One in four homes sold in Q1 were distressed properties


New data from RealtyTrac shows falling prices and increasing frequency of sales of distressed properties, with improving process times for aggressively priced short sales.

Short sales and foreclosures

According to RealtyTrac, one in four homes sold in the first quarter of 2012 were distressed properties, reaching 26 percent of all sales, up from 22 percent the previous quarter. RealtyTrac data also reveals that foreclosure homes sold for an average of $161,214, a 27 percent discount compared to non-distressed homes sold. Short sale homes accounted for 12 percent of all homes sold in the first quarter, for an average price of $175,461, the lowest level since RealtyTrac began tracking foreclosures seven years ago.

“Foreclosure-related sales picked up in the first quarter, particularly pre-foreclosure sales where a distressed homeowner is selling to avoid foreclosure — typically via short sale,” said Brandon Moore, chief executive officer of RealtyTrac. “Those pre-foreclosure sales hit a three-year high in the first quarter even as the average pre-foreclosure sales price dropped to a record low for our report.”

Moore continued, “Meanwhile the average price of a bank-owned home is stabilizing and even increasing in some areas where a slowdown in REO activity over the past year has resulted in a restricted supply of REO homes available. Still, REO sales did increase on a quarterly basis in 21 states, indicating that lenders are still working through a bottleneck of unsold REO inventory in many areas.”

Processing times, regional performance

During the first quarter, it took an average of 306 days to complete a short sale, and 370 days to process a foreclosure. “Lenders are approving more aggressively priced short sales, which in turn is resulting in more successful short sale transactions,” Moore said.

As short sales and foreclosure sales rose in the first quarters, REOs fell 15 percent over the year, accounting for only 14 percent of all sales during the period.

Nevada, where housing bubbled during the boom and sank during the bust, had more distressed property sales than any other state, followed by California and Georgia, RealtyTrac said.

Among the nation’s 20 largest metropolitan statistical areas, those with the biggest annual increases in pre-foreclosure sales were Atlanta (78 percent), Detroit (75 percent), San Antonio (74 percent), Sacramento (70 percent), and Dallas (69 percent).

Metro areas with the biggest annual increases in REO sales were Minneapolis (33 percent), Boston (30 percent), Philadelphia (22 percent), Atlanta (15 percent), and Chicago (13 percent).

via: Tara Steele

What Foreclosure Wave? False Alarm?

repossessed houses for saleSince I am involved in the John L. Scott Foreclosure Team, I see what happens every Friday at auction. The amount of homes sold at auction is pitifully small. Those I work with don’t see a flood coming. The banks are starting to realize the folly of some of their choices.

Many housing experts for months have been warning a foreclosure wave would soon flood several markets throughout the country. But was it all a false alarm?

Recent surveys have shown that foreclosure sales have dropped to their lowest point in more than two years. And while according to March data, 8 percent more homes did enter the foreclosure process from the previous month, that number is down more than 30 percent from a year ago, according to Lender Processing Services.

CNBC real estate reporter Diana Olick notes that it could be another delay in the foreclosure system “as banks try to modify more loans to meet some of the terms of the [$25 billion] servicing settlement. The foreclosure sales decline also appears to be exclusively in private and portfolio loans, which again points to the settlement.”

Meanwhile, banks are increasing their number of short-sale transactions, and some surveys have shown that short sales are actually now outpacing foreclosure sales — the first time that’s ever occurred.

“Lenders are increasingly recognizing that short sales may be a better alternative for them than foreclosure,” RealtyTrac’s Daren Blomquist told CNBC. “This trend began in markets with stronger demand and where the distressed inventory tends to be newer homes (Phoenix, Los Angeles, Las Vegas), but the trend appears to be spreading to other markets like Atlanta and Detroit.”

