Posted by: Timothy Ellis (The Tim)

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

82 responses to “Foreclosures Continue Rapid, Unexplained Decline”

  1. Kary L. Krismer

    I have a new possibility–albeit one based on no evidence.

    Perhaps part of the fallout from the Robosigning controversy is that some banks are no longer dealing with some entities that process foreclosures. That could certainly limit capacity, although it assumes that banks are smart enough to realize that entities that got them into trouble in the past could get them into trouble again.

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  2. gr8day

    There is a related article in today’s Seattle Times – in the Business section, page A8. by Sanjay Bhatt

    In summary:
    “The number of foreclosure filings last year fell for the first time in at least five years, but don’t break out the champagne yet……While fewer homes entered foreclosure and were repossessed, experts said the slower pace had more to do with the government intervention and less to do with distressed homeowners improving their finances……..”In our view, 2011 is an artificial trough in foreclosure activity, and 2012 is going to be higher as lenders catch up with those delayed foreclosures” said Daren Blomquist, a Realty Trac spokesman……Last April, federal regulators ordered eight national banks to hire outside auditors to review their foreclosure practices. The same month Gov Gregoire signed the Foreclosure Fairness Act……..in August state Attorney General Rob McKenna sued a subsidiary of B of A accusing of illegally foreclosing…..Banks are also taking longer to process foreclosures. Nationwide it took an average of 348 days for a foreclosure to be completed…up from 281 days in 2010 and 159 days in 2007…Glenn Crellin, associate director of the Runstad Center for Real Estate Studies at the UW said he expects the foreclosure rate to pick up in 2012 and another difficult year for home prices…there are enough houses entering floreclosure or with mortgages at least 90 days past due to sustain the current rate of foreclosures for almost 15 quarters Crellin said…prices…may increase in selected submarkets, but as a whole we’re going to see price declines this year.

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  3. softwarengineer

    Tim’s Shot Gun Logic Reasoning Seems to Make the Most Sense IMO, Slowing Foreclosures Down Temporarily

    Looks like its just kicking the can down the road….

    Article from the #2 Worst in the State, Pierce County [Snohomish County is #1]:

    “…Nationwide, RealtyTrac showed fewer homes entered the foreclosure process or were taken back by banks in November, reflecting a seasonal pullback in foreclosure activity by lenders and mortgage servicers.
    But that’s just a winter lull.
    “Despite a seasonal slowdown similar to what we’ve seen each of the past four years, November’s numbers suggest a new set of incoming foreclosure waves,” RealtyTrac CEO James Saccacio said in a news release.
    Across the country, auctions were scheduled on 96,540 U.S. homes last month, according to RealtyTrac data, up 13 percent from October but down 17 percent from November of last year.
    Nationally, one in every 579 homes received some notice of foreclosure last month. In Washington state, the rate is 1-in-1,072. The average sale price for foreclosed homes statewide is $198,157, higher than the national price of $182,489.
    The state rate of foreclosures also slowed in November, but The Columbian newspaper in Vancouver reports this could have been triggered by Washington’s Foreclosure Fairness Act of 2011.
    The law has contributed to a bottleneck in the foreclosure process, said Charlene Dahlen, a spokeswoman for the Community Housing Resource Center, a Vancouver nonprofit that offers financial and mortgage default counseling.
    Effective since July, the act obligates a mortgage lender to meet with the delinquent borrower to discuss foreclosure alternatives before a home is repossessed.
    Although the new law has slowed down the process, “people are still in the throes of foreclosure,” Dahlen told the newspaper.

    Read more here: http://www.thenewstribune.com/2011/12/16/1947354/pierce-near-top-in-foreclosures.html#storylink=cpy

    Predictions for 2012 King County With Rationalization, article:

    “…While fewer homes entered foreclosure and were repossessed, experts said the slower pace had more to do with the government intervening to stop foreclosures and less to do with distressed homeowners improving their finances.

    “In our view, 2011 is an artificial trough in foreclosure activity, and 2012 is going to be higher as lenders catch up with those delayed foreclosures,” said Daren Blomquist, a RealtyTrac spokesman….”

    http://seattletimes.nwsource.com/html/businesstechnology/2017216225_foreclosures12.html

    It ain’t over until the fat lady sings….

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  4. softwarengineer

    RE: gr8day @ 2

    You found the same article I did, about the same time too…LOL

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  5. Scotsman

    What a bunch of “Debbie Downers.” Foreclosures are down because the recovery is underway. Millions of jobs saved or created. Unemployment is falling- now down to 8.6%. The stock markets are holding or climbing and pension funds are headed for fully funded status. Federal deficits are falling. Port shipments and auto sales are up. Everybody will soon have free healthcare. Think of the money that will put in people’s pockets!

    I’m calling the bottom for Greenlake, Ballard, Bellevue, and Redmond with everything south of I-90 soon to follow.

    It’s a great time to buy- interest rates have never been lower, prices haven’t been this low in years, and the annual spring inventory swell is about to take off!

    /sarc.

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  6. t-towner

    While I do think foreclosures have peaked, the dramatic dip is simply due to a backlog in paperwork and being understaffed at this point (banks and loan servicing companies being able to send out NOD, NTS is taking longer and longer)

    The national average time it takes to process a foreclosure — from the first missed payment to the final foreclosure auction — has climbed to 674 days from 253 days just four years ago.

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  7. deejayoh

    I find it hard to stomach the “seasonality” argument when I am looking at a chart that shows a rapid increase in foreclosures starting in 2007, and a rapid decrease in the last year. That is a 4 year cycle – where is this “seasonality”?

    There was a foreclosure moratorium in mid 2009 that pretty clearly correlates with the drop in activity during that period. As I posted earlier, the “Foreclosure Fairness” act that is referenced in the linked article has had just about zero impact in “saving” homes, and based on the data Tim presented earlier this week – I can’t see how the lawsuits against BofA are anything more than our AG grandstanding for higher office – as BofA has a very low share of mortgages in our state (less than 2% of foreclosure sales by my math).

    So I tend to agree with Tim’s headline that the drop is “unexplained” – but maybe, just maybe, the red line chart from Calculated Risk might have something to do with it?
    http://1.bp.blogspot.com/-nigyFifibfQ/TwdPVUGm_dI/AAAAAAAAL0s/Kl32YaJDDNA/s1600/LPSNov2011.jpg

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  8. Marc

    I’d take the “national average” time to process a foreclosure with a big grain of salt because that necessarily combines both judicial and non-judicial foreclosure states which have considerably different time frames. Much more useful metrics would be the average among states in each respective category. I don’t recall ever seeing such stats.

