BOOK EXCERPT FROM THE BOOM AFTER THE BUBBLE: ANDREW CORDLE
Consequently, when that house faced foreclosure, it diminished the value of their property. Even though they
had lived there for 15 years, and even if they had faithfully paid their bills those past 15 years, the value of
their property was decreased because of all the other houses around it that were going into foreclosure. So, all
these people were thinking, “I’m not going to put my house on the market; no way! “Cause, if I put my house
on the market right now, I’ll lose money. So, I might as well ride out the wave, and I’ll wait for the increased
value over time in my personal property.”
And then there were the REO properties. From
2009-11, there was so much new inventory that
the banks were selling these REO properties as
move-in ready real estate. This meant that a
homebuyer could get it at a great discount, and
basically just move right in, without doing much
work at all. I know many people who bought a
house at this time, for $30,000 to $50,000 below
market value. They literally just walked in,
cleaned it up, and moved right into it. Today, we
don’t see this type of inventory much. What we
have on the market now, are the REOs that the
homeowner can’t really buy because it would turn
out to be a major rehab project. The house that
one could walk into and clean up for around three
thousand dollars, no longer exists.
If I want to buy this house now, I will have to compete with a bunch of other buyers who are also bidding on
this property. So, if I do buy it, I must pay cash, because no bank is going to loan me money on a house that is
not habitable. Any traditional banker, like Bank of America or Wells Fargo, will not want to lend an FHA type of
loan without the house being market-ready or livable on the date of the closing. So if a homeowner intends to
buy one of these properties, they will need cash. And if they DO have the cash and CAN buy the property,
they will have to go through a twenty to forty thousand dollar rehab process to make it livable.
Most homeowners are not general contractors—they do not have the skill base or knowledge to follow through
on a project of this nature, nor do they likely have the cash for it.
So, those are two property types on the market right now. The third type is by the investor.