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Big Bear Foreclosure Numbers – August 2010

Foreclosure filings in Big Bear rose back up in August 2010, up 5% when compared to July, continuing the zig-zag movement of the Big Bear foreclosure market. Year over year, foreclosure filings were down 25% from the August 2009 numbers, the eighth straight month that foreclosure filings were down year over year.

Keep in mind, foreclosure filings are made up of three parts – Notices of Default (NOD), a recorded document that starts the foreclosure process, which is normally filed after homeowners fall behind in their payments. The timing of when the lender files this can vary from the 1 month to over 12 months, depending upon how aggressive they want to be and the new rules they must follow. Notices of Sale (NOS), a recorded document that is typically filed between 3-6 months after the NOD, which sets the date for the Trustee Sale. Trustee Sales, typically held around 25 days after the NOS is filed, is made up of properties that go back to the bank, generally on the court house steps.

Trustee sales have only three possible outcomes – the property goes back to the bank (which is most common); the property is bought by a 3rd party, those (typically investors) who buy the properties at the trustee sales instead of it going back to the bank; and properties that are canceled, or pulled from sale. I generally have not included these last two as they have always been pretty minor in numbers. The past few months however, I am starting to see an increase in both cancellations and third party sales, so I will start posting this numbers as well.

Here’s how the foreclosure numbers broke down for August 2010.

Notices of Default (NOD) – 69 total, up 32% from July and down 32% from August 2009.

Big drop from the all time highs we saw last year from February to August in 2009, but this is the highest number we’ve seen since last October.

Notices of Sale (NOS) – 56 total, up 6% from July and down 24% from August 2009.

This number continues to remain near the lower end of the yearly average.

Trustee Sales – Back to the bank – 40 total, up 21% from July but down 9% from August 2009.

This is about 100% higher than the low we saw in June, but it remains near the monthly average of 40-50 we’ve been seeing most of the past year.

Trustee Sale – Cancellations

Cancellations have been elevated the past 6 months, and the 27 in August followed along the same line. The more cancellations, the lower the number of distressed properties that will be hanging on the market.

What are reasons for these cancellations? I know of several – 1. the homeowner cures the defaulted amount; 2. the homeowner modifies their loan; 3. the homeowner completes a short sale; or 4. the lender incorrectly filed the foreclosure paperwork and has to start over.

Trustee Sales – Sold to 3rd Parties

Investors were quiet in the month of August as there were only 2 properties sold to third parties.  There are a variety of reasons why this number dropped, but the main cause I suspect was the opening bid prices in August were just too high for third parties to be interested, hence the higher number of properties that went back to the bank.  The more aggressive the opening bid price at the trustee sales, the more third party sales you will see, and the lower the amount going back to the banks.

Expect this number to see this number fall in the 1-10 range over the next year or so. Most of time, these properties will be put back on the market with the investors looking to make a 10-50% return!

Buying a property at the trustee sale has a lot of risks – has to be a cash purchase, “as is” with no inspections, no title insurance, eviction possibility, etc. The major reward is the potential to buy a property at well below market value. To those that have the time, skills and patience, trustee sales can be very lucrative.

Want to see what actually happens at Trustee Sales? Check out the video below.

Direct link to the YouTube video

Foreclosure Inventories In Big Bear (aka the Foreclosure Pipeline)

February 2010 March 2010 April 2010 May 2010 June 2010 July 2010 August 2010
Preforeclosure (Notice of Default) 166 187 189 169 169 190 198
Auction (Notice of Sale) 192 186 168 167 169 156 153
Bank Owned 175 179 167 148 133 121 120

The total amount of Big Bear properties in default rose slightly up in August, while those with a notice of sale or those that are bank owned dropped slightly – 198 properties have an NOD filed against it, 153 a Notice of Sale, and 120 are currently owned by the Bank. Of those 120 that are bank owned, some are already on the market for sale, some are not, and a small amount have already re-sold to new owners. All in all, month over month, the foreclosure inventory in Big Bear is up .01% from last month.

Why are foreclosure numbers important? In my opinion, they are the most important stat to keep track of as they offer a glimpse into the future of any market. Everyone knows that foreclosures bring prices down in neighborhoods. So, the more foreclosures in an area, the more the downward push on pricing. And, if we want the market/prices to get better, we need to get all of these properties through the foreclosure pipeline first.

Til next month…..

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