More lenders taking homes

FORECLOSURE AUCTIONS MAY DRAW NO BIDDERS

By Sue McAllister
Mercury News

Article Launched: 07/07/2007 01:32:28 AM PDT

The house in Silver Creek that real estate agent Nancy Vanegas will soon put up for sale has five bedrooms, views of the foothills, and is part of a growing category in the housing market: homes that fail to sell at foreclosure auctions and are repossessed by lenders.

The increased presence of lender-owned homes in the market - known in the banking industry as REOs, for "real estate owned" - is fallout from the real estate fervor that marked the first half of this decade. Loans were easy to get, adjustable rates made monthly costs more bearable, home values were rising, and many homeowners leveraged themselves to the maximum. But conditions have changed and foreclosures have risen. REOs, once rare in Silicon Valley, may soon contribute to lower home prices in some neighborhoods.

One of the reasons so many foreclosure properties fail to find buyers is because the bidding typically starts at the amount of the unpaid balance on the first mortgage, and in a soft market, some homes are no longer worth that much. When that's true, no one bids. "There's no quick upside for the investor," said Greg McBride.

In May, $2.8 billion worth of California real estate went up for sale in foreclosure auctions, according to ForeclosureRadar, a Discovery Bay company that sells foreclosure information to subscribers. Of that amount, about $2.6 billion worth failed to find buyers, and so became bank-owned. The figures represent the total value of the outstanding loans that went up for auction.

Those figures are way up from early this year. In January, for example, $1.49 billion worth of property was auctioned statewide, and $1.32 billion went back to banks. January is typically a busy month because trustees usually refrain from foreclosing during the December holidays.

With so much property be ing foreclosed upon, "Even if every one of them was a great deal, I don't know that we'd have enough investors to buy them," said Sean O'Toole. "As the banks take back $2.6 billion a month, they're going to get more motivated to get a short sale done," he said. "The conditions are ripe right now for them to start discounting." Short sales occur when a lender agrees to let owners sell a home for less than they owe on the mortgage, to avoid costly foreclosure proceedings.

When banks take back foreclosed-upon homes, they sometimes hire auction houses to unload properties. Several companies specialize in showcasing REO or foreclosure properties, said Laura Pephens, a director of the California Mortgage Bankers Association and a mortgage-industry consultant in San Clemente. Lenders also list homes with realty agents who specialize in REO transactions, which can take much longer than normal sales. Every aspect of the sale - and preparation for it - must be vetted by the lender or mortgage servicer that holds the property.

The REO listing agent typically finds an attorney to handle the eviction of the previous owners or tenants, if they're still in the home. Often, residents are offered "cash for keys," an incentive to move out quickly, saving the lender the costly hassle of evicting them. Cash-for-keys is always the better deal for owners, O'Toole said, because an eviction appears on a person's credit record as a court judgment against them.  When the home is vacant, the agent takes care of cleaning and repairing the place (after the lender has approved the cost estimates). The agent provides an estimate of the home's worth; the lender also gets a separate appraisal.

"Sometimes it takes two weeks, sometimes it takes two months," to get a bank-owned home listed once she lets the lender know her contractors have cleaned it up, said Vanegas as she walked through the Silver Creek home's parched, overgrown back yard in late June.

Vanegas, who works in the Willow Glen office specializes in REO transactions, had three such listings last year. Currently she has 27, ranging from condos to the Silver Creek home, where a neighboring home sold for $1.3 million last fall. (Her listing has not been priced yet.)  When she stepped into the vacant, 2,900-square-foot house through a back door in late June, she surveyed what the former residents left behind - an empty bottle of creme de menthe liqueur, half a withered lemon and a promotional flier from Club One at Silver Creek on the kitchen island. Milk and a can of dried beef in a fridge that still bore some decorative magnets. A tiny dead mouse under a built-in desk.

Compared with some newly repossessed homes, she said, "this is clean."

An estimated 8 percent of homes for sale - or about 450 houses and condos - in Santa Clara County as of June 30 were "distressed" in some way - either being sold in a "short sale," or in foreclosure or as REOs, according to a new report from Movoto, a brokerage based in Redwood City. Movoto gathered the data by scouring the agent remarks that accompany homes on the multiple listing services.  There probably are not enough bank-owned homes on the market in Santa Clara County now to drive down prices single-handedly, especially as the trustees that own them are not deeply discounting. But that could change as the market does, Pephens said.

"All mortgage servicers are buried in this issue right now," she said. Trustees - the entities that have assumed ownership of the properties, be they the original lender or a mortgage servicing company - are still trying to get a handle on the increased number of REO properties they are managing, and on how much leeway they have to discount home prices without encountering resistance from investors in the mortgage-backed securities .  "In this market right now, I hope trustees are being more flexible in terms of the purchase price offers," she said.

 

The Institute for Luxury Home Marketing

Where do the 400 Richest Americans Live?

California: 22.25% (17 American billionaires live in Los Angeles, 13 in San Francisco, not counting Malibu, Beverly Hills, and other parts of the state)     By Cynthia S. Wildridge Where do the 400 richest Americans live?   According to the Forbes 2006 list of the Top 400 richest Americans, more than 22% of them call California home. In fact, more than 50% of the wealthiest Americans on the Forbes list can be found in only four states:  California (22.25%), New York (14%), Texas (9%) and Florida (6.75%), in that order.  Illinois (4.75%) ranks next, followed by Massachusetts (3.25%).    Perhaps indicative of the increasingly international aspect of residential real estate, 3% of the wealthiest Americans live abroad (in Monte Carlo, London, Gibraltar, Bermuda, Hong Kong, Switzerland, and Singapore). Of particular interest is that, for the first time since Forbes began compiling its list, all 400 individuals on the roster have a net worth of at least $1 billion dollars, with Microsoft founder Bill Gates topping out at a net worth of $53 billion dollars. Geographically, the primary residences of the top 400 wealthiest Americans are located in 7 international destinations, and in 40 states and the District of Columbia within the United States

 

The Institute for Luxury Home Marketing

Top 10 Trends in Luxury Residences for 2007

One of the top overall trends of 2007 reflects an increasing ecological awareness and sense of social responsibility.     By Cynthia S. Wildridge In the legal realm, change typically begins in California and heads east.  In real estate, trends tend to start with the affluent:  By the time the rest of the industry has begun to catch on, the wealthy have already established a new definition of “luxury.” While the current housing market remains challenging in many geographic regions, the upper tier continues to show its resiliency.  Moreover, affluent homeowners typically continue “investing” in their homes even if not in the market to buy or sell a residence.  During the four quarters ending in October 2006, Harvard University’s Housing Studies Center estimated that homeowners spent $160 billion in home improvement, a 1.6 % increase over the prior 12 months, with kitchens and bathrooms topping the list.  While that represents a slight decline from the long term growth rate of 5%, Kermit Baker, director of the Harvard center, believes there is still potential for growth among the wealthy. With fewer financial constraints, these ultra consumers have a greater range of choices.  So what trends have emerged from recent selections they have made?  Increasing ecological awareness One of the most notable overall trends reflects an increasing ecological awareness.  Green has come into its own—but this generation’s interpretation is a sophisticated one.  According to the American Society of Interior Designers (AISD), sustainable design is considered to be the fastest growing trend in the industry. Motivations may be economic (making a potentially expensive up-front investment in exchange for energy savings and more control over their energy destiny in years to come), aesthetic (installing an geo-thermal heating and cooling system which is hidden underground, rather than that unsightly box at the side of the house), health-related (using chemical-free building materials), or related to social consciousness (using recycled and renewable materials).  These eco-choices may be manifested anywhere throughout the home, ranging from selecting alternate energy sources, using non-polluting and chemical-free building materials, employing water conservation methods, installing energy efficient windows, doors and insulation, and even in choosing the types of wood for kitchen cabinets and hardwood floors.   This new Earth-friendly consciousness is equally reflected in color palettes, with the most popular being Earth tones, accented by a bright lime or tangerine color.  In choices of woods, oak is passé.  Current trends are toward using wenge, an extremely dark, porous African hardwood, or renewable cork and bamboo rather than hardwoods or expensive, exotic woods which threaten rainforest survival.    Outdoor dining à la luxe Those who can are spending anywhere from $50,000 to $200,000 to outfit their great outdoors for entertaining à la luxe.  No longer is it sufficient to air-condition the backyard for those summer garden parties in Houston.  Today’s affluent entertain from their outdoor kitchens, often from a gazebo or pavilion, complete with stainless-steel ovens, ranges, and grills, granite countertops, wine coolers, ice makers, and warming drawers.  Prices for outdoor kitchens can now rival those of the interior!      Toast your toes with radiant flooring Long practiced in Europe, the use of radiant flooring is becoming a must-have in luxury homes, providing a clever way to warm chilly bathroom floors via the heating system installed beneath them.  One Ohio-based company has designed a heating mat which can be installed beneath the flooring to provide an evenly-distributed heat.  While radiant flooring is most frequently found in bathrooms, the company reports that the super-wealthy are installing this slice of luxe throughout the home, with prices averaging about $500 per square foot.  Due to its flexibility, bamboo is being promoted as an extremely compatible flooring material for radiant heat.  In addition, bamboo matures in 6 years, as compared to the 30 to 120 years it can take for hardwoods to mature.      Living Zen:  The serenity of home saunas and spas Think ultra pampering, without leaving home.  Today’s home saunas and spas are being interpreted as an extension of the master bath suite, incorporating sophisticated design elements such as waterproofing, “green” design features, eco-friendly resources, glass walls, custom seating, and technology to control heating and lighting—all enveloped in a sleek, serene design.  Some ultra consumers are incorporating features such as 15th century Italian tiles or exotic woods, despite an eco-driven trend away from exotic hardwoods which some now consider to be a socially irresponsible choice.   On beyond granite As granite has made its way into the outdoor kitchens of the wealthy and trickled into the homes of the mainstream, alternative choices in countertops have emerged.  While granite remains a popular choice, the latest trends are for colors such as rich reds and browns from India and Pakistan, Swedish blues, and a white Indian granite that resembles marble.  More cutting-edge choices include glass, basalt (a volcanic rock), schist, and quartzite, which is more resistant to acids used in food preparation.  Note that these alternate countertop choices are double the $100 per-square-foot price of granite!   Private screening, chez moi Plush, cushy recliners, huge screens, custom cabinetry, and the latest in technology…with a popcorn machine and juice bar to boot!  Screening rooms or media rooms, once reserved for Hollywood’s power elite, are now topping luxury homeowners’ must-have lists.  In fact, in an April 2007 study of the U.S. Luxury Market released by WineTrend and Unique Homes magazine, 64% of the participants surveyed ranked a home theatre/media room as a very important factor when considering purchasing a luxury home (for purposes of the study, identified as one with a listing price of $2 million or greater).   The seamlessly-integrated smart home While we still have a way to go before achieving the scale of Microsoft founder Bill Gates’ elaborately wired home with sensors to anticipate every need, technology has made its way into the homes of the ultra-affluent.  Wealthy homeowners are spending $40,000 or more to outfit their abodes in an inter-connectedness heretofore unseen.  Think personal assistant.  Computer systems and sensors offer a seamless integration of the electrical, heating, cooling, and security systems.  Floor-sensing thermostats can maintain heat at the ultimate level.  When programmed for “vacation mode,” the system can make the home appear inhabited at the touch of a button, without having to resort to those old-fashioned timers.  Likewise, one can push a button at the end of the day to ensure that all doors are locked and the alarm system set.  If sensors detect outdoor movement, a text message to a cell phone can prompt the recipient to verify security cameras online.  And I suspect that is just the beginning!   Drawers, drawers everywhere! It’s interesting how so many things come full-circle.  My parents once restored an old 1920’s home, complete with functioning steam-heat radiators.  Not only was it cozy—even in the midst of those bleak, Midwestern winters—it was sumptuous to slip from a luxurious bath or shower into a towel which had been warming on the radiator.  In today’s version of luxury, warming drawers are the answer.   Toast your towels while you luxuriate in the bath (you can even set a timer to coordinate!), or slip those amuse-bouches into warming drawer in the kitchen as you prepare the next course—another nod back to Europe’s civilized gentry.  In fact, drawers in general are an emerging trend, housing everything from freezers and dishwashers to microwaves.   Sliding glass windows, moveable walls Today’s families are looking for more flexibility in their living area, particularly in space-challenged areas such as Manhattan.  For those able to spend between $2.2 million to $15 million for a unit in the elite 40 Mercer building, French architect Jean Nouvel offers a solution: moveable walls and sliding bookcases.   Nouvel’s designs feature 20-by-11-foot, floor-to-ceiling windows which can slide completely to the side, exposing an entire wall to the great outdoors.  Units are also outfitted with sliding 12-by-15-foot walls or bookcases which can temporarily transform an open living space into a guest room, study, or child’s play area.  Expect to see this trend manifested elsewhere.   Custom Wine Cellars  As America becomes increasingly sophisticated about wine, there’s a corresponding trend among the wealthy to dedicate space in their homes to the art of wine.  No longer will a simple wine rack do; connoisseurs are investing in wine rooms, closets, and cellars to house their collections, which are increasingly being considered investments.  One affluent homeowner in Scottsdale, Arizona spent $60,000 for an 825 square-foot custom wine cellar built into the side of a mountain, complete with an adjoining area for dinner parties.  Research conducted by Southeastern Institution of Research, Inc. on behalf of WineTrend and Unique Homes magazine reports that 90% of luxury home owners (those with a list price of $2 million or more) consider upscale amenities such as a wine cellars important.  The disparity between those who believe in their importance and those who have already installed them in their homes could signal a growing market for such amenities among those who have the resources to build and appreciate them.