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  9. Scotsman

    Read the chart again, guys. This isn’t just a decline, it’s a return to the boom year levels of 2001 or lower. Given the economy hasn’t recovered to those levels the drop in foreclosure activity, at least in these three counties, is the result of a clear directive or decision.

    My guess- someone thinks either recovery or significant .gov help is just around the corner. Or, the difference between loan balance and market value is currently much greater in these three counties than it is in other areas/states, so the focus has termporarily shifted. They’ll be back.

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  10. Ray Pepper

    It has already been noted by BAC…2013 will be the HIGHEST FORECLOSURES in history!! We can hardly wait………..and …………above all…………….”Keep your powder dry.”………

    This Realty Check is always a great resource as to why : http://www.cnbc.com/id/15837671

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  11. Jill Schlicke

    Decrease in foreclosures is multi-factorial.

    * Wa State law changes in 2010
    * Pending settlement of the 50 state AG lawsuit against major lender/servicers
    * WA AG lawsuit against BOA and their trustee, ReconTrust
    * Backlog throughout the entire foreclosure system
    * Banks not having enough capital to realize their actual losses after the REO is sold.
    * Pressure on banks to mitigate foreclosure via mods or short sales.
    * Seasonal foreclosure moratoriums moving toward the holidays.

    Have I missed anything?

    Delinquencies may have peaked in 2010 but there’s still a huge overhang of people in default. We are nowhere near the bottom. Banks/lenders have everything to win by slowing the process down and kicking the can down the road as long as possible.

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  12. Marc

    By Jill Schlicke @ 11:

    * Pressure on banks to mitigate foreclosure via mods or short sales.

    I’ve got to wonder if the banks are finally figuring out that approving short sales or loan mods may be as good or better than foreclosing in many situations. My experience of 2 or 3 years ago was that a lot of banks thought refusing to engage with borrowers in default was good strategy because most would cure. Flash forward to today where the stigma of foreclosure is seriously diminished – banks have got to realize that, more often than not, borrowers who say “I ain’t gonna pay” really ain’t.

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  13. No Name Guy

    By Jill Schlicke @ 11:

    * Banks not having enough capital to realize their actual losses after the REO is sold.

    Ding, ding, ding…..we have a winner.

    If the Banks had to mark to market, which is what they must do when they get an actual sale price on the foreclosure, instead of the mark the loan at the100% fantasy that they currently do, they’ll take a BIG hit to their capital.

    They MUST spread these losses out or else be forced to admit they’re insolvent. As it stands, the large banks, like BoA ARE insolvent – they’re just playing the above accounting game of mark to fantasy to mask it.

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  14. Ira Sacharoff

    I agree with No Name Guy and Jillayne. The banks already own a ton of property they’ve foreclosed on, some of which they’re trying to sell and some of which they’re sitting on waiting for their own inventory to clear a little. So if they’re slow to foreclose, they can appear to look magnanimous and generous( even though they’re nothing but greedy bastards.). “Yes”, they can say ” We’re giving these unfortunate homeowners a chance to work things out with us.”
    Which is of course not the real reason they’re slowing down foreclosures. Part of it is because of legislation. Part of it is because it doesn’t benefit them to have a large inventory of properties they can’t sell. And part of it is because it makes them look good.

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  15. deejayoh

    Jill,
    Don’t take this the wrong way – but I think this is just throwing explanations against the wall to see what sticks. Most of these don’t hold water as explanations in my view. Maybe the pending litigation – but the others not so much.

    By Jill Schlicke @ 11:

    Decrease in foreclosures is multi-factorial.

    * Wa State law changes in 2010 (Actually, that law has had almost zero effect as I have posted before.)
    * Pending settlement of the 50 state AG lawsuit against major lender/servicers
    * WA AG lawsuit against BOA and their trustee, ReconTrust (That wouldn’t seem to explain much, BOA is not a big market share player per Tim’s numbers)
    * Backlog throughout the entire foreclosure system (nope. A backlog doesnt slow output, it just makes the queue longer. If you said they had slowed processing, I might agree)
    * Banks not having enough capital to realize their actual losses after the REO is sold.(How were they able to have more foreclosures in 2010 when they were arguably in worse shape?)
    * Pressure on banks to mitigate foreclosure via mods or short sales. (from whom?)
    * Seasonal foreclosure moratoriums moving toward the holidays. (that may explain a drop in November/December, but this has been going on for over a year)

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  16. Jill Schlicke

    deejayoh,

    This is a complex problem with no single, easy solution. The mortgage industry needs the gift of time to work through all the bad loans. The AG settlement has been pending for many months and since this is an election year, the AGs will want to use that for their own political gain. They *will* settle this year. After that goes into effect, let’s see what happens with the NTS numbers. I think this another false bottom. We will see.

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  17. deejayoh

    By t-towner @ 6:

    The national average time it takes to process a foreclosure — from the first missed payment to the final foreclosure auction — has climbed to 674 days from 253 days just four years ago.

    Another way to interpret this data is not that the banks are moving slower – but that they are finally getting around to moving at all on deadbeat owners. The time to process has increased by 421 days. Do you think this is because the paperwork is taking longer to shuffle around? More likely it is because certain banks (read BANK OF AMERICA, per Ray’s constant reminders) have finally started to move on the folks they have been allowing to live rent free for 6, 12, or 18 months. So the average moves based on that change. But I sincerely doubt the time between filing the NTS and the sale of the property has changed that much at all. If anything, it has probably gotten shorter – because contrary to what has been incorrectly posted here about the banks sitting on their inventory – they are in fact selling through the backlog – which is why the shadow inventory backlog has fallen YoY.

