FINDING & BUYING FORECLOSURES    with Foreclosure Market Outlook
What we’ll cover today • What is RealtyTrac? • What is ‘Foreclosure?’ • Why Buy a Foreclosure? • The 3 Foreclosure-Buying ...
A BRIEF INTRODUCTION TO REALTYTRAC
WHO RELIES ON REALTYTRAC DATA©RealtyTrac Inc. 2012, Not for Distribution       4
WHO RELIES ON REALTYTRAC DATA©RealtyTrac Inc. 2012, Not for Distribution       5
WHAT IS ‘FORECLOSURE?’
Foreclosure Overview         What is ‘Foreclosure?’         •Foreclosure is a process that allows a lender to recover the ...
MOTIVE: WHY BUY A FORECLOSURE?
REASON 1: AVAILABILITY      Nearly 1.5 million U.S. properties in some stage of foreclosure  REO inventory   REO inventory...
AND MORE COMING     3.2 million U.S. delinquent mortgages10
EVEN MORE POTENTIAL DISTRESS                12.5 million mortgages seriously underwater©RealtyTrac Inc. 2012, Not for Dist...
DON’T MISS OUT                                                  23 percent of all                                         ...
MORE DISTRESSED SALES                  Short sales that closed before aa                   Short sales that closed before ...
BIGGER INCREASES IN SOME STATES©RealtyTrac Inc. 2012, Not for Distribution         14
REASON 2: POTENTIAL SAVINGS/PROFIT                      Average price of these foreclosure-                       Average ...
DISCOUNTS VARY BY MARKET©RealtyTrac Inc. 2012, Not for Distribution   16
BUT PRICES RISING – A GOOD THING©RealtyTrac Inc. 2012, Not for Distribution          17
REASON 3: LESS COMPETITION •      Only about 20 percent of properties in the foreclosure        process are already listed...
THE 3 FORECLOSURE-BUYING OPPORTUNITIES
THE 3 STAGES OF FORECLOSURE©RealtyTrac Inc. 2011, Not for Distribution     20
PRE-FORECLOSURE                •       Contact the owner to make offer                •       Purchase from “distressed” h...
SAMPLE PRE-FORECLOSURE HOME                                                   List price is above                         ...
FORECLOSURE AUCTION                •       Purchase at public auction                •       Contact trustee to verify auc...
SAMPLE AUCTION HOME                                                List price is $10,000                                  ...
BANK OWNED                •      Work with listing agent if listed                •      Contact bank to make offer       ...
SAMPLE BANK-OWNED HOME                                                The list price for this                             ...
FORECLOSURE MARKET OVERVIEW, OUTLOOK
PAST THE PEAK NATIONWIDE                          March 2010 was absolute peak                          March 2010 was abs...
5+ YEARS ELEVATED FORECLOSURES     •   From January 2007 to Aug 2012 nationwide     •   More than 9 million foreclosure st...
REO DECLINES DRIVING DECREASES                                              22 straight months                            ...
REOS REBOUNDING IN SOME STATES©RealtyTrac Inc. 2012, Not for Distribution        31
AND A RECENT JUMP IN STARTS                                                66Percent Increase in                          ...
STATES WITH BIG INCREASES©RealtyTrac Inc. 2012, Not for Distribution   33
IMPLICATIONS     •   Fewer opportunities to buy bank-owned in the short         term except in some select states     •   ...
DISPOSING OF DISTRESS: REO SALES                               REO sales decreased 31                                REO s...
DISPOSING OF DISTRESS: REO SALES                                                REO price increased 10                    ...
REO SALE ACTIVITY SUMMARY•    From Q1 2007 to Q2 2012•    More than 2.7 million REO sales nationwide•    Average REO sales...
DISPOSING OF DISTRESS: SHORT SALES                               Pre-foreclosure sales hit 3-yea                          ...
DISPOSING OF DISTRESS: SHORT SALES                                          Short sale discount hit all-time              ...
