“But I Want To Look At THAT Bank Owned Home!”
April 13th, 2009 . by Jon ModeneI do hear this.
Probably at least once per week. Maybe more.
The buyer calls me or emails me and has the address of a specific house that is REO (“real estate owned” aka bank owned) and wants to see/buy said house.
But the problem is . . . THIS house is not for sale yet.
It is bank owned. But NOT for sale!
It is part of the “Shadow Inventory”.
“We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market,” said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. “California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You’d have further depreciation and carnage.” (San Francisco Chronicle)
Many people cannot understand why it is not for sale.
There are many reasons.
1. The foreclosure process may not be completed.
2. The former home owner may still be occupying the house.
3. A tenant may be in the house.
4. The home is being appraised/prepared for market.
5. The lender is simply overwhelmed and CAN’T get it on the market.
6. The lender is not willing to sell it – so that it does not have to be written off as bad debt on their balance sheet.
And amazingly the most common reason is that the bank is simply not going to put it on the market right now.
Which seems to make no sense.
But if ALL the REO homes hit the market right now . . . their values would be very depressed. So it makes financial sense for banks to parse them out “slowly” or at lease more slowly then they can be marketed.
And think about this – up until this year, in Perrysburg, we have MAINLY been dealing with “Alt-A” and Sub-prime foreclosed loans.
But there is a giant “clot” of OTHER types of bad loans/foreclosures coming right for us.
Look at this chart:
It is a forecast of the future REO inventory.
And it is a sobering picture.
