REOs, Foreclosures, Real Estate and Mortgage Blog

One thing I’ve noticed here in the central Ohio area is the sheer volume of homes that are sitting on the market either in default and still occupied by the homeowner , or ones that have already been taken back by the bank waiting to be released.

I drive around 400 miles a week (easily) all over Pickaway, Ross, Fairfield, Fayette and franklin counties doing BPOs for large banks and run into a high number of homes that are obviously vacant. What worries me is the possibility of these homes hitting the market at the same time. See, there’s a chance that mortgage rates COULD go back to where they were doing the end of the boom (6-7%) and this would KILL resales of properties.

I just ran the July 2010 vs 2009 report for ALL of central Ohio ,and it says that there have been 700 less sales in 2010 than 2009. August sales are down (781 vs 580) from August the 1st through 15th which is a pretty big drop in of itself.

It worries me that with slower home sales combined with a increase in mortgage rates, we’ll see a storm come that will wipe out what little recovery we’ve had.

I’ve been fighting on the same listing over the past 3 months about , first it started out with a gate access issue , then we finally got the key. I put a lockbox on the gate but now it seems someone has tampered with the box and changed the code to something else.

How frustrating is that?

Never the less, I can’t imagine being on the banks end ,fighting with a HOA over access issues to a common gate area. It’s awful because the property will likely sell within 30 days after I get the property listed.

As a agent in Central Ohio who does quite a bit of work in the Circleville, Ashville and Pickaway county areas, I make it my business to learn all I can about foreclosures.

This is why I’m so worried about foreclosures in the area, From all the resources (local government officials, the MLS , and personal data) I don’t see the number of foreclosures to be sold decreasing over the next few months or years, I see the supply as static or slowly increasing.

See, this is very worrysome to me as a agent, Circleville is a VERY small town with only 13,000 or so people in it, and when you have only several thousand homes in the town, a extra 10 foreclosures makes a HUGE impact on the market and causes the market to drag, and home prices to decrease a great deal.

Maybe i’m just a worrier, but the future of real estate sales bothers me quite a bit.

On my way back from doing a new disposolutions BPO , I had to go through the little town of Kingston Ohio to get back to my office.

I noticed something quite interesting…..Foreclosures, and alot of them to boot.

In fact, on main street alone I counted a total of 5 foreclosures on TWO BLOCKS! So , out of the maybe 25 to 30 homes I passed by , 5 of them had the nice little yellow sticker/vacant notice on the doors.

Out of these 5 homes, only 1 was listed by a company , the rest are still waiting to hit the market.

With the summer coming, and a slight increase in a normal market supply , 4 more foreclosures in a town that has maybe 20 listings a year would be HUGE , and granted that I only drove on one single street in Kingston , it’s quite disturbing. I’m sure that it’s not a stroke of luck these properties were on main street, the whole town could be full of them.

I hope everyone has money to buy

Makes you wonder if ML implode is right and we’re in serious trouble concerning foreclosures.

There’s alot to do with shadow inventory , however some of these properties never hit the market and end up in bulk portfolios of investors. In some cases they just keep trading hands at banks till someone gets a bailout.

Well , today I was in God’s country as they call it , over the mountains , through the woods back in a ‘holler’ (the actual name of the road did contain the word holler in it!’

Anyways , I was driving down a dirt road , back in the hills ,and noticed smoke up ahead. I thought “oh , maybe someone’s burning trash in their yard” as that’s a common thing in this area. I then realized that there were no houses around other than the one I was doing a BPO on for clearcapital outsourcing.

Along the dirt road was a heap of trash that someone made the choice to set ablaze, no one around to tend it , just sitting by its lonesome. From what I could tell , there were a few tires , paint cans , and all that type of stuff there.

I’m curious if maybe someone trashing out one of the many foreclosures in this holler decided that they’d save themselves, the EPA and the bank a bit of money and pile everything together and set it on fire. I realized then I was having a very special moment in life , and should take a few pictures of the fire as I drove by.

I wanted to share a little bit of insight into the world of mortgages, and try to inform everyone on the issue at large dealing with mortgages.

