Foreclosures & Short Sales

5 Tips for Purchasing Foreclosure Homes


The foreclosure rate in the Twin Cities area and throughout the nation slowed down for a while following the robo-signing fiasco and subsequent investigation. Now that everything has been sorted out, re-evaluated and the processes have started again, there seems to be indications that the foreclosure rate is on the rise – including in the Twin Cities area. That means more foreclosure homes will be available for purchase.


Thinking of buying a foreclosure home? Here are some tips to keep in mind.

1.     Get preapproved for a mortgage. Getting preapproved for a mortgage ensures that you can act immediately when you find a foreclosure home. Though having preapproval doesn't guarantee anything, not being preapproved could put you at a disadvantage if someone else happens to like the same property you're trying to buy.

2.     Find an agent specializing in foreclosures. If you were a ...

July National, State and Twin Cities Foreclosure News

A recent report show that foreclosure filings have declined since last fall. However, this real estate snap shot isn't a completely pretty picture.

RealtyTrack, an Irvine California firm, has reported foreclosure filings have slowed and are down 25% nationally during the first half of 2011 as compared to the first half of last year. The rate is 29% lower compared to the rate from the second half of 2010. Still, a depressing total of 1,170,402 foreclosures were filed through the end of June, 2011.

The length of time from default to foreclosure to auction has grown.  U.S. properties foreclosed in the second quarter were in the foreclosure process an average of 318 days from the initial notice to the completion, up from 277 days in the second quarter of 2010. New York leads the nation in the length of its foreclosure process at an astounding 944 days. Florida was next at 676 days. At the other end of the spectrum, Texas’ process took 92 days.

The longer length of time for the foreclosure process could be a good or a bad sign. On the one hand, banks are still processing a high-number of defaults, which may be slowing the foreclosure process. On the other, many programs are being developed and offered to help homeowners avoid foreclosure. This is also true for Minnesota.

On a completely related note!

The Washington County Library and the Washington County Housing and Redevelopment Authority are offering free foreclosure counseling and information workshops on Thursdays in July, providing advice from trained foreclosure-prevention counselors. The events will include a 45-minute presentation summarizing the foreclosure process. Participants will also have an opportunity to meet individually with a foreclosure-prevention counselor. No pre-registration is required.

"The value in speaking to a county foreclosure-prevention counselor is identifying options,"...

Federal Program to Help 1,400 Minnesotans Facing Foreclosure

[UPDATE: The application deadline for this program has been extended through Wednesday, July 27, 2011]

A new program offering money to catch up on delinquent loan payments is accepting applications in Minnesota. Qualified applicants should hurry, as the time frame for joining this program ends July 22.

The Emergency Homeowners' Loan Program will provide up to $50,000 in interest-free, forgivable loans to qualified borrowers. The national program is designed to bring selected homeowners current on their loans, and to assist with future mortgage payments over two years. The loan is forgivable for homeowners who stay in their homes five years beyond the program's two-year duration.

The loans are available to borrower(s) who:

  • Had income declines of 15% or more due to unemployment, underemployment or illness.
  • Have not made a mortgage payment in three months and who have received a foreclosure notice.
  • Live in the mortgaged property.
  • Meet income requirements: Applicants may make no more than $75,000, or 120% of area median income, whichever is greater. In the Twin Cities metro area, that's around $100,000 for a family of four.

Time is short for applying. Applications will only be taken through July 22. An extensive application must be filled out, and eligible participants will be selected via lottery.

Julie Gugin, director of the Minnesota Homeownership Center, which coordinates a network of foreclosure prevention counselors around the state, said two-thirds of homeowners who seek counseling are behind due to income or medical issues. "This program will offer an important lifeline to a large segment of homeowners who otherwise struggle to find options to stay in their homes," she said.

Minnesota is one of 32 states sharing a $1 billion pot to stem foreclosure. The state will receive $55.8 million for this program. It should reach 1,405 Minnesota home owners. Officials...

Some good news for Twin Cities real estate in May

The local real estate market is making some progress, according to data released by a Twin Cities Realtor organization.

Figures from the Minneapolis Area Association of Realtors show that pending sales for May 2011 were up 13.2% from the year before, with 4,428 contracts signed. Part of the improvement is due to a drop in pending sales in May of last year, following the end of the federal first time home buyer tax credit.

Though the median sale price of homes decreased 12.6% to $152,950, the median sale price of non-distressed properties rose 1.4% to $200,700. Foreclosure prices were down 16.4% to $104,450, and short sale prices were down 5.6% to $135,000.

