The Future of Foreclosures...

It’s no surprise that foreclosures and short sales still are a significant part of our overall real estate market. While experts continue to offer predictions, no one really knows for certain whether or not we’re in for another wave of defaults or if the worst is behind us. With this in mind, I want to draw your attention to two local resources that can provide some perspective on where we are and where we might be going.

To understand where we are, the Minneapolis Area Association of Realtors (MAAR) does a great job of tracking the monthly foreclosure and short sale activity in the Twin Cities. As of March 30, 2010, their report indicated that 27% of all New Listings, 26% of all Active Listings, 38% of all Pending Sales and 42% of all Closed Sales were foreclosures and short sales. However, it’s important to note that while the traditional market clearly shows an increase in activity during the summer months, the foreclosure and short sale market shows no seasonality and therefore may represent a greater overall percentage simply based on the time of year you’re looking at.

To get a sense of where we’re going, the Minnesota Home Ownership Center tracks the number of pre-foreclosure notices. Their recent blog entitled Uh-oh… First Quarter Pre-Foreclosure Notices indicates that a statewide record 18,412 pre-foreclosure notices went out during the first quarter of 2010. While the moratoria that many banks honored during the first part of 2009 prevents us from doing a meaningful year-over-year comparison, the number of pre-foreclosure notices is still the highest it’s been over the past five quarters and most certainly will have an impact on the amount of foreclosures over the next six to nine months.

As always, you can link to these reports and many others by clicking on the news tab at TwinCitiesHomeForeclosures.com and looking under the Foreclosure Statistics section. You also can find additional articles about foreclosures and short sales on my blog. If you have further questions or comments, please don’t hesitate to give me a call.

— John MacKany

Short Sales: Anything But Short

A short sale is when the proceeds from the sale of a home are less then what is owed. Short sales can create a great deal of frustration if you don’t set the appropriate expectations up front. Here are five tips to keep in mind when purchasing a short sale.

S = Stomach. Short sales are not for everyone – you must have the stomach for it. Because short sales are handled differently from traditional sales, it is imperative that you understand the process before you invest any energy or emotion into pursuing a property.

H = Homework. As with any property, do your homework. Research the property and the market that it’s in. Remember, real estate is and always has been a local business. What may be a good deal in one area isn’t always a good deal in another.

O = Open to change. When negotiating a short sale, you’re dealing not just with the seller, but also with the seller’s lender or lenders depending on how many mortgages are on the property. Each lender has its own set of rules which can cause changes along the way. Remain open minded and flexible or you’ll become very frustrated.

R = Realtor. All short sales are unique and will have very specific forms and disclosures for you to look at. Engage an expert to help you understand what you’re signing and ultimately agreeing to. An experienced Realtor can walk you through the process and alert you when something is out of the ordinary. In fact, a Realtor’s fees are already factored into the transaction so why not take advantage of that?

T = Time. Short sales can take two to three months and sometimes longer before you’ll get final approval from the lender. Then, there can be another 30 to 45 days to complete the closing. Make sure when considering a short sale you have a realistic understanding of the time-frames involved and plenty of patience.

For an interactive map showing all of the foreclosure and short sales in the Twin Cities, go to TwinCitiesHomeForeclosures.com and click on the search tab. While there, you can also click on the news tab to find the latest Twin Cities foreclosure and short sale statistics from the Minneapolis Area Association of Realtors (MAAR) as well as all the local real estate headlines.

— John MacKany

Edina REO & Short Sales

What’s happening with foreclosures and short sales in Edina? Are they increasing or decreasing and how does this compare to last year? Let’s take a look at the recent statistics published by the Minneapolis Area Association of Realtors (MAAR).

According to the report, as of July 1, 2009, Edina had 592 total listings for sale. Of these, 47 or 7.9% were foreclosures and short sales. This is 27.0% higher then July 1, 2008 when there were 37 such listings. From July 2008 through June 2009, Edina had 118 new foreclosure and short sale listings compared to 91 for the previous year. That’s an increase of 29.7%. During this same period there were 62 closed sales that were foreclosures and short sales compared to 42 for the previous year. The overall share of closed sales that were foreclosures and short sales was 10.0% which is up 47.6% from the previous year.

Looking at the 13-county metro area as of July 1, 2009, 25.2% of all active listings and 44.2% of all closed sales were foreclosures and short sales. While the low interest rates continue to keep the affordability level high and help to reduce inventory, the continued rise in the unemployment rate will undoubtedly impact the number of foreclosures and short sales going forward.

— John MacKany