2015 Housing Market – Another Year Of Slow, Incremental Growth

canstockphoto21442914February 2015 had the lowest level of foreclosure filings, which includes default notices, scheduled auctions and bank repossessions, since July 2006. At 101,938 foreclosure filings in the U.S., activity was down 4 percent from the prior month and had decreased 9 percent from a year ago. Despite the national decrease in foreclosures in February, looking at year-over-year numbers, 22 states reported increases in foreclosure starts. Additionally, 25 states reported year-over-year increases in foreclosure auctions and 15 states reported increases in REOs.

When reviewing the housing market over the past year it is safe to say that it was a decent, but not great, year. This can be attributed to the low level of properties for sale in many markets in the U.S., which foreclosure rates specifically contributed to. The continued decline of distressed properties, since its peak in 2010, has limited the available inventory in the housing market.

Other factors that contribute to the current inventory of existing homes being lower than it should are homeowners not having enough equity to sell their homes right now to move to new properties or them being under/behind on their mortgages.

So what does this mean for the housing market looking forward?

In order to forecast what’s going to happen in the rest of 2015’s housing market, we should apply the concept of supply and demand. In regards to homeowners not having enough equity, Rick Sharga, executive president at Auction.com, seems to think, “As home prices increase, and borrowers pay down their balances, this situation will ultimately resolve itself.” In an article by RealtyTrac, Rick goes on to say, “On the new home front, builders continue to proceed with caution – January single family housing starts actually fell from relatively weak December numbers – and the homes being built tend to be higher-priced than what entry-level buyers can afford. Until these situations change, low inventory will keep sales relatively flat, and keep prices relatively high.”

Additionally, Daren Blomquist, vice president at RealtyTrac, gave his two cents on the matter saying, “Given that August 2006 was the peak of the housing bubble, this eight-and-a-half year low in foreclosure activity is a significant milestone and a sign that nationwide foreclosure activity is on track to return to historic norms this year — and is possibly even headed below historic norms given the skinny-jeans-tight lending standards over the past five years. In markets where foreclosures were processed more efficiently we are seeing foreclosure numbers now below pre-crisis levels in some cases. Conversely, the cleanup of deferred distress is continuing in markets where a logjam of in-limbo foreclosures is still lingering from the housing crisis — as evidenced by rebounding foreclosure activity in those markets.”

Due to the pricing of new homes not being the targeted price-point of entry-level buyers and the recent activity and inventory of foreclosures, the U.S. can expect the housing market to be relatively weak for the rest of 2015, or rather, another year of slow, incremental growth.

Zombie Foreclosures Are Taking Over The Market

As of February 2015, RealtyTrac reported that 25 percent of all active foreclosures were zombie foreclosures. The Consumer Finance Protection Bureau (CFPB) is considering taking action because they see the rates of zombie foreclosures as a large enough issue that might hurt the market. Daren Blomquist, the vice president at RealtyTrac, said, “While the number of vacated zombie foreclosures is down from a year ago, they represent an increasing share of all foreclosures because they tend to be the problem cases still stuck in the pipeline.”

So, what is a zombie foreclosure? A foreclosure is categorized as “zombie” when a property is vacated by the homeowners prior to the bank repossessing it. This occurs when a bank begins a foreclosure but then abandons it and fails to alert the homeowners that they are still responsible for that property. Often times, the borrowers, or the owners, are under the impression that the property has been foreclosed because they receive a notice and they then move out but later come to find out the lender never followed through on their foreclosure. So, in theory, the borrower still owns the property. They may have moved to another house but they are unknowingly accruing interest, penalties, maybe even liens, on the property which can lead to large financial deficiencies building up without the owner being aware.

The CFPB has previously communicated ideas to help resolve the zombie foreclosure issue. According to Michelle Conlin’s article CFPB Targets “Zombie” Foreclosures After Reuters Report, some of the CFPB’s ideas include, “creating a national definition of ‘abandonment’, hastening the foreclosure process so vacant homes can more quickly be transferred to potential owners and non-profits, and creating a national registry of zombie properties.”

