With the foreclosure moratorium having officially ended on July 31, should investors and homebuyers expect a flood of cheap housing inventory to hit the market in the coming months?
Not really. Deni and Brian explain the Consumer Financial Protection Bureau’s new rules that effectively ban homeowner foreclosures for the rest of 2021.
But that doesn’t mean there are no distressed sales to be found. After explaining the current foreclosure rules, Brian breaks down some other ways to score great deals in the coming months.
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Deni Supplee: Good afternoon, everyone, and welcome to SparkRental’ss Facebook Live and podcast. Please let us know where you are tuning in from. And as we go along, ask your questions. And you know what? It doesn’t even have to be related to our subject matter. If you have any questions, just ask away. And with that, last week, if you joined us, we talked about the Eviction Moratorium, and ironically, a few hours after we got done our Facebook Live, they extended the eviction moratorium once again. So interesting. And this week, we’re actually going to be talking about the foreclosure moratorium and how that will affect us, real estate investors. So, Brian, why don’t you start us up when this ended and how what this means, right.
Brian Davis: So unlike the eviction moratorium, the foreclosure moratorium did expire at the end of July, at least officially. Unofficially, It’s a lot more complicated than that. And we’re going to get into that today. So, you know, the short version here is that I wouldn’t expect an enormous wave of foreclosures about to, you know, flood the market. So the Consumer Financial Protection Bureau, they have instituted three new rules to slow down foreclosures for the remainder of 2021. And those rules make it pretty difficult for lenders to foreclose. Now, keep in mind that these rules only apply to owner-occupied properties. These do not apply to second homes. These do not apply to investment properties. So here are the three rules. And we’re not going to get into, you know, the weeds of these. But the first rule is that the lender must collect a loss mitigation application from borrowers who are behind. And only after they go through all foreclosure avoidance options can lenders proceed with foreclosure. And they have to give borrowers at least three options for foreclosure avoidance. One is resuming regular payments and moving any missed payments to the end of their mortgage term. Another is modifying the loans, length or interest rate, or three, working with the seller to or working with the borrower for them to sell the home.
Deni Supplee: Ironically, foreclosures take a long time anyway. So now they’re going to take even longer.
Brian Davis: All right. So, you know, Deni, you and I talk all the time about how long evictions take and how landlords often underestimate and especially the general public vastly underestimates the amount of time that it takes to evict someone. It’s a lengthy process. In most states and most cities, the foreclosure process is even longer because the lender doesn’t own the property, the borrower owns the property. So you have to take legal ownership away from the borrower in order to foreclose rather than just taking possession like landlords do since the landlord actually owns the property. So, yeah, the foreclosure process is pretty lengthy and expensive for lenders to begin with. It’s no even longer. So anyway, so that was the first rule. The second rule is if the lender suspects if the property’s abandoned, the lender must confirm that the property is abandoned under state and local laws where the property exists, where it sits before they can proceed with foreclosure. And the third rule is if borrowers are unresponsive, if they do not respond to the lender’s requests for a loss mitigation application when they’re behind, then the lender has to wait until the homeowner is at least four months behind on their rent and has been unresponsive for at least 90 days before they can even begin the foreclosure process.
Deni Supplee: You mean on their mortgage, right? Yeah. Right. Sorry, you said rent,
Brian Davis: I’m sorry, but at least four months behind on their mortgage payments and unresponsive for at least 90 days. So the bottom line is, even though the foreclosure moratorium technically ended at the end of July, the Bush administration has basically tied lenders’ hands on this. So they will not easily be able to foreclose on any homeowners for the rest of 2021. Now, these rules do expire on January 1st, 2022. They could be extended. Of course, you know, we’ve seen a lot of that going around over the last year and a half. Now keep in mind that these rules are in addition to existing rules on foreclosures, that bar loan servicers from starting the foreclosure process until at least 120 days of delinquency and until the homeowner is behind for at least 120 days, four months basically on their mortgage payments. So, It’s really hard for lenders to foreclose right now.
