January 14, 2011 (Shirley Allen)
According to a recent independent study conducted by Field Asset Services, Real Estate Owned (REO) properties that are not rehabilitated before being sold spend an average of 222 days on the market but when the property is properly rehabilitated, it sells roughly five months sooner.
Field Asset Services conducted the survey from January, 2010, to July, 2010, tracking 17,252 properties in 13 states.
The study found that rehabilitated REO properties spent just 69 days on the market before being sold, a 68% reduction from those that weren’t repaired.
Based on their report released in February of 2010, rehabilitated homes were selling even faster by the end of July than they were in February when rehabilitated homes spent 54% fewer days on the market.
The Department of Housing and Urban Development (HUD) provides funding through its Neighborhood Stabilization Program that can be used to purchase vacant REO properties from banks and repair them for resale.
As we reported in a recent article about the lower quality of homes entering the visible inventory from the shadow inventory, many of these homes are attractive to first time home buyers because of their lower costs, yet their inability to purchase these homes because of the large costs associated with making them livable.
Although some mortgage servicers will work with these buyers to get them up to minimum standards, how many of these buyers after paying their 3.5 percent down payment and closing costs have 10, 20 or 30 thousand dollars to fix these homes up?
The data certainly makes a compelling argument for rehabilitating REO’s before putting them on the market.
Tags: fas, REO, rehabilitated property, HUD, neighborhood stabilization program, first time buyers, mortgage servicers