Sounds like we’re all on the same page and no one will have to sue anyone.

You aren’t a very good lawyer, are you?

I kid.

Because it’s easy.

also, am framing my opinion in the context of coments posted on a RE blog.

If your comment is meant to deride our over-litigous society, then have at it with my blessing. If it was aimed at me, well, have at that too. It simply seemed to me that Alan’s questions sought answers that, if given, could easily be construed as legal advice. Since I’m an attorney, if I give legal advice it could be construed as creating an attorney-client relationship thereby giving rise to the rights and obligations incident thereto. I do not wish to create such a relationship, thus the disclaimer.

Off topic rant:
This post, or more accurately the fact that it was considered necessary, represents much of what is wrong with our society.

The problem is that Seattle is nothing compared to either SF or LA, both of which are “world class” cities with far more people, density and jobs in their vicinity. I remember looking up a while back for a post that prices in SF were actually cheaper than downtown Seattle if you took population density into account.

CA
Only in certain circumstances. Adeficiency judgment may not be obtained when a property in foreclosure is sold through a non-judicial public sale or if the foreclosure relates to apurchase money mortgage. Different rules apply to guarantors of such loans.

FL
Yes, adeficiency judgment may be obtained when a property in foreclosure is sold at a public sale for less than the loan amount that the underlying mortgage secures. This means that the borrower still owes the lender for the difference between what the property sold for at auction and the amount of the original loan.

AZ
Yes, adeficiency judgment may be obtained when a property in foreclosure is sold at a public sale for less than the loan amount that the underlying mortgage secures. Lenders are prohibited by statute (33-729) from obtaining deficiency judgments in foreclosures where the land size is 2.5 acres or less and where the property was used as either a single one-family or single two-family dwelling. Deficiency actions must be brought within 90 days of a power of sale foreclosure. Any judgment is limited to the difference of the balanced owed and the fair market value of the property.

NV
Yes. A deficiency judgment may be obtained when a property in foreclosure is sold at a public sale for less than the loan amount which the underlying mortgage secures. Deficiency actions must be brought within 90 days of a foreclosure sale.

WA
Generally, adeficiency judgment may be not obtained using thenon-judicial foreclosure process when a property in foreclosure is sold at a public sale for less than the loan amount that the underlying mortgage or deed of trust secures. A deficiency judgment can be obtained injudicial foreclosure sale, unless the property had been abandoned for the preceding six (6) months prior to the foreclosure judgment or decree that would preclude any deficiency.

As Lt. Kaffey said to Col. Jessep, “the witness has rights.”

From your postings I can tell you’re seeing the complexities surrounding foreclosures in general not to mention the variability from state to state. In short, a judicial foreclosure is a full on lawsuit brought by the lender against the borrower in order to force the liquidation of the property and to obtain a judgment against the borrower for any deficiency. There are both statutory and equitable doctrines of redemption that come into play which increase the time and difficulty of selling the property free and clear to a third party bidder. Thus, most lenders prefer deeds of trust which allow them to foreclose without going to court (thus the term “non-judicial”). The trade off is quicker liquidation in exchange for foregoing the right to recover a deficiency from the borrower.

I can’t speak to what your brother did in Arizona but it appears to have worked so that’s what counts.

Note also that a Notice of Lis Pendens is quite different from a Notice of Trustee’s sale, the former being a notice to the world at large that the property identified in the notice is the subject of or may be affected by pending litigation, thus, anyone acquiring an interest after the date of the notice is at risk of their interest being adversely affected by the outcome of the litigation.

<Is there a right of redemption in Washington?
Washington has a no post-salestatutory right of redemption fornon-judicial foreclosures. For judicial foreclosures, there is a one-year right of redemption and a residential owner may remain in possession of the property during theredemption period.

It sounds like the right of redemption period is the amount of time after public sale that the foreclosee can reclaim his property by paying all deficiencies. Is this correct that for judicial foreclosures this is a year after public sale? What does “residential owner” mean? Is this saying that the foreclosee of a primary residence gets to live in his house for one year after public sale in a judicial foreclosure? No wonder more 90% of lenders pursue non-judicial foreclosures.

If thedeed of trust does not contain thepower of sale language, the lender must seekjudicial foreclosure. The property is then sold as part of a publicly noticed sale. A complaint is filed in court along with what is known alis pendens. Alis pendens is a recorded document that provides public notice that the property is being foreclosed upon.