 

Troubled homeowners are finding a new way to sell

'Short sale' an option to avoid foreclosure

Catherine Reagor
The Arizona Republic
Jul. 6, 2007 12:00 AM

A growing number of homeowners behind on their mortgage and facing foreclosure are finding a way to sell despite the glut of Valley homes for sale. They are turning to "short sales," which are similar to regular home sales except a deal is worked out in which the lender accepts what the house is appraised for or what it will currently sell for instead of what is owed on it.

So a homeowner would sell the house to a buyer willing to pay the current market value of the home, and the lender takes a loss on the rest. Short sales are the latest trend for metro Phoenix's slowing real estate market, and housing advocates are advising struggling homeowners to contact their lender about a sale before falling into foreclosure.
As foreclosures rise, lenders are more motivated to do the sales because they at least get most of what they are owed.

Homeowners don't get any equity from the sale, but they also don't get a nasty foreclosure mark on their credit record. And although lenders lose out on money they're owed, a short sale lets them avoid a costly foreclosure on the home. "Short sales are the buzz in the market now," said Tom Ruff of Information Market, a research data firm based in Glendale. "With foreclosures climbing and homes prices falling, short sales are bound to climb."

There is no way to track the exact number of short sales closing in the Valley because they show up on public records as a regular sale between a buyer and a seller. But real estate market watchers say they are seeing an uptick. For the Valley's housing market, a short sale means one less foreclosure at a time when the number of people defaulting on their mortgages has tripled from a year ago. It also is one fewer hit to Valley neighborhoods, where foreclosures are pulling down housing values.

Short sales lower an area's "comps," or comparable sales prices, too, but not as badly. For some homeowners, they are the best option.A brother and sister from California recently approached Phoenix real estate agent about their house here in the Valley. The pair paid $597,000 for the investment home in Tatum Ranch at the height of the housing market in 2005. Now, they can no longer afford to keep it. And with a record number of Valley homes for sale, their chances of selling the home for what they paid are slim.

"They ran the numbers, and the house won't sell for more than $495,000 now," said Jennie Commins, of Realty Executives. "They didn't put any money into it. They have an interest-only loan. They could only rent it for about $1,800 and month, but their payment is $3,500."They could do one of two things: Work out a short sale or call the lender and hand over their keys.

Lenders can benefit

Most lenders prefer short sales because foreclosures cost them time and anywhere from $30,000 to $50,000 per house in legal, appraisal, marketing and servings fees. A short sale gets a home off their books and typically costs a lender less than a foreclosure. At a recent foreclosure-prevention town hall meeting in Phoenix, the director of National Initiatives for mortgage giant Freddie Mac encouraged housing advocacy groups and lenders to steer people toward short sales if their only other option is foreclosure.

"We have an investment to protect as well as a moral responsibility to help people avoid foreclosure," Christina Diaz-Malones said. A few years ago, most Valley homes to go to the foreclosure auction block enticed multiple bids from investors. But now, lenders are taking back 80 percent of the homes they are foreclosing on. Investors have stopped bidding on many houses because they can't make money on a resale.

To be eligible for a short sale, homeowners must prove they can't pay their mortgage because of some type of hardship such as a job loss, medical expenses, death of a spouse or, sometimes, too much debt. But homeowners should be careful about confusing a short-sale plan with a foreclosure rescue scheme. Once a homeowner misses a payment or two, a lender files a notice with the Maricopa County Recorder's Office to start foreclosing.

Many groups track those filings to try to buy foreclosure properties. But recently, some groups have begun preying on people about to lose their homes. Many of the offers of help are thinly veiled schemes to get homeowners to sign over their house to groups that strip away any equity. Often, the homeowners then are required to pay rent until they can refinance and get their house back. But the rent is usually more than their old mortgage payment, and they wind up getting evicted.

Joann Hauger of Community Housing Resources of Arizona said groups that really want to help homeowners don't typically solicit them. More housing advocates such as Hauger are advising people to seek a short sale now instead of losing their home to foreclosure. "Almost everyone we are seeing now for default counseling owe more than their house is worth," she said.

The hit homeowners take on their credit score is much less on a short sale than on a foreclosure.  A homeowner involved in a short sale will see an 80- to 100-point drop on his or her credit score. A foreclosure is a 250- to 280-point hit, said Phoenix Heritage Real Estate Group. About 70 percent of their business now is short sales. "Banks don't advertise they are open to short sales, but banks don't want to take the homes back," he said.

People who are able to do short sales will have a tax hit.  The difference between what a homeowner owes and what the bank gets for the house is typically treated as income for the seller. That's taxable income for the homeowner that will show up on a 1099 form from the lender. The lower sales price from a short sale won't please too many of the homeowner's neighbors. It will show up like any sale and often will be a considered a comp for the area that other buyers and sellers use as a benchmark for home prices.

But housing market watchers say a lower comp or short sale is much better for a neighborhood than a home repossessed by the bank at a foreclosure auction. "Foreclosed homes can quickly turn into empty eyesores with green pools, yards full of weeds and debris when lenders take them over," Barry said. "A short sale means a new owner for the home and one less foreclosure black mark for the neighborhood."

 

RIPPLE EFFECT Economists See Housing Slump Enduring Longer

Downturn Is Expected  To Keep Growth Tepid; Retailers Feel the Pinch

By JAMES R. HAGERTY, JONATHAN KARP and MARK WHITEHOUSE
June 9, 2007; Page A1

Economists are giving up on the idea that the U.S. housing slump will be quick and relatively painless. Instead, more are concluding, the downturn that began nearly two years ago will last at least through the end of 2007, remaining a major drag on the U.S. economy. The culprits: a glut of homes for sale and growing caution among lenders who now regret being so free with their mortgages during the boom.

Most forecasters still expect the economy to regain some momentum this year after a slow first quarter. Recent data have shown manufacturing, business investment and trade on track to help offset the negative effects of falling home values on consumer spending. Even so, some economists expect economic growth this year to remain tepid, largely because of the weak housing market.

This worry coincides with a surge of inflation anxiety that has roiled stock and bond markets in recent days. Yields on 10-year Treasury bonds, which influence the cost of various forms of borrowing throughout the economy, have risen above the psychologically important 5% level to the highest point in nearly 11 months. That in turn has led to a big drop in stock prices: Both the Dow Jones Industrial Average and the Standard & Poor's 500 fell nearly 2% for the week after hitting all-time highs early on.

The rise in interest rates is only adding to the gloom. The average rate for 30-year fixed-rate mortgages stood at about 6.65% Friday, up from 6.35% in early May, according to HSH Associates, a financial-publishing firm in Pompton Plains, N.J. Though that rate remains far below the 8.2% average of the 1990s, the recent jump makes it harder for many Americans to afford new homes. "That's putting more pressure on housing and delays its ultimate recovery," says Andrew Tilton, a senior economist at Goldman Sachs in New York.

Federal Reserve Chairman Ben Bernanke acknowledged in a speech Tuesday that the housing market remains weak, and warned that residential construction "will likely remain subdued for a time, until further progress can be made in working down the backlog of unsold new homes." The market started to cool in mid-2005 after a buying frenzy that drove up the average U.S. home price nearly 60% in the first half of the decade and more than doubled prices in many areas near the East and West coasts.

Late last year, some economists were saying the market would start bouncing back by the middle of 2007. That hasn't happened, partly because inventories of unsold houses have continued to grow and a surge in mortgage defaults has made lenders much more reluctant to grant credit to people with spotty payment histories. David Resler, chief economist at Nomura Securities International Inc. in New York, says he is surprised by the degree to which speculation caused builders to overestimate demand, leaving a glut of houses and condominiums.

That means single-family housing starts, which have declined 33% since early 2006 to a seasonally adjusted annual rate of about 1.2 million in April, will remain low, around the current level, through the first quarter of 2008 before starting to recover gradually, Mr. Resler predicts. Goldman's Mr. Tilton thinks single-family starts will drop to an annual rate of one million or so before bottoming out in the second half of this year.

Reflecting this worse-than-expected slump, Mr. Resler recently trimmed his forecast for economic growth in the second half of this year to an annual rate of 2.8% from 3%. He sees about a 33% chance that the U.S. economy will slip into a recession in the next year. If it does, he says, the weak housing market would be largely to blame. Among the risks, he says, are that depreciating home values will make consumers more cautious in spending and that many more housing-related jobs will be lost.

Ian Shepherdson, chief U.S. economist for High Frequency Economics, a research firm in Valhalla, N.Y. , doesn't expect a recession but says weakness in housing will help keep U.S. economic growth at a sluggish pace averaging less than 2% for the next several quarters.

