Bulk investors are willing to pay up to 95% of value for Fannie properties in Florida? All we hear is that foreclosures sell for 20% to 30% off – but rarely do you see actual evidence. Hat tip to Daniel for posting this, from the latimes.com:
A San Diego real estate investment firm has won an auction of nearly 700 homes owned by Fannie Mae in Florida, part of a government initiative to sell vacant and distressed properties to investors.
Pacifica Companies, which describes itself on its website as a “privately held, vertically integrated real estate developer, owner, investor and investment manager” was announced as the winner of the auction by the Federal Housing Finance Agency, regulator for Fannie Mae and Freddie Mac.
The firm paid $78.1 million, or close to 96% of the properties’ estimated worth.
Nearly 2,500 properties up for sale by Fannie Mae have been split up into eight geographic pools, and winning bidders are required to rent out the homes for at least three years.
The sale is a pilot program by the agency, intended to help clear the large numbers of foreclosed homes on the books of the two mortgage giants without crashing the housing market’s recovery.
Several hedge funds and other big investment groups backed with Wall Street money have lined up to bid on the homes. These big investors view a lucrative market for foreclosed homes converted to rental properties.
But groups associated with real estate agents, particularly the California Assn. of Realtors, have objected to the bulk sales of foreclosed homes to big firms, complaining that the housing market is actually suffering from a dearth of properties and could absorb more foreclosures.
Several Fannie Mae properties in the Inland Empire are up for bid. The winning bidders in other geographic areas will be announced in coming weeks, the federal housing agency said.
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This purchase at 95.8% of value will quickly be swept under the rug by this one – and/or doomers will say that the investors overpaid:
Who gets to determine market value for this statement?
Look at the bidders for these properties. Are these the type of entities that pay retail for any investment?
Unless we can get a list of the properties, make individual appraisals of them, and compare the total to the bulk sale price, we will not have any idea of whether these sold for the stated percentage of market value.
So the banks that sold garbage loans to government/retirement funds and then were bailed out by taxpayer money are now working with hedge funds to buy assets back for less than government books their value at.
Eventually these properties are going to work their way down to small investors but will there be any profit left?
Btw this is the same thing that happened with the RTC. Only the RTC was too dumb to book asset values much lower than their true value before auctioning off to investors/other banks. The RTC kept the book values high which left a paper trail showing 80%+ losses on asset prices.
The CAR doesn’t like bulk sales? That’s weird.
Yeah. 95% of “value” with no backup. I’m reminded of my college professors, who would surely say “Show your work.”
I wonder what % of the original purchase price and loan amounts.
It’s probably accurate, its not from NAR.
I would think the appraised values would be part of the offering. If the investors are optimistic and expect 15% appreciation to accumulate over three years and then sell them minus repairs/mgmt/vacancy and closing costs and commissions, they would well um….. oh never mind.
Bulk sales slow the velocity of $. Do these as individual sales and think about all the people and salaries/commissions involved, almost all of which will be used immediately to purchase other goods and services. Individual sales also open things up for small investors. Bulk sales benefit only a few and are ripe for concentrated corruption. Diffused corruption at least spreads the $ around…
Pacifica is a flipper, they buy at the trustee sale in San Diego everyday. I work for a competitor, they most certainly did not pay 95% of market value. This is not a buy and hold play. I’m sure they want people to think they paid 95% of market value but I can assure you they did not.
They are required to hold for three years. That’s not buy and hold?
I’m sorry, 95.8% of value? 4% discount on a $78 Million Bulk Purchase – come on…. that’s for the everyday guy who picks up the paper and takes a glance. We should know better, doesn’t mean we can do anything about it. I’m with the Facts guy above but I’m not sure what the play is either, rules say buy and hold but who knows. I don’t think they will mind holding 3 years with the real discount they got…