SHORT SALE ACTIVITY SUMMARY From Q1 2007 to Q2 2012 •More than 1.9 million pre-foreclosure sales nationwide •Average pre-f...
FORECLOSURE MARKET OUTLOOK•    Foreclosure activity in late 2012 and into 2013 will     continue to increase off artificia...
PRICES AND PRICING SETTING STAGE•    Average price of foreclosures up in some areas, in part     because of artificially l...
BUYERS & INVESTORS READY• “Investors are back, they’re paying cash, they’re excited about  the deals they’re getting and t...
MORE INVESTOR PERSPECTIVES “It’s easier to get short sales than REOs.The banks just are not releasing the properties on th...
BEST MARKETS FOR BUYING FORECLOSURES
BEST MARKETS FOR FORECLOSURES©RealtyTrac Inc. 2012, Not for Distribution       46
BEST MARKETS FOR FORECLOSURES©RealtyTrac Inc. 2012, Not for Distribution       47
BEST BANKS TO BUY FROM
BEST BANKS TO BUY REOS FROM                                              1: Ally Financial (Formerly GMAC)                ...
BEST BANKS FOR SHORT SALES                                              1. PNC Financial Group                            ...
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Finding & Buying Foreclosures for IRA Investors

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Presentation given by RealtyTrac Vice President Daren Blomquist at Equity Trust Networking Conference in Orlando, Fla., on Sept. 28, 2012.

Covers the basics of finding and buying a foreclosure and provides a foreclosure market outlook for the remainder of 2012 and into 2013.

Published in: News & Politics
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Finding & Buying Foreclosures for IRA Investors

  1. 1. FINDING & BUYING FORECLOSURES with Foreclosure Market Outlook
  2. 2. What we’ll cover today • What is RealtyTrac? • What is ‘Foreclosure?’ • Why Buy a Foreclosure? • The 3 Foreclosure-Buying Opportunities • Foreclosure Market Overview & Outlook • Best Markets for Buying Foreclosures • Best Banks to Buy From©RealtyTrac Inc. 2012, Not for Distribution 2
  3. 3. A BRIEF INTRODUCTION TO REALTYTRAC
  4. 4. WHO RELIES ON REALTYTRAC DATA©RealtyTrac Inc. 2012, Not for Distribution 4
  5. 5. WHO RELIES ON REALTYTRAC DATA©RealtyTrac Inc. 2012, Not for Distribution 5
  6. 6. WHAT IS ‘FORECLOSURE?’
  7. 7. Foreclosure Overview What is ‘Foreclosure?’ •Foreclosure is a process that allows a lender to recover the amount owed on a defaulted loan by selling or taking ownership (repossession) of the property securing the loan. When does foreclosure begin? •The foreclosure process begins when a borrower/owner defaults on loan payments (usually mortgage payments) and the lender files a public default notice, called a Notice of Default or Lis Pendens.©RealtyTrac Inc. 2012, Not for Distribution 7
  8. 8. MOTIVE: WHY BUY A FORECLOSURE?
