REO Properties Devoured by Investors

Investors have been snapping up REO properties.

Investment homes sales soared a whopping 66 percent in 2011, with investors purchasing 1.23 million properties compared to 749,000 in 2010, according to the National Association of Realtors’ 2012 NAR Investment And Vacation Home Buyers Survey. Many of those purchases were REO properties. Key findings in the NAR study include:

•    Sales of investment properties jumped to 27 percent of the market in 2011, compared with 17 percent of the market in 2010.

•    41 percent of investment buyers purchased more than one property in 2011.

•    Vacation properties purchased have remained nearly flat since 2009.

•    In 2011, vacation homes accounted for 11 percent of all properties purchased.

With bank REO inventories flooding the marketplace and home prices declining, investors believe REO homes are a profitable place to invest their money. Owner-occupancy rates have been plummeting as investors recognize the economic value of REO real estate. Investors are also paying cash for bank-owned REO properties for sale.

REO Properties
All told, the REO inventory was a staggering 634,000 properties as of the end of March 2012, according to RealtyTrac. Uncle Sam is the largest holder of REO property. The government sponsored enterprises — Fannie Mae and Freddie Mac — together own some 180,000 REO listings.

Nationwide, investors are buying  REO real estate, rehabbing them and either renting them out for cash flow or putting them back into the market for re-sale. In a letter to federal agencies and regulators, the NAR urged policymakers and lenders to expand the  availability of financing for qualified buyers and investors to reduce the number of REO properties on the market.

“More must be done to expand the availability of financing for qualified home buyers and investors to help draw down REO inventory rather than focusing on programs that could line the pockets of Wall Street companies and financial investment firms,” wrote Maurice “Moe” Veissi, president of the NAR.

Readers, what do you think? Are buying REOs a good investment? Or do you think that REOs are a bad investment?

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