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.

30 responses to “Reader Question: Sudden Surge of Foreclosure Notices?”

  1. toad37

    I bet that is their (the banks and the Fed) plan… dump the shadow inventory into all this recent good housing news… i heard that available homes are ridiculously low in some areas. Get them hungry for some deals and then shove some foreclosures down their throat.

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  2. Kilen

    I was going to write a post about how unlikely it is that such a huge conspiracy exists around shadow inventory, given the number of people and moving parts in the system, but then I realized that trying to disprove conspiracies on the Internet may be the least valuable way to spend my time.

    So, conspire away!

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  3. ray pepper

    Yes, we have noticed a slight SURGE in properties at Trustee Sale. Bids getting ran up high because everyone is flush with dough. Less and less postponements and it appears evident the homes hitting the Trustee Sale are vacant or from non respondent owners who sit and wait .

    The astute continue to play the Hamster wheel by answering every call and responding to all attempts at Loan Mod. So many I know are nearing 6 years of not paying one penny. Oh the HUMANITY!

    Last week this lil crapper had an opening bid of 60k with 5k in delinquent taxes. It AMAZINGLY sold for 88k. Owner sat and waited for notice and Fairplay gave them a FREE UHAUL to Las Vegas to relocate.. They took it and are probably somewhere in Oregon. House needed 15k in rehab or about 110k. Will be listed at 139k and I just don’t see what they were thinking UNLESS buyer wanted it for a primary…

    http://www.redfin.com/WA/Tacoma/619-N-Hawthorne-St-98406/home/2834661

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  4. whatsmyname

    Respectfully, I think that the possible changes the reader is speculating about won’t impact the metric you cite until the first week of November. So the data based answer is “we don’t have the data”.

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  5. Kary L. Krismer

    By ray pepper @ 3:

    Yes, we have noticed a slight SURGE in properties at Trustee Sale. Bids getting ran up high because everyone is flush with dough.

    I would wonder if that’s merely a side effect of less inventory, particularly less REO inventory. Add that to a little bit of hype with people wanting to buy and flip or buy and rent, and you’d see a lot more action at foreclosure auctions.

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  6. softwarengineer

    RE: Kary L. Krismer @ 5

    I Never Did Like Generalizations

    In a country like America, where “net worth” or wealth has plummetted 40% since 2007, “flush with cash” sounds like clown joke.

    http://money.cnn.com/2012/06/11/news/economy/fed-family-net-worth/index.htm

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  7. Lo Ball Jones

    After 5 years of hearing about foreclosures, and seeing them listed on sites like Redfin I really am confused as to whether they represent anything that can actually be bought like a regular house.

    That would be the “regulation” I would like to see improved.

    Also, I’ve been reading about an upsurge in house building…any of this going on in the PNW?

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  8. softwarengineer

    RE: toad37 @ 1RE: Kary L. Krismer @ 5

    Its the Horrifying Cost Model With “Glass in the Porridge” They Want Us to Swallow Anyway

    Another blogger already said it for me on overpriced auction prices of foreclosed homes in an underwater mortgage market low inventory:

    “…That price would fall into what Mr. Kelman called the “sweet spot of affordability” for the Bay Area that sparks buyer interest — $500,000 to $800,000. There is, in places, even a shortage inventory, he said, making it like the mall after Christmas: “all the remainders that no one else wanted but not much else new on the shelves.”
    These numbers could also suggest that sellers, involving foreclosures or not, are ready for more realistic pricing so their listings don’t languish. But George Graham, chief executive of Concierge Auctions, a real estate auction firm based in New York, said sellers can be a hard group to persuade on this point. “Time is not your friend,” Mr. Graham said. “By the time you are done lowering your list price 30 or 40 percent, your house is worth less and you’ve been carrying it.”…”

    http://distressedproperties-myrtlebeach.blogspot.com/2011/04/foreclosure-side-effect-bidding-wars.html

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  9. Kary L. Krismer

    RE: softwarengineer @ 6 – That number though is largely due to the decline in real estate prices. So it’s not a decline in liquid assets, especially now that the stock market has largely recovered.

    There really is an incredible disparity in this country when it comes to wealth. I’ve commented in the past about how many $1M+ houses are bought with cash or perhaps only the largest conventional loan available at the time. Those that borrow the limit probably just do so in order to deduct their charitable contributions! ;-)

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  10. Kary L. Krismer

    By Lo Ball Jones @ 7:

    After 5 years of hearing about foreclosures, and seeing them listed on sites like Redfin I really am confused as to whether they represent anything that can actually be bought like a regular house.

    If you’re talking a bank owned listing, then yes.

    If you’re talking about buying at an auction to live in the house, for the typical person I would not recommend it, except in very limited circumstances. Too much risk and financing options somewhat limited.

