South Orange County Blog from Bob Phillips

When Can You Buy Real Estate After Foreclosure?

Posted in Personal Finance by southorangecounty on February 8, 2013

Waiting Periods After ForeclosureIf you lost your South Orange County home due to foreclosure, you probably haven’t given up on the dream of owning a new home. The good news is that a number of guidelines have changed which may allow  you an opportunity to buy that new home sooner than you think.  

There are a few guidelines that lenders follow to determine when you’ll qualify for financing after foreclosure. Arming yourself with this information may help you qualify again for a mortgage.

Foreclosure With Extenuating Circumstances

Generally, lenders will take into consideration any extenuating circumstances surrounding the foreclosure on your California real estate.

Was there a death or illness that prevented you from earning money to pay your mortgage? Did you have a job transfer that came with a steep pay cut? Were you severely injured and temporarily disabled as a result?

You can add a memo that explains any lapses in credit worthiness to potential lenders. This report can be as long or as short as needed.

Many lenders will shorten the waiting period for documented extenuating circumstances. Traditionally the waiting period after a foreclosure is seven years. However, these waiting period guidelines may change and you would be best served by getting up to date information from a qualified mortgage professional.

Deed-in-Lieu of Foreclosure and Short Sale

You may be wondering what the waiting period for financing is if you have exercised a deed-in-lieu of foreclosure or successfully negotiated a short sale. Fortunately many lenders offer options if you were able to avoid an actual foreclosure.

Traditionally the waiting period for a deed-in-lieu of foreclosure can be four to seven years. If there were special circumstances surrounding the deal, you might be able to qualify in as little as two years. The lender may have certain down payment or credit score requirements as a condition of approval.

Getting financing after a short sale generally has the shortest waiting time before qualifying for a new home loan. Generally the lender will only require a two-year waiting period before they’ll approve financing. Once again, a call to a licensed mortgage professional will give you the most up-to-date information.

The good news about financing after foreclosure is that it is possible. Your dreams of owning a home can be fulfilled even if  you have experienced a foreclosure in your past.

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3 Ways To Purchase Foreclosed Properties

Foreclosure signThe process of buying a foreclosed home is slightly different from the process of buying a non-foreclosure home.  If you want to invest in South Orange County foreclosures, therefore, it is important to understand the different ways by which to purchase a foreclosed home.

There are three main ways to buy a foreclosed home.

Buying before the auction
Some delinquent homeowners may want to sell their homes before facing an actual foreclosure.In this instance, the homeowner, in agreement with the lender, agrees to sell the home for less than the amount owed on the mortgage.This is called a short sale. Short sales are “pre-foreclosures”, of sorts. By broadening your home search to include short sales, you can identify homes that may be sold at a discount.

Buying at the auction
Another way by which you can invest in foreclosure homes is by buying the home at auction. From area to area, the legal requirements for the sale of a foreclosed home at auction may differ. If you plan to buy at auction, you’ll want to be familiar with your area’s customary judicial proceedings.

Buying after the auction

Buying after the auction means buying bank-owned properties. ( REOs.) This can be the most lucrative and safest means of investing foreclosure properties. This is because lenders often reduce the sales prices of their home inventory in order to “sell it quickly”. It can be expensive for banks to own foreclosed homes, and few banks are equipped for managing owned homes.

The process of buying a distressed home is different from the process of buying a “traditional” one. Therefore, regardless of which path you follow to buy a foreclosed property, have an experienced real estate professional on your team. I have been listing and selling both short sales, and REOs ( Bank Real Estate Owned properties.) for the past two decades in South Orange County and am qualified to assist you as either a seller, or a buyer. Give me a call today and let’s talk about real estate opportunities.

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Short Sales Outnumber Foreclosure Sales For Third Straight Quarter

Posted in Housing Analysis by southorangecounty on December 18, 2012

Short sales risingForeclosure-tracker RealtyTrac reports falling foreclosure sales nationwide as banks get better at selling homes via short sale.

