Large Inventories of Foreclosed Homes Leading to Bulk Sales

December 3, 2008 No Comments »

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As the number of foreclosed homes continues to rise, some of the banks and investors that own them are beginning to fiddle with bulk sales in an effort to clear their inventories more quickly, the WSJ reported.

Per the article, banks and investors owned 871,000 foreclosed homes as of November 1, up from 414,000 a year earlier, according to Barclays Capital data.

And that number is expected to rise to roughly 1.4 million in mid-2010, forcing mortgage lenders to consider alternatives to the one-by-one sales model.

While no banks have pledged full support for an outright clearance sale, the likes of Fannie Mae, Synovus Financial Corp., and Wells Fargo have all participated in such transactions as of late.

Mortgage financier Fannie Mae recently sold 800 homes for $1.2 million (no, it’s not a typo), with many coming out of hard-hit Detroit and other similarly depressed markets.

One investor who purchased the homes said he quickly sold one property for $50,000 after it was picked up from Fannie for just $1,800.

Wells Fargo has completed six bulk sales over the past six months, and is apparently evaluating another transaction, which typically involves 20 to 40 properties.

At the same time, a number of lenders and investors have expressed concerns about participating in bulk sales.

Freddie Mac has been open to bulk sales, but isn’t keen on the lowball offers floating around, some of which are 20 to 30 cents on the dollar.

Bank of America, who acquired a ton of distressed properties after its merger with Countrywide Financial, said it has received a ton of offers from “bottom fishers,” but has yet to offer a bulk sale.

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