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  11. softwarengineer

    RE: Kary L. Krismer @ 9

    Kary, Let’s Be Real

    The stock market volume is down to a trickle….its just a small pack of us that re-cooped 2007 losses and guess what Kary, most of us “lucky lottery ticket” stock cash holders would never stick it into today’s poor Seattle real estate cost model for buying decrepit quality for over bid prices and low inventory….

    http://money.cnn.com/2012/01/19/markets/trading_volume/index.htm

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  12. Kary L. Krismer

    RE: softwarengineer @ 11 – I don’t think volume is at all relevant to the type of transaction we’re discussing. There’s enough volume for people with $5M to liquidate without impacting the market in most stocks.

    It’s not like what happened to auction rate securities in 2007-08, where the market totally froze up.

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  13. Ray Pepper

    here is one for all of you tomorrow amongst a TON of Condos that are in action tomorrow:

    http://www.zillow.com/homedetails/11234-Cornell-Ave-S-Seattle-WA-98178/48918065_zpid/ opening bid 147,835.

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  14. softwarengineer

    RE: Kary L. Krismer @ 12

    What Further Lowers the Trickle of Stock Market Lottery Winners

    Is the lion’s share of retirements’ funding invested as volume by investment managers; practically none of this will go into buying real estate….it better not, its your retirement.

    Also, in a blink of an eye, the 30%+ YOY gain in American stocks in those “long haul” retirement investments to date could vanish….we all know that.

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  15. softwarengineer

    RE: Ray Pepper @ 13

    LOL Ray

    Its like the old 1980s joke about Condos during the Savings and Loan Crisis and the real estate price crash then that continued into the early 90s….”harder to get rid of than Herpes”.

    A blogger above asked about new home construction lately….I’m sure its improved since the crash, even during the Savings and Loan Crisis, new homes were selling much cheaper on a mass cookie cutter learning curve than similar sized used stock. The contractors weren’t complaining then either about price crashes, its a 70% learning curve on fabrication hours on big developments.

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  16. Kary L. Krismer

    By softwarengineer @ 14:

    RE: Kary L. Krismer @ 12 – Is the lion’s share of retirements’ funding invested as volume by investment managers; practically none of this will go into buying real estate..

    Correct, but I was addressing the loss of net worth from 2007, and also the purchase of property over $1M. For the former it’s the level of the stock market that counts, not the volume. And for the latter, it doesn’t matter where the majority of funds from the stock market will go, only that some if it is available for people to purchase houses. I would suspect the majority of the funds from the stock market go into other stocks, and even bonds.

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  17. David Losh

    That is a great question, and reasoning.

    Without getting into the politcis you could probably look at the Presidential election impact on consumer confidence, especially when it comes to a home purchase. The economy seems to do better in an election year.

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  18. David Losh

    RE: Lo Ball Jones @ 7

    I think the system will be changed to make it easier for the home buyer. Auctions were a way of clearing inventory, but that has broken down considerably this time around.

    There are legal reasons to auction a foreclosure that limit liabilities, so you have to be careful what you look at to buy. That’s always going to be a problem.

    As far as building we do have a lot of apartments being built that are coming onto the rental market.

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  19. Carl

    RE: David Losh @ 18 – I always thought it anachronistic to have auctions at courthouse steps. That doesn’t seem to be the best way for banks to get the best market price. It seems to me that once the bank forecloses, they should just list it on the MLS for some period of time (say 2-3 weeks) and say they will take the best non-contingent offer at that point.

    I wonder why banks do the auction thing – is it because of some stupid regulation?

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  20. Kary L. Krismer

    RE: Carl @ 19 – The deed of trust act requires a public auction. It’s to deal with the possibility that there might actually be equity in the property for the homeowner. Remember, the deed of trust act applies in all kinds of markets and to many different situations. One recent case where a foreclosure sale was overturned the value of the property far exceeded the debt.

    What the bank will do though is not necessarily bid in the amount they’re owed. Instead they sometimes bid in a lesser amount which is based on what they think they would likely recover if they sold it REO (presumably adjusting for marketing costs, time, repairs, etc.)

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  21. apartment boy

    By Kary L. Krismer @ 20:

    RE: Carl @ 19 -
    What the bank will do though is not necessarily bid in the amount they’re owed. Instead they sometimes bid in a lesser amount which is based on what they think they would likely recover if they sold it REO (presumably adjusting for marketing costs, time, repairs, etc.)

    I did this often in 1990/1, when cleaning up the portfolio of a failed S & L.
    Also a lot of principal reductions for worthy borrowers. Anything to keep them in the house. If unable, then cut the cord quickly. None of this RayRay monkeybusiness.
    The lenders in this crisis seem a bit slow on the uptake. They’re either incompetent or overwhelmed.

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  22. Kary L. Krismer

    By apartment boy @ 21:

    They’re either incompetent or overwhelmed.

    Why not both? ;-)

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  23. Lo Ball Jones

    RE: Kary L. Krismer @ 10

    So here is what I see.