About 4,968 non-distressed properties entered the market in May 2011, more than the 4,202 of May 2010. Distressed properties - foreclosed homes or those bought as short sales - accounted for about a third of all new listings in May, the lowest percentage in more than a year.

"Both the foreclosure rate and the distressed-sales rate hit 7-month lows in May." said Brad Fisher, president of the Minneapolis Area Association of Realtors. "It is reassuring to have more traditional product entering the market relative to other segments, as today's new listings are tomorrow's closings."

All of this is welcome news for both Twin Cities real estate professionals and home sellers in the area.


Foreclosure News in the Twin Cities

March was dismal for home sales in the Twin Cities area real estate market - except for when it comes to foreclosures. Sales of homes in foreclosure rose dramatically compared to the same month of 2010.

The number of signed purchase agreements in March was down compared to the year before, mainly because the first time home buyer tax credit was still stimulating the market at the time. There was a big drop-off last month in the number of homebuyers who didn't want a foreclosure or short sale. In fact, sales of foreclosure homes surged about 30%.

Additionally, a large portion of foreclosure home buyers were investors ready with cash. Several years ago, only about 3-7% of home purchases were made with cash. But in February and March of 2011, that number was closer to 25-30%.

"Typically when I purchase homes they're bank-owned foreclosures. They've been neglected in some cases, they were at one point condemned. Many of them need a significant amount of work," said Jennifer Olstad, owner of Tupino, Inc., which stands for "Turning Ugly Properties Into Nice Ones." In the past year, Olstad has purchased five properties with cash and sold three of them to first-time homebuyers.

In the wake of the foreclosure crisis, city officials often prefer that people who buy homes also live in them because the downturn particularly affected rental units. The idea is that owner-occupants have more incentive to keep up the property, but communities do need a variety of housing options. Additionally, "house-flippers" do perform a service to neighborhoods when they take otherwise vacant, blighted properties, beautify them, make repairs and sell them to new owners.

One downside to this picture is that first-time homebuyers can't compete against the investors' cash...

Busted House a Boon to Community

Five long years after it was snapped up by a bank in foreclosure, a dilapidated house at the intersection of Oakdale and Butler avenues in West St. Paul has been dropped into the hands of the city's economic development authority. The donation is an unusual opportunity amid the mortgage mess.

In an emailed statement, U.S. Bank spokeswoman Teri Charest said the donation "was the best option because of the value it provides the community. We applaud their efforts to turn this space into something that will benefit the neighborhood."

At its meeting next month, the EDA will discuss what to do with the 0.15-acre lot. It will likely become an open space for the neighborhood. There's even been talk about using it as a community garden.

During the time it belonged to the bank, the property racked up a considerable stack of citations for maintenance problems ranging from broken windows to tall weeds. It brought in contractors for estimates to fix up the house after they were hit with several property-maintenance citations, but eventually realized it made no sense to rehabilitate the house. By donating the property, the bank can write it off as a loss and stop paying for maintenance and county taxes.

Dakota County tax records show the home and lot are worth an estimated $127,900. However, a recent appraisal pegged the home's value at about $26,000.

Source: U.S. Bank turns over foreclosed home to West St. Paul for possible open space


Vacant Buildings Decline in Saint Paul

The number of registered vacant houses in the city of St. Paul has been dropping since hitting its peak in 2008. The number of houses being fixed up and put back on the tax rolls has also been increasing steadily.

The number of registered vacant buildings in the city went from 370 in 2004 to a record of more than 2,000 in 2008. The number decreased to 1,600 in 2009 and about 1,500 last year. About 90% of the vacant properties are single-family residences or duplexes. Vacant houses only make up about 2 to 3% of all residential buildings in Saint Paul, but they're not spread out. It's the concentration of abandoned homes in some neighborhoods that has caused problems.

Monitoring and managing vacant buildings has stressed city resources and compromised neighborhood vitality. The Department of Safety and Inspections, which enforces codes and handles demolitions, spent $338,000 dealing with vacant properties in 2005. This year, the budget is $1.1 million.

Part of the decline in vacant buildings is due to a new ordinance that took effect in 2008 that puts more requirements on owners of vacant properties. It now costs $1,100 to register a vacant building with the city. The condition of a building also determines how easy it will be to sell a vacant home. If it has severe safety code violations, it's labeled Category 3 and no one can buy a vacant home until the owner fixes it up.

