Foreclosures are coming back

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Foreclosures are coming back

Account Closed
Investor · Member since 2021 · 265 posts · 305 votes
U.S. Foreclosure Activity Continues to Increase Despite Government Moratorium

Highest foreclosure rates in Delaware, Illinois, and Florida

Nationwide one in every 4,078 housing units had a foreclosure filing in Q1 2021. States with the highest foreclosure rates were Delaware (one in every 1,705 housing units with a foreclosure filing); Illinois (one in every 2,175 housing units); Florida (one in every 2,237 housing units); Indiana (one in every 2,397 housing units); and Ohio (one in every 2,500 housing units).

Among 220 metropolitan statistical areas with a population of at least 200,000, those with the highest foreclosure rates in Q1 2021 were Lake Havasu City, Arizona (one in every 518 housing units); Provo, Utah (one in 1,280); McAllen, Texas (one in 1,297); Shreveport, Louisiana (one in 1,353); and Atlantic City, New Jersey (one in 1,441).

Other major metros with a population of at least 1 million and foreclosure rates in the top 50 highest nationwide, included Cleveland, Ohio at No.6, Birmingham, Alabama at No. 9, Jacksonville, Florida at No. 12, Miami, Florida at No. 34, and Riverside, California at No. 39.

Foreclosure starts increase 3 percent from last quarter

Lenders started the foreclosure process on 17,652 U.S. properties in Q1 2021, up 3 percent from the previous quarter.

Those states that saw the greatest quarterly increase in foreclosure starts and had 500 or more foreclosure starts in Q1 2021, included California (up 36 percent); Ohio (up 25 percent); North Carolina (up 15 percent); Virginia (up 11 percent); and South Carolina (up 10 percent).

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Jeffrey Morrisey
New to Real Estate · Baltimore, MD · Member since 2016 · 5 posts · 10 votes
5y

I just want to stress a little caution on this topic. Some of the info in the thread is a little behind the times from a banking perspective. For context, I managed a post foreclosure conventional mortgage claim department at one of these mid to large US banks during the pandemic.

Chances are, we aren't going to see another 2008-esq situation. Banks before didn't have any idea how to handle that kind of inventory, weren't able to scale repairs, and calculate accurate pricing on all the homes they had. They are much, much better now.

In my opinion, the most likely scenario we'll see is a smaller uptick in foreclosures, but a good amount of short sale opportunities. 

As someone stated above, the foreclosure uptick is mostly going to come from the flood gates opening on things currently in their pipelines. Banks have now been sitting on a year and a half of inventory in most cases. Things are at a crawl. However, new foreclosure inventory is not going to be in the same spot. The relief acts that paused foreclosures made it so that any and all non payments can and will be turned into a "bullet payment" that is due at the end of your mortgage term or when you sell the property.  In fact, I have seen a letter sent by several US Senators that was sent to the banks stating that if they hear about banks even suggesting to their customers that the loan balance is due immediately, they will go after them with full force and tie them up in regulation for years to come.

But, that doesn't mean you won't see an increase. All of the banks are going to attempt to go through a loan modification process with the customers to get them squared up. There will be a percentage that refuse to answer phones and letters and will basically allow the foreclosure process to happen out of fear and lack of understanding on the subject.

As stated above, I think some of the best opportunities will come from short sales. Banks can't handle this level of volume all at once. They can't even staff up for it right now because they aren't sure if that foreclosure deadline is going to move again. Because of this, they will most likely be open to short sales just to decrease some of the volume they have. Think of a snake trying to eat a pig. It's a large amount of loans trying to move through a well oiled process that is only built to handle 10% of that volume at a time. Processes, databases, and procedures will break because of this. Now, if these short sales will be profitable for investors is another story. That will depend more on the location and the market.

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  • Fred K.
    Member since 2019 · 18 posts · 21 votes
    5y

    @Mike Baxter

    I wonder how high this is when compared with 2019 or 2018

    5Reply
  • Scott Gaspar
    Rental Property Investor · Ontario, CA · Member since 2016 · 23 posts · 24 votes
    5y

    I thought foreclosures couldn’t start until June 30th?

    4Reply
  • Paul Stewart
    Specialist · Atlantic City NJ · Member since 2018 · 114 posts · 50 votes
    5y

    @Mike Baxter Atlantic city has less then 40k residents not sure where the stat of AC having anywhere near 200k residents

    4Reply
  • Scott Mac
    Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
    5y

    It would be interesting to know if they are newly built homes or older, and if Class A, B, C or D, and if owner occupied or not. Plus the number of owners over the last 2 years.

    3Reply
  • Andrew FreedBusiness Member
    Investor · Worcester, MA · Member since 2020 · 1k+ posts · 1k+ votes
    5y

    @Account Closed- Interesting insight. In the scheme of things, the numbers are minuet. If you extrapolate that out to the normal population, that amounts to a couple hundred foreclosures depending on the area. Nonetheless super smart to keep an eye on the trend. If you see constant uptick, please post more content.

    Just curious, what if the trend does continue? What strategies are you utilizing to take advantage of this foreclosure opportunity? Seller finance? Off market lead searching? Wholesaling? REOs?

