Here is a bit of trivia. A foreclosed home is likely to sell for much less than a similar one having a different cause for sale.

Harvard University and the Massachusetts Institute of Technology conducted a study and found;

• A sale brought on by the bankruptcy of the owner will sell for (on average) 3 percent below the price of a similar home not in a forced sale situation.
• An estate sale caused by the death of the homeowner will yield a price 5 to 7 percent below an unforced sale.
• A foreclosed home will sell for 27 percent less.

The number of California foreclosures is coming down. A couple of reasons; home prices are rising so the number of home owners “underwater” is slowly falling. This reduces the motivation for owners to walk away. Another reason is banks are working harder to approve short sales and loan modifications.

The first step in the foreclosure process is the issuance of a notice of default. Such notices fell nearly 44 percent in the second quarter from the same quarter a year ago, reaching a three year low.

Any good news, especially from a neighboring state, bodes well for us.

Resource: REALTOR®Mag

 

 

Some home owners with extremely good credit are walking. Five percent of mortgage delinquencies are by owners with very high credit scores and roughly 28 percent of them are walking away from their underwater mortgage. This is especially the case in states that suffered the greatest decline in property values and in states with no recourse laws (Arizona).

Resource: REALTOR®Mag

 

REALTOR®Mag summarizes data from RealtyTrac and Bloomberg on foreclosures.

Resource: REALTOR®Mag

 

And speaking of foreclosures, lenders are favoring “deed in lieu” as a way for a borrower to get out of an underwater situation.

Deed in lieu is a process whereby the borrower voluntarily turns the property over to the lender without a foreclosure. This gives the lender immediate possession without the expense and delay of foreclosure proceedings. Some lenders are offering cash incentives to the borrower ranging from $3000 to $15,000 for deed in lieu. Deed in lieu is still a hit on the borrower’s credit rating but not as severe as going through a foreclosure.

Resource: REALTOR®Mag

 

Economists at the Federal Reserve Board found that only one in five defaults is ”strategic.” That is, the home owner decides that walking away is the best solution to being underwater on their mortgage.

Once the equity in a property falls to one half of the amount owed, strategic defaults rise to 50 percent. The percentages tend to be higher in “non-recourse states,” Arizona being one.

You can read the report (with lots of statistical formulas for our math buffs) here.

Resource: REALTOR®Mag & Federal Reserve Board

 

Home owners who feel they must default are using the time between their first missed mortgage payment to time of eviction to pay off other loans such as credit card and auto. Some own their own business and are putting money back into the business to keep it afloat during the recession.

Nationally, the average time between last payment and eviction has climbed from 251 days in January of 2008 to 438 days in April of 2010. In Arizona the average number of “rent free” days was 320 days in April.

You can read more here and here. You can also see a map showing the average number of “rent free” days by state here.

Resource: REALTOR.org & The New York Times

 

8 percent of homeowners (4.3 million homes) have missed at least three months of payments or are already in foreclosure.

Resource: REALTOR.org

 

We may have foreclosed properties on the market longer than we expected. Many foreclosed properties are not in the best of shape but many are priced with that knowledge. REALTOR.org just published an article that indicates fewer people are considering a foreclosed property. 45 percent of adults aged 18 say they would consider buying a foreclosure. This is down from 55 percent a year ago.

Resource: REALTOR.org

 

Foreclosures hit an all time high as reported in this BBC article.

Resource: BBC