The majority of vacant buildings registered with the city are labeled as Category 2, meaning they have multiple safety code violations that need pretty expensive repairs but can be sold if the buyer has the means to do the work. The number of those buildings being fixed and sold is helping to reduce the overall number.

A city the size of St. Paul always will have some number of vacant buildings, but the spike in recent years has been remarkable. And though...

Home Price Time Machine

The Finance and Commerce blog pointed us in the direction of a new way to look at which communities have been hit hardest by the foreclosure crisis. They mentioned that Calculated Risk had created a unique graphic that doesn't just look at how much housing prices have declined, it compares markets by how far backward in time housing prices have retreated.

In the Twin Cities area, for instance, prices have fallen to the point they were at in 2001. In Dallas, prices have only retreated to 2006 prices. In Detroit, houses are going for the same price they reached in 1995.

Housing consultant John Burns presented this slide as part of the UCLA Anderson Forecast. He used median prices for this slide.


To Buy a Foreclosure Home or Not to Buy a Foreclosure Home?

You may have heard the news that thousands of foreclosures around the country may be invalid because of bank paperwork problems. Multiple major lenders have frozen tens of thousands of foreclosures while paperwork is reviewed for mishandling.

This could potentially impact people who have bought a foreclosed home, want to buy a Twin Cities foreclosed home, or financially distressed homeowners who are behind no their payments, even if they have not yet received a notice of foreclosure filing.

For recent buyers of foreclosed homes, there's a chance that the bank's foreclosure processing could be found to have been improper or that the bank did not adequately document its legal title to the house. This is where title insurance saves the day. If the purchase of the home was financed, the mortgage company likely required at least a lender's policy that covers title issues. But those who did not take out an owner's policy, or bought for all cash, could find themselves defending their investment on their own.

Financially distressed homeowner who recently received notice of a foreclosure filing from the bank should consult a lawyer. Ask a lawyer to review all documents you may have received. Banks have been careless in their high-volume processing of foreclosures. Even people who aren't behind on their payments have received notices of foreclosure.

If a homeowner is behind on payments but has not received a foreclosure notice, this may be the time to demand a loan modification, maybe even a substantial principal reduction, from your loan servicer. This new foreclosure mess might convince banks to become real partners in devising solutions for distressed borrowers.

A homeowner with title insurance shouldn't worry if the previous owner stakes a claim to the home. Even if the claim is successful, the result would most certainly end up with the title company settling with the evicted homeowner. The new buyer would not end up...

Campaign Signs at Vacant St. Paul Houses

Vacant and foreclosed houses and buildings in Saint Paul have started sprouting political campaign signs.

One of the first people to notice the signs was a real estate agent who found a campaign sign for Ramsey County Sheriff Bob Fletcher on the lawn of a foreclosed St. Paul home. As sheriff, his office has a role in the foreclosure process. Gazing down the block, more signs were planted outside vacant houses.

Though it may seem funny or harmless, it is a violation of Minnesota law to put signs on private land without the consent of the owner or occupant. The signs will be removed if a landowner asks. Some of the properties are owned by banks or mortgage companies.


Twin Cities Habitat for Humanity Buys 8 Saint Paul Houses for $8

Eight properties in St. Paul were purchased for $8 recently. The deal struck between St. Paul and Twin Cities Habitat for Humanity was for properties in two of the neighborhoods hardest hit by the foreclosure crisis. Seven are in Payne-Phalen, the eighth is in Summit-University.

Five of the Payne-Phalen properties will be part of a program taking place this October when former President Jimmy Carter will visit to help build or fix up 20 homes in struggling Saint Paul and Minneapolis neighborhoods. Two foreclosed houses will be rehabilitated, and three new homes will be built on foreclosed lots. An additional five properties near the ones purchased by Habitat for Humanity will get exterior repairs through the nonprofit's A Brush With Kindness program.

"It's an opportunity to focus on neighborhood revitalization and new opportunities," said Sue Haigh, president of the nonprofit affordable housing provider.

Habitat for Humanity is scheduled to go before the Minneapolis City Council next month to talk about 10 properties there.

The organization is expected to acquire 50 Saint Paul properties over the next 4 years.


Twin Cities Foreclosure & Short Sales Up in 2009

Mortgage foreclosures and short sales accounted for nearly half of all housing sales within the Twin Cities during 2009. They will likely continue to play a major role in the 13-county metro area’s housing activity in 2010.

