http://www.realestateappraisertips.info/ - 12/03/2009 Home Appraisers Video Tip Of The Day and Question: How Do You Handle Shadow Inventory? Your Comments Needed! The Tip Is: At Least Attempt To Report On Your Local “Shadow Inventory”!
Have you read fellow home appraiser, Michael Tarabotto, article on “The Landmines Within? If you haven’t, you really need to…..today! Michael, from California, delivered a very detailed analysis that revealed that up to 70% of present foreclosures are not listed in the MLS. In my opinion, this is a HUGE factor for home appraisers to deal with in their reports! In our home appraisals, what do we as home appraisers do with the local Sheriff Sales and Short Sales taking? Generally, they’re not reported in our local MLS. They’re really not quantiable (countable, not easily anyway). But, they are out there!
What about all of the FNMA 2055 Exterior Only Pre-Foreclosure Appraisals some of you are performing from time-to-time….maybe since 2008? When these do go to foreclosure, as much as 70% of these will never make it into the MLS. So, how do you quantify them? How do you report on them within your reports?
To add to your analysis, Have you compared the number of homes currently for sale as compared to the number of homes sold in your market YTD? Here are my local numbers from Realtor/Broker, Tony Zito:
Active 12/2/09-3623
Pending 12/2/09-850 this is down 17% from last month and I have not seen this number that low since I have been tracking the numbers for almost 2 years.
Sold:
November 09-508
November 08-380
November 07-604
November 06-691
November 05-806
November 04-652
One method I use in my 1004MC is to add this statement:
“SMART MLS Analysis showed only X REO sales out of X total comparable sales since 1/1/2007, or X% of Total Competing Submarket Sales, which (does or doesn’t ) appear to be an indication REOs are negatively impacting this market. It’s also stated here that a recent Active Rain article (The
Landmines Within by Michael Tarabotto http://activerain.com/blogsview/930436/the-landmines-within ) stated that as much as 70% of REOs never make it into the MLS – Meaning that it might be impossible to know or state the exact # of competing REOs if
they’re not being listed. MLS is reporting X comparable REO listings.”
Shadow Inventory. I don’t have time in this short tip to get into the technical definition of shadow inventory. When I refer to shadow inventory, I’m referring to Pre-Foreclosures and Short Sales not listed in MLS (not easily quantifiable) and the excessive number of homes currently for sale, higher than the actual number of homes that have historically sold in a market in a given year.
On 9/30/2009, Henry Blodget wrote: “Massive “Shadow Inventory” Overhang Will Keep Pressure On House Prices” with those below showing just how enormous the problem.
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All valids points! We do make a comment on the 1004MC about not really knowing if all the MLS listings and closings are showing if they are foreclosures or short sales, because as you stated, many realtors may only show them as “corporate listings” or Vacant or Fixer Uppers.
We also show the number of expireds and withdrawn listings and median days on the market to show that days on market is skewed many times because when a Realtor relists the homes they days on market count starts all over again.
So short of checking the courthouse records on all of those sales in the past 3, 6 and 12 months as reported on the 10045MC form, you really do not know how many are really foreclosures and that is just with the MLS data. There is no source that I am aware of that pulls only courthouse record sales for this same type of data.
We do check courthouse records for comps in addition to MLS sales and listings and then we can tell if they were foreclosure sales. But we don’t always know if they were short sales.
We also state on the 1004MC that the numbers are limited by what is input into the system and therefore errors in analysis can occur. You know …Garbage in garbage out, etc.
So short of checking with the Courthouse on the number of Sales on the courthouse steps or Sheriff sales and checking with some of the largest Banks on the amount of inventory in your area that they have on the books and have not yet listed, we really have no way of knowing how many “shadow properties or inventory” is out there. We can see as we drive by if there are alot of boarded up homes or vacant homes in the area and report on those, but as for how many are out there not being listed and what their worth and impact is on the subject property…it is almost impossible.
If you hear of other ways apprasiers can figure this one out, let me know!
Interesting stuff, Bill. Thanks so much.