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2011 and Foreclosures!

By Jan Green - Scottsdale, AZ

Real Estate Agent with Value Added Service, 602-620-2699 SA5376460000

January 13, 2011 05:10 PM

2011 and Foreclosures! Yesterday I attended a Contract Law class taught by one of the best instructors in the Phoenix Metro Area. Bill Gray is a former teacher, former CEO of the Arizona School of Real Estate, expert witness in RE cases, and perhaps the most interesting and entertaining speaker we all can appreciate for this type of class. Every time I see that he is on the list of class speakers - I'm there. His style is to make sure you retain the most important facts of that class - no matter how boring or incidental. It was with this understanding that I decided to attend his Contract Law class. After all, who could teach such a class as to disallow for boredom!

Since we are in the throws of market change and perhaps

contract changes, I felt that there would be even more information

worth knowing. Of course, Bill didn't mis-represent himself or

the class. I always walk away with new facts and more to

impress my clients with. Of course that's not the objective, but impressing clients with info regarding Special WarrantyDeeds and title policies that don't cover mechanics' liens always comes in handy!

What made this class even more interesting was one of the sponsors of the class. He is an owner or franchise owner of a carpet/flooring company that contracts with Fannie Mae. His statements really made me take notice, not because he was a sponsor of the usually boring class that wasn't boring, but because of the bottom line he mentioned. He stated that Fannie Mae is ready to unload untold "LOADS" of Fannie Mae properties. He said this year will be like unlike anything we have ever seen.

We've all heard of "shadow inventory" and we've all heard that banks are holding onto properties for various reasons. But, what are those reasons and are they really smart enough to have a collective idea about the market? My guess - they aren't that smart. I do know that banks really don't want "dead" assets on their books that aren't improving their bottom line. But I also know that there are title companies out there that have "tapes" of homes that Hedge Funds are buying right and left. I've sat across the desk from one of those title reps who said their minimum "tape" is $1.5 million.

Is this for real? What's your opinion?

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Dan Edward Phillips

Dan Edward Phillips, Humboldt and Del Norte Counties, CA - Eureka, CA

Humboldt and Del Norte Counties, CA

Hi Jan, it could very well be 'for real', this is going to be an interesting year!

Jan 13, 2011 05:21 PM

Paddy Deighan MBA JD PhD

http://www.medicalandspaconsulting.com - Vail, CO

Paddy Deighan J.D. Ph.D

I do not know whether banks will be dumoing properties in the near future..they are smart enough not to cannibalize the markets. I have noticed that they are turning them over to management companies and allowing them to rent - presumably to bring in some income while the respective markets improve. This adds to the "shadow inventory" that banks are holding...so my synopsis is that, yes, the problem is worse then we see now because many properties are being rented awaiting market up turns and with over 1 million homes foreclosed in 2010 and an anticipated increase in that number in 2011, things are going to get ugly...

Jan 13, 2011 05:27 PM

Jan Green - Scottsdale, AZ

Value Added Service, 602-620-2699 - Scottsdale, AZ

HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Dan - I think you're right. Interesting may be the name of my business plan that is yet unwritten!

Thanks for your comments!

Jan 13, 2011 05:28 PM

Elisa Uribe Realtor #01427070

Golden Gate Sotheby's International - Berkeley, CA

Opening the Doors to California Homes -East Bay

It seems before a lot of agents thought the banks departments were understaffed and that was the reason for the shadow inventory. It could be to hold back inventory so their books don't look so bad for a particular quarter and stocks fall, or it could be that if they foreclose they will be able to claim the insurance. Apparently some insurance policies will not be valid if the bank agreed to take any funds so it has to do with how they can write off their debt....who knows....all I know is it sure takes a long time to close a deal and get paid when it's a short sale:)

Jan 13, 2011 05:37 PM

Jan Green - Scottsdale, AZ

Value Added Service, 602-620-2699 - Scottsdale, AZ

HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Paddy: I agree with you. And yes, surprisingly they are renting homes out. I was surprised to hear that from one of my short sale listing clients. The banks actually discussed renting out her home with the current tenants in place!