In its Q3 2012 report, RealtyTrac says that 193,059 homes in some stage of foreclosure were sold, accounting for 19% of all residential home sales. In addition, pre-foreclosure sales — also known as “short sales” — climbed 22% on a year-over-year basis.

For the first time since 2007, the number of short sales outnumbered the number of homes sold in foreclosure over three consecutive quarters.

The average price of a short sale home fell by 5 percent as compared to a year ago which may reflect an eagerness on the part of mortgage lenders to dispose of distressed properties before they fall into foreclosure. Foreclosures can increase a lender’s losses, and foreclosed properties be expensive to manage.

Compare the average Q3 2012 sale price of a home in short sale versus one in foreclosure :

  • Average sale price of a residential property in short sale : $191,025
  • Average sale price of a residential property in foreclosure : $161,954

It’s not just the higher home sale prices that have pushing banks to settle on short sales, either. Short sales are less costly, too. Foreclosing on a home requires banks to pay court costs, among other fees, and which positions the short sale outcome as a clear winner for many banks. 

For homebuyers in California , the banking industry’s shift toward short sales is welcome news.

Buying a short sale has been a notoriously slow process with a lack of defined timeline. As banks improve their distressed sales division, they’re getting faster and more efficient. This makes it “easier” for a buyer to buy a home in short sale.

However, don’t buy a short sale without the help of an experienced, licensed real estate professional.

The negotiation process is different for a short sale than with a “traditional” home purchase. Time lines are different, responsibilities are different, and purchase contract language may be different, too. The same is true for buying a foreclosure.

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Foreclosure Rate Drops For The 12th Straight Month

Posted in Housing Analysis by southorangecounty on October 18, 2011

Foreclosures by state September 2011Foreclosure activity continues to slow throughout the United States.

According to data from RealtyTrac, a national foreclosure-tracking firm, the number of foreclosure filings dipped below 215,000 in September 2011, a 6 percent decrease from August.

A “foreclosure filing” is defined as any foreclosure-related action including Notice of Default, Scheduled Auction, or Bank Repossession.

September marks the 12th straight month in which foreclosure filings fell year-over-year.

There are several reasons why foreclosure filings are down, including an increase in the amount of time it takes banks to move a foreclosure through its pipeline. It now takes a nationwide average of 336 days from the date of initial default notice to bank repossession.

Some states work quicker than others, however, because of a combination of state law and personnel.

Homes in New York take an average of 986 days to foreclose, for example, the longest in the country. Homes in Texas foreclose the quickest, registering just 86 days.

As in prior months, bank repossessions remain concentrated by state. Just 6 states accounted for half of the country’s REO last month:

  • California : 16.6 percent
  • Georgia : 8.5 percent
  • Florida : 8.3 percent
  • Texas : 6.2 percent
  • Michigan : 6.1 percent
  • Illinois : 5.2 percent

Collectively, these 6 states represent just 36 percent of the nation’s population.

By contrast, the bottom 6 states were home to just 192 repossessions last month — 0.3% of the national total. Those 6 states were Alaska, Wyoming, District of Columbia, North Dakota, South Dakota, and Vermont.

For home buyers in Trabuco Canyon , shopping for foreclosed properties can be an excellent way to get “a deal”. Foreclosed homes typically sell at discounts as compared to “non-foreclosed” homes, but are often sold “as-is”. This means that homes listed for sale may be defective or out-of-code.

Before placing a bid on a foreclosed home, make sure that you’re represented by an experienced real estate professional. 

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The shadow inventory equals shadow gibberish?

Posted in Foreclosures, Real estate, short sales by southorangecounty on May 8, 2010

Here’s an article I just read which talks about the “alleged” Shadow Inventory of foreclosures that we’ve been being warned about for the past year or two:

The shadow inventory equals shadow gibberish?

