August 9th, 2010
Let us start off with a few knowns, so everyone has a foundation of relationship to the foreclosure situation here in the Seattle area. There are roughly 134,000 households in the city limits of Seattle. Year to Date there have been 3399 foreclosure filings (2.5% of the total population has had a foreclosure filing). Remember in the state of Washington a Lender can file foreclosure Default or Notice of Default on day 31 of a home owner’s mortgage payment being late. Also Out of that 3400 hundred homes over the past year only about 35% actually make it to auction to sell. The other 65% will usually remedy there notice which a home owner can do anytime, by paying their default amount. They can get their foreclosure stayed, or hopefully they also have received Loan Modification Counseling, so their payments have become more affordable.
This brings me to a small piece of advice. When you are doing foreclosure searches; remember just because a home owner has received Notice of Default; Does not mean the home is for sale and/or will actually going to auction.
Here is a Chart Showing the Number of Notice of Default given vs. A 30 year fixed interest rate (avg 4.74%). This is for the idea the interest rate are a correlate to the foreclosure defaults… Which I have yet to see… Interest rates are low, and people still can’t afford the loans they were given…
The next Chart shows the avg sale price for retail homes Vs foreclosure homes. The average Sale price for a Home in Seattle is $409,000.00. This home will be on average 1550 sqft, built between 1910 and 1950. That is an average price per sqft of $259.00. We know this city has tons of neighborhoods that are far more expensive than that. The average foreclosure sale price is $279,000.00. Understand a majority of the homes that are in foreclosure and for sale are in the South Seattle area where property values are far cheaper than the average retail sale price. So don’t even begin to think you are going to roll into Fremont or Ballard and purchase a foreclosure home for $279,000 that is 1550 sqft.
I am sticking to what I say to all my clients when they ask me what I think will happen with this market… “The Data Shows me; We will Be Boucing on the Bottom through the end of 2011. No worse or better…There will be small peaks and values, but all within a simular range.”
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March 11th, 2010
In February there were 309 properties in king County that made it to auction. There were a total of 342 REO properties that reverted back into bank ownership. There are 563,000 house holds in King County. So the total percent of homes in King County that are owned buy a Bank in February is 0.0006% of the house hold population. That is 6/10,000th of 1%. So as a lot of us are already experiencing, prepare your clients for multiple offer situations when going after REO’s, because they are scarce. Also know the banks have teams and teams of analysts crunching these numbers, so know there will be a lot less flexibility in negotiations. So, Keep it Real. Remember Banks don’t like Escalator clauses. They will always send out a multiple offer addendum whether you like it or not. And it will be on their time table not yours. And they will take the Highest and Best Offer on the date they select. That is the tough cookies.
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March 4th, 2010
Continually on media outlets that the economy is sluggish, unemployment close to double digits, bailout nation, and what ever fear the media can drum up to keep you watching. I die laughing at how outrageous some of the terminology is. If you watch network news you could think on any given day the world was coming to an end. What does this have to do with foreclosure? Well we are bombarded by these house statics showing all of us that the leading indicators are showing housing is doomed and the commercial market has yet to collapse. Well for my anecdotal perspective in real estate backed by many charts of data. Here in the Seattle Area foreclosure filings are down 22%, from 1100-ish per month to the mid 800’s. This is out of 560,000 house holds. That is 0.0016% of all of the homes in the Seattle/King county are currently in foreclosure. People want the deals but the scarcity is causing a blood bath out there. People are hungery for real estate deals. But remember in this city a deal is going to be $0.70 on the dollar. If you think; because you saw a commercial for a house selling for 3000 is going to be found in this city; don’t fool yourself. On average you will be paying between 300 and 500k for distressed home in this city. So, if you are thinking you are going to get deals at 0.40, 0.50 on the dollar, you will be chasing ghost. Land is scares, the population is well educated, they are healthy, the job market here has international demand, the city of Seattle did not allow for Urban Sprawl; and people haven’t stopped having babies. So everyday there is less space in a city that has high demand for goods and services. Put away the idea of what you saw on TV, because it does not apply in this town. The Distressed Real Estate Market is Hot! There are more buyers than product. Prepare yourself for competition; prepare yourself to write offers higher than asking. Prepare yourself to get less than what you saw on TV.
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October 28th, 2009
Recently I put in an offer on a property in the Seattle area, and the listing agent called me with the most unusual story. It was a methodology is how get the first lien hold to take less, and pay the second more, so the second lien would not follow the seller if it came up short. So i know what everyone is thinking By law the primary Lien Holder has the first rights to any fund to dissolve its debt. The issue is the home owner went and got a commercial loan backed by his house, and since that loan had a personal guarantee it could not be dissolved in Bankruptcy court.
The listing agent had this method to get around the investor rights. Which I still think is illegal. But I would to have some people let me know their thoughts.
1. To write the PSA with the purchase value as much as you are willing to pay the First.
2.Next write a separate addendum were you bring more cash to pay more of the second lien holder.
