Foreclosure’s are increasing in Pasadena. The map below indicates properties in some stage of the foreclosure process. The colors represent what category the property is in. A green pin means that the property is in the “preforeclosure” stage. A notice of default has been filed informing the owner that unless the debt is brought current the bank will proceed to auction. The blue marker indicates that an auction date has been set while the green depicts the bid at the auction was not acceptable to the bank, and the property did not sell. The bank has now repossessed the property.

More Activity in North Pasadena

Most of the foreclosed property seems to be north of the 210 freeway and more heavily confined to the zip codes 91103 and 91104. Approximately 31.5% of the properties are located in 91103 and 26% are located in 91104. Sellers who are trying to sell thier homes in these areas are finding the process more difficult. Things have tough already, and now they are competing with all of these other distressed properties that are having a negative effect on home values.

A Growing Number

Since I first reported on the area foreclosure activity in November the numbers have grown by about 27%. As an example, we reported 78 properties in “foreclosure” in zip code 91103, and now the number has risen to 104, and in zip code 91104, it went from 71 to 86 this month. We will probably see these numbers continue to grow as many adjustable rates begin to reset. Also the sales volume was very cyclical in the past two years. By that I mean the Spring selling season would typically begin late March and early April. Add a 30 day escrow period and many homes would transfer possession in May. Begin to look for a spike in April or May as these anniversary dates appear.

Single Family Most Common

Single family homes comprise the greatest amount of properties in the foreclosure process. There are 212 single family properties making up 65% of the total. This is followed by condo’s/town homes with 57 units or 17% and then by multi-family units. Multi-family units are defined as 2 or more units.

When a property owner becomes delinquent in their house payments they can attempt what is known as a short sale. A short sale indicates that the proceeds of the sale will not cover the debt on the house, indicating the lender will be taking a loss. The question then becomes how much loss is a lender willing to accept? Or is the lender likely to make more money by allowing the house to be foreclosed on and take it to auction?

Negative Equity

If a home was purchased in the last couple of years, there may be a chance that the house is worth less today than it was at the time of purchase. Or if someone has refinanced several times and removed the equity, they may find that they now owe more than the house could sell for. Before a lender will consider a short sale, they need some evidence that the borrower cannot meet the financial obligation previously agreed to. This usually means that their must be some indication of a “hardship”. Some people mistakenly see a short sale as a panacea to get them out from a financial burden. A lender may be less likely to consider a short sale if you own multiple properties, have sizable assets or indicated that you were going to occupy the property you now want to sell when you never lived there. A hardship may be due to a divorce, job loss, death or disability of a spouse or some other loss of income. At this point the lender is going to decide if they will accept the offer, not the home owner. The prospective offer has been submitted to the lender. The ball is in their court.

The lender has sent out the appraiser who has submitted the report. A decision is anxiously awaited. The lender has the required information to either approve or disapprove the offer.

Tell Us Something, Anything, A Simple Yes or No

With all the talk and press lately about the declining real estate market and pending foreclosure’s, wouldn’t you think that banks would be eager to get rid of a property and reduce their rising inventories? I would think so too, but apparently not.

The typical foreclosure timeline starts when a “Notice of Default” is filed, usually after a homeowner misses about three payments. In this specific instance the bank was aware of the situation. They were even communicating in advance which seemed to be a positive sign. I used to have a friend who worked for a consumer products company and the inside motto among the salespeople was that things were just fine until a customer placed a purchase order, then the company had to deliver it which created all kinds of internal problems. Isn’t this what they are in business for in the first place? Nothing happens until someone sells something!

Week 5, Still No Word

An offer on the property was submitted which seemed to be in the guidelines for approval. Uh oh, trouble ahead. Now someone with some authority will have to make a decision and approve a sale along with a loss of $130,000. Hello, is anyone home?

In case your wondering the time from presenting the offer until today has been six weeks. The buyer who was very qualified and able to close the transaction within two weeks of approval has bailed out. The buyer’s frustration and impatience was communicated to the lender regarding their inability to make a decision. They were quick to call what they perceived as a bluff and reply “if the buyer decides to walk away then we will just have to cancel”.

Game Over

The buyer canceled. Seems that there are just too many opportunities out there with prices coming down daily. And why wait for the never ending supply of Vice President’s to add their initials of approval? A classic case of Texas California hold em. Now everyone has folded and the cards are being reshuffled. Nobody won, in fact everyone lost.

If curiosity killed the cat, I am convinced that procrastination kills real estate.

Tags: Foreclosure, real estate market, short sale

A few days ago we looked at the number of properties that were in some stage of foreclosure in the City of Pasadena. With so much talk these days about the increasing number of foreclosure’s we thought we would attempt to explain the process for a property that goes into default. To get a good understanding of what’s involved, we need to first explain what happens when you purchase real property.

In California we use a deed of trust. Other states may use a mortgage. The deed of trust provides collateral for the debt. There are three parties involved which are the Trustor (borrower), the Trustee (neutral 3rd party) and the Beneficiary (lender). The Trustor transfers the property to the Trustee to hold in trust until the debt is repaid. When signing your documents at the closing table you provide the Trustee the right to foreclose on the property if you become in default.

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The Notice of Default

This document starts the foreclosure proceedings. When a homeowner becomes 60 - 90 days late on the house payment the notice of default is filed. The homeowner is put on notice that unless the debt is cured, the property may be sold at public auction.

Notice of Trustee Sale

This document serves as public notice as to the date, time and place of the trustee’s sale. It cannot be published until at least 90 days after the notice of default has been recorded.

Auction

The property can be sold at auction in as little as 14 days. If it is not sold then the bank becomes the owner.

Is There A Redemption Period?

In a non-judicial foreclosure the debt can be paid up until 5 days before the property is sold. However some articles now state that most lenders will allow the back payment’s to be made up until the gavel falls at auction. By now there may be some hefty late fees and legal fees that may have also accrued.

What Impact Does Foreclosure Have on Your Credit Score?

According to the article from Ray Martin your FICO score can drop from 100 to 250 points. A short sale may produce a less drastic hit to your credit score than a foreclosure. If you happen to find yourself in this unfortunate situation and feel overwhelmed, assistance can easily be found. A real estate professional can help you determine the amount of equity you may or may not have in your home. Once that’s decided, then the other options may become clearer. Unfortunately many people go into ostrich mode and stick their head in the sand hoping the problem will work itself out. It won’t.

Tags: California foreclosure, Foreclosure, Pasadena foreclosure, Pasadena real estate, short sale