Auctions and REO's on The Rise. Thoughts???

Question

In pretty much all major markets across the country pre-foreclosures have declined, however auctions and REOs are on the rise. Most likely because with rising property values banks are more quick to repo these props and get them back on the market to hopefully benefit. It's also probably because they are now finally catching up on their paperwork.

What I'd like to know however, is how this may effect the asking price of the REO props once they begin to flood the MLS listings? This is a particularly loaded question I know.....

I'm in the Chicago metro/urban markets btw so our situation is unique. We have growing home sales but stagnant contract activity and declining pending home sales Obviously seasonality plays into this however I believe it goes deeper than that.

Thoughts?

Ellis San Jose · Answer

Wells Fargo just fired 1000 REO brokers.  I spoke to one of the top 10 REO brokers in the nation & his business is off 90%.  He is shifting his business dramatically to other areas. His opinion is that the REO market is not coming back in any significant way. The judicial foreclosure states will have a slower erosion of REO inventory.

Account Closed · Answer

Bank of American told me they would fix the REOs and put them on the market at retail price. Wells Fargo and One West bank are selling a lot of REOs to Chinese buyers, and Chinese buyers don't go around telling everyone how many REO;s they buy. The banks sell REOs every week, but the average John doe will never know how many REOs are hitting the streets.

Joe Gore

Wayne Brooks · Answer

Are more properties getting to foreclosure auction this year as opposed to 2012, yes.  But that's mostly due to the foreclosure process slow down in 2012, until the national settlement was done, then digested by the banks.

Are new filings slowing, yes.  Wilt here be a "flood" of REO's hitting the market...I think not, mostly business as usual.  We've all been complaining about a lack of supply anyway, right?

Paul Z. · Answer

@John Rooster could you elaborate? The information I'm getting is the same information available to everyone. You could guess where I'm getting it from and you'd probably be right.

Account Closed · Answer

You can bet when the banks sell their REOs they will go for FMV or above and also you have the Chinese people to deal with, and they will pay more.

Joe Gore

John Rooster · Answer

I think your getting bogus information

Mike B. · Answer

I think we're ok right now. We have to do our homework and be on top of the ARV for whatever properties we pick up. I'm already making sure I'm on the low end for my ARV's.

Example:

Comp 1: $160k

Comp 2: $170k

Comp 3: $173k

If I'm looking at those as my comps I'm basing my ARV at $150k-$155k. Guaranteed quick sale regardless of what the banks do.

With that being said, we will be in trouble when these hedge funds eventually unload all of the properties they've been picking up.