Where is the REO Inventory

Well for those of you who don't know, REO stands for Real Estate Owned, or bank owned properties. As an REO Listing agent I have seen my inventory shrink during 2011, I used to receive several houses to list every month from different clients and now they are down to a handful and I have more houses waiting for foreclosures to be ratified in the courts and evictions than the ones I have actively listed.

It is easy to understand that it might work better this way, because it keeps the demand and supply balanced. My listings are moving quicker and selling to relative higher prices than they were last year. I believe that banks are controlling the inventory so the prices don't drop so much, etc. 

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Also everybody knows the popular term from last year robosigning, some states have created more obstacles for banks to foreclose on properties and even evict tenants, etc. I know in Maryland the banks have to contact the homeowner and offer the opportunity to apply for modifications, etc. I know some banks hired third party companies to make sure that usually real estate agents visit the homes and deliver documents, call the bank and put the homeowner on the phone, etc.

Today I read a good article that explains in more details why banks are doing this inventory control, not just to avoid property values to drop so much, put to make their books stronger and to manipulate data to their advantage.

Here is a link to the article  

It is hard to understand how a borrower can stay at a house for several years without paying mortgage, and getting away with that. Also banks are trying to sell their portfolio to investors rather than retail. And another idea that keeps resurfacing is the rental options.

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Comments

  • California is slower than slow.  In my tiny town of 30,000 we have 289 active listings in MLS and 50 are REO's that are sitting with no offers so there is no wonder why they are holding shadow in my area. There are also 286 foreclosure filings posted at the county recorders office in the last 90 days. I just read an article yesterday on Housingwire that showed over 1 million units being pushed in to 2012,  No jobs = no buyers so where is their incentive to release anything right now? Bank of America offed a large percentage of their Countrywide portfolio to Fannie Mae last week.  As for renting out foreclosures, can you say stupid?  Who will collect and process rents when they are paid, and process evictions when they are not?  Who will pay the property taxes, maintenance, make repairs, and rehab the property after the tenants trash them? Who will take the tenants calls in the middle of the night when there is no heat or the water heater or boiler blows up. Who is going to pay the insurance on all these units? Your tax dollars at work my friends!
  • Here in NJ the major banks just got approval to move forward with uncontested foreclosures. They have been unable to do so since December 2010. Got my first, new, REO listing this week. It's the first in 2011 after closing 65 last year. I'm curious to see how this is going to play out.
  • Billie, good point. All the groups are claiming low inventory. what's even more interesting is that I had an REO pre-listed and they reassigned to me again as a rental with a different company. The property will probably sell for 30k needs 40k worth of work. Called previous asset manager and informed him that nothing had changed since my last BPO the property is not habitable. Same thing to the new rental company and back. The pictures don't lie but I think we are starting to run with these rentals before we walk. As for pricing it defeats logic, not enough inventory but prices continue to decline
  • Inventory way down in S Florida. I know the banks are trying to control the inventory to keep prices up and profits up but now they are moving too slow. Buyers are getting frustrated by the lack of inventory and price bidding on what is available. Too little inventory is as bad as too much. As for renting these homes, let me ask a couple of questions. Who is going to pay when the A/C breaks down, the roof leaks, the appliances don't work??? If it's BofA or Chase, fine. If it is Fannie or Freddie then it's the taxpayers! It is a delaying tactic, not a solution. I have run into several REO listings lately that have tenants in them. Very hard to show.
  • Billie, FREE rent for as long as they will let them stay!

     

    There a news story going around that disturbs me greatly and that about about the Federal Govt getting into renting foreclosed inventory. They are claiming they have an excessive amount of inventory and cannot move it fast enough, so they want to get into the rental business!

     

    Last year I believe, Jesse wrote a blog about this very thing and how it's a major step towards a Socialist Govt conversion of our Country. If you think about what is really happening with inventory levels and the govt saying what they are, you might want to be afraid for your job! This is shaping up to be another private sector take over by the federal govt!

  • Jose, Every REO agent I know is saying the same thing, inventory is way down. I spoke with a foreclosure Attorney yesterday and he said that here in Connecticut as of July 1st, the defaulted homeowner has a minimum of 8 months before the foreclosure process can get started. I have a pre-list that the foreclosure was finalized 2/6/2011, and they have not started the eviction yet. This particular borrower is a mortgage originator, refused CFK in March because he knew how many delay he could cause. He will probably still be in the house in December. I am all for helping any homeowner retain their home through modifications, but once the foreclosure is completed what is the point of the delay?
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