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  18. deejayoh

    Here is a site that has King County level data on foreclosures, outcomes, and backlog. Very interesting stuff. Tim – you might want to add to your resources. Looks like you can embed the charts

    http://www.foreclosureradar.com/washington/king-county-foreclosures

    REO Foreclosure inventories are flat
    http://charts.foreclosureradar.com/washington/king-county/inventories-month

    And time to foreclose is down (e.g. banks are moving faster), but time to sell the REO is up
    http://charts.foreclosureradar.com/washington/king-county/timetoforeclose-month

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  19. Pegasus

    RE: Jill Schlicke @ 11 – You left out the robosigner bad docs that are still out there and in some recent cases still being produced. The banks are stuck on some foreclosures because they can not produce valid paperwork. They now know those bad docs probably will be scrutinized. How do you do a foreclosure when all of the originals were destroyed and they produced fraudulent documents to replace the missing? It’s one thing to file that you have lost docs but when your forgeries are already out there it makes it difficult to now claim you never had the originals. The banks already know whether or not they have the proper documents to foreclose legally. The pending litigation settlement is rumored to now not let them off the hook for their dastardly behavior unlike the one they tried to force through a year ago..

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  20. S-Crow

    FWIW – Was approached by two acquaintances (parents on our kids sports teams) last weekend who knew we were in the biz asking about how long I thought they could live in their home prior to foreclosure. One mentioned they have not paid at all on the 2nd mtg. for quite some time and the other didn’t share. Ironically, both situations: former Countrywide loans now with B of A.

    Folks, I’m not clear what inning we are in of this correction. However, you can potentially count two more foreclosures that may not even occur for another 24-36 mos. The correction bungie-cord seems to keep stretching.

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  21. Jill Schlicke

    Pegaus,

    Most of the robo-signing problems occurred in the judicial foreclosure states, but Rob McKenna is still very much actively pursuing a settlement.

    http://atg.wa.gov/page.aspx?id=28470#litigation

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  22. David Losh

    I looked at a property last week end that by my estimation needs about $200K worth of work. It’s listed for $500K, and they got an all cash offer of $460K right out of the gate. The agent made a slip when I gave my price opinion.

    The neighborhood, in a good market, would top out at about $650K for used, and $825K for really nice new.

    My opinion still is that there are way too many idiot buyers out there. There are way too many people who buy the idea that inventory is down so prices may stabalize. It’s the supply, and demand dementia all over again.

    Banks are reaping brilliant sales prices by holding property on the books, that as No Name Guy, at comment 13, points out only makes the balance sheets look better than they are.

    The second part is that the Obama Administration wants to do a wholesale Real Estate sale of Fannie Mae, and Freddie Mac properties to hedge funds as rentals. Another opinion I have is that a lot of lenders are hoping for another government intervention.

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  23. David Losh

    RE: S-Crow @ 20

    Which brings in bankruptcy which can strip out a 2nd mortgage.

    I wonder how many bankruptcies are for mortgage, or foreclosure cures.

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  24. Ray Pepper

    RE: S-Crow @ 20

    just entering 3rd inning my friend and it COULD be a double header!

    Upside down homeowners have the chance of a lifetime to get a gift of a generation. Backed by the FED for owner occupied homes the banks hands are strapped. Fools will only remain foolish until a hardship presents itself then the payments stop quicker then I rush home from a ClaimJumper GoldRush chicken feast..

    Hang in there upside down homeowners the BEST is yet to come. When your principle gets written down to market price you will have been blessed. Sure the masses will scream but in the end it will be SOLD to us all as what is best. Patience Buyers….Just be patient a few more years while you seek your GEM!

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  25. Dirty Renter

    RE: No Name Guy @ 13
    No Name & Jill,
    You think banks do not write-down their REO assets until after they’re sold?

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  26. Dweezil

    Time to make a new website: InvertedForecloureBubble.com
    It about to pop folks! We have an unsustainable decrease in foreclosures.

    Joking aside, it does seem an unnatural drop.

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  27. David Losh

    RE: Ray Pepper @ 24

    Let me introduce James Robert Deal into the equation here http://dealmortgage.net/

    He and John Wagner at John Wagner Escrow are attorneys. In the 1980s they did wrap around mortgages.

    The situation we have today is different, but still the same for millions of Americans. Millions of people are losing equity. The way to recover some loss is by principle only transactions.

    No one sees, or reads, about Owner Financing any more. Every body wants to be cashed out. However, with all of this talk about 20% down, it may just be a benefit to a seller to take a down payment, and finance the remainder, and maybe at an accelerated amortization.

    You need to look outside of the box for solutions. There is no white knight coming in to save the day.

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  28. MichaelB

    The foreclosure pipeline:

    1. Underwater home loans (25%)
    2. Homeowners who have just become unemployed, divorced, deceased…
    2. Shadow inventory (1.6 million homes)
    3. Foreclosures & Short Sales (how many? 40% of all sales?)

    How long will it take to work our way through 1.6 million homes which equals 3 months of housing supply as more homes continuously come onto the market and prices continue to drop?

    Best case is zero appreciation for 3+ years. Worst case is…?

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  29. ARDELL

    RE: David Losh @ 27

    A Seller holding the paper doesn’t make much sense when interest rates are low. They would be better off keeping it as a rental.

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  30. Pegasus

    RE: Jill Schlicke @ 21 – The robosigning problems occurred in all states. Not just judicial foreclosure states. The paperwork was bad everywhere. Since in a judicial state the banksters were perpetrating a FRAUD upon the court it got exposed and the judges, somewhat reluctantly, finally started to question the fraudulent paperwork. The same fraudulent paperwork was also submitted in non-judicial states. It just wasn’t being exposed by a judicial system. When caught the banksters backed off much more severely in judicial foreclosure states because of the exposure. Washington had its own problems with the paperwork but it wasn’t even being addressed until the AG was pressured into joining the lawsuit against the banksters. He was about the last to join out of fifty states and has done little to fix the problems other then huff and puff for political purposes, file a minor lawsuit and appears to willing to sign about any settlement unlike California and New York. He stinks about as bad as when the then state AG(Gregoire) joined the suit against big tobacco while doing little or nothing and then crowing about the settlement when it was announced.

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  31. David Losh

    RE: ARDELL @ 29

    They would have to maintain a rental. That costs money.

    Holding worthless property is going to be better left to those who want to own it.

    The mortgage machine is grinding down. Properties will sell for less, and less for years to come. We will rapidly get to a point where we do more principle only transactions. That is where the buyer, and seller agree to terms.

    This is where the gravy train, or buffet, is over. We have millions of housing units, millions. There is no way those millions of crappy housing units are going to be anything but a black hole of a money pit. If you own it, you may be willing to keep it up. If it’s a rental you should send it back to the bank, or find some one to take it off your hands.