In the meantime, zombie foreclosures continue to be an issue and take over the market. Daren Blomquist of RealtyTrac admits, “The states where overall foreclosure activity has been increasing over the past year — counter to the national trend — tend to be states with a longer foreclosure process more susceptible to the zombie problem.”

The five states that reported the most zombie foreclosures, as of February 2015, were Florida, New Jersey, New York, Illinois, and California. At 35,903 zombie foreclosures, Florida had the highest number of any state and they accounted for 26 percent of all foreclosures in Florida. The state with the second highest amount of zombie foreclosures was New Jersey at 17,983 which was an 109 percent increase from a year ago. New York had 16,777 zombie foreclosures, representing 19 percent of all residential properties in foreclosure while Illinois had 9,358 and California had 7,370 zombie foreclosures.

If your property was foreclosed but you have any doubts about the process not being completed or you see a property that looks like its abandoned, it may be worth determining whether or not that property was actually foreclosed by the bank or still owned by the prior borrower. Examining the land records or running a title search on the property could inform you if a foreclosure was completed or not. If you have any questions regarding this subject you can reach us at our website at www.titlesearch.com.

3 Ways To Purchase Foreclosure Properties

home foreclosureInvesting in foreclosure properties is a popular way for investors to leverage real estate assets for higher profit. There are two to three ways in which to buy foreclosure properties. The first way is to purchase it from a sheriff’s auction. This would be in a judicial state where the foreclosure is done through the court system. The second way is directly from a lender whose foreclosed and taken ownership of that property. The third way to purchase is from a lender’s representative. This would be in a non-judicial state where it goes through a trustee. These cases are usually done by law firms that auction off the properties.

As an investor it’s important to understand what your property rights position is relative to a foreclosure. At a foreclosure auction, that auction process may wipe out some encumbrances on the property, but it may not wipe out all of them. For example, tax liens or government liens typically survive most types of foreclosures, but a second mortgage line of credit or even a credit card judgment may not.

When bidding at foreclosure auctions, it’s a pretty common mistake for investors to bid on a second mortgage when, unknowingly, the first mortgage is still in place. Then, that first mortgage becomes the obligation of the investor. That’s why understanding which claims against a property exist at the time of the auction and which claims will be extinguished by that auction process is important. These are things you’ll want to look at in your own particular county and state because the law regarding them varies by location. There are usually statutes that describe which items will survive a foreclosure and which won’t.

The second option of buying a foreclosure is directly through the lender who has foreclosed and owns that property. The lender may have the property listed with a realtor, an REO department, or a short sale department. Whatever the case, dealing with a lender typically gives you a couple advantages. First of all, they may have done some rehab on the property. Secondly, you probably have some time to inspect the property, as is opposed to buying at auction where you typically can’t look inside. However, with those advantages comes a higher price point. Usually, because the property is more appealing, investors bid more for it. Also, if it’s a straight sale the lender will probably price it higher because they’ve incurred some expenses from those additional services.

The third option is buying a foreclosure through a non-judicial state where a trustee is holding the auction. Typically, in these cases, you may have some access to the property because it is a private sale. You also may have different payment terms, which is another very important aspect to look at. Sometimes a sheriff’s sale requires a cashier’s check in the full amount within 24 hours which means having the funds ready to go at a moment’s notice. Other times a 10 percent cashier’s check is required at the time of the sale and 30 days are allotted to pay the rest. Typically there are no contingencies on these purchases, meaning once someone has bid on the property, there is no way to get out of it. It doesn’t matter if there are liens on the property or it has extreme water damage inside. It is an as is sale.

