The number of Loudoun County short-sale and foreclosure/bank-owned properties for sale has decreased significantly over the past few years. This is an important fact because it speaks to the health of the overall real estate market in Loudoun County. As you may know, the less the number and percentage of short-sale and foreclosure/bank-owned properties for sale, the better the real estate market typically is in general.
So here are the numbers…
- The number of new short-sales listings in Loudoun County went down by 42% from 2009 to 2011
- The number of foreclosure/bank-owned properties in Loudoun County went down by 53% during the same time.
And here it is broken down by year…
- Short-sales made up 19.2% of all properties listed for sale in Loudoun County
- Foreclosure/bank-owned properties made up 9.6% of all properties listed for sale in Loudoun County
- Short-sales made up 14.6% of all properties listed for sale in Loudoun County
- Foreclosure/bank-owned properties made up 6.3% off all properties listed for sale in Loudoun County
- Short-sales made up 11.1% of all properties listed for sale in Loudoun County
- Foreclosure/bank-owned properties made up 4.5% of all properties listed for sale in Loudoun County
These are refreshing numbers to see after the chaos of a market we’ve had in the latter part of the last decade. These numbers and trends along with other local real estate market statistics and “street reports” backs-up the sentiment that the worst is behind us and that the local market has and is continuing to improve.
Lots of people ask me, “How do I buy a foreclosure in Loudoun County/Northern Virginia?” There are two ways - one is definitely more popular than the other these days.
Here are the two ways a consumer can buy a foreclosure in Loudoun County/Northern Virginia…
- At the local court house steps during the foreclosure auction. (Yes, there is an actual auctioneer speaking a million miles a minute in that typical auctioneer slang)
- On the open market (including local MLS) once the property is marketed by a listing broker of the bank’s choice.
Let’s look at the first method of buying a foreclosure in Loudoun County/Northern Virginia…
The auction method is tricky and can by filled with pitfalls. Once of the pitfalls is that you have limited access to the property before the auction so you may not get a good idea of what the house looks like or the full scope of work needed to fix it up. There are also many special requirements and nuances to an auction which are different than buying a traditional resale listed through a listing agent/broker on the MLS. Another issue is that there is a “Buyer’s Premium” of 10 - 15 percent of the sales price which you must pay on top of the winning bid price. So your $300K purchase just turned into a $345K purchase.
Even if you get past these issues, there’s one more… The “reserve” price is usually the amount due on the mortgage which is typically higher than the market value of the property. This makes the reserve amount (plus the Buyer’s Premium) an absurd amount of money for the property. The price issue is one of the main reasons why this method is used so rarely these days.
Now let’s look at the second method of buying a foreclosure in Loudoun County/Northern Virginia…
In the current market, this method is used 99% of the time because banks end up taking the property back at auction and then using a listing broker to sell the property on the open market and MLS. This method is also less tricky - as long as you have your own Buyer’s Agent who has a lot of experience working with foreclosures/bank-owned properties and who is looking out for your interests (unlike the listing agent who is looking out for the bank). The transaction is similar to buying a traditional resale in many ways which makes for a smoother transaction than buying at auction. But it’s different in other ways such as “as is” conditions/clauses, bank addenda, etc. This is why you need a Buyer’s Agent who knows what they’re doing with foreclosures/bank-owned properties.
In addition, there is no “Buyer’s Premium”, you get to see the house before submitting an offer, you get to do a home inspection, etc.
Are you intimidated with the prospect of buying a foreclosure in Loudoun County/Northern Virginia?
Don’t be. If you go in educated and with someone in your corner, you’ll find it’s not as crazy of a process as you think. And there’s more good news…Though buying a foreclosure involves much more than buying a traditional resale, it’s a lot less hassle than buying a short-sale.
This post is the quick answer to the question. If you would like to know more or would like to find a foreclosure in Loudoun County or elsewhere in Northern Virginia, click here to contact me.
Short-sales make up 20 percent of Loudoun County homes for sale. As in, for every five “For Sale” signs you see, one of them is a short-sale.
What does that mean in regards to the Loudoun County housing market?
First, let’s go back to August 2009… In a post entitled, “Short-Sales Wear the Crown in Loudoun County”, I ran the numbers and the percentage of short-sales to total homes for sale in Loudoun County was the same - 20%.
Based on a comparison of August 2009 and today, it means things are not getting worse. But they’re not getting better either.
It also means that buyers should know exactly what they’re getting themselves into when buying a home in the area and have a real estate agent that is experienced in short-sales and can walk them through every step of the process.
When will see a decline in short-sales and a return to a “normal” market?
Once the general economy stabilizes and prices go up. Many people are underwater on their homes and can’t afford to come to the settlement table with a check for $20K, $50K or even $200K+. This means that their options are to 1) stay in the home until prices appreciate and/or they have the money to cover the loss, 2) let the property go into foreclosure or 3) try to negotiate a short-sale with the bank(s).
This time last year, foreclosure/bank-owned properties were King by making up the largest percentage of distressed properties on the market. Today, it’s the opposite.
Short-sale properties now wear the crown out-numbering foreclosure/bank-owned properties for sale almost 4 to 1 and accounting for almost 20 percent of the total homes for sale in Loudoun County.
This dramatic shift is due to the foreclosure moratoriums that were in place at the end of last year and the beginning of this year (which seem to be voluntarily continued) along with banks becoming more open to negotiating short-sales (whether on their own free will or government coercion).
What does this mean for Loudoun home buyers and sellers?
For sellers, it means that, if you’re thinking about selling your home “short”, now is the time to do it. Banks are more open to negotiating with home owners and buyers are receptive to buying a short-sale. In addition, the U.S. Government is offering to pay the second trust in a short-sale up to $1000 to get the deal done.
You should also make sure that the Listing Agent you hire has successfully completed numerous short-sale transactions within the past 6 to 12 months (anything further back than 6 to 12 months doesn’t count because the rules today are much different than they were more than 12 months ago let alone in the history of real estate).
For buyers, it means that the majority of the “great deals” are short-sales. This means that you have to shift your thinking and “life plans” from moving in 30 to 45 days to moving in 4 to 7 months from now. This is because short-sales have a much longer turn around time and a smaller chance of success (unlike ordering a Whopper from Burger King).
The typical bank-owned property takes a few days to 1 week to get a response on while a short-sale typically takes 3 to 4 months (sometimes 6+ months). And even when you do get a response, it could be a counter-offer from the bank(s) or even worse, a plain old, “No - we’re not accepting a short-sale” and you’re S.O.L.
As a buyer, you should know what you’re getting yourself into with short-sales and have a Buyer’s Agent working for you that knows the ins and outs of the short-sale transaction. This will maximize your chance for successfully purchasing a great deal and actually getting to the settlement table.
If you’re a seller thinking about doing a short-sale, but aren’t sure what a short-sale is all about or where to start, pick up the phone or email me and I’ll be glad to help answer any questions or concerns you may have.
If you’re a buyer thinking about buying a short-sale in the Loudoun/Northern Virginia area, email or call me so we can chat about your specific needs and see how I can be of help.