Foreclosures are coming back

61 Replies

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.. 

 

@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?

Originally posted by @Marc Rice :

@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?

its one way for sure but you do need to check with your state laws on dealing with those in pre foreclosure .. there are some very robust laws on the books that have teeth in them.. not all states of course but in many.. 

it depends also on the state in your state were foreclosures only require a small deposit to bid then you have basically a normal escrow period to come up with the rest of the money I would think it would be highly competitive .. but there are still deals I fund a court house buying company up in the Cleveland market and they still get deals when the sales were happening.  If the process was the same out our way then there would be absolutely no deals to be had.. But keep in mind your area has neighborhoods with far more distressed assets then many west coast markets will ever have  

 

Originally posted by @Marc Rice :

@Jay Hinrichs

Thanks, makes sense!

And i funded a Dayton courthouse buying operation as well.. until they went out of business for other reasons probably funded 50 or more for them.. I like funding courthouse steps its a specialty and most HML simply cant do it.. but for the right company I will provide capital for them. Maybe drop me a note and lets talk about it some more.. I was quite active in Columbus pre O8 meltdown would love to get something going there again and maybe court house steps would be something to look into.. Its very easy in Ohio compared to other markets.

 

Originally posted by @Jay Hinrichs :
Originally posted by @Marc Rice:

@Jay Hinrichs

Thanks, makes sense!

And i funded a Dayton courthouse buying operation as well.. until they went out of business for other reasons probably funded 50 or more for them.. I like funding courthouse steps its a specialty and most HML simply cant do it.. but for the right company I will provide capital for them. Maybe drop me a note and lets talk about it some more.. I was quite active in Columbus pre O8 meltdown would love to get something going there again and maybe court house steps would be something to look into.. Its very easy in Ohio compared to other markets.

 

Jay,

I've bought 3 properties on the courthouse steps in Xenia Ohio (a Dayton suburb) during it's last two foreclosure and treasurer's sales. I can tell you it was a struggle. Really rough properties can be bought reasonably priced, but the nice stuff almost does retail sight unseen.

Gary

 

Originally posted by @Gary L Wallman :
Originally posted by @Jay Hinrichs:
Originally posted by @Marc Rice:

@Jay Hinrichs

Thanks, makes sense!

And i funded a Dayton courthouse buying operation as well.. until they went out of business for other reasons probably funded 50 or more for them.. I like funding courthouse steps its a specialty and most HML simply cant do it.. but for the right company I will provide capital for them. Maybe drop me a note and lets talk about it some more.. I was quite active in Columbus pre O8 meltdown would love to get something going there again and maybe court house steps would be something to look into.. Its very easy in Ohio compared to other markets.

 

Jay,

I've bought 3 properties on the courthouse steps in Xenia Ohio (a Dayton suburb) during it's last two foreclosure and treasurer's sales. I can tell you it was a struggle. Really rough properties can be bought reasonably priced, but the nice stuff almost does retail sight unseen.

Gary

 

Good feed back I can see that in Ohio were your deposits to bid are very small and you have time to line up your money.. 

in states were its cash on the barrel head it does weed out bidders.  Plus in Ohio when the judge confirms the sale he is confirming clear title.  again a huge advantage to other areas.. good job on getting the few you wanted.. its a numbers game.

I always found sales the week of Thanksgiving if they are going and the week of Christmas or new years was my best deals.. competition was too busy with family or vacationing or whatever..  

 

Originally posted by @Jay Hinrichs :
Originally posted by @Gary L Wallman:
Originally posted by @Jay Hinrichs:
Originally posted by @Marc Rice:

@Jay Hinrichs

Thanks, makes sense!

And i funded a Dayton courthouse buying operation as well.. until they went out of business for other reasons probably funded 50 or more for them.. I like funding courthouse steps its a specialty and most HML simply cant do it.. but for the right company I will provide capital for them. Maybe drop me a note and lets talk about it some more.. I was quite active in Columbus pre O8 meltdown would love to get something going there again and maybe court house steps would be something to look into.. Its very easy in Ohio compared to other markets.

