IRVINE, CA—The increase in vacant bank-owned REOs nationally actually reflects a step in the right direction toward resolving the zombie foreclosure problem, ATTOM Data's SVP Daren Blomquist tells GlobeSt.com. As we recently reported, research by the firm shows that there were 46,604 vacant bank-owned residential properties nationwide as of the end of the third quarter, an increase of 7% from the previous quarter and up 67% from Q3 2015. We spoke exclusively with Blomquist about this increase and what it implies about the residential real estate industry.

GlobeSt.com: Does the increase in bank-owned vacant REOs indicate that those homes might be sold sooner than if they weren't bank-owned properties?

Blomquist: Yes, this increase actually reflects a step in the right direction toward resolving the zombie foreclosure problem. Rather than continue to let properties languish in foreclosure limbo, banks have been aggressively repossessing many of these zombie foreclosure properties over the past year. In the short term, that doesn't really solve the problem since these properties continue to sit vacant and likely contributing to neighborhood blight. But they are now one step closer to getting into the hands of a new owner who will maintain them and improve their value, which in turn should help lift the overall neighborhood quality.

GlobeSt.com: What other implications does the increase in bank-owned vacant REOs have for the residential market?

Blomquist: The good news is this likely means more inventory coming on line in the next few months. The bad news is that this inventory is of the distressed, scratch-and-dent variety and as such may not be good for all buyers.

GlobeSt.com: What strategies for sale do banks have for most of these properties?

Blomquist: In hot sellers' markets (think Dallas or Denver), the banks can simply put these properties on the MLS and advertise them as distressed, which will draw in a lot of offers from bargain hunters as well as others. In these hot sellers' markets, banks can often get close to or above full “after repair” value for these homes because of the strong demand. In locations with less demand (think Chicago or Cleveland), banks are more likely to post these properties on auction sites appealing to real estate investors. In some cases, banks may donate some of the lowest-value properties in the roughest neighborhoods to the local land bank (both Chicago and Cleveland have these), and the land bank will attempt to repurpose or possibly decide to demolish.

GlobeSt.com: What else should our readers know about bank-owned vacant REOs?

Blomquist: The vacant REOs coming out of the foreclosure pipeline this year are typically in very poor shape. This may be an opportunity for picking up distressed bargains, but because the market is so competitive in some areas, these properties sometimes attract bidding wars that can result in the home selling for more than it really should.

GlobeSt.com: Does the increase in bank-owned vacant REOs indicate that those homes might be sold sooner than if they weren't bank-owned properties?

GlobeSt.com: What other implications does the increase in bank-owned vacant REOs have for the residential market?

GlobeSt.com: What strategies for sale do banks have for most of these properties?

GlobeSt.com: What else should our readers know about bank-owned vacant REOs?

Instant Insights /

Is the Rise in Vacant REOs a Good Thing?

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