    I’m thinking more people will trade, or barter housing units than collect them. If people do collect housing units it will make them collectibles. Now those may go through a Multiple Listing Service.

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  32. ChrisM

    RE: ARDELL @ 29 – I’m going to kind of echo David here. IMO many important transactions are not done rationally, but instead emotionally, and this is one of them. A relative did this exact thing, and I think part of the motivation was the feeling of being done with the property. As a landlord (vs a seller), she would not have had that feeling.

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  33. Haybaler

    RE: ARDELL @ 29
    Au contrair, Now is an excellent time to sell by owner contract.

    After only 30 days of marketing by themselves, my parents just entered into a contract sale on a Camano Island property. 25% down, 5.5% interest, 25 yr term, PREPAYMENT PENALTY….They love it.

    Do you know what retired folks are getting on their CD’s these days?… 1% if they can find one.

    The last thing they want is to be paid off.

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  34. David Losh

    Owner contracts are a complex issue. There is a lot of legality that goes along with this. It is though a lost art.

    Mortgages are debt. The people without mortgages are losing that phantom equity that can be compensated for by an interest income.

    There are all kinds of possibilities. Lot’s can be done to reduce the reliance we have on the mortgage industry, but it will be done by individuals rather than sweeping reform.

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  35. Julie Lyda, RE/MAX Northwest Realtors

    I can at least attest to the fact there is no foreclosed shadow inventory, as I track the foreclosure and REO sale absorption rates. I get a paid report though the title company with all REO sales at auction in order to track the actual numbers.

    The banks are quickly listing foreclosed properties on the market and in most cases they are quickly selling. Here is the REO Absorption Graph for King County 2010-2011. There is appoximately a 2 month standing inventory of REO active listings.

    http://3.bp.blogspot.com/-ki3WVbWtXVk/Twt6wSHc4OI/AAAAAAAAA6w/cJAcmhHTSQo/s1600/King%2BCounty%2BAbsorption%2BRates%2B2010%2B-%2BDecember%2B2011.png

    On another note, there is definately an unexplained lag of pursuing foreclosures. As a BPO agent on homes that I have done evaluations for over a year ago (that would obviously become foreclosures because they are vacant and abandoned) there has been no foreclosure action initiated.

    I have no explanation for this.

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  36. Julie Lyda, RE/MAX Northwest Realtors

    Also on another note, something interesting happend in the last couple of months. As we see the Notices of Trustee Sales dropping, the actual number of foreclosures going through hasn’t dropped significantly.

    As a matter of fact, for the first time ever, we now see actual foreclosures rates are exceeding the number of foreclosure notices.

    What can that tell us?

    When the Notices skyrocket in 2010 my feeling was that the banks’s computers were automatically issuing the notices for any 60-90 day late mortgage.

    Since then we’ve had the robo-signing scandal along with the new Washington State Foreclosure Fairness Act. Both of these have put the breaks on issuing mass notices.

    I believe that now all these notices are generated by a human, because they must review the files for accuracy and validity.

    Here is the Notice of Trustee Sales in comparison to actual foreclosures from 2008-2011.

    http://3.bp.blogspot.com/–YMOkDyJK3c/TwtkGCQVdGI/AAAAAAAAA50/IcSgZ0mP4sE/s1600/King%2BCo%2BForeclosures%2B2008%2Bto%2BDecember%2B2011.png

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  37. Kary L. Krismer

    RE: David Losh @ 34RE: Haybaler @ 33RE: ARDELL @ 29 – Seller financing is not without risk, so an attorney should be consulted.

    The biggest risk, IMHO, is the buyer turning the property into a meth lab and contaminating the property in a manner which makes it worthless. Note that you typically have no inspection rights on a real estate contract. I also know of one instance where the buyer tore the house down, which probably did violate the contract, but once it’s torn down, it’s gone. Remodeling would also be a risk, as many banks now know.

    David, the reason you don’t see it much is the Garn Act, which makes due on sale clauses unenforceable. I’ve heard people are turning to unrecorded real estate contracts to avoid the Garn Act. That has a number of issues, none of which are good.

    Also, you don’t tend to see seller financing in an environment of declining interest rates. Those wanting to buy on contract in such an environment tend to be people with lousy credit (which is the second biggest risk I see).

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  38. Scotsman

    http://www.nationalmortgagenews.com/dailybriefing/2010_516/turn-in-housing-may-be-closer-1028336-1.html

    JPMorgan Chase chairman and chief executive Jamie Dimon suspects a “turn” in the housing market is getting closer but a recovery may still be years away.

    The shadow inventory of potential defaults and foreclosures, while still high, is “going down, not up,” he said during a conference call Friday morning, discussing the bank’s fourth quarter financial results.

    Over the past two years JPM’s mortgage division, Chase, has added 15,000 to 20,000 employees to deal with default servicing and REO. “That number has probably peaked and I think you will see it coming down in a couple of years,” the CEO told analysts and investors.

    Dimon stressed that an improving jobs picture will lead to higher household formation, adding that in some markets it’s now cheaper to buy a home than to rent. In addition, he expects lenders will loosen their mortgage underwriting standards. “Put all those things together, and you are going to have a turn at some point. I don’t know if it’s three months, six months or nine months,” he said, “but it’s getting closer.”

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  39. Scotsman

    “Federal Reserve officials are seriously considering giving the US economy—and especially the housing market—an added jolt with more quantitative easing. …
    Two of the new voting members this year on the Federal Open Market Committee, which sets interest-rate policy, have recently suggested they would support more assets purchases.
    San Francisco Fed President John Williams said that sustained high levels of unemployment, as forecast by many Fed members, “does make an argument that we should have more stimulus.”
    Another new voter, Cleveland Fed President Sandra Pianalto, said in a recent speech that economic models indicate the Fed “should be even more accommodative than it is today.”

    http://hotair.com/archives/2012/01/13/get-ready-for-qe3/

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  40. Scotsman

    From the above- this pretty much sums it up:

    “Just as with QE2, though, another round of easing won’t help the underlying problems relating to either housing or employment. The issue isn’t tight money policy any more — we haven’t made money this easy in, well, forever. The problem in housing is employment; there just aren’t enough qualified buyers any longer. And the problem in employment is an administration that keeps pushing short-term, gimmicky tax breaks that make for great headlines but do nothing to allow for long-term planning for investors, while increasing the ambiguity of future investment costs with bad regulation like Dodd-Frank and ObamaCare, which turns over rulemaking to the whim of bureaucrats.”

