The real estate market may be in a slump, but there is one bright spot – savvy real estate buyers should be watching REO (real estate owned) properties. REO is the short hand nomenclature for foreclosed and bank owned properties. We all know that foreclosures of all kinds of properties have been on the rise over the last year or so. What is now becoming increasingly clear is that many mortgage banks holding these foreclosed properties, although slow to act initially, are becoming much more aggressive in pricing their inventory. These banks are pricing their holdings below current market, thus leading market prices downward in some specific communities. 

Since banks are not chartered to hold property for investment purposes, they have to unload them in a reasonable amount of time. With their inventories growing by the day, many banks are now pricing their foreclosed inventory of homes to sell quickly. This leads to an upside in an otherwise uncertain real estate market. The potential winners in all of this are the qualified home buyers and/or investors who are in a position to capitalize on the banks’ growing inventory dilemma. 

There was an interesting article recently in the Los Angeles Times entitled “Sales of Foreclosed Properties are on the Rise” summarizing what is happening in LA County.  See On the Rise to read the entire story. This trend is also occurring here in the CoachellaValley. The inventory of bank owned properties is increasing as foreclosures run their course. But in spite of the general malaise in the market, bank owned properties that are in good locations and priced aggressively are selling really fast. I’ve noticed on a number of occasions that newly foreclosed houses in our area sold in just a few days on the market. So there are buyers here watching our market for bargains, and they are finding them.

Have we reached bottom yet in the overall real estate market? We don’t really know, and we won’t know until that bottom has been passed and we begin to see the evidence of falling inventories coupled with rising prices. However, if you are searching for a bargain right now, take a hard look at what is available in the REO market. You might find a diamond in the rough, just waiting for you.