Here’s a bleak milestone: there’s been more the 1 million foreclosures filed in the U.S. so far this year, according to a count by the Center for Responsible Lending.

Not all of those foreclosures will result in evictions, but the statistic offers a sobering illustration of the magnitude of the problems that still face the housing market.

Some worry that the sheer volume of foreclosures could swamp the government’s efforts to help underwater borrowers refinance and to modify loans of distressed homeowners. Three weeks ago, Treasury department officials estimated that more than 55,000 homeowners had been helped so far by the Obama administration’s loan modification plans, including some 15,000 borrowers who were in trial modifications with Chase Home Mortgage, and 3,000 who were in a trial with Wells Fargo.

The CRL, a nonprofit research and lobbying group that favors aggressive policies to help troubled homeowners, estimates that there are 6,500 new foreclosures filed every day. The center estimates that there will be 2.4 million foreclosure starts in 2009, based off of figures from the Mortgage Bankers Association that are adjusted to reflect the entire mortgage market.

The CRL supports the Obama administration’s efforts to set standards for banks to modify loans, where the government will match in part the costs to the servicer to lower mortgage payments to 31% of a borrower’s income. The CRL warns that “loan modifications are not likely to succeed with superficial fixes that fail to lower a homeowner’s monthly payment.”

See the original post By Nick Timiraos, Associated Press

With an estimated 2.4 million foreclosure starting this year and a paltry 55,000 loan mods, the REO business should continue to grow in all areas including Prescott, Prescott Valley, Chino Valley, and Dewey-Humboldt.

Prescott Area Market Report

Is the market ready to turn around?  If history repeats itself, all that has to happen is that Californians are able to sell their homes again so they can move here.  If the numbers in CA recently hold, then we might have seen the bottom. 

See Great news for Arizona! So Cal prices didn’t drop in Feb

The distressed real estate market in the Prescott area was busy on the listing AND closing sides this week. Twenty-seven new foreclosed or short sale homes coming on the market, about one in every three homes being listed in the Prescott Arizona Area MLS system, and one half of the closings, or 12/24, were distressed sales in Prescott, Prescott Valley, Chino Valley, Dewey-Humbolt and the outlying areas of Yavapai County.

The difference between what newly listed traditional pricing and Prescott foreclosed/REO and short sale properties per square foot remains with strong at a 24% discount.  

On the sales side, the discount between REO/bank-owned/short sale and traditional resale was 36%!  You want a bargain in the Prescott area market?  Now is the time.

Search our list of nationwide foreclosure listings.

To get more information about any of these listings or any others in Prescott, Prescott Valley,  Chino Valley or Dewey-Humboldt areas, feel free to contact me, or you can search by MLS number, address, or lots of other ways in our Search Prescott MLS section.  

The percentage of foreclosed/REO/short sale new listings on market went up a little from 27% to 29% this week.  Last week 36% of the pending sales were REO or Short Sales, and this week they were made of 39% of the deals going into escrow.  The amount of REO/Short Sales that closed last week went from 23% last week to 50% this week.  REO/short sales also sold about 20% faster than traditional resales.

See the full report on our main web site. 

You can get this report sent to you via email.  Sign up here.

 Fico Scores/Reports

Screenshot of www.PrescottREOS.com...Click to Visit Site

Once fully developed, the site will include a portal to our SureClose listings management system that will allow asset managers to have automated updating as well as on demand stats via a login.

Another section of the site will be a portal for agents who need more information to be successful when putting offers in on our REO properties including bank and asset disposition company addenda, and more.

Give it a visit and let us know how we can improve our services to the Prescott area REO community.

See the 1st post:  Why we should be your Prescott area REO team – Reason #1 of 10

FSBB - For Sale By Bank

Are banks and loan servicing companies able to accurately price distressed properties and REOs?

Some do a good job, but more often than not they rely on national indexes, rather than use local assets in the field such as qualified Certified Foreclosure Specialists who know their cities neighborhood by neighborhood.  And they are in tune with what prices are doing right now…not several months ago.