By Russell Shaw on May 8, 2010 

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One of the more remarkable methods used (even by “Intelligence Agencies”) to establish if something is true or not is to is to label it true if it came from a “reliable source”.  Who said it?  If he or she is considered reliable or an authority the data is considered true or factual.  The other – perhaps even more silly – system in use is multiple report.  If a report is is heard from several areas or people it is “true”.   Five or ten people hear the same thing and pass it along, it becomes a “fact”.

I have been hearing about the Shadow Inventory for well over a year now.  It is HUGE.  It is sensational.  A Big Giant Tsunami (BGT) of inventory is going to be unleashed by the lenders.  Get ready.  Like nothing you have ever seen.  The housing market will be flooded with inventory like never before.  No doubt it will change life as we now know it.

Only it is complete crap.  Nothing but invented data dreamed up and endlessly passed along by organizations and individuals who heard it from someone else (I have not yet tracked the original source for this shadow inventory nonsense as it seems to emanate from “everywhere”).  What is really interesting are all the “new facts” dreamed up by “industry observers” to make the Big Giant Tsunami theory still possible – in spite of the overwhelming abundance of easily observable data that would directly contradict the idea of the banks having this huge inventory that they are holding back to be released later.

I bet I have your attention now.  Some of you may even be angry – you damn well KNOW there is a shadow inventory!!!  So lets look over why I am publicly saying it isn’t true and what the thought process was for the people and organizations who have been saying (and continue to assert) it is true.  These people would have no reason to intentionally forward false data. 

So what system is being used by economists and others to calculate this shadow inventory?  Simple, take the cumulative total foreclosures recorded (the big number) and subtract the current active and pending inventory in the MLS, plus the sold MLS properties (the little number) and the remaining number is “the shadow inventory”.  Simple, quick and it requires NO LOOKING at anything – just grade school level math.

To be clear, I am NOT referring at all to any foreclosures yet to come.  Inventory the banks may wind up getting in the future.  I am only talking about NOW.  It is no secret that REO agents are losing market share as they, as a group, have less and less inventory being given to them by their asset managers.  These same asset mangers who – last year – kept telling them that they had a lot more coming in to give them.  It just never arrived for them to give.  The only REO agents I know who are doing better these days are those REO agents who deal in higher end homes.  Those high end agents are getting inventory, lots of it.  This is not to say that all across the country there is no REO inventory, there is – just less and less of it.  The BGT crowd has invented the idea that the banks have the inventory but are keeping it until the prices go up!

How about a few facts that I know are true here in the Phoenix area – and I have every reason to believe are true right across the country (as I can think of NO reason for these facts to only be true here).

Fact: In my local MLS, there are about THREE TIMES as many bank owned homes listed in the MLS as the MLS actually shows.  I know this because two guys who actually look counted them all.  One by one.(Mike Orr of The Cromford Report and Tom Ruff of The Information Market)  They counted them and compared the addresses shown in the MLS, one by one, with the County Assessor records.  These are homes listed by banks who instructed the listing agent to NOT use the term “bank owned” in the listing.

Tom Ruff and Mike Orr spent months going over every deed transfer in Maricopa County (Looking at each foreclosure going to the bank and tracking that house for its current ownership and they could directly account for all but about 5,000 houses) and established that for the Greater Phoenix Area THERE IS NO SHADOW INVENTORY. 

Fact: Major banks often off load huge portfolios of inventory to hedge funds.  Huge portfolios.  Anyone or any organization who is claiming that they are “tracking” what the banks are doing who does not have sufficient access to track those portfolio sales is simply engaging in the simple grade school math referenced five paragraphs above.

No doubt there will be some readers who remain convinced that what they have read about and then co-created must be true.  That’s okay.  If you are happy believing that a Big Giant Tsunami is coming – enjoy the wait.  However, I’m betting you remain completely dry. 

