Don't feel bad. I've been hearing the term for months but didn't have the guts to have it explained to me until yesterday. At our sales meeting , Ed Barrett (the unofficial King of Customer Service from Salem Five) came and gave our agents a little mortgage primer/2011 forecast. One of the opportunities he highlighted for the coming year is the shadow inventory.
Described loosely, shadow inventory refers to the properties that are not actually on the market yet, but probably will be soon. Specific to our market here on the Cape, Ed's prediction is that much of our shadow inventory is distressed property (i.e. short sales, foreclosures and other troubled mortgages). This was a little surprising to me, as Cape Cod has already started to demonstrate evidence of economic recovery. However, as Ed pointed out, foreclosure numbers lag behind other economic indicators like unemployment, etc. According to other experts, Cape Cod's upcoming distressed sales are more specifically going to include more luxury properties than in the past.
Having familiarity with the concept of shadow inventory (or any other economic phenomenon), sellers can tune into what kind of competition they can expect, buyers can position themselves in such a way as to take advantage of unique opportunities, and Realtors can appropriately target their marketing and education efforts. Knowledge is power, and ignorance has an easy cure.
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