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I lost a deal today

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tbsells

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:pissed::pissed:I called today to check status of one of my closings scheduled for this Friday. The status is-there will be no closing. The loan company went out of business. I have a preapproval letter dated August 8, the house was appraised about a week ago, the sellers payoff is ordered, we're ready to go. Boom! The loan company is gone. Things are changing fast in the RE finance world. This deal would have closed less than a month ago. The buyer is very marginal with little or no down, marginal credit, etc. You used to be able to get these buyers financed at a higher rate than normal, but not any more. This "subprime" mess is just getting started. I think its going to get real ugly. The record sales of the past couple years have been largely due to easy money (to easy!) A return to normal underwriting standards will probably disqualify as much as 25% of people who used to be buyers. Now they are renters. I think the next few years will be real good for landlords. I'm looking to buy foreclosures for single family rentals.
 
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andviv

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Sorry to hear that you lost a deal.
Great news for landlords, as you said.
Great time to own apartment buildings!!!!
 

AroundTheWorld

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It is crazy how much it is changing.... literally from day to day. A program is here today, gone tomorrow..... and standards are changing daily as well.
 

andviv

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So, hard money lenders are having a blast? Who else is benefiting from this trend? It is clear that many properties will end up being REO so start contacting the realtors that have these listings.
tbsells, are you already an expert on REOs? I know you have a lots of experience and have been on the market doing deals for long time. What's your perspective about the REO market in the short/mid term?
 

yveskleinsky

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Am I missing something on REOs? How are you guys making money on properties that are most likely worth more than the bank owns them for?
 

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Not all REOs I have seen are the same. Some are great deals and some are basically being sold at retail. I just missed an REO two weeks ago. It was a 1400 sq ft 3/2/2 house that sold for 32K and needed about 10K of improvements. It would retail about 80k finished. I wanted to cash out 75% of the equity, rent it, and buy more properties. Keep in mind that these are Texas RE prices not Cali or Fl. No matter what RE game that you want to play, you better do your due diligence.

Also, I too had a refi and a bid on a property go south a few weeks ago. This was due to my favorite lender going bankrupt. All those nice people that worked so hard for me have lost their jobs. It set me back about a month with my plans. You are right, the finance end of the RE market is changing rapidly. Good luck to all and happy hunting.:thumbsup:

Greg
 

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I think as the REO properties start adding up on the books of these banks/lenders, the discounts will start going deeper! I give it another 6 months.
 

andviv

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Dana, the banks will sell at discount just to recover the money they can and make those funds available for more funds.

There is a somewhat complicated "rule" in banking. The have to keep in reserves certain amount of money to cover themselves for the loans they have generated i.e. if they have a 100K dollars loaned out there, they are mandated to maintain maybe 30K in reserves
(I don't know the real %). If the loan for that 100K dollars default then they cannot recover that money but also can't use the 30K in reserves. Also, the banking system is allowed a high leverage so they can loan something like 10 times what they actually have in reserves (again, this is a simplistic way to put it as, i'm sure, there are better ways to explain it) so every dollar they have tied in reserves is money they can't loan. Can somebody please explain this a little better?

Anyhow, the banks will sell at a discount, write off the loss and move forward with the money they can recover.

I do know it is happening currently in my area --the hot market of Washington DC.
please take a look at this example. I was after it but I was a couple of weeks late as somebody else had already made an offer. The estimate is above $450K and it was sold for $292K
http://www.zillow.com/search/Search...+s+lincoln+ave&citystatezip=20164&GOButton=GO

By the way, I found this property using my friend's RealtyTrac account.
 

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Dana, the banks will sell at discount just to recover the money they can and make those funds available for more funds.

There is a somewhat complicated "rule" in banking. The have to keep in reserves certain amount of money to cover themselves for the loans they have generated i.e. if they have a 100K dollars loaned out there, they are mandated to maintain maybe 30K in reserves
(I don't know the real %). If the loan for that 100K dollars default then they cannot recover that money but also can't use the 30K in reserves. Also, the banking system is allowed a high leverage so they can loan something like 10 times what they actually have in reserves (again, this is a simplistic way to put it as, i'm sure, there are better ways to explain it) so every dollar they have tied in reserves is money they can't loan. Can somebody please explain this a little better?

Anyhow, the banks will sell at a discount, write off the loss and move forward with the money they can recover.

I do know it is happening currently in my area --the hot market of Washington DC.
please take a look at this example. I was after it but I was a couple of weeks late as somebody else had already made an offer. The estimate is above $450K and it was sold for $292K
http://www.zillow.com/search/Search...+s+lincoln+ave&citystatezip=20164&GOButton=GO

By the way, I found this property using my friend's RealtyTrac account.

your in my zip code!!!! well right next to it. Im at the end of rt 28 right there??
 

tbsells

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I think as the REO properties start adding up on the books of these banks/lenders, the discounts will start going deeper! I give it another 6 months.
:iagree:

Andviv,
I'm not sure I'd call myself an REO expert, but maybe I am. I've bought 10-12 in the last 3 years and sold about 20 in that same time period. I probably know more than most, but its changing quickly. I think it is a good time to be hoarding cash in anticipation of buying opportunities that are coming in 3 to 6 months. Alot of these REO's are sitting on the market a long time at to close to retail pricing. The REO pipeline has to be filling up. I think the time is coming soon where the lenders will start dumping these.
 

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