Tuesday, March 07, 2006

Foreclosure Business Is 'Hardball'

An update on Florida. "The number of foreclosure- related lawsuits increased by more than 25 percent in February in Broward County. 'The real estate market is cooling down and now foreclosures are heating up in Broward (up 25 percent), Miami-Dade (up 15 percent) and Palm Beach (up 17 percent),' said Serdar Bankaci."

"'With foreclosure activity on the rise, pre-foreclosure properties are an excellent opportunity to approach homeowners before they go into foreclosure,' said Bankaci. 'Finally, the home prices have hit the roof and people are not willing to pay those prices. Investors are figuring out there are other great places to live in Florida.'"

The Detroit News 'slams the door' on foreclosures. "Detroiters love a bargain. Which is why I am warning you all to stay away from dabbling in foreclosed property. After reporting last week that home foreclosures have doubled in the state, and that Wayne County led the nation in foreclosures during January, I received a stream of e-mails and calls from readers wanting to know where they could snap up the bargains. The answer: Nowhere."

"The fact is that most of these foreclosures would never get to the sheriff's sale if there was any equity left. Either the owners have borrowed too much to buy them in the first place, or they've wrung out every dime of equity in loans, or the home values have declined to the point where the house is, in the best case, barely worth more than the bank is owed. 'Everybody comes in thinking all you have to do is put down a dollar and they can buy a house,' sighs Bob Schneider, a foreclosure expert with in Troy. 'It isn't that way. This is hardball.'"

"For starters, foreclosed homes don't auction for less than $1 over what the bank is owed. Then you'll wait six months and a day, under state law, to see if the homeowner can scratch up the dough to redeem the property or arrange a sale. If the foreclosed property does finally pass to the successful bidder, chances are good that the property is not in what you'd call 'move-in' condition. In some cases, Schneider notes, bidders offer 'cash for keys:' an upfront payment to prompt an owner to move out and walk away."

"At the Wayne County Sheriff's auction I witnessed, 379 properties came up for auction. Three received bids, all for just $1 over what the bank had into the place. The rest all went back to the lenders."

"In some cases, brokers like Schneider work with the owners to arrange a sale. He tries to get the owners some money out of the property, but it's rarely the 30-35 percent discount a real estate investor seeks. Sometimes, he arranges what's called a 'short sale,' where the bank settles for something less than what's owed, but not for a substantial amount less than what the property really is worth. 'It's not 30 grand. It's five, 10, maybe 12 thousand dollars.'"

"And just because the properties go back to the lender doesn't mean the bank is ready to hold a fire sale. Every property gets appraised, Schneider says, and if any of them are offered at a discount, it's because that's all they're worth. 'You think the bank is stupid?' he asks. 'The bank is fighting tooth and nail not to lose that 30 grand. All these late-night, two-o'clock in the morning TV ads that say buy with zero down and make $30,000 a deal, they're in fantasyland.'"


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