If you were expecting the $700 Billion bailout plan to mean that the government might purchase some home loans and in so doing stabilize the real estate market, think again.
This has some significant ramifications for investors and best strategies – please pay close attention!
Treasury Secretary Hank Paulson held a press conference last week during which he stated that the bailout fund – originally designed to fund a “troubled asset relief program” (TARP) – would no longer be used to buy bad mortgages from troubled lenders. Instead, he’s going to use the money to bail out all manner of businesses including insurance companies, credit card companies and automakers.
It’s difficult to refuse to point out how incredibly right I was to oppose the bailout plan, but just because an opinion is right doesn’t make it the popular one. (!!!)
Nevertheless, a practical ramification of this policy change is that lenders will become more aggressive about directly avoiding foreclosures. This will happen in at least two ways:
- Lenders will continue to announce new mortgage modification programs designed to keep home owners in their homes. (Several major lenders have already announced such programs.)
- I suspect short sales will become more commonplace, and ultimately easier to perform
(More on short sales in a moment…)
While it’s deplorable that the government completely lied to us about the purpose of the $700 Billion bailout bill, I do think that this is ultimately a good thing for the real estate market and for real estate investors. The best solution to the real estate crisis is to let real estate values find their true levels, after which buying will resume…
…which is exactly why I suspect short sales to increase significantly in frequency and importance.
(For our new readers, a “short sale” is an agreement by a mortgage lender to accept less money than is owed on a property due to changing market conditions and the inability of the borrower to pay the loan. Essentially, it’s a last-ditch effort by the lender to avoid foreclosing the property.)
My friend, do yourself a favor. Take every opportunity you can to learn about short sales, because I expect they will be a huge part of our business in the next year. And when you know how to do short sales well, very large profits on each deal becomes distinctly possible.
What do you think – how will the change of purpose for the $700 Billion bailout fund effect the real estate market generally and real estate investors specifically?
As always, thank you for reading RealEstate.BryanEllis.com.
Just one more example why we do not need nor do we want the government to be big and taking care of us. They have no idea of how to “do it right”.
Just think what kind of stimulus package would be created if the government would give every man and woman in the USA 18 years old and older $100,000 each. It would do our economy a lot more justice and help the ones that need the help like you and me and everybody else working just to get by.
I like Alan’s idea lol.
Yeah, Alan’s idea is great but we all know that the money will end up in the same place anyway since most of that money will go to paying bills/debt so the bank will get it anyway…
How about 10% of $100,000.00. $1000.00 cash to everyone over 18 and $9,000.00 in education aid.
I agree about the increase in short sales. What do you think about banke letting REO properties already in their possession go at a good price for investors with cash and quick closing. Thinking in terms of 35-40% of the current ARV with properties in rough shape in need of moderate to major repairs. Seems like they currently are holding there longer and longer looking for max pricing from retail buyers. Have seen many retail deals with financing contingencies in our market fall through but yet banks won’t take an investor cash offer with quick settlement. Where do you see this going in the future.
My suspicion is that banks will have to become more aggressive with their REO sales. I think they are all hoping that something the government does will artificially create demand for real estate, but the only thing that can do that is the strength of the free market over time. In the mean time, REO prices will likely continue to be pushed downward. — Bryan Ellis
Well, since I’m new I guess I gotta start learning all I can about the short sale process now. Would gathering the leads for for short sales be enough or should I learn how to do the entire process? I’m up to learn it all either way.
You really should learn the whole process. But stay tuned – I’m working on having one of the world’s leading short sale experts come on a webinar to teach you how to do this. — Bryan Ellis
I like this. I am creating a fund to buy nonperforming loans. I was worried that the government was going to compete with me.
OMG – How about getting off your lazy asses and grab your own boot straps to pull yourself out of whatever hole you think your in. QUIT looking to the Feds for handouts. QUIT whinning and feeling sorry for yourself. Growup, be a man. Go get a job, go get two jobs. Do something worthwhile. Go to a homeless shelter for Thanksgiving and help feed those poor souls, you can’t even imagine how good that will make you feel. If this offends you, I’m not sorry, someone needs to slap some sense into you. Standup for yourself and take charge of your own life
Caitlyn – I’m speaking to those who are suggesting the Feds should give $100,00 to everyone. You don’t have your hand out do you?
John Platt,
What about Ford, GM & Chrysler? Should they standup & take charge of their lives?
It’s not about being a man.
A lot people can’t get a second job because that second job isn’t there. Also, what about the guy (or gal) looking for that job number one?
Where are the jobs, anyway?
Plus, it’s easy to say, work 12-16 hours a day. 24/7.
I have news, folks.
Most Americans are already doing it! Working more hours but getting farther behind.
Remember some people have health issues or family issues that preclude them working that 12-16 hours a day.
A blanket statement of people being “lazy” is not an answer.
Most are not lazy!!
Me???
If there are handouts, right or wrong, than I would rather see them go to the struggling little guy. Instead of millionaires who have their hands out to government after they have already “made theirs” and are trying to make more from the mostly hard-working tax payers.
Just my .02 worth….
Just my opinion…