Posts Tagged ‘REO’

So what in the world has been going on lately??? Foreclosures are on the rise, seems we are experiencing that dreaded “double dip” which is keeping buyers on fences and investors out of our market- what has to happen before that turns around?  We should see first where we were before we try to figure out where we are going next…

Based on the graph provided by The Cromford Report (please click photo for full articles from Mike Orr explaining our current market as well) :

• During the peak of our marketplace in 2005, we had seen annual appreciation rates from 16% up to close to 50%.
• During 2008; we saw a steady decline from just below 0% declining down to below –40%.
• During 2009; we saw our market do the exact opposite and have a steady appreciation throughout the year climbing us almost entirely out of the declining market.
• During 2010; “The Year of Hope” as dubbed by Mike Orr in January 2010; we saw our market have a huge increase in appreciation due to the Obama Tax Credit for Home Buyers.  Unfortunately we now see that was an artificial demand and since it’s expiration, we’ve seen yet another decline and we are now back in the negative as of late August.

Fannie Mae and Freddie Mac have also stopped granting postponements to their borrowers in default working out either loan modifications or short sales, which is increasing our supply of Foreclosure Inventory. Seems contradictory to what our marketplace needs in order to recover.

Interest rates are still in their lowest in years- but there seems to be so much fear out there right now as a result of the lumps and bruises we’ve endured the last few years, those people in a position to purchase seem to be holding out to make sure that pricing isn’t going down further.  Seems the last month we’ve stabilized and we are naturally correcting ourselves; but we do need to have our investors back in our marketplace to drive up demand again.  The job market still seems strong in Arizona, which definitely helps. 

Back before the craziness of 2004-2005; the average appreciation in Phoenix area had always been about 6% since the time I started in Real Estate in the early nineties.  Much of that has a lot to do with the continued job growth overall in Arizona, cost of living and quality of life with our great weather.  It’s just a matter of time before we get back to the normal 6% appreciation; especially as those borrowers re-enter our marketplace that lost their home to short sale or foreclosure in 2006/7—they are already candidates to purchase again.  By next year, the demand will increase just to that because a huge percentage of homes lost went in 08/9.

For those of you hanging on to your homes because you are afraid to Short Sale and damage your credit; we are seeing more and more people get approved to Short Sale and repurchase immediately as long as they stay current on their mortgages, so they can take advantages of today’s low low rates and low low prices.

REMEMBER- THERE IS NO WAY TO KNOW WE’VE HIT OUR BOTTOM UNTIL ITS ALREADY PASSED!  IF YOU NEED HELP WITH REAL ESTATE TO EITHER BUY OR SELL A HOME- CALL US TODAY AT 480-243-4242 OR CLICK HERE TO GET STARTED!

(Please click on photo above for a downloadable PDF of the article written by Mike Orr of the Cromford Report; bullet points listed below)

Last month; in Metro Phoenix’s Real Estate Market we saw the supply of REOs increased substantially, short sales were stable and normal listings declined in number:

• REO listings grew 11% from 5,087 to 5,626 (Greater Phoenix, all types)
• Short Sales / Pre-foreclosure listings grew 1% from 16183 to 16,347 (Greater Phoenix, all types)
• Normal listings fell 5% from 18,123 to 17,226 (Greater Phoenix, all types)

