Short Sale 2.0

By
Real Estate Services

A major shift is taking place in the way the massive log jam of distressed properties is being dealt with. Over the last couple of years, defaulting homeowners have become a protected class. I say this without intent to sound heartless, but I still believe in the basic tenet that you can't keep stuff you didn't pay for. Houses included.

 

Partly because we have a government today that seems to distrust successful businesses, and partly because the banks brought it on themselves, the government has been abusing the mortgage lending industry for years. Law suit after lawsuit, a public relations smear campaign and iron fisted regulations have been unleashed on our mortgage lenders. As a result, it is common for defaulting borrowers to squat in homes for years without paying their mortgage or taxes. The result is skyrocketing costs for banks who attempt to foreclose. It really is out of control.

 

The result of this is Short Sale 2.0 - the next phase. In Short Sale 1.0, lenders were schizophrenic. They would take months to make decisions on short sale offers, and be totally inconsistent. One day they would approve a case, the next they would decline an identical case. They could not figure out what they wanted to do, but now they finally have. They are soliciting high risk borrowers to do short sales.  We should anticipate that the REO inventory will dry up and the short sale inventory will flow.

 

There are two noteworthy differences between an REO and short sale that I have not seen get much attention, so I want to do that here. First, the house is going to be in good condition. Borrowers need to be on their best behavior to have their negative equity forgiven by the bank. They are not going to trash the place.

 

Second, every short sale adds one home to the inventory, and one tenant into the marketplace. These tenants are gold. People who struggled to make a $4,000/month mortgage payment can make a $2,500/month rent payment with ease. Their objective is to create the least disruption to their family as possible, which means renting a house in the same school district.

 

Do you have enough single family houses for rent to give your short sale sellers a soft place to land? Most likely you don't, but the solution is built in. If you have two short sales in the same town, you need to find an investor to buy them both, and create rental options for those two sellers. These folks desperately need us to get in front of this.

 

The habit we need to get into is merchandising each listing in two ways - as a home and as an investment property. I promise you, good investors will respond to any marketing you put out there, since no one does any marketing targeted to them. The message is simple. We have a steady flow of listing AND quality tenants to need to rent houses. All we need now is some smart investors who want to capitalize in this opportunity.

 

This approach will maximize your revenue potential, and provide a service to your community. Just imagine for a moment what it would be like to lose your house and not be able to find a place to move nearby. Your kids have to change schools. You may need to put your dog up for adoption because you are stuck renting an apartment. All because you bought too much house at the wrong time.

 

Let's solve this problem. It's a housing crisis and we are the housing industry, if not us, then who?

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Re-Bloggged 2 times:

Re-Blogged By Re-Blogged At
  1. David A. Weaver 08/14/2012 12:19 AM
  2. Christine Farkas 08/19/2012 05:40 PM
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Topic:
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investors
foreclosures
short sales
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Rainmaker
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Stieg Strand
Real Estate Broker
RE/MAX Results

Greg,

You are truly a prophet of great profit!

 

Stieg Strand

www.stiegstrand.com

Eden Prairie, MN #1Real Estate Blogger on AR

August 19, 2012 07:01 PM
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Brian Schulman
Lancaster County PA RealEstate Expert 717-951-5552
Coldwell Banker Select Professionals, Lancaster PA

Good analysis - although I don't think there is any shortage of investors looking for short sale bargains.  I agree about the many highly qualified future renters.  (Don't know if it was just my computer, but text formatting ran very wide...)

August 27, 2012 06:37 AM
Rainer
16,819
Bryan Dasilva
ForeclosureDataBank.com

Hey Greg, Wonderful distinction. Yeah, this is going to be a mark to introduce a new way of thinking for me. Thanks a lot.

 

Bryan

August 27, 2012 09:32 AM
Rainer
32,223
Darius Ramsey
REO/Short Sale Specialist
Prudential Homesale Services Group

Well thought out post. I can say that we try to reach out to those investors looking for buy and hold properties. You definitely got my mind running with ideas

August 27, 2012 04:49 PM
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Christine Donovan
Broker/Attorney 800-610-7253 DRE01267479 - Costa M
Donovan Blatt Realty

Greg - This is definitely food for thought and makes a lot of sense for many different people.

August 27, 2012 10:40 PM
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Rainer
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Greg Rand

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