If you have been following our blog you know that the supply of quality properties in Detroit has been really low for the last year. I predicted that supply would eventually come back up after the foreclosure moratorium ended and when the tax credit ended. Normally I would be correct but what I didn’t anticipate was the effect the federal bailout was going to have on the banks liquidating foreclosed property.

If you drive around Detroit it is obvious by the number of vacant houses that there is a significant “ghost inventory” of foreclosed houses and a quick check of the MLS shows that the vast majority are unlisted.

Based on all of the information we have it looks like the federal government is backing the big banks so they can hold onto the foreclosed properties and release them slowly over time. This means that unless the government changes its support of the big banks, we are not going to see the REO’s inventory anywhere near what we saw in 2008.

That means that the good old days of just focusing on bank owned properties needs to change. For those that have been investing for several years you will remember what we use to have to do to get deals. If you are looking for deals, it’s time to go old school again. Start looking at probate deals, short sales, pre-foreclosure deals, and good old fashioned distressed sellers.

I must admit that even I got a little lazy looking for deals the last couple of years with all of the REO’s on the market. Like always, we must change with the times. And the times are definitely changing.

Jeremy Burgess