Housing accounts for a lot of jobs, not only in construction but in related areas such as mortgage finance and furniture sales. Zoltan Pozsar, senior economist at Moody's Economy.com, estimates that housing-related sectors created nearly 1.3 million jobs between January 2003 and March 2006. Since then, he says, housing jobs have declined by almost 300,000. He sees more losses to come during the summer, which is usually a big building season.

Home values can also influence consumer spending, as people use cash-out mortgage refinancings and home-equity loans to pull money out of their houses. At the peak of the housing boom in the third quarter of 2005, people were taking cash out of their homes at an annual rate of $709 billion, according to Michael Feroli, an economist at JPMorgan/Chase in New York. As of the first quarter of 2007, that number had fallen to $178 billion. A prolonged housing slump would be particularly painful for retailers of the kinds of things people often buy when they move, such as building and gardening supplies. According to the Commerce Department, those retailers saw sales drop by 6% in the year ending April.

Meanwhile, empty houses are multiplying. A recent Merrill Lynch report tallies a record 2.2 million vacant single-family homes and condos for sale nationwide, about one million above the norm. Florida's Miami Dade County has a 31-month supply of existing condos on the market. About 20,000 new ones will be completed by the end of 2008, says Jack McCabe, a consultant in Deerfield Beach, Fla. He says about two-thirds of those have been sold, but many buyers are canceling orders rather than taking possession of a depreciating asset.

Some local markets remain strong. Prices have continued to rise in Manhattan, Seattle, Houston and some other areas. But in much of the country, home prices have been flat to moderately lower over the past year. Economists at Merrill Lynch admit it is hard to predict how the slump will play out from here. "We are not sure how deflating a $23 trillion asset class -- the value of real-estate assets on the household balance sheet -- will end, but we doubt that it will end well," Merrill economists wrote in their recent report.

The outlook is confusing for the average home shopper, too. Bill Shakespeare, a marine-engine salesman who doesn't mind the inevitable jokes about his name, attended an auction of foreclosed homes in San Diego last month, hoping for a steep bargain. Wearing a red baseball cap and windbreaker, the 74-year-old Mr. Shakespeare made an initial offer of $140,000 for a 600-square-foot condominium. Then he gave up when the bidding spiraled to the winning level of $180,000.

Mr. Shakespeare, one of more than 1,000 people who turned up at the auction, notes that there are plenty of other condos on the market, some of which have been unoccupied for months. "We're not going to be rushed into anything," he insists. The auction in San Diego was one of three held in Southern California last month. The auctions, at which a total of about 280 homes were offered, attracted several thousand people, demonstrating that there are lots of bargain hunters waiting to pounce on the right deal. But the auctions also underlined the trouble some of those opportunists have in obtaining credit. In several-dozen cases at these auctions, homes had to be put back on the block after initial winners failed to qualify for a loan.

Lenders have eliminated most no-money-down "subprime" loans for people with weak credit records. That means many people who hoped to buy homes this year will have to wait until they can clean up their credit records and save for a down payment. At a conference of mortgage lenders in May, David Lowman, head of the mortgage business at J.P. Morgan Chase & Co., warned: "The largest part of the problem in the subprime space is ahead of us, not behind us." Many borrowers who got loans the past couple of years are still paying the low initial monthly payments and have yet to face the steeper adjustable rates that kick in after two or three years. Once they do, foreclosures are sure to rise.

Mark Zandi, chief economist of Moody's Economy.com, a research firm in West Chester, Pa., expects lenders to acquire about 900,000 homes this year and roughly the same number next year through foreclosures, up from an average of about 500,000 a year from 2000 through 2006. That will add to the glut of homes on the market, further depressing prices in some areas.

At the San Diego auction, homes typically sold for around 25% less than their most recent sales prices or appraised values. (The comparison includes a 5% commission paid by winning bidders.) Demand seemed stronger at another recent auction of foreclosed homes in Los Angeles and Orange counties. Many of the houses offered there sold for about 85% to 95% of previous prices or appraisals.

At the Los Angeles auction, Suresh Gupta, a condo developer, made the winning bid of about $1.2 million for a three-bedroom home in Pasadena, where he and his family plan to move. The house had a previous value of $1.5 million. Mr. Gupta thinks the auction price compares favorably with what he could get through a conventional purchase. "There is no justification for the prices many homeowners are asking for," he says. "They are living in a dreamland."

 

Homes Going Once, Going . . .

Auctions Are Bustling for Houses, Including Some Historic Gems; How to Keep From Getting Burned

By RUTH SIMON and JONATHAN KARP
June 30, 2007; Page B1

With the real-estate market cooling, many homes are being hawked by auctioneers. The selection of houses for sale -- often foreclosures or properties that can be tough to value -- can run the gamut from shotgun shacks to McMansions. And buyers need to do their homework or risk getting stuck with nasty surprises.

Damon Malicoat bought this house near Warrensburg, Mo., at auction for $100,000, dead snake included.

Still, there can be some deals hiding in the weeds. Consider Damon Malicoat, 37 years old, who bought a bank-owned house near Warrensburg, Mo., at auction in November after it had been vacant for nearly two years. The front-yard "grass" reached up to his knees, and the basement contained a dead snake.

He feels like he got a good buy, though, paying $100,000 for the property, which had been appraised at $139,000. He spent about $26,000 to upgrade the electrical and plumbing systems and make other repairs.

Sales like these are on the increase. Chicago-based Sheldon Good & Co. says it expects to run 44 residential auctions this year, twice as many as in 2004. Among the recent sales: 21 condominiums in the New York City area and fractional shares in a Jackson Hole, Wyo., resort. One Auction company, which specializes in selling foreclosed single-family homes, auctioned 300 properties in Texas and 300 others in California during June. In July, the company plans to auction 400 bank-owned properties in northern California and 400 others in Ohio and Pennsylvania.

At a recent auction in Michigan, the offerings ranged from a three-bedroom home in Saginaw listing at $2,500 (it was fire-damaged), to a 3,600-square-foot home adjacent to a country club in Ann Arbor listed at $679,000. Nationwide, $16 billion in residential real estate was auctioned last year, says the National Auctioneers Association, a trade group, up 39% since 2003.

Auctions have been used for years to sell trophy homes and other properties that can be tough to value, as well as homes owned by people who are relocating and need to move quickly. But much of the recent growth is coming from lenders seeking to unload foreclosed properties and builders and developers looking to move unsold inventory.

Bidders need to do homework or risk overpaying for a property -- or being saddled with unexpected repairs. "Are there gems you'll be able to pick up out of the dirt? Yes, there are, but not at every sale and not with great volume," says Stephen Martin, president of Gwent Group Inc., a Bloomington, Ind., consulting firm that works with the auction industry.

Unlike in a traditional real-estate transaction, auction buyers need to do all their due diligence before bidding. That's because properties are sold at auction "as is." "There are no contingencies,". That means you can't back out of a deal if you later discover the roof leaks.

Buyers with cold feet risk losing their deposit, though some states allow them to back out of an agreement under limited circumstances.

When looking for a home for his mother, Ralph Savary and his wife, Elizabeth, decided to buy the house in which the auction was being held for $183,000.

Among the details buyers need to focus on: the condition of the property and whether the title is clear. Homes being sold because the owner is relocating are more likely to be in good condition; properties that have been foreclosed on, by contrast, often need more work, either because of vandalism or because the prior owner didn't have the funds to make needed repairs.

Either way, buyers need to take a close look. "I would tell people to hire an inspector," says Bill Sheridan of the National Auctioneers Association.

Homes sold at auction typically are available for inspection before the auction takes place. The auction company's Web site often includes details such as whether the property carries a home warranty. Consumers should also ask the auctioneer if they've made sure the title to the property is clear and if the seller is paying for title insurance. Other things to ask include whether there are unpaid taxes on the property, any easements that would restrict access to it and any deed restrictions that could make it tough to expand or remodel the home.

Risk of Overpaying

Overpaying is another risk. Buyers need to determine ahead of time what similar homes in the area are selling for, though that can be tricky in a cooling market where there's plenty of inventory and few sales. "The best advice I can give [buyers] is to get a qualified real-estate person who...definitely understands market value and how to determine it," says Mr. Martin, the auction consultant. He suggests bidders hire an agent who specializes in representing buyers. Some auction houses will pay a real-estate agent a commission out of the proceeds of the sale. Bidders can also get information about recent sales from online valuation sources.

The 'Auction Fever'

In some cases, "auction fever" can produce a higher-than-expected sales price. About 11% of the bank-owned properties go for more than the bank's previous asking price. A 1,400-acre ranch in Claremore, Okla., recently sold at auction for $4.9 million, more than $1 million above recent estimates of the property's value.

Jack and Loraine Thompson nabbed a historic home in Doylestown, Pa., for $865,000 -- half the original listed price.

Jack Thompson, 68, is among those who feel they've nabbed a bargain. He and his wife Loraine, 66, purchased a home on 2½ acres in Doylestown, a small town outside of Philadelphia, for $865,000 at an auction last year. The home, which includes a swimming pool and a guest house, was built in 1733. Documents show that George Washington stayed in it once.

Mr. Thompson says it was originally listed for twice what he paid. "It's a one-of-a-kind with a lot of history," says the auto dealer. "I was surprised that they put it up for auction and I got the price I did."

Buyers who don't do their homework risk winding up with less than they bargained for. Ken Crow, 61, who lives in Seattle, bid unsuccessfully at an online auction of new homes built by Lennar Corp., but later was offered the home when the high bidder backed out. Before sealing the deal, he decided to fly to Palm Springs, Calif., for a second look. That's when he discovered the mountain views from the triangular 17,000-square-foot plot would be blocked by homes from an adjacent subdivision within a few years. He also learned that a special levy would effectively double his property tax to about $9,000. He decided not to complete the deal.

'Buyer's Premium'

Practices vary among auctioneers, but would-be bidders must typically bring to the auction a certified check that can go toward the deposit, and be prepared to close within 30 days. In addition, successful bidders often pay a "buyer's premium," a percentage of the winning bid that can vary widely and is added to the bid to come up with the final sales price; some firms charge a flat "services fee" instead. Sometimes even buyers can be surprised by the outcome. Ralph and Elizabeth Savary, 49 and 59, respectively, went to an auction in Arlington, Texas, in April, intending to buy a home for Mr. Savary's mother. The couple bought her a three-bedroom home in Watauga, Texas, for $76,000 and decided to bid on the home where the auction was being held, as well.

The couple paid $183,000 for that home, which they will move into in July. "It's a Tudor-style home with a lot of trees around," says Ms. Savary. "It's an absolutely beautiful home."

 

Big auction evidence boom in housing going-going-gone

Carolyn Said, Chronicle Staff Writer

Monday, June 25, 2007

"Folks, take advantage of the market today," a fast-talking auctioneer exhorted a packed room of real-estate bargain hunters on Sunday. "I have (a bid for) $300,000 now on this condo; do I hear $310? I'll take $305 if that'll help you. Who else wants in? Raise those bidder cards."  The bidding got fast and furious, and the three-bedroom condo in South San Francisco sold for $425,000. It was among 88 foreclosed properties, mostly in Alameda, Contra Costa and Solano counties, auctioned at the San Mateo County Event Center.

