Vacant REO Homes Up 67%

The number of some types of distressed and vacant homes are rising.

What’s behind the new surge in Real Estate Owned (REO) and vacant homes? Where are they spiking? How can you find and buy them?

While some argue the best discounts on real estate deals have been declining thanks to a strong housing market, the data shows there are plenty of attractive opportunities. That is if you know what to look for, and where to look…

 

Rocketing REOs

Although overall residential property vacancies may be gradually declining by single digits, the latest ATTOM Data Solutions figures show bank owned REO homes up almost 70% as of September 2016.

At the end of the third quarter 2016 there were almost 50,000 vacant bank owned homes recorded. That doesn’t count all of the other foreclosure properties, pre-foreclosures, and vacant homes and apartments.

Of the bank owned ‘zombie’ REOs the highest concentrations were in:

• Florida
• Michigan
• Ohio
• Illinois
• Georgia

In Flint, MI over 7% of all residential properties are vacant. There are more than 64,000 vacant homes in Detroit alone. Even in San Francisco’s hot housing market there are almost 4,000 vacant homes.

Vacant Homes, REOs & Defaulting Home Loans

Altogether there are an estimated 1,400,000 vacant homes in America right now. Data from the Distressed Property Professional Podcast shows there are still around twice as many defaulting mortgage loans in 2016 as before the 2008 crisis. So the market is healthier, but the opportunity is massive.

There are still far more distressed properties and motivated sellers out there than any one real estate investor or even multi-billion dollar fund can handle by themselves.

REOs may be partially increasing as banks get motivated to recapitalize on non-performing assets, and they see the big profit potential thanks to increasing property prices. Yet, foreclosures and defaults in general have been rising in some areas such as the north east. This may be part due to the lengthy foreclosure backlogs in some of these states.

As for why so many homes remain empty this could be a combination of having been held by the bank for extended periods of time, being abandoned by defaulting borrowers, estate properties, individuals and families relocating for work and to find more affordable areas to live, poor real estate marketing by landlords and property management companies, and in many cases due to cosmetic and structural repair needs.

Overall there appears to be no lack of demand for housing. The population keeps growing and the National Association of Realtors has said that new construction just hasn’t kept up. Home buyers are benefiting from low interest rates, and RealtyTrac reports thousands of active real estate investors in the market flipping homes. Big money funds from all over the world continue to hunt for deals to pour their capital into. All of whom need this inventory.

Many of these properties may need to be cleaned up or renovated, but whether you decided to do this yourself as a rehabber fixing and flipping homes, or simply connecting others with deals as a wholesaler, the key is finding and contracting to buy them.

 

How Do You Find Vacant Homes and Motivated Sellers?

The big multi-million dollar question that everyone wants to know the answer to is “How do I find motivated sellers and vacant home owners?” Then how do you actually connect with them?

There are many options which cover both outbound and inbound real estate marketing. This includes driving, walking, cycling, or running your local or target neighborhoods. This can be a powerful strategy, but not always highly efficient for those seeking to do high volumes of deals.

Auctions can be another choice. The local and regional banks and credit unions holding REOs can be contacted for lists of assets. However, many now list their properties through real estate agents, and ultimately via the MLS. Not all real estate investors are keen on this channel due to high levels of competition and the fact that Realtors add commission on to the deal, but this shouldn’t be ruled out as a part of your funnel.

Tracking public records can help identify distressed home and motivated seller opportunities. Just be sure to find an efficient way to source and filter this data. Private lenders and note investors may provide leads to ripe property deals. Then there are real estate wholesalers who specialize in digging up these opportunities and serving them to others who need the inventory. The REWW SMART System suite can be used to both find motivated sellers now, and to contact them seamlessly with a few clicks.