WaPo: Vultures Are Circling Over Distressed Properties

Kenneth Harney over at the WaPo discusses grave dancers, or businesses who swoop in and buy once overpriced homes for $0.50 on the dollar:

Subprime mortgage delinquencies and foreclosures are swelling those numbers significantly, he said, along with plunging prices in some local areas. Softening markets also are driving down the expected discounts on troubled houses. Whereas in past years, “we might offer 65 percent of a property’s expected value after repair, now in some places we’re looking at 50 percent,” Hayes said.

A $100,000 starter home with a seriously delinquent mortgage and in need of renovation, for instance, might draw an offer of $50,000 to $55,000 cash from a HomeVestor franchisee.

“The owner might be offended at the low-ball offer, but then again, in some situations that might be the only offer they get,” Hayes said.

I have remarked before to friends and family that I do not believe the “bubble burst” will last for long, precisely because these investors seem so willing to swoop in and take advantage of the current turmoil.

Why are they so confident? Consider what homes were selling for one year ago… and people were paying then…

The real danger is the folks trapped by the real estate market: loans they thought (or were told) they could pay for and a mortgage industry willing to lend to virtually anything that could pay. Why? Because some people really want to buy their own house with a mortgage, and if you could pay for it, you were deemed to be a good fit, even though it may have been misleading. Prospective homeowners then decide to take out a loan with the bank that can help them to repay this mortgage. This is called a mortgage loan. Note investors, on some occasions, step in to take over the role of the bank, and when they want more cash in the pocket, they can decide to sell their mortgage note with somewhere like Amerinote Xchange (https://www.amerinotexchange.com/sell-mortgage-note/). It’s a good idea, especially if you want to invest your money somewhere else, and more people may decide to follow suit in the near future. The public mood during the ’00s could arguably be compared to stock trading in the 1920’s, junk bonds in the 1980’s, any dot.com startup in the 1990’s, and so forth.

The good news is the housing market will inevitably rebound. The bad news is that millions of Americans will undoubtedly feel as if they were taken advantage — rightly or wrongly.

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