3. Then create a HUD where the payoff’s are disclosed. And tell the bank to take it or leave it.
Does this raise any red flags for anyone like it has for me?
PS…Hands down this is Illegal. Just got off the Phone with my Real Estate Attorney! Do not participate in anything deal that the listing agent is trying to involve you something like this. This is Mortgage fraud.
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July 28th, 2009
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June 380 properties Auctioned Vs 123 REO’s
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5.42% ave interest rate Vs 503 Filings
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53 Foreclosure Sales in June
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$313,000.00 Foreclosure Price Vs $415,000.00 Retal Price
Average of 24.58% saving when purchasing a foreclosure over a retail property in June. Also to date June was the highest months of foreclosure filing in King County Since the beginning of the fallout. 1490 filling for King County in June Vs 1002 in May. That is up 33%. Wiht the large Majority happening the Southern Part of the County. Also there were far less purchses in June at Auction. So those properties will go back into REO recievership so look for those properties on the market within the next 60 days. I wonder if the reason for that is the foreclosure price was higher than the market value. So the Consumer damand tat the property goes back into recievership, so the bank has to sell it for even less?
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May 15th, 2009
I love getting calls from other Realtors clients, and they are just calling to check on things that quite don’t make since. Before i ever know if they are working with anyone else, they ask me questions about what they are going through. Of course it makes no sense, then I give them about 20 minutes of coaching. Then inevitably they go “Why didn’t my Realtor tell me that?” My only advise is…Please if you call yourself a distressed property specialist, please be one. And not just someone that took a 2 day course that you paid way to much money for. Actually read the laws in your state that govern the distress property process; and know how to apply them to your clients circumstances.
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May 12th, 2009
For the Past Month I have had this man calling every week to ask me about prospective foreclosure properties, and at the end of every conversation I get off the phone wondering if the man heard anything I said. This person came to me with a pre approval letter from a National Lending institution last month for a loan up to $300,000.00. Here in Seattle that is the average price for a foreclosed home roughly. That home is 1300ish sqft; with 3 bedrooms and 1 bath; built between 1910 and 1930. And for your 300k you get all the great things a 80-100 year old house has to offer you. Ancient everything, asbestos, mold, knob and tube wiring, galvanized to cast iron plumbing, got to love it. So not only do you get to buy this foreclosed property, but it also will be a series of piece mill work done by previous owners. This is the average. Sometimes I get excited when I see wiring and plumbing at least updated in the fifties or sixties. I get even more excited when it was done in the eighties. And if that foreclosed home has been remodeled in the nineties or later, have no doubt you will be paying the 500’s or more for it, because resale will be in the sixes and above in some neighborhoods. Welcome to Seattle. That’s my rant.
SO back to the prospect he came to me first wanting a house with good upside for his budget, then he came to me with a need for e house with 4 bedrooms for 300k. This is a little harder but it happens, you will need to put some elbow grease into the property but they are out there in some form. I found Six in the areas he wanted to live, and lucky enough they all were livable. These properties all needed more work than he was comfortable doing. So i didn’t hear form him for a while. Mind you I explained what he was going to get for his money, I am to blunt for another interpretation to of been had.
Last Sunday I am driving back from a hike at Rattle Snake Lake, and i get a phone call from him and he is all excited. HE says he found a 7 bedroom 6 bathroom 5000sqft house that went to auction last Friday for an opening bid price of $256,000.00. Then he says a website told him the home was worth 2.2 million dollars. Could I call the lien holder and see if it sold, so he could buy it. I calmly asked him many questions and informed him that; the opening bid price is so low that the house will end up selling for close to 1.4 million. And even in some crazy long shot there was a way for you to buy such a house for that amount of money not have a time machine; how was he even going to pay the property taxes, which are about 25k a year on the property. He said “I didn’t think of that.” Then I said, if you did not think about how much the taxes were, did you think of how much it would cost just to turn the lights on in that place every month? (About 800 bucks), and you haven’t even flushed a toilet yet. I again ask him if I can send him a list of distressed home that he can afford. He said yes, and asked if we could have a showing on Tuesday. So I sent him 3 homes that meet his needs, yet all need some elbow grease because of this budget. HE asked again if there are any new homes in Seattle (in the city not the burbs) that are 4 bedroom 2 bath for 300k. Then I fired him.
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May 12th, 2009
I had a closing next week for a great deal on a property in Ballard. Inspection went great; appraisal came back spectacular, and two weeks have gone by since. So we are in that coasting period were you are doing little things like going to home depot to price out what you want to do with your new house. You know always in the 11th hour something will pop up, and it usual has to do with the lender needing more docs do to a sudden rule change, right? But no, this time the 11th hour problem was much much worse. My client (the Buyer) got laid off from his job. Thank God for Financing Addendums, because my client needs that earnest money now far more than the seller did. When they talk about the 88 things that go wrong in the Real Estate Transaction, Welcome to Rule Number 4.
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