A house sits empty on a street, alone and forsaken by the voices that used to fill it’s walls with laughter, shouts, and conversation.  My friend No More Empty Fortune Cookies wrote about that house on her street and her words are almost haunting,

There’s another empty house on our street. For such a small cul-de-sack, the occupied home to empty home ratio is precariously teetering in unfavorable ways these days.  I would just shrug my shoulders and say meh, but I want our house to sell.

We live in a town with a very high foreclosure and distressed sale rate - it wavers between 30 and 40 percent.  People in our community have talked about how to stop what had been a slow spiral down into a ghetto-like area, but we are starting to feel like we’re spinning out of control.  And our officials won’t raise our property taxes or place a moratorium to stop the continued building of inexpensive, not always sturdy homes.

I fear that one day, our only choice will be to leave this town.

This could be a classic case of the right arm not knowing what the left arm is doing.  A woman had her house repossessed and her parrot taken by a bank contractor who was there to padlock her pad.

The home owner said all her mortgage payments were current and because she - and her parrot - have been traumatized, a lawsuit has been filed.  From MSNBC.com,

…  she suffered irreparable emotional damage and is afraid to set foot in the house. The lawsuit says she eventually regained possession of the bird, named Luke, after repeated phone calls to the bank.

I’m glad Luke has been returned and can definitely understand her nervousness when it comes to returning to the house.  Good luck!

Photo by crispin swan via flickr creative commons.

I’ve been terribly worried about one of my friends who just received notice of foreclosure.  What has troubled me is where does someone go after foreclosure?  Forced loss of a house has a terrible impact on your credit score and with most landlords now requiring a credit check, how can you find a place to rent?

Key is to find a landlord that only has one or two rental properties rather than a giant apartment complex.  The local paper, craigslist, and family or friends are the best options for where to search.  In addition, you can offer to put down a higher deposit  or prepay several months rent.  If this isn’t an option, find a rental BEFORE the foreclosure hits your credit score.

The challenge is if you’re being foreclosed upon, your credit score likely already has some negative hits from missed mortgage payments.  If you keep paying your other bills, however, it could be viewed positively by a landlord - especially if your mortgage payment was double (or much higher at least) than what the rent payment would be.

Don’t give up hope. It may take a few years, but things will look better.

I proposed at work a couple of years ago that as a fundraiser, we contact a bank or mortgage company to donate a foreclosed property that we would then auction or raffle to raise money to pay for a holiday program for our local needy children.  I suggested that so the bank wouldn’t lose everything, we put a reserve on the property and the bank would get their reserve amount. Anything in excess would go to the charity work.

Unfortunately, I was never able to rally adequate support to make the auction happen, but when I read about the sometimes success, sometimes failure of other house “giveaways” via raffles, it reminded me of the almost effort we made.  The raffles are a great way to raise money for a good charity when they work.

Home raffles, once a novelty, seem to have proliferated around the country in recent years. In California, for example, at least eight charitable groups held raffles for existing or to-be-built homes in 2009, with varying degrees of success, according to local media reports.

For example, an arts group in San Francisco netted just over $1 million after covering its raffle expenses. But ticket sales fell short for a raffle conducted by a group that fights poverty in San Jose, and the charity just broke even. Yet another group announced that it has postponed its raffle and plans to reschedule, but it promises on its Web site that it will refund ticket costs if requested.

More problems can arise when the tax man cometh. To operate a charity fundraiser like this, you’d definitely need the support of a strong management company to oversee that everything is being done correctly.  I still think it’s a great idea.  I’d love to win a house using a raffle, but the idea of an auction could also potentially be a real winner for charities, for the banks, and for any real estate company sponsoring this type of event.  Plus someone would get a new home at an auction price!

Good things often happen in fours:  the Final Four, the Fantastic Four, four seasons, quartets.  An article published today by CNN Money.com points the finger at another four… four states that account for  HALF the foreclosure filings in the United States for 2009.  The states are Arizona, California, Florida, and Illinois and this surprised me because I thought Nevada and Michigan would be on the list before Illinois.

Reading further the filings aren’t the same as actual foreclosures.  The actual number of foreclosures is up by only 1 percent from the previous year.  “Nevada recorded the highest rate of foreclosures, at 10%, followed by Arizona, at 6.1%; Florida, 5.9%; and California, 4.75%.”  The article further states,

RealtyTrac, the online marketer of foreclosed homes, reported that one in 45 households — or 2,824,674 properties nationwide — were in default last year. That’s 21% more than in 2008, and more than double 2007’s total.

We are starting to see falling rates of foreclosures in some states, so this gives me hope that the housing market could start a more solid recovery with fewer distress sales on the market.

Anytime you are behind or think you might get behind on your mortgage, communication is key with your mortgage company, your insurer, your utility companies, your Realtor… everyone.

“In our society as a whole, people should realize they should communicate when they have a problem rather than sticking their head in the sand and hoping it’ll go away or fix itself,” my friend Robert Carroll said after taking the short sale and foreclosure class yesterday.