The auction was visible proof that the slumping housing market and subprime loan fiasco have had an impact on the Bay Area. It was the first large-scale foreclosure auction in the region in a decade. More than 2,300 people flocked to the auction, hoping for discounts on homes being sold by banks that had foreclosed on them.  If real estate is a religion, this was an old-fashioned revival meeting, with the frenzied energy of a game show. Tuxedo-clad "ringmen" raced up and down the aisles, urging on the crowd and pointing to bidders. One particularly gung-ho ringman did a chicken dance whenever he saw someone bid. A half-dozen female "runners," also clad in black and white, clapped and cheered every outcome, then approached the winning bidder, clipboards in hand, to get started on paperwork.

The throngs of attendees included people seeking homes for their families, investors hoping for rental properties or quick flips, and quite a few who said they came just to learn about the process. Many brought small children who played on the grass outside and lined up at a concession stand for snacks.  "It's an adrenaline rush," said Omar Felder of Hayward, who came with his wife, Teresa, and their 7-year-old son, Omar Jr. "I feel I'm getting a chance to increase my future riches."

He was armed with a list of properties he had looked over during three days of open houses earlier in the month. "If we get something for a reasonable price, we would rent it out for retirement investment," Felder said. "If it's big enough, we would move the family in."  

"When the market is hot, we're not," he said. "When the market is down or soft, that's when we're busy again." The company sprang back to life this spring, auctioning 290 foreclosed Southern California properties last month. It is now doing a three-day Northern California tour. On Saturday, 107 properties went on the block in Sacramento, and 47 properties will be auctioned in Modesto today. Next month, the real-estate road show will move on to Atlanta.

"The real-estate market is on a downward trend and so there are a lot of foreclosures. "A few of our sellers, who are major financial institutions, have decided to use the auction method to sell their properties. They feel even if they sell for a bit less that a quick sale is better than a slow sale where they have market ambiguity. They'd rather take their loss and move along."

Quick it was. Many properties sold in two minutes. Most had only about four bidders. Some lingered on the block for several minutes while the auctioneer wheedled for higher offers. Each property had a published minimum bid and a higher secret "reserve price" -- the actual minimum the banks were willing to accept. A phalanx of bank representatives flanked the auctioneers and told them when to accept lower reserves. It appeared that almost every property on the block received a winning bid, but bids below the reserve were subject to possible denial within seven days, according to the auction catalog.

Marjie DeWilde of Mountain View and her husband, David Parker, came to the auction "to make this an educational day," she said. They weren't bidding but had inspected and researched some of the properties on the block. Based on her study of comparable sales, DeWilde said she thought most properties were going for about 80 to 85 percent of their current market value. That's a decent savings for someone who wants to live in a house, but not enough of a discount for an investor, she said.

For example, a four-bedroom, two-bathroom Concord house had a minimum bid of $329,000. According to the catalog, it was "previously valued" at $651,000, meaning it had been listed, appraised or received a broker price opinion at that price. It sold for $500,000.

Many bidders said they thought the "previously valued" prices seemed high. "Most of the homes we looked at were distressed in some way or another," DeWilde said. "Unless the magical mansion came up, I don't think we would do it."  But everyone has their own definition of the "magical mansion." For Whitney and Alexander Hoerman, it was a two-bedroom Menlo Park house that they won with a bid of $590,000 in a nail-biter of a contest with another determined bidder.  "It was nerve-racking," said Whitney Hoerman, 32, who is eight months pregnant. "I almost had the baby."

The couple, who have three other children, want a bigger home. While the 890-square-foot home they're buying is cramped, it's on a quarter-acre lot, so they plan to expand it. They had been eyeing the house since four months ago, when it was listed at $740,000. "We will tear most of it down," said Alexander Hoerman, who is an engineer. "Whitney's dad is a contractor and he gave it a thumbs-up as remodelable."

Like all the winning bidders, the Hoermans were led to a large room to sit down with loan officers and figure out the financing on their new home.  All bidders were required to bring a $5,000 cashier's check. If they had the top bid, they immediately had to put down 5 percent of the purchase price, signing over the cashier's check and writing a personal check for the rest.

After 30 minutes with the loan officers, the Hoermans moved over to another area staffed by escrow agents, where they filled out the paperwork to open escrow.  All winning bidders pay a 5 percent buyer's fee on top of their bid, to cover the cost of the auction and advertising. In addition, Real Estate Disposition Corp. receives a seller's fee from the lenders that own the properties. It declined to disclose that fee or the names of the lenders.

Having financing available is a key distinction between this auction and the foreclosure auctions regularly held on county courthouse steps. The county auctions require bidders to pay all cash, and usually have minimum prices equal to the outstanding mortgage. That puts them out of reach of most people. Houses sold in county auctions have no guarantees that titles are clear, and bidders do not have a chance to inspect them, other than driving by.

"Here is more peace of mind for investors because the titles are clear," said Raj Dhillon of Benicia, an investor who was hoping to bid on some properties in Oakley or Richmond. "There are not second liens that you have to worry about."  Not everybody found the bargains they were hoping for. Felder, the Hayward man looking for retirement investments, said he was outbid on every property he was considering.  "I'm disappointed and sad, but I want to keep trying," he said.

 

Auction $25 Million in Condominiums in the Chicagoland Area

OAK BROOK, Ill.--(BUSINESS WIRE)--An auction of $25 million worth of condominiums in the Chicagoland area in July and August, including brand new models and totally renovated units in Chicago, Oak Park and Hillside.

All told, auction 69 units of over a 100-unit inventory, most originally priced in the mid-$200,000 to $400,000 range. Many of the units will be sold absolute, with starting bids as low as $75,000. The volume of condominiums offered reflects the growing number of developers who are turning to the auction process as a creative and effective marketing tool to accelerate sales.

“In a crowded market, a developer needs a way to make a product stand out from all the rest, and the auction process is increasingly becoming a method of choice for condo builders. “An aggressive marketing program draws all potential buyers from a much wider geography then is typical in convention sales programs, and takes buyers from competing projects. Sales are completed in about six weeks and closings typically occur within 10 to 30 days.”

A total of 17 units in Chicago will be auctioned, including 14 units in the Logan Square neighborhood to be sold as part of a developer closeout. The condos at 2038-2040 N. Spaulding Ave. feature hardwood floors, granite countertops and baths with natural stone flooring and designer lighting. Three additional condos from the same developer, located at 2315-2321 N. Waveland Ave. in Chicago’s Roscoe Village neighborhood, will also be included in the auction. The one-bedroom units are located in a newly-renovated vintage building and feature hardwood floors high-end finishing throughout.

Other properties to be auctioned include 25 newly-built luxury condos in the Blue Stem building, 1905 S. Wolf Road, a few minutes east of Oak Brook mall. The units feature nine-foot ceilings, large private balconies, luxury wall-to-wall carpeting, designer cabinets and countertops and modern GE appliances. Private indoor parking is included, and additional spaces will be offered at auction. Twenty-seven remodeled condominiums in the Avalon complex in downtown Oak Park will also be auctioned. The Avalon, a stately, 1920s-style courtyard building, is said to offer a perfect combination of vintage living and modern amenities. The one- and two-bedroom units, located at 201-211 W. Washington St., offer granite countertops and renovated bathrooms and kitchens.

Because all bidders are pre-qualified for lending by an approved auction lender, the auction offers buyers a convenient, streamlined process not only to acquire the property in one day but also to swiftly obtain financing. Qualified buyers can obtain up to 100 percent financing from the approved auction lender.

“One of the greatest attractions for us was the fact that buyers are pre-approved before participating in the auction, and therefore, many of the sales close within 10 days, compared to the 30 or 40 days or more that we see with traditional sales,”.

 

Homeowner opts for auction block

Saturday, June 16, 2007

By Cami Reister

The Grand Rapids Press

WALKER -- For Tom Vanden Bosch, every year he doesn't sell his three-bedroom home on Shire Street NW costs $40,000 more out of his pocket. It already has been one year. He does not plan to wait another. On June 26, Vanden Bosch's home will be sold to the highest bidder. "Even if it sells at the very minimum, it's going to be a relief to me because I'm not paying out that huge sum of money again," said Vanden Bosch, 42, who a year ago moved to the Hesperia area to start a community farm.

Vanden Bosch is part of a growing trend. Real estate auctions are becoming more common, thanks in part to a large number of foreclosures forcing banks to auction properties to recoup losses. But people such as Vanden Bosch choosing to auction also boosts the numbers. "It used to be when you had an auction, people will say, 'What's wrong with it? Who did what? Who went bankrupt?.

"But the process now is being used really as a first choice for a lot of people because they understand more and more about the advantages of an auction." Gross revenue in the overall auction industry grew by 7.1 percent last year, according to the National Auctioneers Association. That jump was fueled, in part, by residential real estate, which is the fastest-growing sector in the industry. It generated $16 billion in 2006, a 12.5 percent growth over 2005.

 

Foreclosure Filings Up Nearly 90 Percent From May 2006

Foreclosure Market Report, which shows a total of 176,137 foreclosure filings — default notices, auction sale notices and bank repossessions — were reported during the month, up 19 percent from the previous month and up nearly 90 percent from May 2006. The report also shows a national foreclosure rate of one foreclosure filing for every 656 U.S. households during the month.

“After a barely perceptible dip in April, foreclosure activity roared back with a vengeance in May,” said James J. Saccacio, chief executive officer of RealtyTrac. “Such strong activity in the midst of the typical spring buying season could foreshadow even higher foreclosure levels later in the year. Certainly not every community nationwide is seeing an increase in foreclosures, but foreclosed properties are becoming more commonplace and adding to the downward pressure on home prices in many areas.”

Nevada, Colorado, California post top foreclosure rates

Nevada registered a May foreclosure rate of one foreclosure filing for every 166 households — the nation’s highest for the fifth month in a row and nearly four times the national average. The state reported a total of 5,235 foreclosure filings during the month, a 40 percent increase from the previous month and nearly five times the number reported in May 2006.

Colorado documented the nation’s second highest state foreclosure rate, one foreclosure filing for every 290 households — 2.3 times the national average. The state reported 6,321 foreclosure filings, a nearly 9 percent increase from the previous month and an increase of more than 50 percent from May 2006. The state’s foreclosure total was eighth highest among the states.

California foreclosure activity increased 30 percent from the previous month and more than 350 percent from May 2006, boosting the state’s foreclosure rate to third highest in the country. California documented one foreclosure filing for every 308 households, more than twice the national average.

Other states with foreclosure rates ranking among the nation’s 10 highest in May were Florida, Ohio, Arizona, Georgia, Michigan, Indiana and Connecticut.

California, Florida, Ohio document largest foreclosure totals

For the fifth straight month California reported the most foreclosure filings of any state, with 39,659 in May. Florida reported 21,704 foreclosure filings, the second biggest state total. Foreclosure activity in Florida increased 52 percent from the previous month and 144 percent from May 2006, raising its foreclosure rate to one foreclosure filing for every 336 households — fourth highest among all the states.

