Tag Archives: foreclosure properties

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.

Foreclosed Property with Power Purchase Agreements

A Power Purchase Agreement, or commonly referred to as a PPA, is an agreement in which home and business owners, along with nonprofit and government groups, have a photovoltaic (PV) system installed on their property by a third party developer who typically owns, operates, and maintains the PV system and the property owner, or host, purchases the power that is produced by it. Depending on the agreement, there is usually no upfront cost for the host of a PPA and the agreement typically results in predictable electric bills and overall monthly savings. The right to receive the electricity is tied to the ownership of a property and thus is transferred with the title of the property whether it is a voluntary transfer or a foreclosure.

Many solar companies are doing property due diligence prior to signing a PPA to ensure the host who is signing is the owner of the property and that the property isn’t in the process of foreclosure. The reason for this is due to the fact that most property owners are paying off a mortgage to a bank when they sign a PPA and if that property owner were to fall behind on their payments then the bank would have the right to foreclose on the property. When a foreclosure occurs, the bank can then take the land, the house or building on the property, and all permanent fixtures attached to the house or building. According to Solar PPA Protection in Foreclosure, if the PV system is separate property, aka personal property or chattel, then the solar company can repossess it.  If the PV system is deemed a “fixture” then the bank that is foreclosing the property has the rights to the system. When this happens the solar company not only loses the ongoing energy payments they were receiving but also the money and resources it took to install the system itself.

It is recommended that any third party developer entering a PPA have a title search done on a property. A title search would generally help the developer protect their investments, assuming that, if a foreclosure is in the foreseeable future, they would either not proceed to enter the Power Purchase Agreement or they would ensure that the system is considered separate property so they could repossess it if a foreclosure were to occur.

Tips for Getting the Best Value on Foreclosures

Although foreclosures have seen a recent dip in the market, a valuable return can still be made when investing in them and those interested in purchasing foreclosures should know the smart way to buy them. Whether you are buying a foreclosed house for your personal use or as a real estate investment you should know how to get the best value for the property. There are typically three stages at which one can buy a property during the foreclosure process. The first stage is known as a pre-foreclosure. This is when an individual can buy a property before the foreclosure is officially finalized and the homeowner is forced out. The second option is buying at a public auction. At this stage of the foreclosure the property has been sent to the county where a neutral third party, such as a trustee, will carry out the public auction. The third option is to buy post foreclosure. This occurs when there is not a higher bid than the default amount during the auction so the property is acquired by a lender. If a bank takes the property to resell they will list it with a real estate agency, this is then known as an REO, or Real Estate Owned.

Now, here are a few simple tips for getting the best value for a house during the foreclosure process.

ADDED RISK IF PROPERTY HAS NOT BEEN SEEN

A property is still owned by the homeowner up until the point of auction. Thus, when biding on a foreclosure at auction, you typically cannot go inside the house to examine its’ condition. This can potentially be an added risk. Owners who have had their houses foreclosed couldn’t keep up with their payments so they most likely couldn’t afford to upkeep their home. A foreclosed house can have severe water damage, ripped out carpeting, holes in the walls, or be stripped of kitchen appliances. These, and any other unexpected expense, are now costs the new homeowner will have to incur. Therefore, unless you have had the opportunity to see the interior of the home, it is advised that you set your maximum bid amount based on the assumption that there is damage that will need to repaired.

FIND OUT IF THERE ARE ANY LIENS ON THE PROPERTY

When buying a foreclosure, unexpected liens can arise that are not recorded or that you simply are not aware of. The easiest and safest way to be sure if there are liens on a property is to contact a title search company to perform a title search on the property for you. Another option would be to do some investigating of your own by reviewing the property records at the county recorder, clerk, or assessor’s office. Often time’s real estate agents are not fully aware of all liens so you should be sure to check, whether it be through a professional title abstractor or done yourself, before buying a home. To learn which liens are often unknown to real estate agents watch this short video, 8 Most Common Hidden Liens on a Property. If you are going to perform the liens search on your own check out this short tutorial for details, How to Search For Free Lien Records for Real Estate.

ESTIMATE REPAIR COSTS

Foreclosures tend to require extensive renovation and are generally sold as is so you should not expect a discount for repairs. Before purchasing a foreclosed home, it is a good idea to hire a home inspector to estimate the costs required for the repairs. Keep the estimated costs you receive from the inspector in mind and even add an extra 10% to your repair budget. This will help you stay closely within your overall budget. Again, this is not always possible for a home in foreclosure and your maximum bid should reflect your ability to bear this risk.

KNOW THE SALES PRICES OF COMPARABLE HOUSES IN THE AREA

When purchasing any real estate you should look at comparable properties, aka comps, and their recent sales prices. Robert Jenson, owner and founder of the Jenson Group at RE/MAX Central in Las Vegas says people really have to look at the comps in today’s current market conditions and write a competitive offer based on that. Sometimes the bank prices the homes really low, and the home will have multiple offers over list price within hours. Sometimes it’s priced too high, and you can come in lower. A lot of times, buyers will come to me and say, ‘We want to write offers for half price.’ It just doesn’t work that way." By researching what similar homes are selling for at market value, you will be able to establish an accurate range of prices to base an offer or bid on.

High-end Foreclosures Skyrocket as National Rates Come Down

Recently released data from RealtyTrac, shows that overall foreclosure rates are trending down 23% through October 2013, but foreclosure activity on homes in the $5 million-plus range is up 61% from the same period last year.  Although these high-end properties account for a tiny portion of the market, less than a total of 200 in 2013, the financial impact on a foreclosing lender can be significant.

“A home selling for $5 million or above represents the ultra-luxury end of the market, and so far in 2013 we’ve had 34 properties close over that price with the average sale being $7.7 million,” said Emmett Laffey, CEO of Laffey Fine Home International, covering the five boroughs of New York. “Any foreclosure properties in this type of ultra-luxury market usually get purchased very quickly since there is one thing all super rich buyers’ want, an outstanding deal on a real estate transaction, and in most cases foreclosures of this magnitude come with several million more dollars of built-in value.”

Even though California high-end foreclosures are down from a year ago, RealtyTrac still reported that “Florida and California together accounted for more than 60 percent of all ultra-high-end foreclosure activity” in 2013.

Leading the market for luxury home foreclosures is Miami, Fort Lauderdale, and Pompano Beach in Florida.  Other national hotspots include Los Angeles and Orange Counties, California; Fulton and Cobb Counties, Georgia; Orange County, Florida; Long Island New York and Northern New Jersey respectively.