REOs Leased by Bank Considered Shadow Inventory?

[quote author="awgee" date=1253160127][quote author="David714" date=1253159782]I don't know much about banking so maybe someone who does can explain this to me... Why would a bank be motivated to hold a proprty and rent it? Could they be brazen enough to gamble on RE appreciation at a time like this or are there some greater forces in play?</blockquote>
They are just trying to kick the can down the road. And without going into all the accounting procedures, of which I understand very few myself, the idea that it does not cost the bank anything to just hold on to the property is simplistic and just plain stupid.</blockquote>


So if I understand correctly, the banks are affraid to value the REO homes at market prices, or worse yet sell them all, because that would put too much red on their balance sheet. Is that right?
 
[quote author="NewportSkipper" date=1253170638]I admit one could be confused that I was addressing foreclosures only, but my repsonse was addressing this post. I thought it was obvious.



"I know nothing about leasing laws, but logically it seems like if the lease is made with the previous owner, the lease/contract ends when ownership ends. If there are any costs involved with the early cessation of the lease, it seems the responsible party would be liable for those costs."



Absent foreclosure, that is wrong.</blockquote>
I think you may be the only one who thinks it's "obvious"... here is the full post since you've cut out what he was addressing:

[quote author="awgee" date=1253161660][quote author="graphrix" date=1253161026]Does anyone know who these banks are that leasing these properties? I'd love it of they were a publicly traded bank too... perfect short opportunity with the capital ratio issues.



BTW, if there was a lease in place when the bank <strong>foreclosed</strong> on the place, then they have to honor the lease. In a sense, they become forced landlords. A tenant can refuse cash for keys, and the bank will be stuck honoring the lease.</blockquote>


I know nothing about leasing laws, but logically it seems like if the lease is made with the previous owner, the lease/contract ends when ownership ends. If there are any costs involved with the early cessation of the lease, it seems the responsible party would be liable for those costs.</blockquote>
Now, I may be in the wilderness here, but it appears awgee was referencing a foreclosure scenario so it would be easy to assume that your post was also. Which is also why I asked if your response applies to a foreclosure (which you did not respond to).



And by posting one of your absolutes:

[quote author="NewportSkipper" date=1253162051]It's basic real estate law that a lease survives a sale.</blockquote>
It does not say "excluding foreclosures". Maybe you should edit that.



Technically, you can claim that you were... but in the context of the subject of this thread, and what awgee was referencing... your semantic tap dancing is not winning over the judges.
 
[quote author="irvine_home_owner" date=1253233483]

It does not say "excluding foreclosures". Maybe you should edit that.</blockquote>


Just f.y.i., Skipper won't be editing anything. He is no longer with us.
 
[quote author="David714" date=1253192867][quote author="awgee" date=1253160127][quote author="David714" date=1253159782]I don't know much about banking so maybe someone who does can explain this to me... Why would a bank be motivated to hold a proprty and rent it? Could they be brazen enough to gamble on RE appreciation at a time like this or are there some greater forces in play?</blockquote>
They are just trying to kick the can down the road. And without going into all the accounting procedures, of which I understand very few myself, the idea that it does not cost the bank anything to just hold on to the property is simplistic and just plain stupid.</blockquote>


So if I understand correctly, the banks are affraid to value the REO homes at market prices, or worse yet sell them all, because that would put too much red on their balance sheet. Is that right?</blockquote>
When a bank shows a loss, it has to retract all the leverage that was extended on that part of the loan that was a loss. It has to find money it does not have.
 
[quote author="irvine_home_owner" date=1253233483][quote author="NewportSkipper" date=1253170638]I admit one could be confused that I was addressing foreclosures only, but my repsonse was addressing this post. I thought it was obvious.



"I know nothing about leasing laws, but logically it seems like if the lease is made with the previous owner, the lease/contract ends when ownership ends. If there are any costs involved with the early cessation of the lease, it seems the responsible party would be liable for those costs."



Absent foreclosure, that is wrong.</blockquote>
I think you may be the only one who thinks it's "obvious"... here is the full post since you've cut out what he was addressing:

[quote author="awgee" date=1253161660][quote author="graphrix" date=1253161026]Does anyone know who these banks are that leasing these properties? I'd love it of they were a publicly traded bank too... perfect short opportunity with the capital ratio issues.



BTW, if there was a lease in place when the bank <strong>foreclosed</strong> on the place, then they have to honor the lease. In a sense, they become forced landlords. A tenant can refuse cash for keys, and the bank will be stuck honoring the lease.</blockquote>


I know nothing about leasing laws, but logically it seems like if the lease is made with the previous owner, the lease/contract ends when ownership ends. If there are any costs involved with the early cessation of the lease, it seems the responsible party would be liable for those costs.</blockquote>
Now, I may be in the wilderness here, but it appears awgee was referencing a foreclosure scenario so it would be easy to assume that your post was also. Which is also why I asked if your response applies to a foreclosure (which you did not respond to).



