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THE Big Question: Where Are All The REOs..When Will The Surge Hit?

Real Estate Agent with Realty Executives

Fabulous post! 

Yep, you can darn sure believe it.  I believe our market (Riverside County, CA darling) has definitely not hit bottom despite some chatter about prices rebounding slightly. 

Original content by Tim and Julie Harris

If there is a question we get more often than any other it has to be….

Where are all the REOs…..I see vacant homes everywhere..yet, only a small fraction are listed and for sale…what gives..?”

I understand why we get this question….

After all Harris Real Estate University is the nation’s largest online real estate university. The HREU RSD (REO Specialist Designation) has become one of the preferred designations for many Asset Management companies….in other words, they look for RSD Agents to list their properties.

In today’s post we will answer the question, “where are all the REO’s”….and provide you with a clear window into what is coming next….

Agents, you need to be very clear about what you can do now to become a REO Listing Agent. Understand, in NO WAY is it too late for you to become a REO listing agent.

After you have read this post you will want to take the next step…this Thursday April 15th we are providing a FREE 90 Minute teleconference (or webinar) where you will hear directly from agents who ARE listing REOs (and making big bucks from doing BPOs).

Watch the FREE Agent REO Secrets video and grab your FREE How-To list REOs book….when you do we will also invite you to this weeks teleconference. <—Go here to watch the free video, grab the How-To list REOs book…and you will be invited to this weeks teleconference.

OK, lets get started by looking at the real numbers and facts about REOs.

This is from Real Estate Economy Watch:

Despite a slight seasonal improvement over last month, mortgage delinquencies still hover near record highs, 21 percent above a year ago. One of ten mortgages are delinquent as of the end of February and new delinquencies continue to run at record rates.

The total number of non-current first-lien mortgages and REO properties is now more than 7.9 million loans. Furthermore, the percentage of new problem loans is also at its highest level in five years. More than 1.1 million loans that were current at the beginning of January 2010 were already at least 30 days delinquent or in foreclosure by February 2010 month-end.

That’s the frightening news from Lender Processing Services latest Mortgage Monitor Report, which also reported that the nation’s foreclosure inventories also reached record highs. February’s foreclosure rate of 3.31 percent represented a 51.1 percent year-over-year increase.

Other key results from LPS’ report:

• Total U.S. loan delinquency rate: 10.2 percent

• Total U.S. foreclosure inventory rate: 3.3 percent

• Total U.S. non-current* loan rate: 13.5 percent

• States with most non-current loans: Florida, Nevada, Arizona, Mississippi, California, New Jersey, Georgia, Illinois, Ohio and Indiana.

• States with fewest non-current loans: North Dakota, South Dakota, Alaska, Wyoming, Nebraska, Montana, Vermont, Colorado, Washington and Minnesota.

Non-current totals combine foreclosures and delinquencies as a percent of active loans in that state. Totals based on LPS Applied Analytics’ loan-level database of mortgage assets.

Here is a great video from CNBC:

Next, a report from sun-sentenial:

Short sales and foreclosures accounted for 29 percent of all U.S. home sales in January, First American CoreLogic says.

Riverside, Calif., led the nation’s top 25 markets with so-called distressed sales accounting for 62 percent of the transactions. Las Vegas (59 percent) and Sacramento (58) were the next worst. Fort Lauderdale was at 42 percent and Miami was at 32 percent, although those numbers are down compared with a year ago.

Although Florida and foreclosures seemingly are synonymous, only two Florida markets — Orlando and Cape Coral — cracked the top 10 for distressed sales. CoreLogic, a California research firm, says the most likely reason is that foreclosure cases take longer to process in the Sunshine State than in California, Arizona or Nevada.

What do you think about the number of distressed sales in South Florida?

And now to the heart of matter….Where are all the REOs and when will the banks FINALLY RELEASE them?

Rick Sharga from RealtyTrac:

Certain things in life are simply meant to be mysteries. There are age-old philosophical questions that have kept philosophers busy for millennia: What is the sound of one hand clapping? If a tree falls in the forest and no one is there, does it still make a sound? Other mysteries hang heavy with intrigue: What really happened to Amelia Earhart? And who really kidnapped the Lindbergh baby? And still others simply defy logic: If Denny’s is open 24 hours a day, 365 days a year, why are there locks on the doors?

Now we can add another question to the list of ongoing mysteries: With foreclosure activity breaking records nearly every month, where are all the REOs?

It’s a fair question. In normal market situations, a bank will repossess a home and usually process it through to a listing agent to put on the MLS within 30 days. In a relatively short period of time, virtually every marketable REO property finds itself listed for sale on the local MLS. Today, that’s simply not the case; it’s likely that between 450,000 and 500,000 properties repossessed over the past year are still not on the market. And with buyers hungry for housing bargains, and agents and brokers champing at the bit ready to sell the properties, it begs for a reasonable answer.

Lenders and servicers admit that it’s taking longer to process REOs than it has in the past, and they offer a number of legitimate reasons:

  1. -Many of the properties have title issues that need to be resolved
  2. -Many of the properties are in states of utter disrepair
  3. -A number of states have strict redemption rights periods, which prevents the lender from reselling the property
  4. -A few states have extended the length of eviction proceedings
  5. -The sheer volume of REO activity has created a “pig in the python” phenomena, (to put this in perspective, there will be roughly four times the number of REOs this year as in the last “normal” year, 2005)

What else could be slowing things down? A popular theory is that many banks are holding the properties off the market in order to defer losses. There is some accounting logic to this theory, as in most cases banks aren’t required to adjust asset prices until the actual resale of the property. Another idea is that the industry is holding back the inventory to create leverage with the government in order to force the creation of a “toxic bank” or RTC-like entity that would buy the distressed assets at 50 to 60 cents on the dollar rather than the 30 to 35 cents available on the market today. This theory suggests that, seeing the threat of a massive inventory of distressed homes being released all at once, the government would “blink” rather than risk another housing market meltdown.

I will add…the various government programs have served to delay the inevitable. How many months (years?) are added to the foreclosure process now…If someone missed payment..maybe missed 1 – 2 years of payments…..applies for HAMP (Loan Mod)…then, when that doesn’t work out…lists their home as a short sale…..(if they don’t list it with an agent who knows how to sell short sales)….off to foreclosure. How long would that whole protracted process take…years…and years.

Whatever the reason — process issues or conspiracies — we’re going to continue to see record-breaking numbers of REOs for at least the next year, and will all be watching to see when these sought-after homes finally make their way to the market.

OK, get the picture yet? We have a long way to go…literally millions of bank owned homes that must be sold. Now, the question that I have for you…are you ready to become a REO Listing Agent? Its NOT TOO LATE for you. Watch the FREE Agent REO Secrets video and download your FREE How-To List REOs Book.

For those of you who are thinking that the Great Housing Crash is over…and a housing boom will soon return…
Another CNBC Video featuring Yale Shiller (of Case/ Shiller Housing Index fame)

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