[idx-listing mlsnumber=”11-2184″]
1242 Rose, REDDING, CA 96001 (MLS # 11-2179)
[idx-listing mlsnumber=”11-2179″]
What Does REO Mean?
As a Real Estate Broker I often get asked “what does REO mean?” REO is an acronym for real estate owned and is used in the context of foreclosed properties owned by the lender or bank. Typically, after foreclosure, the bank will list the property for sale. It’s cost prohibitive for banks to hold a vacant house for very long. As of this writing, the total number of REOs for sale in Redding and all of Shasta County is 235 houses. So it’s fair to say, if you’re looking for REO houses, there a lot to choose from in Redding and the surrounding areas.
Just because a property is bank owned does not automatically mean the property is a bargain. It’s not uncommon for banks to charge a higher price for their REO inventory as they must recoup financial losses from unpaid mortgage payments and the cost of foreclosing and possibly paying back taxes etc. Further, people losing their home may not have kept up with routine maintenance, or in some cases, may have intentionally damaged the property and or removed appliances, plumbing and lighting fixtures. However, this does not mean you can’t find a great deal on a foreclosed house. There’s no such thing as the last good deal in real estate, great opportunities happen almost every day. The trick to finding great real estate deals is to know about them before anyone else. The analogy I like to uses is, how long does a $100.00 bill last on the floor at K-mart? Less than a minute. A great REO property is worth a lot more than finding a $100.00 bill. Therefore, get the REO list before others and you’ll undoubtedly find some real gems.
Finding new REO listings the same day they’re posted to the Shasta County MLS is easy. Our home page at www.ParsonsGroup.com has a link to our Real Estate Hot Sheet. The Real Estate Hot Sheet is updated daily and every new listing in Shasta County is on the list. Just watch the list and you’ll know about new listings before most other buyers. We also have our Listing Alert Service which sends you the new listings matching your search criteria such as price, location and square footage. You can choose to receive the notification real time by email, instant messenger, text message or telephone voice notification.
Okay, you’ve found a few houses of interest, now what. As fast as you can, you should go and look at the houses in person. Most REO houses are vacant and I can open up the house with my lock box card. It’s very important to get inside to check the condition. As you may already know, banks offer foreclosed houses for sale in their “as-is” condition. Typically, the banks are not willing to make any repairs and they don’t offer any disclosures regarding property defects. This means, buyer beware! When I show REO properties, some major defects are often visible right away (I was a contractor for the last 25 years of my life.) Other defects are more subtle or may not be visible at all until you go in the attic or sub-area of the house.
When you think you have found an REO bargain the next step is to get control of the property so you can do your inspections. Buyers often make the mistake of attempting to inspect the property first and then write an offer. As this may seem logical at first, the plan can back fire when a shrewd investor finds the property the same time you do. The shrewd investor knows to get an offer accepted by the bank and then fully inspect the house. A good purchase contract has provisions for the buyer to inspect the property during escrow. If, after completing the inspections the buyer decides not to proceed with the purchase, she simply cancels the contract. What the investor has done in this scenario is contracted for the right but not the obligation to purchase the house. Imagine poor Joe, the newbie REO investor; he calls his brother-in-law and they spend all day checking out an REO house. After the property meets Joe’s approval he decides to write an offer. Sorry, it’s too late! Ms. shrewd investor has already taken the property off the market and will be doing her inspections next Thursday.
Like many things in life, timing is everything, you must know about all new listings as soon as possible. There are many more strategies and tips you can use to find houses and then negotiate the lowest possible price. Next you must know how to write offers banks and sellers absolutely hate but are afraid to reject. I will share my thoughts on those topics in future posts. Also watch for an upcoming post on Short Sales – The Greatest Opportunity of a Lifetime.
Until next time…
Now You Can Search The Shasta County Multiple Listing Service (MLS) for All Properties. Redding MLS Search
Negative Sentiment Towards Buying Foreclosed Properties Decreasing
A recent survey conducted by Trulia and RealtTrac found that the negative sentiment towards buying foreclosed properties has decreased compared to one year ago. With 78 percent of U.S. adults believing there are downsides to buying foreclosed properties compared to 85 percent in May 2009. Among those who think there are negative aspects to purchasing a foreclosed home, the top concerns about purchasing a foreclosed property between May 2010 and May 2009 include:
| Negative Sentiment | May 2010 | May 2009 |
| Hidden Costs | 68 percent | 71 percent |
| Process is risky | 49 percent | 46 percent |
| Home will lose value | 35 percent | 31 percent |
“Although fewer consumers expressed interest in buying a foreclosed home than a year ago, the actual sales of bank-owned properties (REOs), along with sales of properties in the foreclosure process, continue to increase — accounting for more than 30 percent of total sales in the first quarter of 2010 according to our data,” said Rick Sharga, senior vice president for RealtyTrac. “We anticipate that there will be an increased number of both REO purchases and short sales throughout the rest of the year as the most active buying segments – first time home buyers and investors – continue to look for bargains.”