And by posting one of your absolutes:

[quote author="NewportSkipper" date=1253162051]It's basic real estate law that a lease survives a sale.</blockquote>
It does not say "excluding foreclosures". Maybe you should edit that.



Technically, you can claim that you were... but in the context of the subject of this thread, and what awgee was referencing... your semantic tap dancing is not winning over the judges.</blockquote>
Why would anyone exclude foreclosures in a thread that is about foreclosures?
 
[quote author="SoCal78" date=1253239625][quote author="irvine_home_owner" date=1253233483]

It does not say "excluding foreclosures". Maybe you should edit that.</blockquote>


Just f.y.i., Skipper won't be editing anything. He is no longer with us.</blockquote>




Wait...what?



He got banned?
 
[quote author="awgee" date=1253240193]

Why would anyone exclude foreclosures in a thread that is about foreclosures?</blockquote>
The same reason why anyone would think that when a poster asks advice about real estate investments, that the actual properties don't have to be available to invest in.
 
[quote author="Minimorty" date=1253241046][quote author="SoCal78" date=1253239625][quote author="irvine_home_owner" date=1253233483]

It does not say "excluding foreclosures". Maybe you should edit that.</blockquote>


Just f.y.i., Skipper won't be editing anything. He is no longer with us.</blockquote>




Wait...what?



He got banned?</blockquote>


<img src="http://shipwreckedandstranded.files.wordpress.com/2009/07/adios-black1.jpg" alt="" />
 
[quote author="SoCal78" date=1253239625][quote author="irvine_home_owner" date=1253233483]

It does not say "excluding foreclosures". Maybe you should edit that.</blockquote>


Just f.y.i., Skipper won't be editing anything. He is no longer with us.</blockquote>


Wait for Grace's breaking news post this weekend. Another body dump in Irvine. For the record, me and my Triad homeboys checked the Irvine boundary map first before executing the assignment.
 
[quote author="no_vaseline" date=1253241847][quote author="Minimorty" date=1253241046][quote author="SoCal78" date=1253239625][quote author="irvine_home_owner" date=1253233483]

It does not say "excluding foreclosures". Maybe you should edit that.</blockquote>


Just f.y.i., Skipper won't be editing anything. He is no longer with us.</blockquote>




Wait...what?



He got banned?</blockquote>


<img src="http://shipwreckedandstranded.files.wordpress.com/2009/07/adios-black1.jpg" alt="" /></blockquote>




Did he get banned or did he leave?



If he got banned, that is a little harsh isnt it? Nobody (other than RoLar) really liked him, but he wasnt totally out of line. A few instances of name calling here and there, but this is an internet forum containing differing view points. It is bound to happen. The last couple of weeks have been more interesting than the last couple of months. If he got banned, I think that is a bad decision....
 
[quote author="Minimorty" date=1253243872][quote author="no_vaseline" date=1253241847][quote author="Minimorty" date=1253241046][quote author="SoCal78" date=1253239625][quote author="irvine_home_owner" date=1253233483]

It does not say "excluding foreclosures". Maybe you should edit that.</blockquote>


Just f.y.i., Skipper won't be editing anything. He is no longer with us.</blockquote>




Wait...what?



He got banned?</blockquote>


<img src="http://shipwreckedandstranded.files.wordpress.com/2009/07/adios-black1.jpg" alt="" /></blockquote>




Did he get banned or did he leave?



If he got banned, that is a little harsh isnt it? Nobody (other than RoLar) really liked him, but he wasnt totally out of line. A few instances of name calling here and there, but this is an internet forum containing differing view points. It is bound to happen. The last couple of weeks have been more interesting than the last couple of months. If he got banned, I think that is a bad decision....</blockquote>
Your kidding, right? He was rude and out of line and warned countless times. I for one am glad that he is no longer with us, the forum will be a better place without him.
 
[quote author="Minimorty" date=1253243872]



Did he get banned or did he leave?



If he got banned, that is a little harsh isnt it? Nobody (other than RoLar) really liked him, but he wasnt totally out of line. A few instances of name calling here and there, but this is an internet forum containing differing view points. It is bound to happen. The last couple of weeks have been more interesting than the last couple of months. If he got banned, I think that is a bad decision....</blockquote>


Im going to have to agree. He was not totally un-useful. That should be the test.



Either way he can just make a new account and use that, right? Youre not ip banning are you?



You hear that skipper? Just make a new account.



Be nice.