  9. 9. REASON 1: AVAILABILITY Nearly 1.5 million U.S. properties in some stage of foreclosure REO inventory REO inventory represents 16- represents 16- month supply at month supply atcurrent REO sales current REO sales pace pace9
  10. 10. AND MORE COMING 3.2 million U.S. delinquent mortgages10
  11. 11. EVEN MORE POTENTIAL DISTRESS 12.5 million mortgages seriously underwater©RealtyTrac Inc. 2012, Not for Distribution 11
  12. 12. DON’T MISS OUT 23 percent of all 23 percent of all residential sales in the residential sales in the second quarter were second quarter were properties in properties in foreclosure or bank foreclosure or bank owned owned©RealtyTrac Inc. 2011, Not for Distribution 12
  13. 13. MORE DISTRESSED SALES Short sales that closed before aa Short sales that closed before property started the property started the foreclosure process increased foreclosure process increased 18 percent from 2011 to 2012 18 percent from 2011 to 2012©RealtyTrac Inc. 2012, Not for Distribution 13
  14. 14. BIGGER INCREASES IN SOME STATES©RealtyTrac Inc. 2012, Not for Distribution 14
  15. 15. REASON 2: POTENTIAL SAVINGS/PROFIT Average price of these foreclosure- Average price of these foreclosure- related sales subtracted from average related sales subtracted from average price of non-foreclosure sales. price of non-foreclosure sales.©RealtyTrac Inc. 2011, Not for Distribution 15
  16. 16. DISCOUNTS VARY BY MARKET©RealtyTrac Inc. 2012, Not for Distribution 16
  17. 17. BUT PRICES RISING – A GOOD THING©RealtyTrac Inc. 2012, Not for Distribution 17
  18. 18. REASON 3: LESS COMPETITION • Only about 20 percent of properties in the foreclosure process are already listed for sale • Only about 15 percent of bank-owned properties are listed for sale • The foreclosure auction is not for many buyers (more about that later) • Condition of some foreclosures turns off many buyers©RealtyTrac Inc. 2012, Not for Distribution 18
  19. 19. THE 3 FORECLOSURE-BUYING OPPORTUNITIES
  20. 20. THE 3 STAGES OF FORECLOSURE©RealtyTrac Inc. 2011, Not for Distribution 20
  21. 21. PRE-FORECLOSURE • Contact the owner to make offer • Purchase from “distressed” homeowner • Often short sales (but not always) • Average discounts of 26 percent in second quarter • More than 600,000 on RealtyTrac©RealtyTrac Inc. 2012, Not for Distribution 21
  22. 22. SAMPLE PRE-FORECLOSURE HOME List price is above List price is above estimated value, but estimated value, but the property has been the property has been in foreclosure for 323 in foreclosure for 323 days so the owner and days so the owner and lender may be willing to lender may be willing to deal. deal. The loan history shows The loan history shows three outstanding loans three outstanding loans on the property, which on the property, which may make aashort sale may make short sale more difficult. more difficult.©RealtyTrac Inc. 2012, Not for Distribution 22
  23. 23. FORECLOSURE AUCTION • Purchase at public auction • Contact trustee to verify auction dates • Often requires full payment in cash • High risk, high reward • More than 300,000 on RealtyTrac©RealtyTrac Inc. 2012, Not for Distribution 23
  24. 24. SAMPLE AUCTION HOME List price is $10,000 List price is $10,000 below estimated below estimated market value, but market value, but auction date is not until auction date is not until Oct. 10 Oct. 10©RealtyTrac Inc. 2012, Not for Distribution 24
  25. 25. BANK OWNED • Work with listing agent if listed • Contact bank to make offer • Be persistent if not listed • Submit offers online • Average discount of 37% in second quarter • More than 500,000 on RealtyTrac©RealtyTrac Inc. 2012, Not for Distribution 25
