Are Foreclosures Selling?

By
Real Estate Agent with Crye-Leike REALTORS® 165062

I recently had a very interesting idea about foreclosures.  Normally they are a great opportunity because they are perceived as sub-par or below market value.  In normal times they are, but what happens when they saturate the market?  Business is always guided by fundamentals f supply and demand.  What happens to the market when too many foreclosures come on?  Can they be absorbed?  Here is my opinion!  I don't think foreclosures are selling, and they are coming on at such an overwhelming rate they are not being absorbed! 

Recently a friend of mine had to negotiate with an agent that was a mega producer in foreclosures, and they are haggling over another agents 200K listing that is not a foreclosure.  It is just not making sense, that a foreclosure specialist that normally dad so much business you could never even get a call back from them for several weeks!  So it came to me that this person has or had big staff, and earned really big money, why would they personally negotiate one lowly deal?  It doesn't make sense, unless the tide has changed!  It would make perfect sense if sales had stopped in foreclosures.  That would nessessitate why these big agents are now venturing out to do to do sales to pay the bills.  I also had another agent that has a very big foreclosure team and over 100 foreclosure listings ask me for buyer leads.  Now I am starting to connect a few dots and now I am thinking the foreclosures are coming on too fast to be absorbed, and now buyers are realizing they are not a great deal!

Right now the market is under a moratorium for taking on any new foreclosures.  Remember the "Red letter day?"  This was the agreement for the big mortgage companies to slow down the process!   In the Atlanta area in January we had over 7000 foreclosures, and in February it was over another 10700.  We are only selling 3000 homes a month!  There is a cumulitive listing effect on the current home inventory wiht a very high number of listigns and declining sales.  I'd love to hear your thoughts?  What are the numbers in your market?  Do you have statistics to share?  The numbers are not adding up!

 

Posted by

James Crawford ABR, Broker Associate

 

 

 

 

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Jim Crawford
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Barbara S. Duncan ABR, CRS, GRI, e-PRO Searcy AR   Problems arise where there is a saturation.  It is the same as rain...too much rain and the ground can no longer absorb the water.  Too many homes for sale and too few buyers creates an excess.  Since I wrote this Blog I looked at FMLS and MRIS in Virginia and found that in general there is about a 20% sold from identified foreclosures.  We must also remember there is a voluntary moratorium right now from the big lenders for no new foreclosures.  What happens after?   Will we be lulled into a false sense of security only to have a tsunami of new foreclosures added on top of those we already have?

Apr 13, 2008 03:59 PM #20
Anonymous
Phil

If you believe the GMAC Billboards around Metro Atlanta claiming 100,000 homes for sale and with 3,000 sold last month that means a 3 year inventory unless sales pick up during the sales season!!!  Obviously the market is being flooded with new foreclosures at an even greater rate and thus the bloodbath is going to get worse! Agents tell me their buyers are often looking for a deal and end up buying a foreclosure because they are so much less expensive (even after the necessary repairs). REO (Foreclosure) sales may be slowing down, but only because everything else is selling more slowly too!  I have noticed fewer bidders at auctions and even many of the "wholesalers" are having trouble moving inventory and resorting to all kinds of gimmicks to get a paying "body" into a house! The scary tightening credit negative spiral is a double whammy as the banks are approving fewer buyers and thus banks are having to lower prices on their REO's because they can't sell them (there aren't enough buyers!)! 

PS- I don't ever want to hear Mayor Shirley Franklin complain about affordable housing for working class people in Atlanta. There are plenty!!! I can show her thousands for less than $100k!!!

Apr 13, 2008 04:15 PM #21
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Phil  - If you drove past the sign last week they took the number off!  As of this moment, there are 114284 active listings in GAMLS.  It is harder to track the pending and closed sales in GAMLS, but the ones I quoted are accurate for FMLS and the Metro Atlanta area.  There were 10700 new foreclosures in February in Atlanta and over 7000 expired listings, and 3000 withdrawn listings.  Yep, in general there are several years of homes in some categories for sale.   The new range I see softening is the over 1 Million Dollar range!  I see a substantial tightening of sales.

Apr 13, 2008 04:30 PM #22
Rainer
11,976
Windy Hixson
MOVE HOME REALTY - Riverside, CA
Riverside Ca~h2o Homes Specialist

 

 My manager stated that Countrywide is holding back a lot of the homes they own.They will add them to the market next year. They don't want to add to the foreclosure flood

Apr 13, 2008 04:50 PM #23
Rainmaker
1,048,784
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate
Jim the statistics for your area on foreclosures is staggering. The inventory levels are just incredible. WIth that kind of inventory prices must be dropping fairly steadily?
Apr 14, 2008 12:04 AM #24
Rainer
66,665
David W. Bolick
Network Real Estate, Inc. - Little Rock, AR

KEEP IN MIND....every foreclosure STILL has a family/person that MOVED.  Where did THEY go?  Either the apartment market is tightening up OR it's a perfect time for an investor to buy and not consider selling but RENTING!

