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How Does Shadow Inventory Affect My Home Sale?




As a Real Estate Agent, I spend many hours a week researching just about anything that is going to affect the market in which I work. Over the last year I have followed the number of Lis Pendens that have been filed with the County Clerk of Courts office. This is a good indicator of the number of distressed properties that will be hitting the market in the next year or two.


Distressed property sales are either short sales or foreclosures. Lis Pendens is the first step in the process of the lender or bank taking back the property. If the home owner does not take action to settle the note after a Lis Pendens has been filed (normally 20 days), the lender will begin the process of foreclosing on the property. So after evaluating the number of distressed sales in 2009 which for our area was 40% of all sales and for 2010 it was 41% of all sales of Residential SIngle Family Homes, it appears to me that there is a huge amount of Shadow inventory in the Highlands County Florida real estate market.


What is shadow inventory? Shadow inventory, a term you have been hearing on the news a lot lately, is a term used for all those homes out there that the owners have stopped making payments on and the homes that have had Lis Pendens filed against but have not been foreclosed on yet. These are all homes that are going to hit the market either sooner or later. In some cases these homes started going into default one or two years ago and have still not entered the market for resale. Some indicators are that there are two to fours years supply of homes left to go through before the current housing situation changes.


So how does this shadow inventory affect the average home seller? For one, it means that the regular home seller is still going to be competing against distressed sales for the limited number of buyers out there. Some home owners I talk to say their home is not in the same market as distressed sales. I tell them, “Mr. Homeowner, the three bedroom two bathroom home down the street built in 2006 is for sale right now for $89,000″. He replies he is not concerned about that because that home is a foreclosure, his is not. Yes, but Mr. Homeowner, your home is a three bedroom two bathroom home built in 2003 and has almost the same square feet and same two car garage. Does it really matter what you call it? It is comparable. A buyer is not going to pay thirty thousand dollars more for your home when they can get the one down the street for less and repaint and carpet for less than ten thousand.

I have spoken to many sellers that do not “need” to sell right now. They say they can wait until the market corrects to sell and move back closer to their children and grand children. Shadow inventory means they are going to lose precious years with their loved ones.

Meanwhile, we will continue to market ans sell foreclosures just as we do normal sales. The sellers that “price it right” will sell their homes.


If you would like a list of foreclosed homes for sale in your area, please do not pay for one. They are available for free from any local Real Estate Agent in your area. After all, they are the one’s selling the homes, why wouldn’t they give you a list to pick from for free?


The best strategy in purchasing a foreclosure is to use a Licensed Agent. Where I am from the buyer does not pay for this service. The buyer’s agent is compensated by the seller’s agent. This is what we call co-broke. So, my buyers get representation for free. I also provide a foreclosure list on my website that is updated every day.




Darrin Mills is a licensed Florida Real Estate Agent. Representing buyers and sellers of homes including short sales and foreclosures. Darrin works with his wife Andrea together as a team in Highlands County Florida and the three cities, Avon Park, Sebring, and Lake Placid.




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For more questions about Short Sales in Maryland, DC or VA, you can reach us at the following:

BBT Team
Keller Williams Preferred Properties
9701 Apollo Drive,Suite102
Largo, MD 20774
Phone: 240-737-5024
EFax: 240-296-5024
Website: BBT Team

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