Posted by: 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.

38 responses to “Bank-Owned Sales Still Slim”

  1. softwarengineer

    The Only Major Difference Between a Foreclosure and a Short Sale

    Is the short sale seller could owe taxes on untaxed income to the IRS in 2013, after the short sale.

    Both impact the old owners’ credit history too.

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  2. kyle

    I keep hearing about shadow inventory of foreclosures. Most recently I heard this from a realtor. From the day that a trustee sale (do I have that right?) is filed how long does it typically take for a foreclosure to hit the market? Is it possible to over lay the graph above with a graph of the number of trustee sales to see how long the lag is between the two?

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  3. Howard

    By kyle @ 2:

    I keep hearing about shadow inventory of foreclosures. Most recently I heard this from a realtor. From the day that a trustee sale (do I have that right?) is filed how long does it typically take for a foreclosure to hit the market? Is it possible to over lay the graph above with a graph of the number of trustee sales to see how long the lag is between the two?

    I have seen less than a month to over a year, sometimes it doesn’t even hit the MLS. A property I had been watching was sold to a neighbor before it even hit the MLS. The banks representative literally knocked on the doors of the neighbors.

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  4. ray pepper

    RE: Howard @ 3 – I don’t think so. Please provide address.

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  5. Marc

    RE: Howard @ 3 – I agree that that sounds unlikely. With institutional lenders they won’t sell unless the house hits the MLS. However, I did have a client who was able to get a credit union (or small local bank, I forget which now) to agree to sell an REO it had that was not yet being marketed. Of course, once she got inside and saw the condition she passed. Suppose the take away is never say never.

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  6. Mike

    I’m not seeing many vacant homes lately. The few I have spotted and subsequently looked up don’t appear to be bank owned or in the process of foreclosure (IE: no NTS, Trustee Deed, Trustee Sale on record, etc…) I say this from the perspective of having spent a lot of time driving around and looking at neighborhoods. Comparing to how things were 5 years ago when housing was severely overbuilt, most of today’s distressed properties have occupants.

    Granted, many of these occupants aren’t taking very good care of the homes so they may not be move in ready when they change hands. However the time they’ll spend in rehab only further reduces the number of available places to live.

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  7. Kary L. Krismer

    By softwarengineer @ 1:

    The Only Major Difference Between a Foreclosure and a Short Sale

    Is the short sale seller could owe taxes on untaxed income to the IRS in 2013, after the short sale.

    Both impact the old owners’ credit history too.

    Don’t assume that a foreclosure is without tax consequences to the prior owner. And don’t assume that the short seller will. As to the latter point, the NAR has been running a bit of propaganda overstating the impact of the expiration of the Mortgage Debt Relief Act. Insolvency will still be an exception to recognizing the tax.

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  8. Kary L. Krismer

    RE: Marc @ 5 – Tenants can sometimes buy.

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  9. Howard

    By ray pepper @ 4:

    RE: Howard @ 3 – I don’t think so. Please provide address.

    7601 champagne point drive, foreclosed in June by Whidbey Island Bank, sold to adjacent propert owner on November 16th for 1.2 million

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  10. Howard

    By Marc @ 5:

    RE: Howard @ 3 – I agree that that sounds unlikely. With institutional lenders they won’t sell unless the house hits the MLS. However, I did have a client who was able to get a credit union (or small local bank, I forget which now) to agree to sell an REO it had that was not yet being marketed. Of course, once she got inside and saw the condition she passed. Suppose the take away is never say never.

    Here is the trustee deed

    http://146.129.54.93:8193/imgcache/OPR20120620000412-1-4.pdf

    Sold to neighbors next door
    http://146.129.54.93:8193/imgcache/OPR20121116002316-1-2.pdf

    They bought it to protect their view. They thought it was cheap at 1.16 million.

    And here their new purchase is for rent
    http://www.zillow.com/homedetails/7601-Champagne-Point-Road-Ne-Kirkland-WA-98034/2115762312_zpid/

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  11. ARDELL

    RE: Howard @ 9

    Another one to support Howard’s statement and to also answer Kyle. Property is in Lynnwood.

