Small Business, Individual Real Estate Investors Are Key to the U.S. Housing Market's Recovery: An Open Letter from HomeVestors, America's #1 Home Buyer, to President Obama

Dear President Obama:

On August 10, 2011, the Federal Housing Finance Agency, the Treasury Department and the Department of Housing and Urban Development issued a call for input on the "Disposition of Real Estate Owned Properties" by government enterprises. The objective is "to help address current and future REO inventory" and "explore alternatives for maximizing value to taxpayers and increasing private investment in the housing market, including approaches that support rental and affordable housing needs."

President Obama, there are people who, given the right resources, can and will help solve the housing crisis. In fact, they're doing it already, with little or no risk to the taxpayer.

Who are these people?  Big institutions, including hedge funds, are not the answer. Why?

• Big institutions face the same challenge the federal government does. If they buy properties scattered all over the country, how are they going to manage them? Who is going to repair them? Who is going to rent them? The answer? They will simply find local real estate agents to handle the properties.  But, to make it profitable for the institutions, they will have to acquire properties at steep discounts. How does that "maximize value to the taxpayer"?  It doesn't.

So, who are the people already making great strides to solve the issue now?

The answer is the same answer that built this great country. The backbone of America is small businesses. The local business man or woman who cares about their country, but more importantly, lives in a community, takes pride in their community and works hard to make a living, helping that community remain stable if not thrive.

In this case, the small business is a real estate investor. Across this great land local people are investing in their local communities. They believe in the future of their cities. They appreciate the intrinsic value of residential real estate.  They believe that these same properties that are discounted today will be worth more in five years.

And, they are willing to invest in their communities to make sure that happens.

• They will invest their time
• They will invest their hard work in repairing and improving the properties
• They will invest their money because they believe that the value will increase

At HomeVestors, we are America's #1 Home Buyer. Our nationwide network of franchises, small independently owned and operated businesses, together have purchased more than 45,000 houses since 1996, many of them "ugly" and in need of repair. In fact, we were buying houses long before the current "crisis," and we never stopped buying them. Interest in real estate investing is higher than it has been in recent years as evidenced by the number of people currently requesting information about becoming a HomeVestors® franchisee!

How can the country aid small business real estate investors to achieve your objectives?

• The federal government can help assure that local real estate investors have sufficient access to capital.

Real estate investors want to buy government-owned properties. The problem is that local bankers have become so risk averse (in part because of increased capital requirements and other regulations) that they either fear or are prohibited from loaning any money for real estate purchases of any kind.  They won't even talk to many real estate investors.  This is unacceptable; the high volume of property inventory cannot sell without liquidity.

So critical is liquidity that at HomeVestors, we are developing a vehicle to fund the acquisition of rental properties by our franchisees. We are not just talking about a solution – we are implementing a solution.

• Focus on the local house, and the local investor, not big institutions.

No one knows a local market better than the local businesses. Look for solutions that empower the local investors.

• Separate housing assets into two groups:
  • Retail ready houses. There is no one in the country better at selling these houses than the local real estate agents. Let them do their job.  They will help the government clear the housing market of excess property inventory.
  • Houses in need of repair. Help provide the local real estate investor with the access to financing needed to buy these houses.  They know what's best for each property. They will fix properties as needed, then sell or rent them to local families needing affordable housing.

President Obama, small businesses are the backbone of this nation. Given the chance, a local real estate investor will:

• Hire local people to paint, carpet and repair the house, putting those people back to work!
• Improve our neighborhoods one house at a time. Instead of a boarded up empty house, this house can be an affordable home for a local family!
• Invest in the local community. Local investors live in the communities in which they do business.  They have a personal stake and pride in their local communities, and believe in the future of real estate as a long-term investment.

In summary, Mr. President, our solution has the benefit of being simple and having been tested … there is little risk to the federal government in helping small investors help the market recover, while the upside is tremendous: Local private investment in local communities and job creation to repair and rehabilitate houses, with affordable sale and rental housing produced as a result.

In contrast, reliance on big, national (or even global) investors including hedge funds, and complicated programs, are less likely to produce meaningful results, more likely to take longer to execute, and more likely to cost the government more money over time.  Isn't this one of the reasons why the housing crisis occurred in the first place?

Thank you for your consideration, President Obama.  We stand ready to shift our efforts into an even higher gear to help you solve the housing crisis.

Sincerely,

David L. Hicks and Kenneth Channell

Co-Presidents, HomeVestors of America