Rapid Spike in Foreclosures Is Right Around the Corner

On March 18, U.S. Department of Housing and Urban Development (HUD) Secretary Ben Carson authorized a foreclosure and eviction moratorium for single-family homeowners with FHA-insured mortgages. Carson stated that this “will allow households who have an FHA-insured mortgage to meet the challenges of COVID-19 without fear of losing their homes and help steady market concerns.”

In Texas, where we collect daily data on distressed properties, select counties followed HUD’s lead and temporarily suspended all foreclosures. Property auctions did still happen in most counties despite the foreclosure moratorium, but postings and sales in Texas as a whole have been significantly lower than normal.

And the auctions we’ve attended in the last few months have, for the most part, been a waste of time.

Auctions in Bexar County fell through because trustees didn’t show up on sale dates. On multiple occasions in El Paso and Dallas, local law enforcement forced buyers to leave auction sites. And in Denton County, sheriff’s deputies turned trustees away from a scheduled sale. These are just a few examples of the many mismanaged auctions in Texas we’ve witnessed from mid-March to May.

COVID-19’s Impact on Foreclosure Postings

With so much confusion surrounding foreclosure sales in Texas amid the COVID-19 pandemic, it’s no surprise that auctions were such a mess.

Buyers want to know with certainty that upcoming auctions will be taking place and that they can attend without the risk of being fined or arrested. Individual counties need to do a better job coordinating auctions with local law enforcement, and trustees need to show up to scheduled sales.

Fortunately, now that the state is starting to open back up, it’s only a matter of time before these issues are ironed out.

And while recent foreclosure auctions in Texas have been frustrating for active investors like us, there’s a silver lining: incredible investment opportunities are likely just around the corner.

Look at the chart below and you’ll start to see why. Normally, foreclosure postings and sales in Texas stay fairly consistent month to month. However, due to the moratorium authorized by Carson and coronavirus-fueled confusion over whether or not auctions could take place, foreclosure postings and sales both dropped significantly.

Where we’d typically see monthly foreclosure postings average out around 5,000 per month, we’re now seeing them down near 2,000. It’s a big drop, but it’s far from permanent. Those 3,000-some-odd postings we would have seen each month if not for the moratorium aren’t going away; they’ve just been delayed.

Opportunities Ahead for Real Estate Investors

In coming months, as normalcy returns and the extended foreclosure moratorium expires, I expect to see a huge jump in postings. Foreclosure postings that have been delayed will go live along with new postings, giving investors the chance to choose between more foreclosures at any one time since mid-2013.

Also, as you can see with my predictions in the chart above, this would be the fastest spike in postings ever. And with so many postings going live so quickly, real estate investors won’t just have a huge variety of properties to choose from, they’ll have the opportunity to get some incredible deals on foreclosures—deals that we’d never see in a normal market.

In Bidding to Buy, an upcoming book I authored with real estate legend David Osborn, we outline our process for researching and buying foreclosures at auction. If you have questions about that or foreclosures in Texas, post them for me in the comment section below. Also, feel free to share what’s happening with foreclosures in your market.

Bidding to Buy: A Step-by-Step Guide to Investing in Real Estate Foreclosures by David Osborn and Aaron Amuchastegui is available now in the BiggerPockets Bookstore.

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.