Foreclosures in Little Rock are up but appear to be REO rather than the HUD inventory.  REO's are too slow in realizing the market is down.  HUD is one exception I've found that when they get what they consider "too many" in inventory they Drop the Price! Look into the HUD homes.  There always appears to be better bargains in there.

Jim...as for the "appraised" value.  That means nothing from my point of view.  I don't think appraisers are "on the mark" like they used to be.  Their definition of "price at which a reasonable person would purchase in a reasonable period of time..." has something missing.  Reasonable is the key word here.  I think that time frame has changed a bunch.

Apr 14, 2008 12:15 AM #25
Rainmaker
340,205
Judy Greenberg
Coldwell Banker Long Grove - Buffalo Grove, IL
Coldwell Banker - Buffalo Grove - Long Grove Homes

Jim,

 I agree with your idea 100 percent.  Also, I'm not apt to show a buyer a foreclosure now since most of them are in horrible condition and it is a pain to work with the banks.  They are a little overwhelmed at this time.    I think the deals are found in situations where someone has to move to another state, estate sales, divorce etc.  You just have to know your market.

Apr 14, 2008 12:22 AM #26
Rainmaker
340,205
Judy Greenberg
Coldwell Banker Long Grove - Buffalo Grove, IL
Coldwell Banker - Buffalo Grove - Long Grove Homes

Jim,

 I agree with your idea 100 percent.  Also, I'm not apt to show a buyer a foreclosure now since most of them are in horrible condition and it is a pain to work with the banks.  They are a little overwhelmed at this time.    I think the deals are found in situations where someone has to move to another state, estate sales, divorce etc.  You just have to know your market.

Apr 14, 2008 12:22 AM #27
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WINDY HIXSON / Tarbell Realtors-Riverside Ca I agree...they do have the power to do that!
Apr 14, 2008 02:21 AM #28
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Jim Crawford
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Bill Gassett Metrowest Massachusetts Real Estate  Prices have just started dropping in the last few months.  What folks in Atlanta do not want to understand is that even though we did not have the major run up in prices, it was all done on sub-prime loans.  No money down, HELOCs, second mortgages, negative equity and no equity have created a false bottom on pricing. Declining sales show there are not buyers to absorb!

Apr 14, 2008 02:25 AM #29
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David W. Bolick  I agree fully with you!  HUD are not too big in our area.

Apr 14, 2008 02:27 AM #30
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Judy Greenberg- Coldwell Banker Long Grove/ Buffalo Grove Real Estate   I agree, I do no think that in this current market, that foreclosures are a better buy for the money!  So maybe they are not selling, but accumulating!
Apr 14, 2008 02:28 AM #31
Rainer
141,840
Karen Luke
South Metro Property Management, LLC - McDonough, GA
Henry County Real Estate
Mike Barry or Kelly Adams must have called you back.
Apr 14, 2008 03:52 AM #32
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Rainmaker
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Patricia Beck
RE/MAX Properties, Inc., GRI, CDPE - Colorado Springs, CO
Colorado Springs Realty
Foreclosures are definitely not as good of a deal as they have been in the past.  I am looking for a home right now for myself and the amount of foreclosures and short sales are overwhelming!  There are many of them here and it seems the number is increasing.
Apr 15, 2008 06:30 AM #34
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Jim Crawford
Crye-Leike REALTORS® - Atlanta, GA
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Colorado Springs Realty Patricia Beck  In hte past they were a steal if you could get to the foreclosure before anyone else.!  Now there are loads of foreclosures, are they really a buy?  Even the buyers are starting to question their value!  A foreclosure is only a value if it is in good shape and priced right!

Apr 16, 2008 04:05 PM #35
Rainer
50,084
Ed DeChristopher
Fredericksburg Realty, Inc. - Fredericksburg, VA
CRS Fredericksburg VA
What a coincidence that I picked up on this posting; yesterday wrote a contract on one foreclosure and went to a home inspection on another.  The foreclosure market here in Fredericksburg, VA is "alive and kicking" as I have never seen it before.  Truly 30% of the sales in our area last month involved foreclosures.  Seems that certain jurisdictions are even higher than others.  No difference in acquisition price either!
Apr 16, 2008 09:51 PM #36
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Ed DeChristopher, CRS©,Fredericksburg VA  I think that in your market prices have been correcting for a good while now.  I firmly beieve your market is poised to start picking up!  Your prices are in line with the market!

Apr 17, 2008 12:49 AM #37
Rainer
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David W. Bolick
Network Real Estate, Inc. - Little Rock, AR

I HAVE A GREAT IDEA FOR THE FED'S TO HELP BAIL OUT THE "FORECLOSURE MARKET CRISIS".

Pass a bill giving Real Estate Agents an Extra 3% Commission to "Move the Foreclosures".  It would be cheaper for the Fed's and get us off our computer and out in the field quicker !  LOL

Apr 17, 2008 06:06 AM #38
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David W. Bolick  I know you are on to something!  Most agents work their tail off in a foreclosure deal and what do they want to do?  Cut our commission!
Apr 17, 2008 07:46 AM #39
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