Bank-owned homes, ‘shadow inventory’ in Southington

Bank-owned homes, ‘shadow inventory’ in Southington


SOUTHINGTON — A review of the Multiple Listing Service shows nine bank-owned houses on the market in town.

That’s fairly high, said Joshua Brown a foreclosure expert and agent with Keller Williams, but given the number of homes in the highly developed town of 43,000, not entirely surprising.

“There is a high inventory in town and it’s a little bit pricey,” Brown said. “The higher you go, the greater the risk.”

The costs of owning a home today is equal to the 1980s when low prices but high interest rates strained homeowners. During the 2000s, low interest rates enticed more buyers into mortgages many couldn’t afford.

“The loans they are writing now scrutinize everything,” Brown said. “The guidelines were loose in 2006. Divorce, sickness, unemployment, you’re always going to have fallout.”

Brown currently has two bank-owned properties on the market. Houses can appear for months, then are taken off and reintroduced at a later time.

“There is a shadow inventory that is inventory that hasn’t been listed,” Brown said.

If the bank has a lot of inventory, or asset portfolios get sold back and forth between banks, the properties come and go off the market.

“Too much inventory would drive the prices down.”

A property at 400 Rockwood Drive is an example of the shadow inventory that emerges and disappears off the market. The property was purchased in 1999 for $100,000, developed and listed at $618,900 in April 2012. Four months later it was reduced to $514,999 and is currently off the market.

“That’s a great one,” Brown said. “It’s kind of in bank limbo. I get a lot of calls on that.”

A common misconception in foreclosure sales is buyers believing a foreclosed property is a bargain. First-time homebuyers should be especially wary if they plan to live in the home and needed repairs gobble up their liquidity.

“You have to come out of pocket for certain repairs,” he said. “It’s not for everybody.”

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