Performing a good amount of due diligence and knowing the risks of buying a foreclosure property is key. It is an excellent way to purchase a property for 10, 15, or 20 percent less than the typical market value and save on closing costs. Instead of spending thousands of dollars on closing costs you may only want to spend a couple hundred on some due diligence, title research, or inspections and be ahead of the game versus somebody who is buying it retail through the MLS system.

Whether you are an experienced investor or a first time foreclosure auction bidder looking for more investment information, you should attend the webinar Foreclosure Auction Buying – Concepts & Tips for Real Estate Investors for FREE on March 18, 2015. You will gain valuable insights into the title search process and how to best utilize a title search report in foreclosure auction buying. The webinar will be presented by David Pelliginelli, founder and president of AFX Research. Topics will include locating properties with the highest ROI, mitigating risk by reducing liens in advance, reducing up-front costs for lower out of pocket, projecting future sales price from prior records, and 4 categories of auction buying due diligence: Title, Condition, Valuation, & Terms.

How Liens Are Prioritized & Cleared From A Property Title

FedTaxLiens ImageThe order of priority for claims against a property is typically done by a number of factors that are set by the state or county statute of the property. The most prevalent one found in almost every county is a race notice factor. This means the priority is determined chronologically based on whatever gets recorded first. If a specific lien against the property is record on a certain date, any additional lien or mortgage that is recorded after that have secondary priority and so on. There are many cases  where two mortgages are done at the same time, a first mortgage and a second mortgage on the same piece of real estate. So, in general, you’ll find that that race notice factor kicks in so that an earlier recording has a priority over later recording. However, there are exceptions to that rule.

Certain types of liens, such as government issued liens, have automatic priority by statute. For example, if a tax bill is not paid on a piece of real estate then the tax bill has first priority on claims against the property. Additionally, some other types of liens such as mechanics liens may have some priority because they can’t get wiped out by a foreclosure.

So how does one clear a lien on a property title? Even if a lien is paid off and the debtor has paid the amount owed under that lien or mortgage, the lien still remains on the property until the creditor files a lien release saying it’s off the title.

Paid in fullA lien release document is a separate recording which cancels out a previously recorded lien or encumbrance on that property. For example, if a lien is filed on a property and later on that lien is paid off or removed from the property, the original lien document remains in the same place, or book, it was recorded originally. So, even if the lien has been cleared and you’re looking through the book which has it recorded, you’re going to see lien. It’s not going to be removed or get stamped paid and clear. Nothing is actually going to happen to that document and it will remain in that book. In fact, it is illegal for a county recorder to alter or remove a document. It must remain in place.

For a lien to be officially, legally, removed from a property a separate document, a lien release, must be filed. This filing could be several years later and in a separate book which corresponds to the original lien. It will state that the property is now released from a claim or cloud on that title and will reference what book and page the lien was recorded.

To properly get a title search abstracted correctly you have to make sure both documents, the original lien and the lien release, are reviewed, that they match up, and that it is a full release. A lien release could be a partial release or it may be a contingent release. The documents must be reviewed in their entirety to make sure they completely wipe out the underlying lien.

The same holds true for a mortgage. Mortgages can be released, partially released, or reduced in value. Simply looking at the release to see that it’s there is not enough to ensure that it’s gone from a cloud on title.

At the same time it’s also important to make sure the information matches up correctly. Just because the same lender and the same holder are on both documents doesn’t necessarily mean they correlate to one another. You want to read through the details of the release to ensure that it matches the original recording. Be sure to double check that the book and page match, the legal description matches up, and the amount matches up, basically that everything is the same so you know that it’s cleared out.

January Foreclosure Activity Increases Due To High REOs

Foreclosure houseIn 2014, foreclosure filings totaled 1.1 million making it the lowest annual total since 2006, down 18 percent from 2013, and down 61 percent from its peak in 2010. Despite the annual amount of foreclosure filings being a record low for the past 8 years, the number of U.S. foreclosure starts increased 6 percent in December 2014 from the previous month.