Russell Shaw

Russell has been an Associate Broker with John Hall & Associates since 1978 and ranks in the top 1% of all agents in the U.S. Most recently The Wall Street Journal recognized the Top 200 Agents in America, awarding Russell # 25 for number of units sold. Russell has been featured in many books such as, “The Billion Dollar Agent” by Steve Kantor and “The Millionaire Real Estate Agent” by Gary Keller and has often been a featured speaker for national conventions and routinely speaks at various state and local association conventions. Visit him also atnohasslelisting.com and number1homeagent.com.

Note from Bob Phillips:  I think Punxsutawney Phil will be looking for THIS shadow for a long time to come.

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The O. C. Market Report – This Market is Taxing!

Posted in Foreclosures, Real estate, short sales by southorangecounty on April 20, 2010

Below is the latest Orange County Market Report from my friend Steven Thomas, the President of Altera Real Estate. Steven’s reports are cited and discussed in most of Southern California’s media, as an authoritative source of local real estate information. I have slightly altered his report to make it a bit easier to read, but the context and content remains true to Steven’s report.

“The Orange County Market Report – This Market is Taxing!

Talk to an Orange County buyer, especially a first time home buyer, and you will quickly find that the real estate market is simply crazy. 

Let’s first establish that there are two different markets – below $1 million, HOT, and above $1 million, COLD. The below $1 million market accounts for 77% of the total active inventory, and 94% of demand. The lower the range, the hotter the market.  Most buyers new to the market have already formed an incorrect idea of the real estate market. They think that the market is plagued with desperate sellers waiting for a buyer to finally write an offer to purchase at a major discount and an incredible “deal” for the buyer. Instead, new, fresh inventory is scarce and buyers find that they are competing for anything half way decent that hits the market. Properties that are priced well and in good condition, garner tremendous attention and procure multiple offers.

Writing a purchase offer at the list price only to lose to three other buyers that brought in offers above the list price is common. Sales prices above list prices are common. First time home buyers losing out on properties to investors with larger down payments is common. The reality is that if a buyer is looking to bargain and negotiate, they are better off attending the local weekend swap meet. Remember, values of homes have already dropped significantly, 35% or more. Some economists have argued that values have dropped below where they should be today, which is often the case in real estate downturns. So, homes are already heavily discounted from where they were a few years ago.

Home affordability has returned to the Orange County real estate market. Interest rates are still at historical lows. Throw in buyer income tax credits and we have all of the ingredients for a major seller’s market. Buyers entering the fray in today’s market get a real quick dose of reality and, if they really want to buy, sharpen their pencils real fast. In the lower ranges and in hotter areas, homes are starting to sell for more than the last comparable sale. The only thing that is keeping values from taking off like they did before is the distressed inventory.

Housing Demand: Demand has not seen these levels since the beginning of August 2005.
Demand, the number of new pending sales over the prior month, increased by 126 homes over the prior two weeks and now totals 3,748, a 3% increase and the height thus far in 2010. Last year’s height in demand was reached in June at 3,652 pending sales. Demand is 195 pending sales stronger than last year at this time and 1,374 stronger than two years ago. It seems as if demand is beginning to hit a plateau, so we will have to watch and see if that trend continues over the coming weeks.

Developing Trends: The active listing inventory has continued to gradually increase after bottoming at the beginning of the year. Over the past two weeks, the inventory has increased by 266 homes to 9,177. We started the year at 7,165 listings and so, have added 2,012 homes to the active inventory thus far. Last year, the inventory continued to drop from mid-March to the New Year. Towards the end of last year, the drop was probably more in line with the cyclical drop in the inventory that starts in September until the end of the year.

Customarily, during the beginning of the year and into the Spring market, more and more homeowners place their homes on the market in anticipation of the strongest time of the year to sell. In the Spring market in 2006 and 2007, homeowners often tested the market and attempted to obtain values above the current fair market value. There were a ton of overpriced listings that remained on the market and which were not successful in selling – EVER.