Oh! There is another record type for foreclosure counts. You learn something new every day.

There is also judicial foreclosure in which the lender can bring suit for foreclosure against the defaulting borrower for the delinquency and force a sale. This is used in several states with the mortgage system or in deed of trust states when it appears that the amount due is greater than the equity value of the real property, and the lender wishes to get a deficiency judgment for the amount still due after sale. This is not necessary in those states which give deficiency judgments without filing a lawsuit when the foreclosure is upon the mortgage or deed of trust.

How does the process of filing a Notice of Trustee Sale and selling at auction related to judicial/non-judicial foreclosures in WA state?

I am sure the laws differ from state to state. My brother sold a piece of land in AZ and seller financed it. The buyers tried to give it back to him even-steven when the value dropped by half. He told them no. They defaulted. He foreclosed, bought it back at auction for less than half what he sold it for and was able to get a judgement for the difference. When the judgement was filed it got attached to a different property they owned and they had to pay him before they could sell that property.

Granted, if the defaultee doesn’t have any assets it isn’t worth pursuing and many defaults may be non-recourse.

“You know that is not an either/or decision. The lender can take/auction the house AND pursue the person for a deficiency. If it is an investor with multiple properties, they can attach a lien to any property that has equity. Then the investor cannot sell that property until the lien is paid off.”
I can’t say I agree with this statement. Lender’s who choose to foreclose “non-judicially” are barred from seeking a deficiency judgment against a borrower. This occurs in the vast majority of foreclosures because the lenders want to speedily liquidate the property. Non-judicial foreclosures are permitted only by the use of a deed of trust for security rather than a mortgage. Generally, speaking, executing against the property and proceeding against the borrower for a deficiency requires a “judicial” foreclosure or a lawsuit based on breach of the promissory note, either of which requires lengthy court proceedings. Since time = money, most lenders of residential real estate forego the judicial option in favor of the relatively quick non-judicial procedure and write off the deficiency.

Secondly, a lender may not, as a simple matter of course, attach a lien to any property owned by the borrower. The lender must have a legal basis to record a lien on a property or else they are at risk of liability for slander of title. A final judgment against a person that is properly recorded in a given county’s auditor’s records will constitute a lien on any real property owned by the judgment debtor in that county, but again, that requires a completed lawsuit which is a time consuming process.

The new developments in trouble in the rest of the country are on the very far away outskirts of cities. For example, Stockton CA is the foreclosure capital and had a ton of new development. It is about 1.5 hours away from the Bay Area, but was considered by stupid investors as a upcoming exurb that people would not mind commuting to/from silicon valley. Depressing prices on those homes is forcing its way inward to the better areas. You will not find block after block of foreclosures in San Jose, but you can bet that the foreclosures in the outlying communities like Stockton, etc, is effecting the home prices here. The same is true in Seattle, large numbers of foreclosures are going to happen in the far away and over developed areas of King/Snohomish county, not in downtown Seattle.

Every one of the places in the country where prices have dropped enough already to qualify as a downturn (10%) or a bubble (20%) there has been lots of new development and a subsequent substantial increase in foreclosures amongst homeowners in those new developments.

Case shiller excludes new houses and foreclosures, but the Case-Shiller median prices for existing detached houses are clearly affected by being nearby these new developments. The local areas showing declines also happen to be where there has been lots of new development concentrating distresses homeowners.

S-crow’s recent post also illustrates this as do most recent news reports:

http://www.latimes.com/news/nationworld/washingtondc/la-me-ochomes26mar26,1,5327201.story

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/03/25/MNMUVPO1F.DTL

I can’t find anywhere in Seattle zip codes where these conditions exist . The closest thing seems to be streets where 1/2 of the block became town homes, or houses flipped by builders and contractors which don’t seem real concentrated.

I have read a statistic a number of times that every foreclosure within a mile of a house depresses it’s price by an average of 1.4%, put a lot of foreclosures in a concentrated area and prices can quickly drop 10-30% as homeowners in trouble affect each other.

I have been looking and I can’t find those conditions concentrated anywhere in Seattle.

First of all, interest costs have nothing to do with the return on any investment. Borrowing money is just a way some people use to get money to invest. Person A might borrow money to buy MSFT, Person B might not, but all MSFT shares give the same return.

