Zillow sheds some light on shadow inventory

Information on foreclosed homes not yet listed on the multiple listing service (MLS) is now available for free to the public. Of the 1.2 million homes now listed by Zillow nationwide:

• about 1 million are in pre-foreclosure or listed for auction; and
• 260,000 are real estate owned (REO).

Zillow offers an estimate for each home’s sales price based on its fair market value (FMV) and the area’s average foreclosure discount. The service also lists the unpaid balance and the foreclosure timeline for each home. This information is usually only made available by large aggregators for a fee.

If buyers want help pursuing a foreclosed home, Zillow has a list of agents specializing in foreclosure. These agents must pay a fee to be listed as a foreclosure expert and “premier agent.”

Interested buyers can ask to be notified when the home enters the MLS. Zillow also claims buyers can go directly to the bank or the owners of the foreclosed home to make an offer.

first tuesday insight

This is a step in the right direction, particularly for small investors and buyer-occupants looking to score a deal in this low-inventory environment.

However, what can buyers really do with this information?

Not as much as promised. Contacting the bank holding an REO property is rarely fruitful. With rare exception, banks will not entertain offers on an REO until it has been officially listed on the MLS. Banks often require that a property be listed for a minimum amount of time before accepting an offer. Both of these measures serve as a fail safe against accepting too-low an offer and ensure maximum competition among bidders.

Thus, the best use of this service is to focus on pre-foreclosures. While banks have hard and fast rules for REOs, delinquent homeowners may be open to pursuing a short sale with your client.

Some critics have cited privacy concerns for homeowners in pre-foreclosure. However, it’s all public records for the curious, and the increased visibility of your client’s potential short sale will drive competition and potentially fetch higher bids from interested parties. This is ripe fruit about to fall from the tree – be the first to catch it.

Do you see other uses for this service? Will you encourage your clients to use it? Share your thoughts below!

Re: Zillow to list Foreclosure Properties Not Yet Put on Sale from the New York Times and Zillow Introduces Pre-Market Inventory To Its Home Search from Zillow and Zillow now lists homes in foreclosure from the Los Angeles Times