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.

Investors don’t have much choice when it comes to buying Columbus HUD homes. I appears that any halfway decent house is picked up by owner occupants in the first go around, i.e. during the initial 10 days reserved for home owners. And what’s left, is usually overpriced or uninsured.
 
You may wonder why this is the case. Why are HUD Homes selling out to owner occupants every week? And why are hardly any Columbus houses left for investors?  Read on, here’s my explanation:

First of all, HUD’s mission is to sell to Owner Occupants. Their policies and procedures clearly favor someone who moves into the house. Owner occupants get extremely favorable financing terms ($100 down FHA loans and $2,500 toward closing costs or repairs) and an exlusive 10 day period, so they don’t have to compete with investors.

Second, there is a rush to take advantage of the $8,000 first time home buyers tax credit. This means that owner occupants can get an additional 10% discount (up to $8,000), if they close before December 1, 2009. That’s real cash in your pocket, which buyers can use to remodel or furnish their new house or pay other bills.

Finally, HUD homes are good qualitiy residences that you can buy at a discount. Most HUD homes are insured or insured with a repair escrow and need only cosmetic repairs. Many of these Columbus houses are in the suburbs, and only a few years old.

As an investor you may ask yourself what’s your alternative? Based on my most recent experience, I can tell you that REOs (bank owned homes) are not a good choice either. Currently, it takes between 5 and 6 months for a Sheriff’s deed to get recorded after the foreclosure sale. If you make an offer on a REO, you have to make sure that the deed has already been recorded. Otherwise, your patience will be put to the test and nobody will and can give you a firm date on when you can close.

If you have any questions or thoughts on this topic, please leave a comment or send me an email. I can help you find an investment property or a residence for yourself, and I will make sure you don’t run into major delays.

Thanks for reading our Columbus HUD Homes Blog
Posted by: Susanne Novak, ABR, FIS, GRI 
Columbus Realtors specializing in
HUD Homes, Shortsales, Investment Real Estate
(614) 975-9650