Banks are restrained by the new tenant laws recently passed. Some of you REO listing agents might want to prepare yourselves to become property managers. Granted banks will most likely try hard to persuade tenants to do CKs. However, if banks realize they can get positive cash flow now and a much higher price a few years down the road they might reconsider their aggressive CKs policy
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I think it really depends on what area you work. In the San Francisco Bay Area, we've been dealing with these type of issues for a long time. Nothing new to the banks.
Johnny Huang > Daniel RipperSeptember 1, 2009 at 6:31am
Would be great insight if there was a blog of someone's experience with this issue. Looking forward to see it if you are willing, Daniel.
Good point, however, REOs are REOs for a reason - the homeowner defaulted on their mortgage. If the banks convert them to tenants, how long will it be before they default on their rent too? Unless the banks are willing to rent their new REOs to the defaulted homeowner for much less than their mortgage payment, I suspect they will be looking for a new tenant before long. If they do drastically reduce the rent, there may not be enough "positive cash flow" to make this a viable strategy. As for existing vacant REOs that are pending release to the market, finding new tenants will present a whole new set of challenges that may also make this a less desirable strategy. I doubt that most banks will be willing to become landlords on the speculation of higher prices several years down the road. Except in cases where the new tenant laws apply, I think the banks will be more inclined to beef-up their CFKs policy and get on with the REO process. Short of government intervention, I think a more likely scenario might be a steady but "controlled" release of REO listings, to avoid the negative price impact of a "flood" of REOs all at once. I guess time will tell, but I know the banks don't want to be real estate owners in the first place, and I really doubt that they want to be landlords either. Having said that, a good case could be made for renting vs. the cost and risk of vacant properties waiting to go to market. At this point, I think it is anybody’s guess.
I agree that banks are not interested in becoming landlords but they have to comply with the law. CFKs will be aggressively pursued but in cases where it does not happen the banks will probably have a lease agreement where the tenant agrees to have the property marketed while they are in it. Also, they will most likely have some type of compensation to have the tenant agree to vacate the property once it's sold or the buyer will buy it with tenant in place.
Hi Carlos,
ok , so now I connected the dots. i see your point. I have been solicited by TA in my area, but originally was thinking of them from an investor/bulk point of view. I now see that the focus is on lenders hold position. Thanks for opening my eyes.
Replies
ok , so now I connected the dots. i see your point. I have been solicited by TA in my area, but originally was thinking of them from an investor/bulk point of view. I now see that the focus is on lenders hold position. Thanks for opening my eyes.
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