Experts differ on their predictions in regards to what 2011 holds for the nation's real estate market. Despite their confusion it is certain that private homeowners will be in head to head competition with lenders trying to unload a surplus of real estate owned (REO) properties. Although the prospect of competing against the big boys stash of 'shadow inventory' may be intimidating for private sellers, the reality is that individually sold homes are currently considered to be some of the most attractive type of home sales transactions to prospective buyers.
The nation's real estate market is brimming with a surplus of unsold housing inventory. More than 6.3 million homes were unsold as of November 2010 (CoreLogic). According to the "...consumer, financial and property information and business services" agency, that total number showed a 10 percent increase in vacant homes during a one year period.
The source estimates that the number represents nearly two years worth of available inventory for interested buyers and private homes represent a small fraction of the equation. Selective consumers looking for the easiest and smoothest type of home sales transactions are weeding through a sea of foreclosed property providing private sellers with a much-needed edge.
Advantages of Private Home Sales
In a buyers market, home shoppers have a large variety of sale options to choose from including REO, short sales and individually owned homes. While many consumers may favor buying homes that are financially distressed as a way to benefit on price reductions of up to 32 percent (as compared with non-foreclosed homes), those discounts often require extra time and nerves of steel because of the stress involved.
In order to avoid any mishaps associated with those varieties of home sales, buyers may find buying via a private sale more attractive. By opting to partake in a private sales transaction home shoppers will have direct access to the source for home information. A clear title and price negotiations in real time are part of the package. Additionally, chances are that the sellers have discounted the homes in order to compete with the shadow inventory in the marketplace. In July of 2010, 25 percent of private home sellers reported discounted their listing prices out of necessity. Analysis of housing values in America's 50 largest cities detected that a price reduction of approximately 10 percent off of fair market value was the norm. At that time, the total estimated price reductions fueled by both private sellers and banks totaled $30.1 billion (Trulia.com).
Complications Associated with REO and Short Sales
The recently discovered 'robo-signer' scandal, implicating that the nation's largest lenders automated legal procedures in regards to foreclosure, have caused thousands of homeowners to erroneously lose their homes. While the government and lenders are still trying to unravel the mess, many of those fraudulently claimed homes are being sold as REOs. While the paperwork may initially check out, home shoppers are now learning the hard way that despite assurances from the banks, the titles may not be clear and may cause complications down the line. Mortgage Marvel defines a title as "A legal written instrument evidencing a person's lawful possession of a property," and for some properties, legal ownership from the lender has yet to be proved.
Short sales have also grown in popularity as many financially distressed homeowners on the verge of mortgage default opt to work with their banks in order to sell their homes for less money than is owned to the lender as a way to avoid foreclosure. Consumers should note that 'short' refers to reflect that home sales price is less than the actual amount due to the lender. Banks must approve all bids on short sales and home buyers may have to wait up to six months just to find out if their offer is being accepted. It is not uncommon for buyers to patiently abide by the rules only to have the bank reject their offer during the final hour.
What is Shadow Inventory?
Shadow inventory is defined as the vacant home statistics created by a combination of foreclosure and private sellers who opted to delay selling their homes until market conditions improved. CoreLogic estimates that in a healthy real estate market it is normal that there is a trail of six to seven months worth of shadow inventory and the current real estate market is flooded with nearly three times the rate considered to be the norm.
It is this abundance of inventory that has forced all sellers to lower their asking prices and have tilted the home buying equation into the favor of the buyer. For those who have the financial means, the time to buy a home is now as aside from the bargains, mortgage rates are at historic lows. Potential borrowers should start their mortgage quest at Mortgage Marvel. Mortgage Marvel is the industry's premiere mortgage rate origination tool that will empower consumers to find the best mortgage rates possible and eliminate the need for a broker middleman.
