Tsunami of Bank Owned Homes. Is it Real?

For about three years now, we in the real estate industry have been hearing there is tsunami of bank owned homes coming on the market. Earlier this year, REO agents I know, had asset managers telling them to "get their running shoes on" because there were a bunch of bank owned homes to be released. Well, bank owned assignments and listing have actually declined. So then the question becomes, "what about the shadow inventory?" The homes that are owned by the bank, but not on the market? Or even a bigger number, the homes that are in the foreclosure process that could turn into bank owned? I did some research in Rocklin to get my arms around the numbers and here's what I found out:

- There are 175 bank owned homes in Rocklin and 42 for sale or pending sale. That leaves 133
- There are 400 homes in pre-foreclosure and auction status and 215 for sale or pending sale. That leaves 185.
- So, there is 348 home of "shadow inventory" in Rocklin.
- Over the past six months, about 80 homes have sold per month. That means, if all 348 homes were placed on the market today, they would be absorbed in just over 4 months at the current rate. That is still technically a "seller's" market. Sis months or more supply is considered a "buyer's" market.
- One caveat pointed out by my friend in the commercial world, Ross Tolbert. These numbers do not include those that are behind in their payments but the bank has not started the foreclosure process, i.e., the shadow of the shadow.

So where is the tsunami? This graph below shows bank owned homes in Rocklin for sale and sold over the past five years.

This shows that clearly, the tsunami of bank owned homes hit in 2007 and 2008 in Rocklin. There was a little wave in 2010. Is the worst of it over then? Well, experts predict we will have short sales through 2014 to 2015. We will certainly still have foreclosures and bank owned homes released. However, if the current pace continues, it will not make a material impact on values. I checked these numbers about two years ago and there was 6 months supply, so things have actually improved.

Here's the thing, some of you need to move. Renters can buy and pay less than they are in rent. Every one's situation is unique, so don't listen to the media. Talk to real estate professional like me. We likely have the "real" story of what is going on. 916-213-4522. bob.walatka@kw.com

Loan Mods, Short Sales, Foreclosures - Oh My!

For the past several years, we have been helping out people that are underwater in their homes, can't afford the payments and at risk of foreclosure. This whole foreclosure monster was virtually non-existent a few years ago and now most home owners to need to have some basic knowledge about it. We do hear similar questions when owners are facing foreclosure or considering a short sale. "Can the bank come after me for the deficiency? Can they go after other assets? Will there be tax consequences?" In almost all cases, the answer is "maybe." However, there are some simple answers to each of those questions.

"Can the bank come after me for the deficiency?" In California, on the first loan, whether short sale, foreclosure, primary residence or investment, purchase money or refi, the answer is "NO." The law was clarified effect January 1, 2011. If you have a second loan, the answer is maybe. If purchase money, no. If a refi...well...Alex Munn of BPE Law Group will give you the straight answer. And he will be at a FREE workshop on June 30. Click here for more info.

"Can they go after other assets?" California is a single recourse state, meaning they can go after you or the property. 99.9% of banks use a non-judicial foreclosure because it is easier and less costly. In that process, they take the house...and that's it. The deed of trust that you signed to get the loan and the house basically say "as long as you make the payments, you keep the house. If you stop making payments, the bank gets the house." Find out more at our seminar.

"Will there be tax consequences?" Thanks for the debt forgiveness act of 2007 good through the end of 2012, the IRS will not tax you for the forgiven debt on your primary residence in a short sale or foreclosure. Same is true of California. On income property, it gets tricky. There will be a forgiven debt that could be taxable, but you also probably experienced a loss on the property. The two could like offset or even result in a loss for tax purposes. We will have a tax expert, Dona Riolo at our seminar as well, to address the most common tax questions related to short sales and foreclosures. Click here and sign up.