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Banks Doing Renovations on REO's

Banks Doing Renovations on REO's

Private and government subsidiaries regulating lenders are providing a new trend with REO's: light renovation to facilitate quicker sales. Bay writes, "A standard rehab project will generally run the lender between $6,000 and $8,000. [The] business case for such a renovation is compelling if the lender can get at least a 20 percent return on that additional investment with the sale of the property."

Think back to 2009 -- Fannie Mae was rehabilitating virtually no properties in an effort to move their bank owned inventory -- coming from multiple sources of high volume brokers. "Field Asset Services tracked 17,252 properties across 13 states during the first six months of 2010, and found the average days-on-market for those that hadn’t been rehabilitated was 222.8. This number dropped significantly for properties with rehabilitation to 69.8 days." That is nearly one-third of the time it was typically taking to move assets.

In addition, cleaner properties mean a larger buying group; more buyers tend to relate to higher sales prices. This is a win-win for inventory, but a tough pill to swallow for savvy investors seeking bottom-line prices.

Know your asset manager or know where to find assets direct from banks. Visit WC Equity Group for detailed market information and available properties.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.