National Public Radio reported today that the inventory of pre-foreclosure homes has increased 22%. That is because lenders have discovered that it is often less expensive to accept a short sale, rather than foreclose on a property. A "short sale" is a real estate transaction where the underlying lien holder (the lender) agrees to accept less for the house than what is owed.
As the inventory of foreclosures, pre-foreclosures, and bank-owned houses has increased, institutional investors have rushed into the market (perhaps in response to Warren Buffett's comments in February about the investment opportunities with single family homes? see our previous blog on this topic).
Here are some snippets from the national media about this change:
"Large Wall Street investors rushing
into the foreclosure market have
raised between $6 billion and $8 billion,
with the intent to acquire between
40,000 and 80,000 foreclosed homes
nationwide in the months ahead."
- Housing Wire
"Landlords have always tended to be
mom-and-pop outfits. That appears
to be changing. Fast." - Fortune
Magazine
"The business of buying foreclosed
homes, renovating and renting them
out is morphing from a largely mom-
and-pop business into the next big
thing on Wall Street." - CNN
Individual investors are finding it difficult to compete in this market, where the institutional investors can come to the table with quick and ready cash. In order to compete, individual investors with ready access to cash are the most likely to succeed in this arena today.
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