Instead, they just clogged the inventory and it methodically grew, reaching a height in August 2007 of just shy of 18,000 listings. In 2008 and 2009, homeowners no longer tested the market and the discretionary ( “equity”.) seller disappeared. During the second half of 2009, the Orange County active listing inventory continued to shed homes and not as many new, fresh homes were placed on the market. REALTORS® in the trenches were complaining of a lack of inventory and nothing “fresh” to show their buyers.

We still hear that there is a lack of inventory, but behind the scenes, the active inventory is slowly but surely nudging upward, in every price range. It remains to be seen if the trend in an increase in the active inventory continues. Will the equity homeowner return or will more and more homeowners place their toe in the water, testing the market? We will have to wait and see. There are currently 1,384 fewer homes on the market today than just one year ago and 6,379 fewer than two years ago.


Expected Market Time: The lower the range, the lower the expected market time.
The expected market time for all of Orange County is currently at 2.45 months, a slight drop from 2.46 months two weeks ago. For homes priced below $500,000, the expected market time is 1.63 months, a deep seller’s market. For homes priced between $500,000 and $1 million, the expected market time is 2.84 months, still a seller’s market. For homes priced above $1 million, the expected market time is 9.44 months, the higher the range, the slower the market. For homes priced above $4 million, the expected market time is 38.44 months, or over 3 years.

Distressed Inventory: Again, not much has changed in the distressed inventory.
The number of active distressed homes on the market,  short sales and foreclosures combined, decreased by 33 homes to 2,781 and represent 30.3% of the active inventory. Last year at this time, there were 4,006 distressed homes on the market, representing 37.9% of the active inventory.  The number of foreclosures within the active listing inventory decreased by two homes in the past two weeks from 418 to 416. Yes, that is correct. With all of the talk of foreclosures there are only 416 on the market in all of Orange County. The expected market time for foreclosures is 1.01 months.

Short sales are a different story; there are plenty of short sales in Orange County. Short sales are where a homeowner attempts to sell a home for less than the total outstanding loans against the home, which requires the lender (or lenders in many cases) to approve the short sale, indicating their willingness to take less than the full payoff of a loan. Most short sales are not as  fast as their name would suggest, and, on average, take months to close. The number of short sales within the active listing inventory decreased by 31 and now total 2,365. The expected market time for short sales is 1.61 months, also a HOT seller’s market. Everybody’s looking for a deal, so foreclosures and short sales tend to fly off of the market.

The Most Absurd Tax Credit EVER? 

I am still scratching my head trying to understand why California approved $100 million towards a first time homebuyer tax credit. These are for transactions that close escrow on or after May 1, 2010. The $10,000 credit is spread out over three years. So, when will the $100 million run out? For every buyer, the state is counting $5,700 against the $100 million. That equates to 17,543 first time home buyers. Based upon the current wave of first time home buyer activity, the credit is forecasted to last less than two weeks. And, if there are buyers who are supposed to close at the end of this month – to take advantage of the $8000 Federal Tax Credit – and are looking to delay closing until after May 1st, the credit may end even sooner. ( End of Steven’s report.)

Like the former “Cash for Clunkers” program for automobiles, there will likely be a mad scramble for those credits – and a lot of disappointed buyers.

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How To Buy Distressed Properties In A Period Of Rising Inventory

Posted in Foreclosures, Real estate, short sales by southorangecounty on April 15, 2010

 

Foreclosures concentrate on 4 statesForeclosure filings rose close to 20 percent nationwide last month versus February, according to foreclosure-tracking firm RealtyTrac.com, and for the 13th straight month, total filings topped 300,000.

In addition, bank repossessions reached an all-time, quarterly record. Through the first three months of 2010, banks reclaimed more than 257,000 homes.

Nonetheless, 4 states dominated foreclosure activity nationwide.

California, Florida, Arizona and Georgia accounted for more than half of all bank repossessions. It’s a disproportionate distribution of foreclosures. Together, the 4 states represent just 23 percent of the overall U.S. population.

