RealtyTrac has just released its statistics for the First Quarter 2011, including foreclosure sales numbers. You can read the numbers online for free at their site’s Trend Center.
Why should Florida homeowners care about foreclosure sales?
The foreclosure statistics impact everyone. For example, the number of foreclosed properties in the housing market impacts fair market value for all surrounding properties since they are included in any market price analysis. Comparables will include the foreclosure prices, which will weaken the overall values of the neighborhood.
[Important Note: these statistics include properties from initial notice of default through final repossession of the property: therefore, any reference in today’s post to “foreclosure properties” includes short sales.]
What are foreclosed properties according to RealtyTrac’s study?
Foreclosed properties are properties that are in default and in the process of being owned by the lender; repossessed from the mortgagor who stopped paying their home loan. They are considered “distressed,” since they are usually in need of some repair and they may have been vacant for a long period of time, which is never good for a property.
Foreclosed homes are considered to be bargains, as a general rule.
Banks are usually willing to sell these homes at a lower price than the home would sell for if the homeowner were putting up a “For Sale” sign. That lower price, if there are enough foreclosed homes in an area, can drive down neighborhood market values.
When RealtyTrac issued its quarterly reports on the national real estate market, lots of people took notice. MSNBC reported on the new information, focusing upon the fact that homes in various stages of foreclosure – from notice of default to after full repossession – account for 28% of the homes sold in this country during January – March 2011. That’s 600% higher than in an average, normal market year. (A RealtyTrac representative is quoted as saying that in an average year, the percentage would be below 5% of homes sold.)
That’s a lot of foreclosures being offered to buyers, right? So, why are sales dropping in South Florida?
If you read the Sun Sentinel’s coverage of this First Quarter 2011 news from RealtyTrac, you will learn that foreclosure sales dropped in South Florida: they are 11% lower than the Fourth Quarter 2010 and 20% lower than First Quarter 2010.
Why? Experts are thinking that this is because buyers are not as thrilled to buy these distressed properties as they were in the past. They need work; it takes time to make the deal (months and months, in some cases). Also, there were freezes instituted by the banks last year during the Robosigning Scandal – which meant foreclosure homes couldn’t be sold. Part of the reason for the freeze may relate to those homes having title problems.
Other reasons for the drop? According to Sun Sentinel’s coverage, sellers competing with the foreclosure homes are becoming price-competitive. They are dropping their sales prices to bring their non-foreclosure homes more in line with the bank listings. Of course, this lowers the fair market value of everyone’s home in the area even more. And, we recently posted about Florida Realtors marching on Washington trying to get help in speeding up short sales. The length of time it takes to complete a short sale is yet another reason why sales of foreclosed properties are dropping in South Florida.
Everyone Knows Banks Are Sitting On Lots of Foreclosure Properties Here in South Florida
Whatever the reason, there is one known fact among Florida real estate professionals: there is a glut of properties sitting on Florida bank books that are not being placed into the housing market for sale. As suggested, this may be, in part, because of the Foreclosure Fraud scandal – banks fear they may not have clear title to these homes because of robosigning and other related issues.
If you are a bank, and your law firm was The Law Offices of David J. Stern, then would you trust that title to be free and clear and legal? Maybe not.
Whatever the reason for the drop in foreclosure sales, RealtyTrac will be there tracking it all. Unfortunately, their recent report isn’t telling us that 1st Quarter 2011 is the light at the end of the tunnel.