“The U.S. foreclosure numbers in 2014 show a foreclosure market that is close to finding a floor and stabilizing at a historically normal level,” said Daren Blomquist vice president at RealtyTrac. “But a recent surge in foreclosure starts and scheduled foreclosure auctions in several states in the last few months of 2014 indicate that lenders are gearing up for a spring cleaning of deferred distress in the first half of 2015 in some local markets.”

Foreclosure filings, which include default notices, scheduled auctions and bank repossessions, in the U.S. this past January totaled 119,888 properties. This is a 5 percent increase from December 2014 but a 4 percent decrease from a year ago. The main cause of the 5 percent increase can be attributed to the number of REOs, or rather bank repossessions, which increased by 55 percent making it the highest monthly total of REOs since October 2013. This increase also indicates that the “spring cleaning” Daren Blomquist anticipated got off to an early start in 2015. Daren also said, “the number of future foreclosure auctions scheduled continued to increase in many states, foreshadowing more foreclosure spring cleaning to come in the next several months in those.”

Other highlights for the foreclosure market in January 2015 include 21 states posting an annual increase in scheduled foreclosure auctions. There was an 8 percent increase in properties that were scheduled for a foreclosure auction. Foreclosure starts decreased 18 percent with 48,838 U.S. properties starting the process. Additionally, Florida, Nevada, and Maryland reported the highest foreclosure rates. Florida was up 24 percent from December and Nevada increased 38 percent. Although Maryland’s foreclosure activity decreased since December it still posted third highest in the U.S. with one in every 611 housing units with a foreclosure filing.

 

Important Elements Of Commercial Property Title That You Need To Know

130In theory, a commercial property title search would run exactly the same way as a residential property. The records are generally in the same location and the logic behind running a search is the same in the sense that the same deed books and files are being examined. However, there are a couple differences to be aware of.

First of all, there may be UCC filings on a commercial property to be conscious of, which are less likely in a residential property. A UCC filing governs commercial transactions and essentially states that an individual claims an interest in someone else’s property, typically as collateral for a debt. These are filed in the Secretary of State’s office which allows the creditor to have a security interest in the debtor’s personal property. There could also be leasehold interests, which are created by a written lease and gives someone the possession and use of a property for a stated period of time.

A name frequency factor could also exist. Normally, the name on a commercial property is a corporate entity, not an individual. Now, this corporate entity may have several variations of the name. Sometimes it may be listed as Inc., while other times it may be written out as incorporated. There could also be abbreviations of that corporation. In some cases, a parent and subsidiary corporation could own the building and operate the business. Thus, with all of these variations, making sure that the correct records are analyzed for that title search is an important part in making sure a commercial property title search is performed correctly.

imagesIn addition, there can be records on a commercial property which normally aren’t seen on a residential property. For instance, blanket mortgages that cover all properties that a particular entity may own. There may also be common deeds between multiple parcels at that commercial location. For example, a house is normally only a half-acre or less with a single building or structure on it. A commercial property may be larger in size, have more complex ownership, or have multiple complex structures on that parcel. In addition, there may be a variation of names on the tax assessor versus the ownership. In many cases, a commercial property owner will have a tax preparer or agent handle their real estate tax payments for them, whose name is then on the tax assessor’s site. Therefore, a person listed on the tax assessor is not necessarily the owner; they may simply be an agent that handles paying the taxes.

Another variable that can be found with commercial real estate is a sale and leaseback. This occurs when an individual who owns a property sells it to a corporation and then leases it back to the entity that’s actually running the business in that location. When this occurs there can be clauses for the tenant which affects the property. There may be purchase option clauses or clauses to make sure that the property is maintained with certain zoning.

Lastly, a big factor in commercial property title search is the variation of types of property. For example, a single barber shop in a small building requires much less complex research than a mall that may have multiple parcels or the Empire State Building which may get into ground leases and air rights and all other types of factors.

