Foreclosure Numbers are Misleading
Many filings do not end up with the lender taking the property.
Palm Coast, Florida – December 16, 2008 – The national media’s obsession with the number of real estate foreclosures has a dampening effect on the housing market. Potential buyers are leery about making a decision when the market bottom seems so far away. But as I’ve said before, all real estate markets are local. Palm Coast is generally ahead of the national market.
At closing, a buyer using lender financing signs two documents. The first is a note, which acknowledges the debt and obligates the buyer to repay the loan. The second is the mortgage, which pledges the property as collateral against the loan. When the borrower fails to make payments, the lender may file a notice of foreclosure (lis pendens). Several things can happen after the lis pendens is filed:
· The borrower may sell the property.
· The lender and borrower may renegotiate the terms of the loan in a manner in which the loan becomes compliant again.
· The borrower may refinance the loan, thereby paying off the defaulted loan.
· The lender may simply sit on the foreclosure without proceeding towards a repossession.
· The lender may agree to take back the deed "in lieu of foreclosure." This action short circuits the foreclosure process.
· The lender may, upon receiving a default judgment and final judgment, move to force a foreclosure sale.
Lenders may decide not to file for a foreclosure sale if they think the market will get better. Once they take possession, they are responsible for taxes, maintenance, liability, etc. In the case of homeowner association or condo association fees, the lender’s liability at closing is limited to 6 months in arrears, so many lenders postpone a foreclosure sale. This, of course, raises havoc with associations since the shortfall is irrecoverable.
To get a handle on the foreclosure activity in Flagler County, I watch two different statistics:
· The number of lis pendens filings
· The number of certificates of title issued to lenders. Once a bank takes a property through a foreclosure sale, the County Clerk issues a Certificate of Title (a form of deed) to the lender, transferring title.
The first measures the activity of initial foreclosure filings. The second indicates the number of properties actually taken back by lenders through the foreclosure process. Here are both numbers for the past two years:
|
Filings |
Sales |
|
| 2007 | ||
|
January |
67 |
9 |
|
February |
113 |
6 |
|
March |
84 |
18 |
|
April |
102 |
12 |
|
May |
113 |
10 |
|
June |
130 |
21 |
|
July |
132 |
28 |
|
August |
122 |
37 |
|
September |
93 |
23 |
|
October |
223 |
32 |
|
November |
120 |
23 |
|
December |
221 |
52 |
| 2008 | ||
|
January |
186 |
32 |
|
February |
240 |
33 |
|
March |
238 |
25 |
|
April |
238 |
38 |
|
May |
248 |
27 |
|
June |
280 |
30 |
|
July |
198 |
38 |
|
August |
184 |
12 |
|
September |
252 |
17 |
|
October |
277 |
35 |
|
November |
215 |
44 |
|
December (’08 mtd) |
94 |
21 |
Notes:
· The foreclosure activity picked up dramatically toward the end of 2007. This coincides with the increase in lender-owned properties on the market and the drop in median selling price experienced since January ’08.
· The number of Certificates of Title has remained relatively constant since late ’07.
If you are at risk of foreclosure, contact your lender to see if any options to foreclosure are available. Any action you take has both legal and tax consequences. Be sure to contact a professional for legal or tax advice. Beware of foreclosure rescue companies. While some are legitimate, many are not. If they ask for a fee "up front," they are probably not legitimate. That’s against the law.
One positive sign recently appeared in the local market. Local homebuilder Seagate Homes has lately begun a few spec homes. Although these homes are in the "affordable" market (under $150,000) they represent a level of confidence in the upcoming selling season not seen locally for several months.
lis pendens (lease pen-dense) n. Latin for "a suit pending," a written notice that a lawsuit has been filed which concerns the title to real property or some interest in that real property. The lis pendens (or notice of pending action) is filed with the clerk of the court, certified that it has been filed
FORECLOSURES
THANKS FOR A VERY GOOD ARTICLE.
A MAJOR PROBLEM ALSO IS THE ABILITY OF REALTORS TO LIST PROPERTIES AT PRICES THAT ARE NOT BANK APPROVED AND SIGNED OFF PRIOR TO LISTING.
THESE PRICES ARE MISLEADING,THEY CREATE UNREALISTIC EXPECTATIONS,AND THEY FORCE NORMAL NON-SHORT SALE PROPERTIES TO COMPETE AT THESE PRICES FURTHER HELPING TO FORCE PRICES DOWN.
IN MY OPINION THE LOCAL BOARD SHOULD NOT ALLOW LISTING PRICES THAT ARE NOT LENDER APPROVED AND THERBY HELP PUT PRESSURE ON THE BANKS TO CLARIFY THE REAL PRICE.
BEST WISHES FOR THE HOLIDAY SEASON,MARTIN COLLINS
There’s no market
The problem with short sale listings is that they are just concocted numbers, which then must be "sold" to a buyer as well as the bank. In effect, you have to sell twice- first to that virtually non-existent buyer and then to the loss mitigation dept of the lender.
Lenders will only approve actual offers. So, to get some kind of pre-approval, you need to submit a bogus offer to the bank.
All of this is done for what purpose? The seller gets nothing out of it. All the seller wants to do is return his upside-down property to the bank. Short sales are great in theory – that the bank doesn’t want the property back-but it remains only a theory until they start readily accepting these offers and allow the market to find a bottom.
Last 5 months
A good trend that is showing up in your data on the last months is fillings to sales ratios. In August and September, they are around 6%. In October, moved up to 12%. In November and December, it jumped to 20 and 22%. I think that this represents buyers’ confidence is improving and is encouraging them to act upon the good deals they see. It looks like the bottom has been reached and a steading effect has taken place. Florida and California are the leaders in real estate trends. All other states (michigan excluded) put on a smile, our light is shining at the end of the tunnel!
SHOUTING
Somebody needs to tell Martin that typing in all caps is equivalent to SHOUTING.
Leonard D. Miles
Great post! I’ll subscribe right now wth my feedreader software!