Source: “Flood of Foreclosures Still Fails to Materialize,” CNBC (May 2, 2012)

Distressed Sales Undercut Home Prices in 2011, Study Says

repossessed houses for saleA report released today says that home prices slid by nearly 5 percent last year, but also indicates that most of the decline was due to distressed sales.

CoreLogic’s December Home Price Index found that home prices fell 4.7 percent in 2011 compared with December 2010, marking the fifth consecutive year of the housing slump. But excluding distressed sales, prices only dropped by 0.9 percent in 2011. The discrepancy between the two figures highlights the foreclosure crisis’ obstructive effect on a market recovery

"Until distressed sales in the market recede, we will see continued downward pressure on prices," said Mark Fleming, chief economist of CoreLogic.

Since the housing bust battered the real estate market in 2007, 8.9 million homes succumbed to foreclosure, according to RealtyTrac

And millions more may share this fate. One expert estimated that, in addition to the 2 million homes already stuck in some state of foreclosure, 1.8 million more will join their ranks in both 2012 and 2013, The Huffington Post reports.

Foreclosure filings dropped dramatically last year, a market movement that would seem to indicate the beginning of a turnaround. But experts say the steep decline was not organic, and instead the result of government crackdowns on banks over alleged foreclosure abuses. The abuses include so-called "robo-signing," a practice where bank employees sign foreclosure documents without adequately reviewing them.

In 2011, distressed sales grew the most in Montana, Vermont, South Dakota, Nebraska and New York, according to the CoreLogic study. It also found that Nevada, Arizona, Florida, Michigan and California are the states that have seen the largest decline in home prices since the peak of the housing boom.

Nevada’s home prices have plunged 60 percent since the peak of the housing market, the report says.

If you are interested in knowing more about the foreclosure process and how to invest in real estate, call me 206-713-3244 or email me.

The World of Distressed Real Estate – Always Changing

strategy-102-real-estate1-pop_178Foreclosures, Short Sales, REO… The real estate market is full of confusing terms. With so much misinformation surrounding these terms, I want to update you on these distressed property types.

Short Sales have been all the rage lately, with sellers marketing properties at prices well below the rest of the market. Many people believe that short sales offer an opportunity for a good deal on real estate.

A short sale is the sale of a home for a price less than what the owner owes on the mortgage. The sale may close if the lender agrees to a “short” payoff in exchange for release of the bank’s lien on the property — hence the term.

REO stands for Real Estate Owned. It is a class of property owned by a lender, typically a bank, after an unsuccessful sale at a foreclosure auction (more on that below). If there are no interested bidders at auction, then the bank will legally repossess the property. Once the bank repossesses the property, it is listed on their books as REO – Real Estate Owned – and is categorized as an asset (non-performing).

foreclosureAs an REO, the bank will go through the process of selling the property on its own. It will remove some of the liens and other expenses on the home and sell it to the public. These can also be deals listed below the rest of the market (often in need of rehab).

Foreclosure is used when a power of sale clause exists in a mortgage or deed of trust in which the borrower pre-authorizes the sale of the property to pay off the balance on a loan in the event of owner’s default. The lender will attempt to sell the property at auction through a trustee, hence the term “Trustee Sale”.

There is typically a three month period between when a property goes into the foreclosure process and when the property is actually sold at a courthouse auction. During this period, the house is referred to as a "Pre-Foreclosure".

Auction buyers are required to have cash in hand on the courthouse steps. Because of this, foreclosures have often been limited to investors who can bring cash to the sale. Now, John L. Scott Foreclosures is making auctions available to home buyers and investors alike, providing the same experience you’ve come to expect from the industry leader, now in the foreclosure realm. There may be an opportunity for you to take advantage of the current market conditions and get a great deal at auction.

If you are interested in knowing more, please contact me at 206-713-3244, or email me.

How to Rebuild Your Credit After a Foreclosure or Short Sale

If you’re one of the millions of Americans who experienced either a foreclosure or short sales due the housing downturn, you might be left wondering where to go from here, when it comes to rebuilding your credit score.

