If you’ve been buying properties using any of these strategies: pre-foreclosure, foreclosure, sheriff’s auction, bank owned, HUD or even Auction.com you’ve likely seen a steady drop in inventory over the last 3 or 4 years.
Today, I’m going to dive deep into one of the MASSIVE changes in the Real Estate market and share how it has been affecting the way we, as Real Estate Investors, are finding properties to buy.
From 2010 to 2012, we could find properties everywhere without virtually any competition. The main sources that Investors were using back in those days were MLS, bank owned, and HUD homes. The reason those strategies were working so well was thanks to the start of the crash back in 2008.
In 2008 we started seeing a HUGE SPIKE in the numbers of foreclosures (81% to be exact) that banks were doing. Just so we’re clear when I say “the number of foreclosures” I’m really talking about the number of foreclosure filings that are happening NOT the properties that actually get foreclosed on and end up going to the sheriff’s auction. It seemed like everyone was getting foreclosed on back in 2008 which added inventory to the Real Estate market for the years to come.
Back in those days, inventory was all over (because the number of foreclosure filings) the place and we transitioned into a buyers market due to the overwhelming demand of inventory that was hitting the market (Most being foreclosures and short sales).
Back in 2008 we started to see a massive spike in the number of foreclosures that the banks we’re filing. With an 81% spike in these filings from 2007 to 2008 we weren’t even close to a peak yet. For 3 years straight we saw these filings through the roof and they finally hit the peak in 2010.
When you compare 2007 to 2017 (2007 = 1,285,873 to 2017 = 676,535) we have had a decrease in foreclosure filings of 47%.
When you compare 2010 to 2017 (2010 = 2,871,891 to 2017 = 676,535) we have had a decrease in foreclosure filings of 76% keeping in mind that 2010 was the peak of the recession
It’s no secret for 3 solid years we had records set for the number of people getting foreclosed on in the entire county.
Another piece of really important information is the time it take a bank to actually foreclose on a property.
In 2008 it roughly took 200 days to foreclose on a home. This means by the time a bank sent a foreclosure notice to the owner in default that 6.5 months after the home was on the courthouse steps going to auction then shortly after if the property didn’t sell at the auction we would see the inventory up on the public market as a bank owned home or a HUD home and sometimes even on Auction.com! A good estimate of time would be in 2008 that when a homeowner received a foreclosure filing from their lender that on average a Real Estate Investor wouldn’t see this property available to the public for around 12 months!
In 2010 (The peak of the numbers of foreclosures) it roughly took 300 days to foreclose on a home. This means by the time a bank sent a foreclosure notice to the owner, 10 months later the home was on the courthouse steps going to auction.
It makes complete sense that with the foreclosure filings climbing that the time it would take a bank to foreclose would increase BUT IT HASN’T GOT ANY BETTER!!! In fact at the end of 2017 on average it took a bank 1,027 days (2.9 years) to foreclose on a homeowner in default.
There’s a major reason why I showed you these 2 pieces of research on this blog post. The number of foreclosure filings and the days it takes to foreclose on a homeowner has a HUGE IMPACT on a Real Estate Investor and how and where you’ll find deals.
Here’s the sequence of steps that happens today in 2018 on a homeowner that gets a foreclosure notice:
- 1.Homeowner gets a foreclosure filed on them (The home is in pre-foreclosure)
- 2.The home goes to the foreclosure auction (The courthouse steps)
- 3.If the home doesn’t sell at auction it goes either 1 of 2 places. Auction.com or to a Real Estate agent that specializes in foreclosures (REO Realtor)
- 4.Home goes to Auction.com or becomes a REO home, or becomes a HUD home and will almost always go on the MLS for the public to buy!
- 4.Bank Owned Properties
- 5.HUD Homes
Again look above for as long as you need to! With foreclosure filings almost at record lows it has a domino effect on properties hitting the market for Real Estate Investors to buy.
If We Started To See Foreclosure Filings Go Up TODAY, With The Average Days To Foreclose At 1,027 Days, It Will Take Almost 3 Years For Us Real Estate Investors To See Inventory In Any Of The 5 Sources Above!!!
By no means am I saying that you can’t find a deal on any of the sources mentioned above! I’m simply saying that you can’t grow and scale a business by using any of those deal sources!
On next week’s blog article I’m going to dive deep into what Real Estate Investors should be doing right now to grow and scale a Real Estate Investing empire and for the next 3 years to find deals right in your own local market!
I really enjoyed writing this blog article for all new and established Real Estate Investors to read so if you got any value out of it feel free to share it!
Remember this… With foreclosure filings low, the inventory will be low in all 5 deal sources that I listed above!
Until Next Week,
The King of Systems