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Old 10-12-2010, 10:33 PM
Marion Rhodes's Avatar
Marion Rhodes Marion Rhodes is offline
Join Date: Feb 2006
Location: Poconos
State: Pennsylvania
Professional Status: Certified General Appraiser
Posts: 11,270
Default REO Pullback impacts?

With the banks agreeing to stop foreclosure procedings and to stop selling their REO properties, has anybody's crystal ball ventured to guess what that will do to market values?

I was thinking an inital increase in prices due to the removal of the bottom of the barrel priced products, and that got me to wonder how long they will continue to hold properties. There are some here that they have been holding for more than 2 years now.

It was also my thiinking that if people who should be foreclosed, are not being foreclosed but rather are continuing to live in those homes, they probably aren't going to put any money into maintaining those homes. Marry that with the large shadow inventory that already exists, that nobody is taking care of and I was thinking that, even if they are not being marketed, all those homes are still going to drag the market down.

Anyone else have any thoughts?
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Old 10-12-2010, 10:56 PM
Lloyd Bonafide's Avatar
Lloyd Bonafide Lloyd Bonafide is offline
Join Date: Jan 2006
Location: Poway / San Diego
State: California
Professional Status: Certified Residential Appraiser
Posts: 4,785

It's sure going to affect sales numbers a lot. The sales market has been really dead in the past few months here, and this will only make things worse. Prices might stay up at unsupportable levels for a while, (which is probably the goal of this whole farce), but I think a lot of buyers are thinking that prices will be declining in the next year or two, and they might hold off on buying until more REOs get released.
Old 10-12-2010, 10:56 PM
biker4ever biker4ever is offline
Join Date: Nov 2009
State: Washington
Professional Status: Certified Residential Appraiser
Posts: 382

lots of Short sale comps.....
Old 10-12-2010, 10:56 PM
Denis DeSaix Denis DeSaix is offline
Join Date: May 2005
Location: Northern California
State: California
Professional Status: Certified General Appraiser
Posts: 15,179

I'm thinking that many markets have hit "bottom" because investors have stepped in and are buying at the floor; this creates some stability for the upper tranches.

If foreclosures are stalled, stopped or delayed, I think the investors will wait until that inventory hits the market rather than continuing to buy now.
So, much of what has created the floor (under my theory) will wait with the anticipation that the floor level will be dropping once the foreclosure spigot is re-opened.

I do agree with you that some will live effectively rent free and not do anything but the required maintenance.

This situation is a mess. Delaying the foreclosures is not the answer. I do understand that the process was not followed as it should be. There should be a penalty for that (against the banks/servicers) but there shouldn't be a reward to those in default because rewarding default penalizes everyone not in default.
Old 10-12-2010, 11:19 PM
Elliott's Avatar
Elliott Elliott is offline
Join Date: Apr 2002
Location: Pumpland
State: Oregon
Professional Status: Certified General Appraiser
Posts: 11,303

My $64 question is, so you don't or can't make your payments, or your upside
down, so who gets to renegotiate, who gets a short and who gets foreclosed on?
What is the criteria in this messed up, mixed up world of real estate?

If I knew who gets foreclosed on, then I'd know better how stopping foreclosures
is going to affect the great big real estate market. My guess is, the longer there
is the prospect of over-supply of homes on the market, the longer the market
will be stagnant or declining, and will continue to be messed up.
Old 10-12-2010, 11:39 PM
Riick's Avatar
Riick Riick is offline
Join Date: Aug 2007
Location: DuPont: "Better Living through Chemistry"
State: Delaware
Professional Status: Certified Residential Appraiser
Posts: 9,140

If I was trying to get a short sale done on the house I live in ((or invested in))
and suddenly realized that no forclosures were going to happen for an indeterminate period....
and that means ME as well as everybody else
Would I stop the short sale or keep it going???????
“If you would know who controls you, see who you may not criticize.” - Tacitus -Rome 96 A.D.
Old 10-12-2010, 11:51 PM
Tom Woolford Tom Woolford is offline
Join Date: Nov 2005
Location: Nature Coast
State: Florida
Professional Status: Certified Residential Appraiser
Posts: 5,450

Immediate impact is that a whole bunch of my business will dry up.
Some mornings, its just not worth chewing through the restraints.
Old 10-13-2010, 12:15 AM
CGgonnabee's Avatar
CGgonnabee CGgonnabee is offline
Join Date: Apr 2008
State: Virginia
Professional Status: Certified General Appraiser
Posts: 555

A good realtor friend had two scheduled closings within the next two weeks for REO's...not gonna happen now.

So begins the domino doesn't get commissions, realtor doesn't go shopping. If this keeps up, realtor might not make mortgage payment. Oh and then there were the "almost homeowners" that won't be buying new furniture, won't be buying new curtains and blinds...oh yeah...won't buy the new lawnmower, won't buy the washer and dryer that they finally have space for, won't buy paint for that little kid's bedroom that is green that should be pink...

Hmm...there is now no need for a home inspection or an appraisal....and the list just grows of things that won't happen because a sale is stalled.

This is a huge mess.
Old 10-13-2010, 02:47 AM
Marion Rhodes's Avatar
Marion Rhodes Marion Rhodes is offline
Join Date: Feb 2006
Location: Poconos
State: Pennsylvania
Professional Status: Certified General Appraiser
Posts: 11,270

So here is my immediate problem.

Working on an appraisal for refinance. Have got 5 very similar to the subject listed for sale. 4 are REO and one is owner occupied. All the REO listings are $40,000 below the one and only owner occupied listing. Now, there are 6 sales, 3 REO, 1 short sale and 2 owner occupied, my spread is $32,000 on sale prices.

So if REOs will not be a factor in the market moving foward for an undetermined length of time, wouldn't it be wrong to heavily weight those REOs that sold? Especially if it takes the banks a year to decide to market their holdings?

And, if the REOs are pulled from the market. I have one active listing comp.

This is going to be big and ugly really quick.

I think the market will stall out very quickly. Especially with winter coming and the price of gas going up again.

Old 10-13-2010, 07:27 AM
redfish's Avatar
redfish redfish is offline
Join Date: Sep 2007
State: Michigan
Professional Status: Certified Residential Appraiser
Posts: 2,300

Might as well invest heavily in the banks stopping foreclosure---their books will look real good for atleast the next quarter.

This is perfect timing for all the HUD REOs floating around out there stalled by the new M&M contract award period.
Who else is looking at your appraisal?
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