As the number of HUD homes, Fannie Mae, Freddie Mac and other bank-owned properties has dropped substantially since the beginning of the year, we are all wondering what happened to the so-called Shadow Inventory. That’s all of the foreclosed homes that are owned by banks or soon to be owned by banks that are not listed for sale.

In early 2011 it was rumored that the Shadow Inventory was huge and that it will tear the real estate market to pieces.

2011 is over and the real estate market is improving. REOs and foreclosed homes did not flood the market as predicted. According to a recent report by CoreLogic there’s only one foreclosed home in the “shadows” for each home that’s currently listed.

It appears that the Shadow Inventory does not affect the Columbus market. Many HUD and bank-owned homes sell for asking price or above. The market is not flooded with foreclosed homes and the total number of HUD homes for sale has dropped significantly.

Columbus Real Estate Stats

Let me share a few data to show that the Columbus real estate market is very active and alive, as we enter the new year. Below you can see the current number of government-owned, foreclosed homes in Central Ohio.

HUD Homes: 71
Fannie Mae: 233
Freddie Mac: 105

Here are more indicators of a vibrant real estate market:

The inventory of homes for sale on the Columbus MLS dropped by 27.5%  from 17,471 to 12,675 (within one year – Nov 2010 to Nov 2011).
Pending contracts increased by 37.4% from 1,341 to 1,843.

If the shadow inventory does not show up soon, we are actually heading in a sellers market.

Remember the house on Westfall Road in Lancaster that we featured a couple of weeks ago?

It was listed for $72K, way below market value. With retail values of similar homes in the $160K range, it seemed that HUD forgot to add a “1″ in front of the purchase price.

This is a huge, 3,000 sqft, new house with hardwood floors, stainless steel appliances, a large attached garage and a pole barn in the yard. It sits on a 2 acre lot, just a few minutes from the amenities of a large city!

As expected, the low asking price generated a lot of interest in this home. There were more than 40 showings during the initial 10 exclusive period. By the deadline, HUD had 30 offers on the house.

Now this home is in contract.

The winning bid was $115K, that’s 50% higher than its list price.

What can you learn from this Bidding War?

If you are a seller and list your house below its market value, you will generate a lot of interest. This is true in any market, even in today’s economy. It is especially true, if the house is in good condition.

You will receive more offers! And as the seller you can pick the one that’s best for you.

Keep in mind that there’s a buyer for every home – if it’s priced right.

One more trick that’s been used by many REO brokers (but not by HUD): if they receive more than one offer, they call all bidders and ask for a best and final offer. Usually, they will squeeze out another couple thousand bucks for the seller.

If you are a buyer, don’t despair! Despite all the activity, the 30 offers, and the overwhelming competition, the winning bidder still got the house for almost 30% below market value. That’s $45,000  in immediate equity!

What a great deal!

The number of HUD homes available for sale in Columbus has been shrinking since February.  A year ago HUD picked 3 new asset managers to speed up the sale of its inventory. And that’s exactly what happened.

Even without incentives, such as the  first-time home buyer tax credit or the $100 down program for FHA loans, HUD homes sell like crazy.

Why does HUD not increase the number of listings?

They have the capacity to sell at least twice as many homes than they are listing in Central Ohio. Many listing brokers have joined the program. There’s no shortage of real estate agents to sell HUD homes.

Are they running out of HUD homes?

Now that would be hard to believe. The number of foreclosures was still very high during the past 12 months. There should not be any shortage of foreclosed homes.

We constantly read reports of a humongous shadow inventory that could hit the market any day and push home prices down by more than 20%. There is no indication that this shadow inventory is held back by HUD, if you look at their listing stats.

Currently, there are only 704 HUD homes listed in the State of Ohio. That’s less than a year ago, when they switched management contractors.

The most expensive HUD home sits in Dublin on Pebble Creek Drive. It’s listed for $235,000.

And the least expensive home (not counting dollar homes which are only available to government agencies) is a 2-bedroom in Zanesville offered for a mere $3,000.

Here are the stats for Central Ohio.

HUD Listings per County

Franklin County: 80
Delaware County: 6
Licking County: 5
Fairfield County: 8
Pickaway County: 5
Madison County: 5
Union County: 2

TOTAL Number of Central Ohio HUD Listings: 111 (209 at mid-April 2011, 164 mid-May 2011)

Now that’s hard to believe!

According to a report by the Wall Street Journal “HUD ran out of money to pay lawyers or other closing agents who manage the sales of properties”. They had to delay closings of HUD homes already in contract and re-negotiate service contracts with vendors.

The good news is that the problems were centered around the New England region. More than 500 homes were affected. Here’s a link to the full article: Realtors Steamed About HUD Foreclosure Delays

And I thought the Feds have the printing presses.

This situation is not new. We experienced similar problems in Columbus a year ago, when HUD was unable to complete the sale a number of Columbus houses due to difficulties with their service contracts. Just one more frustration for buyers and agents when dealing with HUD homes.

