I was challenged on another blog about the amount of Foreclosures/Pre-Foreclosures in Las Vegas with this article.
First of all I would like to define a couple of terms.
- A notice of default (NOD) is a pre-foreclosure. The home has not been foreclosed upon yet but the owners are behind on their payments. Realty Trac includes this in their statistics also. Sometimes the owner can cure the default and get back on track. 100% of these homes will not go into foreclosure.
- A short sale is when an owner is forced to sell for less than what they owe on the property. They may be in distress or they may be forced to move out of state for one reason or another.
Raise your hand if you realize that time shares are included in Realty Trac's statistics? One day I received (in my notice of defaults) close to one hundred pre-foreclosures of timeshares. Do you think that this will skew the results of Realtytrac's foreclosure statistics? ABSOLUTELY! It isn't sexy to report about timeshares foreclosing but it is sexy to report about people having financial difficulties because of icky loans they got "trapped" into.
I have been receiving many calls from many different types of buyers (first time buyers and investors) who want foreclosure commenced, REO and short sale information. Their main focus is that they are under the impression that they will receive a great bargain to either live in these homes or flip.
IT is my job to find out WHY these people want these types of properties or any type of property for that matter and to counsel them on whether that type of property will work for them and the ongoing process to get from point A (a purchase contract) to point B (a close of escrow). While it is ultimately the consumer's job to find the best property to suit their needs at the best possible price, they need to know and understand what they are getting in to.
First of all, most NOD's and Short Sales are fairly competitively priced in this market at this time. Even a 5% bargain may not be enough to recoup possible costs from two main problems that are usually associated with short sales and foreclosures:
- Liens
- Deferred Maintenance
If they can't pay their mortgage why would you assume that they are paying their association dues, trash, sewer bills and general maintenance of their home? Most banks sell these properties AS IS and will NOT correct liens & material defects. It is important to run a preliminary title report prior to writing up an offer and to put a contingency for a home inspection in it. While the bank or homeowner will not be liable for fixing defects and it minimizes your chances for getting your offer accepted, at least you can back out if there is something majorly wrong that you cannot live with!
There are plenty of sellers wigging out right now and lowering their prices and these are not necessarily people in distress financially: they just believe the sky is falling in on the Las Vegas Real Estate Market which is blatantly untrue! Read: Inventory Shrinkage..., Real Estate Has Never Been a Better Value..., Here we grow again...
You can find a better deal right now other than a short sale or foreclosure!!!!!!!!! We currently have 20578 listings (numbers from 2/10/2007) in the valley. Of those 20578:
- 565 are Foreclosures which is 2.7% of our listings
- 722 are Short Sales which is 3.5% of our listings
- 241 are both which is 1.1% of our listings
Compare those numbers to last month's statistics and it is pretty much the same! So my point is, why do you want to limit yourself to only 3.5% of listings to find yourself that bargain?
Alright, you find a short sale or preforeclosure and you want to put in an offer! What do you need to know?
- Have your Realtor get with a title company and run a preliminary title report prior to wasting valuable time and writing up an offer. Make sure that you can live with paying off the liens and correcting title defects if the bank won't.
- Be prepared to wait wait wait for the bank to consider your offer. This isn't an overnight or 48 hour decision!
- Write your highest and best offer if it is priced right because while the bank is considering your offer, others will probably roll in to be considered!
- Put as much cash down as you can.
- Live without as many contingencies as you can.
- Make the COE (close of escrow) as short as you can.
Good Luck!
Renee,
Thanks for the post. I can likewise can attest to better buys in my market, outside of pre-foreclosed or foreclosed properties. They remain competively priced. I suspect that the pricing will hold at least through spring.
Hey Renee,
Are you sure about your NOD stats? I realize it's merely a notice but I can't believe 100% will not go into foreclosure. Perhaps 95% or even 98%, but there must be a few people who will go from the NOD stage through to the courthouse steps. No?
- Tchaka Owen
http://tchakaowen.blogspot.com/
William: YES!
Jeff: absolutely!
Tchaka, my dear friend: I did put the key word "not" go into foreclosure :) Many will sell or rectify the situation prior to going into foreclosure. If there is a sentence in there that I don't make that clear, please point that out for me :))))))
Hi Renee, I see what you're saying now. The way it reads, it sounds like 0% will go into foreclosure, but what you're saying is that we won't see 100% going into it. And you are certainly correct about that. Coincidentally, I'm looking at possibly doing a SS right now (if the numbers work out). I'll let you know how it turns out.
- Tchaka Owen
http://tchakaowen.blogspot.com/
Tchaka: keep me updated!
John: It skews the numbers. It seems like all numbers the media is using are skewed somehow or another. Like I said, doesn't paint a sexy picture when the data used is put forth!