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Shadow Inventory in the DC Metro Area

Home values in the DC metro area have been moderately suppressed this year due to “shadow inventory.”  Shadow inventory is the foreclosure and REO inventory that banks are holding in their pipeline.  Many consumers, and some real estate professionals, fear that the real estate market will be flooded with these properties, causing the value of homes in the DC area to decrease.
There are a few reasons why this issue does not pose as great a risk as some think.  While recent federal guidelines placed on major banks have caused the foreclosure process to be sped up, the process is still quite involved – especially in judicial foreclosure states such as Virginia and Maryland.
In a judicial foreclosure the lender has to prove that the borrower is in default, and that the lender has exhausted all attempts to resolve this debt with the borrower.  Only after documented evidence is provided can a lender file a pending lawsuit and receive court approval to initiate foreclosure proceedings.
This obviously addresses the processing time for new foreclosures, so let’s address the issue of foreclosures in the DC area that are already being processed in the system. 
Banks are anxious to unload these properties, but ... more

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