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  • Troy GandeeBusiness Member
    Real Estate Broker · Charleston, SC · Member since 2013 · 794 posts · 454 votes
    5y

    I don't think we'll see a massive wave of foreclosures. I wouldn't bet on that as an inventory source. Wall St has been putting tons of capital aside preparing for it and it just isn't happening. I think may of the funds that were counting on it have had to forget about that as a source of deals. 

    8Reply
  • Scott Gaspar
    Rental Property Investor · Ontario, CA · Member since 2016 · 23 posts · 24 votes
    5y

    I agree with @Troy Gandee, I doubt there will be massive foreclosures coming, big reason is almost no one is underwater but I could see a lot of properties possibly being listed so people can try to get out with whatever equity they have so they’re not foreclosed on.

    5Reply
  • Mary M.
    Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
    5y

    my guess is these are foreclosures that were halted by the pandemic and they are just getting ready to resume once the ban is lifted. 

    7Reply
  • Aj Parikh
    Rental Property Investor · Centreville, VA · Member since 2019 · 1k+ posts · 799 votes
    5y

    Interesting. Will be waiting for VA foreclosures :)

    3Reply
  • Andrew FreedBusiness Member
    Investor · Worcester, MA · Member since 2020 · 1k+ posts · 1k+ votes
    5y

    @Account Closed Solid facts. Thanks for the info Mike and congrats on your past success! 

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  • Melissa Rowlett
    Member since 2021 · 1 post · 0 votes
    5y

    @Paul Stewart

    Same w Provo Shreveport and McAllen...

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    5y
    Originally posted by @Mary M.:

    my guess is these are foreclosures that were halted by the pandemic and they are just getting ready to resume once the ban is lifted.

    Yup there are foreclosures in every cycle in every year and every month.. so if you stop them nationwide for a year which has happened you have all of those to process plus the normal years flow.. so of course the numbers will be higher its just simple math.

    Although I was surprised to see Provo Utah on a list like that .. not sure how accurate that is.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    5y

    I made my first Mil in the late nineties when people who went into preforeclosure had a lot of equity.

    People don't go into foreclosure because they don't have equity, they go into foreclosure because they don't have cash flow. 

    Right now according to the Bureau of labor Statistics there are 261,000,000 people of working age and over 100,000,000 are Not working. That number is more important to me than the U3 unemployment rate which doesn't include people who are no longer eligible to collect unemployment benefits or even the U6 which includes everyone along with the underemployed which is somewhere around 10.9%

    What I see is a huge part of the population not making enough money to bring their forbearances current, landlords that have gone crazy trying to make payments on rentals where they are not collecting rent and I think I'd add in banks who are getting tired of not getting paid. Owners of properties who have not made payments for a while will have a rude awakening when moratoriums end. Already in AZ and TX you can get a foreclosure through when you have a mind to. That will only escalate.

    The following chart is from King Co. Seattle in 2010. I started in Seattle (King Co.) in about 1997. This is where and when I got started by buying preforeclosures exclusively. My business boomed going forward.

    As you can see the number of foreclosures was in a bit of a trough. The Blue line is Unemployment and the Red line is Foreclosures. I am not saying these numbers are here today and real estate is always local anyway, but this is an example that it doesn't take a flood of foreclosures for you to make a ton of money. Done legally, properly and ethically. But there are secret ingredients to making the soup. Don't try this at home, unless you really know what the current laws are.

    My absolute best years at court house steps was 2002 to 2006..  same with pre foreclosures but then again as you Know Mike in Oregon and WA in 07 08 they made it very tough if not illegal to do what we used to do in OR and WA on the pre foreclosure scene which would make someone move markets for sure I went back east. LOL

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  • Marc RiceBusiness Member
    Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2018 · 2k+ posts · 1k+ votes
    5y

    @Jay Hinrichs

    Great share. I need to dedicate more time digging into the pre foreclosure space with my cold calling efforts. The seller finance route is a great exit to build up rentals with lower down.

    How did you approach the “depreciation recapture” roadblock on transfer or did you only do subject-to where it didn’t trigger?

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  • Amelia Castaño
    Realtor · Los Angeles, CA · Member since 2021 · 1 post · 0 votes
    5y

    @Scott Gaspar I agree people have a lot of equity on their homes

    0Reply
  • Menno Heinrichs
    Flipper/Rehabber · Arcadia, CA · Member since 2019 · 8 posts · 1 vote
    5y

    @Fred K. Great question. Hopefully more deal are coming!

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    5y
    Originally posted by @Marc Rice:

    @Jay Hinrichs

    Great share. I need to dedicate more time digging into the pre foreclosure space with my cold calling efforts. The seller finance route is a great exit to build up rentals with lower down.

    How did you approach the “depreciation recapture” roadblock on transfer or did you only do subject-to where it didn’t trigger?

    TWO things 

    One when we bought it was stepped up basis.

    Two most of the properties we held as inventory. 

    I would not buy a pre foreclosure if there was not 20 to 50k or more of profit DAY ONE> so we could exit at anytime.

