Foreclosures drop, short sales on the rise

Foreclosures drop, short sales on the rise

Michele Ellson
Courtesy of ForeclosureRadar

Foreclosure filings are declining here in Alameda and across California, recent data show, though local real estate professionals said the numbers don't reflect a “shadow inventory” of homes with troubled mortgages and others lenders own but haven't put on the market.

But they said banks are more aggressively pursuing short sales to get some of the properties off their books. And with a dearth of homes on the market, they said the short sales in Alameda are producing market-rate results.

San Diego-based market watcher DataQuick has reported that the number of California homes entering the formal foreclosure process dropped in the first quarter of 2012 to its lowest level in five years, with the number of Alameda County homes entering the foreclosure process dropping 21.6 percent in comparison to the same quarter in 2011. They credited a more stable housing market and economy and lender policies more favorable to short sales for the numbers.

They said most of the loans going into default date back to 2005 through 2007, when housing prices peaked. Nearly 10 percent of the homes in California have been lost to foreclosure, the company reported.

The ForeclosureRadar website lists the number of notices of default filed in Alameda – the first step in the foreclosure process – at 14 in April, the lowest number in a year, with auction notices slipping to 16 from a high of 28 in January. It shows the number of properties entering the foreclosure process at 90 in April, down from a high of 224 in October, and bank-owned properties at 84 in April, up from 72 a year earlier.

The site lists 183 Alameda properties as being in some stage of the foreclosure process, though one local real estate agent said that notices of default are typically more easily remedied than issues that come up later in the foreclosure process.

But Mark Wyman, broker/owner of Bayside Real Estate, said banks are sitting on 200 properties they own here in town instead of putting them on the market – properties that aren't reflected in those numbers.

“They're just letting people live there for free,” Wyman said.

Another site, RealtyTrac, lists 90 bank-owned properties in Alameda, just seven of which are for sale. It shows another 75 with default notices and 85 headed to auction.

Realtor Jeff Goodman of Harbor Bay Realty said banks are changing their policies to make it easier for short sales of troubled properties to take place. Bank of America announced Tuesday that they are offering relocation assistance to homeowners who complete a qualifying short sale by September 26, 2013, and other banks are offering similar programs. And Goodman said banks are trying to turn the deals around more quickly.

“Before you had to have a hardship before they would accept a short sale. Now banks are looking at, if these people are going to walk away, maybe it makes more sense to approve a short sale whether they have a hardship or not,” said Goodman, who said vacant, bank-owned properties pose maintenance and security issues for banks.

Short sales made up more than 20 percent of the resale activity in California over the first quarter of this year, according to DataQuick, up from about 18 percent during the same period in 2011.

Goodman and others said tight inventory has helped lift the sale prices of short sale homes to market rates, and that homes for sale in Alameda are receiving multiple offers. Roughly 70 properties are on the Multiple Listing Service where homes are listed, one agent said – a low number for what is typically the peak of the market cycle.

Goodman said a Harbor Bay Isle home listed for $275,000 in a neighborhood where homes typically sell for $550,000 received 18 offers, and he believes it will sell at the market rate for similar homes.

“Houses have dropped in value from what they were bought for in 2005 to 2007,” he said. “We're probably at 2002 pricing (now).”