Second, your return on any investment consists of capital gains PLUS net yield, aka total return. Yield on stocks is dividends. Yield on housing is net rental income – market rent minus taxes, insurance, maintenance, etc.

Historically total return for stocks has been much better than for housing.

lenders seem to have decided that it is cheaper to just take/auction the house than pursue the person for a deficiency judgement

You know that is not an either/or decision. The lender can take/auction the house AND pursue the person for a deficiency. If it is an investor with multiple properties, they can attach a lien to any property that has equity. Then the investor cannot sell that property until the lien is paid off.

So far every market with substantial price declines that is not in the rust belt has been where there has been lots of new development and investors buying properties in those new developments.

Case-Shiller avoids building in builder’s promotions and such into their index by only tracking sales of existing homes only, but the effect of those new homes (and potentially nearby foreclosures) on the prices of nearby homes is in their index.

I read in the WSJ yesterday that in San Diego and Las Vegas for the last couple of months > 40% of the total real estate sales have been foreclosures. Do you see that happening here in ~ 8-12 months?

As a side note, Shiller was featured in today’s journal talking about the S&P being at 1999 levels today by some measures, and 20% off of it’s peak, signaling a bear market.

A cushion of equity for non-primary loans used to be the main way of keeping this from occurring, and we all know where those type of standards went the last four years or so.

Two words: Casey Serin.

Only if the lender decides to go after it, which is unlikely. As we have seen pretty much everywhere, lenders seem to have decided that it is cheaper to just take/auction the house than pursue the person for a deficiency judgement. A cushion of equity for non-primary loans used to be the main way of keeping this from occurring, and we all know where those type of standards went the last four years or so.

they don’t punish any buyers buy holding out

The intent wasn’t really sarcasm. I think that is the attitude of many people who are trying to sell. You see it in the occassional message from a seller urging other sellers not to lower their prices and that the price drops are just a result of negative media and other owners believing it.

I agree with you on that one. However I think what you see in many other states (coming soon to WA) is that these “investors” just walk away from the underwater property and never realize a loss. So I think its more likely that instead of capitulation by finally selling, they capitulate by getting foreclosed and the bank then sells for a loss. This type of activity should really accelerate the deprecation considerably more like it has in California, Florida and other states already.

I don’t know about that. Seattle has just depreciated for a couple of months and it takes some time to unload property even if you detected the top so there could still be many pros holding property.

I get that you were sarcastic but just to be clear, they don’t punish any buyers buy holding out. They most probably save them a good amount of cash as long as prices are falling but they definately punish themselves.

There may be a bit of hyperbole and unjustified generalizations in the preceding paragraph.

perhaps but many investors are also savvy enough to know that when a price bubble of historical measures deflates it does not just bounce back to earlier levels after bottoming out. It’s a very long process and the risk to the committed capital and the time it’s being unproductive by being under water is not appealing. It’s likely “hobby” investors with to much pride and denial that will be skinned by hanging on to unrealistic hopes.

I am curious to see if an increasing awareness of the fact that the market and prices are both finally heading south will prompt people to list, or if they’ll pull out?

Annual carrying costs on a $500k house (circa June 2007) with a $400k mortgage: $30k
Loss from a 20% drop: 100k.

If the owner believes prices will recover in three years then he can eat the carrying costs and still break even compared to selling today. If prices recover before that then he makes more money. I bet many investors are expecting prices to recover before then.

And I don’t get the comment “So far it is an issue of locations where there has been new development.”

Case Shiller is paired sales of existing homes only. New homes are excluded.

What data is leading you guys to believe it is king county bringing down the numbers?

I didn’t say it was king county bringing down the numbers. what I said was that I would not draw any conclusions using the median as an indicator of what is happening – especially when there are mix-shifts going on driven by financing availability. King county is far less homogenous than pierce and snoho – so looking at averages and medians is far less values.

But if you accept that King county is the site for the bulk of the “high priced” homes (over $455k) then the inference seems pretty clear.

