We need to have more investors in the market and we need them flipping properties. There, I said it. I know it won't be long until the riotous crowds start descending on me. But before they do, let me explain. Investors aren't the scourge of the earth. Well, at least not most of them. They are looking to buy an under-valued asset. No different than a stock or a bond fund. And here's why investors are helpful in this market:
1. There are hundreds of thousands of REO and short sale properties on the market. Values will not be going up until demand at least equals supply. In the ever tightening lending markets, investors fill a void by paying cash. It's very true that they may take a potential buyer out of a transaction, but that buyer should be putting offers in on multiple homes, thereby taking two properties off the market.
2. Investors buy up a lot of the very distressed (read: completely trashed) properties. These are units that, due to health and safety issues, can not be financed anyway. Investors buy these up cheap, and fix the inherent problems. At this point,the unit is now gone from total disrepair to some form of turn key for a buyer. That subsequent buyer will get into a home and not have to spend thousands doing repair work they would other wise need to. And I'm pretty sure the neighbor living next door doesn't mind a lawn that actually has grass and windows not made of plywood.
3. Investors buy/sell or buy/rent repeatedly. One by one, that gets more properties out of the hands of the REO listing agents and non-responsive banks we've all grown so fond of dealing with.
When you put all of that together,investors help stabilize the market. Since I see the agitated crowd starting to mill outside now, I will make one more point before the horse mounted,riot police descend. In an effort to quell investor purchases/flips ,FHA, Fannie Mae & Freddie Mac(the latter two having made repeated, brilliant decisions to the point of government receivership) have mandated that no property can get a loan on it if title has changed within the previous 90 days. In fact, an offer can not even be written prior to the 90th day. Hmmmmmm. That law might have worked really well 3-6 years ago, BEFORE the appreciation horse left the barn.THAT'S the time investors needed to be reigned in. THAT was the time when demand far outstripped supply. THAT'S when everyone was on Easy Street. It would have made great sense to calm the market by making "flippers" hold their investments for 90 days. But in the market today, it makes no sense. If your house is worth less that it was 3 years ago, raise your hand. 1...2...1,453,312. I count fast. The point is, why take away a tool that can actually help stabilizeand start to appreciate an asset that you are either living in, or hope to buy? I think it's time to conclude this post. It's some what unnerving to see yourself burned in effigy.
1. There are hundreds of thousands of REO and short sale properties on the market. Values will not be going up until demand at least equals supply. In the ever tightening lending markets, investors fill a void by paying cash. It's very true that they may take a potential buyer out of a transaction, but that buyer should be putting offers in on multiple homes, thereby taking two properties off the market.
2. Investors buy up a lot of the very distressed (read: completely trashed) properties. These are units that, due to health and safety issues, can not be financed anyway. Investors buy these up cheap, and fix the inherent problems. At this point,the unit is now gone from total disrepair to some form of turn key for a buyer. That subsequent buyer will get into a home and not have to spend thousands doing repair work they would other wise need to. And I'm pretty sure the neighbor living next door doesn't mind a lawn that actually has grass and windows not made of plywood.
3. Investors buy/sell or buy/rent repeatedly. One by one, that gets more properties out of the hands of the REO listing agents and non-responsive banks we've all grown so fond of dealing with.
When you put all of that together,investors help stabilize the market. Since I see the agitated crowd starting to mill outside now, I will make one more point before the horse mounted,riot police descend. In an effort to quell investor purchases/flips ,FHA, Fannie Mae & Freddie Mac(the latter two having made repeated, brilliant decisions to the point of government receivership) have mandated that no property can get a loan on it if title has changed within the previous 90 days. In fact, an offer can not even be written prior to the 90th day. Hmmmmmm. That law might have worked really well 3-6 years ago, BEFORE the appreciation horse left the barn.THAT'S the time investors needed to be reigned in. THAT was the time when demand far outstripped supply. THAT'S when everyone was on Easy Street. It would have made great sense to calm the market by making "flippers" hold their investments for 90 days. But in the market today, it makes no sense. If your house is worth less that it was 3 years ago, raise your hand. 1...2...1,453,312. I count fast. The point is, why take away a tool that can actually help stabilizeand start to appreciate an asset that you are either living in, or hope to buy? I think it's time to conclude this post. It's some what unnerving to see yourself burned in effigy.
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