Thursday, March 09, 2006

'Be Ready To Move' When Defaults Hit

The MSN RE site has this report on foreclosures. "Risky borrowing is catching up with a number of homeowners across the U.S. Foreclosures rose 45% in January compared to a year ago, and experts only expect the pace to accelerate. The number of homes entering some stage of foreclosure, from notice of default to bank ownership, increased 45% in January from the same period a year earlier."

"The areas of the country with the highest foreclosure rates on a per capita basis were Georgia, Nevada and Colorado. One out of every 422 households was in some stage of foreclosure in Georgia in January, an 88% jump from the previous year. Georgia also came in at No. 5 for the highest total number of foreclosures. Nevada was second, with 1,795 properties entering foreclosure; 2 1/2 times the number reported the year before and one for every 483 households. Colorado came in at No. 3, with a 36% rise to 3,747 properties, or one in every 488 households."

"Economists speculated that lost jobs in and around the Atlanta and Denver areas were the main culprits. Realtors say the hardest-hit areas appear to be houses in lower-income urban neighborhoods. 'There are definitely more foreclosures out there,' said Duane Duffy in Littleton, Colo. Indeed, when Duffy recently took a client looking at homes in southwest Denver, 'one out of every four homes we were looking at seemed to be a foreclosure.' But, foreclosures, he said, are becoming much more commonplace across Denver County."

"In the last few years, many buyers took out interest-only, variable-rate loans, and in some cases put no money down to afford a house, said Frank Nothaft, chief economist Freddie Mac. He estimates one out of every three loans issued in 2005 was an adjustable rate mortgage. Now that we’ve seen 14 consecutive interest-rate increases since June 30, 2004, many of these loan rates are bumping up, increasing the size of mortgage payments."

"Nothaft estimates that $500 billion in variable rate mortgages will reset, or rise, sometime this year, leaving many with a payment they can no longer afford. 'Those would be the candidates for, delinquent status,' he said."

"In the months ahead, analysts expect delinquencies to rise, putting a greater number of these foreclosures on the market for buyers to choose from. That’s bad news for owners who live in these areas, analysts say, because rising foreclosure rates typically mean falling home prices. But it’s good news for buyers looking for some relief from the high prices of the last several years."

"In addition to driving neighboring home values down, foreclosures themselves tend to sell at a discount to the market, said Rick Sharga. Typically, Sharga says, buyers can shave 10% to 30% off the market price with a foreclosed home, depending on demand. The best deals can usually be negotiated with an owner, when a property is in default, but hasn’t been put up for auction or turned over to the bank."

"'Sometimes you can negotiate both ends, with the property owner and the bank,' Sharga said."

"There are more drawbacks and risks to buying property at auction. First of all, most buyers will need to come up with 100% of the purchase price on the day following the auction. Second, many times a property can’t be fully inspected, and in some states, the previous owner has the right to buy it back for what you paid within a certain period. 'Like any other investment, the higher the reward, the higher the level of risk,' Sharga said."

"Real estate economist John Tuccillo recommends that buyers educate themselves about the foreclosure process now, so they can be ready to move when they see something they like. 'Start doing a lot of research and monitoring of those markets now,' Tuccillo said. With interest rates expected to rise 3/4 of a point to a point this year, 'In six months, you will be able to do more picking and choosing.'"


At 2:19 PM, Blogger K Michelle said...

How does buying a foreclosure work?
Would you talk with the owner and negotiate a percentage off? How do you know what price to offer?

What about sites like Are they helpful?

Knew at this and looking for a house in Socal.


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