Here is the information you must know about your credit, to best recover from a foreclosure or short sale.

Know How Things Ended

Though you may be relieved to have finally resolved your housing situation, don’t put it out of your mind just yet. Keith Gumbinger, mortgage expert says that knowing the final terms of the arrangement made with your lender plays a role in rebuilding credit. That’s because different defaulted home loan terms come with different ramifications to your credit score. Know whether you had a short sale (the lender allows you to sell the house for less than the balance on the mortgage, and may or may not require you to make up the deficiency), an involuntary foreclosure (you stopped making payments and the property, and potentially your assets, were seized), or you negotiated a deed-in-lieu of foreclosure (a voluntary process in which you “hand over” the deed to the lender, shortening the process and accompanying expenses), as well as the specific terms were agreed upon. When it comes to foreclosures and short sales, no two agreements are alike; the terms and conditions have different impacts on credit scores, how they are reported to the credit bureaus, and how long they take to “fall off.”

Confirm Where You Are Now

While short sales are often perceived as more “favorable” when it comes to defaulting on a home loan, FICO conducted a study simulating the aftermath of a foreclosure and a short sale, and revealed that in regards to credit score impact, there isn’t much difference between the two events. The real gauge, it seems, is in the starting credit score before the default took place.

FICO examined three hypothetical consumers with starting credit scores of 680 (customer A) 720 (customer B), and 780 (customer C). It found that despite whether the loan default was a short sale or foreclosure, customer C’s credit score was most impacted, indicating that the higher the credit score, the longer it takes to restore. Further, time is critical in rebuilding credit worthiness: a short sale with no deficiency balance will generally require at least three years before the credit score will increase. In the case of a foreclosure, the borrower must wait for at least seven years, and in some cases, up to ten, if a bankruptcy filing was involved.

Keep Credit Cards Under Control

After you have completed the foreclosure or short sale, request your credit report, which allows you one free credit report each year. Confirm that the report does not contain any errors, or reflect old debts that were paid off, and report any disputes to Experian, TransUnion and Equifax immediately. Ornella Grosz, author of Moneylicious: A Financial Clue For Generation Y says that one way to add points to your credit score is by paying off or lowering your existing credit card balances, and that  “about 30 percent of your credit score is made up from keeping balances low. The lower your debt-to-income ratio, the better.” John Ulzheimer, Mint’s credit columnist, also addresses this the post What Kind of Debt Pay-Off Boosts Your Fico Score Most.

Set up automatic bill pay on all of your existing credit accounts to make certain that creditors are always paid on or before the due date (don’t play with grace periods when you’re trying to rebuild credit). Or use the “Bill Reminders” feature on your account. If you have missed payments in the past, commit to starting good habits now. You can rebuild a score by paying every bill on time. On the contrary, skipped or late payments will reduce your credit score further.  Don’t attempt to raise your credit score by closing open credit lines, and know that removing the credit availability might actually hurt your score more after a short-sale or foreclosure, when access to new credit will be limited. (To potential lenders, closing the credit, even it you haven’t used it in years, makes it appear as though you are closer to being “maxed out” than you really are).

If you are left with no credit lines after the foreclosure or short sale and cannot find unsecured lines of credit, apply for a secured credit card, which are offered by many financial institutions and credit unions. Secured cards will require you to deposit funds with the creditor, in exchange for a credit card with a credit line of the same amount. (For example, if you put $500 down, that will be the amount of your secured credit line). If you use secured cards responsibly, they will help to slowly increase your credit score. Over time, the lender may raise your line of credit for “good behavior,” and eventually, you’ll be a candidate for unsecured credit again. However, Grosz cautions to read the fine print in the agreement for all secured cards, and confirm that you will not be charged additional fees for use.