You can imagine that realtors are not happy about it. The NAR (National Assoc of Realtors) even fired off a press release calling it a “nonsensical situation”.

Rightfully so! The demand for HUD homes and other foreclosed properties is strong. Now is a great time to sell HUD’s inventory of homes, which they inherited from the mortgage crisis. They should really do everything they can to liquidate their HUD houses and recover the money for us tax payers.

Realtors are eager to help. HUD homes have provided a consistent source of listings for many Columbus brokerages, as they try to survive this terrible real estate market.

Let’s hope that HUD gets their budget in order before the Feds are running out of money. Because if they are defunded, HUD will be one of the largest home owners in the country, but don’t have the funds to sell their inventory. I guess that’s how many home owners feel these days, too.

Here’s a quick update on the status of HUD listings in Central Ohio. The total number of HUD Homes in Columbus has dropped to 164 – the lowest level since the beginning of the year.

74% of HUD homes are in Franklin County, the other 26% in the 6 surrounding counties. While these counties maintained their number of listings, Franklin County lost more then 40 HUD homes over the past month. Detailed statistics are at the end of this post.

Great deals can be found outside of Columbus! Just take a look at today’s featured HUD home in Newark.

FEATURED HOME

This charming Newark home is located near the University Campus. It has been recently remodeled and is in very good condition. The repair escrow was established to put a new roof on the garage and repair the kitchen sink.

829 Granville Rd, Newark, OH
Asking Price: $65,000

Comparable Sales: $85,000
Year Built: 1928
Sq Footage: 1,568

Bedrooms: 3
Bathrooms 1/0

Category: Insured w/Escrow
Repairs: $2,420
Schools: Newark

Deadline: 5/22/11
Eligible: owner occupants

HUD Listings per County

Franklin County: 122 (74%)
Delaware County: 4
Licking County: 12
Fairfield County: 8
Pickaway County: 6
Madison County: 6
Union County: 6

TOTAL Number of Central Ohio HUD Listings: 164 (209 at mid-April 2011)

Last week I alerted you on substantial price reductions on 2 HUD condos. Let me give you an update on what happended over the weekend.

Both condos are now in contract. That was predictable, as the asking prices of these Columbus HUD homes had dropped by more than 50%.

You may be surprised to hear that HUD left $20,000 on the table on the Sowerby condo.

HUD did not accept the highest offer that was submitted over the weekend. Instead, they took the first acceptable offer they received on Saturday.

These homes were on a daily bidding deadline. As HUD does not review offers on Sunday, we did not know, if they had accepted a contract. New offers were flowing in on Sunday. More than 10 in total.

I warned my buyers that HUD may have accepted an offer on Saturday, and that we would not know until Monday. Contracts submitted on Sunday came too late, despite the fact that at least one of them was $20K higher than the one they accepted.

What can you learn from this?

You have to be ready when HUD lowers the price. The first acceptable offer gets the house.

Unlike Fannie Mae, HUD does not apply the Best-and-Final approach to get the highest offer.

“The early bird gets the worm.”

I was quite shocked this morning when I compiled listing statistics for HUD homes in Columbus.

The number of HUD houses available for sale has dropped by more than 50% since the end of February. We are now down to only 182 HUD listings in Central Ohio, as compared to 394 at the end of February 2011.

Here are the detailed listing data per county, followed by an explanation, why this has happened.

HUD Listings per County (Apr 14, 2011)

Franklin County: 146
Delaware County: 8
Licking County: 9
Fairfield County: 7
Pickaway County: 8
Madison County: 0
Union County: 4

TOTAL Number of Central Ohio HUD Listings: 182 (394 at end of February 2011)

Improving Real Estate Market

The Columbus Board as well as the National Association of Realtors just published sales data for the month of March. Their stats show an improvement in the US real estate market.

National

Existing home sales are up by 3.7% in March relative to February, however, they are still 6.3% below March 2010, when the first time home buyer tax credit inflated sales in the first half of the year.

The number of first time home buyers was 33% in March 2011, as compared to 44% in March 2010.

Central Ohio

In Columbus existing home sales in March outpaced the previous month by almost 32%, but they are still 7.9% below March 2010 sales.

The good news is that the number of pending contracts has increased by 11.5% as compared to a year ago. This will result in more sales in the coming months.

Three Signs of the Time

• 35% of sales were all cash purchases
• 40% were distress sales
• 20% of homes were purchased by investors

What does this mean for you?

It means that the real estate market is heating up. As the majority of sales are foreclosures, short sales, REOs and HUD homes sales, the number of distress listings has decreased. With other words “distress sales” fly off the shelves, while retail listing sit on the market for a long time.

The consequence is that there will be more competition on HUD contracts, less selection, and possibly less discounts.

So, don’t wait! If you want to buy a HUD home or REO this year, now is the time!

Thanks for reading our Columbus HUD Homes Blog

What a dramatic change since we published Statistics on Government Foreclosed Homes at the end of February 2011.