So, when getting a title search on a commercial property, be sure to speak with a provider who has the experience, knowledge, and capability of performing the title search to the level that is needed for commercial property.

Free Webinar: Concepts and Practical Application of Property Title Searches for Insurance Claims

Many carriers are now requiring a property title search on large loss homeowners or commercial claims. This research will verify property ownership, current mortgagee, check for other major encumbrances (such as Federal Tax Liens) or foreclosure activity.

AFX invites you to join us in reviewing the title search process and how to analyze the final title search report by attending our free webinar, “Property Title Searches: Concepts and Practical Application for Insurance Claims.”

David Pelligrinelli will be the lead presenter. He is a Board Member of the National Association of Land Title Examiners and Abstractors, an expert witness for the Department of Justice on matters of recorded title documents, and a licensed Private Investigator in Florida, California, Washington and Michigan. Dave is one of only 53 national certified title examiners, serving every county in every state, and his corporation, AFX, has performed over one million searches. Having been in the title industry and private investigations for twenty years now, Dave is an expert on topics related to such and has been featured in The New York Times, Wall Street Journal, Forbes, The Robb Report, and several industry publications.

The webinar is scheduled for Thursday, February 5th at 11am EST and will be approximately 30 minutes. Register for this free webinar with the link below:

https://attendee.gotowebinar.com/register/7584615190881640962

Topics covered will include:

  • What is a title search: The process of a title search and the official document generated by the search, a.k.a. “the abstract report”
  • Why do a title search
  • How to read a title search report / what the report looks like

U.S. Foreclosure Activity for November 2014

U.S. foreclosure activity decreased nine percent this past November from the previous month, according to RealtyTrac’s Foreclosure Market Report. A total of 112,498 properties were reported having default notices, scheduled auctions, and bank repossessions. A little less than half of those properties started the foreclosure process in November while the other half had already begun the process. The number of foreclosure auctions was down sixteen percent from the prior month and total repossessions were down ten percent.

The states with the highest foreclosure rates were Florida (1 in every 462 housing units with a foreclosure filing), New Jersey (1 in every 478), Maryland (1 in every 581), Delaware (1 in every 693), and Utah (1 in every 750).

Florida was the only state, out of the five states with the highest foreclosure rates, to see a monthly decrease in foreclosure activity. Thirteen out of the last fourteen consecutive months Florida has had the highest foreclosure rate in the U.S., yet the state has seen an annual decrease of fifteen percent.

When asked about the Foreclosure Market Report for November 2014, the Vice President of RealtyTrac, Daren Blomquist said, “The housing market is struggling to find the new normal when it comes to a tolerable level of foreclosure activity in this post-Great Recession economy. Finding that new normal requires striking a balance between too much loan risk, which would result in another housing meltdown, and too little risk, which could result in a stunted recovery. Foreclosure rates on 2014-originated loans are actually higher than 2013-originated loans nationwide and in many markets, indicating that lenders are open to a slightly higher level of risk than we’ve seen over the past five years of extremely tight lending standards, but it’s unlikely that lenders will dial up that risk level too quickly going forward given that many are still dealing with working through a lengthy and messy foreclosure process on risky loans from the last loose lending spree.”

Will the U.S. housing market be able to “find the new normal” in foreclosure activity and reach the required balance between too much and too little loan risk? Only time will tell.

Title Insurance Policy: Coverage, Costs, & Current News

insurance policyA title insurance policy is similar to other types of insurance policies you would buy, such as car insurance, homeowner’s insurance, or health insurance. They cover for risks, defects, or damages to something in the future, in this case the property title. A title insurance policy is a one-time premium that covers you as long as you own the property. The policy is sold by an insurer certifying that if a title issue arises on a property, they will pay to correct it or pay the maximum the policy was for. Title insurance does not guarantee repair of a title defect or cloud on title, but it does provide financial compensation for the policyholder if a defect is discovered in the future.

