Foreclosed homes attract professional investors

As reported in the Los Angeles Times this morning, professional investors are  turning to foreclosed properties, seeking big profits once the homes are refirbished and "flipped".

These foreclosed homes, sold on the steps of the County Courthouses usually draw a small crowd of amateur investors seeking an investment they can buy with savings or maybe an equity line drawn on their primary home. 

Increasingly however professional investors, primarily private equity funds and groups of wealthy individuals have appeared on scene squeezing out the individual investor.  These professional investment groups have rushed in, partly because of sparse investment opportunities elsewhere.

"In crisis there's opportunity," declared Rick Hudson, president of investment firm Prosperity Group Real Estate in Irvine. "Right now there's huge opportunity with flipping houses."

Statewide, the number of homes sold at foreclosure auctions increased to 4,336 in April, up sharply from 884 in January 2009, according to research firm ForeclosureRadar. It declined slightly to 3,483 in July as banks offered fewer properties for sale. The auctions are now dominated by professional investors who shop with cash, elbowing out the smaller investor.

And, while it's widely reported that the housing market is all but dead, the foreclosure market turns that notion on it's ear.  Last year, Chase Merritt, a Newport Beach private equity fund management firm, notched strong returns from auction sales, according to Chad Horning, its chief executive. Chase Merritt bought a property in Costa Mesa in June 2009 for $315,500 and sold it 21/2 months later for $470,000. It bought a Mission Viejo home for $305,371 and sold it within two months for $375,000.

Chase Merritt launched its first foreclosure fund in May 2009 and has started two more funds since then. But "it's literally gone from a business that's very attractive, even lucrative, 12 to 18 months ago to something that almost doesn't make sense," Horning said.

Don't let foreclosure happen to you!  If you or someone you know has questions about how to stop foreclosure and stay in your home, don't hesitate!  Contact Michael Sebastian, Certified Properties in Foreclosure expert at http://www.michaelsebastianhomes.com/