Foreclosure prices can’t get cheaper
March 3rd, 2009
Notice how October is the Peak Filing Month for Washington State
I have been hearing from investors that they want to keep their powder dry to see where the market going before they start purchasing distressed property. They have also told me that they think the banks are going to become more negotiable in time. I am going to say in the nicest way possible, that you are wrong. Foreclosure prices are not getting cheaper. That is obviously a statement of ignorance to the foreclosure process. Foreclosure in the state of Washington works by a lien holder notifying the home owner that they have not made their payments by which breaks their contractual obligation to that lien holder. Because of that action, they have the right to auction that property starting at the Default Judgment amount. That when you go to auction to purchase that property the opening bid will be that default amount, plus any back taxes or public utility lien’s that are on record. That is only the opening bid; you still have to complete with the 12 other bidders you WILL be bidding against most likely.
When we buy in short sale we will be purchasing lower than the mortgage values, then things like back taxes, unpaid utility bill’s get paid at closing and it comes out of the seller’s side. A lot of Realtors will not want to deal with this negotiation with the lenders. The lenders will try to go after the agent’s commission as a way for them to lessen the loss. Agents need to have previous agreements with their clients about just this issue. From a buyer’s agent’s side, my clients make a lot of money in equity upside. It has yet to be an issue. It is easily earned when you purchase your client a house 30-45% below market value, and 30%+ below Mortgage value. Better than that is you as an investor can finance, have an inspection, and the seller pays the commissions. Where if someone purchased at auction that individual does not get the luxuries stated above. Yes, short sales take longer, your agent needs to do a lot of leg work, but you make the most money by doing the work other don’t want to.
Yes, the real estate prices are going down. But foreclosures cannot get cheaper with the way the State laws are set up. Not only that foreclosure filing is down 27%; from Washington States peak filing month in October.
