Bank Owned Property Inventory Dump

We are once again hearing the phrase “Shadow Inventory” being discussed in the media and it is causing some confusion. To some the definition of “Shadow Inventory” is some large pool of unsold real estate that the banks are sitting on that has already been foreclosed on. Others define “Shadow Inventory” as those properties that the banks have yet to foreclose on in which the homeowner is more than 60 days behind on their mortgage. There are a host of other definitions that combine both definitions and something in between or even beyond what I have described here.

The mere use of the word “shadow” allows for a very broad definition and also allows the user to be as vague as they so choose since the definition is so elusive. The fact is there is just no factual basis for its use and one has to wonder as to the motivation behind it all. I imagine we could come up with a host of reasons as to why this subject continues to resurface and keep everyone on edge.

One thing for sure is that the banks and those who service lienholders/investors do not want to hold on to real estate inventory/assets that they have foreclosed on any longer than they have to. There are a number of things that hold up the liquidation of these assets and slow down the overall process, and the most significant hold up us is physically acquiring the property back from the owner or tenant. In addition to this the banks have to ensure the Title is clear and in some cases there may be repairs and maintenance to address.

In fact many of these bank owned homes are sold in bulk packages and then bought up by single investors or groups of investors. They are in turn repaired or repackaged and then sold or “flipped” which then end up becoming traditional sales. This process alone has changed the way in which many properties return to the market and have also changed the perception of the entire “foreclosure” market.

For those properties that the banks are unable to sell in bulk are the ones that typically make it to the open market and are usually listed with a Realtor. Until there is an improvement in the labor market and in turn the overall economy, then we will continue to see foreclosures. The banks however, are in the banking business and although there may be some exceptions to the rule, you can be sure that they are not holding on to properties with the anticipation of flooding the market with new inventory.

If you are in a position to buy then I can think of no better time than now. Home prices are low, interest rates are low and people continue to listen to negative reports as to the real estate market. There are deals to be had – call me!!

Keep in the game:

Mike Southwick
530-363-8662
mikesouthwick@gmail.com

Written by:
Mike Southwick
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