My first 3 years of being a real estate agent were HUGE when it came to learning. I had the privilege of being an agent for Dan Kubinski at Crowned Eagle Realty. At Crowned Eagle, Dan and Alex Manitzas (combined over 40 years experience) taught me everything I know today about foreclosures – and of course a lot of it was trial and error on my part. Once our company was selected to be a HUD Home listing brokerage for the US Dept. of HUD, things got really busy!! Starting in 2011, I was able to list over 90 HUD properties spanning from, Poteet, Victoria, Floresville, Lytle, Seguin, San Antonio, New Braunfels, San Marcos, Kyle, Buda, Austin, Pflugerville, Bastrop, Lockhart, Luling, Llano, Bertram, Liberty Hill, Cedar Park, Leander, Round Rock, Blanco, Dripping Springs – whew I was everywhere! I am forever thankful for that opportunity. As you can imagine, I got a tiny piece of every market in Central Texas on the fly. Being in this REO/Foreclosure/HUD Home niche gave me insights into a realm of real estate that would normally take people years to learn. They say you become an expert once you approach 10,000 hours of doing something and it certainly felt that way.
Why was I everywhere and why the foreclosure specialization?
Long story short, foreclosures are indiscriminate. They happen to all walks of life for any reason: medical bills, death in a family, loss of employment, divorces, etc…They happen in any neighborhood at any time. I wasn’t a “farming” agent where I was the expert in just one area. Think of me as an expert of Central Texas! Anyhow, once a foreclosure is enacted by a lender, there is not much an agent can do. The sheriff/constable will go to the property by order of a judge on behalf of the lending institution, place a notice on the door, and order the inhabitants to leave. It’s a tough situation. However, as an agent it’s my job to make sure these homes sell after vacating. Why? While I respect the devastating effects a foreclosure can have on a family, the longer a foreclosure sits in a neighborhood vacant, generally the home values in that neighborhood will drop. That foreclosure sits there collecting dust, in disrepair, and vandalized in some markets (I’ve had to fill paperwork on that kind of stuff before). Multiply that drop in value by a few thousand foreclosures in all of America and you can see how the market crash in 2008 was devastating for the economy. Foreclosure sales was definitely a niche market in real estate. It’s not for everyone and not every real estate agent is created equal. The path from contract date to close was sometimes difficult for the parties involved – but at the end of the day they were GREAT deals with INSTANT EQUITY!!
Common Foreclosures/REO (Real Estate Owned) Found on the Austin Market:
- HUD Homes
- Fannie Mae
- Freddie Mac
- Bank Foreclosures
The U.S. Department of HUD was the single largest seller of homes in the United States last year (around 70,000 homes). A HUD home is a property that was originally purchased with a government insured FHA loan. If an owner defaults on this loan, the house will go into auction at the county courthouse steps on the 1st Tuesday of the Month (here in Texas). If it doesn’t sell there (and most times it doesn’t) the U.S. Department of HUD takes possession of the property, get’s it ready for listing, and eventually hands it over to a real estate brokerage to list in the area market.
Putting an offer on a HUD Home is simple. It’s an online, sealed bid placed by your agent where no one knows who is bidding and how much. Only the winner will be notified the next day after bid deadline. Only owner occupants (people who intend to occupy a home) are allowed to place offers on a HUD Home during the first 30 days of it being on the market. I can only assume that this is the government’s effort to increase home ownership. If the property is still available after 30 days, investors will be allowed to make offers. Offers are taken the first 10 days and an acceptable offer (deemed acceptable by HUD) will be selected on the 11th day. If the property is still on the market after the 10 day period, then the deadline to place an offer will be 11:59pm on that night – at which point HUD labels this bid deadline as “DAILY.”
Fannie Mae and Freddie Mac Foreclosures
Fannie Mae and Freddie Mac are similar but not the same. That’s why I group them together. They are separate entities. However, as a result of the market crash in 2008, these two mortgage and securities companies were subsidized by the Federal Government and taken over as part of the agreement. That being said, they are still separate, and are different from HUD Properties. Both entities offer a 15 day ‘first look’ period, where only owner occupants can submit offers. If the home isn’t under contract after the 15 day period, then investors are allowed to submit offers as well. More often than not, I see these properties sell closer to their list price, and closer, if not above, market value in a down market. In my experience, these homes are usually in better shape than your typical foreclosure. That might suggest why they are sold closer to market value. Fannie Mae is also known as Homepath loans and Freddie Mac Homesteps…they offer a varying degree of financing options and down-payment options. Check with www.homepath.com and www.homesteps.com to see the latest offers, as they periodically change. The process to submit offers on these properties is similar to a regular home transaction utilizing the common One to Four Residential contract promulgated in Texas by the Texas Real Estate Commission (TREC). Unlike HUD Homes, these are not sold in a sealed bid process. However, some properties are being transitioned to online offers.
Bank foreclosures are those that are held and for sale by a bank (via a realtor in most cases). This could be any bank…Bank of America, Wells Fargo, CITI, “ABC” Mortgage, “ABC” Bank, you name it. Each institution will have different processes in which a buyer can go about and purchase. A lot of times financed offers will require buyers to get a pre-approval/pre-qualification from the lender/bank that is selling the property. That doesn’t always mean buyers have to ultimately go through that bank. These listings can be in horrible condition, while some are move-in ready. It all depends. In my opinion these used to be the most common foreclosure in the Austin market. However, they are a rare find these days. Many banks are now holding on to foreclosures, or revising their policy on evictions. I’ve also heard/read that banks are working more closely with homeowners to avoid foreclosure.
I’ve been seeing more and more of these for sale. I’ve actually won a bid war/auction on these for a client in the past. Unfortunately, the property was in too bad of shape to appraise for my client’s loan. In fact, ALL of these properties that I’ve visited through the year were in great disrepair. This site was once known as OCWEN – an online foreclosure auction site/company. I always thought of this as the eBay of foreclosure sales. The bids buyers place on these properties are displayed live online for the whole world to see. In my opinion this raises the sale price and forces people to pay more than they have to just to win.
Austin Area Foreclosure Stats
This graph depicts the foreclosure market in the Austin TX Area. In January 2011 there were around 700 foreclosure listings. That number was down to just below 400 in January of 2012, and now down to 300 in November of 2013. This is a major difference in total listings in real estate terms. Also notice that Close Price to List Price Ratio…the higher that number is to 100% or more, the more people are paying for a foreclosure relative to its list price. In other words, according to the stats as the number of active foreclosure listings went down, the closer buyers paid to the list price, and sometimes higher, just to buy a foreclosure. To me that’s a perfect depiction of what’s happening in the Austin Real Estate Market all around! Less listings, and higher sold prices.
About how many of what type of foreclosure made up the foreclosure market in Austin in the last 2 years?
- HUD Homes: 1700
- Bank Foreclosures: 2,100
- Mortgage Co. (Fannie and Freddie): 1,100
-That concludes my Foreclosure report. Thank you for reading this latest blog on foreclosures.
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