“It appears that potential homebuyers are taking a more realistic view of foreclosure purchasing,” Sharga continued. “Buying a foreclosure property still provides an opportunity for dramatic savings on a home, but the time and effort involved in executing a short sale, bidding against other buyers for an REO, or the need to do renovations may be issues for buyers not as focused on getting the best price.”
The Bank-Owned Discount
The survey also found that 18 percent of U.S. adults expect bank-owned homes to offer a realistic price discount of less than 25 percent off the value of a similar home that was not in foreclosure. However, not all consumers have realistic expectations, with 36 percent saying that they expect to receive a discount of 50 percent or more when purchasing a bank-owned property. Most consumers (95 percent) would expect to pay less for a foreclosed home than for a similar home for sale that is not in foreclosure.
The survey also found some interesting demographics of who is buying the foreclosed homes.
Renters are showing strong interest in buying foreclosed properties, with 57 percent at least somewhat likely to purchase a foreclosed home in the future. In comparison, only 40 percent of current homeowners would consider buying a foreclosure in the future. Additionally, the likelihood to consider purchasing a foreclosure decreases with age: 65 percent of renters ages 18-34, 63 percent of renters between the ages of 35-44, and 54 percent of renters ages 45-54 are at least somewhat likely to consider purchasing a foreclosure, compared to only 31 percent of renters 55 years and older.
April 2010 Nationwide Foreclosure Report
RealtyTrac®, an online marketplace for foreclosure properties, released its U.S. Foreclosure Market Report™ for April 2010, which shows that foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 333,837 properties in April, a 9 percent decrease from the previous month and a 2 percent decrease from April 2009. One in every 387 U.S. housing units received a foreclosure filing during the month.
“There were two important milestones in the April numbers that show foreclosure activity has begun to plateau — but at a very high level that will not drop off in the near future,” said James J. Saccacio, chief executive officer of RealtyTrac. “April was the first month in the history of our report with an annual decrease in U.S. foreclosure activity. Secondly, bank repossessions, or REOs, hit a record monthly high for the report even while default notices dropped substantially on a monthly and annual basis. We expect a similar pattern to continue for most of this year, with the overall numbers staying at a high level and ripples of activity hitting the various stages of the foreclosure process as lenders systematically work through the backlog of distressed properties.”
Foreclosure Activity by Type
During the month a total of 103,762 properties received default notices (NOD, LIS), a decrease of 12 percent from the previous month and a decrease of 27 percent from April 2009 — when default activity peaked at more than 142,000.
Foreclosure auctions (NTS, NFS) were scheduled for the first time on a total of 137,643 properties during the month, a decrease of 13 percent from the previous month — when auction activity peaked with more than 158,000 properties scheduled for auction for the first time. Auction activity was up 1 percent from April 2009.
Bank repossessions (REOs) hit a record monthly high for the report in April, with a total of 92,432 properties repossessed by lenders during the month — an increase of 1 percent from the previous month and an increase of 45 percent from April 2009. Bank repossessions were less than 1 percent above their previous peak of 92,182 in December 2009.
Five states account for more than 50 percent of national total
California, Florida, Michigan, Illinois and Nevada accounted for 52 percent of the national total. California led the way, with 69,725 properties receiving a foreclosure filing — although that total was down 25 percent from the previous month and down nearly 28 percent from April 2009.
California posted the nation’s fourth highest foreclosure rate, with one in every 192 housing units receiving a foreclosure filing, and Utah posted the nation’s fifth highest foreclosure rate, with one in every 221 housing units receiving a foreclosure filing.
Foreclosure activity in Modesto, Calif., decreased 32 percent from April 2009, but the metro still posted the nation’s second highest foreclosure rate, with one in every 101 housing units receiving a foreclosure filing during the month. Other California cities in the top 10 were Merced at No. 3 (one in every 104 housing units); Stockton at No. 5 (one in 108); Riverside-San Bernardino-Ontario at No. 6 (one in 110); Vallejo-Fairfield at No. 8 (one in 117); and Bakersfield at No. 9 (one in 120).
April 2010 California & Shasta County Foreclosure Report
ForeclosureRadar.com just released its April 2010 California Foreclosure Report. Their report is statewide and broken down by county. Here are some of the stats from Shasta County.
Notice of Defaults, the start of the foreclosure process, increased by only one notice. April 2010 had a total of 150 NOD’s filed compared to last month’s 149.
The number of homes in Shasta County that had a Notice of Trustee’s sale filed, stayed exactly the same at 129 notices.
There were a total of 81 trustee’s sales down from last month’s 98. The banks took back 76 homes as REO’s and only 5 homes sold to a 3rd party investor.
There are currently 167 REO / Bank owned properties for sale on the Shasta County MLS with 68 REO / Bank owned homes selling last month.
Highlights from the statewide report:
- Foreclosure filings were down in April for the first time since the beginning of the year.
- Despite the decline in filings, the inventory of properties in preforeclosure or scheduled for sale only dipped slightly as the drop in filings were offset by an increase in the time to foreclose.
- Cancellations continue to climb, up more than 32 percent from the beginning of the year.
- The number of properties sold to 3rd parties also continues to climb, helped again this month by slightly better discounts.
Download the full report at Foreclosure Radars website.
