Thursday, November 30, 2006

Repossesions "Record" In Arkansas

The Morning News reports from Arkansas. "Area economists and bankers alike agree the housing market in Northwest Arkansas is slumping from last year's all time high. The oversupply in upper end homes, predominantly in Benton County, has been the talk for months. But another less discussed aspect of the recent market downturn is foreclosure and the opportunities that exist for potential buyers."

"Betty Galloway, broker in Springdale, said her company is listing a record number of repossessions, almost one per day, primarily because the homeowners were enticed into buying homes they couldn't afford thanks to adjustable rate mortgages and interest only loans. 'I have been in the real estate business since 1976 and I have never seen this many repos come through my office for listing,' Galloway said."

"'When you are this far into a housing boom, this type of fallout is not terribly surprising,' said Kathy Deck, associate director for the Center for Business and Economic Research at the University of Arkansas. 'We have listed several homes for local banks and they were priced to sell quickly, at about 5 to 10 percent below appraisal,' said broker Mike Price."

John Sullivan, broker in Tontitown conducts area auctions for homeowners looking to sell property quick, sometimes to prevent foreclosure. He said auctions and foreclosures do represent excellent opportunities for interested buyers."

"'We have worked with a number of homeowners who were trying to avoid losing their homes to foreclosure. We also get calls weekly from builders who want us to auction their property,' Sullivan said. 'The problem with the builders is they don't own it, the banks do.'"

"Sullivan blames the lack of equity problem on a rampant misuse of financing, particularly refinancing. He said those families who refinance and don't stop spending can soon find out they can no longer afford to live in their home. Sullivan said he rejects many auctions because homeowners don't have enough equity in the home to cover the expenses and pay off the loan."

"'We are seeing some sellers who have recent appraisals and loans higher than the real market values. Appraisals for refinances are often done by banks who want to lend the money. Some use a liberal approach,' Sullivan said."

"In the end, the market value appraisal is only the amount a buyer is willing to pay. Sullivan said buyers today are paying less than they were a year ago and that means buyers have the advantage."

"Repos also add to the housing surplus and can drive down other home prices, Galloway said. For instance, if a repossessed home in a neighborhood sells for less than market price, other homes for sale in the same neighborhood will likely get similar offers."

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