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RISMEDIA, September 10, 2010—With the bulk of the subprime mortgage resets behind us as of early 2009, it may seem that the only direction to move is straight up toward recovery. Projections through 2012, however, show two more waves of resets on more than $1 trillion in Alt-A and Option ARM mortgages. Many owners of these properties may face foreclosure, as did subprime borrowers. This means the current shadow inventory is expected to remain at record levels. NAR estimates that there are 2.7 million delinquencies (90 days or more), foreclosures and REOs that have yet to reach the market. Absorption of these properties could take several years in some major markets.

It’s in everyone’s best interest—including the banks’—to release shadow properties onto the market in stages. Until the backlog is cleared, however, the housing market will continue to recover slowly. You can expect to see the market conditions you’re seeing today for the next few years. In the meantime, the real estate professionals who will succeed are the ones who are committed to being the experts in the tough times, too.

Move Out of the Shadows
If digging your heels in against entering the distressed property market seems more and more like a bad idea, it’s not too late to become an expert. Consider earning the Certified Distressed Property Expert (CDPE) designation, NAR’s Short Sales and Foreclosure Resource (SFR) certification, and the Five Star Institute’s Short Sale and REO certifications. Agents who have earned these credentials report a significant impact on their businesses.

Focus on Pricing with Sellers
The release of shadow inventory typically puts a strain on home prices, and can create a clogged pipeline of homes on the market. Pricing homes competitively is one of the simplest ways to buck that trend and stimulate demand among all types of buyers, including first-timers, repeat buyers and investors.

Make Buyers Aware
Although any of us would prefer this slump be behind us, there are positives in the market for qualified buyers. With interest rates so low and prices extremely competitive, there are opportunities for some buyers to find deals on previously unobtainable properties. Investors, in particular, will play a larger and larger role in moving inventory. It’s smart to reach out to all categories of buyers.

There is some good news in all this. By the end of 2012, the bulk of Alt-A and Option ARM resets will also be behind us. With no guarantees on how long it will take to re-establish balance in the market, it’s important in the short- and long-term that you’re prepared to face this challenging inventory head-on.

Margaret Kelly, CRB, is chief executive officer of RE/MAX LLC.

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