One in Three Seattle Area Home Listings are Distressed

By request, here’s an update to the distressed listings map I first posted six months ago.

In the map below I have taken all the currently active listings on the market in King, Snohomish, and Pierce counties, and separated them into three buckets: bank owned, short sale, and non-distressed. Each zip code has a pie chart that shows the breakdown for that zip code. Pies are sized according to the total number of listings in the zip code. Float the mouse over a slice of pie to see the number of listings it represents, as well as the median list price and median days on market for those listings.

King County’s most distressed zip code is 98168, right between Boeing Field and Sea-Tac Airport. Of the 56 homes on the market there, 58% are bank owned or short sales. West Federal Way comes in a close second with 57% of the 228 homes on the market being either bank owned or short sale.

In Snohomish County, Marysville’s 98270 is by far the most distressed, with bank owned and short sale homes making up a whopping 61% of the listings. Pierce County’s leader is Orting’s 98360, with 56% of its listings distressed. South Puyallup’s 98375 is also up there at 54% distressed.

Central King County (basically Seattle and Bellevue) have relatively few distressed listings, but once you venture very far outside that narrow band to the north or the south, the picture changes fairly dramatically.

Here’s the total distressed listings breakdown for each county:

  • King: 12% bank owned, 22% short sale, 66% non-distressed.
  • Snohomish: 16% bank owned, 27% short sale, 57% non-distressed.
  • Pierce: 14% bank owned, 23% short sale, 63% non-distressed.

Overall, 37% of the listings in King, Pierce, and Snohomish are either bank owned or a short sale.

It’s also interesting to see the difference between the prices of the distressed inventory vs. the non-distressed inventory. Take single-family homes in Deldrige (98106) for example. Here’s the number of homes, median price, and median days on market for the three buckets:

  • non-distressed: 45 homes, $275,000, 88 DOM
  • short sale: 21 homes, $259,990, 105 DOM
  • bank owned: 22 homes, $147,000, 47 DOM

Short sales are a little cheaper than non-distressed, but are taking a lot longer to sell. Bank owned homes are a lot cheaper than non-distressed homes, and are selling a lot faster.

If you want to know what’s continuing to drive prices down in this long, slow grind, there’s your answer. Bank owned homes are driving down prices hard, and will likely continue to do so until the foreclosure surge dies down.

If you’re a potential seller in one of these areas with a lot of distressed listings, you’re going to have to work pretty hard to overcome the huge price advantage of the bank owned homes on the market. If your home is not priced right and doesn’t sparkle right out of the gate, you’re going to get left in the dust. Fair warning.

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About 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. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

66 comments:

  1. 1

    Tim- Those are interesting and freightening numbers. Here in Leavenworth less than 1% of all listings right now are distressed sales. I assume we’ll see more as the year continues, but last year REOs were only about 10% of the sales here.

  2. 2

    Yes Tim

    Add in the uncountable “Shadow Inventory” of foreclosure homes and homes not in foreclosure impact(s) that are/were pulled awaiting the economy rebound; and IMO you have the proverbial “cow dung awaiting the fan”.

    They’re doing this “Shadow Inventory” hocus pocus with newer used cars too IMO, I drive by the Green River valley Boeing parking lot and alas, 1000s of cars parked/stored, unsold and apparently not listed at dealers. Airplanes and boats, same conundrum. Don’t ever buy into a market where supply and demand is “monkeyed with”…..buyer beware.

    As to the sellers with over-built condos, SFHs, etc, etc that are “sitting it out” for better times ahead with their own “monthly cash payments” in the meantime….IMO, the circus clowns are aiming the selzer bottle right your way.

  3. 3

    RE: Geordie Romer | Leavenworth WA @ 1

    Just 1%…LOL

    How about maybe 1% of the total homes in your area are even selling period? Now that 1% is HORRIFYING.

  4. 4
    deejayoh says:

    I wonder if there is any seasonality component to this? Your post this summer had 1 in 4 as bank owned – basically at the point in the year when inventory is at the peak. Now we are in the low inventory season. and it is 1 in 3 Hypothesis might be that the banks and short sellers are not as likely to take a listing off market because it is slow selling season or the holidays. Especially the short sellers. There were roughly 4400 in July, and… I can’t run the number for this month because the raw numbers aren’t there. But it’s a thought.

  5. 5
    David S says:

    RE: deejayoh @ 4 – JUNE is RAPIDLY approaching.

