The troubled US real estate market may present an investment opportunity for brave investors.
The latest news out of America mentions the dollar getting hammered, the credit market in turmoil, and foreclosure filings increasing by the day. Real estate values have plummeted. Seems like the last thing you’d want to do is to buy real estate in the States. But I bet you didn’t buy Apple when it hit $10, twice, in the last 12 years.
Note the following: Bloomberg.com reported on October 26th that a record 17.9 million homes stood empty in the third quarter. More importantly, only 2.07 million empty homes were for sale. If these figures are accurate, that means 15.83 million homes are just sitting there empty. This is an unprecedented backlog of inventory waiting to hit the market.
In the normally strong Southern California housing market, short sales were reported to have topped 10,000 units in early October. Short sales occur when lenders will accept on sale of the property less than the amount due. Lenders will usually agree to this when the alternative of filing and executing a foreclosure and eviction will probably bring in less revenue for the house when it’s sold at the foreclosure auction, as is almost always the case.
Technology allows potential investors access today that only grizzled professionals had until a few years ago. Searching local newspapers online in an investor’s target area and cross-searching the web site for the local metropolitan courthouse will enable the savvy bargain hunter to track properties that are in trouble or have been foreclosed on.
Online searches of real estate listings in the Miami area show houses for sale sitting on the market for upward of 360 days. Cross-referencing a property that’s been listed for sale for 360-plus days with the local county property registry will give you the owners of record for that property. Logging into the Dade County Courthouse listing of court actions and searching by the name of the owners of record will show whether the property is in foreclosure, and if it is, will list all the relevant appearances. More importantly, it will list the original lender who is listed in the suit and holds the mortgage to the property. The auction date will be listed, and in some cases the results of the auction will also show.
Upon completion of the foreclosure process, if the lender is the high bidder in the auction, it will take possession of the property. By cross-referencing the lawsuit against the defendants in the foreclosure case, you have the name and address of the lender. Contact the lender through its REO (real estate owned) department (look them up online) or through their foreclosure department. The file on the property will be in one of these departments, depending on how quickly you reach the lender.
What’s the property worth? How well you buy the property will affect your profitability. Make an offer too high and not only do you leave money on the table but, if you’re financing the transaction, your debt service (income versus expenses calculated in monthly terms) will suffer and your bottom line will decrease. Offer too little and your deal will be rejected and your reputation as a credible buyer will suffer.
Now that you’ve found your bargain, you only need to pay for your purchase.
Zaq Harrison is a licensed commercial & residential mortgage banker with Sage Financial, which has offices in Chicago & Israel. He is an independent commentator, and his views do not necessarily represent those of "Globes".
This column should not be taken as advice to buy, sell or continue to hold any securities, and anyone acting on the advice of this column does so at his or her own risk.
Published by Globes [online], Israel business news - www.globes.co.il - on November 18, 2007
© Copyright of Globes Publisher Itonut (1983) Ltd. 2007