With 13,214 foreclosure filings reported in May, Ohio documented the nation’s third highest state total for the third month in a row. The state’s foreclosure activity increased 16 percent from the previous month and more than 150 percent from May 2006, resulting in a foreclosure rate of one foreclosure filing for every 362 households — fifth highest among the states and 1.8 times the national average.

Other states with foreclosure filing totals among the nation’s 10 highest in May were Texas, Michigan, Georgia, Illinois, Colorado, Arizona and Nevada.

California cities continue to dominate top metro foreclosure rates.

The cities with the nation’s top three metropolitan foreclosure rates were all located in California, and three other California cities also documented foreclosure rates among the top 10.

A 49 percent increase in foreclosure activity ensured that Stockton, Calif., would continue to register the highest metropolitan foreclosure rate. The city reported one foreclosure filing for every foreclosure filing for every 88 households — nearly 7.5 times the national average.

Merced, Calif., documented the second highest metro foreclosure rate, one foreclosure filing for every 100 households, followed by Modesto, Calif., with one foreclosure filing for every 118 households. Other California metros in the top 10 were Riverside-San Bernardino at No. 5, Vallejo-Fairfield at No. 6, and Sacramento at No. 7.

Other cities in the top 10 were Las Vegas at No. 4, Denver at No. 7, Detroit a No. 8, and Miami at No. 10.

The RealtyTrac Monthly U.S. Foreclosure Market Report provides the total number of foreclosure filings — both nationwide and by state — over the preceding month. Data is also available at the individual county level. RealtyTrac’s report includes documents filed in all three phases of foreclosure: Default — Notice of Default (NOD) and Lis Pendens (LIS); Auction — Notice of Trustee Sale and Notice of Foreclosure Sale (NTS and NFS); and Real Estate Owned, or REO properties (that have been foreclosed on and repurchased by a bank).
 

WAL-MART To Sell 44 Prime Parcels via Auction

Lakeland, FL June 11, 2007 

Wal-Mart Realty, a division of Wal-Mart Stores, Inc. to sell 44 prime out-parcels in 19 states at public auction from June 11-June 26. Located from Georgia to Idaho, these prime sites are adjacent to Wal-Mart Stores and Supercenters. "Simply put, excess land provides value to our customers, other businesses and Wal-Mart. Customers benefit because excess land generally attracts restaurants, service businesses and other retailers that compliment and add convenience to our developments. Businesses that purchase our excess land realize the location is a draw for customers. Selling land adjacent to our stores allows Wal-Mart to reduce overall development costs; therefore lowering prices for our customers and bringing value to our shareholders," .

Wal-Mart Realty has again chosen the auction method of marketing to accelerate the sales of some of its excess properties. This year's auction is Wal-Mart's eighth in nine years. "While the auction is a regular part of our land sales plan, it represents only a small portion of Wal-Mart's available land for sale," stated Sill. Roughly 300-400 parcels are available throughout the United States. Information on all of Wal-Mart's available land and buildings can be found online.

This year's auction sites range in size from a .65± acre pad site in Payson, Utah to a 35.7± acre development tract in Houghton Lake, Michigan.  "Nineteen of these sites will be sold absolute to the last and highest bidder." The pad sites are prime locations for fast food restaurants, retail or service businesses, each benefiting from thousands of people visiting the sites daily. Each sale will be conducted onsite. The entire sales journey will span more than 8,900 miles.

Professionals, realtors, investors and individuals are invited to take part in this incredible opportunity to purchase prime commercial real estate at auction prices. Potential bidders to receive a sales brochure and due diligence packages.

 

Purchasing property from the bank or sheriff

KATHERINE OESCH

When purchasing a bank owned property or house from a sheriff’s sale you’ll want to be well informed and prepared. These transactions are handled differently than the traditional home is bought and sold thru a professional real estate company. When purchasing through the sheriff your more on your own. When purchasing an REO (Real Estate Owned) property you can utilize the help from a professional real estate Auctioneer Specialist.

In the county of Columbiana the sheriff’s holds real estate auctions. These auctions are held at the Lisbon courthouse. These homes have been foreclosed on.  Unfortunately with these homes you do not get the opportunity to tour the home prior to the sale. You will be bidding on the home from what you can see on the outside and through the windows. The sales are held once a month or more, as needed on the first floor of the courthouse. The sheriff’s web site is accessible through the auditors web site at www.columbianacntyauditor.org

You may view a list of upcoming sales and the starting bid. The sheriff appraises the home and starts the bid at 2/3 of the appraised value. In order to bid you must have 10 percent down the day of the sale in the form of cash or cashiers check. You also need to have your ID with you. The remaining balance is due within 30 days. If you are the successful bidder you will receive the property in "as is" condition. You will be responsible for all repairs to the home.

The sheriff makes no guarantees or warranties regarding the property. You will however receive the property with clear title. Any liens on the property will be voided; however a federal tax lien may exist.  This information can be found at the Clerk of Courts office, also in Lisbon. If you’re unsure of the process I recommend that you attend a sale to observe how it works.

Many investors choose to acquire property this way. There is a show on the television network A & E called "Flip this House." It’s a great example of the potential most of these homes offer. Besides making a nice profit you’re also doing a service to your community by renovating a run down property. Another way to acquire foreclosed property is through an REO. A REO is property that goes back to the mortgage company after an unsuccessful foreclosure auction or when the bank purchases the property back at the foreclosure sale.

The bank owns the property and the mortgage no longer exists. The bank will handle the eviction, if necessary, and may do some repairs. The bank will negotiate with the IRS for removal of tax liens. The purchaser of an REO property will receive a title insurance policy and the opportunity to tour the property. Do your homework before making an offer.  Banks sell property in the "as is" condition. They will allow inspection by you or paid for by you but may not agree to do any repairs. They will also make you sign several waivers regarding the "as is" condition and possibilities of existing mold and potential lead based paint hazards. It’s also a good idea to include a letter of pre-approval or poof of funds (ex. Bank savings statement) with your offer.

The bank usually requires earnest money. Plan on submitting $1,000 or more with your offer. The earnest money will be credited back to you so long as you follow thru and purchase the property as agreed. You need not be scared when purchasing a home at sheriff’s sale or thru an REO company.  You do however need to be prepared and well informed.

A real estate Auctioneer Specialist can assist you with the process.

 

Home auctions prevalent
Some bidders get good deals on properties

Michael Perrault
The Desert Sun
June 9, 2007

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Last Saturday's auction of cowboy-hero Hopalong Cassidy's home in Palm Desert by auctioneer Pacific Auction Exchange drew nearly 250 curious lookers, a dozen solid bids - and a sales contract for $467,500. Not a bad turnout, insisted Steve LaRocque, particularly considering there are roughly 2,200 homes on the market in Palm Desert alone.

That approach to selling late actor and Hollywood legend William Boyd's 1,892-square-foot, 1950s-style ranch is among a spate of real estate auctions that have hit the Coachella Valley recently. As part of a separate auction, prospective buyers and investors this weekend will get a sneak peek at two dozen area foreclosed homes and condos in advance of Dallas-based Hudson & Marshall's auction slated for Thursday evening in Palm Springs. More than 200 properties statewide are being offered by the Texas auctioneer from June 12-17. Dave Webb, said his firm has more than $65 million worth of properties on the auction block. "We anticipate (we'll) sell to the highest bidders at significantly reduced prices because banks want to quickly move bad loans off their books," Webb said.

Prospective bidders must show up armed with a $5,000 cashier's check or credited funding for each property they wish to bid on, LaRocque said. The auction moves to a new property about every half hour. Some motivated sellers are turning to auctions in hopes they can sell their houses more quickly in a sluggish market where home inventory has surged to more than 9,100 homes in the valley, area real estate agents said. The trend has gained traction nationally over the past three years, as revenues for real estate auctions have increased 39 percent, according to the Overland Park, Kan.-based National Auctioneers Association.

Auctioneers such as Holland & Marshall often offer step-by-step guides and Q&A information sections to purchase homes at auction. There can be risks, and first-time homebuyers may need help understanding the process. Some auctioneers may tack a premium of 15 percent to the purchase price, for example.

For Stan Fedderly, an Orange County direct mail executive, the auction was the way to go. He described himself as "a lucky guy" after he and his wife, Lynn, of Costa Mesa, came away with the winning bid on Hopalong Cassidy's former home

 

Seeking bargains on top-dollar properties at auction

By STEPHEN FRATER

stephen.frater@heraldtribune.com

SARASOTA -- It was like a folksy old-time revival crossed with a white-knuckle, high-dollar real estate sale. The Sotheby real estate auction -- offering one of the largest luxury home portfolios ever presented in a single swoop -- drew an overflow crowd of 300 people to a huge white tent on the front lawn of the Ritz-Carlton Sarasota.

What the event showed even those in Southwest Florida's all-important real estate industry who decided to bypass the gathering was that people are willing to buy, but definitely not at top dollar. Some properties only generated half of their listed prices, while others commanded up to 80 percent.

That upper strata included a 14-acre, seven-bedroom Lakewood Ranch Polo Club estate that had languished on the market for quite some time. The mansion, with the guest quarters and the 22-stall barn, originally had a reserve on it, but when the bidding for the property rose above $5 million, the owner declared the auction absolute, meaning it would sell to the top bidder.

Prior listings showed an asking price of $8.95 million. The winner bid $6 million. Add in the 15 percent commission to Sky and King and the cost comes to $6.9 million, or about 77 percent of the ask. Well-known Sarasota investor Marvin Kaplan bought a four-bedroom, three-bath house on Parmeron Lane in Gladstone Park for $300,000. The builder had about $590,000 in the home, meaning Kaplan got it for about 49 percent off. Delighted, Kaplan offered to buy three more at the same price but the owner turned him down. Kaplan was working both sides of the street at the glitzy auction.

He had four properties that he was looking to sell. He found that buyers were discounting by 30 percent or more. He decided not to sell -- his auctions were not absolute -- saying, "There were not a lot of end-user buyers in the crowd." That auction crowd included Sarasota socialites, top Realtors from other firms, hard-eyed businessmen, condominium developers, car dealers and even foreign-glitterati-power-couple types, draped in Chanel and Saville Row suits.

A pianist played softly as the wealthy-looking crowd snacked on a light lunch. Several bars were operating to capacity in the humid, 90-degree afternoon sunshine. The music stopped as the auctioneer, took the podium. About 10 of the associates, dressed in matching gray jackets, were spread evenly through the crowd. Using a wide range of hand gestures and shouts of encouragement, they worked the crowd hard. The Auctioneer launched into his traditional auctioneer's rapid-fire banter. If you closed your eyes it sounded like he might have been selling mules, not estates -- just like his great-grandfather did.

"I've got a million, got a million. Looking for two! Come on, what a value. You will bid. How about you sir? Now I got a million-two -- looking for more. Do I hear a million-five? I've got a million-five, need two. Meet me halfway! Do I hear one-point-seven-five?" The associates often pointed to various people and shouted, "Come on, we're looking for one-point-seven-five, one-point-seven-five." When a bid was made, the associate would blow a silver whistle to alert the Auctioneer, who then ratcheted up the request until he finally brought down the gavel with an amplified bang. Sotheby's president, was running between bidders and sellers, often at opposite ends of the huge tent, trying to hammer out deals.

