Those doing short sale investing or who are real estate agents dealing with short sales must understand “Shadow Inventory” and what it’s going to mean for your future in real estate.
Some experts say that the shadow inventory doesn’t exist, or that it doesn’t pose a problem, while others insist that the shadow inventory will cause another real estate market crash.
I’ll cover exactly how shadow inventory will effect you and your business, whether you are short sale investing or doing short sales as a real estate agent, I’ll uncover the facts.
1. There are currently millions of homeowners who would like to sell, simply so they can relocate for better weather, be closer to family or similar reasons. Instead of selling, they’re waiting. Waiting for the market to change, so they can capture more profit when they sell. This is called “Shadow Inventory” because what would normally be listed on the market is what you might say “hiding” until it’s ready to come out. The problem arises because there will be a time when the media announce the “good market” and all of these people will want to sell at the same time. Can you say “over-supply”? This will drive housing prices down.
2. Lenders are not required to sell homes after they’ve foreclosed on them. They now own the home, and can do as they wish! this is an enormous issue, since there are currently 600,000 homes in the banks REO inventory. This is massive and will add to the homeowners above when everyone decides to sell at once!
3. There is an estimated 7 million homeowners currently in default in the US. this is massive beyond all measure, and will add to the 2 above. They will be trying to sell before losing their home to foreclosure, or simply adding to the banks’ inventory.
There is a solution. Real estate agents being aggressive and working with short sales, and people who are doing short sale investing hold the key. These two solutions will provide to be the saving grace for the nations failing real estate market. Normal sellers will not be able to compete with short sale pricing. If you’re not in the short sale markets, you need to be.
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