Real Estate’s Underutilized Shadow Markets



Have you read in real estate news about the so called shadow market? This is the market segment normally defined as the homes where the owners have defaulted, but the bank has not yet completed the foreclosure process. And beneath this underlying market, there still exists an even more nebulous shadowy segment beneath this one. We live in a real estate world now where even experts are baffled by uncharted territories.

Shadow markets are hard to utilize

Studying shadow markets could be a game changer

Shadow markets as typically described occur because the lag between default and foreclosure can be range from 90 days to years, depending on the circumstances – and bank’s ineptness, owner bankruptcy, unsuccessful short sale transactions, and other factors may keep very marketable homes off the market. Even once foreclosure is complete, it is often another few months before these houses get back on the market.

The shadow market is housing inventory purgatory out of which it seems someone could benefit, but hardly anyone ever does. But all of this is well documented, if circuitous to understand and navigate. It is really impossible to venture more than a guess at the number of properties in this shadow market at any given time. Real estate pundits don’t often look beyond this definition of the shadow market.

As a real estate professionals, we look at housing listing and sales activity, but how many out there have noticed yet another shadowy area? Not too many I will wager. Not all real estate listings sell obviously, and when the listing period expires, the home seller makes the decision to re-list with their current agent, find a new agent, or keep the house off the market.

The unsold home margin

Your margin could be out there hidden under a shadow

A sizable, but unknown number of non-relisted expired listings therefore exist underneath all the other numbers of home metrics, because the intentions of the sellers are unknown.  Did they give up and resolve to stay in their homes?  Are they itching to get back on the market?  Are they contemplating the more drastic route of default? Only they know for sure. Where are leads to this info when you most need them?

We know just as little about the expired market segment as we do about the pre-foreclosure shadow market, and the growing backlog of expired listings could have as much impact on the on the overall market, depending on the sellers’ decisions in the future. What happens when sellers give up? What does this mean for the potential buyer? Is anyone able to “see” the real real estate situation? More questions than answers, I know. Next we need to look into ways in which this new shadow market can be exposed and flipped into an asset rather than and unseen liability.