There are some positive and interesting Big Picture trends going on in our Lake Norman real estate market. To help provide some insight I made these graphs comparing waterfront, distressed and new construction closed sales in 2014 to 2013:
There was a rather disturbing article in Sunday’s Charlotte Observer: Housing glut looms behind region’s ‘shadow inventory’. It is not the whole issue of shadow inventory that is disturbing but rather the tone of the article, starting with the ominous title itself. Home buyers are already extraordinarily nervous, why add relatively useless fuel to this fire?
Before I go any further, I need to address the definition of shadow inventory which is widely disputed: The Shadow Inventory Debate. For the sake of this article, I am defining shadow inventory as any home where there is a delinquent mortgage and has not been foreclosed upon by the lien holder. While most of these are not listed for sale and may not be for years, some homes currently on the market in Lake Norman have been in the foreclosure process for several years but the sellers have been preemptive and have listed their homes as distressed.
If you are a regular reader you know two things about this blog, I love analyzing and interpreting the very specific numbers and data for Lake Norman’s housing market and I work hard to separate our local market from the broad brush media headlines about real estate.
While you might think that the Charlotte Observer’s article is specific enough to be applicable to our Lake Norman housing market, it simply isn’t and here is why: Continue reading
There are myriad sites online dedicated to detailed explanations about foreclosures. This is not going to be another “how to” guide. Instead, I am going to try to provide you with some insight and examples of real hurdles encountered during my recent experiences representing Lake Norman buyers through the process of purchasing foreclosures or bank-owned properties (REOs). In my next post I will do the same for shortsales. If you take only one thing away from reading this post, it should be that no two sales transactions are alike. Be prepared for the unexpected. That said,
REOs (Real Estate Owned) or Bank Owned properties are MUCH easier to purchase than ShortSales
When a bank owns a property, you can usually count on the fact that as a seller they are going to care about one thing and one thing only: their bottom line. They have been through the long foreclosure process, they own this property along with many others and they want it off of their books. It’s about as unemotional a transaction from their perspective as is possible.
Most of the time the listing agents of REO properties do nothing but REOs. They have been hired by a bank because they are good at processing paperwork and working with the bank’s systems and staff. They want a quick, easy sale. It is all about numbers to them as well. This is a business transaction, it is not about relationships or empathy. In the case of several of my buyer’s REO purchases the listing agents had never even seen the property and their offices were located far from the listing. In most cases I have found that these agents really don’t want to be contacted unless it is really important. They want the buyer to fill out the paperwork to the satisfaction of their sellers including each banks’ own addenda protecting them from just about everything. They don’t want to hear about repairs or problems related to the inspections or even having utilities turned on or the property de-winterized for inspections. (But they will when prodded). Take it or leave it and the sooner the better. The only thing they worry about, and rightfully so these days, is the buyer’s loan. Always be pre-approved and have your loan pretty much in place before writing an offer.
REO’s come in many different states of condition. In some cases, especially if they are new construction, they will be in excellent condition. There are some beautiful new construction foreclosures that I have shown in communities like The Point, The Farms, Bay Crossing and Northington Woods. Our Lake Norman home builders have been hit particularly hard these past two years; many have gone under leaving an inventory of spec homes some of which are still active listings.
However, many homes, especially those that were lived in and abandoned by the homeowners, can be in various states of disrepair. I have seen houses that have been stripped of everything including cabinets, toilets, appliances and light fixtures. Some have been trashed by their angry owners before leaving. I’ve seen holes in walls, shattered doors and the like. Others are truly “fixers” in every sense of the word. Some new construction homes, especially close to the lake, were abandoned by the builders before completion so the buyer will have to finish the work and get the permits signed off before moving in. It is especially important to look for signs of moisture problems. (From broken pipes to drainage issues. When homes sit vacant many things can happen and go unaddressed.) It is important to be diligent about inspections of bank-owned properties!
One of the homes I sold several months ago had had mold as a result of some moisture issues which had been such a detriment that the bank actually had the mold remediated. My buyer was willing to take on the moisture issues (after numerous inspections and estimates by mold and moisture experts) and the other repairs related in most part to the house having been vacant for 2 years. The result? My buyers purchased a 7000 sq. ft. $1 Million+ waterfront home with a dock in the$600,000’s.