  6. 6
    The Tim says:

    RE: deejayoh @ 4 – Oh I’m certain that there is a seasonality factor. Banks don’t care whether it’s the middle of winter. They just keep churning through their foreclosure backlog at a steady pace all year. Non-distressed sellers of course favor the spring and summer.

    As for the raw data, you can download it by floating over the arrow over a bucket icon on the bottom of the viz and clicking “data.”

  7. 7
    deejayoh says:

    By David S @ 5:

    RE: deejayoh @ 4 – JUNE is RAPIDLY approaching.

    RE: The Tim @ 6 – Thanks Tim. That’s pretty cool. didnt know you could do that. So the Bank owned has almost doubled in terms of units, and short sales are up about 12% in terms of units. So it looks like seasonality is less pronounced than I would have thought.

    By David S @ 5:

    RE: deejayoh @ 4 – JUNE is RAPIDLY approaching.

    and your point is? are you adding anything constructive to the conversation?

  8. 8
    LA Relo says:

    Considering in LA you have rising foreclosures in upscale areas like Beverly Hills, I’d guess within the next year or so the nicer areas get hit here too.

    High end areas certainly won’t be as bad as low end areas, and frankly I wish it would come sooner, but if 5-year ARMs are the most common toxic loan in Seattle, where housing peaked in 2007, you do the math.

  9. 9
    Gerald says:

    RE: softwarengineer @ 2 – I drive by that Boeing facility every day and noticed the buildup of cars a couple of months ago. It’s not quite as bad as it was right before CFC but it’s getting there. There must be some channel stuffing going on.

  10. 10
    Jillayne says:

    Hi The_Tim,
    Thanks for updating this chart for us!

  11. 11

    RE: Gerald @ 9

    I Agree Gerald

    The worldwide car production slowdown the last few years probably kept the parking lot of “Shadow Inventory” today smaller; but irrespective, it’s back again.

    I bought a newer used car in 2007 that had been in storage for at least about a year [bought it in Jan 2007 and the old tabs said Mar 2006]….it was cheap too, then. Today, with 4 years use and 65,000 miles more on the odometer, I see my identical car with my today’s milage on it and the same age for about the same price I paid in 2007 [it’s rigged]….LOL

    If I had to pay today’s newer used car 50% jackups, I’d probably buy new, before I’d buy used.

  12. 12
    brainiac says:

    Tim,

    Is there any data on how many short sales are pending?

    Is there any data on how many short sales actually close versus eventually being foreclosed?

    Thanks!

  13. 13
    Scotsman says:

    I think the price discounts on the bank owned homes is the real story here. Look at the DOM- those are moving but still taking some time. And how is a regular seller supposed to compete- you can do a lot of clean-up, repairs, etc. for the differential assuming the homes are at least similar. There sure isn’t going to be any upward movement until all of these are cleared out.

  14. 14
    jffj says:

    But do we really know it’s a bigger discount, or just that bank owned homes tend to be lower end homes in the first place? I know the reo’s I’ve watched weren’t THAT much better priced (almost half off, according to these numbers) than comparable non-distressed homes. More like 10 or 20% off, and even then, they can get bid up to near the non-distressed price if they are nice reo’s. Just like the mix of sales can affect the median, I think the reo market is sharply tilted toward lower end homes. Not to say that there aren’t mid or upper tier bank owned homes, just far less of them.

  15. 15

    RE: softwarengineer @ 3

    Do you want to help me with my math? There is one single family home that is an REO and 139 in Leavenworth that are not. My calculator tells me that’s 0.7 %.

    You’re certainly welcome to look at my 2010 data if you like.

    http://iciclecreekrealestate.com/2010-leavenworth-foreclosure-report/

  16. 16
    ray pepper says:

    Most that need to sell in the next 5 years will become very “distressed” if they are NOT already. Short sales and foreclosures are all we have on the horizon for years to come.

    Further stimulus is not apparently coming “YET” but I assure you it will. Today at The Trustee Sales every property that was even close to being investory worthy was postponed. Week after week postponement after postponement. When these thousands of homes get unleashed on the markets thousands more will follow.

    Careful treading everyone……………

  17. 17
    ray pepper says:

    Got this tasty email back from the listing Agent today when my offer met two others:

    “Thanks for submitting your highest, best and final offers on the above
    property. The seller has rejected all offers and it remains on the market.
    I will give you a courtesy call if we get a price change.”

    Good Job Buyers!! Let the price come down to you! Just so many more coming and always remember they have to SELL more then you have to BUY!

