Underwater mortgages and negative equity homes are back again. Just how bad is it? What does it mean for real estate investors?
The latest statistics from ATTOM Data show a resurgence in underwater homes in 2019. ATTOM’s latest report measures this metric by the number of properties that has serious negative equity, and owe at least 125% of their home’s value on mortgages.
Seriously Underwater
There were at least 5.2M homes in this situation as of Q2 2019. That’s about as many homes that sell in an entire year in a strong market.
This does not count all of those who just have zero equity or too little equity for a conventional sale using a Realtor. If you added in, all those that owe 90% to 124% of their property value on mortgages this number could be dramatically higher. It will get higher every day as prices float down again.
Then if you count other debt and liens that may mean owners have even less equity, that number may already be at crisis level. Think past due property taxes and code violation fines.
Some zip codes are already seeing negative equity properties return to 2012 levels, with upwards of 20% of properties in trouble. In at least 32 zip codes more than half of properties are seriously underwater.
Equity Rich Properties
The good news is that there is a large number of equity rich properties out there as well. These are those with a loan to value of 50% or less.
While this number is shrinking, and has been since 2017, nationally, 25% of homes were considered equity rich in Q1 2019. Most of them being in California.
What it Means for Real Estate Investors
While there do still seem to be speculative buyers willing to pay 150% of the real value out there, many more property owners are finding themselves stuck. They simply can’t sell conventionally. It’s going to take seller financing and creative financing to make it happen.
The great news is that all of these equity rich properties are really ripe for wholesaling. Those equity cushions will shrink if the market keeps contracting, but wholesalers who act fast still have plenty of potential properties to pick from.
"I want thank you for the excellent service I received from Best Transaction Funding.The quick response I received from your company from the beginning of the transaction and to the end was unbelievable. I also want to give a special compliment to you as well. You went to great lengths to keep me informed and gave my title company all the information they needed to complete a successful closing. I cannot express how thankful I am. Such service builds great working relationships. I will definitely recommend Best Transaction Funding to all my fellow investors. Thank You."
- Frank Olaitan, Real Estate Investor, MD
"I can't thank you and your company enough for providing funding for our latest project, and right at the last minute. You came through with funding in less than 24 hours and coordinated with the closing agent and attorneys like you had been involved with our project the entire way. I'll know exactly where to call for the funding we'll need for our next project."
- Dave Pricken, Real Estate Investor, NJ
"Thank you so much! I just had a talk with our Realtor on both properties and told him amazing things about your company!... Normally I rehab the houses and re resells them. I just don't have the patience for that work anymore. This [transactional funding] is such a better way for me and less stress."
- Steven Kupecz, Real Estate Investor, TN
"We want to thank you for the exceptional customer service you provided. No one comes close. We had contacted a competitor the same time we contacted your company. Your company responded with in a few minutes while the competitor has yet to respond weeks later even after multiple phone calls and emails. Thanks again for the unmatched customer service."
"We had looked into several transaction lenders for a couple properties we were trying to flip. Your company was the most responsive and had the best pricing. Even though we had logistics issues with the B/C lender, your company acted very professionally and handled our requests beyond our expectations."
"Thank you for your commitment to an excellent customer experience."
- Phoenix Properties, LLC, Ronald Destefani, Investor, PA
"I was studying on how transactional funding works and you guys had the best and most thorough explanations posted so I could fully understand the details in back to back closing. I'd already started setting everything up but your video confirmed that I'm on the right track."
- La'Donna Turnipseed-Scott, Investor, LA
"....a few months back, I happened upon a video, on your site, regarding the use of transactional funding with Hud properties; and I found myself replaying the video over and over because of the value that I saw in the message...it actually explained the process, step-by-step on how to submit a Hud deal by using transactional funding. Once I completed the video, my initial response was to take immediate action by duplicating what I had learned from the video into real time. So I did some research on properties in a market where I knew I had buyers; and put together a hud deal. I then located a realtor able and willing to submit my bid online and within a couple of days, to my surprise, received a call telling me that I had won – my very 1st Hud bid."
"To you I say, ”KUDOS to Best Transactional Funding and Thank you for providing the education and services to Real Estate Entrepreneurs like me. Please keep up the good work!'"
- T. A. Davis, Investor, NJ
"You each deserve high marks for your wonderfully quick response time to each of our questions and requests! You hit home runs with us! Your application system was easy to use. Our deal met your qualifications and every time Rob Kozak or any member of Mystic Properties, LLC phoned, we received a "real" person dialing back to speak with us.
Your patience and persistence were exceptional in dealing with our business interests. Thank you for such great customer service! We look forward to working with your staff, again, in the future. We like referring people to you, as us, our team would have missed-out on an excellent earning opportunity.
Your help negotiating with our title company made our back-to-back deal, finally happen. People noticed on settlement day how effectively and efficiently your part of the transaction was organized and executed. Again, thank you for truthfully being the "BEST" at what you do!"
- Diane McAdams, Mystic Properties, LLC, Real Estate Investor, Pennsylvania
"Boy, you guys are impressive! I can’t thank you enough for scrambling and getting my deal done at the last minute like that. You and your team were awesome!"
- Donna Bauer, The NoteBuyer Inc., Real Estate Investor, OH
"Thank you so much for working so diligently with me. Your services really are the "BEST". I look forward to working with you in the near future!"
- Ericka B., Real Estate Investor, CA