Change Is In The Air

Well, I've been away for way too long.  I moved back to the US a year ago and got to work with a REO (bank foreclosure) specialist company.  That's helped me learn a lot about the business and how it has changed over the years.  It also helped me get re-acclimated to the city and its environs.  I bought my own place and two rental properties which are doing well (14% annual net returns ain't too bad).

But the feeling of change is hovering around us.  I've taken a few real estate education classes and the same message appears - that 2013 will be the year that will begin to bring us back to traditional real estate sales. 

REO WILL BE WITH US FOR A WHILE

Does that mean that the REO business has or will go away?  No way!  Those properties will be around for a while but pricing is on its way up.  We're seeing gradual price increases across the city brought about, in part, because of the supply and demand curve being out of whack.  Inventories are at an all time low while investors continue to pour into the city looking for steals and deals.  But instead of getting deals, those investors are doing their best to out bid one another.  Yield compression is being seen throughout the market and is now averaging 9% per year (net).   Still not so bad but not the 15% most investors were expecting.

The biggest change we're seeing is a shift away from bank foreclosures to short sales.  Short sales are sales implemented by the home owner which is meant to stave off a foreclosure.  Banks are having a tendency to go along with short sales because of the savings they realize.  The foreclosure and subsequent property preservation costs hurt their bottom line more than the write off sometimes.  Foreclosures won't go away altogether because sometimes the banks have no choice but to foreclose but we'll see more short sales this coming year.

If you're an investor, be prepared to wait too.  Short sales, though becoming more streamlined in their approval process, still take time to get approved.  It can be take a few months to get the final approval but it can be worth it in the long run.  More often than not, the owners are still in the house and they are, to some degree, still maintaining the house.  NOT ALWAYS but some people still take care of their homes; they're just in a bad place and need to get from under heavy debt. 

Investors are still looking at properties priced, on average, around $60,000.  The problem is that there are too many investors looking for too few properties at this price point.  Moving up the price point will get you the same yield (and maybe better tenants). 

For more information on buying or selling in Metro Atlanta, give me a call.  +1 678.230.9613 

or write at johnb@southernreo.com

Featured On House Hunters International 

Information regarding any real estate investment contained herein is for informational purposes only.  You should check with your tax and/or legal adviser before making any investment decision and always conduct proper due diligence prior to a purchase.