For Rent in 91710>Question Details

Lucas, Home Buyer in 91710

Why doesn't the banks rent their REO homes out to people instead of auction til prices go up again?

Asked by Lucas, 91710 Sun Jun 21, 2009

I was wondering since the prices for houses are so low now, why doesn't the bank just rent these REPO homes out to tenants for a few years until the house prices go up again so they can resell it for higher price?

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It's an easy and complicated answer. It's just not their business is the simply answer. But depending on their formation, they may be actually prohibited from doing so in that it's outside the scope of their business...add in a dash of tax consequence/incentives...stimulas cash to off-set losses and you have a receipe for its just easier for them to dump them at pennies on the dollar than hold, maintain, and then sell.

I am wondering of late though if they aren't "managing" when to release a property for sale so as to not flood a particular area and drive pricing lower. Maybe that's just wishful thinking on my part!
1 vote Thank Flag Link Sun Jun 21, 2009
Banks are in the business of money not home ownership or renting out property. Doing so would present an entirely different set of challenges for these institutions.

Our question is, why don't banks state behaving responsibily when it comes to dealing with "short sales" and "foreclosures?" The fact that there are multiple buyers tied into so many of these transactions for months at a time does nothing to help move the market and economy in a positive direction.

When we see 3, 4, 5 etc. buyers waiting on a particular home because the bank can't manage the situation efficiently, it becomes evident that this alone is standing in the way of progress.
1 vote Thank Flag Link Sun Jun 21, 2009
Actually some banks are allowing tenants to stay for the remainder of their lease as long as the tenant cooperates and agrees to show the property to other prospective buyers duringthis time. Most banks want to cut their losses and sell the property right away but there are always other options especially for tenants.
0 votes Thank Flag Link Wed Aug 10, 2011
Hey there Lucas!

That's a brilliant question you asked and guess what? Things have actually changed a bit since you asked that question. Laws have changed pertaining to foreclosures and REO properties where banks are now required to keep a bona fide tenant in an REO so they can fulfill their lease term! It's quite a grand transition from the previous 60 day notice requirement. So, the banks are sort of being forced into leasing their REO's whether they like it or not if in fact there is a qualified tenant in place at the time they get the home back.

It's a really great thing for property management firms like . Banks of course are not equipped to handle the day to day operations of tenant / landlord relations on a large scale so they need desperately a network of qualified asset managers on the ground running things, collecting rents, doing repairs, and so on. We are working with many financial institutions who have REO portfolios and helping them comply with the new laws and creating a smooth transition for the tenant. It also allows REO portfolio holders to hold onto their assets instead of having to liquidate them at rock bottom prices and allow them to generate revenue while they wait out the market.

In additon to that, the tenants are in a better spot as they are not displaced and their new owner (the bank) has the funds to make needed repairs to the property, etc. I think it's a great thing for all and I hope this info has been useful to you.

If you own investment property or are thinking of taking advantage of this great market and buying rental property in the Inland Empire or surrounding areas feel free to give a call or go to our website where you can view the types of homes other investors are buying and exactly what they are renting for.

Good luck and keep the questions coming...
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0 votes Thank Flag Link Thu Oct 29, 2009
Additionally, why would the banks want the hassle of renters? As an investor/landlord from 1997 (and helping my parents with their rental since 1986) I can attest to the problems of being a landlord. There are entirely new sets of regulations that must be enforced, repairs to be made, and local rules that change from city to city.

Banks would have to hire a local property management team, and then manage the management team. We've seen how well the banks get things done during the REO/short sale process, so I would be hesitant to be the property manager that had to deal with the banks on that basis.
0 votes Thank Flag Link Wed Jun 24, 2009
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