San Diego Foreclosure and REO Website

San Diego foreclosures are on the rise again! They seem to be popping up everywhere. I have a lot of people asking me questions about foreclosures and the nature of the foreclosure market. Are they different than a typical residential purchase? Yes they are!

What is adding to the San Diego foreclosures? Taking a look at the amount of Notice of Defaults filed over the last few years shows a trend. In 2005 the number of Notice of Default filed per month was around 500. In 2006 the number of NODs filed per month was around 1200 on average. In 2007 the average between January and August was about 2000 per month with August ending at a staggering 4,845 according to RealtyTrac. As current ARM loans adjust for the next 3 years, we will continue to see lots of REOs hitting the market.

While foreclosures can often lead to good deals, there are some changes happening as the banks are seeing an increase in their inventory levels of foreclosures. During slower periods of foreclosure activities, banks may let properties go for less money as they need to compete with the non-foreclosure residential listings that may not require as much work. The amount of equity in the property when it was foreclosed on can also play a factor as to how much loss the bank can take. If the debt on the home has been paid down and it was foreclosed on with a lesser amount of debt than the market value, the bank may have more room for negotiation. The current foreclosure market is due, in part, to borrowers using interest only loans to get into the property and no longer being to afford the payments when they adjust to principal and interest. When combined with decreasing market values, the owner often cannot sell the home for the amount owed to the bank. When this happens, the bank is already taking a loss to sell the property due to the depreciated value, costs to them of foreclosure process, escrow and title fees and real estate fees. When you figure in the amount of properties that the bank has to sell at a loss, they are loosing lots of money! Foreclosures are also becoming a hot trend for buyers in the current market. These foreclosures often need work and buyers are willing to try to get a good deal and fix up the property to gain some equity.

Dont get me wrong, there are some smoking deals to be had and there will continue to be over the next couple of years. However, the media and auction advertising that we all see and read can be very misleading. Everyone would like a $500,000 house for $100,000 but, deals like that are rarely the norm. I am not really sure that the ads that we see about homes like this example sold at auction are even creditable. I do know that if you are looking for a home to live in as your personal residence, a foreclosure may work great for you! If you are looking to flip a house in San Diego and make a huge profit...you may have missed the market for that by a few years.  

How are foreclosure deals different that a typical residential transaction? Things can move a bit more slowly in a foreclosure transaction. The banks typically have an asset management department that handles these properties. So, after the offer comes in, it needs to go to an asset manager for approval. They may need to go above themselves to have it signed off or approve it with a client that has the property. After it is looked over they need to factor in their bottom line or the amount of loss that they can take and counter anything else in the offer that does not work for them. After all of that is goes back to the listing agent to forward along to the buyers agent. By the time there is a counter offer it could have gone through the hands of 4 or more people! With a typical residential transaction, the agent presents the offer their seller, they discuss it and the acceptance or counter offer goes back to the other agent, much less time involved.

The escrow periods are also longer in general for a foreclosure transaction, and they may even get longer for a period of time. Since there are many more people to coordinate with and more paperwork to be done, the bank has to allow for more time to get things done so that they are not liable for the escrow running past the closing date. It can be up to about 60 days to close escrow in some cases.

Another thing to consider is that most of these foreclosure properties are sold "as is." The banks will rarely make repairs to anything on the property. They also cannot disclose much about the history of the property as they have not lived there or even set foot in the house. Often times, the bank that is selling can be all the way on the other coast. This makes property inspections very critical! You need to make sure that all aspects of the property have been looked at so that you are not left holding the bag if there is a major problem after the escrow closes and you own the home. Aside from a home warranty, there are still many things that will not be covered if there is a problem after you close escrow.

While they can move a bit slower and require a more work than many residential homes, the right price on the right place can easily make it worth while!

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