Will the Number of Foreclosures Increase In 2012?

A couple of months ago, a real estate investor who works the same market we do, told me he wished I’d never write or teach about foreclosures again.  He said all I was doing was creating more competition for him at the monthly foreclosure auction.

Over the years, folks have wondered why Kim and I host a monthly real estate investors meeting.  After all, by teaching folks how to be successful investors and landlords, we are creating competition for ourselves, right?

That’s one – small-minded – way to look at it.   Here’s another: Kim and I were on the hamster wheel working long hours at multiple jobs for most of our lives.  Investing in real estate changed that for us.  We want you – if you’re willing to learn and work your rear off – to have the opportunity to also get off the wheel that goes nowhere.

We want folks to be able to live life to its fullest and have the financial freedom to do WHAT they want, WHEN they want, WHERE they want.  Financial freedom comes when your capital assets are working for you instead of you working for your capital assets.  One great capital asset happens to be paid-for rental property. 

Let’s get back to foreclosures.  The other day, I got a call from Misty Williams; she writes for the Atlanta Journal-Constitution.  Misty was writing a column about the number of foreclosure decreasing in 2011, and whether that trend would continue in 2012.

Sadly, I told Misty that this year’s foreclosure numbers will increase – and increase by a good bit.

In 2011, lenders found themselves knee-deep in a quagmire.  Because of things like robo-signers, failing to record mortgage assignments, and not possessing the original Promissory Note, many lenders were forced by the courts and government to delay foreclosing on thousands of properties.  At the same time – due to title issues – lenders weren’t able to sell the properties they had already taken back. 

As 2012 starts, lenders find themselves saddled with a HUGE backlog of homes where the homeowner hasn’t made a mortgage payment in more than a year.  Combine that with the number of bank-owned homes lenders haven’t been allowed to sell, and you have a serious real estate problem.

As lenders’ issues get resolved in 2012, you’ll see the number of foreclosures begin to increase.  You’ll also see the number of bank-owned properties hitting the market go up as well.  The result will be a further slide of real estate values.  In other words – and I HATE saying this – the real estate market has yet to hit bottom…and it won’t hit bottom until the excess inventory is gone.  It’s a simple too much supply & not enough demand thing.

Where will folks find the best real estate deals in 2012?  The best deals will be found at foreclosure auctions, from realtors who specialize in selling bank-owned property and from real estate investors.

Is this a good time to buy investment real estate?  When you can buy a ten-year-old, three-bedroom, two-bath, all-brick home for less than half of what it costs to build, what do you think?

Bill & Kim Cook are a husband and wife real estate investing team. They live in Adairsville, Georgia and have been investing in real estate since 1995. They specialize in buying single-family homes, mobile homes and mobile home parks. They also run North Georgia REIA and teach folks how to successfully invest in real estate.