Foreclosure, Bank-Owned, Short-Sale Properties Bulk of Loudoun Home Sales

Foreclosure, bank-owned and short-sale properties make up over half of total home sales in Loudoun County. This has been the case for some time now and will most likely continue through at least the end of 2009, if not longer.

A few things I’ve noticed…

1. The percentage of foreclosure/bank-owned properties to total sales has decreased. This probably has to do with the foreclosure moratoriums that were in place from the end of 2008 to March 31 of this year.
2. The percentage of short-sale properties to total sales has increased. This is due to banks becoming more willing to accept short-sales and because more sellers are trying to take the short-sale route rather than being foreclosed on.
3. The increase in short-sales has left more home buyers frustrated than every before. The short-sale process is long, requires a lot of patience and has less chance for success than a foreclosure/bank-owned and traditional sale.

We should start seeing more foreclosures come on the market now that the foreclosure moratoriums have been lifted and Fannie/Freddie and other banks are back at it foreclosing on delinquent borrowers. In one way, this is a good thing because it will give home buyers more straight-forward and less stressful inventory to choose from. In another way, more foreclosures on the market could be bad because it could put downward pressure on prices. It all depends on the rate at which banks release all their foreclosure properties on to the market.

Loudoun Foreclosure, Bank-Owned, Short-Sale Market Statistics - April 2009

Here’s a look at Loudoun County foreclosure/bank-owned and short-sale market statistics for April 2009:

Total Sales/Buyer Demand 

• The number of foreclosure/bank-owned and short-sale property sales in April 2009 were almost exactly the same as in March 2009 (325 vs 323)
• April 2009 sales were up 29 percent over April 2008

Inventory/Supply

• April 2009 had 273 new foreclosure/bank-owned and short-sale listings come on the market versus 289 in March 2009, a decrease of almost 6 percent (In comparison, April 2008 saw a 23 percent increase in listings from March 2008)
• April 2009 had 273 new listings come on the market versus 360 in April 2008, a decrease of  24 percent

Translation…

Buyer demand for foreclosure/bank-owned and short-sale properties has increased tremendously from last year. But the rate of new inventory/listings on the market is way down. This means more buyers competing over fewer properties which has lead to price stabilization and many multiple/competing offer situations.

Click here for more on Loudoun’s housing market conditions and how they affect you as a home owner, seller or buyer.

Tips for Buyers Previewing Foreclosure/Bank-Owned Homes

If you’re a home buyer who is considering purchasing a foreclosure/bank-owned property between now and the end of summer, here are a few tips when it comes to previewing these types of properties:

• Dress light and bring a towel - many foreclosure/bank-owned properties don’t have the electricity turned on which means that the air conditioning is not on - 90+ degrees outside can equal 100+ degrees inside
• Don’t wear anything you don’t mind getting dirty - most likely, neither the previous owners nor the bank cleaned the house prior to it coming on the market
• Bring a flashlight - the electricity may be turned off so it’ll be dark in the basement area especially if it’s an inground basement
• Use the bathroom just before you head out to preview homes - the water may be turned off meaning that the toilets are not working
• Consider leaving your children with a family member/friend - the lack of air conditioning makes for extra hot temperatures inside the home which can make kids really cranky, really fast (plus no working toilets)
• Bring something to drink and some snacks - the high temperatures outside and inside the home can make you thirsty and lethargic. If you’re anything like me when you’re really thirsty or hungry, you’re brain will slow down and you won’t be able to focus

The Type of Property You Can Buy May Depend On The Time You Have

Many home buyers start seriously looking for a new home about three to six months before their preferred move date. Some give it even less time. But is two, three, even six months enough time? And does it affect what type of property you can try to buy?

Six, three, even two months may give you enough time to search for a new home, write and offer, go through the negotiation process, come to an agreement (ratify the contract) and then proceed to settlement - IF the property is a traditional resale or bank-owned (foreclosure). But it may not be enough time for a short-sale.

Though the time from which the offer is ratified to when settlement occurs is similar regardless of what type of sale it is, the negotiation process varies drastically especially when it comes to short-sales.

Here's the breakdown…

Traditional resales

A traditional resale is a sale in which the property is not bank-owned nor is the seller attempting to do a short-sale (definition of a short-sale later in this post). The owners are selling it directly to a buyer without needing final approval from a bank or other creditors.

Traditional resales typically take anywhere from a day to a week from the time you present an offer to when the negotiation process is complete.

If you've given yourself between 3 and 6 months, you'll be fine even if you don't get the first or even second or third house you've made an offer on.

Bank-owned properties (aka "foreclosures")

Bank-owned properties have been foreclosed on and are now being sold by the bank on the open market.

Bank-owned properties typically take a few days to two weeks to negotiate. The reason for them taking longer than a traditional resale is that you're dealing with the bank's asset manager - they have hundreds of files on their desks at one time and they don't work nights, weekends or holidays.

If you've given yourself between 3 and 6 months, you'll be fine even if you don't get the first or even second or third house you've made an offer on.

Short-sales

Short-sales are situations in which the seller/borrower is attempting to sell the property for less than what is owed on it (they're "short") and the seller/borrower is trying to get the bank/creditor to agree to take the loss. The bank/creditor must give final approval on the offer in order for the deal to take place. (For a more detailed explanation of what a short-sale is, click here)

The average response time from the bank on a short-sale is 3 months though I've seen responses take as long as 6 months. And here's the kicker…only about 20 percent of short-sales are approved.

If you've only given yourself 2 to 3 months before having to move, you're outta luck - short-sales are not for you. Even if you've given yourself 6 months, you may be cutting it close because it may take the full 6 months to hear a response. But…if the bank doesn't approve the short-sale, you're back to square 1 and you've lost an average of 3 months (if not more) of house-hunting time. 

If you'd like to look at short-sale properties, you should give yourself enough time to find a home PLUS another 4 to 7 months (average response time plus time to close).

The home buying process is stressful for many - especially first time home buyers. The last thing you want to do is feel rushed or, even worse, find yourself having to double-move or living out of a hotel. That's why knowing the timing involved with each type of property and planning accordingly is so important.

Foreclosures/REOs Comprise Nearly 20 Percent of US Inventory

RealtyTrac just released a report which shows that nearly 1 in 5 homes on the market in the US are foreclosures/bank-owned. The report also states that US foreclosure filings are up 8 percent from June to July and up 55 percent from a year ago.

The worst hit states are California, Nevada, Florida and Ohio. California happens to have 3 of the 4 metropolitan areas with the highest rate of foreclosure-related filings.

Here's a heat map showing the level of foreclosure activity across the US (click on image to enlarge):

Photo credit: RealtyTrac

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