Distressed properties in bulk
In several cities across America, a new program is launching to help the recovery of the areas hardest hit by foreclosures, with Fannie Mae’s recent announcement that investors will get special deals when they buy distressed properties in bulk and rent them out for a specific period of years.
Nearly 2,500 distressed properties on Fannie Mae’s books in Atlanta, Phoenix, Las Vegas, Los Angeles/Riverside, and three Florida regions are on the table, including all property types from condos and apartment buildings to single family homes.
“This is another important milestone in our initiative designed to reduce taxpayer losses, stabilize neighborhoods and home values, shift to more private management of properties, and reduce the supply of REO properties in the marketplace,” said Edward J. DeMarco, the acting Director of the Federal Housing Finance Agency (FHFA), regulator of Fannie Mae.
Extremely stringent requirements
Fannie reports that in order to get these lucrative deals, investors will be required to follow strict guidelines and be highly qualified, as most of the properties being offered are leased and will be required to be leased for as long as the current leases last and then for a specified period of years afterwards, eliminating the option to flip any properties which many believe to be one of the core problems with the original housing crash years ago. The agency has not disclosed how many years they will require investors to hold these properties as rental units.
Bulk buyers will be required to put up security deposits so that they can bid, they will be required to have property management experience and “strong ties to the local community.” FHFA said that bidders must purchase all of the homes that are for sale in a given metro area with a few dozen in some areas, but up to several hundred in others. Even though the requirements are extremely stringent, the FHFA reports thousands of responses interested in the program.
As each distressed property brings down the value of surrounding properties, having these units purchased through the program and held for several years could make a major impact on these struggling areas that can’t seem to shake the virus of foreclosures.
