So you want to buy on the Courthouse Steps?

colorful road curve

We just attended a class dealing with Trustee Sales in Arizona, given by a real estate attorney specializing in this portion of the law and a Realtor who is on the steps every day.

We took away a lot of information, but facts that directly apply to you as a buyer are what we will mention here. First the purchase money: you will need a certified check for $10,000.00. That will be verified as you sign up to bid. You will need to make the balance of payment for the property within one business day ! If you fail to make the payment by the end of the following business day after the auction, you lose your $10,000.00 earnest money.

This eliminates all bidders with loans, unless you are to be an investor non-owner occupant and want to deal with one of the unlicensed short term “hard money” lenders at up around 18% with 20-30% down.

The starting bid is stated and it is usually the amount of the first mortgage plus $1.00, but it can change up to the moment of the actual auction. Bids are usually increased by $100 each bid.

Next most important is that you are buying the property totally and completely “as is”. That is the physical as well as the legal condition. You do not get title insurance with the purchase, you may have to evict the current residents. You may have additional liens on the property. You may not have legal title to the property. You may not be able to inspect the property. It may be pristine or it may be destroyed.

There will be bidders representing investors or investment groups who are buying 5 to 100 homes at a time! Definitely the big league.

Incidentally the current (Jan-May 2012) sales numbers show that the winning bids are an average of 31% above the opening bid and 64% of the original loan amount. 80% of the sales are postponed from their original sale date and 60% additionally are postponed on the day of auction! Of those 40% remaining, 56% are purchased by 3rd party buyers.

Our conclusion is that everyone should visit the Courthouse Steps once, just to get a feel for the pace and intricacies of the auction. BUT that to participate as a buyer or as an agent of a buyer is a mistake and could be an expensive mistake. There are Realtors whose only activity is to bid on those steps every day. They have entire teams of professionals working for them, checking bank records, checking with not 1 but 2 title companies, doing Comparable Market Analyses on the property, estimating repairs and establishing a top bid. It is definitely one of those things that we are accepting as “out of our area of expertise” and we will be happy to connect you with confidence with a Realtor whose entire business is centered around Trustee Sales.

Why isn’t the bank doing a short sale?

I had a great question asked this week. The person asked me about a house in their neighborhood. It had been vacant for a while and they were interested in the stats and possibly purchasing it. I looked up the house and found out the property was scheduled for foreclosure in less than a month.

The question: “Why isn’t the bank doing a short sale?”

The consideration for a short sale is requested by the owner of the home. It may be in the owner’s best interest to do a Bankruptcy, and let the property foreclose. If the owners had consulted with a tax attorney, they may have been advised to move forward in the manner they were.

Doing a short sale is not the choice of the bank. They (the bank) cannot opt to sell the property, as they do not own it. The current owner could at the last minute pay the bank the fees owed, renegotiate their loan and get out of default. The foreclosure process allows the owner to get out of trouble if they can.

The bank is not at liberty to do anything until they have ownership of the property.

Foreclosures and the Adult Communites

Although there are no adult communities within McCormick Ranch, our initial website is focused on Active Adult Communities and we work with many 55+ buyers.   

We are seeing lots of numbers being published for the ratios of Bank Owned and Short Sale properties in the valley.   We are not seeing those same numbers in the Adult Communities.   Since it is a cold rainy day, I have been playing with numbers and really surprised myself with what I found!

Taking only single family detached homes in the entire MLS for the valley, a total of 41,832 this morning, 10,796 of them were Bank Owned and an additional 9,003 were Short Sales.  Those numbers round off to 25% of the single family homes on the general market are bank owned and another 21% are short sales.  

Current MLS Single Family Homes on the market, with Bank Owned and Short Sale

Current MLS Single Family Homes on the market, with Bank Owned and Short Sale

 

 

BUT when you look at the Active Adult Community 55+ single family homes, there are a total of 2819 on the market.  Of that 2819 only 52 are bank owned and 63 are short sales which works out to 2% of the homes are bank owned and another 2% are short sales.

Current active single family home listings in adult communities comparing bank owned/ foreclosure and short sale

Current active single family home listings in adult communities comparing bank owned/ foreclosure and short sale

 

 

HMMMM  kinda makes you wonder.    Our 55+ citizens have indeed saved for their retirement homes, their financing is minimal and their risk taking days are in the past.

There were very few zero down,  or investor homes sold in these communities in the 2005 and 2006 sales surge.    I believe it is the investors who did get in to these adult communities, that are making up the Bank Owned and Short Sale properties.