September 02, 2010

Banks to Allow Local Governments 1st Shot to Buy Foreclosures

A recent MSNBC article (read the article here) states that several major banks, including Bank of America and Wells Fargo, have decided to give local government and nonprofit groups the ability to buy their foreclosures before they are sold to private investors.

One can only assume that they intend to give these entities a first right of refusal on the property even before they are listed to the public, as it's the only way that they can prevent an investor from getting it first.

I can see a whole slew of problems with this idea.  BUT WAIT! IT GETS BETTER!

Congress has already provided the above entities $7 Billion to buy foreclosures in their area, but they are "struggling to spend the federal money because they are often outbid by speculators who are snapping up foreclosures."

Lovely.  The market is moving forward, investors are buying, but since our governments can spend our money fast enough by low-bidding on houses THAT ARE SELLING, the banks are going to help them out by giving the first shot buying.

So why is an investor buying a house such a bad thing, according to our governments?  Well, apparently it's because they "fear" that the investor won't improve the property enough, or might rent it, or might decide to wait until the market improves to sell it.

Forget any facts to support these claims.  Forget the fact that most real estate investors spend alot of $$$ improving foreclosures from the previous condition because they actually intend to make a profit.  Or that rentals aren't necessarily a bad thing or even if an owner does "wait on the market to improve" that the property will still be kept up/maintained, something that clearly doesn't happen with a foreclosure.

Forget all that.  Remember only that our local governments have been given taxpayers money to spend and they MUST find a way to do it!  Free Market be damned!

It's a whole other article on just how long it's going to take a government organization to rehab and resell a property and what it'll actually look like compared to what a real estate investor would do.


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