What We See When We’re Working ForeclosuresPosted on January 31, 2012 by
Last week’s column titled, Will the Number of Foreclosures Increase in 2012, brought in a number of calls and emails. Several folks in the real estate field accused me of being negative and trying to drive down real estate values.
I asked one caller, “Do you really think my weekly real estate investing column influences real estate values? Seriously?”
The truth is, Kim and I are along for the ride just like everyone else. But in case my column CAN influence values, let me try an experiment: The value of fifteen-year-old, two-bedroom, one-bath mobile homes in Cartersville, Georgia just shot up one million percent!!!! And I just happen to have one I’ll sell you for only $800,000. Call me!
Before discussing what we’re seeing when working foreclosures, it’s important to know that Kim and I are out there every week looking at foreclosures, bank-owned properties and homes for sale. More importantly, we’re meeting face-to-face with sellers. In other words, we’re not looking at statistics. We’re on the front line – in the trenches – buying, selling and renting single-family homes.
When working foreclosures, a basic day consists of us driving by each property in our area advertised for foreclosure. If the house is occupied, we often stop and talk to the homeowner. Most homeowners have no idea what happens on the first Tuesday of the month at the auction. Many think that a large, burly man will show up, kick down their door and throw their family out on their keisters. We make sure homeowners know that this can’t happen.
When a property is vacant, we often do a full inspection of the property. It’s shocking the number of homes that were abandoned long before the auction. Fear and a lack of knowledge about the foreclosure rules are the two main reasons folks needlessly move out early.
Some of these vacant homes haven’t been foreclosed on yet. Sadly, the homeowner still owns the property but doesn’t know he still owns it. How does this happen? Early on, the owner got a letter from the lender threatening imminent foreclosure. After getting the letter, the homeowner simply moved out.
In many cases, it’s a year or more before the lender finally forecloses. Can’t tell you the number of times we’ve contacted the owner of a vacant property and the owner said, “Oh, that’s not my house any more; the bank took it back last year.” When we explain that he does, in fact, still own the property, the owner’s reaction runs from shock to anger.
We also see tons of vacant homes that were foreclosed on months or years ago. The bank got the property back at auction but hasn’t done anything with it. It’s not on the market and there’s no For Sale sign in the yard. The house just sits empty…except for the 14-year-old boys who “visit” the home and do what 14-year-old boys do to vacant homes.
Why does it take so long for the banks to do anything with the houses they get back? There are a lot of reasons. One is: They’re swamped. A second is: The government doesn’t want to flood the real estate market with too many homes for sale. If every vacant home owned by lenders were suddenly put on the market, real estate values would plummet much lower than they are today.
Why not spend a day looking at properties advertised for foreclosure in your area? You may be surprised by what you discover.