So what goes into a title insurance policy and what does it cover? First, a title search must be run on the property to search for existing liens, mortgages, encumbrances, or clouds. If any are found during that title search they will be excluded from coverage and be listed on page one of that title insurance policy. The title insurance policy would cover if something is hidden on the property, for example, a forged signature on a deed fifty years ago, or claims against the property that the title search missed.

After the initial title search is complete a few more reports are analyzed. Usually the title insurance company will require a property survey to find out where the boundaries of the property actually are. Next, a credit report on the current or prior owner will be run to make sure there are no pending judgments or pending lawsuits against the owner that could turn into a lien against that property. Depending on the property and the insurer, some other types of research might be done additionally; otherwise the insurer will complete the policy.

The turnaround time for a title insurance policy is typically around 30 days. This includes the time it takes to get the underwriting and background checking complete on that title insurance policy.

The cost for a title insurance policy varies. It is based on the purchase price of the property and it is based on whether or not the property is being financed. If the property is being financed it will most likely cost a little extra to cover the lender in addition to covering the owner. However, the cost is essentially based on the selling price of the property which is usually going to be a few hundred dollars per thousand. For example, if the property was $500,000 then the policy could be a $1,500 or $2,000 premium altogether. Yet, keep in mind that the title insurance company will probably want to do the closing for that transaction so you may also incur some closing costs or escrow fees on top of the title insurance policy.

shredded-document-fraudWhen choosing a title insurance company and insurer, be sure to do your due diligence beforehand. There have been many cases of title insurance fraud in the United States. For example, the article by Moe Bedard titled FBI Charges Pennsylvania Lawyer in Title Insurance Fraud Scheme describes a case in which Susan Kevra-Shiner was recently charged for fraudulently offering title insurance policies to approximately 76 homeowners and/or lenders and receiving $72,000 from fraudulent title insurance premiums.

If you would like more information regarding title insurance policies, check out the following videos: What Goes Into a Title Insurance Policy, Title Search vs. Title Insurance, Insurance Underwriting Standards and Title Searches.

August 2014 – Foreclosure Filings Increase Seven Percent In U.S.

Foreclosure houseU.S. foreclosure activity increased seven percent this past August. According to RealtyTrac’s U.S. Foreclosure Market Report for August 2014, “foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 116,913 U.S. properties in August, an increase of seven percent from the previous month but still down nine percent from a year ago – the smallest decrease in the last 47 consecutive months of year-over-year declines in U.S. foreclosure activity.” The report also shows one in every 1,126 U.S. housing units with a foreclosure filing during the month. The states with the highest foreclosure rates are Florida (1 in every 400 housing units with a foreclosure filing), Maryland (1 in every 532), Nevada (1 in every 524), New Jersey (1 in every 553), and Georgia (1 in every 582), this past August.

At 51,192 scheduled U.S. property foreclosure auctions during the month, we see an increase of one percent from a year ago but a decrease of one percent from the prior month. This number of scheduled foreclosure auctions increased in 24 states, including Colorado, Oregon, Connecticut, New York, and Oklahoma.

If we break down the current distribution of foreclosures based on the number of active foreclosure homes in the U.S, pre-foreclosures make up 33.7%, scheduled auctions make up 43.8%, and bank repossessions make up 22.5%. Compared to July 2014, the amount of new foreclosure filings is up 12%.

According to Daren Blomquist, the Vice President at RealtyTrac, “The August foreclosure numbers demonstrate that although the foreclosure crisis is well behind us, the messy business of cleaning up the distress lingering from the housing bust continues in many markets. The annual increase in foreclosure auctions — the first since the robo-signing controversy rocked the foreclosure industry back in late 2010 — indicates mortgage services are finally adjusting to the new paradigms for proper foreclosure that have been implemented in many states, whether by legislation or litigation or both.”

 

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