  26. 26. SAMPLE BANK-OWNED HOME The list price for this The list price for this duplex is $12,000 below duplex is $12,000 below estimated market value, estimated market value, and the property has and the property has been bank owned for been bank owned for 105 days 105 days More details about how More details about how to purchase this Freddie to purchase this Freddie Mac property is in the Mac property is in the listing description listing description©RealtyTrac Inc. 2012, Not for Distribution 26
  27. 27. FORECLOSURE MARKET OVERVIEW, OUTLOOK
  28. 28. PAST THE PEAK NATIONWIDE March 2010 was absolute peak March 2010 was absolute peak with rolling average of 336,909 with rolling average of 336,909 total foreclosure filings total foreclosure filings28
  29. 29. 5+ YEARS ELEVATED FORECLOSURES • From January 2007 to Aug 2012 nationwide • More than 9 million foreclosure starts • These can be NODs, foreclosure lawsuits or scheduled foreclosure auctions, depending on the state • Nearly 4.5 million completed foreclosures • These are REOs, or properties repossessed by the lender through foreclosure • More than 1.9 million pre-foreclosure sales • Typically short sales or sales at foreclosure auction29
  30. 30. REO DECLINES DRIVING DECREASES 22 straight months 22 straight months of year-over-year of year-over-year declines starting in declines starting in November 2010 November 2010©RealtyTrac Inc. 2012, Not for Distribution 30
  31. 31. REOS REBOUNDING IN SOME STATES©RealtyTrac Inc. 2012, Not for Distribution 31
  32. 32. AND A RECENT JUMP IN STARTS 66Percent Increase in Percent Increase in Q2 2012 first annual Q2 2012 first annual increase since the increase since the fourth quarter of fourth quarter of 2009 2009©RealtyTrac Inc. 2012, Not for Distribution 32
  33. 33. STATES WITH BIG INCREASES©RealtyTrac Inc. 2012, Not for Distribution 33
  34. 34. IMPLICATIONS • Fewer opportunities to buy bank-owned in the short term except in some select states • But increase in foreclosure starts mean more short sales in the next six to 12 months and more REOs in next 12 to 18 months34
  35. 35. DISPOSING OF DISTRESS: REO SALES REO sales decreased 31 REO sales decreased 31 percent from aayear ago in the percent from year ago in the second quarter of 2012 second quarter of 201235
  36. 36. DISPOSING OF DISTRESS: REO SALES REO price increased 10 REO price increased 10 percent annually in second percent annually in second quarter, biggest increase quarter, biggest increase since Q3 2008 since Q3 2008©RealtyTrac Inc. 2012, Not for Distribution 36
  37. 37. REO SALE ACTIVITY SUMMARY• From Q1 2007 to Q2 2012• More than 2.7 million REO sales nationwide• Average REO sales price nationwide spiked 10 percent in Q2 from year ago, but still down 22 percent from peak in Q2 2008• Average REO sales price in Q2 2012 was $155,892, 37 percent below average non-foreclosure price• Accounted for 12 percent of all sales in Q2 201237
  38. 38. DISPOSING OF DISTRESS: SHORT SALES Pre-foreclosure sales hit 3-yea Pre-foreclosure sales hit 3-yea high in first quarter of 2012 high in first quarter of 201238
  39. 39. DISPOSING OF DISTRESS: SHORT SALES Short sale discount hit all-time Short sale discount hit all-time high in second quarter high in second quarter©RealtyTrac Inc. 2012, Not for Distribution 39
  40. 40. SHORT SALE ACTIVITY SUMMARY From Q1 2007 to Q2 2012 •More than 1.9 million pre-foreclosure sales nationwide •Average pre-foreclosure sales price decreased 1 percent in second quarter from year ago and was down 28 percent from peak in Q1 2007 •Average pre-foreclosure sales price of $185,062, 26 percent below the average price of non-foreclosures •Pre-foreclosure sales accounted for 11 percent of all sales in Q2 201240
  41. 41. FORECLOSURE MARKET OUTLOOK• Foreclosure activity in late 2012 and into 2013 will continue to increase off artificially low levels of 2011 and early 2012 – but not in every market.• Foreclosure activity will not return to the peak of 2010 (depending on market), and foreclosure activity will resume its downward trend in 2013.• Biggest increases will come in states with the biggest backlogs created in 2011: Florida, Maryland, Massachusetts and eventually even New Jersey and New York41