Deni Supplee: Now, Jeff Moore has put in a comment I have been predicting no for a year.
Speaker3: No wave of foreclosures. Yeah, I mean, the government is not going to allow a wave of foreclosures, basically is the short version here
Deni Supplee: No more than a wave of evictions.
Brian Davis: Right. So these temporary rules that the Consumer Financial Protection Bureau has put in place, do apply to all primary residences, not just federally backed mortgages, not they would matter that much anyway because most homeowner mortgages in the US are based on federally backed mortgages. You know, Fannie Mae, Freddie Mac, FHA, USDA, VA, that’s just how the industry is. So keep that in mind. And speaking of federally backed mortgages, all of these mortgages to all of these divisions of the government and all of these different federally backed loan programs, they all have very extensive forbearance programs that are still in place. The earliest of those to expire will be at the end of September. Some of them expire at the end of October. And again, they may well be extended. So keep that in mind. So is there going to be are there going to be any foreclosures hitting the market over the next few months, maybe a few second homes, investment properties, that are still able to be foreclosed on by lenders.
Deni Supplee: Let me ask you this, Brian. What about small multi’s and somebody is living in one and renting out the three? Do you think they have some leeway or?
Speaker3: There is protection? As long as the property is four or fewer units and as long as they live in one of those units. OK, so for lending purposes, residential properties are one to four units. Anything over four units is classified as commercial for lending purposes. Thanks, so there will not be a huge influx of cheap inventory to hit the market over the next few months and alleviate this housing shortage that we’ve all been talking about for the last year. And, you know, with second homes and investment properties, you know, these are typically owned by the upper middle class and, you know, the middle class, the upper-middle-class Americans, they’re all doing pretty well, actually. I mean, home values are up significantly year over year. Stock markets are up significantly. So, you know, the middle and upper-middle classes are actually doing pretty well. Not a lot of them are in foreclosure. So even I mean, even if lenders could foreclose on these and they can, of course, on second homes and investment properties, there aren’t that many of these houses that are behind on these loans. So Deni, let’s talk about some alternative ways to find good deals on properties since there isn’t going to be this enormous flood of foreclosures, you know, hitting the market and, you know, introducing a whole bunch of cheap inventory to alleviate this housing shortage.
Deni Supplee: Well, we have talked about some of these before on other programs. But one is to contact homeowners that are in a tax sale. And to do that, we have some different ways to find that out, right, Brian, there
Brian Davis: Upstream being the easiest, right. I mean, I know that’s one that you rave about. And it is it’s very good software. It’s not, you know, Penneys. I mean, it’s not super cheap, but it’s really good. It’s very effective in finding distressed sales, basically. And that includes far more than just foreclosures. That includes stock sales, of course, judgments, and Leans and divorces. And, you know, as far as
Deni Supplee: And pre-Foreclosures when they’re allowed.
Brian Davis: Yeah, yeah. So that’s right. And so it does include homeowners who are behind and where their lenders are starting to go through the process of foreclosing, but haven’t actually put the property up for auction yet. So pre-foreclosures are actually a great way to find deals. But yeah, you know, with tax sales, don’t expect the local governments to be as forgiving as the federal government with these things. Local governments want their money. So if you don’t pay your property taxes, I mean, they’re going to sell your property taxes, and even, you know, property owners who are in the beginning stages of a tax sale, a lot of them just want to sell. You know, they don’t want to deal with the hassle. They obviously don’t want their property to go to tax sale. So often they will be amenable to a quick sale, potentially with a lowball offer just to end the headache of the whole thing.
Deni Supplee: Absolutely, Ashley has asked, what was the program called, Ashley I did put a link to it and it’s called Prop Stream, and they do offer a free seven-day tryout. And it’s cool even if you decide not to go forward with it, it’s fun to play around for the seven days, see what’s on there. Yeah. So, Brian, what about. Oh, sorry.
