So just how do we dispose of hundreds of thousands of foreclosed properties? That’s what the Obama administration is trying to figure out.
Faced with roughly 290,000 government-owned foreclosed homes and a limited number of buyers (according to the Center for American Progress Article - Renting our Way Past the Home Foreclosure Crisis: www.americanprogress.org/issues/2011/08/reo_bundles.html ) the White House announced on August 10 that they’re asking for suggestions from investors.
The basic idea: to sell many of the properties owned by Freddie Mac and Fannie Mae to investors who would rehabilitate them as energy efficient and affordable rentals. The benefits include:
- Stabilizing home prices by reducing the glut of foreclosures overshadowing the market
- Improving neighborhoods by turning deteriorating empty houses into rentals
- Create much needed affordable rentals
- Provide construction jobs and increase the demand for homebuilding materials
- Build more energy efficient homes
The down side? If the process isn’t handled well as rentals are bundled and sold to investors, it could end up being another boondoggle that benefits only hedge fund managers. Thus far the Administration doesn’t have a great track record – previous real estate fixes such as the loan modification plan have had questionable success.
The effect on small investors? Yet to be seen. We’d welcome any thoughts you might have on how the small real estate investor could participate in shaping the program and in taking part.