Why has the REO inventory Shrunk recently.

Real Estate Agent

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. 

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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Paul S. Henderson, REALTORĀ®, CRS
Fathom Realty Washington LLC - Tacoma, WA
South Puget Sound Washington Agent/Broker!

I enjoyed your insight on REO properties Jose. I also like the questions this post brings. 

Aug 11, 2011 07:46 AM #1
Victor Zuniga
Berkshire Hathaway Home Services California Properties - San Diego, CA

I've also talked to asset managers who are selling foreclosed properties in bulk to investors directly. Buyers might be in for a surprise awaiting that flood of foreclosed homes to hit the market.

Aug 11, 2011 08:17 AM #2
Jose Rivas
Nottingham, MD

Thanks Paul,  yes there are several questions.

Victor it seems that some banks are going that route, I think eventually they will hit the market, those hedgefunds will hire outsourcers to sell the inventory.

Aug 11, 2011 08:42 AM #3
Debbie Holmes
John L. Scott - Boise, ID
Gets the job done!

The REO inventory seems to be shrinking in Boise Idaho too....This year I got several first time home buyers into REO homes as a  buyers agent.


Aug 12, 2011 10:32 PM #4
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Jose Rivas

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