    For those interested it was an REO listed for 3 months at 205k. Then dropped to 149k for 9 days. My offer was most likely the lowest at 93k AS IS. I’m at the end of the line but who cares…at least I’m in the game and maybe a call back in 30 days…

  18. 18
    EconE says:

    Quite a few pent-up sellers out there. One of the few useful services Zillow provides is the ability to see homes that were on the market back in 2008, 2009 and 2010 but were never sold. More of those homes than you can imagine. Then, think of all the condos that were meant to be flipped but never were (harder to find condos on Zillow so I kept my own records).

    LA Relo makes a good point also but I’d like to add a couple points. 2005 was well into the bubble and there were also 7 year ARMs written. More of the same math. Not only that, but NegAM loans were written up into the multi-million dollar level and $0 down was allowed for home purchases into the millions. A neighbor here in L.A. told me that he was offered a $0 down $1,800,000 loan when he moved here. The kicker was that he was unemployed at the time.

    Ray Pepper is dead on with his assessment IMO. You ain’t seen NOTHING yet.

    p.s.

    I’ve even come across banks trying to rent out their foreclosures (unsuccessfully) on craigslist. Pretty smart of them if you ask me as they can then find out what the market will bear. I certainly wouldn’t want to be the renter in that situation.

  19. 19
    David S says:

    By David S @ 5:

    RE: deejayoh @ 4 – JUNE is RAPIDLY approaching.

    “and your point is? are you adding anything constructive to the conversation?”

    Sorry I was so abrupt. My feeling is that holding our breath for the summer selling season will be suffocating. I also think there is the strong possibility that the summer may be flat. And, I also meant to say, before you know it, summer will be here. Yea!

    “Ray Pepper is dead on with his assessment IMO. You ain’t seen NOTHING yet.”
    Agreed.

  20. 20
    David Losh says:

    RE: deejayoh @ 4

    There’s end of the tax year, and end of the fiscal year. Fiscal year is usually June, tax year is December January.

    I forget how it works, but the losses, or gains are realized before or after the first of the year, or fiscal year.

    That’s just a hazy memory because the tax laws have changed so much, and it’s been years since I followed such things.

    In the real estate business is just about the numbers. In real estate sales it’s all about mom, dad, and the kids school, and school year.

  21. 21
    Jonness says:

    By ray pepper @ 16:

    Today at The Trustee Sales every property that was even close to being investory worthy was postponed. Week after week postponement after postponement. When these thousands of homes get unleashed on the markets thousands more will follow.

    Ray. Why are all the properties being postponed?

  22. 22
    corncob says:

    By Jonness @ 21:

    Ray. Why are all the properties being postponed?

    I think usually they are postponed as the seller is working out either a loan mod or short sale and the lender is willing to give them extra time. I was at the auction in Factoria this morning where around 100 King county properties were up (there were even more up in Seattle at the same time). I would say roughly half reverted to the bank, half were postponed and I saw only one get any non-bank bid action at all.

    With the holiday foreclosure freezes over and a 20+ day lag after the auction before listing is even possible I am guessing we will see a lot of new REO inventory rolling in starting at the end of next month and going forward.

  23. 23
    ray pepper says:

    RE: Jonness @ 21

    as Northwest Trustees stated to me..” The banks need to make sure they got it right…”

  24. 24
    David Losh says:

    RE: ray pepper @ 23

    Who would tie up money in Real Estate today? The returns from the stock market, bond market, currency, commodities are going through the roof, while Real Estate is sinking.

    No one cares about the title, or the banks robo signing, the title can always get quieted. The problem is finding enough people to tie up money, to pay a mortgage, for seven plus years on a declining asset value.

    Banks aren’t stupid. Banks know the value of the properties they have. As long as they dole them out, enough people will be inclined to pay money for them.

    In my opinion what very few people figured on was the shear volume of properties going back to the bank. I think most bankers, and investors thought people would tough it out, or have that moral hazard thingy.

    No one saw the global economics that would be played out. No one saw riots in the streets, or food riots, or countries going broke, or government entities talking about going bankrupt.

    More properties are poised to go back to the bank than you can even imagine.

    I’m going to share a story about a nice couple headed for retirement in Mexico who confided in me they never intended to pay the mortgage. When they leave, they are just going to leave. No jingle mail, just an atorney to be sure the bank is forced to foreclose.

    I also think that banks were unaware of how pissed off people who bought property, refied property, took out debt consolidation, played by all the rules, would be.

    You haven’t seen any thing yet.