 

Jay,

I've bought 3 properties on the courthouse steps in Xenia Ohio (a Dayton suburb) during it's last two foreclosure and treasurer's sales. I can tell you it was a struggle. Really rough properties can be bought reasonably priced, but the nice stuff almost does retail sight unseen.

Gary

 

Good feed back I can see that in Ohio were your deposits to bid are very small and you have time to line up your money.. 

in states were its cash on the barrel head it does weed out bidders.  Plus in Ohio when the judge confirms the sale he is confirming clear title.  again a huge advantage to other areas.. good job on getting the few you wanted.. its a numbers game.

I always found sales the week of Thanksgiving if they are going and the week of Christmas or new years was my best deals.. competition was too busy with family or vacationing or whatever..  

 

Jay,

No deposit to bid. 5k or 10k deposit if your bid is accepted, depending on asset price. 30 days to pay AFTER court approves sale, so sometimes 60 days or more total.

Gary

 

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.

Originally posted by @Jay Hinrichs :
Originally posted by @Darius Ogloza:

The current supply demand dynamic pretty much nationwide cuts against any foreclosure crisis in the near future.  

There are lots of home owners who don't have access to the sub 3% interest rates because of credit scores and DTI. Even with equity, these people are effectively homeless if they lose their primary residences. The rental market is very tough for tenants here in Utah with an almost 0% functional vacancy rate. So they are going to fight tooth and nail to hold on to their homes rather than sell.

I just don't see enough conversation about what happens when the bottom half of the economy can't afford housing in any shape or form.

 

Originally posted by @William Hochstedler :
Originally posted by @Jay Hinrichs:
Originally posted by @Darius Ogloza:

The current supply demand dynamic pretty much nationwide cuts against any foreclosure crisis in the near future.  

There are lots of home owners who don't have access to the sub 3% interest rates because of credit scores and DTI. Even with equity, these people are effectively homeless if they lose their primary residences. The rental market is very tough for tenants here in Utah with an almost 0% functional vacancy rate. So they are going to fight tooth and nail to hold on to their homes rather than sell.

I just don't see enough conversation about what happens when the bottom half of the economy can't afford housing in any shape or form.

 

This is the big issue I see with evictions. All of the people set to be evicted this year for non payment are going to end up on the streets with a big black mark on their record. Investors won't rent to them, and many to most of them will not be able to get a bank loan for their own place. I think it is likely we will see some sort of government mandated and backed loan program to assist these individuals in getting their own homes eventually.

Originally posted by @Jeffrey Morrisey :

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.

will lead to some zombie mortgages.. I remember very well 09 talking to a client of mine that worked for loss mit for wells fargo in Oregon they had 10 people in the department in 04 by 2009 they had 400..  your exactly right with your post !!!  

 

Originally posted by @Gary L Wallman :
Originally posted by @Jay Hinrichs:
Originally posted by @Gary L Wallman:
Originally posted by @Jay Hinrichs:
Originally posted by @Marc Rice:

@Jay Hinrichs

Thanks, makes sense!

And i funded a Dayton courthouse buying operation as well.. until they went out of business for other reasons probably funded 50 or more for them.. I like funding courthouse steps its a specialty and most HML simply cant do it.. but for the right company I will provide capital for them. Maybe drop me a note and lets talk about it some more.. I was quite active in Columbus pre O8 meltdown would love to get something going there again and maybe court house steps would be something to look into.. Its very easy in Ohio compared to other markets.

 

Jay,

I've bought 3 properties on the courthouse steps in Xenia Ohio (a Dayton suburb) during it's last two foreclosure and treasurer's sales. I can tell you it was a struggle. Really rough properties can be bought reasonably priced, but the nice stuff almost does retail sight unseen.