The auction generated about $15.92 million in sales, including four properties worth about $8 million that were sold before the event even began. The balance moved within the humid tent.
Fifteen percent of $15.92 million is about $2.38 million in commissions. Roffers was ecstatic. He predicted more auctions in the future, even as several more sellers and buyers were still working on deals as the event wound down. "It demonstrated that auctions are an effective way to sell luxury real estate," . In the end, eight of the 22 properties being offered were sold.

Most deals or non-deals came down to pure mathematics:

A home at 807 Tropical Circle, last sold in October 2004 for $2.6 million, was listed at $3.479 million by owner Kevin Brown. In 2002 it sold for $2.249 million. Two years earlier, it was $712,500. Friday's high bid of $1.8 million likely did not net a final sale.

An estate on Sarasota Bay at 7350 Periwinkle Drive, owned by Kaplan, was listed for $3.8 million. It sold for $2.95 million in July 2005, $2.6 million in 2002 and $689,000 in 2000. It generated $2.2 million, but Kaplan declined the offer.

A home at 445 McKinley Drive in Sarasota was listed at $5.25 million. It last sold in 2003 for $3.8 million, and only generated a $3.5 million bid.

But someone got a tremendous $125,000 bargain on the absolute sale of a vacant lot at 2185 Hawthorne St., near Sarasota Memorial Hospital. The property last sold for $415,000 in 2005.

"It's heartening," said Garner, who seemed both impressed by the event and bemused by the large commission costs that buyers were paying. Several top Michael Saunders & Co. agents were in attendance, including partners Michael Moulton and Annette Rogers. Moulton was warmly greeted by Roffers, who once worked at Michael Saunders. Moulton worked his BlackBerry looking up Multiple Listing Service data on properties as they came up for auction, but did not bid on anything.

Some Realtors had clients on the line and a couple of properties were sold over cell phones.

"The bottom line is that they moved some property today," he said.

 

Auction draws more than 1,200 bidders on Southern California houses, condos

By Emmet Pierce

UNION-TRIBUNE STAFF WRITER

May 13, 2007

The bidding on foreclosed homes was so fast and furious that Candace and Curtis Friedman were still feeling an adrenaline rush as they were escorted out of the auction to sign a purchase agreement.

JOHN GIBBINS / Union-Tribune "Ring man" Jeff Johnston showed his disappointment after a bidder lost an auction for one of nearly 100 foreclosed properties in San Diego and Imperial counties. Johnston's job is to build excitement in the crowd.

“You don't have a lot of time to think,” said Curtis, a stay-at-home dad from El Cajon. “It's the fastest $200,000 we ever spent. It's over before you know what happened.”

His wife, a business owner, quickly agreed. “It's been a whirlwind.”

The Friedmans, who already own a home, plan to rent out their newly acquired three-bedroom dwelling in El Centro. They were among more than 1,200 people who came to the San Diego Convention Center yesterday morning to bid on nearly 100 houses and condominiums that had been reclaimed by lenders. Many others had the same idea. Traffic was backed up at the entrance to the convention center at 9 a.m., an hour before the event began.

Reflecting the recent national surge in home loan defaults, the dwellings from San Diego and Imperial counties were put on the block. It was the first of three such events planned in Southern California this month. A record number of San Diego County homeowners lost their homes in the first three months of the year, as default and foreclosure activity rose throughout the state, DataQuick Information Systems reported. Locally, 1,182 foreclosures took place from January through March.

JOHN GIBBINS / Union-Tribune Bill Conti (left) got ready to hug his daughter, Nicole, after Jim Buzzella (right) told them they were the high bidders on a house in Escondido. More than 1,200 people attended the auction.

That was nearly eight times the amount reported in the first quarter of last year. The previous record was 1,059 in the third quarter of 1996. Prices have softened but not fallen steeply since the end of the boom that saw many home values double between 2000 and 2005. Ed Leamer, director of the UCLA Anderson Forecast, said foreclosure auctions tend to pressure prices downward.

Yesterday's sale was the largest such event since the housing recession of the mid-1990s.

“These are all foreclosures from major financial institutions,” said Friedman, no relation to the El Cajon couple. Typically, the homes were reclaimed by lenders who were unable to sell them, he said.

“Maybe the home was too high and there was no equity,” he said. “Now the lender will sell it for less than the outstanding balance, in many situations.” His employees did their best to create a festive atmosphere yesterday. Rousing rock music blared through the sound system as potential bidders filled a large meeting room at the convention center. The auction was a sometimes-raucous affair.

 

Auctioneers talked at lightning speed as tuxedo clad assistants mingled with the crowd, leaping, waving their arms and shouting encouragement as each bid was cast. Hamid Gholam, a real estate agent from Irvine, said he saw reasonable deals but few true bargains. For investors like himself, “I don't think there's much money to be made,” he said. Rick Verducci, a homeowner from Carmel Mountain Ranch, came looking for an investment property but left empty-handed.  “We bid on two,” Verducci said. “We didn't get either one. They were high. I was surprised.” Home auctions require careful research, Todd Cuffaro, a mortgage broker based in Mission Valley, said before the event. Auction companies work on commission and push for top dollar.

“You have got to make sure you have (it) inspected, just as if you were going to buy from a Realtor,” Cuffaro said. “You have to take your due diligence seriously. If it was a foreclosure, it could be overvalued or it was not livable, something was wrong with it.”  Robert Friedman also recommends careful research. He said a preliminary tally at the conclusion of yesterday's auction showed that 90 homes had been sold. One successful bidder was SueAnn Miller, a sales representative who rents an apartment in Rancho Bernardo. Miller bought a two-bedroom condo in the same community.  “I went a little over what I'd planned on,” she said. “I bought it for $288,000. I originally wanted to stay at $280,000. It was fair priced.”

Candace and Curtis Friedman said they were convinced they got a bargain. The home they purchased was the first dwelling that was auctioned yesterday. Although financing was offered at the convention center by Impac Funding Corp., the couple said they saved money by qualifying for a loan with their own lender ahead of time. They said they also agreed on a maximum amount to spend beforehand.

“We knew what our limits were,” Curtis Friedman said. “Otherwise you are flying blind.”

 

Real Estate and Development

Foreclosures could lead to opportunities

By Brian Wargo / Staff Writer

While Las Vegas and Nevada garner national headlines over their increasing number of homes entering the foreclosure process, local housing analyst Dennis Smith said it got him thinking how that growing concern can help solve another problem in the valley.  Smith, the president of HomeBuilders Research, who analyzes the Las Vegas housing market, said the spotlight has been on the negative fallout caused by foreclosed properties.

Nevada kept its No. 1 spot in the country in March for its foreclosure rate calculated by national tracking firm, RealtyTrac. Las Vegas made the list of cities at No. 2. Foreclosures increase inventory and lower prices and that could provide an opportunity to deal with the region's problem with affordable housing, Smith said.

"There is plenty of demand for housing, and the foreclosed properties could offer ownership opportunities to many," Smith said. "If officials really wanted to help those that have been priced out of the housing market, they would restrict the sale of foreclosed properties that might be classified as entry level to investors and allow only owner occupants."

When he first broached the subject in his newsletter, Smith said he was taking a tongue-in-cheek approach but he said it's something that's starting to make sense to him. First-time homebuyers should get the first shot at those homes, he said. Smith said it's a long shot because it would require some federal or state legislation and also the cooperation of banks who repossess the homes. "I don't know if you can do it, but what's wrong with the idea?" Smith asked.

Many investors get a list of foreclosed properties and acquire them from banks that are looking to get them off their books, Smith said. "You are not telling me that there isn't a market out there for people who might be able to afford a $250,000 home that can't afford one for $300,000," Smith said.

About-face: In his latest take on the Las Vegas housing market in light of new home sales remaining weak, new home prices dropping and inventory of existing homes increasing, Smith said he appears to have underestimated what was happening when he predicted at the end of 2006 that the market was bottoming out. Smith said any suggestions that the market was going to improve by the end of 2007 appears to have been just wishful thinking. He said a recovery may not happen until 2008 or even 2009 based on the current trends.

Smiths said he wouldn't be surprised if some neighborhoods saw home prices drop as much as 20 to 30 percent because of a glut in those areas. Other neighborhoods where fewer homes are on the market would remain the same, he said.

The fallout from the subprime market has been felt by the housing market because of tighter credit standards, Smith said. In some cases, it's taking a credit score of 720 to qualify for a 30-year fixed loan. Those with scores of 680 have to jump through extra hoops to try and qualify for a loan, he said.

"I have heard this from builders and lenders, and it is not helping sales," Smith said. The 2007 sales figures will be down from the sales of 2003 to 2006 and the same will probably occur in 2008, Smith said. The growing inventory of existing homes also makes it harder for those who want to sell their home and buy a new one. Smith reported that the cancellation rate in March ranged from 24 percent in the northwest to 42 percent in the south valley.

More foreclosures: Michael Krein, the president of Nevada Real Estate Services, who handles foreclosure cases, said what's happening in the foreclosure market is nothing in comparison to what's coming. He said he was handling about 500 repossessed properties and would like to add staff to handle another 500.

Many adjustable rate mortgages will kick in by November and a second wave of cases entering foreclosure will occur, he said. "The worst is yet to come," Krein said. Patrick Egger, a local real estate analyst, wrote me and suggested it should be pointed out that even though Nevada has been singled out for a growing number of cases entering the foreclosure process, that doesn't mean all of those cases are foreclosures.

"It appears that many are including notices of default in their foreclosure figures. The Notice of Default is not a foreclosure nor should it be included when comparing to past years unless you can verify that foreclosures from past years also include the NOD's," Egger said. A Notice of Default means that the lender has filed a public record that the borrower has missed a payment and is now in default of the terms of the loan, Egger said. This does not place the borrower in foreclosure at this point, only makes the breach a matter of public record, he said.

"If the borrower brings the payment current, this is meaningless," Egger said. "While NOD's are the first step in the process, they do not necessarily reflect the true picture of the number of properties in foreclosure or foreclosed in any one time period."

RealtyTrac, which provides the data to The Wall Street Journal's Real Estate Journal, MSN Real Estate and others, said it does apple versus apple comparisons.

Its numbers include default notices, auction sale notices and bank repossessions from the months, quarters and years it makes comparisons.

In March for Nevada, the firm reported 4,738 homes entering the foreclosure process or one home per 183 households. That includes 3,227 Notices of Default, 857 Notice of Trustee Sale and 654 bank repossessions.

 

Californians Flocking to Phoenix for Bargains

Daily Real Estate News 

April 24, 2007

Californians are packing up and moving to Arizona — where bargain hunters can still buy their dream house for less than $300,000. "Housing isn't cheap in Phoenix compared to what it was. But it's still cheap compared to California," says R.L. Brown, publisher of the Phoenix Housing Market Letter. "We're averaging 9,000 Californians a month changing their [driver's] licenses to Arizona. To me, that's a phenomenal number."

