Monthly Archives: March 2015

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.