Kately: Thanks for your comments. I am in front of some of the leaders of information since we are one of the hotbeds for foreclosures. Plus I am in a powerful office for information sharing! Best of luck to you!

Jan 13, 2011 05:37 PM

Jan Green - Scottsdale, AZ

Value Added Service, 602-620-2699 - Scottsdale, AZ

HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Elisa:

Thanks for your comments. I think banks don't want to write a dead asset on their books. The minute they value a short sale at a certain price, then it devalues their lending capabilities as the asset just dropped on their books. That write-down has such a negative effect that they would as soon have the cash vs the dead asset. Of course in the short sale scenario lenders do receive mortgage insurance and stimulation money for those loans and oftentimes they make more on that than they would if the processed a short sale!

Jan 13, 2011 05:40 PM

Tim Lorenz

TIM LORENZ - Elite Home Sales Team - Mission Viejo, CA

949 874-2247

I have heard the same thing here from different sources that the dump is coming soon.

Jan 13, 2011 06:14 PM

Phil Leng

Retired - Kirkland, WA

Phil Leng - Retired

Hi Jan,

I have had two potential bank listings rent to the current renters this year.

Recently the foreclosure happens on Friday and I am knocking on the door on Tuesday. They are clearly wanting to turn the properties!

Phil

Jan 13, 2011 07:21 PM

Anonymous

Wayne Martin

The shadow inventory may be bigger then we imagine. The banks, in conjunction with the FDIC, are working for large scale solutions which may put a bulk of the inventory in control of third parties. If this happens, they will be smart enough to control the pace of sales so as not to flood the market.

Jan 14, 2011 02:38 AM

Jan Green - Scottsdale, AZ

Value Added Service, 602-620-2699 - Scottsdale, AZ

HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Phil: Good to know. One of my short sale listings has tenants and the owner was offered by the bank to let the tenants stay and rent from them. Interesting! Thanks for commenting!

Wayne: Let's hope that the release of all the bank owned homes is not a flood! I'm looking forward to this year in anticipation of some of that to be released as clearly there are homes not on the market that are REO's. We'll see.... Thanks for your comments!

Jan 14, 2011 02:42 AM

Laura Reilly

Real Living Real Estate Professionals - Redding, CA

Home Sales Realtor - Short Sale Team Member - Redd

Interesting article, my bet is they don't even know what they are doing. The right hand is doing something and left hand has fallen asleep..lol Thanks for the post.

Jan 14, 2011 03:38 AM

Jan Green - Scottsdale, AZ

Value Added Service, 602-620-2699 - Scottsdale, AZ

HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Laura: After my recent short sale listing debacle - I'd definitely agree. The left hand has no idea what the right hand is doing. And are they really, collectively that smart? Thanks for your comments!

Jan 14, 2011 03:49 AM

John Pusa

Glendale, CA

Jan - I have learned from good sources that FNMA will place very large number of homes inventory in the market. Thanks for the information.

Jan 14, 2011 06:11 AM

Jan Green - Scottsdale, AZ

Value Added Service, 602-620-2699 - Scottsdale, AZ

HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

John: Thanks for the ditto on that! I appreciate your information. Whatever we can do to help each other in this crazy market. Best of luck to you.

Jan 14, 2011 06:41 AM

Donne Knudsen

Los Angeles & Ventura Counties in CA - Simi Valley, CA

CalState Realty Services

Jan - While it may seem like the banks don't know what they're doing or that the left hand doesn't know what right hand is doing, I strongly suspect that the banks know exactly what they're doing and that they have no intention of flooding the market with their shadow inventory and driving the prices down even farther. JMHO and I could very well be wrong.

Jan 16, 2011 02:29 PM

Jan Green - Scottsdale, AZ

Value Added Service, 602-620-2699 - Scottsdale, AZ

HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Donne: I agree with you to some extent. I was a banker back in the 80's for 5 years and at that time our bank was the 2nd largest in the state. It always seemed like everything moved at a snails pace! First off, the banks weren't ready for the huge number of short sales; then had to hire more people that didn't know what they were doing; and now they may be getting a bit more savvy! We'll see!

Jan 16, 2011 02:35 PM