Certainly the current market has seen a substantial reduction in value.  And foreclosures, short sales, and bankruptcies have happened in record numbers over the past three years.  Bank owned houses listed with realtors have appeared in record numbers.  All of this appears to be a bad thing.

Let’s not kid each other.  Behind the foreclosure notices and bank owned houses are people who lived in these houses.  The cost of these distressed houses goes way beyond the financial loss to the homeowner and the lender.  These houses affect the entire neighborhood.  Vacant houses are houses that are not maintained.  Perhaps you have seen them in your travels throughout different neighborhoods.  The grass starts to grow higher and higher, trash starts to accumulate, the pool starts to grow algae, and vacant houses attract the wrong kind of interest.  This results in lower property values for everyone.  The lower values have translated into lower property tax revenue for each county.  Lower tax revenue places stress on local government budgets.  All of this hurts our local economy.

Nobody wants to see people lose their home.  Nobody wants to see a family – parents with children forced out of their home into an uncertain future.  After all, the American Dream is home ownership.  Nobody wants that dream to be taken away, especially real estate investors.

Foreclosures have always been a part of the real estate market.  Traditionally, it has accounted for about 2 percent.  It always represented a small niche in the total market.  The other 98 percent have always represented a healthy, properly functioning market with houses changing hands between qualified buyers and willing sellers.

No matter how good or bad the market is at any one snapshot in time, there have always been opportunities in the market for investors.  Now is actually a great time to invest in the real estate market, even if you are a beginner.  It is important for investors to enter back into the market.  Purchasing bank owned and other distressed houses puts them back into the market as productive assets instead of unproductive liabilities.  Repairing them, cleaning them up, and making them suitable as a rental property or a property for sale helps to stabilize values and improve the livability of neighborhoods.

When investors purchase distressed properties, many other businesses benefit.  Title companies, appraisers, property inspectors, mortgage lenders, insurance agents, surveyors, termite companies are all part of the process of purchasing a house.  After the closing of the purchase, contractors, plumbers, electricians, roofers, air conditioning people among others are often needed and hired to improve the property.

They in turn purchase products such as carpeting, ceramic tile, counter tops, plumbing fixtures, appliances, sheet rock, paint, etc. at Lowe’s, The Home Depot, and other local businesses to spruce up the property.  This helps employ people in the local economy.

The real key to an overall stable real estate market is job creation in a growing economy.  When employment is stable, home ownership is stable.  Consumers have the ability to qualify for and purchase a home, or continue to pay the mortgage on a timely basis, all of  which helps maintain real estate values.  This stabilizes prices and provides a predictable amount of property taxes to the county.

In conclusion, investors have always had a role in the overall real estate market.  This role is vital to keeping distressed houses down to a minimum and returning them back to the market.  This role is important to the overall market and is needed.

But, that still means there will be plenty of foreclosures coming onto the market in the remaining months of 2009 and into 2010.  If you are an investor like me, you should be interested in making offers on these bank owned properties while the supply lasts.  This represents a unique opportunity to buy properties at bargain basement prices.

So, how can you take advantage of this once in a lifetime opportunity?

The best way would be to develop relationships with local realtors who handle REO properties.  When a lender takes back a property through foreclosure, it eventually places the listing with one of a handful of local realtors.  These realtors have established relationships with asset managers at banks throughout the country.  The realtor has quite a bit of work to do before the house is listed with him or her.  The realtor has to go to the house, arrange a cleaning out of the property, a changing of locks, perform a Brokers Price Opinion (BPO) and turn in the results to the lender.

You would need access to the Multiple Listing Service (MLS) in order to find out which realtors have the listings to the REO properties.  Then you would have to contact the realtors and make an offer to buy on the listings they have that interest you.

There is good and bad news with bank owned REO houses.  The good news is that they are plentiful due to the large supply of foreclosed homes over the past 2 to 3 years.  The bad news is that prices have dropped significantly over the past 3 years and it could be tricky to determine value and therefore what you would want to pay for a house you may be interested in.

There are also websites which have listed properties.  All banks and lenders have their own websites and usually show a list of their REO houses.  Many times there will be a link to the realtor who already has the listing to the house.  You can also google keywords such as asset manager, REO properties, bank owned properties, etc. and follow up on what comes up from the Google search.

By establishing a business relationship with the REO realtors, you are giving yourself the best chance at buying these properties.  You should call the realtors and set an appointment to meet them.  Bring a credibility kit with you.  This could include copies of any closings you have already done, photos of houses you have already bought, and proof of funds when making cash offers.

Gaining the trust of the REO realtor is the most critical part.  They have to be able to trust you to close on a purchase once your offer has been accepted by the bank.  The best way to do this is to follow through and build a track record of closings.  Once the realtor has confidence in you, he or she will often call you first when the next listing is in hand.

REO properties are a great way to get below market houses even  in today’s market.  These houses can be rented out, sold on a lease-option, or sold with owner financing.  All represent ways to build a monthly positive cash flow from houses.

I hope you have enjoyed reading my post.  Please leave a comment if you would like.

Not one single major city has been exempt from a decline.  Prices have been falling throughout the country, from Los Angeles, to Chicago, Dallas, and New York, and especially in Florida, Nevada, and Arizona.  According to RealtyTrac, a total of 2.3 million properties nationwide had a foreclosure notice filed against in 2008, nearly double the amount in 2007.  The sheer amount of foreclosed homes has without a doubt put a damper on prices. However, this is coming more from the lenders rather than buyers and sellers in a normal marketplace.

The significant and continued decline has been due mostly to banks dumping large numbers of foreclosure houses into  the market.

Lenders are affecting the market prices of neighborhoods by accepting offers to buy at prices so low, they are driving down home values and therefore the median price, not just in neighborhoods, but in townships, cities, and whole counties.

Ironically, the lower prices have started to create increasing interest in buying houses.  According to FAR, the Florida Association of Realtors, the Tampa Bay area experienced a 21.4 percent increase in existing home sales from June of 2008.  Sales totaled 2,848, up from 2,348 from one year ago.  There has been a clear trend in the increasing number of sales, but declining prices have lead to an overall lower median price.

This should and is bringing investors back into the market.  Investors should be noticing the increase of the median price.  Retail buyers are also coming into the market.  Houses have become affordable again in terms of the monthly payment as compared to current market rents.  And there is the $8,000 first time home buyers tax credit, although that expires at the end of the year.

In conclusion, if the market has not yet reached bottom, then it appears to be close.  This means it is a great time to buy.  Bargains are available to both investors and homeowners.  Investors should be moving into a more aggressive buying mode.   Prices are at a price point where owning and holding houses makes financial sense again.  Houses are cash flowing again.  It has been a long time since that has been the case.  And homeowners are seeing prices they may never see again.  But I still think future property values comes back to steady economic growth, a stable economy, and the availability of jobs.  This gives people the opportunity to buy and pay for a house they can call their own.

Thanks for reading my blog and I hope you will leave a comment if you like and let me know what you think.