Another reality is that the number of foreclosures available in prime areas is significantly lower than in inland areas, therefore making the search more difficult in coastal areas like ours.

REOS AND ‘HIDDEN INVENTORY’

They call it an Real Estate Owned by banks, or REO, sale, but that does not necessarily mean you will be awarded the lowest price.

Are these properties great deals? Absolutely, because there is no emotion in the sale, so banks generally want these properties moved as quickly as possible to overcome any requirements of holding their funds in reserve as a guarantee against government-lending guidelines.

We hear stories about the “hidden inventory” supposedly waiting to be unleashed on the market. Is that true? The hidden inventory may exist but it is certainly not a smart idea to unleash it all at once — and banks know that.

And most of this inventory is being held by large financial funds that have already released the properties they do not want and are holding properties they do want waiting to slowly release them at a sizable profit when the market recovers.

There is no possibility of buying one of these at a distressed price.

These will be released at the prime moment of inflation or transition of the market back to a sellers’ market, where inventory is low and demand is high.

A LOOK AT SHORT SALES

On another note, I want to discuss short sales, and what I believe is the proper way to view these opportunities. There should be a benchmark set in communities where the value of the property is not subject to the financial wherewithal of the owner.

The property should not be subject to a neighbor’s ability to maintain the payment, therefore forcing overall prices in the community downward.

Any person acquiring a property under short sale should be the winner of that opportunity, and the prices of the neighborhood should not be affected.

It’s much like an automotive dealership where there is advertised only “one at this price,” not that the one at that price sets the value of them all.

*Orange County Records 2010 NOD and Foreclosure. Including local MLS cross search for closed sales.

TOM IOVENITTI is the former president and chief operating officer of Coldwell Banker. He lives in Newport Beach.