    I go to Redfin and there is the checkbox for foreclosures.

    Sometimes it has a listing with picture and some times its a generic photo of an empty lot.

    Can I buy these? Or is it just pro forma for people who are going into foreclosure to reset their mortgages?

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  24. David Losh

    RE: Carl @ 19

    At auction every one has a chance to bid, and you never know what will happen.

    It was in the 1990s when I was at the auction here in Seattle. A house by Green Lake was going up for bids. There had been a fire, the owner moved out, but couldn’t keep up the payments. I recall he owed about $65K or $85K on the property, plus expenses. The owner was there with his grand son to see what would happen.

    It got bid up to the amounts owed to the bank then the bidders started to fade. There was a kid there in his twenties bidding, and one of the auction regulars. The bid up to $120K when the regular auction attender demanded to see the kids money. The auctioneer told him those weren’t the rules, and does he want to keep bidding.

    The regular kept bidding, and taunting the kid, telling him he didn’t have the money, that the kid was an idiot, and the price got to be $225K when it was all done. The kid “won.”

    The previous owner was faint, and his grand son had to prop him up. He was going to get a check out of the whole thing. As I understand it he got some insurance money, and then this auction thing.

    The house stood vacant for a couple of years, but the Real Estate market caught up, and I think it sold for like $600K something when it was fixed.

    You just never know what will happen, but it doesn’t hurt to have the option of higher, and best price at auction.

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  25. David Losh

    RE: apartment boy @ 21

    The system is broken, and no one expected these many homes, and counting, in the foreclosure market.

    There’s an example in another thread of a house in Kirkland that was $800K, sold for $1.6 Million in 2006, and is now listed again for $850K. That house was never worth $1.6 Million, but somebody paid that.

    That is just one example of millions of homes across the country. Millions of homes sold for at least twice the price of value.

    So I don’t think we will hit a correction from this. The foreclosure process is supposed to be the equalizer, but at some point people will wise up, and just not buy at twice the price, or a third of the price, or at all.

    Prices will need to come in line with incomes, and the economy would need to stabalize to make betting on property realistic.

    I don’t think banks are overwhelmed, or incompetent. I think they are making the smartest moves they can to build balance sheets that absorb as much of the loss as possible. What the fair market fails to pay, in my opinion, is being off set by other income, like consumer credit.

    The longer banks stretch this out, the better the balance sheets can appear.

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  26. Kary L. Krismer

    By Lo Ball Jones @ 23:

    RE: Kary L. Krismer @ 10

    So here is what I see.

    I go to Redfin and there is the checkbox for foreclosures.

    Sometimes it has a listing with picture and some times its a generic photo of an empty lot.

    Can I buy these? Or is it just pro forma for people who are going into foreclosure to reset their mortgages?

    I’m not very familiar with Redfin’s site, because agents have better tools than Redfin. I did go and check MLS-Listed Foreclosures, and the one I checked was in fact an REO listing. Checking “Foreclosed Homes” didn’t get any results. Is there something else?

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  27. ARDELL

    RE: Kary L. Krismer @ 26

    Yes there is “something else” Here is the announcement from 2008.

    http://www.redfin.com/about/press/releases/Redfin-Adds-Foreclosure-and-For-Sale-By-Owner-Inventory

    I believe they pull data from both the County Records and RealtyTrac. The Tim may have a newer update on where they are pulling the current data from as to foreclosure homes. But it is clear they are not relying primarily on the mls for this information.

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  28. Lo Ball Jones

    Pace of housing short sales in Pierce County picks up

    “In the eight years I’ve been negotiating short sales I have never seen banks so eager to make short sales happen,” said Eastern. “Lenders are drowning in bank-owned inventory and they are doing everything they can to avoid adding more distressed properties to their portfolio.”

    One strategy is to pay homeowners to sell their homes short rather than go through foreclosure. Two of the nation’s largest banks, Chase and Bank of America, have been paying significant cash incentives to short sale sellers at closing, the short sales company said.

    “In the past few months we’ve had clients receive cash incentives that range from $23,000 to $35,000,” said Eastern. “One homeowner whose property sold for $164,000 received a $25,000 incentive from Chase, plus an additional $3,000 from the federal government’s Home Affordable Foreclosure Alternatives Program.”

    In addition to providing incentives, banks are streamlining what historically has been a slow process, said Eastern.

    http://www.thenewstribune.com/2012/10/16/2333398/pace-of-housing-short-sales-in.html

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  29. Kary L. Krismer

    RE: Lo Ball Jones @ 28 – A lot of what they’re talking about there is due to the National Mortgage Settlement–something seemingly not even mentioned in the article.

    http://www.nationalmortgagesettlement.com/

    The banks have to give billions of dollars of money away, and short sales are a good place to do that because they will likely never see that money anyway.

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  30. toad37

    RE: ray pepper @ 3

    Wow RAy, that thing sold for 165k. Looks like the did a decent rehab though.

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