Date registered: Jan 2008
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Cities around Phoenix are planning on using bailout cash to buy up distressed housing in zip codes where more than 30% of the mortgages are in default. The plan is to refurb and rent them as city owned low income housing. Sounds good on the surface. The intent is to keep the tougher barrios from becoming slums.
The rabid investor market was key in driving housing costs. It resulted in bidding wars and unrealistic prices for homes. Many new housing developments had out of state investors rushing in as they opened their doors then turning around and listing the house as soon as the builder raised his prices. Many invetors paid cash and are still sitting on the property three years later. They bought the base house with no upgrades on the worst lots just to get in rush. No electricity for three years with weather that goes from near freezing to 115 degrees plus no extermination makes it a haven for scorpions and packrats.
Now is an excellent time to become a bottom feeder and snatch up a couple of houses as rentals in the Phoenix metro area. The volume of listings has shrunk dramatically and pricing has mostly bottomed out. People foolishly look at this as taking advantage of people. Wrong. When the bank sends in the Sheriff to boot the former owners, you now have a bank owned property that may sit there for over a year deteriorating. There is a huge amount of houses that will require massive amounts of money to bring up to liveable standards. Most buyers can't see past the filth and the banks do nothing for upkeep. Craigslist is full of offers to sell cabinets and appliances from people in forclosure. They pull everything and stack it up in the garage. It's like going into an appliance store with price tags on ovens, dishwashers, toilets, light fixtures, pool pumps, AC condensers, water heaters, etc.
I spent most of '08 working with (it seemed like against) banks to try to close some short sales. Most just never got back to us or couldn't come to terms with the owner on the mortgage and were willing to just let it go into forclosure. I stuck to it and bought the worst house in the best development for a great price.
One caveat emptor item to consider if you are thinking of jumping into the game: Shortsales in preforclosure are listing at rediculously low prices trying to get offers into the bank in first, second, and third place hoping the bank will bite or at least counter. These are usually people who owe 400k on a house listed for 200k. They have nothing to loose. Many don't realize that if the bank does let them out of the mortgage, they will get a 1099 for the $200k difference and the IRS won't be as accomodating as the bank.