It’s so true - communication is key.  Your mortgage company understands that people sometimes face financial difficulties and they definitely would rather work with you than go through the trouble and expense of foreclosing.  It’s estimated that it costs about $60,000 to foreclose, so a period of forebearance, loan modification, short sale, or deed in lieu is a better option.

Banks are getting better about working with homeowners - possibly because the Obama administration and U.S. Treasury Department is now cranking up the pressure for them to do so.   In fairness, some companies were already doing a better job than others (Wells Fargo has a good reputation for working with homeowners). According to CNN.com,

Responding to complaints that too many borrowers are stuck in trial adjustments, administration officials said they will now focus more heavily on getting borrowers into permanent modifications. Government swat teams will go to the institutions to see what the holdup is and banks will have to submit progress reports twice a day during December.

Trial modifications are occurring because homeowners and lenders have negotiated a lower interest rate, but they have to then wait three to six months at this lower payment plan to see if they make payments on time before it becomes permanent.  To get a loan modification, you still must have the ability to pay.  If you don’t have the ability to pay, a short sale could be an option as long as you communicate with your lender.  Failing that, a foreclosure will be in your future.

Photo by Deman through Flickr Creative Commons.

Originally valued at $185,000, the land became a victim of bankruptcy.  My friend negotiated directly with the bankruptcy court and is closing tomorrow on 2.5 acres on top of a mountain … for significantly less.  Significantly.  $110,000 less.  That’s what I call negotiation skills!

He and his wife plan to build their retirement home overlooking this marvelous vista.  I am envious!

We are so close to Thanksgiving that I want to write about why I’m grateful… happy that my head is still above the water in today’s real estate market, grateful that my family will be together to share a wonderful meal, thankful that my friend just had her 8 pound, 5 ounce bouncing baby boy and that they’re both healthy.  Instead, I read in the paper about this poor 93-year old Long Island man with Alzheimer’s disease had his home stolen by a couple of swindlers.

From UPI.com,

Rebecca Tharpe posed as a legitimate buyer for the home of Artee McKoy, a retired barber with diminished mental capacity, and forged his signature on a sales contract. The contract was used to obtain a mortgage on the property. Tharpe then sold the house for $395,000 and pocketed $102,000. Tharpe’s accomplice, Alexandra Gilmore, received more than $200,000 in proceeds, including a $97,000 check that had been made payable to McKoy and an additional $130,000 which she secured by setting up a real estate company and falsely claiming to have been owed the money from a previous mortgage loan on the property.

The house is now in foreclosure because - obviously - the loan payoff wasn’t made and payments ceased.  What’s worse?  The crook is serving 30 days in jail and five years probation, with the added punishment of having to speak publicly about mortgage fraud.  To help other people avoid it.  I didn’t read anywhere that she has to repay the money stolen, but with a light sentence like that I hope she will.  Dang.

What happens when a buyer is in a lease-purchase contract with a builder and then the builder is foreclosed on?  Though rare, it DOES happen.  It’s a painful, scary process - especially for a buyer who has already invested their heart (and money) in a home and is just waiting for final loan approval to officially close.

Along with a process that offers more questions than answers, you also have many many parties involved:  the Realtors (buyer-side and seller-side), the Realtors’ brokers, the title company, the lender, the bank that’s foreclosing, the builder, and the builder’s business partners.

Lessons I’ve learned from being involved in one of these transactions:

• Sometimes it’s better to remove all the middle men and allow the buyers to work directly with the bank that’s foreclosing.
• The bank doesn’t want to own the property and will probably attempt to honor the contract originally signed between the buyer and the (builder) seller.
• If coordinated carefully, the bank will move to foreclose on the day of closing for the buyer. The bank will then assign title to the buyer at foreclosure for X amount in a “bid” type contract thereby removing the bank from ever owning the property.

I don’t yet know the end results of what will happen, but do realize that as foreclosures continue to make headlines in the U.S., we may see more and more of these.

There are 2.5 million homes in the foreclosure process, with about 750,000 in the hands of banks, according to Mark Zandi, chief economist with Moody’s Economy.com. As many as 4 million foreclosed homes will be sold by the end of 2011, he estimates.

I so look forward to the day that we can begin talking again about curb appeal, dressing your house for the Holidays, and signing your name to verify that’s your signature at closings.

Good news in the housing market from CNN.com … if you want to buy a foreclosure, better hurry.  The market is getting tight and if you see a deal, be prepared to make your best offer first.

For example, in Stockton, California,

“For every listing that comes out, we have 10 buyers,” said Dias, an agent with Approved Real Estate Group. “We had a lot of inventory last summer. Now we’re down to 1,500 listings — from more than 5,000.”

Then…

And there’s almost no negotiating, no back-and-forth, after the initial bid. “We don’t get a counteroffer,” said Delgado. “The sellers just ask for your highest and best bid. If you’re not prepared to send in your best bid the first day, you may as well stop looking.”

I see that evidenced every day in my own local market. One of my investors offered a reasonable bid on a bank-owned property.  Almost immediately we received a “final and best offer” form from the listing agent.  No word yet on whether he got the house or not.  I’ve got to go make a phone call now…