CRR Blog

Old habits are hard to break...  even harder if you are having trouble finding a job, your unemployment has run out, and they involve defaulting on your house-payment.  An April 24 article in Mortgage News Daily by Jann Swanson is definitely worth reading.

It points out that as of March 31, 2013,  the oldest loan modifications from Q3 and Q4 of 2009 are defaulting again at rates of 46.1 and 39.1 percent respectively.  Wow.  It also points out that while banks got 75 percent of the TARP money, homeowners got less than 2 percent.  What this means is that you will see at least 40 percent of the foreclosures from the last 4 years that were modified are going back into foreclosure over the next few years, if not sooner.  That is nearly half.  It also means that the majority of defaults from that period never even got help at all.  With an average of 455 days per foreclosure here in California, according to RealtyTrac, how many of these older foreclosures have yet to hit the auction block?  And how many that have are still in postponement and cancellation limbo?  All these properties will be heading to the auction, and with no elections on the horizon, the politicians and regulators will do the will of Wall Street. 

What are we saying?  You have half of the Foreclosure Tsunami yet to hit.  It is far, far, far from over.  Anyone who tells you otherwise is uninformed or selling you something.  Look for a steady growth through the summer, punctuated by spikes that others will be surprised about.  If you are paying attention to the facts, you will be ready.  Have your plan and be ready to buy at auction.  Use our bidding service to capture the low bids as they come with the least amount of effort.  There are many commercial and multi-unit properties that will be hitting the block and that is where the smart money is going.  There will be flip properties as well, and you should be ready to turn these as soon as you can so you can get into rental income for the long haul.  Retire in comfort, with a little help from CRR.

Buy smart and buy safe.  Let us help you.

Sometimes you just have to tip your hat to a brilliant observation.  Realty Trac has helped some smart reporters point something out that we have known about for some time in a way that is genuinely humorous and also appropriate.  If you google "zombie foreclosures" you will see a growing group of articles about foreclosures that are not quite alive, yet not quite dead.  While I am paraphrasing from an article in Today's Chicago Tribune by Mary Umberger, I wanted to add our two cents as well.

These are properties where the bank has dropped one shoe, the Notice of Default, but has yet to take title through the Trustee's Sale.  So what does this mean?  It means that the property could be vacant and yet not yet out of the name of the borrower in default.  As the article from Today's Chicago Tribune (and others) states, these properties are abandoned by their "owners" who assumed the bank would proceed to auction and take title.  According to Realty Trac, over 300,000 such situatuions seem to exist on a conservative count from coast to coast, but the numbers really are much higher if you pull in other variables.  This only accounts for those that are abandoned and yet still owned by the person who the bank foreclosed upon.  These properties tend to become weed-ridden and neglected or the target of scavengers.  They also now tend to attract assessment liens from communities trying to correct for lost tax revenue and deal with the blight of home abandonment. 

What this does not take into account are those that a bank has begun foreclosure on and simply backed off, allowing the borrower or a renter or a squatter to simply hang out while the bank is slowly moving through existing reo inventory.  This group is not exaclty what I would call Zombies.  What would you call them?  They will go to auction eventually, but not until the lenders have churned through more REO's than the economy has ever absorbed before.  So maybe they are like kids who live at home until they are in their 30's... the failure to launch zombies?  Well, keep your eyes open for many that will be coming to auction very soon, where they have actulay been kept up fairly well.  They should do for a quick flip.

Where are the Best Prices on Real Estate?  The Trustees' Sales!

Lenders are setting the opening bid prices at auction based upon a Net Liquidation Value.  This essentially means a wholesale price that begins at market value and is lowered to adjust for the costs of holding, rehab, and remarketing that property.  So they discount that amount sufficiently enough to create an equity position in the event that they take it back as an REO.  Does that mean every property will be a steal?  No.  Here's why...

A lender is an organization of individuals performing their various functions, including the asset managers who determine the auction price.  These folks are over-whelmed. Sometimes they simply don't have the numbers on their desk when the time comes to set the opening bid.  You will see this when a home worth $200,000.00 goes to auction for $487,000.00 based upon the balance on the books.  It is simply a fact that they don't discount every single one.  That is why you want as many properties on your target list as possible.

Your strategy should be to allow for this variable by having an ever-growing list of target properties so you are certain to have a mix that includes attractively discounted properties in a large enough number that you may be a sole bidder or part of a select few.  For each of these have a max bid price that matches your business plan.  The objective buyer should set a max bid price that is not fluid once the auction begins.  Don't alter your game plan...  because the other bidder may have a different strategy that does not require the same level of profit you require.

Regardless of that, there is plenty of property to go around if you are adding to your target list on a regular basis.  just develop a pteern of goig through upcoming sales and adding properties.  If you are using our biding service, st your max bid at a dollar until your research is complete, that way if you don't finish your research you don't bid.  Once you are done researching, set that max bid.  Set your plan on buying weeks in the future, so that you can drive your target properties and set your bids well in advance.  You will be amazed at how easy this can be if you just make a plan and stick to it.

The day that everyone loves to hate is fast approaching.

If you are one who waits til the last minute you are not alone.

But most of us end up getting something back at the end of the year.

It may not be much, or it may be quite a bit.

Either way, now is the time to put it to good use.

There has never been a better time to borrow, so you can use that refund to cover closing costs on a refinance.

Or you could take that refund and add it to the cash you have been saving to buy that next foreclosure at auction.

The number of foreclosures can only grow from this point forward.

The number of people who are behind on their payments is larger than you are hearing, and the number of new foreclosures will surprise alot of people over the next 3 months.

So the opportunity to invest will be yours.  So take your check from Uncle Sam and put it to good use.

Every day that goes by sees more potential foreclosures becoming actual foreclosures.

In California we have seen a slowdown that began last year work its way into this year as the lenders got accustomed to changes in the foreclosure procedures.  That slowdown is starting to subside and we believe that you will have more opportunities as lenders get back to the business of demanding payments or reclaiming properties.  Call with questions and look for a steady increase in foreclosure as we go into the summer months.

One of the common foes for the individual investor today is the professional bidder who represents Hedge Funds or Investment Groups who are seeking safe havens in real estate.  These parties have alot of money to spend and on a case by case basis they may be in a position to place a higher bid than you are.  If your target list of properties is finite to a fault, then you will find yourself at a disadvantage.  As we cherry-pick our properties to bid on, we end up with a short list that is defined by our business plan. 

These lists are made all the shorter as the lenders postpone and cancel.  Note that your advantage in this market is your ability to make your list less finite by doing more research over time.   Look ahead and place as many bids on your list as possible.  Most cancelled sales will be republished.  Many sales are being cancelled rather than postponed, and this is a new scenario.  The lenders are cancelling sales due to changes in the law, and bankruptcy-related delays.  That means that your previous homework can be put to use later.  These will come back, and likely in volume.

Use our individual property status update function and tag the cancelled sales with a request for a status update.  When that new NTS is published you will be notified.  Make sure it is on your bid list.  Also, keep your list growing with postponements and new NTS filings.  The numbers will be growing again as the year rolls forward. 

The market moves in cycles.  So watch it closely and be aware that your best bet is to be ready to go when the next cycle develops.  Stay Tuned to CRR!