  25. 25
    Haybaler says:

    RE: David Losh @ 24 – About the “nice couple” headed to Mexico,….are you suggesting that they recently refinanced to take out money and are now leaving the country?… If they purchased with the intention of walking, I’m wondering why they would do that because it is cheaper to rent monthly….

  26. 26

    By jffj @ 14:

    But do we really know it’s a bigger discount, or just that bank owned homes tend to be lower end homes in the first place?

    There may be some of that. I don’t have data to back this up, but I think the banks are leery of taking back higher priced homes, and thus more likely to approve a short sale on them. Or maybe they just give the higher priced homes more attention.

    But a lot of the price difference is due to condition too.

  27. 27

    By Jonness @ 21:

    By ray pepper @ 16:

    Today at The Trustee Sales every property that was even close to being investory worthy was postponed. Week after week postponement after postponement. When these thousands of homes get unleashed on the markets thousands more will follow.

    Ray. Why are all the properties being postponed?

    That was very typical even back before 2007. The banks are willing to give owners that want to save the house a chance to do so. Sometimes it’s a bankruptcy filing that causes the continuance.

  28. 28
    MacroInvestor says:

    By softwarengineer @ 2:

    Yes Tim

    Add in the uncountable “Shadow Inventory” of foreclosure homes and homes not in foreclosure impact(s) that are/were pulled awaiting the economy rebound; and IMO you have the proverbial “cow dung awaiting the fan”.

    They’re doing this “Shadow Inventory” hocus pocus with newer used cars too IMO, I drive by the Green River valley Boeing parking lot and alas, 1000s of cars parked/stored, unsold and apparently not listed at dealers. Airplanes and boats, same conundrum. Don’t ever buy into a market where supply and demand is “monkeyed with”…..buyer beware.

    As to the sellers with over-built condos, SFHs, etc, etc that are “sitting it out” for better times ahead with their own “monthly cash payments” in the meantime….IMO, the circus clowns are aiming the selzer bottle right your way.

    Great comments, SWeng… you’re on fire these days. I would just add that all markets are monkeyed with to some degree. But especially in hard times, buyer BEWARE.

  29. 29
    MacroInvestor says:

    RE: ray pepper @ 16

    “Further stimulus is not apparently coming “YET” but I assure you it will. Today at The Trustee Sales every property that was even close to being investory worthy was postponed.”

    Stimulus may be coming, but even real estate lobbyists know it didn’t work. We may instead see an 80’s style resolution trust — basically all the excess property is auctioned off in blocks until nothing is left. A year or two after that normal market dynamics would return.

  30. 30
    Julie Lyda says:

    When discussing inventory I see two types of “shadow inventory”.

    Foreclosures that the bank has not put on the market yet
    Defaulted homes not yet foreclosed on yet.

    With regard to foreclosures that the bank has not put on the market yet, there is very little. Once the bank forecloses, we are seeing the homes come on the market usually right away.

    I have done absorptions rate graphs for those who are interested on my blog.

    With regard to those in default and have not been foreclosed on yet is the “mystery” number. We know there are alot. But how many are going to go through either loan mods or short sales rather than foreclosure. That would be an interesting number to find out.

    Graphs for REO Absorption rates for King and Snohomish County:
    http://www.snohomishcountymarketstatistics.blogspot.com

    I haven’t run the numbers yet, but I think for King County, if we factor in how many REO’s have come on the market and sold with new REO listings monthly, it appears to be about 20 months of inventory… don’t quote me on that… just a guess.

  31. 31
    David Losh says:

    RE: Haybaler @ 25

    They purchased, a condo, which is spectacular. The one across the hall sold at what they would need to sell at to break even.

    The guy is a finacial markets analyst. They sold the family home, paid cash in Mexico, invested the rest, then bought the condo with a low down payment and a full mortgage. It’s his office, but is technically two units put together.

    They bought well with every intention of renting the place out. The problem is the property is losing equity. Why sell it? What is the upside to short sales?

    She is very angry with the way the economy has gone. He is much more pragmatic, it’s just business. They both blame Obama.

    What I’m saying is that these people are financially savvy. They are retiring. They are at the age where they planned to retire, and this financial move won’t pan out. The property goes back to the bank that made them the loan.

  32. 32
    David Losh says:

    RE: MacroInvestor @ 29

    I agree with the resolution trusts, and the wholesaling of property. There was some obscure law that made that unrealistic, but that will change.

