From the Wall Street Journal:
Slower Home Sales Open Up a Market For Some Investors
By JAMES R. HAGERTY
“The cooling market for real estate brought Michael Termine and Uso Mbanefo together.”
“Mr. Mbanefo, a 43-year-old entrepreneur struggling to launch a clothing-design company, had fallen behind on his mortgage payments. He needed to sell his four-bedroom house here quickly to avoid losing it in a foreclosure. That’s when Mr. Termine, a 32-year-old novice real-estate investor, stepped in.”
“One afternoon in early April, Mr. Termine visited Mr. Mbanefo’s office in a strip mall and offered to pay $400,000 for his house. Mr. Mbanefo showed Mr. Termine fliers for nearby homes offered at $600,000 or more. Mr. Termine pointed out that the inventory of unsold homes here, as in many parts of the country, has nearly doubled over the past year. Even so, Mr. Mbanefo said that he might be able to refinance his home, spruce it up and sell it for $500,000.”
“”I don’t see it at 500,” said Mr. Termine. “I think the magic number to move that house fast is 475.” Before leaving, he reiterated his offer. “I have $400,000 waiting for you, in cash.””
“The slowdown in housing sales, after five years of frantic buying, has ended the party for many real-estate investors. But the cooler market is welcome news for a subset of investors — those who target homeowners facing foreclosure.”
“One of the best-known buyers of homes from distressed owners is HomeVestors of America Inc., a franchising company based in Dallas that helped found the trade group headed by Mr. Grant. After paying an upfront fee of $49,000, franchisees receive two weeks of training, and can tap into leads generated by the company’s ads. HomeVestors, known for big yellow billboards proclaiming “We Buy Ugly Houses,” has 250 franchisees in 31 states and the District of Columbia, up from 43 at the end of 2000.”
“The company says its franchisees typically offer about 65% of the estimated market value of homes, minus renovation costs. Such a deal, it says, can benefit people who lack the time or inclination to fix up and sell a home themselves.”
These wannabes Sharks or Vultures will make the same mistakes that all theses flippers have done.
Which is buy low, sell high -with borrowed money. And this suppossed borrowed money where does it come from?.. A few years ago, it would have been the open spigot of Greenspan liquidity.
But now with the Sub-prime lenders going the way of the do-do, and with Fannie Mae looking more and more like Enron… Where is this money going to come from to provide the liquidity to these wannabe Vultures.
True vultures have their own cash, they don’t borrow… The problem with housing, what it is really going to make it bad is the lack of liquidity…. In short the lack of buyers, becauseo f lack of $$$…
I had a house for sale in FL. and spoke to people in HomeVestors. They are much more honest and professional than any realtor I have done business with.
So, I’d say at least they are up front about buying and flipping your house. Realtors have other agendas, and you end up feeling cheated and lied to.
Like zombies rising from the ground, now you will see the real vultures and sharks consuming the putrefied financial remains of those unsuspecting victims.
People like this just drag it out longer – by creating an artificial demand.
I think any spike we see will just be people like this snapping up houses and the bubble bursts. the dead cat bounce will basically just be people selling preforclosure.
“dead cat bounce”
Involves covering short positions.
What you describe is more like a margin call.
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