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  • Logan M.
    Investor · Provo, UT · Member since 2016 · 759 posts · 626 votes
    5y

    I would love to figure out how to find these in Provo, Utah. I'm not seeing any increase in notice of defaults so you tell me. 

    0Reply
  • Allen Williams
    Realtor · Jacksonville, FL · Member since 2019 · 95 posts · 87 votes
    5y

    @Mary M. @Mike Baxter

    This is exactly what we are seeing. I am a Realtor in Jacksonville and have had the privilege of getting a couple mentors who have been doing REO listings for decades. Much of what you see is the resumption of process of homes that stopped foreclosure because of COVID. Foreclosures always happen in every market to some degree but with low interest rates, high equity for most people, and shortage of housing it probably won't be happening to the degree many think

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    5y
    Originally posted by @Logan M.:

    I would love to figure out how to find these in Provo, Utah. I'm not seeing any increase in notice of defaults so you tell me. 

    I suspect the data on Provo is faulty personally. Knowing Utah and the citizens of Utah as I do.

    subscribe to Property Radar is all you need to do.. @Sean OToole has created the absolute best software on the planet for the investor looking for needles in a haystack..  check it out.. And no I don't have any affiliation with PR  :)  My staff uses it and I love how robust it is .. 

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    5y
    Originally posted by @Marc Rice:

    @Jay Hinrichs

    Great share. I need to dedicate more time digging into the pre foreclosure space with my cold calling efforts. The seller finance route is a great exit to build up rentals with lower down.

    How did you approach the “depreciation recapture” roadblock on transfer or did you only do subject-to where it didn’t trigger?

    Marc one reason we had more success in those years was it was much tougher to chase foreclosures down .. And we had UBER great title company customer service that the average investor simply could not get gave us a HUGE advantage especially in pre foreclosures. 

    once the on line auction companies came into the scene it changed along with the laws.

    but just think about this scenario.

    I get my lists my title company preps and does basic date downs day one.. so i have every NOD in the 3 county area with mortgage records on each tax records on each and liens that are easy to see on each. I did not even start to market the pre foreclosures until about 10 days before the sale and we only door knocked them. One can use direct mail but the success rate is VERY low given the competition. So by the time reality set in. IE usually 2 days before the sale maybe 3 days you now had a owner who realizes they ARE going to lose this house..

    Well we make a deal I call customer service and get a date down on the phone.. I call the trustee ( most were in Seattle) I have a courier service on speed dial I call my bank having already got the reinstatement or payoff from the Trustee.. Courier goes to the bank picks up the cashiers check and gets it to their office day before the sale or in some instances by 9am the day of the sale.. and of course you can see all the sad faces at the court house steps when the Cryer reads off the sales that are removed from that days list..  Thats how we did it

    took a full time person on keeping my list and title stuff up to date  3 teams of 2  door knockers and then myself.. so pull these off in this market.  And robust customer service department at the title and escrow company ( we used Chicago for this) were they would give me a title date down on the phone within 3 minutes of me calling .. and it was 97% accurate.. so some risk but heck at our level if you lose one no big deal. as you generally were only putting out 10 to 50k per deal on pre foreclosures If we had to pay cash like courthouse steps we might dive into it deeper especially if opening bid was over 500k. 

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  • Darius Ogloza
    Investor · Marin County California · Member since 2018 · 1k+ posts · 2k+ votes
    5y

    The current supply demand dynamic pretty much nationwide cuts against any foreclosure crisis in the near future.  We are more than 4 million homes short in this country.  In my neck of the woods, I can list a milk crate and fetch $100,000.  Who in his right mind is going to hand equity over to the bank when sales routinely close for all cash,  no contingencies and close in 10-15 days?

    3Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    5y
    Originally posted by @Darius Ogloza:

    The current supply demand dynamic pretty much nationwide cuts against any foreclosure crisis in the near future.  We are more than 4 million homes short in this country.  In my neck of the woods, I can list a milk crate and fetch $100,000.  Who in his right mind is going to hand equity over to the bank when sales routinely close for all cash,  no contingencies and close in 10-15 days?

    I understand this thought process but you do have a few instances were homes will go to sale.

    1. Intestate

    2. NASTY divorce 

    3. BK 

    4. Extreme denial

    5. Wholesaler has it tied up cant close walks at last minute.

    6. Lender is bad promises loan that never comes through  

    I bought a lot of distressed assets with number 5 and 6 over the years.. 

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  • Marc RiceBusiness Member
    Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2018 · 2k+ posts · 1k+ votes
    5y

    @Jay Hinrichs

    Super helpful explanation! As the public data and availability of data becomes easier, I definitely understand the compression of that business model. It’s becoming more “efficient” thus limiting the opportunities.

    My takeaways for preforeclosure:

    1. Clean and detailed data

    2. Great sales team

    3. Fast execution team

    @Jay Hinrichs Going forward, do you see getting preforeclosures before they hit the court house steps the only real viable way to land a deal as the participants at foreclosure auctions have skyrocketed?

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  • Nick Dunin
    Real Estate Investor · Longview, TX · Member since 2009 · 111 posts · 28 votes
    5y

    @Jay Hinrichs

    Some good info here!!

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