Be Patient

Rebuilding credit after a short sale or foreclosure can be frustrating, but it is a process most impacted by being patient. Amber Stubbs, senior managing editor at says “the more time passes, the less a black mark affects your credit, and you won’t be able to make a full recovery until the derogatory item is off your credit report. Most derogatory items, including foreclosures, fall off seven years after the last activity on the account. If you manage other accounts responsibly while you wait, you should be in good shape by the time the foreclosure disappears from your credit report.”

Stephanie Taylor Christensen is a former financial services marketer based in Columbus, OH. The founder of Wellness On Less, she also writes on small business, consumer interest, wellness, career and personal finance topics.

How Long Is the Wait to Buy After Foreclosure?


MORTGAGE troubles won’t necessarily shut you out of the housing market forever.

As the economy and real estate market continue to struggle, millions of Americans have lost their homes through foreclosure, short sale (when a property is sold for less than is owed) or a deed in lieu of foreclosure (when the bank takes ownership without foreclosure).

Even if you think you never want to own a home again, clean credit is important. Bad credit can make it more expensive to rent. In some fields, especially financial services, it can make it difficult to find or keep a job.

How quickly your credit score improves depends in part on how the problem is reported, said Sarah Davies, a senior vice president of VantageScore in Stamford, Conn., a credit-scoring company that competes with FICO, the dominant scoring system.

In a short sale where the balance is forgiven and no deficiency is recorded in public records, recovery can be quick. “Simply paying all your debts on time could bring your score up to a reasonable range in nine months,” Ms. Davies said. “Reasonable” may not qualify you for a mortgage, but it will help in other situations.

A foreclosure or bankruptcy can weigh you down for years. FICO has found that it takes three years for a borrower to pull a score back up to a fair-to-middling 680 after a foreclosure, according to Joanne Gaskin, a company director. A borrower who started out with a near-perfect 780 score would take about seven years to climb all the way back.

But if someone has gone through foreclosure and still has a mountain of debt and not enough income, bankruptcy is worth considering, said Tracy Becker, the founder of North Shore Advisory, a credit-restoration company based in Tarrytown, N.Y. Sure, it will be another hard blow to your credit rating — but your credit most likely is already “wrecked,” at least for now, she said.

Bankruptcy can wipe out some debt. “The choices you make for the future about your financial options should be based on how bad your credit is,” Ms. Becker said. With one 30-day-late payment, for instance, “don’t assume your credit is ruined forever,” she said. It’s easier to recover from that than it would be to pull back from a string of late payments.

And what about a future mortgage? Fannie Mae, Freddie Mac and the Federal Housing Administration set guidelines for how long a borrower must wait after a “significant derogatory event.”

There are plenty of asterisks and conditions. But to generalize, the wait is longest after a foreclosure. Extenuating circumstances like a job loss, illness or divorce reduce the wait.

With such circumstances, Fannie and Freddie specify a two-year wait after a short sale, deed in lieu, or discharge or dismissal of bankruptcy, and three years after foreclosure. Without extenuating circumstances, waits can extend to four years after bankruptcy and seven years after foreclosure.

“The key is to avoid the foreclosure,” said Andrew Wilson, a spokesman for Fannie Mae. “That is what will help you be eligible for the shorter period.”

As for F.H.A.-insured loans, they are available three years after a foreclosure, assuming perfect credit afterward, and two years after a bankruptcy is discharged. After a short sale, there’s a three-year wait if the borrower is in default at the time of the sale and there are no extenuating circumstances. If the borrower was on time with all payments for 12 months before the sale, there is no wait specified, meaning that an F.H.A. loan might be available immediately. Among the conditions: A loan isn’t available if the short sale was to “take advantage of declining market conditions,” according to the F.H.A. Home Loan Handbook for lenders.

One caveat: All of this assumes you have income to pay off debts and stay afloat. It’s likely to be a long time before the mortgage market returns to an anyone-can-borrow-anything way of thinking.

resource: NY TIMES