(How about NewSkipper)
 
[quote author="USCTrojanCPA" date=1253244064][quote author="Minimorty" date=1253243872][quote author="no_vaseline" date=1253241847][quote author="Minimorty" date=1253241046][quote author="SoCal78" date=1253239625][quote author="irvine_home_owner" date=1253233483]

It does not say "excluding foreclosures". Maybe you should edit that.</blockquote>


Just f.y.i., Skipper won't be editing anything. He is no longer with us.</blockquote>




Wait...what?



He got banned?</blockquote>


<img src="http://shipwreckedandstranded.files.wordpress.com/2009/07/adios-black1.jpg" alt="" /></blockquote>




Did he get banned or did he leave?



If he got banned, that is a little harsh isnt it? Nobody (other than RoLar) really liked him, but he wasnt totally out of line. A few instances of name calling here and there, but this is an internet forum containing differing view points. It is bound to happen. The last couple of weeks have been more interesting than the last couple of months. If he got banned, I think that is a bad decision....</blockquote>
Your kidding, right? He was rude and out of line and warned countless times. I for one am glad that he is no longer with us, the forum will be a better place without him.</blockquote>






What actually ended up getting him banned? The blog post comments today? He is usually combative, and rarely supports his viewpoints with verifiable data, but that should not get him banned.



I wish we had someone knowledgeable (with supporting evidence) to argue the other side of the bear mentality. It would be more interesting to have both sides presented with good data behind each argument.



fyi - I can afford to buy, but am waiting 2-3 years to see how things play out in the near future.
 
[quote author="Minimorty" date=1253244490]

What actually ended up getting him banned? The blog post comments today? He is usually combative, and rarely supports his viewpoints with verifiable data, but that should not get him banned.



I wish we had someone knowledgeable (with supporting evidence) to argue the other side of the bear mentality. It would be more interesting to have both sides presented with good data behind each argument.



fyi - I can afford to buy, but am waiting 2-3 years to see how things play out in the near future.</blockquote>
I didn't even check the blog to see what kinda stupid stuff he did over there. He was warned several times to stop the name calling of long time members but he just couldn't stop. I didn't have a problem with him until he went after me with no reason.



The markets probably won't do much up or down over the next few years so your strategy may work out (hopefully interest rates aren't much higher by then).
 
[quote author="Minimorty" date=1253244490]I wish we had someone knowledgeable (with supporting evidence) to argue the other side of the bear mentality. It would be more interesting to have both sides presented with good data behind each argument.</blockquote>


If there were "good data" for the bull argument, people wouldn't have to strain, twist, obfuscate, or deny the facts in the bear argument as it would be obvious. The lack of a coherent argument on the other side isn't due to lack of desire, it's due to a complete lack of ability to produce supporting evidence. You have to be willfully ignorant to assume prices are going up.



Note that I am not saying not to buy a home. I own one and we are above water by a large margin, however the price trend is down and it appears to be continuing for the foreseeable future. If you find a place you like at a price you can afford, this may be the time to buy it but you <strong>might</strong> get it cheaper or at the same price 2-3 years from now, too.



(Edited for syntax, spelling, and tense errors... where is my coffee?)
 
[quote author="Nude" date=1253245425][quote author="Minimorty" date=1253244490]I wish we had someone knowledgeable (with supporting evidence) to argue the other side of the bear mentality. It would be more interesting to have both sides presented with good data behind each argument.</blockquote>


If there were "good data" for the bull argument, people wouldn't have to strain, twist, obfuscate, or deny the facts in the bear argument as it would be obvious. The lack of a coherent argument on the other side isn't due to lack of desire, it's due to a complete lack of ability to produce supporting evidence. You have to be willfully ignorant to assume prices are going up.



Note that I am not saying not to buy a home. I own one and we are above water by a large margin, however the price trend is down and it appears to be continuing for the foreseeable future. If you find a place you like at a price you can afford, this may be the time to buy it but you <strong>might</strong> get it cheaper or at the same price 2-3 years from now, too.



(Edited for syntax, spelling, and tense errors... where is my coffee?)</blockquote>




I admit I spent no time searching for an answer to this question, but are you aware of any "bull argument" blogs (not realtard blogs, but independent)? Basically, the opposite of this blog.



There have to be some bulls out there. Even some (few) with data they believe support an increase in prices in the next couple of years. Why do we not have any of those people on this blog? I'm just saying it would be interesting to hear both sides.
 
[quote author="USCTrojanCPA" date=1253244908][quote author="Minimorty" date=1253244490]

What actually ended up getting him banned? The blog post comments today? He is usually combative, and rarely supports his viewpoints with verifiable data, but that should not get him banned.



I wish we had someone knowledgeable (with supporting evidence) to argue the other side of the bear mentality. It would be more interesting to have both sides presented with good data behind each argument.



fyi - I can afford to buy, but am waiting 2-3 years to see how things play out in the near future.</blockquote>
I didn't even check the blog to see what kinda stupid stuff he did over there. </blockquote>


In his most recent misrepresentation, he claimed that Scott Gunther agreed with him. Unluckily for Scott, I have him in my autodialer.



