OfflineI recently read an article that gave a good reason for the banks willingness to hold their foreclosures rather than to quickly sell them off. I would cite the author and give them credit but I can’t find the article. REOs are non-earning assets for the bank. They receive no income from the properties and property taxes and insurance are an on-going cost for the bank so it was sensible for them to convert the foreclosure into an earning asset. The reasoning was that the banks cost of funds was so low that the banks holding costs were only the taxes and insurance costs. Most banks are paying interest for deposits around one percent. Those low holding costs are allowing them to hang onto the properties. Something to watch for will be rising interest rates which means the banks holding costs are also rising. As rates rise the banks will likely begin to sell off more of their inventory.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125
1. Banks are not following mark to market accounting thanks to some relaxed guidelines. This means they don't have to account for the loss on their books until they take back the property as an REO. In areas like California where we are, there's been brutal price declines. Even on higher end properties. Banks are consistently seeing $300-$500 losses on million dollar plus loans. Ouch. No wonder they don't want to take any back, it would look horrible for their earnings!
2. Dumping REOs in the market will soften prices further if market can't keep up with demand. Seasonally, it's business as usual here. Not much REO coming out and inventory build up is happening a little but not enough to cause concern. We have a radio show and the next two weeks will feature California Association of Realtor Chief Economist, Leslie Appleton-Young. Always friendly, nice, and honest. Worth a listen.
3. Robo-signing and MERS. The Feds and 50 state attorneys generals are just completing their investigation. Many REOs are still being help off the market until the banks know what their punishment will be. We have so many REOs agents in our area who have been told to "hurry up and wait" for years now. Still, no inventory. Very frustrating. I'm also keeping a close eye on which foreclosure aid programs will get dumped (NSP, REO, and short refi).
More to come I'm sure.
Aaron Norris
The Norris Group
6391 Magnolia Avenue, Ste. C
Riverside, CA 92506
Tel: (951) 780-5856 x108
Fax: (951) 780-9827
http://www.thenorrisgroup.com
http://www.TNGtrustdeeds.com
Specializing in California hard money loans and trust deed investing since 1997.
We need hard money for northeren California.
Steve and Veronica.
Steve and Veronica
Steve and Veronica's Journal.
http://www.deangraziosi.com/real-estate-forums/investing-journals/58073/...
http://www.deangraziosi.com/real-estate-forums/totally-fulfilled/72344/d...