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Friday, October 5, 2012

Bank Owned Homes Evaporate From Utah Market



I have been sifting through the market today and have found some interesting changes occurring.  Just a year ago, banks were fire-selling REO property and investors were swooping in to clean up the inventory.

Today, the inventory of bank owned property appears to be scarce.  Also, the banks that do have REO homes for sale have made it increasingly difficult for investors to participate in the market.

For instance, lets review some "Agent's Remarks" as found on the MLS.

Here is an example of an REO in Roy:

"Seller only accepts full price offers only, no BCC, 10% EMD with cash offers, Property is being sold subject to 24 CRF 206.125. Mold remediation needed, All EMD with Sellers Title company"

Now that is enticing.  It is no wonder the home has been on the market for 5 months with no accepted offers.

Another agent has a bank owned home for sale in Farmington with this wild Agent Remark:

" NO LOW BALL OFFERS PLEASE! 203K OR HOMEPATH RENOVATION MORTGAGE RECOMMENDED!! Showing desk does NOT have any information regarding offers received. Please email ******@****.com for offer status. Offers must include 1% EM or 10% on cash offers (must be deposited into sellers title co @ time of acceptance), pre-approval letter/proof of funds less than 30 days old. The seller has directed that all offers on this listing be made using the HomePath Online Offer system at the HomePath website www.homepath.com. All owner occupant offers will require owner/occ cert from listing office. Please be advised Fannie Mae does NOT accept electronic signatures. IN ADDITION: please go to https://*******.com -Near the bottom click on "Search Properties". Search by listing agent. Enter "****", choose "Utah" from the state drop down box, and click on "search". Locate the correct property (search house number) and click on "make an offer". Do NOT forget to upload the Pre-Approval (or POF), REPC, Fannie Mae Addendum, and Owner Occupant Certification (if applicable). Sold as-is, NO SELLER DISCLOSURES! Due diligence deadline is 10 calendar days from verbal acceptance. Deed restriction will apply to investors: cannot sell property for 3 months for more than 120% of sales price.  More info on www.HomePath.com. MUST REVIEW ALL MLS ATTACHMENTS PRIOR TO SUBMITTING OFFERS. Sold as-is. Buyer to verify all information."

Oh beautiful...deed restrictions, stiff earnest money requirements, and a convoluted system to submit an offer to boot!  The remarks should simply say NO INVESTORS!

An answer to why this is happening comes when we look at the inventory figures of REO homes in relation to the rest of the market.  In Weber County, 452 bank owned homes sold in the past 12 months. That constitutes 15% of all homes sold last year. 

Today there are only 32 bank owned homes available out of 1536 for sale.  Our REO inventory has shrunk to 2% of the market   Thus, we have less than a 30 days supply of "investment grade" inventory.  The banks know this and they are ratcheting up prices and placing silly restrictions to discourage investors.  This means that we have entered an environment where investors are competing with end-users for some of the best bargains. 

This is ultimately good news for the housing market but frustrating for those seeking to create wealth through acquiring discounted real estate.  The best deals for now will go to those who are prepared and in the right place at the right time. 

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