  33. 33
    Pissed Smurf says:

    Mostly a lurker….
    Keep up the good work, Tim. I really enjoy your site and effort on this.
    Also, insights from the commentators are a treat. Even the trolls are cute, sometimes. :)

  34. 34
    Jonness says:

    By Julie Lyda @ 30:

    When discussing inventory I see two types of “shadow inventory”.

    Foreclosures that the bank has not put on the market yet
    Defaulted homes not yet foreclosed on yet.

    Apparently there’s a 3rd type. My neighbor’s home was foreclosed on Dec 2, 2010. He and his family are still occupying the home. I have no idea what’s going on there and haven’t asked him because I don’t want to make him uncomfortable. I’m guessing he is squatting. Is this illegal, and can he get into legal trouble?

  35. 35
    ray pepper says:

    RE: Jonness @ 33

    Jonness many many reasons they are still there and will likely still be there in a year. You just have to know how to play the game. Thousands know how and many more are learning.

  36. 36
  37. 37

    By Jonness @ 33:

    By Julie Lyda @ 30:

    When discussing inventory I see two types of “shadow inventory”.

    Foreclosures that the bank has not put on the market yet
    Defaulted homes not yet foreclosed on yet.

    Apparently there’s a 3rd type. My neighbor’s home was foreclosed on Dec 2, 2010. He and his family are still occupying the home. I have no idea what’s going on there and haven’t asked him because I don’t want to make him uncomfortable. I’m guessing he is squatting. Is this illegal, and can he get into legal trouble?

    Assuming it has actually been foreclosed, and a deed transferred, then he could be subject to an unlawfull detainer (eviction) action. I think there might be a judgment for the rental value of the property that could be entered, but I don’t recall for sure. The biggest risk might be simply that at some point the Sheriff will show up with a writ and have everything thrown outside and the locks changed.

    I would say you should probably talk to your neighbor so that you can find out if they’ve consulted an attorney, and if not, to advise them to consult one.

  38. 38
    Julie Lyda says:

    RE: Jonness @ 34

    But this still falls under the category of homes foreclosed on and not yet on the market. So no… not a third category.

  39. 39
    Jonness says:

    By Julie Lyda @ 38:

    RE:
    With regard to foreclosures that the bank has not put on the market yet, there is very little. Once the bank forecloses, we are seeing the homes come on the market usually right away.

    Perhaps this is true in the micro-area you track, but it is not representative of the Puget Sound area in general.

    http://www.redfin.com/search#!lat=47.21723624490803&long=-122.53875732421875&market=seattle&sf=4&uipt=1&v=6&zoomLevel=11

    But this still falls under the category of homes foreclosed on and not yet on the market. So no… not a third category.

    When discussing the Puget Sound region in general, we need to either include a third category or alter your definition of foreclosures to include the massive glut of homes that are not being listed right away.

    So is the market finally reaching a bottom? We will only be able to tell when we see price increases over a longer period of time. However, we see the market is opening up some great buying opportunities for some who are taking advantage of them now.

    Will we still look back upon recent purchases of Puget Sound homes as having been buying opportunities after the looming glut of shadow inventory is finally released onto the Puget Sound market. And will the areas you track that appear to be protected from the foreclosure glut remain immune to the massive spreading effect that we’ve seen engulf other regions once inventory is released in earnest?

    We will have to wait and see. In the meantime, buyer beware.

  40. 40
    Julie Lyda says:

    RE: Jonness @ 39

    I don’t really think that King and Snohomish county are a micro area and represent the Puget Sound area very well.

    I’m not sure what your link was trying to point out so I can’t comment on that.

    Why a third category? What would it be called? Perhaps a third group that are in default, but have not yet received a default notice? Is that what you mean?

    So when you say the massive glut of homes that are not being listed right away – what are those? Just trying to clarify.

  41. 41
    Julie Lyda says:

    Regarding the neighbor that was foreclosed on. He has 90 days to vacate.

  42. 42
    S-Crow says:

    RE: ray pepper @ 35 – quite the testimony for people that work in the industry who in many cases propogate in almost a giddy manner how to play the “game” of walking away . It’s almost like sport. This is not a personal comment Ray, just a general comment on the sad state of the industry.

    Health issues, loss of employment or other catastrophic events certainly can play a role in default, but the line stops there. No where in my conversations with clients signing loan docs do I point out the terms stating that only in markets that goes down is it allowable to walk away from your responsibility. No where does is say you can’t but the ramifications speak for themselves. Is real estate the only asset class that it is now becoming socially acceptable to socialize FORCED losses? I guess so.

