As we drive around our county (Mason WA) we see suspicious houses that are not on the market, but are empty and have those ubiquitous 8 x 11 papers posted either on doors or in windows. You can tell they are foreclosures, but they are not listed anywhere. We know these are bank owned houses that are being held back for some future time. We have an awareness that these houses are going to keep seeping into the market by dribs and drabs for the foreseeable future and this is not pleasant knowledge. I read an article recently that claims these homes are going to take “nearly three years to clear at the current sales rate.” The impact of these REO’s on housing prices will be felt for years to come.
We also hear rumors that people are living in homes that are in foreclosure and delaying moving out for sometimes over a year, until they are finally evicted. No sense for them to move out until they have to move out. So there are more homes in this shadow inventory than anyone can really know about. It is sad, and pointless in so many ways. For one thing, when a house finally does come on the market it is often sold for less than what the previous owners owed on it. I cannot help but wonder what it is about banks that instead of negotiating with the owners and finding a way to lower interest rates, or doing a loan modification so the owners can stay in their homes, the banks prefer to repossess the home and evict the owners, and then go through the hassle of trying to sell it. In the meantime, the people being evicted often are in such emotional pain and distress that they lash out, and the only way they can lash out is to hurt the house.
I’m sure that other real estate professionals share our experience of showing REO’s that have holes punched in walls, destruction by pets locked in rooms, and other signs of emotional distress. Sometimes every appliance, light bulb and fixture that can be removed has been removed. As I show these houses I can almost hear the cries of their former occupants, who didn’t want to leave. While the new buyer may be getting a very good deal, I do find myself thinking of the raw deal the previous owners were given by their lender. This is the one area of our business that I have very mixed feelings about.
Tags: foreclosures, impact of these REO's, loan modification, shadow inventory