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  41. ARDELL

    In King County, a fair amount of the short sales (pre-foreclosures) are selling before there is an NOD or NTS recorded. Those will never hit the data charts of NOD filings.

    YOY there was an increase in closed Short Sales of 40% comparing 4th Quarter 2010 with 4th Quarter 2011. For the year as a whole there was only a 19% increase.

    So to some extent an increase in Closed Short Sales, and the accelerated rate of that increase YOY, will eliminate at least some of the NOD/NTS filings moving forward. You have 620 Closed Short Sales in 4th Quarter 2011. I can’t check all 620 by hand…but in spot checking it looks like at least half of those had no Notice of Default filed before the owner sold it off short.

    (Required Disclosure: Stats not compiled, verified or published by The Northwest Multiple Listing Service.)

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  42. Ray Pepper

    BECU was unloading today in Pierce County.. I got jacked on my bid 28k, going once, going twice, going 3x..SOLD 28k…”Congrats Ray you got it..”.”……..Wait, hold on…Lousy Trustee APPARENTLY didn’t hear incoming bid in the back at 30k….Nor did I hear it either…..and for this VERY reason the BUYER was gonna PAY UP BIG TIME….. If I didn’t get it for 28k on a VERBAL SOLD then any Buyer that came along was gonna have to PAY UP…Long story short 40,100 took it…and I have a bit of satisfaction in getting jacked ….and next week brings another LOAD of properties…..Enjoy it VESTUS client…YOU OVER PAID !!

    FYI 5832 S Lawrence Tacoma 98409

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  43. Scotsman

    RE: Ray Pepper @ 42

    Seriously? Ray- stop drinking- this is NOT a GEM, even at $28K:

    http://www.redfin.com/WA/Tacoma/5832-S-Lawrence-St-98409/home/2719345

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  44. Ray Pepper

    RE: Scotsman @ 43

    It actually really is Scotsman..Its adjacent to a Catholic Church and Catholic School…Its turn key. Owner left. In excellent condition..Its actually a 2 bed 1 bath and easy flip at 59k…Also a great rental at 850….great price point!…Owner contract on that house would ROCK!

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  45. Scotsman

    RE: The Tim @ 45RE: Ray Pepper @ 44

    I saw the one bedroom and the size. Maybe, but it seems like a small amount of income to have to deal with another rental. I’d rather have something a bit larger with more potential.

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  46. David Losh

    RE: The Tim @ 45

    You’re required to maintain the property. Ray is correct that he may get some one to buy it at $60K, but that’s what it’s worth.

    Now some one, yeah probably Vestus, paid $40K. WTF? Costs going in, costs going out, and it’s Fair Market Value.

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  47. David Losh

    RE: Kary L. Krismer @ 37

    Yes, any one considering an Owner Contract Sale should have an attorney.

    The second point is that rental property is also a huge liability. An Owner Contract can have stipulations. There are pros, and cons to both sides.

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  48. 2kt

    RE: Scotsman @ 38

    What does them, Jamie Dimon knows anyway? In the Fall City they got better minds, don’t they.

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  49. 2kt

    RE: Ray Pepper @ 44

    Ray, have you ever tried to collect rent at night in parts of town where you “jams” are?

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  50. Scotsman

    RE: 2kt @ 49

    It’s not what JD knows, it’s what he says and whether or not you want to believe him. I don’t trust him. It is interesting that he and others seem to be suggesting we’re going to get an extension of the status quo. Nothing will be fixed, but the can will continue to get kicked down the road for some period of time.

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  51. Ray Pepper

    RE: 2kt @ 50

    We don’t collect alot of rents. …Mostly flip and move onto the next…..Its ALOT easier collecting 850 in Tacoma/Gig Harbor then 1800 in Ballard…

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  52. 2kt

    RE: 2kt @ 49

    The bigger issue at this point is whether European rating downgrades will cause problems for SoGen and other French banks. If not for that, current inventory levels are the point where price declines are likely to end.

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  53. 2kt

    RE: Ray Pepper @ 52

    Gig Harbor, may be. Tacoma, depends on the time of day. There are not really any problems collecting $1,800 rent in Ballard with Adobe, Google, Amazon, Swedish, Providence, etc. offices in near proximity.

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  54. Jonness

    By Julie Lyda, RE/MAX Northwest Realtors @ 35:

    I can at least attest to the fact there is no foreclosed shadow inventory, as I track the foreclosure and REO sale absorption rates. I get a paid report though the title company with all REO sales at auction in order to track the actual numbers.

    The banks are quickly listing foreclosed properties on the market and in most cases they are quickly selling. Here is the REO Absorption Graph for King County 2010-2011. There is appoximately a 2 month standing inventory of REO active listings.

    Redfin shows the average unlisted SFH foreclosure on 1/4 acre or more in King County has sat idle for 178 days. 20% of these have sat for 300 days or longer.

    OK, I checked all SFH, and the rate is about the same. I notice you included condos, but I doubt that’s the difference. Perhaps what I’m seeing is due to most homes listing quickly, so they no longer show as foreclosed. But if this were the case, I would expect to see much more REO’s with 30 days or less.

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  55. ssongtan

    Foreclosures are down because the lenders are holding back to see how attorney generals and congress acts to either punish or give them a free ride. There is another 4 million homes ready to hit the foreclosure market. That is about the same number as before. In addition for the next three years all those modification refinance arms will becoming due again. That will take place over the next three years. After that there will be yet another much smaller waive of modification loans coming do. The impact on that group will be minimal if the market clears out the 4 million homes and the first waive of modification loans. The remainder of the economy will have a direct impact on how rapidly this process takes place. Perhaps the only silver lining is that we are pretty much at the bottom of the devaluation of the market value of homes in general.

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  56. Jonness

    Including all SFH, condos, townhouses doesn’t change the picture. About 15% have sat 30 days or less, and about 20% have sat 300 days or more in both cases. Average days is about the same as stated in above post. It doesn’t make much difference if it’s north or south of I-90.

    A slowing pipeline could explain a slight amount of what I’m seeing. Perhaps I’m just being really stupid right now, but I’m not seeing the cause of the discrepancy.