Brian Davis: I was going to say, I mean, know Deni is a realtor, of course, a licensed realtor, and of Deni. I’ve heard you rave many times about the information that’s available on Prop Stream that is not available on the MLS.
Deni Supplee: Yes. And that is sadly true, sadly true.
Brian Davis: So, yeah, homeowners and taxable homeowners in foreclosure, if you see any homeowners with JUDGMENT’s and Lean’s homeowners getting a divorce, you can contact all of these people. You can send them letters, postcards. you can see some of these services will also offer you their contact information beyond just their address on public record. So things like their email address, their phone number, you can try reaching out to them that way and also look for estate sales because heirs people who inherit properties often want nothing to do with them. The last primary residence that I owned, I bought from a couple of siblings who inherited the property from their father who died. And it was a rental property when I bought it, you know, it was in OK shape, but not fantastic shape. The heirs didn’t want anything to do with it. So I got a good deal on the property. You know, I moved in and just kind of gradually fixed it up over the next couple of years when I lived there. Um, so, you know, look for some of those, that can be a great way to find deals from these heirs who just aren’t that interested in the properties.
Deni Supplee: And a lot of these things are not only available on, the different software that we’ll discuss, in a little bit, but you can also sometimes look in the county publications or the county websites and you’ll see some of the listings for some of this stuff. Maybe not divorces, divorces are propstream in some cases.
Brian Davis: Yes, they are. And, you know, you can follow the oldie but goodie strategy of driving for dollars. You can look for vacant properties, rundown properties, you know, properties that may be still occupied by tenants but are not very well taken care of, you know, absentee landlords. And we have a couple of links to help you with that. We have an article that goes into a great deal of detail about driving for dollars and how to do it. And there’s also there’s a mobile app that makes this really easy as well called Deal Machine. And we’ll send a link to that in the comments here as well. Deal machines seems pretty cool. So you just you open the app on your phone and with it you take a photo of a property and it will combine, and use your GPS data and the photo data to pull up that property and all of its public records sort of pull up the owner’s name, the owner’s information, contact details when they bought the property, how much they bought it for mortgages and Lean’s and, with a single button, you can have your machine send out a postcard to that owner, you know, your template, your script to get in touch with them and make them an offer on the property.
Deni Supplee: So they are out there. I mean, I know with all that’s going on, it may not seem like it, but im always looking. My poor husband, I think he wants to hit me half the time. But every time were driving i’m like, ooh, look at that grass over there.
Brian Davis: I know you’re a real estate investor at heart. Always, you know, a lot of these people are tired landlords. And those are another great group of sellers to target, especially right now when there aren’t really any foreclosures in the market or not many. Retired landlords, you know, people who have just had enough of the headaches of the ever-increasing regulation of the eviction moratorium being extended five times, tired of bad tenants, tired of bad contractors, and tired of the never-ending repairs and the maintenance. You know, a lot of these tired landlords, just want to make the pain go away and they’re willing to sell their properties at a very reasonable price. If you can settle quickly and give them a sure settlement.
Deni Supplee: So and Edwin Tars, adds why wait to invest? A good deal is good at any time. If the numbers work, that’s what matters. That’s so true, too.
Brian Davis: Yeah Edwin that’s absolutely true and you know, a lot of investors try to get fancy with timing the market. Don’t try to do that. Stock investors should know better than that. Real estate investors should know better than that with housing markets. Don’t try to time the market because today’s price point could still be lower than tomorrow’s dip. You know, if the let’s say the housing market goes up by 20 percent over the next couple of years and then crashes by 15 percent, you know, even if you were to buy at the very bottom of that crash, that pricing is still higher than today’s pricing. So don’t try to time the market. It never works out. There are people way better informed and smarter than you are who don’t know how to time the market accurately and can’t do it so seriously. Like Aaron said, look for deals that cash flow today. That makes sense. And you can start earning a yield on these properties immediately. And don’t worry about the appreciation. We’re trying to speculate on how much it’s going to go up in value over the next two years or whatever, um, you know, buy properties. That makes sense in today’s market, today’s rents, today’s cash flow. And you can’t go wrong.