February's median home price in Los Angeles County was $528,000, while in the Phoenix area it was $253,000. Jobs also are plentiful in Arizona. Unemployment runs on average about 4.2 percent, says Barry Broome, CEO of the Greater Phoenix Economic Council, and "would be lower, but we add 100,000 to 130,000 people each year."

Source: Los Angeles Times, Maria L. La Ganga and Doug Smith (04/24/07)

 

364,000 Homeowners Face Foreclosure So Far This Year

SACRAMENTO, Calif.--(BUSINESS WIRE)--The worst of the U.S. housing slump may be over but not the foreclosure nightmare that haunts many of the nation’s homeowners.

More than a quarter-million (253,803) pre-foreclosures and notices of pending foreclosure auctions were filed nationwide in the first quarter of the year. That means 2.4 out of every 1,000 homeowners faced losing their property to foreclosure in the first three months of 2007, according to new and expanded foreclosure filing numbers now available from a California-based real estate investment advisory firm and publisher of foreclosure and property information.

Those numbers are up 22.5 percent from the 207,128 filings in the fourth quarter 2006. They also don’t include tens of thousands more now-vacant properties that actually were lost to foreclosure during that same period. Those REO or bank-owned real estate filings totaled 110,791 in the first quarter alone.

“The numbers cast a dark cloud over the American Dream of homeownership,” says Alexis McGee, author of the upcoming book, “The Foreclosure Guide to Investing: Making Huge Profits Investing in Pre-Foreclosures Without Selling Your Soul” (John Wiley, September 2007). “Unfortunately for those overextended homeowners it’s a cloud that isn’t likely to lift any time soon either, especially in light of the recent troubles in the sub-prime lending market,” McGee adds.

In the past weeks, some of the nation’s biggest subprime lenders have cut back or shut down their operations. New Century Financial Corp., for example, stopped taking new loan applications, then filed for Chapter 11 bankruptcy protection; mega-lender Countrywide Financial pulled out of the subprime market altogether; and another big player, Fremont General Corp., after watching its stock plummet, is selling off its subprime lending unit. The end result is that financially strapped homeowners now have even fewer bailout options.

“Remember, a lot of these foreclosures, auctions, and REOs are in part a result of homebuyers who really couldn’t afford to purchase their homes, but did so anyway with creative financing (relaxed loan qualifications, too) and the expectation of rapidly rising home prices,” says McGee. “Now, those low monthly mortgage payments have adjusted upward beyond reach, housing price appreciation has stagnated or dropped, and in many cases their lender is gone. Though the remaining lenders hope to help their homeowners work out their mortgage woes, the plain fact is that the financial markets are now using tighter underwriting guidelines then they were just a few months ago. Homeowners who can’t afford their monthly payments, rather than simply refinance their way out of trouble as many have grown accustomed to, will now have to sell their homes quickly, or risk losing their home to foreclosure. That means in the coming months we can expect to see many more pre-foreclosure filings, more auctions, and more REOs,” adds McGee.

Meanwhile, earlier this month in Detroit Michigan a group of lenders, with REO portfolios bulging and area prices depressed, hired Texas-based auction experts auction 450 REO properties. Initial bids were set at $1, with only a $3000 deposit required to bid. Some run down properties in the poor neighborhoods sold for less than a car -- $30,000 or less!

“But don’t expect to pick up a great deal on a great house in a great location at an REO auction,” adds McGee. “The well-publicized Detroit auction drew a huge audience of bidders, and subsequent competitive bidding led many properties to sell at or above market value.”

Let’s look closer at some numbers expanded database of more than 2 million listings:

• Nationwide, auction filings alone for the first quarter were up almost 50 percent from the previous quarter--102,930 vs. 69,802 for fourth-quarter 2006.
• Pre-foreclosure numbers climbed, too—168,837 in first-quarter 2007 vs. 138,799 in fourth-quarter 2006.
• Total March foreclosure filings in all three categories—pre-foreclosures, auctions, REOS—also were up substantially over February numbers--70,350 pre-foreclosure filings in March, up 39 percent over the 50,496 in February; 45,512 auction filings, up 52 percent over the 29,867 in February, and 45,561 REOs in March, up 50 percent over the 30,337 in February.
• California led the nation in pre-foreclosure filings (49,016 year to date) and auctions (25,023 year to date); both numbers are up substantially from the same time last year, 139% and 277% respectively.
• Texas had the most REO or bank-owned real estate filings with 14,101 year to date, up from 11,226 a year ago.
• On a per capita basis: Ohio led in REO filings with 2.5 per 1,000 households (11,027 filings year to date) with Tennessee a close second—2.2 per 1,000 (5,022 filings).
• Colorado led in pre-foreclosure filings with 5.9 per 1,000 households (9,711 filings) with Florida a very close second with 5.8 foreclosures per 1,000 households (36,598 filings).

    -- The Top Five Counties in terms of numbers of pre-foreclosures
       included:
        -- Los Angeles, California: 9,354 filings year to date up 92
           percent over 4,871 for the same period a year ago.
        -- Clark, Nevada: 6,601 filings, up 143 percent from 2,720 a
           year earlier.
        -- Cook, Illinois: 6,259 filings, up 44 percent from 4,363 a
           year ago.
        -- Miami-Dade, Florida: 6,197 filings, up 90 percent over the
           3,262 a year earlier.
        -- Riverside, California: 6,103 filings, up 172 percent from
           2,247 filings for the same time a year earlier.

    -- The Top Five Counties in numbers of auction filings included:
        -- Dallas, Texas: 5,090 filings year to date (0.63 percent per
           capita), up 24 percent from 4,107 the same period a year
           earlier.
        -- Maricopa, Arizona: 4,872 filings, up 109 percent from 2,332
           the same time last year.
        -- Los Angeles, California: 4,739 filings, up 222 percent from
           1,470 a year ago.
        -- Tarrant, Texas: 3,498 filings (0.66 percent per capita), up
           16 percent from 3,027 a year earlier. Riverside,
           California: 3,249 filings (0.64 percent per capita), up 364
           percent from 700 a year earlier.

    -- The Top Five Counties in numbers of REOs/bank-owned properties:
        -- Harris, Texas: 3,985 year to date in 2007, up 147 percent
           from 1,616 a year earlier.
        -- Wayne, Michigan: 3,701 filings, up 18 percent from 3,135 a
           year earlier.
        -- Cook, Illinois: 2,564 filings, up 20 percent from 2,138 a
           year earlier.
        -- Cuyahoga, Ohio: 2,322 filings, up 63 percent from 1,424 a
           year earlier.
        -- Tarrant, Texas: 1,852 filings, up 19 percent from 1,562 a
           year earlier.

MORE FORECLOSURE FILINGS BY REGION:

Southwest Region

(Includes Arizona, California, Colorado, Nevada, New Mexico, Oklahoma, Oregon, Texas, Washington)

The nation’s Southwest region continues to lead the nation in pre-foreclosure and auction filings. In the first three months of 2007, 130,392 homeowners faced the prospect of losing their properties to foreclosure. A total 44,163 properties ended up as REO or bank-owned properties, too, according to new numbers.

Looking closer at those numbers, the region had 70,073 pre-foreclosure filings, up 98 percent from just 35,487 for the same period a year ago. That means more than 70,000 homeowners faced mortgages in default. Notice of auction filings soared in the quarter too, to 60,319, up 83 percent from 32,937 a year ago.

Adding to the dismal statistics, the region includes 17 of the Top 20 counties in the nation in numbers of notice of auction filings and 14 of the Top 20 counties in numbers of pre-foreclosure filings.

Consider a few more regional numbers:

• Nevada leads the nation in pre-foreclosure filings per capita—10 for every 1,000 households in the state. Colorado takes the second spot with 5.9 for every 1,000 households, and California comes in No. 4 (after Florida) with 4.3 per 1,000 households.

• California leads the nation and the region in numbers of pre-foreclosures for the quarter (49,016 filings, up 30 percent from 37,605 fourth-quarter 2006) and auction filings (25,023 filings, up 66 percent from 15,036 the same time a year earlier).
• Texas leads the nation and the region in numbers of bank-owned, REO filings for the quarter (14,101, down 13 percent from 16,155 a quarter earlier.)
• The region’s counties hit hardest by foreclosures include: in Texas--Dallas, Tarrant, Collin, Travis, and Denton; in California—Riverside, San Bernardino, Los Angeles, San Diego, San Joaquin, Orange, Sacramento, and Contra Costa; Clark, Nevada, and Maricopa, Arizona.

Midwest Region

(Includes Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Wisconsin)

Impending foreclosure hit home hard in the Midwest during the first quarter of 2007. A total 31,641 pre-foreclosures and notice of auction were filed in the first three months of the year. A total 36,021 properties also ended up as REO—reverted back to the lenders.foreclosure filings with 12,061. On a positive note, that’s down 6 percent from the 12,768 in the previous quarter. However, on a month-to-month basis, March’s 4,907 filings were up 50 percent from February’s 3,263.

Reeling from the effects of the region’s economic woes, Michigan ranked No. 3 nationally with 11,401 REO filings, and Ohio at No. 4 with 11,027 filings. But those first-quarter numbers for Michigan represent a 14 percent drop from the fourth quarter 2006, and for Ohio, an 8 percent decline.

“Despite the drop, both states likely will feel housing economics fallout from major auto industry and manufacturing cuts for a long time to come,” says McGee.

Looking at more regional statistics:

• Nine of the region’s 11 states actually saw a drop REO filings in the first quarter, with Indiana (2,800 filings) and Kansas (379 filings) registering significant drops—42 percent and 54 percent respectively.
• Pre-foreclosure numbers dropped 67 percent each in Indiana and Kansas, in the first quarter compared with fourth-quarter 2006. Unfortunately, Missouri, also hit by manufacturing cuts and job losses and the resulting economic fallout, didn’t fare as well with 3,298 filings, up a whopping 377 percent over the last quarter’s 692 filings.
• Ohioans continue to struggle with housing affordability issues. More than 1,376 notices of pending foreclosure auction were filed in the first quarter, up 100 percent from the previous quarter.
• On the positive side, in addition to Illinois, four other states in the region saw a drop in pre-foreclosure filings, including Indiana, Nebraska, North Dakota, and Wisconsin.

Southeast Region

(Includes Alabama, Arkansas, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, West Virginia)

Florida far outpaces the rest of the Southeast in the number of homeowners facing pending foreclosure. A total 46,023 pre-foreclosure and auction notices were filed in Florida during first quarter 2007. That’s up 26 percent from just 38,512 filings in the last quarter of 2006, and accounts for more than two-thirds of the region’s total 68,161 homeowners in financial trouble so far this year.

On a per capita basis, 5.8 out of every 1,000 Florida property owners were in pre-foreclosure, and at risk of losing their homes so far this year. In the majority of other states in the region—West Virginia, South Carolina, North Carolina, Mississippi, Alabama, Arkansas, and Kentucky, per capita numbers are negligible.

In terms of bank-owned or REO properties, Georgia barely trails Florida in the numbers, 5,555 vs. 5,699 at the end of the first quarter. Georgia’s problem counties continue to be in the Atlanta metropolitan area, and include Fulton, DeKalb, and Gwinnett, though two of the three saw double-digit drops in their numbers during the quarter.