According to the Minneapolis Area Association of Realtors, foreclosures and short sales to account for about 43% of all housing sales in the Twin Cities. Prior to 2006, foreclosures and short sales accounted for less than 5% of all home sales.

All that activity also had a major impact on the metro area’s median sales price and the area’s housing inventory. The Twin Cities closed out 2009 with a median home price of about $170,000, down from $195,000 in 2008. The Twin Cities median home price has been brought down by the high number of bank-owned homes sold and short sales.

Sales of homes less than $120,000 invreased 80% in 2009 compared with 2008. Homes that sold for between $120,000 and $150,000 incrased 40%. Sales of homes in the $150,000 to $190,000 range rose about 10%. Sales of all other home categories fell, with home at more than $1 million down about 30% in 2009 compared with 2008.

More foreclosures and short sales are expected this year, likely keeping the homes sales prices flat.

In response to the foreclosure crisis, Minneapolis and St. Paul have landed a combined $37.5 million in federal money aimed to slow down the foreclosure rate.

The city of Minneapolis received $19.46 million. The city was the lead applicant with Hennepin County and the city of Brooklyn Park. The city will ultimately divide...

Minnesota Foreclosure Snapshot

The Minneapolis / St. Paul metropolitan area ranks as one of the most active in the nation in the number of delinquent or at-risk home mortgages. It is also one of the areas with among the most mortgages modified under the Obama Administration’s Homes Affordable Modification Program. 11,627 Twin Cities Metro area mortgages have been modified under the program through November, making it the 13th most active metropolitan area. Minnesota, as a whole, ranks 18th among the states, with 14,154 loans modified, or about 2% of the total. That bodes well for the area, as it will hopefully prevent more homes from going into foreclosure.

Nationwide, about 1.7 million homeowners were on the verge of foreclosure in the fall. Those homes will be put up for sale in the coming years and weigh down prices. Up from 1.1 million in 2008, is likely to keep rising through the middle of next year or later.

Not only do the vacant homes flood the market with inventory and hold down prices, they can become eyesores as lawns become overgrown and dangerous if they attract the attention of local riff-raff. Confounding the problem is redemption. Redemption in Minnesota is usually a six-month period following a sheriff's sale during which the people who owned the house can buy it back. Redemption poses a problem for cities because if a home winds up vacant or vandalized during that time, the homeowner and bank can deny responsibility, putting the burden of fixing it on the city. As we know, cities are already strapped and facing budget troubles, so it takes time and money with which communities...

Home Affordable Modification Program to Expand

The Obama administration plans to expand a program aimed at stemming foreclosures and helping more people to remain in their homes.  Known as the Home Affordable Modification Program, its goal is to convert troubled home loans into new loans with lower monthly payments:

Under a $75 billion Treasury program, companies that agree to lower payments for troubled borrowers collect $1,000 initially from the government for each loan, followed by $1,000 annually for up to three years.

The government support, which is provided from the $700 billion financial bailout program, is aimed at providing cash incentives for mortgage providers to accept smaller mortgage payments rather than foreclosing on homes.

The renewed effort will increase pressure on mortgage companies to accelerate loan modifications two fold. First, by highlighting firms that are lagging in this area. Second, by now waiting until the loan modifications are permanent before paying cash incentives to mortgage companies that lower loan payments.

The program has been in place for a while, but has been heavily criticized for not helping more people. Months after the program's initiation, the foreclosure rate is worsening:

The Congressional Oversight Panel, a committee that monitors spending under Treasury's bailout program, concluded in a report last month that foreclosures are now threatening families who took out conventional, fixed-rate mortgages and put down payments of 10 to 20 percent on homes that would have been within their means in a normal market.

The expanded program will, among other things, make more aid available to struggling borrowers and expand the number of organizations providing that help.

Rising ...

How Foreclosures Affect Your Home Sale

Though for the past several months, the number of pending home sales has gone up and the excessive inventory of unsold homes has been slowly going down, the Twin Cities real estate market still faces some challenges.  Rising unemployment, sagging wage growth, higher down-payment requirements, and stricter mortgage qualifications are all weighing progress down. Moreover, the rising number of Twin Cities foreclosures sales and short-sales taking place are particularly hitting home sellers hard. 

A sharp rise in foreclosures across the country is being blamed for declines in home prices that have shaken the economy. The foreclosure crisis has directed lenders and the government to launch extensive efforts to keep people in their homes, even if it means renegotiating the terms for hundreds of thousands of loans and in some cases, banks taking a loss. Most worrisome, the high foreclosure rate means home sellers must cut their prices to compete with short sales and foreclosure sales.