In the past , I’ve shared thoughts and feelings on the market melt down, and the housing bubble which you can find on my other blogs.

In this post, I wanted to show 2 simple scenarios, showing you how you can avoid being bit by the real estate market, and in a good market make a killing on the resale of your home.

Long story short – 30 year mortgages are scams, I say this as a real estate agent, and a private citizen. If you have a 30 year mortgage, you’re renting your house off of a lending institution , and not really owning the home yourself.

Here’s the sample scenario – A $100,000 home is purchased in 2010

Normally, when someone does not have cash to buy a home ,they get a loan on it, which they pay off over time. Currently, the most popular by far is the 30 year mortgage (I can’t tell you how many homes I’ve sold with 30 year mortgages), yet no one has had a interest in a 20 year mortgage.

Using a simple mortgage calculator I found here I entered the 2 sample mortgage scenarios , at 6% interest.

The payments of the mortgages came out as $599.99 per month with the 30 year mortgage, and $716 per month with a 20 year mortgage.

Now , most people pick the 30 year over the 20 year , seeing as how the payment is $116 less per month than the 20 year mortgage, and only see the benefit of the 20 year mortgage as “Ending payments sooner, which we’ll never likely ever see”.

See, most people really don’t plan on living in their houses for too long , 3-4 years maybe , the national statistic is actually 7 years before someone sells their home and moves somewhere else. This is where a huge issue starts to show itself in the 2 mortgage situations.

Using a standard mortgage amortization table, one will find that while paying on a 30 year loan , they will have a total balance of $89,639.39 , while the 20 year loan will have a equity of $77,475.17 , around a $12,000 difference in the payoff for the home.

A secondary thing to consider is , that with appreciation , the 20 year loan would likely have dropped PMI (Assuming the loan was no-down or a low-down loan). This could provide another $50 to $100 off per month of potential payments, offsetting the 20 year mortgage in itself.

Now , another thing to think about is what if the home the house is in drops in value? A 5% drop in home values for the individual with a 30 year loan would put them under water, after you include commissions, and other transfer costs, while the individual with a 20 year loan would have to see around a 15% drop in prices to be under water. This prevents one from having to perform a short sale, or loose their home in a tough market.

The numbers look even worse if you were to sell a home within 5 years, $93,054.36 on a 30yr loan versus $84,899.60 for the 20 year loan. A difference of $8,000 total.

Personally, I have a few 30yr loans, and a 15yr loan , and the 15yr loan , although a bit more per month than the 30yr for the same price , is well worth it as I’ve already paid off a large portion of the principal after only 3 years. This is compared to the 30yr loans I have , and in their 3rd year, have almost no principal paydown, which means I’m really just renting them from the bank.

This HSBC REO property that I have in pre-list has been a PAIN IN THE REAR!

It’s a great house , and I’m sure I can sell it quick , as it’s a nice little log cabin that shares a 60 acre common area with other cabins in the hocking hills area (That’s in Ohio).

So , I finally was able to actually reach the property , on foot no less for my ‘occupancy inspection’. When I reached the property I checked a few things.

Lights – No lights were on in the house , in fact , the electric panel had been removed, so there’s no power to the home at all.

Tire Tracks – We’ve had alot of rain and snow in the past few weeks , so normally with a property that’s occupied ,there will be somewhat fresh tire tracks, none were to be found on the property at all.

The door to the home had a notice from the county sheriff to vacate the premise , due to a foreclosure sale. Almost ANYONE will remove the notice when they find it , and it was dated 12-1-09 , so that was nearly 4 months ago, and still up.

Furthermore , there was a small tree that had sort of fallen over, and blocked the entrance to the home, which for me would make it quite hard to even get in the home’s doorway.

So , there’s 4 strike against whether or not the property was occupied or not.

That was 2 days ago , now today I get a mail from Safeguard , the company who is employed by the bank to take trash out , do a general cleaning and the like , they say that the home is occupied! According to a email I got a few hours ago , they talked to a neighbor who said that someone is currently living there!

