The Problems are the Path: Opportunities

Sermons are usually boring and sleep enhancing experiences.  In all my years of listing to sermons, this one from a Franciscan Father was memorable.

A soul reaches the Pearly Gates and is shown his new reward for his past life.  As the soul tours Heaven they pass a door.  The soul inquires as to what is behind the door.  "Nothing important".  The soul pushes and the door is opened.  Behind the door are "PRESENTS", un-opened gifts as far as could be seen.  "What?".  The Creator's gifts to mankind that were never opened.

Certainly we all have events and circumstances in which a gift not opened is regretted as we never realized the gift or we just didn't care or have time to open the gift, or never viewed it as a GIFT.  A job position? A house sale or purchase?  A date? A proposal? A gift unopened and lost forever.

The greatest gift we have before us are opportunities created by the sharp rise in interest rates and the failure of bank management and the FED to monitor asset allocation among banks.

"The Problems are the Path" was chosen as a lesson in History. With each problem we experience is a path to our movement to the future.  Each problem is a gift for use to open and enjoy.  It is the problem that creates the Opportunity.

While I am now a realtor, I have over 30 years as past investment experience to direct buyers and sellers to opportunities that will create future value.

The rise in rates created the bank failures.  The bank failures only indicate what the future will bring forth.  The bank failing has many repercussions.  Foreclosures will follow. They are only starting now.  Notice of Defaults will follow with Notice of Auctions by the lenders and Lis Pendens (Latin for Suit Pending) by the owners to fight or protect the value of potential profits from the sale of the property less debt. The result of this action will be a severely discounted offer, approved by judge or court appointed trustee to recommend to the court for approval.  It will be out of the hands of the owner or the bank.

The inexperienced property owner will fight and refuse to recognize the gift.  The first notice of default was a warning to eliminate a bad investment decision.  The wife will be upset, the husband will be upset, the children will be upset.  No one will want to leave their friends and contacts.  No one will want the embarrassment of an error in judgment.  It is far better to lose face than net worth completely!  

The rise in interest rates create higher monthly payments, or a change in the economy, or a loss of an income source.  Whatever the cause the gift of starting over with a lesson from the mistake is never realized and it goes behind the Creator's Door in Heaven.

Today a Broker Price Opinion (BPO) is the first step by a lender to start the road to foreclosure.  Payments are late and or never received.  It begins the process of a lender request for a BPO on the value of the property.  BPO's never stop until a sale is recognized on the property.  I completed 15 in the past 30 days!

Sales of properties are the next indicator of opportunity. Investors are losing money on 1 in 7 (13/5%) of homes they sold in March 2023, 14.5% losses in February 2023.  This is the worst record since 2016.  They are taking these losses in 5 cities where the largest surges occurred during the Pandemic.  

"In March, the hardest hit market was Phoenix, Arizona, where 30.7% of homes sold by investors lost money. Phoenix was followed by Las Vegas, Nevada, (28%), Jacksonville, Florida, (20.9%), Sacramento, California, (20.2%) and Charlotte, N.C. (17.4%)."   Moneywise

That does not mean the losses are only in these 5 cities.  They are all over America.  Where there was and is a Fix and Flip investor there is an investor who is under pressure to sell as his "due on sale completion" in the loan sits squarely before the investor.

Why are investors selling at a loss.  Leverage is the answer.  They are not long term investors who can or want to rent the property.  The Flipper is just that.  Flip and turn inventory and go onto the next property to fix and flip.  They will make money in a slowing market.  They just buy at lower prices and keep costs tight and sell in a soft market at prices less than the competition.  They do not let greed or "I want" to get in the way of moving inventory. Market it down and go onto the next deal.  That is what investment banking and stock brokers were all about until they became national banks.  They now hold knowing they will get a FED Bailout!

You will not find the BPO on Zillow, or the foreclosure notation until after it has sold.  If it does appear online there are very few agents or buyers with the experience of getting into that market.  Today's real estate agent have only known higher prices and aggressive buyers and greedy sellers.  

The foreclosures will take training of agents and lessons to buyers.  No property inspections?  As Is.  Buyers must learn "Buyer Beware" is a maxim to keep mistakes  to a minimum. This is where an experienced agent is very useful.

Opportunities in real estate in this path of problems take many shapes and forms.  The opportunies in Commercial Real Estate is a way to invest in real estate if the turnoff is the single family market.  Prime Commercial Real Estate has out performed the S&P 500 over the past 25 years!  This is not duplexes or four-plexes of Mom and Pop owner's.  Commercial Real Estate can take to form of Apartments, Shopping Centers, Office Buildings, Car Washes, Gas Stations, or Storage Facilities.  All with ever increasing income that match inflation with costs kept in line with stable and consistent returns.

Finding opportunities and solutions is what I am here for.

As before, call or write for any question you may have and think of me of your "in the know real estate agent".