Rentals in Richardson>Question Details

Donna, Renter in Richardson, TX

why don't the banks rent the bank owned homes....?

Asked by Donna, Richardson, TX Fri Jun 24, 2011

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9
Hi, Because banks aren't allowed to practice Real Estate. The government is working on a plan to allow banks to rent some of their shadow inventory and other distressed homes on the market to prevent any further glut of inventory.

Chris
0 votes Thank Flag Link Wed Aug 17, 2011
Bank laws in the USA don't allow banks to own real estate that has been forclosed on and hold it for rental property. It is in a category called "other real estate owned" or "OREO" and sometimes shortened to "REO" which they are required to sell by law. However, The Obama Administration is currently seeking ideas to help housing values. One idea they are exploring is to allow Banks to become landlords for some of the properties in certain situations. I just went to a Bank of America lending summit for Realtors where they mentioned this. I personally haven't formed an opinion on this idea. Banks for years have wanted to have a one-stop-shop for consumers by selling real estate to thier mortgage customers but, Congress has never allowed it to happen. This is really an attempt to prevent houses from ending up in forclosure by keeping a tenant in it and thus never hitting the market. The idea is forclosures hurt home values and if we prevent them from happening in the first place it will help keep values from dropping. The other viewpoint is to let the free markets allow the forclosures to happen and eventually let the market decide what happens.
0 votes Thank Flag Link Wed Aug 17, 2011
Actually they do.

If you check around, you'll find rentals that the GSEs own.

Property managers with those rentals are normally in urban areas, not the suburbs.

When searching for rentals, start by going to the high-volume places, such as searching for Dallas Home Rentals for example, then use one of the websites you find. Smaller places may not have rental listings where you're looking.
0 votes Thank Flag Link Sat Jun 25, 2011
Donna,
Great question and in circumstances there are banks which are renting out the properties in order to generate income to offset their financial loss on the inventory of properties (known as OREO), but this is not the norm.

Based on the bank executives we work with at PahRoo Appraisal & Consultancy, they do not want additional legal encumbrances that come along with tenancy. Specifically, you are a renter and have rights for habitation amongst other things. Generally speaking, when you have a right to occupy the property, the banks forgoes some of their rights in exchange for your rental payment (as well as other agreements which may be part of your rental contract). Ask any landlord and they will tell you that owing a property is easy, dealing with property management can be challenging.

By not renting the property, the bank is in the strongest and most direct position to negotiate, transfer, divest or dispose of the real estate asset. As noted by fellow professionals, banks are on the in the OREO business (and hence not in the property management and rental business), but they are in the lending business. They would rather let you buy this specific property and give you a mortgage on that property than rent the property to you.

Sincerely,
Michael

Michael Hobbs
President
PahRoo Appraisal & Consultancy
Web Reference: http://www.pahroo.com
0 votes Thank Flag Link Fri Jun 24, 2011
That's an excellent idea but it takes more work on the bank to keep up with the property such as collecting rent and repairs which isn't what they obviously want to do. That's property management. They just want their money back ASAP without taking a loss or any extra work on their part.. However, if they thought like you did they'd be making money while waiting but that's just too logical.
0 votes Thank Flag Link Fri Jun 24, 2011
When you lease a property, it becomes more difficult to sell it. You have to find an investor that wants an income generating property, rather than a homeowner that wants to live in it. There are many more homeowners than investors. Therefore, by selling the home vacant, the bank has more potential buyers available.

The bank's sole objective is to sell the property as quickly as possible while still getting a fair price on their asset. They feel this is best accomplished by selling a vacant home rather than a tenant occupied home.

Hope this helps.
0 votes Thank Flag Link Fri Jun 24, 2011
They don't want to be landlords and take the property management expense.
You can search available rental properties here:
http://www.metroplexhomesalesinfo.com/community/area/Richardson/
0 votes Thank Flag Link Fri Jun 24, 2011
Bruce Lynn, Real Estate Pro in Coppell, TX
MVP'08
Contact
Lenders are the business sell properties not worry about rental issues with tenants

Lynn911 Dallas Realtor & Consultant, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
972-699-9111
http://www.lynn911.com
0 votes Thank Flag Link Fri Jun 24, 2011
as a rule; the banks do not want to own Real Estate: In some cases, they are not allowed to own it.
They are in the business of lending and borrowing money.
There are probably incentives, both positive and negative.
Even when the banks foreclose on a property, they generally turn it over to a management company to dispose of it.
0 votes Thank Flag Link Fri Jun 24, 2011
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