What are the banks waiting for?


#1

Hi folks,
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I’m an investor following a dozen zip codes in my area very closely. I’ve followed properties from shortsale, to auction, to REO the hard way without ForeclosureRadar. So I know what a wonderful tool this is.
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However, now that I have gained such visibility in to the REOs with ForeclosureRadar, I’ve got several questions I can’t figure out.? It seems only a very small portion of REOs end up on the MLS and get liquidated. What’s happening to the other REOs that closed several months ago with no aparent activity since?? What are the banks waiting for?? Are they having a hard time evidcting the tentants?
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It seems some REOs end up on the MLS almost the next day…? Sean?? care to comment?
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Thanks,
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John
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#2

I have suspicions about why this may be happening, but you are aboslutely right that a lot of REO property is not ending up listed promptly in the MLS. In fact one complaint that we plan to address in our next release is that we only show REO properties for 120 days, and they often aren’t listed until well after that. We had an agent complain the other day that we were missing a “brand new” REO property that was “just” listed – turned out it was sold at foreclosure auction over a year ago.


#3

Yes, just look at the numbers.? If you use the “Track” tool, you can see that at least in my county, Orange, there are about 20 or 30 houses that go back to the bank every day.? Many of those are not on the MLS.? I suppose one way to keep the price of houses up is to limit the supply - if the banks let loose this flood of REO homes, the market will go through the floor, right?? Plus, other homeowners who have little equity may find one morning that their mortgage is worth more than the house and decide to walk away…So Sean, what’s going to happen?? They can’t sit on these houses forever, can they?


#4

Now that most of our so called lenders are really just loan originators and loan servicers with the actual money coming from other parties we are really in uncharted territory. Utlimately these entities are in no position to own houses. With 10,000 more properties being taken back by lenders each month then they are able to sell, their inventories are clearly swelling. And states like CA have now passed laws allowing local governments to fine these lenders up to $1000 per DAY per property for failure to maintain them. Hopefully I’m wrong, but at some point I expect to see these lenders start to rush for the exits, not wanting to be last out. Such an event would put significant short term pressure on prices.


#5

Sean,
You are correct the lenders are exactly who they say they are - originators and servicers.? They are not property managers, listing agents, or investors.? It’s not a matter of “waiting”, it’s a matter of not having the correct infrastructure in place to handle the fallout.? I’ve reviewed not just the listings on the radar, but also gone to the bank/lenders’ own websites to view the “bank owned properties” - there is no doubt that there is back log where the influx of properties far out number what the loss mitigation department can process.


#6

Hi Sean. You mention that you have “suspicions” about why there are so many REOs that are not listed on the MLS. Can you share those suspicions with us, as to give us more insight into what’s going on here? The difference between the REO holdings vs. those listed on the MLS are significant. Finally, are you planning on showing REOs for more than 120 days?
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#7

You can view REO’s going back to September 2006 by checking “Include Historical Records” under the Foreclosure Details criteria. ? Some of the reasons that I see for REO’s not being listed: 1. Lenders simply can’t keep up with the volume. 2. They are afraid to list too many at one time as they don’t want to push values down. 3. They are hoping the market improves so they can sell them for more. 4. Better to leave a “$500k” house sitting on the books, then have a $300k sale and a $200k loss. 5. Difiiculties getting approvals from underlying investors to list and sell asset at a loss.