• Because sales pricing is higher than last year, we saw a more significant 8.6% jump in dollar volume which is good news for the optimists.
• It seems likely that almost anyone who wants a "starter home" in 2010 and could get approved for a home loan has already purchased one before the Tax Credit expired at the end of April.
• Overall we can say with confidence that the luxury market is now showing strong signs of improvement while the low end end of the market is weakening significantly. The weakness in lender-owned homes is particularly noticeable, with REO sales volume down 36% year on year. 
• These annual charts are very slow to react to changes but confirm the bottom of the market is now over a year behind us.  The most important measures of real home pricing – the average price, median price and average $ per sq. ft. of homes that actually sell have been moving in a general upward direction for Greater Phoenix since April/May 2009.
• New notices of trustee sale dropped another 8% from April, to the lowest monthly number (6,471) since July 2008. Trustee sales also dropped 8% to 4,090, the lowest total since November 2009. 
• Nevertheless market distress remains very high and will dominate the market for at least the next two years. Short sales are becoming more significant as each month goes by, while lender-owned properties become gradually less so.
• The market is still fragile and although it has stabilized over the last year, we must caution that in the last several days the Cromford Market Index has been falling fast due to weakening demand matched with a fairly strong and stable supply.
• The biggest question we have right now:  Are the changes we have seen in the last month merely due to the end of the tax credit or are the result of more significant changes in the demand for housing??

Stay tuned for next months update and we hope to be able to answer that question for you.  In the meantime; if you’d like to discuss your particular situation with one of our very talented and experienced Realtors, please call us at 480-243-4242.

What is the default process?  I’m going to try to explain what the information on this chart means but… it is when someone starts getting behind on their mortgage payments and they are usually at least 3 months behind before the following occurs:

Basically, there are only 4 results that can happen when a person isn’t able to stay current on their mortgage payments:

• NOTS= NOTICE OF TRUSTEE SALE is sent to the homeowner.  This notice gives them 90 days to do something otherwise the bank will try to sell them home at a Trustee Sale. (Please see resource tab of website for more information and a slide show re: what happens at Trustee Sales) Most lenders will either issue a postponement or a cancelation of the Trustee Sale (aka Foreclosure Proceeding) as long as someone contacts them and tries to work out an alternative solution.  Unfortunately the majority of homeowners facing this do nothing and put their heads in the proverbial sand and ultimately do lose their homes, which only adds to this crisis.
• REINSTATEMENT OF LOAN= This means that the Lender will allow the borrower to add the missed payments to the end of the loan and allow them to become current under the original loan terms.  In this situation one normally needs to show that it was a one time problem that caused them being late.  It’s also commonly called a Forbearance.  For most this isn’t an option. 
• LOAN ADJUSTMENT= By proving a hardship, one can request what is called a loan modification in hopes of getting the payments reduced to where they are affordable.  Financial information must be sent to the Lender with an application to be considered.  The government has stepped in and have some programs (HAMP and HAFA) intended to help those in need but in my opinion, they aren’t enough.  This process can be tedious and time consuming and many give up.  In some opinions, these are just temporary Band-Aids because to get principal reductions to what the current value is has not happened with anyone I have met or heard of .  The recent stats are that 58% that do get approved for these loan modifications end up in default again as well.  I had one client recently that fought with her Lender for a year and they extended her loan to 40 yrs and reduced her interest rate but changed the loan from an interest only and in the end it only reduced her payment $100, which wasn’t the help she had asked for.  Typically the Trustee sale is either cancelled or put on hold by the Lender during this process.
• SHORT SALE= Default process is over because the borrower sells the home short with the Lender(s) approval.

 SHORT SALE VS FORECLOSURE GUIDELINES (Published by CDPE February 2010)

There is another option called “Deed in Lieu” which is basically the homeowner giving the house back and is considered a Foreclosure without having to go thru the legal proceeding of a Trustee Sale.  If the home doesn’t sell to a private 3rd party (many investors pick up great bargains) at a Trustee Sale (aka Auction), then title goes back to the bank and they have to remarket the home.  That’s where the term REO (Real Estate Owned) comes from, sometimes called a Lender or Bank Owned Home.  Those homes get marketed normally on the MLS, here’s a link to the Bank Owned Homes in our area.

If you have any further questions about this process, feel free to call us at 480-243-4242 or go to our Get Started Tab and enter in your information so we can see if we can help you or someone you know who is in DEFAULT on their Mortgage payment(s). We do everything we can here to help those that need it!