Any insight on why a desirable REO property would sit for months?

Question

Hello BP,

I'm currently in the "research" phase of my journey to investing, but hope to get to the "action" part later this year.

The market in my area is super hot, and usually in my research when I notice a good deal, it's snapped up within days (if not hours).

However, I've watched this one particular REO house sit on the market for nearly 6 months. It's almost 3000 sq ft and priced at $115k in a neighborhood where rehabbed houses of that size can go for 200k-215k.

By my calculations, this house should have been snapped up 5 months and 29 days ago.

There's no evidence of any pending sale/relisted cycle that would signal the house is scaring off investors due to needing lots of work.

As far as I can tell, no one has made an offer on this house.

Anyone have any ideas why this would happen? Is it an issue with the bank? Are they holding this property for some reason and not accepting offers? Or is the house potentially in legal limbo? And if so, why has it remained listed?

Curiosity has really got the better of me here. It's like watching people avoid an unattended stack of money and I just cannot understand it.

Any knowledge or insight on this to further my education would be greatly appreciated.

Wayne Brooks · Answer

Call the listing agent, and solve the mystery.

Don Konipol · Answer

Here are some possible reasons

1. Your analysis of value is incorrect

2. The property has a severe physical defect

3. There is a title issue that needs to be cleared up

4. The person with authority to sell at the bank died and has not been replaced

5. The bank is in receivership

6. The  property, for some reason, is not financable

7. The property was previously used as a meth lab

8. The property has mold issues

9. The property has structural defects

10. The property has legal issues

11. New proposed road construction will run right by the property front door

12. The property is about to lose its backyard by eminent domain

13. The property is scheduled to be torn down by the city under the dangerous building code

14. The next door neighbor is a high up organized crime figure

15. The neighboring house is a Columbian drug cartel safe house

16. The house was the basis of the movie "Amityville Horror"

17. The house was built on Native American burial ground

18. The smell of sewerage from a local treatment plant reaches the property three times a week

19. The property sits on a huge natural gas reserve and may ignite at any time

20. The dry cleaner in the adjacent shopping center has been dumping perk in the rear of the shopping center for years and the contamination has reached the subject property

21. The property is on a water well system and the well has run dry

22. Etc., etc., etc.

Lenzy Ruffin · Answer

Google "zombie foreclosure" and you'll find what you're looking for. If it's only been months, the house you're looking at may not even be a zombie, just one they haven't gotten around to marketing for sale yet. Houses have sat / do sit in foreclosure for years. There's nothing you can do to buy it until it either shows up on MLS or an auction site.

Brent Coombs · Answer

22a:- the Bank is very CAREFULLY attending to their "stack of money"!

Lenzy Ruffin · Answer

Sorry for not reading your post correctly, @Crystal Em. Are you familiar with the 70% rule? It may be the 65% rule in your market. It's possible that the repair costs on that house make it not a deal at the list price. There may be a major issue with the house that you can't see from the outside or in any of the images posted in the listing.

If you haven't visited a local REIA yet, that would be a good way to find out what percentage of ARV people are buying at in your area. It's also a great place to ask about that particular property. There will be experienced investors at the REIA who have likely made offers on the property and can tell you why they're not interested in it at the list price.

https://www.biggerpockets.com/renewsblog/2014/02/1...

Crystal Em · Answer

Lenzy, the house has been on the MLS entire time. It was listed by the bank and can be found as an active listing on Zillow, Trulia, etc. This is part of why I'm so confused as to why it hasn't sold yet.

I should also add that other homes in the area, including both rehabs AND foreclosures, have come up for sale and sold while this house has seemingly had no activity.

Any insight on why a desirable REO property would sit for months?

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