Looking closer at more regional numbers:

• Tennessee’s pre-foreclosure filings climbed 40 percent to 4,545 in the first quarter, up from 3,239 in the final quarter of 2006.
• North Carolina REO filings dropped 10 percent for the first quarter to 3,877, from 4,320 the previous quarter.
• Month-to-month pre-foreclosure filings in North Carolina, however, climbed 27 percent to 2,516 in March, from 1,988 in February (full year-to-date data is not yet available)
• Six Florida counties made the list of the Top 20 counties nationwide with the most pre-foreclosure filings year to date 2007. They include: Miami-Dade, Florida (6,197 filings, up 90 percent from 3,262 for the same time last year); Broward (4,454 filings, up 62 percent from 2,750 a year ago; Palm Beach (3,439 filings, up 38 percent from 2,499 a year ago; Hillsborough (Tampa; 2,272 filings, up 90 percent from 1,195 a year ago); Pinellas (Clearwater/St. Petersburg; 1,696, up 92 percent from 883 a year ago), and Orange (Orlando; 1,599, up 62 percent from 987 a year ago.

Northeast Region

(Includes Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont)

The nation’s Northeast Region appears to be weathering the foreclosure storm better than much of the rest of the nation. Despite its major population centers, the Northeast trails in numbers of foreclosure auction and bank-owned real estate or REO filings. Only the Midwest trails it in fewest numbers of pre-foreclosure filings.

“The Northeast, with its many diversified economies, didn’t have quite the mega-price appreciation or creative-financing frenzy of some other parts of the country,” says McGee. “As a result, the region is recovering faster from the housing market slump and foreclosure fallout.”

Pre-foreclosure filings in the region are up just 8 percent for the quarter--25,919 vs. 23,939 for fourth-quarter 2006. Auction filings, however, climbed 167 percent region-wide to 9,529 year to date vs. 3,571 in fourth-quarter 2006. That means a total 35,448 property owners worried about losing their homes to foreclosure in the first three months of the year.

But those numbers remain manageable compared with the bigger numbers elsewhere in the country. Looking closer at a few more regional numbers:

• Monroe County, Pennsylvania, had the highest number of REOs per capita in the region, 2.5 out of every 1,000 households. The county is in the eastern part of the state and its economy banks big on tourism and home construction.
• New Jersey had the most pre-foreclosure filings—7,821 in the first quarter, down 9 percent from 8,595 in the previous quarter. New York numbers were down, too--6,696 off 13 percent.
• Massachusetts led the region in notice of auction filings with 2,510 in the first quarter, up 60 percent from the 1,569 in the last quarter of 2006. New Jersey followed with just 1,256 and New York with 1,155.
• Pennsylvania led the region in REOs with 2,031 for the first quarter, off 43 percent from the previous quarter. Numbers dropped in New Jersey, New York, Maryland, the District of Columbia, and Massachusetts, too.

 

Luxury Homes On The Block

Subprime lending. It’s enough to strike fear in the heart of the most credit-worthy homeowner. Indeed, scores of homeowners and banks, reacting to recent mortgage  defaults,are scrambling to sell off housing, often at a loss. In watching congressional hearings and reading media reports, it seems the subprime problem is germane to the low end of the market. But there is something of a fire sale in the luxury sector as well.

In Pictures: Luxury Homes On The Block

"Even wealthier households use ARM products to finance the purchase of luxury homes in expensive areas," says Anthony Sanders, real estate finance chair at Ohio State University, of adjustable rate mortgages at the center of the subprime saga. "The rate resets combined with declining house values are creating a problem even in this sector of the housing market."

The Big Sell-Off
As a result, some high-end homeowners are selling short in the panic. Like lender EquiFirst--which took a $76 million buyout offer Monday from Barclays Bank when in January the offer stood at $225 million--luxury homeowners faced with default pressures are selling for less than their mortgages.

Enter the auction. In the auction world, those sales, deemed pre-foreclosures, are big business. In a pre-foreclosure, the homeowner can use the sale proceeds to pay off the mortgage debt even though these proceeds may be less than the amount owed.

Homeowners' desire to rapidly liquidate real estate holdings has made real estate auctions the fastest growing auction category, according to the National Auctioneers Association. A quick sale may mean less money, but bankers and homeowners are increasingly willing to accept that caveat, according to Nicholas Varzos, president of Exclusively Auctions, an auctioneer of luxury homes. "If the bank forecloses, they have to take it into inventory and figure out how to sell it," he says. "Foreclosing just makes it the bank's problem, and they've got enough problems."

Many of the luxury sector homes currently on the block--either due to relocation or market and payment pressures--are second and third homes. Definitive data does not yet exist on luxury homes in the subprime fallout--due to the prematurity of such a market state--but according to Varzos, the most market activity exists in second home markets like South Florida or Colorado, or locales where the housing market drastically over-expanded in the early 2000s like Las Vegas or Los Angeles. .

Not So Bad, Some Say
While lenders like New Century Financial and SouthStar are tossing in the towel, the overall lending situation, while not booming, is hardly cataclysmic.

Though "early payment defaults on subprime loans through mid-2006 have risen to more than triple the rate of early 2005," says Frank Nothaft, chief economist at Freddie Mac, the accompanying 2006 fourth-quarter delinquency rate of 1.9% on commercial bank loans is still below the national average in the late '90s.

Jonathan Miller, president of Miller Samuel, a New York-based real estate appraisal and consultancy firm urges perspective. "No matter which real estate market sector you're discussing there's a problem of perspective," he says. "Most of the people in the business now haven't been in it long enough to see a full market cycle."

Which means second home buyers worried about the bottoming out of the market may be better served to refinance and wait it out. In late March, mortgage rates came down, with the 30-year rate dipping to 6.16% from a February high of 6.34%, based on long-term bond yields dropping and a flat inflation prediction by the Federal Reserve. Both Fannie Mae and Freddie Mac report good market liquidity in the prime lending market, and their share of new ARM mortgages is expected to fall by 13% in 2007, according to the Federal Housing Finance Board.  While the subprime fallout may get worse before it gets better, those with the cash to finance in the prime lending market should temper their worries.

"There have been reports of households frantically trying to sell their luxury homes," says Sanders. "Instead, they should have a glass of chardonnay, a slice of brie and chill out. The housing market will turn."

 

ACTION AUCTION

Process appeals to sellers who want immediate results

By ANGELA BAUER, Special to the Times-Union

Auctions in the United States long have largely been the domain of fine art, farm equipment and what was left of Grandma's belongings after the kids and grandkids staked their claim to her jewelry and china.  That is changing quickly as people increasingly used to instant communication and fast everything else seek an alternative to listing their home for sale with a traditional real estate agent and waiting, often months or more, for an acceptable offer.

Ponte Vedra Beach Realty's relatively new accelerated marketing division doesn't mention the word "auction" in its title, but it embraces the concept, division head Jerry Soriano said.  "We're doing high-end property [where the] homeowners want immediate action," Soriano said. "It's on the market about 45 days. The auction is on the 45th day."  That time frame, which can be slimmed down to 30 days, primarily allows for proper marketing of the property and the auction to ensure the largest number of qualified bidders. 

An auctioneer in Gainesville, advocates real estate auctions as the best way to determine a property's true market value.  "When one sells conventionally, you generally have one offer at a time for a piece of property," he said. That process often leaves the seller wondering if he should hold out for a better offer or take what he can get and walk away. The buyer can wonder if he paid too much.

But buying and selling at auction satisfies everyone because the buyer knows how much his rival bidders were offering, and the seller knows he accepted the best offer for his property, Campen said.  "The process is over in a matter of minutes. Everyone there has had the opportunity to raise the bid, and [the high bid] is undeniably the truth" about the property's market value.  But there are no guarantees in auctions, and "market value" at auction isn't necessarily "appraised value," those in the industry say.

Auctioneer Nicholas Varzos, who works with Ponte Vedra Beach Realty as President of Exclusively Auctions (www.MyNextAuction.com), said real estate auctions aren't for everyone. But, when it fits a seller's needs, nothing works better. A seller who's heavily invested in the property and has to get a set dollar amount from its sale is might also consider taking the traditional route, Varzos said.

Others find the time trade-off balances the calculated risk of an auction, he said.

Nicholas Varzos of Exclusively Auctions of Lake Tahoe, Nev., was the auctioneer for the event, which was coordinated by Jerry Soriano, the head of the accelerated marketing division of Ponte Vedra Beach Realty Inc. MARK E. GRISHAM/Special Sections staff

One property recently sold at auction had been on the traditional real estate market for more than 550 days as the owner continued to pay for expenses associated with a property he no longer needed, Varzos said.

Within 45 days of deciding to sell at auction, that property was sold and no longer a drain on the seller's finances, he said.  "It's not for everybody," Varzos said of auctions. "But for those that fit the criterion, they're pretty happy with what happens."

Another auction Varzos handled hinged on the emotional costs of a lengthy sales process, he said. A couple decided to retire and move for health reasons. They opted for an auction to speed the process, saying they wanted "to sell it at any price" to get the sale over and done with.

Registered bidders on the home included seven who attended the auction, 22 on the Internet and one sealed bid. Mark E Grisham

Their property was auctioned off for full appraised market price, with both the seller and buyer shedding tears of joy, Varzos said.

"That's a fantastic free-market result," he said.

An auctioneer in Tulsa, Okla., which has auctioned properties in the Jacksonville area and has other auctions upcoming in the region, agrees that auctions are an excellent way to sell a home.

"We think the auction model works best for all non-speculative buying and selling," he said. "That's been proven."

The traditional real estate market benefits sellers who are living in a home and don't necessarily need to sell but put their home on the market to see if they can make some money off the sale.

"If your goal is to speculate, that is well-suited for what we in the United States term as the traditional system. Set a price and see if you can get it," he said. "If you're a non-speculative seller, then the cost of speculating becomes significant, because for each month you don't sell a real estate asset, there are costs. And it tends to depreciate if it's not lived in."

While real estate auctions remain the exception rather than the rule in property sales in the United States, that is changing to catch up with European countries where as much as 40 percent of all real estate is sold at auction. Varzos cited the National Association of Realtors in saying that one-third of all homes is expected to be sold by auction within three years.

"The Internet changes some things," Varzos said. "One of those is information access. Seven out of 10 [people] go to the Internet to do research before buying. As a result, more people are willing to rely on what they do themselves," including researching and buying property.  While some may see that as pitting auctioneers against traditional real estate agents, Varzos disagrees.

"I'm not trying to put Realtors out of business," he said. "If 25 people are bidding on a house, only one gets it. What happens to the other 24? They make pretty good leads for Realtors." Moreover, Realtors benefit by having an auctio-option as just one of their innovative marketing tools for sellers. Elaine Casteleyn, CRS, says that every major real estate firm will soon have an Auction House as part of their marketing system.

Soriano agreed, saying his auction division works at  Ponte Vedra Beach Realty's traditional real estate office. "We're not in competition at all," he said. "We give people options about how they want to sell their property."