Back in May, I blogged about the significant number of homes in the Redfin database that were clearly bank-owned, yet had not been put back on the market by the lenders. Now, according to this post from the Sacramento Real Estate Statistics blog, based on research from Deutsche Bank, this practice could be widespread.
[B]ank-owned homes frequently do not show up in resale inventory, or MLS listings. The extent to which bank-owned homes do not appear in MLS listings is difficult to quantify because it depends on each bank or servicer’s timeline and approach in handling foreclosed properties.
The research estimates that there could be as many as 88,843 foreclosed homes in Los Angeles County, although only 62,379 have actually been listed for resale on the MLS. In San Diego, there could be more than 12,000 foreclosures that haven’t hit the MLS — a significant percentage more than the 18,000 listed now.
It’s easy to find hidden foreclosures on Redfin. Go to any neighborhood or ZIP and do a search that includes recent sales for the last six months or so. You can tell which homes are foreclosures by the oddball sales prices, like, say, $761,405 – it’s rarely a round number.
Here are some random ones I found just now on Redfin:
8961 Tree Farm Lane, Riverside
Sold for $263,891 on 4/30/08
2018 Lemnos Drive, Costa Mesa
Sold for $805,454 on 6/11/08
1785 Deavers Drive, San Marcos
Sold for $432,808 on 5/21/08
So why are lenders holding on to these properties? According to a report included in the May post, some aren’t quite prepared to swallow the huge losses, so they’re holding on, hoping for a market rebound. In cases where mortgages are held by multiple companies, all parties must agree on the best course of action, which snarls progress. Lastly, lenders are so overwhelmed by the volume of distressed properties that they don’t have time to deal with them.
Once these foreclosures finally land in the MLS, it’s hard to imagine them not depressing prices even further. In the meantime, who’s taking care of these vacant, languishing homes? Lenders would be wise to hire some people to process these properties; not doing so is just delaying the inevitable.