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inna ivchenko, Real Estate Pro in Calabasas, CA

I wonder why we dont see more REO inventory?

Asked by inna ivchenko, Calabasas, CA Mon Jan 7, 2013

Really, there is very few.....I don't believe they don't have houses to sell. Holidays are over. They do auctions every day. Everything gets multiples. Why or what banks are waiting for?

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Hi Inna,

I agree with everyone below that answered....but, I want to add one little 'twist' to this equation of 'shadow inventory'. There are huge investor groups, pension funds, hedge funds, foreign funds/individuals that are buying houses/condos/real estate in BULK. They are sometimes buying hundreds of homes at a time, all for long-term investment, knowing the market has already turned for the better.

It's happening mostly in the states where the housing meltdown was deepest.

Scott Miller
Realty Associates
Boca Raton-Miami Beach
2 votes Thank Flag Link Tue Jan 8, 2013
Bulk REOs and notes always were and always will be . I worked with bulk REOs and notes few years ago, it is not so easy to get those packages any more. Competition:) Yet, I know well what they do after they buy those bulk packages. I know my area very well. There are not a lot of vacant houses, few rents and very few flips. I also worked with a company who help investors buy on auctions, that business is not as good as it was 2+ years ago. Most investors hunt SS these days or fixers. RE is my full time job, I watch carefully all sales and auctions, receive updates from all major REO sellers....situation is different.....something is going on.
Flag Tue Jan 8, 2013
In my opinion they are waiting for prices to rise and for competition to become more fierce so they can get closer to market value for these homes as well as for short sales. The problem is this, the banks are so completely non-functional that buyers don't want to work with them at any price. Their valuations are NOT based on recent sales, but on the amount they want to recover, their staff is badly trained, their processes and procedures are antiquated and they have absolutely NO ability or desire to negotiate in good faith. It has actually gotten worse again recently. I have had three short sales go sour, not because of the BANK, but because of Fannie Mae and the FHA! I believe there is a law against practicing real estate without a license, we ought to enforce it against Banks and GSEs. LOL! THEN we might be able to get these properties sold!
2 votes Thank Flag Link Tue Jan 8, 2013
Did you see this article?
Data: Housing inventory has decreased by 49% in Los Angeles and 53% in San Diego this summer, compared to the same period one year ago. This lack of listings is causing bidding wars.

Result: Sellers have received high multiples of bids, 50 or more on a single property, lifting home sales volume and prices in the second quarter (Q2) of 2012. All this action puts sellers in the most competitive position they’ve held since the dead cat bounce of late 2009 and early 2010 during the tax credit episode, which stimulated a homebuying surge and resulted in momentum driven speculation.

Thus, a huge level of inventory displacement has taken place, but is it that moment of instant, long-term change?

There has been conversation that this shrinkage in the MLS inventory will contribute to a reset of the housing cycle, as rising home prices will result in increased home equityand reduced negative equity across the board. Thus, more homeowners will be able to conventionally sell their homes without them or the mortgage lender taking a loss.''

California Article on lower inventory, higher prices, Shadow

‎10-09-2012 01:13 PM
1 vote Thank Flag Link Thu Jan 10, 2013
This came out in today's news, exactly what I mentioned the other day, fyi:…

Scott Miller
Realty Associates
Boca Raton-Miami Beach
1 vote Thank Flag Link Wed Jan 9, 2013
thanks Scott!
Flag Wed Jan 9, 2013
I also want to ad that investor groups are buying large numbers of REO's, doing the fix and least here in San Diego. Because they are getting purchased at auction, fewer of them end up on the MLS.
1 vote Thank Flag Link Tue Jan 8, 2013
The whole "shadow inventory" thing makes little sense to me. I know the banks are holding on to properties awaiting higher prices, but at the same time they are failing to maintain those properties adequately, so by the time they get them to market, they've lost significant value to the damage caused by inadequate maintenance. It's a rare thing to walk into an REO that doesn't stink of mold, and that is no selling point for most buyers!
1 vote Thank Flag Link Tue Jan 8, 2013

Are lenders really sitting on a pile of REO properties that it's waiting to do something with? I think not....sure there are homes that are in the pipeline that will continue to exist for a very long time but banks are taking care of their inventory by other means.

First, they are finally accepting the "short sale" process as a viable solution to the distressed home issue. This adjustment has made a serious dent in the forclosure inventory.

Secondly, they are using other creative means by which to erase homes from the distresses market that include selling large blocks of these properties to investor groups. This initiative usually removes these REO destined properties from the distressed property roles before they are foreclosed on.

Additionally, banks are also now using serious means by which to intervene on behalf of the financially distressed home owner. Unfortunate for so many thousands earlier on in the economic melt down, lenders turned their backs on people that were in financial trouble....the results of which we are still dealing with. This new position is also causing a decrease in the now shrinking numbers.

For those that are waiting for this HUGE wave of REO homes resulting from the release of the "shadow inventory" the wait may never result in anything of substance.


0 votes Thank Flag Link Thu Jan 10, 2013
Hi Inna,

low inventory increases demand instead of flooding the market. I read an article that says there is a huge REO shadow inventory. I guess we will have to wait to see.
0 votes Thank Flag Link Thu Jan 10, 2013
Hi Inna,
I posted a blog about this just a few days ago. According to Corelogic (who tracks REO properties), the shadow inventory is shrinking due to investors buying up properties.

Here is the link to the article:…

Best wishes!

Laura Feghali
Prudential Connecticut Realty
0 votes Thank Flag Link Wed Jan 9, 2013
Thumbs up to Cindy as well. Cindy, I see you're in SD. If you want in on my new little niche email me at or call me at 760 815-6977. I don't want to discuss it on a open RE thread.
0 votes Thank Flag Link Tue Jan 8, 2013
Thumbs Up to Scott Miller he is spot on. The headline and link below may clear the air a bit on this question.

"Foreclosure Bulk Sales Program Allows Banks and Hedge Funds to Buy Low After Selling High"…

There really isn't much "SHADOW INVENTORY" left out there worth buying unless you want some downtown Detroit dirt which is presently worthless. The fast and furious fix and flip feeding frenzy is history. It's time to create a new shtik. I know I sure have and it's working.
0 votes Thank Flag Link Tue Jan 8, 2013
The banks aren't waiting for anything. They just want to get the most out of their non-performing assets. They've carefully managed to create a tight housing market over the past 3-4 years and are finally seeing rapidly rising bids. Why would they want to wreck that by flooding the market with distressed inventory?
Web Reference:
0 votes Thank Flag Link Tue Jan 8, 2013
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