In the second installment of a two-part Inman News series that focuses on the waves of foreclosed properties called, Obstacles delay REO Sales, the author, Matt Carter, comments on a timely book by professor, Norm Miller, and Michael Sklarz about the methods needed to properly price properties by local and micro market: 

A recent analysis of more than 1,000 distressed properties in 25 states suggests lenders and loan servicers stand to lose billions of dollars because they are either underestimating or overestimating property values when deciding whether to foreclose on a property or do a loan modification or short sale

In “Home Pricing in Rapidly Changing Real Estate Markets: The Need for Micro Market Metrics in Lending and Loss Mitigation,” Norm Miller, a professor at the Burnham-Moores Center for Real Estate at the University of San Diego, and co-author Michael Sklarz argue that lenders rely too much on backward-looking valuation tools such as appraisals, broker price opinions (BPOs) and automated valuation models.

As many real estate brokers and agents are aware from firsthand experience, lenders may overestimate the foreclosure value of a property, and turn down short-sale offers or opportunities to engage in workouts or loan modifications with troubled borrowers. Instead, they foreclose on a home and put it on the market at an unrealistically high price. In rapidly declining markets, those homes may sit on the market while their real value declines, causing an even greater loss for the lender.

At the same time, Miller and Sklarz say lenders sometimes underestimate the value of some REO properties in their inventories by relying on macro-level data — such as the Standard & Poor’s Case-Shiller indexes — that don’t reflect the unique characteristics of individual neighborhoods.

Such undervaluations by lenders can create windfalls for savvy local real estate investors who purchase and flip these properties, Milller and Sklarz say, but fire-sale pricing can also hurt neighborhood property values.

In the Prescott Arizona area foreclosure market, we see this happening all the time.

 An example of this are homes priced in the Talking Rock Subdivision where a foreclosed home was listed at $446,000 or $225 per square foot and 2 comps nearby were listed at over $400 per foot.  Needless to say, it was snatched up by a cash buyer who was looking at the subdivision, but didn’t want to pay $650K to get in.

For more information on how to take advantage of the Prescott area bank-owned market, see my latest Prescott Arizona Real Estate and Foreclosure Market Report, or contact me. 

Happy bargain hunting!

Prescott Foreclosure Home

The REO (real estate owned) foreclosed home market is hot right now in the Prescott area with many homes priced under an already depressed market price.
  
When banks price REOs under the market price, multiple offers are often the response.  This means buyers can  be up against stiff competition for that bank-owned home.  

It’s not unusual for some bargain-priced REO homes in  the Prescott area to receive 3 or 5 offers.  Sometimes the bank will throw out all but two offers and then ask the selected buyers to resubmit what is called “Highest and Final” offer.  Sometimes the bank simply accepts the best offer at inception, or they can start over.  Fun isn’t it?

If you’re wondering how you can make your offer rise above all the rest and be the winning offer, here are the top 10 tips to win the REO multiple offer game with right packaging, price, terms and conditions:

1.  Know What the Bank Note Is For and What they Paid

Ask your foreclosure buyer’s agent to find out the bank’s purchase price on the Trustee’s Deed.   Compare that price to the price the bank is asking.  Then, look at the amount of loans that were once secured to the property.  Usually, the amount the bank will accept is somewhere between the original mortgage balance(s) and the foreclosure sale price.  BUT, don’t put TOO much emphasis on these numbers when they are low.  It a property is worth $300,000 and the bank is holding a note for only $100,000, they are not going to take $100k for it.  They not not against making a profit on the rare occasion when they are not upside down.  They’ll likely hold out until a reasonable offer appears.

2.  Know the Comparable Sales Data

Make sure you know what properties have been selling for in the immediate area, both REO and traditional sales.  The bank already got this data when they received their Broker Price Opinion (BPO) to determine the listing price and might have  another BPO once the offers were reviewed.  If the comparable sales for REOs has been $120/sqft in the neighborhood and you are offering $90/sqft, you can expect a counter at best and most likely will never hear back from the bank.

 3.  Do an Analysis of the Listing Agent’s REO Pricing Record

Most REO agents focus as listing agents for REOs, and often they do not list any other type of property. Since REO agents deal in volume, they typically apply the same pricing principles to all their REO listings.  Have your foreclosure buyer’s agent pull the history of the listing agent’s listings to determine the list-price to sales-price ratio. If most of those listings are
selling for, say, 5% under list price, then you will have some guidance as to how much you need to offer.