So , needless to say , I’m a bit upset about it.

I go into many rural areas to complete BPOs (broker price opinions) for banks. Most of the time I’m never concerned with where I’m going to with the rare exception of when I’m going to particularly bad areas of Columbus, then I get worried a little bit.

Today I was doing a order for Citi Finance, and it was on a pretty rural area in an adjacent county.  While on the road of the subject property, I missed the property I was supposed to take pictures of , and went down the road to try and turn around. In the distance I noticed a bedsheet blowing in the wind, which seemed odd to me. I slowed down a bit, and realized that the bedsheet was being held down by a ribcage, which very much freaked me out.
Just a little bit later down the road,  I noticed several trash bags in the ditch as well , one of them had a tear in it, and it appeared to contain a small dog’s carcass.  I finally turned around a little bit later down the road, and came back……I counted a total half dozen dead animals (I realized what was in the bedsheet was of a very large dog).

Then I saw it…….What appeared to be a large rottweiler dog , dead (but recently killed) in the ditch , it appeared to be torn quite badly.
On the way back to the office , I sort of came to the conclusion I ran into a dumping ground for animals from (possibly) local dog fighting rings.  I’m going to call the county sheriff and report it to them, I know there’s not alot they can do , but maybe it’ll do something. This all of course is a reminder , that when you go looking at homes, be careful , especially with foreclosures, you’ll never know what you’ll run in to.

This is a little article I figured I’d post up , since the goal of this blog is to help real estate agents as well as consumers, I figure I should provide something of value to the real estate agent readers of the blog.

Anyways, many agents who are involved with selling foreclosures are required by banks to fill out BPO forms to provide the bank the value of the property in their portfolio , either for sale , or just as a general valuation.

Never the less, I’ve found that completing BPOs can be a very daunting task , in terms of investment of time for simple data entry. It takes me something like 15 minutes per order to complete a BPO’s data entry task (Copying data from the MLS and putting it into the BPO form).
There’s a few sites out there that provide software on how to do this yourself, however there are quite a few sources out there for a do-it-yourself method.  The biggest problem with automation of BPO forms is that every BPO/REO company is different concerning their forms, as well as each MLS system is different. This can be solved by the use of macros, as macros manipulate your computer, to do repetitive tasks over and over again (Copying information from one area, pasting to a second area.)

First , go download autohotkey , which comes with a great recording program called AutoScriptWriter , this program allows you ‘train’ the program to follow your commands.

Now , I will say this , it will take trial and error to record a BPO script, HOWEVER , the time savings would be immense , as I’ve been able to reduce BPO entry times from 15 minutes down to approximately 3 minutes using this program. For those of you who use data entry workers, this could replace the use of a worker or two , if you still pull your own comparables.

Auto Hot Key works by ’scripting’ repetitive actions that take place in your browser window. In my case , I use separate tabs , one MLS tab, one BPO tab , and copy paste the requirement tabs to each desired group.

In some cases , the BPO tabs may change positions, so you can hit the [tab] button on your key board to scroll through the data positions , sometimes this is required.

It takes some trial and error to get done just right , however when you do it , you can have a full BPO automation program that will chew through a BPO in less than 3 minutes (given you have your comps selected).

Many people ask what you should look for (or have as qualifiers) concerning rental properties.

There are many rules that I go by , but these seem to hold true.

#1 – Determine median pricing for the various types of units in the area. This could include single-family homes, as well as multi-family (apartments) , duplexes, triplexes and quads.

These will be on a per-bedroom basis, you will also want to consider amenities such as a large yard, washer and dryer, low cost of energy , ect.

For this scenario, I’ll be using the typical 3br single family home in my part of Ohio , which goes for just around $700 per month.
#2  Now that I’ve determined my average market pricing for a 3 bedroom rental, I’ll use a very simple calculation to figure out my max pricing. I take the monthly rent ($700) and divide by .015 (One and a half percent).  This comes out to $46,666 total purchase price.

This rule isn’t always set in stone, but I use it as a quick gauge to tell how good of a investment it will return.