Uncle Sam needs you to help unload 250,000 distressed properties

Federal agencies are scrambling to come up with ways to get rid of 250,000 properties in various stages of distress and are leaning heavily toward making many of them rentals through investors and previous owners.

by Broderick Perkins
© 2011 DeadlineNews.Com

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Deadline Newsroom - Federal agencies are scrambling to come up with ways to get rid of 250,000 properties in various stages of distress and are leaning heavily toward making many of them rentals.

The Federal Housing Finance Agency (FHFA), in conjunction with the U.S. Department of the Treasury and U.S. Department of Housing and Urban Development (HUD), has announced a "Request for Information: Enterprise/FHA REO Asset Disposition", seeking input from both the public and private sectors on options for moving off the books residential real estate owned (REO) properties held by Fannie Mae, Freddie Mac (GSE's or "Government Sponsored Enterprises") and the Federal Housing Administration(FHA).

Federal agencies own a quarter million properties with only about 70,000 of them currently listed for sale. Buyers have made offers on another 22,000 of them, but the bulk, about 158,000, are in limbo.

The Feds want to reduce agencies' carrying costs, including loan losses, and address repair and rehabilitation needs (taxpayers foot the bill) in a manner that recognizes economic and real estate conditions and needs in specific locations, while helping stabilize falling pricesexacerbated by the glut of distressed properties.

"While the Enterprises will continue to market individual REO properties for sale, FHFA and the Enterprises seek input on possible pooling of REO properties in situations where such pooling, combined with private management, may reduce Enterprise credit losses and help stabilize neighborhoods and home values," said FHFA Acting Director Edward J. DeMarco.

"Partnerships involving Enterprise properties may reduce taxpayer losses and meet the Enterprises’ responsibility to bring stability and liquidity to housing markets. We seek input on these important questions," DeMarco added.

Federal agencies are looking hard at selling off pools of properties to investors who will turn the REOs into rental units. It's a strategy that could help ease tight rental markets.

The tactic is hard at work in places like Las Vegas and Florida where a glut of distressed properties have squeezed million dollar homes until they are worth only a quarter million dollars.

While some groups are purchasing distressed properties in bulk to flip and resell, others are renting them out if they can get adequate cash flow to make the deals pencil.

"It's going to be a cold winter. There's nothing we are seeing in jobs or the economy or housing to make us believe there is any more good news for this year. It's making it easy for investors to pick up homes and banks are thinking about that," said Jon Sterling, Director of Marketing at Mountain View-based Altos Research.

However, Feds aren't likely to put all their eggs in one basket.

Another idea includes allowing previous homeowners to rent properties and perhaps even buy them back under a rent-to-own deal.

Current renters could also participate in rent-to-own deals, and the homes could be put up for sale as reduced-price affordable housing.

"As we continue moving forward on housing finance reform, it's critical that we support the process of repair and recovery in the housing market," said Treasury Secretary Tim Geithner.

"Exploring new options for selling these foreclosed properties will help expand access to affordable rental housing, promote private investment in local housing markets, and support neighborhood and home price stability," Geithner added.

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Selling Strategies That Ease The Squeeze

To help get the housing market rolling again, you might have to get on the bus, hold an auction, lease back a model home or consider equity sharing, among the growing number of existing, new or lesser-known marketing strategies.

by Broderick Perkins
© 2008 DeadlineNews.Com

Deadline Newsroom - Looking to buy a bargain or make a hard sell?

Take the bus and make it the "F" Line.

The "F" is for the growing number of foreclosure properties that have become bus stops along motor tour routes designed to put home sales on the fast track.

The Keenan Carter Group in Pismo Beach, CA became the darling of the bus tour set when its version was featured on "Good Morning America" on ABC-TV and a segment with Neal Cavuto on Fox News.

At $20 a seat, the tour bus also becomes a school bus between stops, serving up information packages on each property. Riders get spreadsheets on mortgage payment options, potential rental income properties could yield and refreshments.

The special focus on marketing foreclosures is not surprising, especially in California where the number of foreclosures exceeded the number of sales in January, according to foreclosure figures from ForeclosureRadar.com and sales numbers from DataQuick Information Services.

Other bus tours are driving into Florida, Las Vegas and other hard hit housing markets that have been flooded with foreclosures.

Driving a bargain on a bus isn't new, but using the strategy as a vehicle to move foreclosures is part of a current trend in special marketing, designed to help turn the housing market around.

Auctions are hot too.

• The fastest growing segment of the auction industry's real estate sector, residential real estate auctions, on or off line, experienced a gross revenue growth of 5.3 percent from 2006 to 2007, according to the Overland Park, KS-based National Auctioneers Association. In 2007 the association created NAARealEstateAuctions.com, a real estate auction multiple listing service (MLS) to handle the volume. Many, but not all, auctions are listed there.

Coordinated open house events are big.

• In Silicon Valley, April 13 will become "The Biggest Open House Day Of The Year," as sellers queue up to offer incentives and accommodate -- on the spot -- buyers who make an offer that day.

Second home marketing is getting a renewed spin too.

• Elisabeth Miller-Fox, president of PrivateCommunities.com says little is known about "model sale lease backs," a spin on lease options typically found in master planned communities.

The tight market is giving this tactic a higher profile.

"In second home communities the developer builds a model home which is fully furnished and beautifully appointed. The developer sells the model home to a buyer who is not yet ready to have a second home, but will be in a few years. The developer then leases the model back from the buyer for 'X' amount of time and continues using the model to generate more sales for the community. It's a win-win for both parties," says Miller-Fox.

Bozeman, Montana's Black Bull Golf Community; Quechee, Vermont's Quechee Lakes; and Ocala, Florida's SummerGlen adult community are just a few communities offering model home lease back deals.

"This is a very different segment of the market and not well understood by the media or the average buyer. The National Association of Realtors (NAR) & HGTV have done a great job of helping people understand the general real estate market and how it works, but there has not been a good conduit for information for the second home buyer in a private, master-planned community. This is a very different animal and a different type of purchase," she added.

• Home shoppers should also be on the look out for some financing flash to give savings-poor but income-rich buyers an edge.

Quincy Virgilio, president elect of the Santa Clara County association, says expect to see a return to equity sharing.

The creative financing strategy includes two parties -- one who occupies the home, another, an investor, who foots the bill for the down payment.

The symbiotic relationship has flourished during past periods of buyer-seller separation in the housing market.

Las Vegas-based Creative Real Estate Online publisher, J. P. Vaughan, also a trial lawyer and real estate investor says everyone can benefit from the strategy.

One person becomes a homeowner with little if any money down, the investor, with the down payment, can get a joint venture-like return on his or her money and a seller, in a slow market, could become the investor or otherwise use the technique to quickly seal a deal, says Vaughan.

Read more creative buying, selling and financing stories.

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Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews.Com, a real estate news and consulting service, and the new Deadline Newsroom, DeadlineNews.Com's new backshop. In both cases, it's where all the news really hits home.

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