Search our list of nationwide foreclosure listings.
 

4.   Know your Competition – Ask About the Number of Offers

If there are no offers on the REO home, you can probably offer less than list price and get your offer accepted. However, if there are more than two offers, you may need to offer above the asking price.  If there are 10 offers, bear in mind that some of those offers might be all cash. Banks like all cash offers. If you are obtaining financing, then you may need to increase the price on your offer to be considered.

5.  Prepare an Offer Summary as a Cover Sheet

This is aimed at simplifying the process for the Asset Manager, who, will more often than not, have 400 – 500 properties under management and often in multiple states with vastly different real estate contracts. This cover sheet will have the basics only (Price, Terms, Concessions, Closing dates, etc.). 

See a sample cover sheet.  If you are an agent and want one emailed to you in Word format, just contact  me.

6.  Choose a Closing  Date Before the End of the Month

Try to have close of escrow on or before the 25th of the month.  Banks are assessed their handling charges on the first and if they have not received the check before the end of the month then there is an additional charge for them.

7.  Submit Your Loan Status Report or Proof of Funds with your Offer

It goes without saying that you do not want to submit an offer without showing the REO manager that you have the means to purchase the home.  If you are getting a loan, then it’s  of paramount importance to submit the Loan Status Report  (LSR) with your offer.  If you are paying cash, you need to show proof of funds.  Often buyers submit copies of money market account or bank statements (with the account numbers obscured) to show that they are capable of completing the purchase.

8.  Give Enough Time for the Bank to Respond

Unlike homeowners who are typically working on one transaction at a time and can respond within 24 or 48 hours, REO asset managers usually hundreds of homes they are trying to dispose of.  And since many of these are getting multiple offers, the amount of workload can be be overwhelming.  This is why we suggest allowing 7 – 10 days as the response time on offers.  Sometimes responses will come much quicker, but other times even longer.   Manage your own expectations for response as well and make sure your agent is following up. 

Don’t take it personally when you don’t hear back…
it’s not personal, it’s business!

9.  Don’t Try to Choose your own Title Company

Choosing the escrow company who will help close the transaction is normally the buyer’s decision, but when buying a bank-owned home, buyers need to be flexible.  One of the items that your buyer will need to be flexible about is that the bank will, more than likely, want to choose the title and escrow companies.  This is due to the fact that they have significant amounts of title work done during the foreclosure process so they usually want to stay with that title company. Please be aware that many of the escrow and title companies that banks choose to use are not local, and that they are usually low bidders who are overwhelmed by transactions as well. They will have traveling notary services or local options for document signing, but don’t expect the same service you get from your favorite escrow officer.  If you are an agent, take an active role in trying to help the title company get the contacts they need locally, like the HOA information, etc.

10.   Shorten the Inspection Period and Don’t Ask for Repairs at the Offer Stage

If other buyers are asking  for 15 days to conduct inspections, and you ask for 10, you will be deemed the more serious buyer.  Banks, just like traditional sellers, don’t like the “Free Look” that the Arizona contract offers buyers during the inspection period.   If your agent can’t make everything happen within 10 days, (home inspection, termite inspection, special inspections) ask why not.   Sometimes banks will pay for repairs, but typically will not agree to do so at the offer stage.  If there are serious problems are found during a home inspection, try to renegotiate after your offer has been accepted.  Banks are much more likely to offer concessions once your offer is in the hopper, especially if the repairs are required as a loan condition.

Bonus Tip:  Offer to Split Transfer Fees if You Ask for Any Concessions at All

As a rule, banks do not like to pay transfer fees, but if the buyer offers to split those fees, the bank will feel more amenable to accepting the offer.  We suggest offering 50-50 splits on all transfer fees and do not ask for further concessions like seller paying buyer’s escrow costs, etc.

Keep all of these tips in mind when you are making offers and you will experience far less frustration and and much more success when trying to buy bank-owned properties in the Prescott area.

Bonus Tip #2:  Write your contract in English and not legalese. 

Forget what the last CE instructor taught you at your renewal hours, and go back to writing the contract in plain English. 

Want to see an example of how not to write a contract?

Related information on the web:

Are There Really Other Offers Coming in on this Property?

How to Get More of Your REO Offers Accepted

The ABCs For Buyers Of REOs