    Notice of Trustee Sale filed 10/24/2011
    Foreclosed by Wells Fargo Settle Date 1/27/12
    Was not listed for sale
    Wells Fargo sold it to the tenant and it closed on 5/23/12
    The reason for the long delay between foreclosure and the tenant close date is the tenant was not thinking of buying it until they ran out of time as a tenant including granted extensions. They elected to buy it vs move out at that point. If they knew they wanted to buy it back in January or February, the time frame would likely have been shorter.

    I happen to know about this one as the tenant/buyer is one of my clients. I expect if I know one without looking for it and Howard knows one without looking for it…there are many.

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  12. ChrisM

    You can also spot similar sales by spending quality time with the Redfin foreclosure search combined with the county property tax website. I’ve seen bank-owned properties in Clark county that never hit the open market.

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  13. Pegasus

    RE: ARDELL @ 11 – Nothing new, guys and girls. Banks don’t have to MLS any of those properties. They can do anything they want. Ever see how they handle properties in an estate when they are the trustee? I suspect there are plenty of sweetheart deals for friends, relatives, business relationships, etc. Ever watch how the Savings and Loan crisis went down? Eventually the less desirable remaining properties got stuck into the Resolution Trust. If this crisis was smaller than it is we would have already seen another trust formed.

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  14. Feedback

    This is great! I’m glad to see that banks are getting out of the real estate biz.

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  15. softwarengineer

    RE: kyle @ 2

    Yes Kyle

    Its bank manipulation/stalling to keep house prices from collapsing worse. They let some of the old owners squat in them rent free for years too.

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  16. softwarengineer

    RE: Kary L. Krismer @ 7

    One Comment Kary

    The fiscal cliff in abour 3 weeks….we can’t afford our military anymore, why can we afford to placate to home equity freeloaders?

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  17. Kary L. Krismer

    RE: softwarengineer @ 16 – I wasn’t arguing in favor of the extension of the Mortgage Debt Relief Act. I was only pointing out that when it does expire there is another exemption from taxation which probably affects a lot more people.

    That said, taxing people in the narrow circumstances covered by the Mortgage Debt Relief Act does seem unfair. It only applies to the extent that they actually paid a high amount on their property, or used the loan to improve the property. It doesn’t apply to people who took out HELOC type “ATM” loans to pay for other things. So the only reason they’re facing a tax is because they can’t deduct the loss on the sale of their house, because it’s a personal expense, and therefore cannot offset that loss against the income recognized on the forgiveness of the debt secured by the house.

    In the HELOC ATM situation, they actually did receive cash, and sometimes have to pay the tax when they no longer have to pay the debt back. That does seem fair.

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  18. Kary L. Krismer

    RE: Pegasus @ 13 – Back in my bankruptcy days I once saw a bank kick a family out of their Lake Washington waterfront home and then sell it dirt cheap to an insider. That was probably over 20 years ago, so nothing new.

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  19. Marc

    RE: Howard @ 10 – Looks like they paid cash too. Must be rough. It was a small local bank so that provides some distinction from the typical REO sale. Although Kary and Ardell make good points about sales to tenants by large lenders. I still think these are exceptions to the general rule.

    If I were a shareholder in these banks I would have more confidence in a small bank having the capacity to make a well reasoned decision on whether to list a property or sell it in an off market deal. I would not want to give that much discretion to the REO managers at an institutional lender who frequently (I suspect) are responsible for properties in other states or localities they’re not familiar with.

    Note, I said “capacity” as any grant of discretion comes at the risk of abuse and shady dealing.

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  20. Pegasus

    RE: Kary L. Krismer @ 18 – I bet no one at WAMU ever did anything like that.

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  21. redmondjp

    RE: Pegasus @ 13 – Yup. The house that my dad now owns was from an estate. The bank that held the mortgage sold it by sealed bid. It was never on the market per se.

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  22. ray pepper

    RE: Howard @ 9 – Yep, Local Bank…good find….The Regionals were the FIRST dropping principle balances and as time ticked on the Big Boys finally realized that MORTGAGE CRAMDOWN was the answer!