    Much of the root of the problem is overall debt load and the cavalier attitude of ” if they go after me for the deficiency I’ll file bankruptcy”, which is what many are doing. People get so pissed off at banks, but they are the very people that were serial refinancing or brokers/ owners sending me personal mail saying there is no bubble then file BK after walking away from their home two years ago and collecting rent in the interim. Illegal? No. Reprehensible? Absolutely.

    My spouse takes it step further suggesting that anyone who walks from their responsibility with a Fannie/Freddie loan should have to pay a recapture rate for future gains on a subsequent sale. And, lenders should only be able to portfolio loans.

  43. 43

    By Julie Lyda @ 41:

    Regarding the neighbor that was foreclosed on. He has 90 days to vacate.

    I’m pretty sure that’s not right, if you’re talking about an owner occupant. There is a 90 day period from Notice of Trustee’s Sale to sale, but the owner does not need to be out right at the time of the sale. And again, from memory, the time to get out after the sale is 20 days, but I could be wrong on that. Assuming it’s changed, I really doubt they extended that to 90 days.

  44. 44
  45. 45
    David Losh says:

    RE: S-Crow @ 42

    Where to begin? Where to begin?

    The fact you don’t understand the Real Estate business, or the loan documents you have people sign bothers me.

    If I take my loan documents for what they say I don’t have to make any payments at all.

    I think escrow companies should be required to read, understand, and explain every paragraph of the loan documents they have signed, the same as a Real Estate agent is required to know, understand, and explain the documents before they have some one sign.

    Let me fair, and say that you couldn’t do that because you aren’t an attorney. A change here, a word there, can impact the entire agreement. I don’t have to walk away, or declare bankruptcy because I can litigate. I could litigate for the next five years.

    The reason is simply because I did modify my loan documents as is my right. Do you tell the people that sign the documents in your office they have a right to modify the loan documents? Seriously how much do you work with the people? I’m not just saying the documents, or the file, I mean the people you sign up for hundreds of thousands of dollars of debt?

    This isn’t a personal attack it’s just a question.

  46. 46
    Julie Lyda says:

    RE: Kary L. Krismer @ 44

    Yes Kary you are right. What was I thinking?!

    However this makes me think of another question. Didn’t Obama sign a Federal law in 2009 that gave tenants 90 days? So which law would apply for tenants, the State Law of 60 days or the Federal Law of 90 days?

  47. 47
    S-Crow says:

    RE: David Losh @ 45 – David, I never take anything you say as personal. I appreciate the fact that you believe escrow staff should understand every paragraph of the same purchase and sale agreement than an agent should understand. The same one we review multiple times a day in addition to dealing with lenders, title concerns, funding departments and on and on. That is why we collaborate, advise and suggest to agents weekly to clarify what they draft (agents practicing law in my view by the way) to avoid potential conflicts both during and post closing.

    How do you reconcile your stance that you don’t have to pay? One of the first sentences in a Note says “I promise to pay…”
    Further, one of the most common questions we receive from agents when we point out a proration or potential issue is “how did you get that figure?” or ” where does it say that in a purchase and sale agreement…?”

  48. 48
    EconE says:

    RE: S-Crow @ 47

    If I remember correctly, you stated some time back that you would see people who were taking out toxic loans but your position did not allow you to say anything and had to keep a tight lip even though you knew the loan was going to fail. Perhaps people in escrow positions should be allowed to say WTF?

    Doesn’t the note also say that if you don’t pay the loan, that the bank gets the house back?

    To me it sounds as if you *had* to keep silent when people put the noose around their neck initially but now when they are deciding to exercise their contractual rights and relieve themselves of the yoke (and the house) that you want to cry foul. Bit of a double standard eh?

  49. 49
    S-Crow says:

    RE: EconE @ 48
    I typically explain the Note is the promise to pay as well as where and when to pay and the Deed of Trust explains the obligations of the borrower and lender and what happens if you don’t pay.

    Being neutral is certainly tough from personal standpoint, but never in a professional standpoint. Escrow is neutral. If a loan was approved based upon the underwriting guidelines at the time; nothing I can do about it. Escrow is not in a position to tell someone whether or not they should move forward with a refi or purchase. That’s the job of an agent or loan officer. We tell them the facts. I have a difficult time not commenting when I think our industry and the people that work in it sometimes appear to treat this correction like a game or think it’s cute to “work the system”. It’s not a game and when you are on the front lines like we are see the financial destruction that leads to personal and family destruction– it affects me. We’ve seen families busted up, people take their life, etc. I have personal family in dire straights with short sale and foreclosure issues, so not only does it hit home personally but also during the course of work. In too many cases, the crux of the problem is not income, it’s overall debt load. The walkaway issue is a tough one but the end result is laying all the burden on everyone and that fundamentally should not be the case. But that’s just my opinion.