The RealtyTrac report revealed some other interesting statistics, too.

  • Foreclosure activity was up in 40 out of 50 states last month
  • Bank repossessions rose 9 percent versus the same quarter last year
  • For the 13th straight quarter, Nevada topped the state foreclosure rate

Regardless of where you’re buying, short sales, foreclosures, and REO are making a profound impact on pricing and product. Distressed homes are 35 percent of the overall resale market.

There’s excellent value in foreclosures out there if you know where to look, but keep these points in mind:

  1. Buying short sales homes can take 120 days to close or more. Be flexible.
  2. Foreclosures aren’t always listed for sale publicly. Some inventory is privately-held.
  3. Bank-owned homes are frequently sold “as is”. There may be defects that render the homes mortgage-ineligible.

The short sale/REO market is very different from the traditional “existing home” market.  Therefore, if you have an interest in buying such a property, be sure to talk with an experienced real estate agent first.  I have been selling properties like these for over 33 years, and would be honored to share my expertise with you.  Give me a call or shoot me an email – and let’s talk about real estate!

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For The Second Month In A Row, Foreclosures Are Concentrated In 3 States

Posted in Foreclosures, home affordability, Real estate by southorangecounty on May 13, 2009

Florida, California and Nevada accounted for more than half of the country's foreclosures in April 2009For the second month in a row, the country’s foreclosure activity was dominated by a small number of states.


As shown by the latest stats from RealtyTrac.com, more than half of the country’s foreclosure actions from April were concentrated in just 3 states:



  1. California
  2. Florida
  3. Nevada

Those 3 states are home to but 19 percent of the U.S. population.


No matter in which state you live, however, it’s important to understand the far-reaching ramifications of foreclosures.


Although real estate is local, mortgage lending is not.  Fannie Mae and Freddie Mac insure loans in all 50 states and when those mortgages go into default, the government entities often take losses. 


This is the primary reason both Fannie and Freddie asked for government aid to the tune of $19 billion and $6 billion, respectively, last week.  It’s also the reason why loan fees have increased over the last 12 months — another way to shore up balance sheets is to raise consumer charges.


Furthermore, downpayment requirements are larger than before foreclosures proliferated and private mortgage insurance is more expensive, too. 


These are important changes to homeowners in all states — not just the 3 named above.  In some cases, they can be the difference between a home loan approval and an underwriting turndown.


Search the complete April 2009 foreclosure report for yourself on RealtyTrac’s website.

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List of Lenders Participating in the HOPE for Homeowners (H4H) Program

Posted in Real estate by southorangecounty on November 13, 2008

NOTE: Homeowners, contact your existing lender and/or a new lender to discuss how you may qualify for the H4H program.

The lenders listed below have indicated an interest in refinancing loans under the HOPE for Homeowners program.  When contacting any of the lenders listed below, you are strongly encouraged to contact your servicing lender and any subordinate lien holders since their participation is vital for you to refinance into a HOPE for Homeowners mortgage.  It is important to remember that the HOPE for Homeowners program is voluntary and your servicing lender may offer different solutions for avoiding foreclosure. 

If you are experiencing difficulty in communicating with your current servicing lender and/or subordinate lien holders, you may wish to contact a housing counseling agency to ask for advice and assistance in reaching a mutually agreeable solution for avoiding foreclosure.

To view the list of lenders who are participating in the HOPE for Homeowners program click on the link below.  Your browser will open an Excel Spreadsheet. 

The H4H Lender List was updated on October 17, 2008. We will refresh the list on most Fridays.  

List of H4H Participating Lenders

If you are looking to buy or sell a property in South Orange County, I began my career in this area over 32 years ago, and have been through numerous cycles, some just like this one.  I would be pleased to be your Realtor of choice.

Send me an email ( agent.BobPhillips@cox.net )  or give me a call. 

        Bob Phillips, Altera Real Estate, 949-643-2100.

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