    Now countless homeowners are skipping along happily after not paying for years and getting their DEAL OF A LIFETIME on their upside down mortgage.

    Seems to be quite effective in curtailing the sheer MASS amount of homes that would have hit the market in 2012-2015.

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  23. Pegasus

    RE: ray pepper @ 22 – Not sure if that lasts. That write-down is coming mainly from the 25 billion settlement and it is almost gone.

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  24. kyle

    Thanks for all the replies. I’ve got to say that I live in Phinney/Greenwood and are currently being told by a realtor that the prices will colapse in 2013 due to pent up foreclosures hitting the market. Although, I am sceptical of jumping into a sale right now, since I am just not convinced that we are going to see a massive wave of foreclosures take over the market and significantly conteract the demand that is out there for in city properties. We will certainly see in the new year how the buying season shapes up.

    Long story short, we are nto going to sell.

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  25. ray pepper

    RE: kyle @ 24 – If you are contemplating selling I would ABSOLUTELY do it with the high demand we are now experiencing now. At best we can hope for is a LONG flat line in the years to come. I would not expect a market collapse in 2013 in this era of “GIVE BACK.” They are all coming back and **Astute** Bubble Buyers are getting the Deal of a Lifetime!

    Good Luck!

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  26. Ira Sacharoff

    In 2005, 2006 , realtors were telling people that prices were just going to continue upwards forever, and there was a particular urgency to buy right now because if you waited, you wouldn’t be able to afford to buy.
    Now, a realtor is telling you that prices will collapse in 2013 due to the pent up foreclosures hitting the market. And they’re telling you this because they want you to put your house on the market right now, and use them as the listing agent?
    There’s one thing I’ve learned: Realtors like to portray themselves as experts, but the vast majority of them don’t know diddly. Barbers and garbage men know as much about the direction of the market

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  27. kyle

    Thanks for the advice Ray. Do you think there will be a long flat line due to demand decreasing or supply increasing? I’m trying to figure out what everyone is worried about with employment numbers doing well in Seattle, limited supply, and all those renters starting to get to a point where they can buy a house in Greenwood for less than they pay for rent in Ballard right now. The realtors are telling me they have a long line of first time home buyers ready to buy this spring and Amazon is building 3 more huge towers downtown to bring even more highly paid young (first time home buyer type) workers into the core.

    This feels mroe like the start of a run up in housing prices then the end of of one. But I am young myself and could be ignorant.

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  28. ray pepper

    RE: kyle @ 27 – You are absolutely correct that the PNW is on FIRE with jobs and this will definitely help. However, I don’t believe you will ever call me and say..”Ray I should have never sold in Feb 2013..I left alot of money on the table.”!!!……As interest rates continue to go up, taxes up, underwater homeowners that will still exist along with all the grass roots movements I see at Trustee Sales every month, the “feel or pride” for homeownership has been damaged. Renter Nation is a real possibility with discussions of wiping away Mortgage Interest Reduction and the ever increasing taxes. * *Most importantly we are a MOBILE society**. This generation does NOT sit for 30+ years anymore. We are forced to move for so many reasons and so many of these people are STILL upside down. Furthermore, In Washington State it costs 10% to unload your burden!! I also believe in Schiller and his research that indicates homes never go up in value unless you buy at base of bubbles: http://video.cnbc.com/gallery/?video=3000131858… …………..Dump it and Good Luck…

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  29. ray pepper

    RE: ray pepper @ 28 – Here you go Kyle…I sat with Tim through his seminar…Schiller gave us this chart in his lecture illustrating housing/inflation: http://www.ritholtz.com/blog/2011/04/case-shiller-100-year-chart-2011-update/

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  30. corndogs

    The Tim said ….
    “At 18.7%, the total share of sales that were either short sale or bank-owned hit another two-year low. It’s no surprise then that the median price continues to go up”.

    Let me interpret this comment “blah, blah, blah, blah, blah, blah, blah, blah, blah…. prices continue to go up! .

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  31. wreckingbull

    RE: Ira Sacharoff @ 26 – I’d argue that garbage men probably know even more than real estate agents. You can learn a lot about a population’s financial situation by humping their garbage into the truck every week.

