The “shadow market”- banks could be holding back foreclosed homes from the market
October 12, 2010 Leave a comment
(For a foreclosure update see this blog: http://bit.ly/JGU1dZ ).
Why do they do it? We don’t know. It might be that they don’t want to crash the housing market now or it might be that they don’t want prices to drop any lower so they lose even more money.
But according to my sources in real estate there apparently is a shadow market of homes the banks don’t release or list on the MLS. These are homes that they have already foreclosed on and they own and hold in their portfolio of properties. But these homes don’t appear in the Multiple Listing Service (MLS) used by realtors to see what properties are on the market.
Realtors only realize what has happened when one of these shadow homes suddenly appears on the MLS. Then by looking at the original foreclosure date the realtors realize that the home was foreclosed on some time ago and the surmise that it was held in the “shadow market”.
It appears that the banks are holding these properties back and releasing them slowly when they are ready. Some appear to be vacant and some are overgrown with weeds with pools that are filling up with slime, but the shadow homes remain unreleased into the real estate mainstream.
There are also reports that the banks are now renting these homes. The banks appear to want to be landlords now too. They have this real estate which they can’t or won’t put on the market, they hold it back in a shadow market and they then apparently rent these properties to tenants. Is this because prices are so low and rents are high? Are the waiting for prices to climb again or have the banks just found a new profit center?
These are unanswered questions about the current state of affairs with the banks and foreclosures and real estate and it seems to be getting stranger and stranger. More to come……
I am a bankruptcy lawyer in San Diego.
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