DEAN GRAZIOSI: DEAN GRAZIOSI REAL ESTATE

When we see a vulture near the roadway, it’s usually feeding on a dead carcass, not the prettiest site.  When the term “vulture investor” was coined, it referred to an investor who swooped in and purchased distressed properties, whether foreclosures or short sales.  In the boom days of the real estate market preceeding 2007, the primary activity for vulture investors was to purchase distressed properties, rehab them, and flip them for a profit.  While this is still possible, the new crop of vulture investors is taking another approach.

In some areas, condos and homes are selling at a third the prices of previous years, with double-digit discounts available almost everywhere.  But, it’s not the flipping market it once was, with no fast appreciation to help to kick up prices in the short term.  Today’s vulture investors are buying, rehabbing, and holding homes as rental properties.  One investor stated:  “I’m buying condos for less than the cost of a Corolla.”

Why is the rental market an opportunity for real estate investors now?  First, there will be a lot more renters for the next ten years, as they’ve either lost a home to foreclosure, or know someone who has.  Also, many who would be today’s first time home buyers are not seeing owning a home the same way they used to.  They don’t see it as an appreciating asset that can help fund their retirement at some point.  Then, there’s also the tough lending climate, keeping as many as one-third of possible homeowners out of the market because they can’t get a mortgage with their current credit scores.

Today’s vulture investor recognizes this opportunity, and the cash flows that rental property brings.  They also are finding that these new renters will pay sustainable market rents to live in the communities they find desirable.  And, many more previously tight rental neighborhoods are yielding distressed properties to buy, rehab and place into the rental market.  With historically low interest rates, deep discounted properties, and a growing demand for quality rentals, it’s a bull market for the vulture investor right now.

The term “vulture investor” is also enjoying more respect these days, with the government and lenders encouraging real estate investors to scoop up properties, sometimes whole neighborhoods packaged into a single deal.  Vulture investors are helping to reduce foreclosure inventories and stabilize falling prices in many areas.

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For an action that is so relevant, it is amazing how little most people really understand about foreclosure.  If you are fortunate enough to be making your mortgage payments in a timely manner, foreclosure may never cross your path.  However, chances are good that someone you know is either in the foreclosure process or acquiring properties through foreclosure.

Foreclosure is the repossession of a property by the mortgage holder when the homeowner fails to meet the payment terms in accordance with the mortgage document.  In today’s economy, the most common reasons people fall behind on their mortgages are loss of employment, health issues, divorce, death of a family member and mismanaged finances.

Each state has its own mortgage foreclosure laws.  However, on the whole, delinquent homeowners can attempt to resolve the deficiency and hold off the foreclosure action.  The most common ways to halt foreclosure are by refinancing with another lender, resolving your differences with the current lender, ask for forbearance, sell the property to pay off the mortgage, a short sale, a deed in lieu of foreclosure or filing for bankruptcy.

Today, the federal government is assisting homeowners in a number of ways.  The Home Affordable Mortgage Program (HAMP) is the most popular means to modify an existing loan.  In certain circumstances, the government is also helping lenders and sellers come together to create a short sale. 

There are three stages in the foreclosure process:

·                     Pre-foreclosure

·                     Foreclosure at auction

·                     Bank Foreclosure  

It is important for troubled homeowners to understand everything about the foreclosure process. Lenders are swamped with stressed homeowners so HUD has opened help lines with mortgage counselors who can offer good advice. 

Foreclosure has serious credit repercussions.  It should always be the action of last resort.  When the homeowner receives a Notice of Default from the lender, all is not lost.  Opening a line of communication is still the most important step in preventing foreclosure. 

Confronting the foreclosure action head on is the best way to resolving the problem.  Remember that banks do not want to repossess the property so if you care about your credit history or keeping your property, work with the lender.  

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