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  57. Foreclosures in Western Washington on decline « PugetSoundHomesBlog
  58. Jonness

    By Scotsman @ 39:

    Another new voter, Cleveland Fed President Sandra Pianalto, said in a recent speech that economic models indicate the Fed �should be even more accommodative than it is today.�

    I’m thinking the Fed wants to get out of this mess by devaluing the dollar. The problem has been, no matter how much they print, it never seems to reach mainstreet. Instead, they gift the banks, and the banks hold it on reserve. They could charge the banks interest to park the cash, but then they could hurt the banks. Heaven forbid!

    But the bond sales ended up weakening the dollar, which boosted exports and aided GDP, so the tactic appeared to work somewhat (but not for non-domestic inflation and did not induce an associated wage spiral). Then Europe began to print money in order to quell it’s crisis just as the U.S. started showing improving green shoots. Thus, the Euro started to rapidly devalue against the dollar. So now the Fed is probably thinking, there is no way Europe can outprint the U.S. if it comes down to a printing war. Let’s hint to the sheep that we want to print more money to “help” them while we figure out what we’re going to do.

    However, I don’t think the American consumer is the Fed’s friend. I believe the Fed works for the banks and pretends to be the consumer’s friend because the consumer needs to be somewhat healthy in order to keep the banks profitable.

    Let’s say you have 5 cats and 100 mice trapped in a warehouse for life. The stupid cat team will kill all 100 mice right away. But the smart cat team will develop a Dept of Wildlife and issue hunting permits based upon the health of the mice population. The Fed is the Dept of Wildlife, the banks are the cats, and we are the mice being supported just enough to be sustainably preyed upon.

    OK, all that was just a fleeting thought. Does it seem reasonable?

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  59. whatsmyname

    RE: Jonness @ 57

    Pretty close. The banks (the big ones) are the Fed’s children. Sure, Johnny has a crack problem; that’s what caused him to rob all those people. But, we love him. And it we just dig into the retirement savings one more time, this new rehab place will get him straightened out – and he’ll be the loving boy we remember.

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  60. David Losh

    RE: Julie Lyda, RE/MAX Northwest Realtors @ 35

    Your chart is showing a shadow inventory, but that’s not important. It’s also showing a lag in absorbtion, but let’s bypass that, and get to the pricing of those REOs.

    That is where the rub actually is. Banks are lowering prices, and REOs are selling. Banks have also had to do some work to properties, because it is kind of like a rule, or a law, that if you own a property you have to maintain it. Otherwise an abandon house could be called an attractive nusaince.

    Banks have eneded up with millions of foreclosed, bank owned properties. If using Tim’s reasoning that to maintain a property costs 5% per year, times millions, that adds up to a lot of liability.

    Next up we have the Fed talking about wholesaling properties to Hedge Funds. It’s been tried in the past, and failed misarably.

    Your own data will show we have an excessive amount inventory that banks are now playing close to the vest.

    People are still paying massive amounts of money for these REOs, but over the course of time they will see the mistake. Those properties can then be sent back to the bank.

    I’m really getting a little tired of hearing how great the market is doing. The more I look at pricing, or let me say, the price buyers are paying, the more I’m convinced we have a very long way to go before we get to a correction.

    The forelcosure system is broken. There is way too much gaming the system going on.

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  61. ARDELL

    RE: Jonness @ 57

    Not “stupid”, just talking apples and oranges. Julie’s Absorption Rate has nothing to do with Average Days on Market…or Days on Market at all. Absorption Rate is low, only because Inventory is low in January…for all property…almost every year. A “two month supply” is only saying that on average 400 to 430 sell in a month’s time, looking at the last 120 days, and there are 800 to 825 or so on market right now. If they sell off at the same rate of 400+ a month, they would be gone in 60 days.

    That also has nothing to do with “Shadow Inventory” and there is plenty of shadow inventory. There is always plenty of shadow inventory in January. Let’s see where we are on April 15 to May 1.

    The Absoption Rate at 2 months…just says Inventory is LOW right now…no surprise, and doesn’t mean much in the grand scheme of what will happen in 2012.

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  62. Julie Lyda, RE/MAX Northwest Realtors

    For the most part banks are quick to turn the properties over to an agent for listing.

    However there can be delays sometimes.

    1. Dealing with the current mortgagor who is still living in the property and working through an eviction.

    2. Dealing with a tenant in the property and having to abide by a current lease and then doing and formal eviction.

    3. Cleaning up a property, such as new paint, carpets, trash removal, etc.

    4. Resolving title issues.

    There may be other causes, but this is just to give you an idea of some of the reasons why a property hasn’t come on the market right away.

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  63. David Losh

    RE: Julie Lyda, RE/MAX Northwest Realtors @ 63

    There are a million more reasons, such as fraud.

    You are on a Bubble Blog. A Bubble Blog is an actual term coined by the number of people who questioned why property prices got so high to begin with.

    We have found that banks, and lenders sold mortgages. Banks are supposed to lend on the security of the asset, anyway that’s what I have always known to be true.

    The foreclosure process sells the asset to satisfy the debt. In the past there was a deficiency, maybe 20% or 30%, but we are seeing 80% deficiencies in some parts of the country. Even here in Seattle we are seeing that 30% to 36% reduction in sales price, or refinance as Fair Market Value.

    We are three years passed the crash, and you are still tracking distressed properties.

    There is something very wrong with this. Millions of people, millions, are “underwater.” We throw around the term “underwater” like we do Housing Bubble.

    Well, by all other estimations we still have millions of properties to contend with. There is no inflation on the horizon to wipe out this debt.

    In my opinion banks are playing a game with the investor market to see if they can keep prices from falling further. That’s all I see in the data you have presented.

    People should be very aware that prices of residential property have a long way to fall before we get to a healthy market place.

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  64. Julie Lyda, RE/MAX Northwest Realtors

    RE: David Losh @ 64

    David,

    Yes we are on a bubble blog, not sure what your point is on that.

    I hear anger in your words (I don’t know if that was your intent or not). I’m well aware of the massive fraud the banks have done to the “world” economy. I’ve written extensively about it on my blog.

    Yes, we are 3 years pass the crash and I’m still tracking distressed sale. I expect to be tracking distressed sales for the next 10 years, because it will most likely take that long for this mess to clean up.

    Actually, this mess might never get cleaned up. At least until MERS is shut down and selling mortgage back securities is stopped, I don’t see the problems we are dealing with today ever going away.