Banks do negotiate. They get really tired of low-ball offers by investors. In my experiences, the banks came down in price more than the listing agents expected. (About 8% in one case). Banks tend to use pricing systems that dictate price reductions on a schedule. But, they also want these properties off of their books. I had one offer accepted on a Friday afternoon after the listing agent had told me there was no way it would be accepted. Perhaps on that Friday afternoon the bank looked at their numbers and decided they needed to get more properties off of their books. Don’t give up!
Know the recent comparable sales and determine ahead of time what price you are willing to pay based upon those comps and the amount of out-of pocket expenses for repairs. As long as your inspections and loan goes smoothly, you should be able to close the sale within a short period of time with little drama. (Of course, your own loan and the inspections could add a bit of hard work).
If you are willing to take on a house that has issues and no disclosures or warranties then an REO may be for you. Inspect the property thoroughly with experts in their fields so you know what you are buying.
Stay tuned for Part 2 of this series which will share some of my experiences with short sales.
I decided to analyze just the sales month-to-date for this month, January 2010, by reading each sold listing’s individual MLS listing information and remarks to figure out the actual category in which to place each sale. So far 40 homes have been reported as sold this month. I broke down these sales into four categories:
Type of Sale
- Foreclosures: There were 12 bank-owned properties that sold representing 30% of our total sales this month.
- Shortsales: 3 sales indicated in the remarks that they were short sales representing 7.5% of our total.
- Bargains/Sell below tax values: 16 properties sold below their assessed tax values, in some cased substantially below. These represent 40% of the total sales.
- Regular Sales/Sales above tax values: A total of 9 properties sold at or above the assessed tax values. It is impossible to know from the MLS data if any of these were distressed but there was no indication that they were in their remarks. These represent 22.5% of our total sales this month.
Sales by Price Range
- Up to $250,000: 17 or 42.5%
- $251,000 – $500,000: 15 or 37.5%
- $500,000+ : 8 or 20%
Lake Norman Area
- Iredell County/Mooresville: 24 or 60%
- Mecklenburg County/Cornelius % Huntersville: 6 or 15%
- Lincoln County/Denver: 8 or 20%
- Catawba County/Sherrills Ford: 2 or 5%
- This past month approximately 4 out of every 5 sales were distressed in some way. Slightly over one third were foreclosures and shortsales and another 40% sold well below their assessed tax values. There is no doubt that bargains are what are driving our Lake Norman home sales right now just as they have for quite some time.
- 42.5% of all of our January sales were $250,000 or less and 80% were $500,000 or less.
- 60% of our sales were in the greater Mooresville area in Iredell County. The second most active area was Denver. It is interesting to see how few homes sold in Cornelius, Huntersville and Sherrills Ford.
As I have written before, there are truly two different kinds of active listings in our Lake Norman area. There is the group of distressed properties that are listed well below the historic highs and then there are the majority of active listings that are priced at levels more appropriate for two years or more ago.
There is a great disparity growing between the prices of properties that have sold in specific neighborhood or community and the current active listings that are not yet distressed sales. I have found this in such neighborhoods as The Point, The Harbour, Bay Crossing. The disparity can be as much as $50 per square foot! Serious buyers know the recent low sales numbers so get frustrated when they view comparable active listings that are priced significantly higher.
The million dollar question is what is going to happen to all of our active listings that are over priced? Are they too headed for foreclosure or will the sellers simply wait out the market?
Unfortunately, Short Sales and Foreclosures are where the action is right now in Lake Norman home sales. Recently, our Charlotte Multiple Listing Service added a new search field for Realtor members which enables us to search for properties that are in “distress”. However, at this time our MLS is not providing this same capability to the public. If you are using my property search program or any other you will not be able to specifically search for short sales or foreclosures.
I contacted the company that provides my home search program and got them to send me a link that will allow you to search for “possible distressed properties”. What they have done is create a program that searches the “remarks” that the listing agent inputs regarding the listing for any words that might be flagged to indicate a seller is in distress. It seeks out words like short sale, foreclosure or auction.
I am not yet able to put this search option permanently on my website but if you bookmark this page you can use this link: http://lknrealty.localhomesearch.net/idx/distress. Then put a check by “Search for possible distressed sales” and then add your additional search parameters.
