Real estate investors have recently been crying out for help as REO prices rocket and the lenders holding them make increasingly ridiculous demands but is it all an artificial rebound?

Real Market Improvements versus the Hype

There have certainly been many real improvements in many real estate markets across the U.S. over the last year, especially in hot spots Miami, Silicon Valley and a few others. However, statistics show that on a nationwide level REO prices have been gaining steam faster than retail home sales. At the same time real estate professionals have been busy telling the media that the threat of shadow inventory has evaporated and there are just a couple of weeks or months of inventory left in some cities, leading to any even more desperate surge in demand for what little is left out there.

This has been spurring bidding wars in many hot markets with cash rich funds and investors over paying for property and smaller investors barely getting a chance to get an offer in.

However, there are two major factors here that many real estate investors aren’t really paying attention too.

The first is that real estate agents are pros at hyping up deals, it’s their job. They really shouldn’t be revealing any information on other offers at all, so by telling investors or other agents they had better come in high because they already have an offer for $X they are really breaking rules and could simply be telling tall tales. Don’t fall for the hype and certainly don’t be seduced into paying too much or waiving rights to inspections or putting too much in deposit. Stick to the principals of sound investing or you will get burned.

Secondly, while there really may be only a couple of months’ worth of REO inventory actively being marketed to the public new data shows that up to 90% of REOs are being held back by lenders. Fannie Mae has even admitted almost 50% of their homes aren’t being marketed at all. These institutions don’t want to reveal how financially unstable they really are and are hoping that by controlling supply they can jump up prices and lose less.

What it means for Real Estate Investors…

Just like foreclosure auction and tax lien sales have become unprofitable for most investors due to the competition perhaps the same is true of many REOs. That’s fine, let them go, let some other poor investor lose their money on them and perhaps you can pick them up at an even bigger discount later.

Any way you look at it the opportunities for picking up discounted properties right now are far better than during the hot boom of the early 2,000s.

Dig deeper for deals and get better at reaching distressed homeowners directly instead of just relying on REOs.

Be cautious about what you add to your own inventory but have all your ducks in a row including access to flash funding so that you can move lightning fast when great deals do hit your desk.

As the effects of the multi-billion dollar mortgage settlement kick in delinquent borrowers are receiving more unpleasant visits with foreclosure notices as real estate investors re-order more checks to go bargain shopping.

Instead of being the miracle lifeline for homeowners as advertised the massive mortgage settlement appears to be resulting in even more homeowners losing their homes at an even faster rate. 21 states saw foreclosure rates rise last month, the highest number in almost a year and a half. Even more shocking Florida reported a 90% year over year increase in repossessions in February 2012, with South Florida hitting a 121% increase according to a report in the Palm Beach Post.

Clearly mortgage lenders are not just putting the pressure on they have gotten incredibly serious about taking over properties and kicking out delinquent homeowners. For many of the homeowners mislead by news headlines, believing that they could be ‘smart’ and beat the system while safely skating by for years without making a mortgage payment this is a big wake up call. Unfortunately for many it is going to be far too late to get back on track. Those who still have time need to act quickly to exercise their options and take advantage of the programs ad solutions available to them before the eviction crews show up.

On the positive side this is all great news for real estate investors. More foreclosures and repossessions mean more motivated homeowners desperate to sell and more attractive discounts on bank owned REO properties.

With most of the new surge in foreclosure actions happening in the country’s hottest markets where investors have been complaining there hasn’t been enough inventory a new wave of REOs on the market is unlikely to hurt home values. If anything it may help balance the action in these markets so they do not bubble again.

The key for real estate investors is locking down as many of these new bargain priced homes as possible. The first there with a checkbook and contract are the ones who will be walking away with the largest share of the profits.

Those who have been wisely building the largest list of potential buyers and developing a network of other investors seeking rental properties can use flash funding to quickly and easily flip these homes in as little as a few days for some pretty handsome spreads. With an additional 2.2 million foreclosures expected this year the potential is huge but it won’t last forever.

In many areas of the country foreign buyers now make up as much as 30% of all buyers. This is a number that is only likely to grow if newly proposed legislation is passed and promoted by the government.

A new bill proposed by two US Senators would create a new visa program offering residency in exchange for foreign buyers investing at least $500,000 in real estate. This can either be invested all in one residence of can be spread amongst multiple investment properties providing at least $250,000 is spent on a residence.

This will really tackle three issues all at the same time; attracting more foreign investment, moving foreclosure inventory faster and appeasing those seeking more lenient immigration rules. Of course this is all great news for investors and could bring a fresh rush of buyers with plenty of cash, with the government pitching in with a lot of marketing.

Marketing to foreign buyers doesn’t just mean more volume either. In many cases it can also offer bigger spreads. Some agents in hot markets have been reporting receiving full priced offers from overseas buyers on all of their listings. So expanding your marketing to include foreign buyers could not only mean flipping more houses but getting top dollar for them too.

So what can you do to reach and attract more foreign buyers? While many interested buyers will speak English you can also better equip your real estate investing businesses by bringing on more assistants who speak other languages, at least on an as needed basis. Then consider expanding your social media marketing to include platforms like Ecademy and Xing which are more popular with international businesses and real estate professionals. Plus you will also find European real estate related companies much more open to affiliate referral arrangements which you can use for promoting your properties.