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May 19th, 2010 5:15 PM by David W. Welch
The second story in this two part blog about banks in real estate involves a first time buyer. We really have two markets going on in Orlando right now with most of the more affordable properties being distressed sales, and more “normal” sales in the higher priced homes. This puts most first time home buyers up against each other and investors paying cash. Buyers that are using some form of down payment assistance have even more obstacles in their path to home ownership. Most of the down payment programs look at the properties with more scrutiny, and many require a clear wood destroying organism report. REO’s are as-is, and the banks really mean as-is. Do not expect the bank to make repairs required for you to obtain your financing.
I looked at the months of inventory of bank owned, short sale and “normal” sale properties, and there is less than a two month supply of bank owned properties available. Since we generally consider a six month supply to be balanced, I think it is safe to say the supply of REO’s available on the market right now is low. About 2/3 of the REO’s are selling for cash, and it is safe to assume many if not most of those sales are investor purchases. Add to the investor demand, the affordability of these properties and the number of first time buyers still trying to purchase a home, and the demand is quite high. This has created a situation where banks regularly have multiple offers on the homes they have available for sale.
Home buyer’s, like one I am working with who is approved for Neighborhood Stabilization Program (NSP) funds, routinely have their offers rejected in favor of investor’s cash deals. NSP funds can only be used to purchase foreclosed properties in certain target areas of Orange County. After writing eight offers on these properties, three different agents have told me the banks are not accepting offers using NSP unless that is the only offer they have. One agent said, even then the banks she is working with are only considering NSP if the property has been on the market a long time. So, he can only use the money to help with the purchase of a foreclosed home, but the banks that own the foreclosed homes will not take offers using NSP funds. The government creates a program to help the buyers and the banks as they work through the foreclosures, but in my experience the banks are not utilizing it.
David Welch Real Estate Optimist, Orlando Real Estate