Foreclosure Equals Pre-Foreclosure in Current Hot Real Estate Market
Winter is here and, along with it, a pre-foreclosure wave. So says investor and residential real estate expert Cameron Dunlap of Real Estate Wealth Network. With housing prices hitting record highs and inventory at an all-time low, a homeowner facing foreclosure can sell their home before it goes back to the bank. Hence the term “pre-foreclosure.”
Homeowners have Equity
“When a homeowner has equity,” says Dunlap, “and they don’t want to destroy their credit, they can sell their home and forego a loss. And real estate investors look at these types of opportunities as a way to help someone out of a bad situation.”
Home Demand is High
As much of a black swan as COVID has been, as long as interest rates stay low, demand will remain high. Dunlap also predicts that mom and pop investors will see upticks in activity in markets where iBuyers (like Zillow) have exited, which is occurring in many major markets. Instability in the market that caused Zillow to exit is not unique to them, so other iBuyers may also pump the brakes.
Property Values are Good
“We have not seen a decline in property values, so there’s a lot of equity,” adds Dunlap. “Property owners have the opportunity to sell because they don’t owe anywhere near what the property is worth. This gives investors and sellers a chance to negotiate a win-win transaction. In 2009-10, it was most likely a short sale because you had to get the bank to take less than they were owed. Today, we have the opposite – properties that are in trouble whose owners owe much less than what the property is worth.”
What to Expect in 2022
What else can the real estate market see in 2022? As Dunlap likes to say, “Desperation is often the cause of inspiration.”
- Housing prices will not change so long as demand stays high and interest rates don’t go up. Dunlap predicts interest rates won’t go up at all.
- Small investors will do very well over the next 12-18 months due to the absence of iBuyers and the presence of motivated buyers.
- A Pre-Foreclosure wave will take place. Look at foreclosures as a line in the sand, which is drawn the day of the foreclosure sale. There are tools to help investors aggregate that data so when notices are posted by the Lender, investors can see which properties are pre-foreclosure. Most credible investors want to help the seller keep a foreclosure off their credit, and a pre-foreclosure sale accomplishes that.
- Because there’s equity in their house, which is unique to this period in time, the seller can find a way to sell before it goes to foreclosure and impacts their credit. It’s best to contact these sellers before they’ve been notified by their bank.