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Great News!! President Bush just signed into law the Housing and Economic Recovery Act of 2008.
Homebuyers will soon have access to more affordable financing, and first-time homebuyers (those who have not owned a home for three years) will receive a tax-credit to help them enter the market. For more details on all of the provisions in the new law, please use the link below.
See Tax Credit Chart
Summary of Housing & Economic Recovery Act of 2008
Because a large part of our business is helping people that are in foreclosure (and investors that purchase pre-foreclosure properties) we have been tracking the amount of default notices that are recorded in Shasta County. Since last year we have noticed a large increase in foreclosure notices. As an example, for the month of June 2008 we have seen an 88% increase in foreclosure filings compared to June of last year.
88 % increase in Notice of Default Filings compared to June 2007!
There were a total of 86 notices filed in June ’07 and 162 notices filed in ‘08
The amount of foreclosure filings for the week of July 18, 2008 through July 25 is 43, the week before was 42. At this rate, July is on track to meet or beat June’s number of 162 notice of default filings.
Whether it’s through pre-foreclosure sale, Bank Real Estate Owned (REO) or bankruptcy, most of the homes that enter foreclosure end up on the market. With our current inventory at 1,930 homes and an average of 167 homes selling over the last three months, inventory should continue to climb.
We feel these are important stats because; as the foreclosure starts go down there will be less distress sales on the market and will provide an opportunity for prices to stabilize.
Below is a chart of Shasta County housing data compiled July 24, 2008. This chart is a good indicator of year of year inventory levels.
|
|
New Listings |
Active Listings |
Sold Listings |
Months Inventory |
|
Jun-08 |
434 |
1933 |
151 |
12.8 |
|
May-08 |
408 |
1876 |
184 |
10.2 |
|
Apr-08 |
483 |
1830 |
166 |
11.02 |
|
Mar-08 |
425 |
1768 |
165 |
10.72 |
|
Feb-08 |
351 |
1775 |
115 |
15.43 |
|
Jan-08 |
412 |
1796 |
108 |
16.63 |
|
Dec-07 |
227 |
1901 |
119 |
15.97 |
|
Nov-07 |
324 |
1998 |
130 |
15.37 |
|
Oct-07 |
351 |
2140 |
160 |
13.38 |
|
Sep-07 |
383 |
2214 |
146 |
15.16 |
|
Aug-07 |
487 |
2249 |
214 |
10.51 |
|
Jul-07 |
517 |
2227 |
188 |
11.85 |
|
Jun-07 |
561 |
2157 |
243 |
8.88 |
|
May-07 |
579 |
2049 |
211 |
9.71 |
|
Apr-07 |
663 |
1910 |
205 |
9.32 |
|
Mar-07 |
533 |
1723 |
216 |
7.98 |
|
Feb-07 |
440 |
1689 |
179 |
9.44 |
|
Jan-07 |
492 |
1666 |
133 |
12.53 |
|
Dec-06 |
283 |
1784 |
213 |
8.38 |
|
Nov-06 |
320 |
1989 |
173 |
11.5 |
|
Oct-06 |
451 |
2059 |
186 |
11.07 |
|
Sep-06 |
493 |
2146 |
188 |
11.41 |
|
Aug-06 |
596 |
2154 |
199 |
10.82 |
|
Jul-06 |
590 |
1991 |
216 |
9.22 |
Currently we have 1936 homes active in the MLS which is off our 52 week high of 2249 in August last year. The market has been fairly stable with fewer homes coming on the market and fewer homes selling than this time last year. We currently have 398 homes under contract with the average days on market of 134 days.
The inventory stats are not far off of last year at this time. There are a lot of foreclosed home coming on the market but the sellers who do not need to sell are staying put. This is keeping the inventory numbers close to last years. We do expect numbers to climb through the rest of the year due to the spike in foreclosures and demand for homes to slow as the season winds down.
A good indicator of were inventory is going will be the amount of default notices we receive in the next few months, we will be watching closely.
I’m sure you have seen the late night infomercials and heard stories about people making a lot of money from buying foreclosed homes. Generally they tell you how easy it is and that you can buy these properties from the bank for pennies on the dollar. It is true you can make a lot of money investing in foreclosures; however it is never as easy as the stories make it sound.
Most people do not know where or how to get started and often times get discouraged before they even buy their first property. We are going to start out with the basics on how properties become bank owned and how you can find them.
In California which is a deed of trust state there are a generally only two ways that lenders can get the property back from a borrower.
Deed in lieu of foreclosure – This is when a borrower will give the property back to the lender to satisfy a loan in default and to stop foreclosure proceedings. This is a lot less common then the property being foreclosed. There are several advantages for both borrower and lender. The main advantage to the lender is they get the property back much sooner than foreclosing and the borrower will avoid the public embarrassment of a foreclosure.
Auction – if a property goes up for foreclosure sale and no one is willing to pay the minimum bid then title will be transferred to the beneficiary (lender) and the property is now REO. It is not un-common for properties to not sell at auction. In most states to bid you are required to have certified funds, such as cashier’s checks or cash. The recent trend is borrowers will owe more than the home is worth. The minimum bid is typically close to what the foreclosing liens balance is plus fees & backed interest. So there are not as many deals at auction as you would think.
Once the lender is in control of the property they will work with an asset manager to get the property sold ASAP.
How does the lender establish a listing price?
The asset manager will hire a local appraiser or a BPO agent to give them their opinion of value. The asset manager will often order a second opinion of value to reaffirm the first. While they are doing that they will be looking for a local agent to market the property for sale. Sometimes this process can take a couple of weeks or even months.
Insider Secret: Most of the lenders will post a list of their REO properties on their website. See our list of lender websites to find REO properties before they are listed.
As soon as the asset manager has arrived at the listing price and contracted with a local agent to list the property, it will be posted on the local MLS. This is the point where most investors will find out about the properties and it can get pretty competitive depending on how good the deal is. The trick is to find out about these properties as soon as they are listed if not before.
Insider Secret: With our VIP Buyer Service you can receive these listings as soon as they hit the market. We will send all REO properties straight to your email inbox within minutes of being posted to the MLS. Sign up here!
Now you have a basic understanding of how to find bank owned properties. In the next posting we will discuss what to do when you find a screaming deal and how to make it an even better one.
We encourage your comments and questions.
