Types of Distressed Property Sales

In the current strong market for real estate, distress sales have dropped to a minimal level in the South Bay and most areas.  Investors snap them up when prices are right. Nonetheless, now and then I'm asked what the principal types of distress sale terms mean.  Here's a refresher:

First, a link to an article from my real estate blog back in 2011 that gives an overview of the different types of distress sales: 

http://www.beachcitydigs.com/2011/12/post-recession-real-estate-terms-great.html

In a short sale, the owner offers the home for sale through a Realtor and the bank, if they approve an offer, accepts less than they are owed, forgiving the rest of the debt.

In pre-foreclosure, the bank has given the owner a Notice of Default, saying in effect “pay up or we will sell your home in a foreclosure sale.  Some owners list their homes after receiving a Notice of Default, but they are typically in denial and won’t actually sell their home, but if they do it’s typically for cash or a very fast loan.  [expansion on this topic:  Here's the thing about pre-foreclosures:  It's just a term meaning the homeowner has been served a Notice of Default (that's a 90-day waiting period notice in California).  If the homeowner, considering this fact, decides to sell their home, then it comes out on the MLS as a Notice of Default sale.  All the rest (those who don't list their homes) are just that:  owners very late on their mortgages who have NOT decided to sell.  So the fact that eager websites like to tell us how much trouble these people are in doesn't translate into those homes actually being for sale, and the lender has no standing to sell them.]

Foreclosure is when the Notice of Default has matured and the bank has scheduled a foreclosure sale (the ones you hear about on the “courthouse steps”).  At this point, you have an angry seller who is still probably in denial but might sell for cash (there’s no time for buyer to get a loan).

Foreclosed or Real Estate Owned (REO) properties have been foreclosed by the lender and taken into their ownership.  The foreclosure is over, now the bank just owns the home.

And thank God most of these are over! -David

New Short Sale Website for California Consumers AND Realtors

With fewer than three of five short sales closing in California, C.A.R. is well aware of the complexity and difficulty of navigating lenders’ and servicers’ short-sale procedures.  To assist both REALTORS® and consumers, C.A.R. has launched shortsalescalifornia.org, a website specifically focused on short sales.

On the new site, visitors will find information ranging from short sale news, foreclosure timelines, and red flags to watch for, to legal Q&As, a short-sale glossary, and much more.


Additionally, consumers can find a REALTOR® to assist with their short-sale transaction, learn what to expect as a buyer or seller of a short-sale property, and find out whether they qualify for government programs to keep their home.


Visit the new site at www.shortsalescalifornia.org 

Existing Home Supply Down 40% In Last 6 Months

Home resales rose another 2.7 percent last month, according to the National Association of REALTORS® monthly Existing Home Sales report.

An "existing home" is a home that's been previously occupied and is not considered new construction.

The number of existing homes sold on a rolling 12-month basis is now at its highest point since May 2010, the month before the federal homebuyer tax credit ended. It's also up some 40% since July 2010, the month after the tax credit ended.

But that's not the biggest story in the Existing Home Sales report. The precipitous decline in home inventory deserves more attention.

At the current pace of sales, the complete, national home resale inventory will be sold in 7.6 months. This is close to 5 months faster as compared to last year's peak, and well below the 2-year home supply average of 9.0 months. There more buyers in the market, it seems, and fewer homes from which they can choose.

Total home resale inventory is down to just 3.38 million homes nationwide -- the fewest in 12 months.

There were other interesting statistics in the official Existing Home Sales report, including a break-down of purchases by buyer-type.

• First-time buyers accounted for 29% of purchases, down from 33% in January
• Repeat homebuyers accounted for 48% of purchases, up from 47% in January
• Investors accounted for 23% of of purchases, up from 20% in January

In addition, distressed sales -- foreclosures and short sales -- made up 37 percent of the market.

Over the next few days, more housing data will hit the wires and it's expected to show similar strength to January's Existing Home Sales report. With falling supplies and a growing base of move-up buyers, home prices are expected to rise in the coming months ahead.