While about one-third of all home sales in the metro area during the July-September quarter were "lender-mediated" transactions, in some communities they represent more than 60% of sales so far this year, according to data compiled by the Minneapolis Area Association of Realtors.  In Brooklyn Center, for example, 64% of home sales so far this year have been lender-mediated, while in Edina only 8.3% were. Regardless of what community you live in, if there are foreclosure homes or houses involved in short sales on your block and you’re trying to sell yours, it will influence your sale price in the end.

Some might...

U.S. Launches Mortgage Aid Program

The federal government kicked off a program last week that aims to prevent foreclosures by letting approximately 400,000 troubled homeowners exchange their mortgages for more affordable loans. It will be up to the lenders, rather than borrowers, to decide if they will participate in the program, which requires them to take a loss on the initial loan. This new $300 billion, three-year program is designed to help out borrowers who owe more on their loans than their homes are worth.

To qualify, borrowers must be spending more than 31% of their income on mortgage payments. Loans that were acquired this year are excluded, except for those completed on Jan 1. Borrowers must have made at least six months worth oof payments on their loans.

The program, dubbed 'Hope for Homeowners,' was passed by Congress this summer as part of a massive housing bill. It is one of several government efforts to stem the mortgage crisis.

Executives from Citigroup, JPMorgan Chase, Bank of America and Wells Fargo told lawmakers last month they have been hiring additional workers to put the new program in place.

It is unclear, however, whether or not the financial industry will embrace the plan fully. One concern is that investors in mortgage securities must take an immediate loss and can't recoup their lost money if home prices turn upward again.

Read more about foreclosures and short sales.


Tips to Sell a Vacant House

Last week, I wrote some tips for first time home buyers.  Specifically, things they should do and shouldn't do to prepare for buying a homeBut buyers are only part of the equation, sellers are another big part.  This week, I’ll talk about some tips for people who are selling a home. I’ll start with the subject of vacant homes, since there are so many homes which have been foreclosed on or whose owners got too impatient to wait for it to sell.

After years and the real estate business, I can say that the idea a home is sitting vacant while it is on the market is almost an immediate turn-off for potential buyers.  Often their imagination runs rampant with ideas of an unkempt yard, scarred walled, filthy floors, possibly even stolen wiring and copper piping.  Alas, an existing home that looks “lived in” when it is furnished and people are actually living there, it could look bare and flawed to potential home buyers when it’s unoccupied.  That can be overcome, however, as selling a vacant home isn't impossible.  If you must vacate a home before you sell it, try to follow these pointers:

  • First impressions count. Even if the house you are trying to sell is vacant, it must have some curb appeal.  Regardless of whether your home is vacant or not, make sure that the surrounding grounds are being well kept.  If you have to, pay a neighbor to mow the lawn, keep it watered, and tend to the landscaping. 
  • Spruce up landscaping before you leave. Plant some new shrubs,...

Tougher Rules to Buy Vacant Homes in Saint Paul

Last week on Wednesday, the St. Paul City Council unanimously approved the last of several reforms aimed at preventing vacant homes from languishing.  After months of negotiations and many compromises, real estate leaders are on board with the plan, too.

Council Member Dan Bostrom, says "We're trying to save our neighborhoods here." He first proposed the reforms in January when the city's list of registered vacant buildings had topped 1,600. As of the time of this post, the number of vacant buildings in Saint Paul was 1,973.  1291 of these are single-family residential dwellings.

Many of the homes are unoccupied after lenders foreclosed on the homeowners. Out-of-state lenders don't tend to them. As a result, these vacant homes become targets for gangs, drug dealers, thieves, even arsonists.

In an effort to encourage owners of vacant houses to sell their properties, the City Council recently hiked the annual fee for owning an empty house from $250 to $1,000. And now, in an effort to force repairs, the sale of many of these types of Saint Paul real estate is restricted.

The reason for the changes stems from too many inexperienced, underfinanced or underqualified people purchasing vacant homes with the idea of making a quick flip.

Previously, anyone could sell a vacant home to anyone. Deficiencies in the home were disclosed, but it often wasn't until new owners tried to rent it out or move in that they fully understood how much work needed to be done before the city would grant an occupancy or fire safety permit. A portion of the reform measures will force the shabbiest vacant buildings to be brought up to safety codes before they can be sold. It also forces buyers of the next tier of...

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