Decrease in Loudoun County Short-Sale, Foreclosure/Bank-Owned Properties For Sale

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…

2009

• 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

2010

• 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

2011

• 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.

How To Buy a Foreclosure in Loudoun County/Northern Virginia

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…

1. 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)
2. 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.

Buyers/Sellers: What Does Few Foreclosure/Bank-Owned Properties on the Market Mean To You?

The other day, I talked about how few foreclosure/bank-owned properties there are on the market in Loudoun County and Northern Virginia (click here if you missed the post). But what does having only a very few foreclosure/bank-owned properties on the market really mean for Loudoun/Northern Virginia home buyers and sellers?

Buyers

• If you would like to settle quickly, your only options are traditional resales and foreclosure/bank-owned properties. Either can typically settle within 3 to 6 weeks (less if cash offer) of when the contract is accepted and ratified
• Since there are so few foreclosure/bank-owned properties, the overwhelming majority of properties you’ll see will be traditional resales
• Traditional resales are typically in better condition and require less work than foreclosure/bank-owned properties, but you’ll pay more for them up-front in the purchase price
• If you have the time (3 to 6+ months) and patience and want to spend less money up front, but don’t mind doing some work to the property, then you may want to consider a short-sale
• If you’re trying to take advantage of the first-time home buyer tax credit, you’re looking at only foreclosure/bank-owned properties and traditional resale (click here for more information on what I mean by that)

Sellers

• If you are a home owner selling your home as a traditional resale (not a short-sale), you’re in a great position
• When there were a lot of foreclosure/bank-owned properties on the market, buyers who needed to settle quickly could choose from a foreclosure/bank-owned property or a traditional resale. Now…their options are pretty much limited to traditional resales, which is good for you

CLICK HERE TO SEARCH FOR LOUDOUN FORECLOSURE/BANK-OWNED PROPERTIES

Anyone Seen Where All the Loudoun Foreclosure/Bank-Owned Properties Have Gone?

Two years ago, you couldn’t walk out your front door in Loudoun/Northern Virginia and not see a foreclosure/bank-owned property for sale. But something interesting has been going on for the past 12 months…the number of foreclosure/bank-owned properties on the market has been quickly dwindling.

As of today, there are only 60 active foreclosure/bank-owned properties on the market in Loudoun. That’s a total of only 6 percent of the total existing home inventory on the market in Loudoun County. This is a far cry from what we were seeing in 2007, 2008 and even the beginning of 2009.

How is this possible despite record foreclosure filings throughout the US?

One possible reason is that the bans are holding on to their inventories on purpose. Releasing them all at once would sink the market and the value of all properties (including the ones the bank are holding to) would fall. This means that the overall worth of the properties the banks are holding on to would fall - not something banks or their shareholders want to see.

Another reason may be that the government is buying up these “troubled assets” so that they don’t get released on the market and sink it. Just look at the millions the government is spending buying up Mortgage Backed Securities (MBS).

Will we see a flood of foreclosure/bank-owned properties hit the Loudoun market in the near future?

I’d say “not any time soon” for a variety of reasons including political ones. But I don’t have a crystal ball so don’t take what I say to the bank.

Either way, the majority of homes on the market in Loudoun and Northern Virignia in general are short-sales and traditional resales. Practically speaking, this means that buyers who need to settle within 30 to 90 days have pretty much only traditional resales to choose from (blog post on this coming next week).

CLICK HERE TO SEARCH FOR LOUDOUN FORECLOSURE/BANK-OWNED PROPERTIES

Short-Sales Wear the Crown in Loudoun County

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.

***CLICK HERE FOR A LIST OF ALL ACTIVE SHORT SALES FOR SALE IN LOUDOUN COUNTY***

10 Things To Look Out For With Bank-Owned Property Contracts

I had the opportunity to attend an excellent  “REO Contracts” (aka “contracts on bank-owned properties”) class yesterday presented by Keith Barrett, Esq of Champion Title in Leesburg, Virginia. The class went over some of the main pitfalls of REO contracts and what to look out for as a Buyer’s Agent or as a buyer of a bank-owned property.

Though the REO contracts class was for real estate agents/brokers, everything covered in the class directly affects buyers of bank-owned properties. That’s why I wanted to share the key points of the presentation with you, the home buyer.

DISCLAIMER: Nothing within this post is intended as legal advice or comprehensive answers to all questions, nuances, etc. that may come up in particular transactions. Consult an attorney for guidance. The following points were derived from the material given to attendees as part of yesterday’s REO contracts presentation.

Practical Considerations of REO Contracts

1. The buyer is generally getting the benefit of their bargain up front in the price - not in the ease or speed of the transaction
2. The seller is a corporate entity, which is both positive and negative. You don’t have to deal with an emotional seller that has unrealistic expectations about property value, etc. On the other hand, sometimes big corporate sellers “do what they want.” These banks are selling properties all over the U.S. making it difficult to conform to local custom and practice
3. Approximately half of all REO transactions do not close on time. Have a plan B should settlement be delayed (e.g. don’t schedule contractors to come out to the property the day after settlement, don’t settle on a Friday especially not before a long holiday weekend, etc)
4. Some bank sellers take the position that if the REO addendum is silent on an issue addressed in the original offer, that is a conflict and the REO addendum controls/prevails (e.g. appliances, home warranty, seller closing cost credit, etc). If something that you “agreed upon” in the original offer/contract is not listed/addressed in the REO addendum, the bank seller may argue that it’s not part of the contract
5. Even though the property is sold “as is”, there may be room for negotiation on a case by case basis
6. HOA Disclosure package - by law, the bank seller should provide this
7. Residential Property Disclosure Statement - by law, the bank seller is exempt from providing this
8. Make sure you change the locks immediately after you take possession of the property
9. Consider a longer rate lock period on financing from your lender - about 50 percent of REO transactions do not close on time
10. The latest revision to CRESPA (Consumer Real Estate Settlement Protection Act) states that the buyer’s right to choose a settlement agent/title company can not be varied or waived by any agreement - including an REO addendum (effective July 1, 2009)

Once again, this is not intended as legal advice. Every bank’s addendum and every transaction is different. I’ve even seen different versions of an REO addendum from the same bank.

Point is…be smart, read the entire addendum and know how the addendum affects the transaction and you as the buyer (even if that means consulting a real estate lawyer). But also know that bank sellers “do what they want” so even though it may seem “wrong” or “unfair”, there may be little, if any chance of getting the bank to change the language in the addendum.

And if you have any specific legal questions regarding REO contracts or real estate law in general, don’t hesitate to email or call (703.443.1010) Keith Barret, Esq directly - he’s knowledgeable, experienced and tells it like it is (though I have no idea what his hourly rate is as a real estate lawyer).

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