I

This is from tim’s January NWLMS Post

King – Price: +1.3% | Listings: +55.6% | Sales: -30.6% | MOS: 7.5
Snohomish – Price: -1.5% | Listings: +41.9% | Sales: -36.8% | MOS: 8.8
Pierce – Price: -2.2% | Listings: +26.3% | Sales: -36.6% | MOS: 11.3
Kitsap – Price: -0.5% | Listings: +32.9% | Sales: -8.9% | MOS: 9.8
Thurston – Price: +3.7% | Listings: +11.2% | Sales: -23.7% | MOS: 7.0
Skagit – Price: -4.1% | Listings: +17.6% | Sales: -23.4% | MOS: 9.5

and here is february

King – Price: -0.0% | Listings: +61.3% | Sales: -32.3% | MOS: 6.1
Snohomish – Price: -0.3% | Listings: +44.5% | Sales: -36.3% | MOS: 7.4
Pierce – Price: -7.4% | Listings: +26.0% | Sales: -28.2% | MOS: 8.6
Kitsap – Price: -12.3% | Listings: +35.5% | Sales: -35.2% | MOS: 9.7
Thurston – Price: +2.0% | Listings: +14.8% | Sales: -17.7% | MOS: 6.0
Skagit – Price: +9.2% | Listings: +23.2% | Sales: -20.6% | MOS: 8.4

Where are the King county price reductions in those numbers? I see pierce and snohomish down the last 2 months and King county up 1.3%. What data is leading you guys to believe it is king county bringing down the numbers?

Gath that rimes pretty poor with the fact that the high tier took a bath this time around.

The title says Welcome to Depreciation, Seattle, but the reality from the most recent MLS numbers it appears the bulk of the price drops were in Snohomish and Pierce counties.

Garth – see Tim’s next post. are you suggesting that the “high priced” tier is predominantly located in Snohomish and Pierce counties? The downtrend appears to be pretty universal to me.

I think that there is probably a more even distribution of home prices in outlying areas (e.g. lots of cookie cutter subdivisions and relatively few McMansions) than there is in King County. What this would mean is that the drop shows up more clearly in the median price for these areas than it would in areas with a broader range of prices (like King County). The mix of homes sold simply cannot change as much.

However, given that prices for every tier of homes appear to be falling – I personally find it difficult to conclude this is just an issue in outlying areas

The title says Welcome to Depreciation, Seattle, but the reality from the most recent MLS numbers it appears the bulk of the price drops were in Snohomish and Pierce counties.

Now that KING 5 has abruptly switched to the gloom and doom tone (there really is no middle ground for them, is there?), I think we’re going to hear the approaching thunder of the herd mentality shifting in our direction. That is, the herd running for the exits on their overpriced shacks. Those “New Price!” signs are going to become as commonplace as mossy shingles in this market.

So THANK YOU to all the fellow Bubbleheads who recently counseled me to be strong and resist the temptation to buy. We just signed a new 12-month lease. It’s going to be a lot more fun to watch the mayhem from the deck chairs on the front porch of our rental.

Its a terrible problem. :)

I wish these people would get there English together to!

The data is a 3 month moving average for Nov/Dec/Jan. So I *think* that means that if you want to know what happened in, say, Feb then you have to get the data for March, as that would be the average for Jan/Feb/Mar and thus putting Feb right in the middle. That’s how I think about it anyway – could be wrong.

Buceri, it’s MEDIAN, not mediam or indeed medium. Mediam is not a word, and medium is the incorrect usage in this case anyway. The “median” refers to “in the middle” or “mid-point” and in statistics refers to half the data on one side, and half on the other.

While we’re at it, and this doesn’t refer to you but I’m going to say it anyway, it’s “tract” housing not “track” housing.

Also, there is a difference between ensure, insure and assure. The ONLY correct usage of “insure” is with reference to a guarantee against loss or harm with relation to the issuance of an insurance policy. It drives me nuts to see marketing people with English degrees saying things like “to insure satisfactory performance of the product, you must blah blah”. Oh, really? How much is the policy? I’d love to insure that. Can I pay by installments? BAH HUMBUG!!!

http://seattletimes.nwsource.com/html/businesstechnology/2004306599_homeprices26.html

Did you guys see that Portland is more special than Seattle?

“We’ll be at the bottom when median price is three times the median income with 10-20% down and an average credit score”.

I am sorry, I can’t let it go. He did not say “the loan/mortgage is 3 times the mediam income; he said “the home price” is 3 times.

So again, this puts the mediam home at about $180K.

Yeah, I can’t let it go, because I want it to be a fact (and not a prediction!!!)