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Big Supply of Dallas Bank Owned Properties, But Ways to Buy Are Limited

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By : Allana Castro    99 or more times read
A huge supply of distressed homes and Dallas bank owned properties are available to investors and all types of homebuyers right now, but these buyers have revealed that finding financing is very difficult. Investors stated that it is very hard for them to take advantage of the cheap homes being sold in the Dallas-Fort Worth area because majority of lenders are not willing to issue loans.

According to real property investors, they have the cash and they have good credit histories, but they are still finding it difficult to buy bank owned properties in Texas due to difficulties in securing financing. One investor revealed that he applied for financing help with more than ten lenders, but all of them turned his application down.

Potential buyers revealed that in cases wherein they are trying to purchase commercial or apartment buildings, lenders are reluctant to help with the financing since most of these properties are only 70% occupied. Some buyers also stated that when they tried to purchase bank owned repos and tried to secure financing, banks would often want them to become customers of the bank first. In other instances, lenders would offer a contract with an interest rate running between 14 and 18%, a rate that is considered too high even among industry-savvy investors.

Judging by city housing trends, buyers of residential Dallas bank owned properties might even have an easier time securing loans than those who are trying to purchase commercial and multi-family properties. According to the Mortgage Bankers Association, origination volumes for these two types of structures have decreased by 46% in 2009. Multifamily lending deals backed by Freddie Mac also declined in 2009 by 24%, while those supported by Fannie Mae declined by 32% in the same year.

To take advantage of the available cheap distress residences and bank owned houses for sale in the city, some investors have recommended going against the common trend. One property investor suggested finding properties that are under-managed and to invest on their turnaround. Other buyers use the 1031 Exchange when purchasing properties. This method involves selling properties and investing in others to defer taxes.

Some buyers opt to purchase rundown apartment buildings and renovate them to increase the occupancy rate, while others prefer vacant, abandoned homes that not a lot of investors will give a second look. Such properties, according to buyers, are offered at very low prices and would not require a lot of capital to get renovated.

An earlier forecast report from real property company Marcus and Millichap had stated that in 2010, multifamily properties in Dallas-Fort Worth will attract more local buyers, while owners of properties who came from outside Texas would start leaving. The company also predicted that properties foreclosed by lenders and Class B structures will be the best-selling real estate in the area.

So far though, this prediction has not fully happened because investors and home buyers are finding it hard to purchase distress homes and Dallas bank owned properties due to lack of financing. Some investors, however, are trying to get around the problem of financing by opting for properties that require some renovations which are a lot cheaper and do not require too much capital.

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