the Government agencies that are preventing the public from reurning to the REO’s and FDIC-liened ( created by closed banks and the government-guaranteed greedy minions that take over properties!)projects! Give the Banks of the FDIC-created LLC’s sixty days to move the properties, or lose them. My experience in Portland is that the public wants to buy the houses, but not at the price that Banks and Realtors were getting three, four years ago! Put them to auction, require the winning bidder to occupy the residence as primary residence for at least one year! Eliminzting Glas-Stegal allowed Speculators to destroy Residential housing. It is time for Americans tio become homeowners again. This will allow them to do so