Bank of America is leaking more details of new plans to liquidate its REO inventory. The latest idea? Now they want real estate investing companies to bail them out!
Rumors have been floating around about a ‘short sale to lease’ type program from Bank of America for a while. Details released last week uncover a plan that would pitch short sales to investors providing they kept the current owners in the properties as tenants.
While this might sound attractive to some who are new to real estate investing it is critical to look through the fluff and recognize why Bank of America would really work so hard on a plan like this. It certainly isn’t out of a heart felt desire to ensure that current borrowers aren’t evicted and put out in the street.
The fact is that in the 3rd quarter of 2011 alone Bank of America had more than 1.1 million loans which were more than 60 days delinquent, in addition to the masses of REOs they already have on the books. If this was burden enough as it is, know that they are employing more than 35,000 staff members to work on these properties in various states of foreclosure and are spending millions in maintaining, improving and marketing these properties. The bottom line is that they are desperate to be rid of these properties and loans.
Unfortunately they are also running into heavy opposition and lawsuits in the process of foreclosing on these borrowers and evicting them. Plus you now have the Occupy movement pushing ex-homeowners back into their properties.
For those in real estate investing can be attractive to purchase properties which already come with tenants in place and can begin producing returns from day 1. However, with properties like this, they are only being sold like this because those occupying the property weren’t paying. How are they going to be able to afford to pay you? Plus, if the mighty Bank of America with all of their legal power couldn’t get them out you can imagine you will certainly have your work cut out for you to, among very cloudy title issues.
On top of this it is interesting to note that these real estate investing opportunities are only planned to be rolled out in distressed markets which are too saturated with inventory for B of A to sell them on the open market themselves. So before you go jumping in on real estate investing ‘deals’ like this make sure that you are aware of all the potential issues which can affect your income and ownership rights.
