Monday, September 22, 2008
Uncle Sam's bailout of Fannie Mae, Freddie Mac from the trenches;Cleveland Ohio realestate
As a small broker in Cleveland Ohio my impression "from the trenches" of this latest government bail out is definitely a different perspective. What I saw in the industry before the Fannie Mae Freddie Mac bail out of the bank owned properties were selling for pennies on the dollar. It was like the wild wild west in real estate. A great big give a way! This had a huge effect on the regular market. The inner city and the first ring of suburbs are the ones that have suffered the most. High end markets are not feeling this as badly as our middle class properties. High end markets have suffered some losses in value but it appears that it is still moving along unlike the lessor priced properties. Why would someone buy a home on the resale market if it wasn't hugely discounted like many of these bank owned properties. The answer is few were. You could buy a double for 80k or less and put a few thousand dollars into it and end up with a huge equity savings. I have seen some of these bank owned single family homes in very good condition. You will see that they were on the market before the people lost their home. Then when the bank takes it over they put the property up for half the price. I have seen banks turn down offers on these properties only to turn around and put them up for far less than they would of made. I personally have been involved in three of these recently. The new buzz word in real estate is short sale. I have been doing short sales for 24 years. Sometimes you work out a deal but most of the time you get caught up in a bureaucratic web of who's on first base who's on second. Half of the people presently employed in the loss mitigation departments have no real estate background. They don't understand the dynamics of the industry. They just do what they are told and carry a huge work load. Since the bail out any bank owned property that was listed has had a really hard time getting answers on offers. I have had an offer in on one for over a week. Before the bail out anything in escrow seemed to be tied up. Now that the bail out occurred the properties that are in escrow are all getting cleared off the books and the deals appear to be set to close. All the brokers that I know who work the REO market are complaining that the listings are all dying out. Their sources of business continually keeps changing. Maybe this is a good thing! Maybe the slow down in the marketing of these bank owned properties will give the regular market a chance to catch up. I do know that "from the trenches" this last week made the phones stop ringing. It is the end of September and we have a long winter a head of us in Cleveland. Making a living in this continually declining environment has never been more challenging.