  50. 50

    By Julie Lyda @ 46:

    RE: Kary L. Krismer @ 44

    Yes Kary you are right. What was I thinking?!

    However this makes me think of another question. Didn’t Obama sign a Federal law in 2009 that gave tenants 90 days? So which law would apply for tenants, the State Law of 60 days or the Federal Law of 90 days?

    I’ve yet to be able to keep the details of those two straight in my head. So I can’t answer that. I think one of them might even run to the end of the lease!

  51. 51

    By EconE @ 48:

    RE: S-Crow @ 47 – If I remember correctly, you stated some time back that you would see people who were taking out toxic loans but your position did not allow you to say anything and had to keep a tight lip even though you knew the loan was going to fail. Perhaps people in escrow positions should be allowed to say WTF?

    The escrow is merely a stakeholder. Their only job is to collect money from the buyer (and/or buyer’s lender(s)), obtain documents, and arrange the recording of documents and transfer of funds when certain conditions are present. It’s not their job to analyze the transaction as to either party, because it’s their job not to represent either party. They basically only exist because the buyer cannot 100% trust the seller to convey a deed and the seller cannot 100% trust the buyer to bring funds. It’s like a gambling situation where a third party holds the stakes.

    But in any event, who would want someone playing their parents in a transaction? If I were your escrow, would you want me telling you that you shouldn’t buy that type of house, or that you shouldn’t get a variable rate loan, because those are things I wouldn’t do? Simply put, escrows are not advisers.

  52. 52
    David Losh says:

    RE: S-Crow @ 47

    What I object to is the moralizing. There is a saying in Real Estate, I quote: “did they promise?” It’s a joke.

    Explain to me the legal ramification of a promise in a legally binding contract that also makes clear provisions for what to do when that promise is broken.

    I suggested that maybe you should be required to go over every paragraph, but you can’t. It’s a fifty page document. How many meetings of the mind do you really get out having people sign that document? I’ll bet 20%.

    What I said about Real Estate agents explaining the boiler plate contract for a Purchase and sale takes me about an hour, because that is my job. Now I know an agent who has done about 100 transaction these past two years, nice guy, honest, but he knows very little about the United States, or Real Estate. How many of his clients do you think had a meeting of the minds. I’ll bet about 20%.

    So you continue to moralize, and Kary continues to moralize, but it’s a simple legal recourse that if not resolved by the banking system will bankrupt this country.

  53. 53

    RE: David Losh @ 52 – Specifying remedies in the event of a default does not mean that it’s somehow okay to default.

  54. 54
    David Losh says:

    It’s on a comment of it’s own because in my opinion we don’t have legally binding contracts anyway you look at it in the residential Real Estate business.

    The longer these discussions go on makes me realize we really should put residential Real Estate back with all commercial transactions. Every one should consult an attorney. I think attorneys do need to be paid to go over all of these documents before they end up in an escrow office.

    I think this whole thing of loan documents showing up in an escrow office for a buyer to sign, sight unseen is ridiculous. It’s frivolous.

    I have always asked to have the documents at escrow an hour before signing, at least, so I can look at them, at least. I have had people take documents away to be reviewed by an attorney. I have sent documents back, and forth.

    The lender can always pull the loan. There is always that threat, but today you want every one to pay attention to the threat of foreclosure. I say sue the bloody hell out of the bank that drafted the documents and prove they were clear in what they were doing. I certainly intend to.

  55. 55

    RE: David Losh @ 54 – You won’t get me to argue against attorney review, but few people opt for that.

    I’d also say that the amount of documents the banks pump out for a loan transaction is well beyond ridiculous. Much of it is duplicative, but there’s no reason there should be a 2 inch pile of documents to sign to get a deed of trust transaction completed. A lot of it has to do with government mandated disclosure, and others are the results of lawsuits, but what it’s become is there’s so many documents there’s practically no disclosure.

  56. 56
    GuyFawkesLives says:

    I would say “buyer beware” of all foreclosures and REOs and any other real estate. Unless the buyer includes buying PERSONAL title insurance, not just the policy you buy for the banks. I have been assisting the Attorney General in the investigation of the trustees and the land records in all counties are just crap. I still have not pulled up a record that is totally 100% clean. Perhaps all real estate purchases should come with an addendum that the property needs to go through quiet title to solidify the sale? That would be the ONLY way I would purchase real estate post bubble.