  42. 42. PRICES AND PRICING SETTING STAGE• Average price of foreclosures up in some areas, in part because of artificially limited supply • Detroit foreclosure sales prices up 18 percent • Miami foreclosure sales prices up 9 percent • Phoenix foreclosure sales prices up 18 percent• Lenders are pricing bank-owned and short sales more aggressively • “We’re pricing things to sell.We’re not holding onto anything thinking that values are going to come back … I don’t think anybody is in that mode. … It’s almost like you have to price properties to sell or your inventory is going to explode.” – Executive with mortgage servicer in Wisconsin whose company services mortgages nationwide.42
  43. 43. BUYERS & INVESTORS READY• “Investors are back, they’re paying cash, they’re excited about the deals they’re getting and they’re buying multiples” – Kandy Clayton, broker/owner at Clayton & Associates Real Estate in Sandy, Utah• “We have a backlog of buyers we are working with that just cant find the right home based on the homes that continue to come to market.  2012 will be a nice turnaround year and once interest rates begin to rise we believe many of these buyers will come off the fence and make a move before this market changes.” – Ian Whitelaw, broker/owner at Central Properties Group in Oakland County, Mich. 43
  44. 44. MORE INVESTOR PERSPECTIVES “It’s easier to get short sales than REOs.The banks just are not releasing the properties on the market. It’s an artificial supply shortage.With short sales they are more willing to deal.” – Bill Bronchick, president, Colorado Association of Realtors “I don’t care about retail. I’m buying cash flow and return. I buy cap rates.We’re buying at 2001 and 2002 levels.” -- Dan Valentine, investor in Phoenix©RealtyTrac Inc. 2012, Not for Distribution 44
  45. 45. BEST MARKETS FOR BUYING FORECLOSURES
  46. 46. BEST MARKETS FOR FORECLOSURES©RealtyTrac Inc. 2012, Not for Distribution 46
  47. 47. BEST MARKETS FOR FORECLOSURES©RealtyTrac Inc. 2012, Not for Distribution 47
  48. 48. BEST BANKS TO BUY FROM
  49. 49. BEST BANKS TO BUY REOS FROM 1: Ally Financial (Formerly GMAC)  Avg. REO Sales Price: $60,254  Avg. Percent Savings: 60%  Avg. Time to Sell: 104 days 2: Wells Fargo  Avg. REO Sales Price: $83,530  Avg. Percent Savings: 43 %  Avg. Time to Sell: 157 days 3: Citigroup  Avg. REO Sales Price: $68,406  Avg. Percent Savings: 49%  Avg. Time to Sell: 167 days 4: U.S. Government  Avg. REO Sales Price: $93,941  Avg. Percent Saving: 30%  Avg. Time to Sell: 187 days 5. JPMorgan Chase (Tie)  Avg. REO Sales Price: $98,864  Avg. Percent Savings: 41%  Avg. Time to Sell: 203 days 5. Bank of America (Tie)  Avg. Sales Price: $120,801  Avg. Percent Savings: 27%  Avg. Time to Sell: 187 days©RealtyTrac Inc. 2012, Not for Distribution 49
  50. 50. BEST BANKS FOR SHORT SALES 1. PNC Financial Group Avg. Pre-Foreclosure Sales Price: $133,015 Avg. Percent Discount: 40% Avg. Days to Sell: 151 2. Government Entities (Fannie, Freddie Mac, HUD) Avg. Pre-Foreclosure Sales Price: $127,618 Avg. Percent Discount: 42% Avg. Days to Sell: 154 3. Ally Financial (Formerly GMAC) Avg. Pre-Foreclosure Sales Price: $143,410 Avg. Percent Discount: 35% Avg. Days to Sell: 188 4. Ocwen Financial Avg. Pre-Foreclosure Sales Price: $126,071 Avg. Percent Discount: 43% Avg. Days to Sell: 168 5. Sun Trust Banks Avg. Pre-Foreclosure Sales Price: $151,308 Avg. Percent Discount: 32%        Avg. Days to Sell: 207 6. Bank of New York Mellon Avg. Pre-Foreclosure Sales Price: $155,488 Avg. Percent Discount: 30% Avg. Days to Sell: 283 7. Bank of America Avg. Pre-Foreclosure Sales Price:  $166,389 Avg. Percent Discount:  25% Avg. Days to Sell:  223©RealtyTrac Inc. 2012, Not for Distribution 50

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