    I look at the market today as “today’s market”. I mean that by saying this is the new “norm”. That being said, people are still buying and selling real estate.

    So when you say that prices have a long way to fall before we see a healthy market, what do you mean by that? What percentage do you think the market should fall to achieve a healthy level?

    Would you be investing in the real estate market right now?

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  65. David Losh

    RE: Julie Lyda, RE/MAX Northwest Realtors @ 65

    This statement is a problem: “I can at least attest to the fact there is no foreclosed shadow inventory, as I track the foreclosure and REO sale absorption rates.”

    That’s a pretty murky point as you go on to explain that: “As a matter of fact, for the first time ever, we now see actual foreclosures rates are exceeding the number of foreclosure notices.”

    Well, both statements are murky.

    Buyers should be very aware that prices of residential property are still very high. The market place has shifted significantly.

    Having a Real Estate market place of 25%, or more of short sales, and REOs has skewed all the data you could ever want to look at.

    The second part about the number of foreclosures is that it is global. All Real Estate market places are in flux. As prices climb for property in emerging markets the price is dropping in all markets where the mortgage bubble has passed.

    There is no way any one should be looking at REOs, short sales, or foreclosures as anything but the Fair Market Value of today. With that understanding people should also be aware that prices will continue to decline.

    The only reason we have sales at these extremely high prices is because of a constant barrage of sales hype from every corner of the economy. There is no financial reasoning for taking on a huge amount of mortgage debt.

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  66. Jonness

    By Julie Lyda, RE/MAX Northwest Realtors @ 65:

    What percentage do you think the market should fall to achieve a healthy level?

    I think the key to a recovery is finding a market where average buyers can feel as if they are making money. We can use all the gimmicks and tricks in the book to attempt to keep house prices artificially inflated above healthy historical relationships to what people earn, but at the end of the day, this only makes matters worse. It does protect the banks though.

    It would be nice to see Seattle area house prices fall another 25% in order to get back to healthy historical relationships to incomes. If they were to overshoot the bottom and fall further, it would help the economic recovery as investors rush in to make money. This is important, because housing typically leads economic recoveries. Without a healthy housing market, it seems the best we can do is slow growth as far as they eye can see.

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  67. Julie Lyda RE/MAX Northwest Realtors

    RE: David Losh @ 66

    David,

    I really don’t know what you mean by the statements are “murky”.

    Do you mean I am being unclear?

    My intention is to post the statistics that I track, giving no opinion what it means to the real estate market.

    My statement that foreclosures outpaced Notices was not to mean the market is improving by any means, if you thought that was what I was saying.

    I also agree that distressed properties sales are part of the pricing in the market place.

    Regarding shadow inventory, I mean property that has been already foreclosed on.

    Of course there is the other shadow inventory – those not yet foreclosed on, but that isn’t what I was talking about in my post.

    Is that more clear?

    TO JONNES –
    Thanks for the comments – maybe we can talk about prices more. I have a question – when you say it would be nice to see another 25% drop – do you mean from the current median?

    What do you think of these current “average prices” for King County?

    •REO/Bank Sales: $231,598
    •Short Sale: $333,450
    •Regular Sale: $474,383

    I know Ardell tracks different neighborhoods, especially the eastside, and it is true location, location can drive prices.

    The Seattle area has some really nice homes in some places. Beautiful waterfront properties, beautiful view properties. Those can certainly affect the average home prices when those types of properties sell.

    Just curious about your opinion. Do you live in this area?

    *Statistics not compiled nor published by the NWMLS.

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  68. ARDELL

    Median Prices in King County Single Family homes on a 90 day rolling basis are:

    $399k for not Distressed – 67% of all sales

    $265k for Bank Owned – 22% or all sales

    $187k for Short Sales – 11% of all sales

    I’ve never seen the median price for bank owned property be lower than short sales.
    ********
    (Required disclosure – Stats not compiled, verified or published by The Northwest Multiple Listing Service)

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  69. Dirty Renter

    RE: Julie Lyda, RE/MAX Northwest Realtors @ 65

    The end of MBS will be the end of the fixed rate mortgage. Most countries don’t offer them anyway.
    You’ve been helpful over the years, reminding the readers that most mortgages are held by pension funds, sovereigns, investors, et al, not the banks themselves.
    It’s also been extremely amusing to see the realtors on Seattle Bubble blame banks for the housing bubble. You all remind me of Eddie Haskell….”Beaver did it, Mrs. Cleavor”.

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  70. whatsmyname

    RE: Jonness @ 67

    Maybe what we need to to get the income/price relationship back to historical levels is getting incomes back to historical levels.

    There is no stimulation to the economy in vulture capital arbitraging existing assets.

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  71. David Losh

    RE: Julie Lyda RE/MAX Northwest Realtors @ 68

    I’m going to address this part of your statements: “I also agree that distressed properties sales are part of the pricing in the market place.”

    Distressed properties have become the market place. In my opinion you track these statistics in hopes that they will be some how predictive for a buyer. They are just numbers, the same as Jonness wanting a 25% price reduction, or Ardell tracking zip codes.

    Real Estate is a complex market place. It all looks so easy in charts, and graphs, but the reality is some properties are toxic, both literally, and figuratively. In Real Estate there are assets, and liabilities.

    When we combine the construction practices with the mortgages the situation becomes more complex.

    New construction created millions of mortgage loans. Those loans will see a steady decline in the price of the asset. Other mortgages on used homes will amortize while holding, and in some cases, increase in pricing.

    The mortgage mess is in question because the foreclosure process has broken down.

    Mortgages are based on the value of the asset. If the asset won’t sell for anywhere close to value, if no one wants the asset, or if, like in my opinion, we way over built housing units, then the market place will need to severely correct.

    So I think a clear statement that people need to make offers much lower than Fair Market Value, and below distressed property pricing is much more appropriate. Buyers need to be much, much more aggressive in this market place.

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  72. David Losh

    RE: Dirty Renter @ 70

    Banks are to blame.

    There’s no more mystery about how, or what happened. Once you get out of the United States it becomes clear that this Mortgage Backed Security idea is built on sand.

    I use Dubai as the most perfect example. There are billions, if not trillions of dollars invested in Dubai Real Estate. China is probably the queen of bogus lending, but Dubai is a much more majestic vision.

