The following are just a few short notes about foreclosures and short sales.

Washington State continues to have one of the lowest foreclosure rates in the nation.

Definitions

A Short Sale –is a sale that does not produce sufficient funds to cover the existing monetary encumbrances against the Property, closing costs, real estate commissions, and other financial requirements of closing (“Seller Costs”).  Buyer and Seller acknowledge that the purchase price is insufficient to cover Seller Costs and that this Agreement constitutes a “Short Sale.”

A Foreclosure – is the forced sale of Real Estate to pay off a loan on which the owner of the property has defaulted.

A Bank Owned Home – Is a home that has been foreclosed & did not sell on the courthouse steps. The bank then takes possession & actively markets the home for sale with a local Realtor.

© Ryan Martin for Bellingham Real Estate Blog, 2009. | Permalink | 7 comments | Add to del.icio.us
Post tags: Bellingham Foreclosures

There is a common misperception about foreclosures and short sales that has been spreading like wildfire. It is a fact that short sales and foreclosures have been increasing at a national and local level. It is NOT a fact that short sales and foreclosures are the best deals in real estate.

Why are short sales and foreclosures not the best deals in real estate?

Understanding the cause of most short sales and foreclosures reveals the reason why they are not the best deals. Currently in Whatcom County and Bellingham, approximately 50% of the foreclosures and nearly all of the short sales are the result of recently refinanced loans. Homeowners simply borrowed more than their homes are worth.

In the case of short sales, it is true that banks are now settling for less than the full value of the loan, but the full value of the loan is more than the home is worth.

Case Example A: Home was purchased for $350,000 in 2005. The market value was $400,000 in 2007, so homeowner refinanced a new loan of $380,000. Homeowner can no longer afford the payments on a loan of $380,000, so they want a short sale to get out. They decided to list their home for $360,000 (which is the current fair market value of the home) and hope that the bank will take it.

The example of the foreclosure is exactly the same as the short sale, except for the fact that the bank already owns the property. In both cases the banks and sellers are selling homes at fair market value.

Where are the best deals on foreclosures in Bellingham?

The answer is that the best deals are actually the homes in the same neighborhood as the foreclosures. They just happen to be located next door. The neighbors that were fiscally responsible are the ones who can afford to sell their homes for less money. Consider the house located next door to the short sale in Case Example A.

Case Example B: The homeowner next door is in trouble and attempting to sell their house in a short sale for $360,000. The neighboring homeowner bought their house in 1999 for $200,000. They initially borrowed $175,000 and have been making their payments. Something happens (death, divorce or…) and they really need to sell their home right away. Their home is exactly the same as next door, with the exception that their home is very well kept. Because their real estate agent informed them that only 1 out of every 10 homes in Bellingham and Whatcom are selling every month, they choose to list their house for $350,000 because they just want to get it sold. They get an offer right away for full price. They clean the house move out.

So the question is….. are foreclosures and short sales really the best deals?

Call Ryan Martin at 360-319-0040 if you would like to know what the best deals in Bellingham really are.

© admin for Bellingham Real Estate Blog, 2008. | Permalink | 2 comments | Add to del.icio.us
Post tags: Bellingham Foreclosures, bellingham homes, Bellingham real estate