Market Littered with REO’s and Short Sales
It is no surprise thst the current real estate market is cluttered with REO’s( real estate owned…taken back by banks) and short sales. The vast majority of the listings that I have looked into are 100% financed loans where the borrower has nothing into the transaction. I have stated before that the old adage that “…if it sounds too good to be true it probably is.” There are many examples of ordinary homeowners turned investors who leveraged their homes to buy investment properties based on the futire appreciation-ignoring heavy negative cash flows. The thinking was that they would cash out in a few years and make a bundle. Investments can be highly speculative and risky but the smart investors always keeps his eye on the basics of sound investing. In this case it means asking questions like: Is this the right location? Can I survive a downturn in the market? Is there anything unique about the house that will help it stand out in a dull market? Can I create value rather than just buy and hold and hope someone else bails me out?
I talked to a very astute real estate attorney the other day and he told me of going to a seminar and listening to one of the nation’s top economists who said one word describes this current crisis-greed. Greed from the top down and I couldn’t agree more. What we are faced with now is how to get out from underneath his excess and gluttony and get back to a balanced market. Time is the only answer. However, location and neighborhood are very important. If you find a home that you want in the neighborhood you want and then you wait for someone to tell you we are at the bnottom you risk losing this home. It is a home first and an investment second.