Let me know if you find this helpful! As soon as our MLS allows it, I will provide you with the ability to search for short sales, foreclosures and auctions.
In today’s real estate market, both here in the Lake Norman area as well as the entire country, economic data changes daily. This is especially true of the number of home foreclosures. And it is particularly difficult to stay on top of our local numbers as they are not as readily available.
That is why I got pretty excited when I learned about this interactive map on the National Public Radio’s website: Interactive Map: The Economy Where You Live. If you click on the link a map of the United States will appear with the option to search three different numbers BY COUNTY:
- Foreclosure Rates
- Unemployment Rates
- Median Household Income
These numbers are updated regularly so you can keep track of trends by county not only where you might be buying but where you are currently living as well.
Today’s numbers for our four Lake Norman counties:
Iredell (including Mooresville, Troutman,Statesville):
- Foreclosures: 1 in 1662 (one out of every 1662 homes are currently in foreclosure)
- Unemployment rate: 13%
Mecklenburg (including Charlotte, Huntersville, Cornelius, Davidson):
- Foreclosures: 1 in 213
- Unemployment rate: 11.7%
Catawba (including Sherrills Ford, Terrell, Hickory):
- Foreclosures: 1 in 2479
- Unemployment rate: 14.9%
Lincoln (Including Denver, Lincolnton):
- Foreclosures: 1 in 1401
- Unemployment rate: 14.5%
While I have included which Lake Norman cities fall in each county, it is important to know that there are many other cities in these counties, especially Mecklenburg which includes the greater Charlotte metropolitan area. It is clear that the more densely populated areas in Mecklenburg County are experiencing a much greater number of foreclosures than the other counties surrounding Lake Norman.
In a report released by RealtyTrac today, the foreclosure related filings in August were ranked by state, the worst being:
- Nevada: 1 in 62
- Florida: 1 in 140
- California: 1 in 144
- Arizona: 1 in 150
- Michigan: 1 in 234
According to this report, one in every 357 U.S. homes was subjected to a foreclosure-related filing in August.
Overall, the Lake Norman area is doing considerably better than the country but the numbers are not currently trending in a positive direction.
I plan on checking these maps on a regular basis to watch for changes!
If you hadn’t read my title for this article, you might think this photograph would be introducing a post about the beautiful luxury homes at The Point in Mooresville, Lake Norman. In fact, this estate is currently one of the bank-owned properties at The Point. The listing price is $875,000 for this approximately 5500 square foot newly constructed but only 90% completed home. Not exactly what one would picture when thinking foreclosures!
This morning’s Charlotte Observer article, “Foreclosed Homes Draw Hefty Crowd, ‘Scary’ prices” highlighted a “mega-auction” of 500 homes held this past Saturday at the Metrolina Expo in Charlotte. Some notable comments and statistics:
- Most of the 1000 attendees were real estate investors
- Some high-dollar homes went for as little as one-third of their previous price
- Mecklenburg County accounted for almost one in six of North Carolina’s 54,000 filings last year
- Charlotte-area sales prices declined 7.2% in December compared to December 2007
- Many of the auctioned properties were subject to seller approval.
No Lake Norman homes were mentioned in this article so I thought I would provide you with a little insight into our higher priced foreclosures and short sales.
Right next door to the estate above is this home which is also bank owned. Both homes are about 90% complete as the builder lost these properties before he completed them.
In our Charlotte MLS I found 5 short sales in the The Point ranging from an astoundingly low $499,000 to $1,075,000. Interestingly, while there have been a number of significant price reductions in properties over $1.5 million, I did not see any mention of short sales or foreclosures in The Point itself in the highest priced listings.
What I did see, however, were three estates with offers of seller financing. Because jumbo loans have been so difficult to get, (above $417,000) it makes sense that an able seller might offer their own financing.
The key to a recovery of our normally dynamic Lake Norman housing market is a lowering of our inventory. Unfortunately, every foreclosure and short sale instantly becomes the most recent comparable sale for any property in the neighborhood when it closes thus lowering the bar for all future appraisals/sales.
This is the challenge we will continue to face until the number of active listings in Lake Norman drop back down to about an 8-month supply. Hopefully with the incredibly low interest rates and the loosening up of credit as the incentives kick in, buyers who have been on the fence will have the confidence to move forward, take advantage of these low prices and interest rates and help our market head to a recovery!