Get well soon Deuce! Don't let Hamthrax keep a good man down!



[quote author="Minimorty" date=1253246652]



There have to be some bulls out there. Even some (few) with data they believe support an increase in prices in the next couple of years. Why do we not have any of those people on this blog? </blockquote>


Because their "data" doesn't stand up, even under minimal scrutiny. When disproved, the "bulls" scamper away like the cockroaches they are.



BTW, I'm bullish on real estate. Just not today.
 
[quote author="Nude" date=1253245425][quote author="Minimorty" date=1253244490]I wish we had someone knowledgeable (with supporting evidence) to argue the other side of the bear mentality. It would be more interesting to have both sides presented with good data behind each argument.</blockquote>


If there were "good data" for the bull argument, people wouldn't have to strain, twist, obfuscate, or deny the facts in the bear argument as it would be obvious. The lack of a coherent argument on the other side isn't due to lack of desire, it's due to a complete lack of ability to produce supporting evidence. You have to be willfully ignorant to assume prices are going up.



Note that I am not saying not to buy a home. I own one and we are above water by a large margin, however the price trend is down and it appears to be continuing for the foreseeable future. If you find a place you like at a price you can afford, this may be the time to buy it but you <strong>might</strong> get it cheaper or at the same price 2-3 years from now, too.



(Edited for syntax, spelling, and tense errors... where is my coffee?)</blockquote>


What about the argument about splitting the middle? That is, my personal opinion is prices will not rise or fall significantly for years. That's not bearish or bullish-I'm splitting the difference.



Inventory is extremely low today. Prices are stable (check Redfin's price per sq ft graphs for proof). Demand is very elastic; people are very price sensititve. Supply of non-REOs is very elastic as well-the first sign of a price recovery will cause more standard sales as people who normally would sell have been holding off. The combination will kill the recovery, keeping prices stable. But since supply is so below demand, additional units (at reasonable prices) will be easily snatched up. Prices aren't going to fall much if many houses for sale get 30 offers. Now, if there's really a huge flood of foreclosures for sale all at once, that would drive down prices further. But currently, inventory is going down, not up; there's absolutely no indication of such a huge flood coming on the market. That is, there are very few non-distressed sellers, so the prices that REOs are at is the market. There's currently a shortage of said REOs, so adding more won't cause prices to rise, but until there isn't a shortage, prices won't fall either. If prices show signs of rising, even more standard sales will come on the market, plus many buyers will drop out, lowering prices back down.



All signs seem to point to stable prices, IMHO.
 
[quote author="Geotpf" date=1253251608][quote author="Nude" date=1253245425][quote author="Minimorty" date=1253244490]I wish we had someone knowledgeable (with supporting evidence) to argue the other side of the bear mentality. It would be more interesting to have both sides presented with good data behind each argument.</blockquote>


If there were "good data" for the bull argument, people wouldn't have to strain, twist, obfuscate, or deny the facts in the bear argument as it would be obvious. The lack of a coherent argument on the other side isn't due to lack of desire, it's due to a complete lack of ability to produce supporting evidence. You have to be willfully ignorant to assume prices are going up.



Note that I am not saying not to buy a home. I own one and we are above water by a large margin, however the price trend is down and it appears to be continuing for the foreseeable future. If you find a place you like at a price you can afford, this may be the time to buy it but you <strong>might</strong> get it cheaper or at the same price 2-3 years from now, too.



(Edited for syntax, spelling, and tense errors... where is my coffee?)</blockquote>


What about the argument about splitting the middle? That is, my personal opinion is prices will not rise or fall significantly for years. That's not bearish or bullish-I'm splitting the difference.



Inventory is extremely low today. Prices are stable (check Redfin's price per sq ft graphs for proof). Demand is very elastic; people are very price sensititve. Supply of non-REOs is very elastic as well-the first sign of a price recovery will cause more standard sales as people who normally would sell have been holding off. The combination will kill the recovery, keeping prices stable. But since supply is so below demand, additional units (at reasonable prices) will be easily snatched up. Prices aren't going to fall much if many houses for sale get 30 offers. Now, if there's really a huge flood of foreclosures for sale all at once, that would drive down prices further. But currently, inventory is going down, not up; there's absolutely no indication of such a huge flood coming on the market. That is, there are very few non-distressed sellers, so the prices that REOs are at is the market. There's currently a shortage of said REOs, so adding more won't cause prices to rise, but until there isn't a shortage, prices won't fall either. If prices show signs of rising, even more standard sales will come on the market, plus many buyers will drop out, lowering prices back down.



All signs seem to point to stable prices, IMHO.</blockquote>


Except for that 3.5 million homes in some stage of foreclosure.
 
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