- Real Estate
I'm coming to a painful realization that I might have to eat my words regarding my S&P500 market bottom call. Â I say this because of my recent observations in the bank owned/foreclosure market. Â There seems to be too much "optimism" and inventory on the part of the banks!
My wife and I started trolling around the foreclosure markets again and found a potential property. Â Its'a 2 bedroom, 1 bath cottage overlooking a lake in a decent neighborhood. It's run down and needs a new septic system, new roof, and lots of inside work to bring it up to date. Â The bank foreclosed on the property over a year ago with the judgement amount of $125,000. Â That means the the bank was owed $125,000 on their loan when the bank took back the property.
Instead of putting the house back on the market at $125,000 or even $130,000 in "as-is" condition, the bank in their wisdom listed it with a realtor for $225,000! Â Based on our calculations, you'd need to pump in at least $100,000 to fix up the place into something that people what to rent or even own. Â In this market, there is no way someone would pay list price and then pump in an additional $100k to live in a 2 bedroom, 1 bath cottage overlooking a garbage dump. Â As one might expect, they've had no offers and the property remains vacant. Â
I highlight this property because its one example of the multitude of properties we've come across in similar condition and cirucumstance. Â Compounding this problem is the daily influx of newly bank owned properties to the already excessive inventory. Â It doesn't take a rocket scientist, or neural net model, to tell you that something's gotta give and my guess is equity prices.