    If I believed in a conspiracy theory I would say that the reason we are seeing all these companies scrambling with pension plans is because there is no actual money to withdraw. If you have a 401(k), or pension plan I suggest you look at it, see what they are doing.

    If you own stock? Take a look at that there prospectus thingy, closely. I think most small investors will be surprised that they are the actual asset the company has.

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  73. David Losh

    Today was an interesting day. It started with this exchange with Julie Lyda, and ended with a phone call from some one I know who is involved in a REO, HomePath mess.

    This guy put in a bid $12K over asking price as a back up offer. The property came back on the market Friday, and he asked his Windermere agent what happened with his offer. Well she never submitted it, but didn’t tell him that. The listing agent is very big time, way tooooooooo important to answer his phone, so the guy who called me wants to resubmit.

    Well he has paper work signed with his agent. His lender, of course is unavailable on week ends? The lender who I called answered his phone, but there again we are dealing with very important people who work 9-5 Monday through Friday, except for Holidays, when some one may need help.

    Yes, I’m angry.

    I love Real Estate, and love the business. It’s just that there are so many hucksters out there that make it hard.

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  74. Kary L. Krismer

    By David Losh @ 74:

    His lender, of course is unavailable on week ends? The lender who I called answered his phone, but there again we are dealing with very important people who work 9-5 Monday through Friday, except for Holidays, when some one may need help.

    Too many people don’t understand the importance of having a good loan originator, and one that is available on weekends.

    Even ignoring the weekend issue, more problems in closing result from marginal loan originators than any other issue, IMHO.

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  75. Ron Halford

    What people really want to know is when home prices will go up again. The quick answer to that is when the Federal government (aka, central bankers) issues press releases to the central banker-controlled media, and the media takes the statements verbatim and reports that information as if it has been investigated as true.

    This will result in potential home buyers gaining confidence to go ahead and purchase a home. Home prices will rise as a result.

    The underlying fundamentals will not matter when this happens. IMO, this type of activity is a trap that is intentionally designed to extract wealth from what is generally perceived — at least by Fabian socialists — as “rich” middle class Americans.

    The Fabian socialists I have met and talked to — and there are **many** of them out there, do not be fooled — state that it is morally correct to extract wealth from middle class Americans, since the world needs wealth redistribution at this time in history. In other words, the central banker-backed media will release whatever propaganda is necessary to support such wealth redistribution. One can no longer trust the mainstream media. Quoting that media is a waste of time.

    On que: a sock puppet hired by an agency that receives money from central banker-backed institutions will now post a comment that is designed to convince you that I am mentally unstable and not fit to share an informed opinion here. These are the same tactics the KGB used in the former Sovet Union. The highly charged words “tinfoil” and “conspiracy theory” are likely to be used to perform this task.

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  76. David Losh

    I just talked with the listing agent who explained to me how HUD Homes work.

    WOW!

    The guy did 153 transactions last year, but told the Windermere agent not to bother submitting a VA Loan buyer.

    This is another example of what’s wrong with Real Estate today. After it closes, I’ll check to see why this guy is allowed anywhere near HUD Properties, and what our government intends to do about making homes more affodable for all buyers.

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  77. ARDELL

    RE: David Losh @ 76

    David,

    It sounds like the house may not meet VA standards. Often an FHA or VA buyer can’t buy a home that is being sold “as-is”, because FHA or VA would require some improvements be made to the home in order to fund the new loan.

    If the house is older than 1978, there can be no peeling of paint, as example. For a seller to accept a VA offer, and then not be willing to do known VA standard requirements, would only result in the transaction failing at time of funding after the VA Appraisal and repair conditions to funding of that loan type.

    I ran into that with an FHA buyer on a home that needed a roof in order for the loan to fund. I was able to work through it on a bank-owned sale, but it was not easy.

    I think what they are trying to tell you is that the house does not qualify for a VA loan, as to its condition, and it being an “as is” sale.

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  78. Kary L. Krismer

    By David Losh @ 74:

    This guy put in a bid $12K over asking price as a back up offer. The property came back on the market Friday, and he asked his Windermere agent what happened with his offer. Well she never submitted it, but didn’t tell him that.

    I just talked with the listing agent who explained to me how HUD Homes work.

    In addition to what Ardell said, I’m not sure there is a method of submitting a backup offer on a HUD home. Their system is very different from a normal REO system. I don’t recall what their policy is on backup offers.

    As to what Ardell said, with ANY property the listing agent needs to consider what type of financing is likely to get approved. And in the REO area, there are Fannie Mae listings where the property will not qualify for Fannie Mae Homepath (non-rehab) financing.

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  79. David Losh

    RE: Kary L. Krismer @ 78RE: ARDELL @ 77

    Thanks, however, I understand about the condition, as well as I am aware of the what can work. As Ardell says it needs a walk through with the lender, but a listing agent should be encouraging offers.

    I’m just talking generally, but I’ve been going through the other 153 transactions the listing agent has done, and there are allowances for repairs.

    My opinion is that in today’s market everybody is looking at what’s easy. That’s how we have a redfin. redfin does what’s easy. Every Broker is looking for what’s easy.

    This market place needs more agression.

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  80. Kary L. Krismer

    RE: David Losh @ 79 – You’re assuming that the bank entity is acting rationally! That’s a very bad assumption to make.

    If banks were making good decisions, they’d be recovering a lot more money on their foreclosures.

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  81. David Losh

    RE: Kary L. Krismer @ 80

    From what I have looked at since last November banks are making tons of money on properties.

    Let’s just take the simple logic that home prices had double digit appreciation in 2005, 2006, and a start of 2007, that by the way lasted until July, just past the peak selling season. Here we can target August of 2007 as the collapse of the housing market.

    Well let’s just say that is a 20% increase in pricing in two years. So a drop of 30% from the peak is actually nothing in the big scheme of things.

    “Distressed” properties are actually selling for what they were in 1998, but those are newer housing units in Everett, and Arlington. Those properties should have had a slight decline from “new.”

    As we get closer in, properties are selling for 2004 prices, which seems like a fair bet to me that they should sell for that price.

    The big difference is that refinances hit 50%, or 30% more than fair market value. That’s where we are seeing the short sales.

    The bank however sold the loan many times over, and insured against the loss. The bank comes out with a massive profit, any way that you look at the mess.

    We pay for it. We all pay for it, but today’s home buyer is paying the most.

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