Why Investors are Helping in the Cleanup of the Housing Crisis.

I think you have to have a thick skin if you’re a real estate investor in this market.  I’ve seen hundreds of posts, usually by well meaning agents, painting horrible pictures of the investor as a “bottom feeders” – Many times I read through these posts and see HUGE holes in their arguments.  If you dig deeply in the masses of negative posts the one thing I see as a common denominator is fear.  Many well meaning agents seem to have a HUGE fear of working with investors and I believe it boils down to inexperience.  We all have fear over the things we don’t necessarily understand.  I’ve seen posts where agents have never worked with an investor, however they are out there in mass numbers advising homeowners to stay away.  They throw scary words out like “fraud, scam, schemer” with little effort, and strike the same fear they have over investors into the minds of homeowners.  At first, I was extremely bothered by the generalizations on the internet.  These posts pointed to no specific cases of schemes or fraud, but now my skin has thickened to a point where my knee jerk reaction is, “Here we go again” – The cases that seem to be brought up over and over involved agents with licenses, but the investor is the one with the bad rap.  All you have to do is Google short sale fraud, and you’ll see what I mean.

The truth of the matter is there is very little short sale fraud.  The FBI has published that there are no solid numbers on short sale fraud (“As such, the extent of short sale fraud nationwide is unknown” http://www.fbi.gov/stats-services/publications/mortgage-fraud-2009) – According to the Corelogic (a company that sells mortgage fraud software) it’s estimated that short sale fraud is 2% of overall mortgage fraud.  So every time you see an article with the words fraud, scammers, floppers, etc., remind yourself that only and ESTIMATED 2% of overall mortgage fraud is a short sale transaction.  ESTIMATED…not actual.  Oh, and keep in mind Corelogic lines their pockets with lender loot!!  So the sheer fact they have a bias going into the study makes me skeptical.  I wonder if they accounted for their bias in the study as all GOOD RESEARCHERS SHOULD.  It’s too bad we can’t see numbers from an independent company.  

My point is investors are helping the housing recovery.  According to Econohomes — an Austin-based online source for wholesale investment properties, local investors are acquiring, rehabilitating, renting, and reselling the tens of thousands of distressed properties in the market.  They are moving inventory.  Most of these investors work part time and make less than $100,000 a year.  So please keep in mind we all aren’t raking in huge amounts of dough for what we do, but have a love of the real estate market.

I’ve even had the argument that when we purchase a property and sell it immediately that we aren’t helping in stabilizing the housing crisis.  WHAT?!?!? That is absolutely NOT the case.  As a matter of fact we are the first step in stabilizing. (We do rehab properties, but we did a double closing yesterday)  For instance, we just closed on a short sale yesterday that took over 12 MONTHS!!!  Now I have to be honest and say it was the LONGEST time we’ve ever taken to negotiate and take title to a property.  The property should have closed at the 6-7 month mark, but unfortunately due to a long, long, LONG list of title defects, it was impossible.  So my argument is, we play a VITAL role in clearing and insuring marketable title.  We actually sold the property to a rehabber who plans on turning it into an office building.  The rehabber didn’t wait 12 months to purchase the property..we did.  The rehabber waited a little over two months to take the nice clear title from us.  The rehabber didn’t wait through 1 BPO and TWO appraisals and 4 approval extensions.  The rehabber didn’t run around collecting paperwork and worrying.  They had the best job.  They got a property for a under market value and had none of the headaches. 

The beauty of this short sale is everyone WON.  The homeowner who owed over $300,000 on a property walked away with NO DEFICIENCY language in her approval letter and we bought the property for under $90,000.  The homeowner had fallen on bad times and there was no way she could have paid money at closing, or repay anything if there was a deficiency in her approval.  We paid for the remaining money the second lender wanted at closing.  The rehabber won because they will start work on the property.  The town won because now they won’t have a home sitting empty not being cared for, and will have a new owner paying taxes and keeping the property up.  The lender won because they got a non-performing note off their back.  The homeowner hadn’t paid the mortgage in 2.5 years.  The agent won because he got a 7% commission as he was an agent for all parties.

This can happen with every home we purchase and take title too.  Unfortunately we get far more calls from homeowners than we know what to do with and unfortunately we have become very selective with our process.  Luckily for every homeowner that owns a home we CAN’T take title to, our negotiation firm can assist them with the process.  We have a network of amazing Realtors we work with that we can reach out to and are happy to assist these homeowners.

Investors ARE assisting in the housing recovery in many ways.  I feel blessed to be a part of it.

Maryann Little, Preforeclosure acquisition and negotiation

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