Gary

 

Good feed back I can see that in Ohio were your deposits to bid are very small and you have time to line up your money.. 

in states were its cash on the barrel head it does weed out bidders.  Plus in Ohio when the judge confirms the sale he is confirming clear title.  again a huge advantage to other areas.. good job on getting the few you wanted.. its a numbers game.

I always found sales the week of Thanksgiving if they are going and the week of Christmas or new years was my best deals.. competition was too busy with family or vacationing or whatever..  

 

Jay,

No deposit to bid. 5k or 10k deposit if your bid is accepted, depending on asset price. 30 days to pay AFTER court approves sale, so sometimes 60 days or more total.

Gary got it I just used to send 50k or so out there for my teams so was not sure if you needed to proof up to bid or as you state.

but thats one of the easiest states I have ever seen for auctions..  

 

 

Originally posted by @Jeffrey Morrisey :
Originally posted by @William Hochstedler:
Originally posted by @Jay Hinrichs:
Originally posted by @Darius Ogloza:

The current supply demand dynamic pretty much nationwide cuts against any foreclosure crisis in the near future.  

There are lots of home owners who don't have access to the sub 3% interest rates because of credit scores and DTI. Even with equity, these people are effectively homeless if they lose their primary residences. The rental market is very tough for tenants here in Utah with an almost 0% functional vacancy rate. So they are going to fight tooth and nail to hold on to their homes rather than sell.

I just don't see enough conversation about what happens when the bottom half of the economy can't afford housing in any shape or form.

 

This is the big issue I see with evictions. All of the people set to be evicted this year for non payment are going to end up on the streets with a big black mark on their record. Investors won't rent to them, and many to most of them will not be able to get a bank loan for their own place. I think it is likely we will see some sort of government mandated and backed loan program to assist these individuals in getting their own homes eventually.

this is the unintended consequence's I have no answer but for those that could pay rent and used the eviction moratorium to evade paying then I think they will get what's coming to them.  At least that's my thought.  They have Royally pissed off their landlords and future landlords.

 

Originally posted by @Jeffrey Morrisey :
Originally posted by @William Hochstedler:
Originally posted by @Jay Hinrichs:
Originally posted by @Darius Ogloza:

The current supply demand dynamic pretty much nationwide cuts against any foreclosure crisis in the near future.  

There are lots of home owners who don't have access to the sub 3% interest rates because of credit scores and DTI. Even with equity, these people are effectively homeless if they lose their primary residences. The rental market is very tough for tenants here in Utah with an almost 0% functional vacancy rate. So they are going to fight tooth and nail to hold on to their homes rather than sell.

I just don't see enough conversation about what happens when the bottom half of the economy can't afford housing in any shape or form.

 

This is the big issue I see with evictions. All of the people set to be evicted this year for non payment are going to end up on the streets with a big black mark on their record. Investors won't rent to them, and many to most of them will not be able to get a bank loan for their own place. I think it is likely we will see some sort of government mandated and backed loan program to assist these individuals in getting their own homes eventually.

 The wild thing about that is capital is already very available to buy property in the US. We have far more options for financing than any other developed economy. If money was less available, prices would be lower solely due to less money being in the system. Can't fix the shortage of supply by pumping more money into the secondary market, we need significantly more development.

I appreciate what you said in your other comment and I think folks don't really appreciate how banks have changed their processes for dealing with foreclosures in the wake of the GFC. The only way I could see it being a major problem is if their foreclosed inventory exceeds their ability to deal with it.

@Mike Baxter interesting statistic. What’s the source? Can you cite it for us?

Reason I ask is that and if I recall correctly, periods subsequent to the financial crush was less that 3%. Someone please fact check me on this.

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?

This 

SO many people looking for homes to buy
 

Originally posted by @Mike Baxter:
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).


 Ooooooh nice time to buy some property in Atlantic City!!!!

Very interesting... and exciting. Hopefully this means if they're letting more inventory flow into the market, it might bring the housing prices back to normal. We shall see...