As the number of REO properties continues to shrink, investors are looking for distressed inventory in different areas and looking at different opportunities to buy discounted real estate. One of those programs is the CWCOT (Claims without Conveyance of Title) that was designed to decrease the number of FHA properties in default through quick sales.
The program was developed to help servicers sell properties quickly at auction without having to convey them back to the U.S. Department of Housing and Urban Development. The program has been in effect since 1987, but received a crucial update in 2014 when HUD recognized that the properties needed to be discounted to be competitive.
Now, to expedite the sale of default properties, HUD is allowing bids that are below the total debt owed on the asset, which opens up a huge opportunity for investors. The amount of these mandatory discounts varies by state, but can be anywhere from 10% to 35% off the value of the property, and servicers can choose to discount them even more if they wish. The CWCOT program differs from an REO sale in some significant ways. For instance, properties are sold “as is” where REO properties could be remodeled.
Almost all of the major banks and servicers are now selling part of their FHA inventory through the CWCOT program and the percent of assets sold through this program is anticipated to increase substantially in the near future.
Through our networks Stonecrest was able to get into this market and will continue to acquire properties through this channel. We believe this will be extremely fruitful for our fund.
Our featured property this quarter is a 4-bedroom, 2.5-bathroom, 2,208sqft single family home that sits on a 1.13-acre lot. It is located at 1300 Little Meadow Road, Guilford, Connecticut.
Investment Stats (rounded):
- REO Purchase Price: $140,523
- Expenses: $44,026
- Sold Retail: $263,000
- Gross Profit: $75,451
|Performance Since Inception|
|Land Contracts Summary|
|Face Value of Notes||$896,698|
|Non-performing Notes Summary|
|Modified Notes Summary|