What is the Real Estate Truth?

Originally Published Sep. 8th 2009

I have been reading the real estate blogs which seem to be all over the place nowadays. Supposedly we are at some type of bottom in the residential markets. How is that? I know there is buying going on and that brokers are seeing multiple offers and prices rising. OK that is true. How does that mark the bottom?

Supposedly there are less foreclosures and REO inventory. How is that true? I heard reports that more and more foreclosures were coming on the market and that the banks were not releasing bulk REO’s? I tried for a year and a half to find true bulk REO packages, but the banks were not letting them go.

Asset managers supposedly did not even have the facilities to do bulk nor were the large title companies seeing masses of titles clearings of these supposed assets. So where did they go? I heard the banks did not want to let them go for pennies on the dollar as the market was hard to price so they only let them go at auctions or one at a time for higher prices of around 65 cents, or higher, on the dollar as oppossed to the 30 cents on the dollar we heard of on the bulk REO street.

Is the FDIC buying them? Recently the FDIC bought $2.8 billion in bad assets from Colonial as BB&T took over around $22 billion of Colonials assets and $20 billion in deposits.

Are the banks playing three card monte with the books to bury or hide bad assets? I understand many banks were allowed to take bad assets off the books. Is this why many are showing profits?

I don’t know, but now the commercial market is in the throes of failure and distressed asset numbers will grow over the next few years. I have read that the commercial failures will not cause the same calamity as the residential subprime issues did, but it is reported that Capmark’s recent distress may bring the bank failures to above 100.

I read that the list of problem banks stands at 416 and the amount of currently failed banks is at 84 or maybe more by now. In 1992 over 100 banks failed so it is not unprecedented that more could go.

I don’t know what the truth is, but I don’t have to be a rocket scientist to know that by holding distressed assets, the banks and financial institutions are just forestalling the inevitable issues of inventory supply and demand.

Check out ADAPT the program RIISnet and ARGUS have put together to move commercial REO distressed Assets. You can join the Webex on Tuesday nights. Check www.CREPIG.com events section for the details or go to www.RIISnet.com

I also have heard that hedge funds are buying up the bad assets. As I know many investors that have tried to buy these assets, is there favoritism going on? I understand BH and Warren Buffet is making a deal for the Capmark assets. Does the little guy, regular investor ever get to play?

I am no expert here; I am just asking the stupid questions. I want to know what you know or think.

JW Najarian
Crepig.ning.com