Real Estate Investments:Bank of America Offering Cities First Crack at Foreclosures
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I am not comfortable with the new Bank of America policy of offering foreclosures to cities and municipalities to buy instead of offering it to the general public. The goal is to allow the cities to buy the properties, rehab them, and then sell them to families. All well and good.
But isn’t that the goal of real estate investors?
The investor is also working from the profit motive. Sure they will try to charge more, but the price will be determined by the market. Instead, the government officials that will be in the market do not have a profit motive. The want to maximize power and influence.
So they will sell below market and to those that can benefit themselves the most, with the added concern that the buyers will work hard to provide incentives to the government official making the decision.
That is just logical.
So instead of a marketplace that has profit as it’s driving motivation, it will be replaced with influence. And home prices do not do well in these cases. Which hurts everyone.
What investor is going to put their hard earned money up to rehabilitate a home in a neighborhood where they will not make a profit? When competing against the government, not one I know. So the opportunity for investment disappears and cronyism is the rule of the day.
And that is just plain scary.
If it all works according to plan, the result may be that cities have an easier time buying foreclosures, redeveloping them and then reselling them to homeowners in neighborhoods hardest hit by the housing crisis.
It also gives communities an upper hand in buying a foreclosed home cheap, before it’s snapped up by the investors that already are starting to surface in some neighborhoods. Under one important facet of the program, Mercy Portfolio Services, which is coordinating the NSP program for Chicago, will receive notice of a Bank of America-owned property that’s available for sale before it’s listed on the multiple listing service of Midwest Real Estate Data LLC. That’s considered key. Cities also will be able to get “real time” access to the bank’s real estate owned (REO) property lists through a dedicated Web site.
In many respects, it is an extension of the “first look” and “bulk purchase” programs that the National Community Stabilization Trust has already established with large lenders. Whole Banking