  57. 57
    GuyFawkesLives says:

    RE: Kary L. Krismer @ 53

    Why don’t you tell that to the big boys? They all default when they determine it is the best financial business decision.

  58. 58

    By karen1p @ 57:

    RE: Kary L. Krismer @ 53

    Why don’t you tell that to the big boys? They all default when they determine it is the best financial business decision.

    That is one of the arguments I really hate on this issue. Is our moral compass suddenly based on what a large corporation would do?

    Also, I seriously doubt that large entities default without consequence, unless they were operating through a subsidiary or on a non-recourse basis. In the former situation the creditor should have known who they were dealing with. In the later case there expressly was no promise of direct liability (as opposed to in rem), in which case again the creditor should have known what they were getting.

    In any case, I get back to the first point. Just because someone or something else does something, that does not mean it is the right thing to do.

  59. 59

    By karen1p @ 57:

    RE: Kary L. Krismer @ 53 – Why don’t you tell that to the big boys? They all default when they determine it is the best financial business decision.

    BTW, the “big boys” probably get a lot better advice, and have a lot better understanding of the consequences before defaulting, compared to the average homeowner. I would agree there are times when default is the right option, but understanding the consequences are a bit part of that.

  60. 60
    ray pepper says:

    RE: Kary L. Krismer @ 50

    I’ve posted this so many times already and not sure what people do NOT understand about it.

    http://www.nolo.com/legal-encyclopedia/article-30064.html

  61. 61

    RE: ray pepper @ 60 – That only addresses that federal law. There’s also state legislation and it’s not entirely consistent, even though (or perhaps because) it was enacted at about the same time. And I’ve heard attorneys who work in the area and studied the statutes be unsure about how they interact.

  62. 62
    David Losh says:

    RE: karen1p @ 56

    Hello Karen, do they know you are posting on a bubble blog at work?

    I agree with you for a lot of reasons.

  63. 63
    David Losh says:

    RE: Kary L. Krismer @ 58

    If I ran my businesses through my LLC. I would have no personal involvement with my finances.

    I have worked with hundreds of people who bankrupt LLCs as a normal course of business. They make fun of me for the way I do things, but it’s only money, and there is always more money.

    The only reason people buy a home is for financial security. That is the only reason. Real Estate is a business whether you own one property or a thousand.

    It’s all a meeting of the minds until we get into escrow and that escrow agent is having people sign contracts. Do you read the contracts? I do, but I can’t give legal advice. I just read them and advise escrow of defects.

    Do you know what’s in all of those loan documents, the millions, and millions of loan documents out there? No, you don’t.

    What I know is that probably 80% of them are total BS and frivolous. I know for a fact there was never a meeting of the minds in millions of sales, or loan documents.

    You are a bankruptcy attorney so I’m asking if you explain the loan documents to people who sign a Purchase, and Sale Agreement with you.

  64. 64
    ray pepper says:

    RE: Kary L. Krismer @ 61

    Kary the Federal Law supercedes any State Law in/re to tenants under a valid lease:

    These rules changed dramatically on May 20, 2009, when President Obama signed the “Protecting Tenants at Foreclosure Act of 2009.” This legislation provided that leases would survive a foreclosure — meaning the tenant could stay at least until the end of the lease, and that month-to-month tenants would be entitled to 90 days’ notice before having to move out*** (this notice period is longer than any state’s non-foreclosure notice period, a real boon to tenants).***

    From my own experience with about 10 of these when the proof of tenancy is handed over to the Realtor assigned to get a BPO (at or near the time of sale) or the Trustee serving notice, the documents are then forwarded to the bank who initiated the foreclosure. In each and every case the tenants I know continue to live in the property and about 1/2 got offered cash for keys.

    When the tenant is astute and knows their rights they are HELL on the banks per Landlord Solutions who I have worked with for years. Furthermore, I’m told many tenants aren’t even notified for 90-120 days after the acquisition. Plenty of time for the “daring” party to initiate a new fictitious lease and the cycle starts all over again..

    But, you didn’t hear it from me………….

  65. 65
    Thomas Szelazek says:

    Hey Tim, I really enjoy the site.

    Where do you obtain data on Median Days on the Market by zip code?

    Cheers.

  66. 66

    […] and one more parting shot from Seattle Bubble: “One in three Seattle-area home listings are distressed.” Filed under News, Real Estate blog comments powered by Disqus […]

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