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Pleasant Hill Short Sale: Shadow Inventory

by Scott Fuller on November 2, 2012
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Hi, everybody, it’s Scott Fuller with the East Bay Short Sale Group. We are your Pleasant Hill short sale specialists. I just wanted to talk a little bit about something that we’ve seen in the news quite a bit lately. And today’s actually October 31st, 2012. Happy Halloween to everybody.

We hear a lot on the news about shadow inventory and if that actually exists. What shadow inventory refers to is properties that may be in default, the banks are in the process of acquiring or owning but they hold on to it and they don’t actually foreclose on the property until a later time. So are there a lot of properties that are going to go into foreclosure? Is it going to flood the market with new properties at some point, at the end of this year or the beginning of next year? A lot of people are saying there’s shadow inventory out there but, of course, we’re located in Northern California. We’re in the Bay area. We’ve got a very strong demand and right now there’s actually a very limited supply of properties.

If you’re a buyer right now it could be pretty frustrating. Are there properties available out there? Are you going to be outbid? Are you going to be outbid by cash investors? So what we’re seeing is the notice of defaults are continuing to go down a little bit. We’re still seeing notice of defaults which are petitions filed by the bank letting them know that they are going to go into default. They’re behind on their loan, and it begins the foreclosure process. I don’t think there’s much, if any, shadow inventory located in the East Bay, and the reason is because banks right now are more proactively approving short sales and they’re also, believe it or not, a little bit more than they have been, they’re actually approving more loan modifications. But I would say it’s probably the prior.

So banks are opting for the short sales. They typically make more money on a short sale than they do if they have to own the property and have all the costs associated with owning it. So in their case, the investor and the net is going to be higher if they approve the short sale. So I don’t anticipate that we’re going to have a lot of shadow inventory out there that’s going to come on the market anytime soon. There may be a little bit, but especially in the lower price points below $500,000, we’re seeing multiple offers on every property. So it’s unlikely that the banks are going to need to own that because in an up rising market they’re going to get the top dollar that they’re looking for when they’re approving a short sale on this type of property.

If you have any questions, we do a lot of business in Pleasant Hill, we’d be happy to talk to you about how short sales work, more about what’s going on in the market. Contact us at

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