OfflineHave you heard the term "shadow inventory" recently? Shadow inventory pertains to houses that are falling into a "no man's land" after banks foreclose on them.
Here's the scoop: The nation's banks have not been staffed adequately to deal with the vast number of foreclosures throughout the country. Even as the banks ramp up their REO (real-estate owned) departments, they're still falling behind. As a result, it's believed that more than half a million properties are falling by the wayside.
That's the shadow inventory.
According to a recent San Francisco Chronicle report, there are an estimated 600,000 foreclosed homes of this sort right now. The banks aren't getting them ready for sale and they're certainly not maintaining them in any way.
Neighborhoods suffer greatly from shadow inventory. Unused houses tend to attract vandals, squatters and a host of other troubles.
But as an investor, shadow inventory is a source of great opportunity. As these houses sit and go unmaintained, there will be many that have nothing fundamentally wrong with them; they just simply look and smell awful. That means no one else wants them and you can swoop in to steal a deal.
On another note, I believes that until the banks come to terms with their shadow inventory, we can not truly call a bottom in the real-estate markets around the country.
Meanwhile, a recent study analyzed foreclosures in 4 states and found that 70% of them were not showing up in the MLS. Either they've gone into the shadow inventory or the banks put them up for sale as REO but without any agent representation in the MLS.
So how can you tap into shadow inventory as a first-time homebuyer or an investor? Go to the websites of individual banks and look for a link to their listings. You used to have to hunt around for this kind of info, but now you'll usually find it linked directly on their homepage.
This gives you the ability to potentially ferret out a bargain before others get it through an agent and the MLS.
Does that mean you don't use an agent? No. If you a hire a buyer's agent, you need to have a written agreement stating that they only represent you on properties they show you. You don't want a blanket agreement where you owe them commission on any property you buy -- even if they have nothing to do with locating it.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125
Yes, Craig - these are all valid and useful points. However, when I was working for a REO broker in MA last year (all REOs - no short sales), my broker was working with over 12 lenders who gave him their properties to list.
One way these properties wind up as "shadow inventory" is because there can be several months lag time between the time the broker signs the listing agreement with the bank due to many reasons:
the fire department has to inspect before they can be shown;
the broker and/or lender hires people to clean the properties which can just be in horrible, horrible shape as Craig pointed out and the cleaners haven't gotten there yet;
broker has to hire handyman to make property showable, i.e., the front porch is deteriorating and no one wants a buyer to hurt himself;
properties have to be "winterized" or "dewinterized" meaning all fluids are drained from all pipes so they don't expand, freeze and crack; and
on and on and on. There are many things to do to ramp up a lot of the really rickety properties.
You should search online for lender's brokers in your state. That's all these broker sell - they're not selling normal properties - just REOs. A bank is one place, but a broker like the one I worked for has more than 1 lender he's selling properties for.
Good Luck, All!
JennyInMalibu
Thanks for sharing this info. Just shows us how many awesome deals are out there, all we have to do is research and we will find what we are looking for and can steal those deals.
and Jenny, how are you??????? Longgg time no talk, how has your investing been going in California?
This train, Dreams will not be thwarted
This train, Faith will be rewarded
Big wheel roll through fields where sunlight streams
Meet me in the Land Of Hope And Dreams
Bruce Springsteen
Its amazing to see how many homes are out there and we can get lots of great deal all over the country. Time for all of us to get our work done ! Thanks for the great information.
Paul
I was researching a REO in my area online-the online property records. I copied the name of the lender ex Fannie Mae and enter it into the Name search- the inventory was amazing! Half of the homes are not even advertise! I also found out that on the MLS a reo might appear as though its recent when in reality the house was possesed by the bank back in December. So guys go online look up a reo find the lenders name like Fannie Mae and look for thier properties under THIER NAME not the address. I am so overwhelmed by the number of properties, that I have to really focus on the ones I know are worth more than they are advertised for in my area. Anybody used a land trust to buy REOs?
>>>>NEVER give up, and know that the SKY is the LIMIT. We are OURSELVES worst enemy<<<
Hello cmitchell,
Reading your post i realize,I am dealng with people like me. I always was the one to support the idea of...Common good!This Real estate investing,What is good for you...Is also good for me.If i do not buy the house...Someone will!
I hate to say it; It is the game of life-Best wishes too everybody.
Thank-you cmitchell/coach, For reminding me of the score and great post!!!
Invest in yourself!