So, where ARE all those foreclosures?

According to the National Press,  foreclosures are abundant and property seekers can pick up a home of their choice for a real ‘deal’!

If this is so,  why are there so many buyers still waiting for property prices to come down?  Why haven’t they already purchased those ‘deals’?

The fact of the matter is that no matter what the Press says,  there are not as many foreclosures as we are led to believe.

“Half the state’s default activity is concentrated in 293 zip codes, almost all of which are in the Inland Empire and Central Valley. Grouped together, those zip codes saw year-over-year home price increases that reached 34.0 percent in first quarter 2005. Prices peaked in third-quarter 2006 at $399,000. Last quarter’s median of $352,250 is 11.7 percent off that peak.

In the 1,172 other zip codes, appreciation peaked in second-quarter 2004 at 25.0 percent. Last quarter’s median of $575,000 was 2.5 percent below the prior quarter’s peak of $590,000.”

SO DESPITE WHAT THE PRESS REPORTS,  ORANGE COUNTY (and in particular, Huntington Beach), IS NOT IN AS BAD A SHAPE AS WE ARE LED TO BELIEVE. One wonders why the Orange County Register paints the whole of Southern California so black, when the whole State’s foreclosures only occurred in 25% of the zip codes!

Let’s understand the foreclosure process:

When a home owner defaults on their mortgage payments,  it can be up to three months before Notice of Default (NOD) is issued.  At this time,  the NOD is to advise the home owner that the lender intends to foreclose – or take back the property, UNLESS the payments are caught up.

At this stage,  the home owner can still put the loan payments right by catching up on default payments, although, once a loan is three months in arrears,  it is very difficult for the home owner to come up with that money (Realistically,  if the home owner had that kind of money,  they probably wouldn’t have defaulted in the first place).

Usually, a property goes from NOD to foreclosed status three weeks after NOD has been issued.  During the NOD period,  it is possible for the home owner to sell the property, in order to avoid foreclosure,  however, many home owners remain in denial and pray that the money will miraculously appear to save their property!

During the NOD period there are five options open to the home owner:

1)  Catch up the arrear payments
2)  Find a really good Realtor to sell the property FAST – this usually involves pricing the property below market value in order to move it quickly,
3)  Send the property to Auction
4)  Sell the property as a Short Sale, or
5)  Allow the property to go to foreclosure.

In the next Blog,  we will discuss the difference between Foreclosure and Short Sales,  but for now,  let’s just say that the situation is not as bleak as the Press makes it seem.  Are there home owners who have to get out from under an ‘upside-down’ loan (where the amount owed is more than the market value of the property)?  Yes!  Are there home owners whose sub-prime mortgage payments have hiked (in some cases they have trebled), causing them financial hardship?  Absolutely!  Are there ways to overcome the adverse effects of losing one’s home?  Very definitely!

The first step in the recovery process is to accept that there is a problem – without this,  the property will most assuredly go to foreclosure.

The mere fact that there are not as many foreclosures as the Press alledges, is evidenced by the fact that there is more than one way to get out from ‘under’.

As consumers, newspaper readers must first accept that when the Press talks about foreclosures,  they are talking about not only foreclosures,  but also NOD’s and Short Sales and all three of these are very different in nature.

More in our next Blog!

Rose-Marie & Althea
(Star Real Estate)

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