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  32. Pegasus

    Look! More free money! HOUSE MEMBERS URGE PRESIDENT, HOUSE, AND SENATE LEADERS TO INCLUDE MORTGAGE PRINCIPAL REDUCTION IN ANY FISCAL CLIFF DEAL

    In July, the Federal Housing Finance Agency issued a study showing that offering principal reduction modifications under the Making Home Affordable-Principal Reduction Alternative program to borrowers with loans backed by Fannie Mae and Freddie Mac could help as many as half a million homeowners, save Fannie Mae and Freddie Mac as much as $3.6 billion, and save U.S. taxpayers up to $1 billion.

    http://democrats.oversight.house.gov/index.php?option=com_content&view=article&id=5821:house-members-urge-president-house-and-senate-leaders-to-include-mortgage-principal-reduction-in-any-fiscal-cliff-deal&catid=3:press-releases&Itemid=49

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  33. Tim McB

    RE: kyle @ 27

    If it were me and and I was thinking of selling sometime in the future, now probably wouldn’t be it but perhaps in a year or two. Instead of looking locally (jobs numbers, foreclosure rates) I’d look nationally to significant rising interest rates or macro economic black swan events (the Eurozone fracturing, international trade wars, US debt impass turns ugly etc.) as your most dangerous worries to the real estate market. As long as the fake rates keep affordability strong the market should stay flat to slowly increasing with inflation in the Puget Sound area, especially Seattle proper and good parts of the eastside. If or when the big monsters come out to play then all bets are off.

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  34. Ira Sacharoff

    RE: kyle @ 27
    Sometimes it’s not what’s happening locally that influences local real estate. In 2006, I kept hearing that even though home prices were declining in other parts of the country, we were immune here in Seattle because we had Microsoft, Boeing, Amazon, etc. There are a lot of things that can affect local real estate prices, and that includes the lawsuits against the major banks :

    http://www.nytimes.com/2012/12/10/business/banks-face-a-huge-reckoning-in-the-mortgage-mess.html?pagewanted=2

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  35. Kary L. Krismer

    RE: Ira Sacharoff @ 34RE: Ira Sacharoff @ 26 – Great posts Ira! It’s amazing that only five years after 2007 those two things even have to be said, but apparently they do.

    1. Real estate agents are not qualified to predict future prices. I would add that they don’t receive any training in that area, and many of them don’t even know what’s happening in the current market.

    2. Many things can affect real estate prices, and not all of them are local (e.g. PIGS).

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  36. ray pepper

    RE: Kary L. Krismer @ 35 – Kary who do YOU believe IS QUALIFIED to predict future prices?

    Surely not Tim and he has many stats. Not even Schiller is qualified and he has ALL the stats in the world! In fact, Schiller tends to shy away from such questions and defers to historical norms because he knows he cannot EVER predict what will happen due to so many moving parts in the puzzle.

    What people want in advice Kary is what they personally desire to occur. Then they look for people to support their desired outcomes to make themselves feel better. Those that have different opinions of their desired goals, the onlooker will seek to find holes in their thought process to fit their desired outcome.

    So Kary we all make predictions and some are right and some are wrong. Its human nature to find someone else to blame for their misgivings. When Tim attacks Agents and anyone in the Real Estate Industry, then and now, it makes me laugh. Because THE FACT IS, at the end of the day, people make their own decisions. Pointing fingers at anyone for ones misjudgement is solely to pacify ones self and ease their pain..

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  37. Kary L. Krismer

    By ray pepper @ 36:

    RE: Kary L. Krismer @ 35 – Kary who do YOU believe IS QUALIFIED to predict future prices?

    No one. There are too many variables. But it is an industry that keeps a lot of economists and statisticians employed, so I suppose that is a good thing. ;-)

    I agree with you that people are often looking for predictions that match what they already think.

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  38. Plymster

    RE: Ira Sacharoff @ 34 – Thanks for that link, Ira. That’s the best news I’ve heard in a while. I just can’t believe it took 5+ years for some action to be taken on the mortgage securitization fraud that ran rampant and brought the global economy to its knees.

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