Deni Supplee: Absolutely. What else, Bryan, is there?
Brian Davis: Well, if all else fails, you can just go buy a turnkey property, right? I mean, you can find a property that may be in a cheaper market than where you live. You know, a lot of us live in markets that aren’t necessarily great for rental investing markets with either too strong regulation against landlords or maybe the cap rates are low and don’t make any sense. Maybe their home prices are too expensive, you know, for it to be feasible to buy rental properties there. So go invest in a different market, go find a city somewhere else with better cap rates, lower home prices, you know, more landlord-friendly regulations and laws. So investors don’t be afraid to invest long distances. In today’s world. You can buy a turnkey property that doesn’t need any repairs or maintenance. You know, maybe that even already has a tenant in it. Um, you know, that’s nothing you can do really easy nowadays, especially through platforms like rootstock that are specifically designed for that. We added a link to rootstock in the comments here. You can check them out. But yeah, it’s a platform for buying and selling turnkey rental properties. And they specialize in how many people do that long-distance with really good transparency for each property listed and a couple of really good guarantees. They guaranteed you’re going to have a rent-paying tenant in there within two months and they guarantee that you’ll be happy with the property. And if not, there’s a 30-day guarantee to basically return it. So, no, it’s a great platform for long-distance turnkey investing.
Deni Supplee: Absolutely. Do you have anything to add?
Brian Davis: Well, I saw that Floyd Saunders said, he said except it’s not over. I’m not entirely sure what Floyd what he’s referring to there. And I do appreciate the shout-out here from Edwin. And he says, I love you guys take care, Edwin. We appreciate that. We very much do want this show to be interactive. We want this to be about you guys and what you want to hear about and your questions. So, you know, as always, you can always feel free to reach out to us by email, ask us questions, live during these broadcasts. And on that note, no Deni, I don’t think there’s anything else that I feel the need to get up on my soapbox about for today’s episode. You?
Deni Supplee: No, no. All right. On your soapbox.
Brian Davis: Well, on that note, we reach out to us any time you can message us through our Facebook page, you can email our support at Spark Rental dot com. Let us know what you wanna hear about next week, and we will catch you next Tuesday.
Deni Supplee: Actually, next week we have a guest.
Brian Davis: That’s right. Actually, we do have a guest. Next week, Becky Nova will be joining us again. She joined us maybe six months ago. We talked about how she reached financial independence with rentals in something like two and a half years. It was really fast. And this time, you know, we’re going to talk a little bit more about that. But we’re going to talk some more, too, about international real estate investing. She and her husband own some property in the Dominican Republic and possibly elsewhere. By now. I don’t remember. But, you know, we’ll have her on to talk about it next week. And by the way, Kayla asked what was the website for turnkey properties and that is rootstock. There’s a link to it added in the comments here. And Brian Townsell said the moratorium stepping on landlords without payment. That is true. That is true. It’s been a tough time. There’s been no bailout for landlords. But it doesn’t make real estate a bad investment, although I will confess that it has made me reassess what role rental properties will play in my passive income portfolio for financial independence. Deni you and I have been doing more land investing recently and less rental investing because the land is virtually unregulated. So it’s so I have found it to be a much more investor-friendly space. But, that’s up to every single investor, how they what kind of strategy they want to use to invest. We’ve done some webinars on land investing. We’ve talked about it on the podcast few times, and we will certainly talk more about that in the future as well. So on that note, we’ll see you guys next Tuesday at 2:00 p.m. Eastern. Looking forward to having Becky Nova on the show. And we’ll see you then. Have a good weekend.
Deni Supplee: Absolutely. Thanks for joining us. Have a great week.
Brian Davis: Have a good one, guys.