The total number of HUD Homes in Columbus Ohio is down to 299, from more than 400 HUD listings at the beginning of the year. Even at the end of February we had close to 400 listings.

It appears that after an initial push by the new asset managers to get as many HUD properties on the market as possible, the listing volume is now leveling out.

However, this may also indicate that we are now in a much stronger market than predicted by the experts. A couple of weeks ago we reported that right now 30% more homes for sale are in contract than a year ago. We noticed that the demand for discounted and foreclosed homes has significantly increased since the beginning of the year.

Take a look at the HUD homes data for each of the Central Ohio Counties. The loss of listings has affected most counties evenly with the exception of Union which saw an increase.

HUD Homes Listing Statistics

Listings per County

Franklin County: 220
Delaware County: 13
Licking County: 19
Fairfield County: 16
Pickaway County: 13
Madison County: 11
Union County: 7

TOTAL Number of Central Ohio HUD Listings: 299 (394 at end of February 2011)

Here’s information on the pricing of HUD homes in Columbus.

Pricing & Listing Types

Average List Price: $71,980
Lowest Price: $7,000
Highest Price: $215,000

Dollar Listings: 3
Exclusive (owner occupants): 114
Extended (all bidders): 176
Lottery (Non-profits & government): 6

There are 3 really decent Dollar Homes available. These homes have been on the market for a long time. All of them have been overpriced while they were still listed. Now for $1 they are a huge bargain, but only available for Government Agencies.

One of the homes has a retail value of $155K. It is located on 930 Stoney Creek Road in the Indian Hills subdivision near Antrim Park, just South of Worthington. If you work for the Government – go get it!

February 2011 is almost over. You may wonder how well HUD homes and other government foreclosed properties, such as Fannie Mae, Freddie Mac and VA houses have been selling this year.

Foreclosed homes are certainly a bargain. Realty Trac reports that foreclosed homes sell for 43% less than regular houses in Ohio.  The average price of a HUD homes is around $75,000, which is similar to all foreclosures.

Nationwide buyers have to pay $100K more for foreclosed homes. And in most states they are just 25% less expensive than other residential listings.

Talking to Columbus real estate agents we are picking up some good news. It appears that buyers made more offers on HUD homes in January. Some brokers tell us that 35% of HUD listings are in contract.

HUD asset managers are struggling to get contracts ratified. It may take more than 2 weeks to get a ratified contract back from HUD after an offer was accepted online.  The lone closing agent in Columbus (Lakeside Title) is scrambling to schedule the closings within the deadlines specified by the asset managers.

We believe that this “buying frenzy” will have a positive impact on the Columbus housing market.

Summary of Government Foreclosed Homes in Central Ohio

HUD Homes Listing Statistics – HUDHomeStore.com

Franklin County: 299
Delaware County: 16
Licking County: 28
Fairfield County: 19
Pickaway County: 16
Madison County: 13
Union County: 3

TOTAL Number of Central Ohio HUD Listings: 394

Freddie Mac Homes Listing Statistics – HomeSteps.com

Franklin County: 95
Delaware County: 6
Licking County: 9
Fairfield County: 7
Pickaway County: 1
Madison County: 3
Union County: 3

TOTAL Number of Central Ohio Freddie Mac Listings: 124

Fannie Mae Homes Listing Statistics – HomePath.com

Franklin County: 347
Delaware County: 43
Licking County: 36
Fairfield County: 34
Pickaway County: 8
Madison County: 13
Union County: 9

TOTAL Number of Central Ohio Fannie Mae Listings: 490

In addition, there are a few VA homes, which you can find at VA listings.

There are basically no homes owned by the Department of Agriculture in Central Ohio. If you want to search USDA home listings, click this link.

Here’s a final thought: the total number of residential properties listed on the Columbus MLS (for the 7 counties) is 13,430. Government foreclosures make less than 10% of all listings.

You are probably wondering why a beautiful house like this one is back on the market?

There are 3 main reasons why HUD homes fall out of contract:

1. The buyer can’t get financing
2. The property inspection uncovers hidden defects
3. The buyer gets frustrated

Do not underestimate the challenges that await you when you buy a HUD house.

It’s a hassle to turn on the utilities, you don’t know what to expect from the property inspection, the lender questions the condition of the house, the A/C unit gets stolen a week before the closing, and the seller (HUD) won’t make any repairs.

As a buyer you will get frustrated and maybe lose motivation to close on the purchase. There are just too many things to put up with.

An experienced Columbus real estate agent who specializes in HUD homes will try to prepare you for these uncertainties before you submit an offer. Most important, your realtor should take as much pressure off your shoulders as possible and manage the HUD house purchase from bid to closing.

After all, you can get a really good deal on Columbus HUD homes. Like the house above, which just came back on the market due to some of these unexpected problems.

You can have this almost new HUD house for only $145K. The original home owner purchased it for $212K, which means you pay 32% less!