What is Shadow Inventory and How Does it Effect the Real Estate Market

The term "Shadow Inventory" may be new to you, but you will hear it more and more over the next several months and years.  This term refers to the homes that are not on the market yet, but are destined to be for sale next year or the year after.  These are homes that banks will be foreclosing and placing for sale in the future. 

This "Shadow Inventory" is also a prime reason that many buyers are holding off, not buying at this time. Since homes that are yet to be placed for sale are a major factor affecting our real estate woes, it seems prospective home buyers should be aware of all the facts... Lawrence Yun, chief economist at the National Association of Realtors says "To be sure, the housing market is faring better in several metro areas, particularly those with decent job growth such as parts of Illinois and Washington, D.C., though it could be "choppy at times."

You probably already know where I am going with this... By parts of Illinois, he means "THE CHICAGO AND SCHAUMBURG REAL ESTATE MARKET"!

For the last 24 months I have been hearing so much about the next wave of foreclosures coming on the market and there have been quite a few that have come up. Yes foreclosure homes are a great value but are the always worth the headache? There are many things you should know before purchasing a foreclosed home.

1.)   You are purchasing the home as is where is. Which means all liens and problems with the home can become your responsibility.

2.)   They may need some work. Very few foreclosed homes are in great shape. Typically you will need about 10% of the purchase price to do repairs on the home.

3.)    The home may not be in as a great shape when you close as when you first saw it. The home will remain vacant and who knows what can happen to a vacant home in 90 days.

4.)    You are dealing with a corporation not a regular seller. Everything about the deal is about money there is no emotion and the bank will walk if the deal is not perfect.

5.)    Financing may be an issue. Fha loans require a certain in-habitability standard. If they home is not inhabitable for example: mold or no furnace, odds are you cannot get financing.

So before you purchase a foreclosed Schaumburg home, make sure you know exactly what you are getting into. Feel free to search all foreclosed homes on my website at http://www.aaronwittenstein.com/mx/Foreclosure/index.cfm?