Is Foreclosure Activity on the Rise?

According to RealtyTrac, January foreclosure filings nationwide increased by 8% over December, one of the largest month-over-month increases in recent history. For purposes of RealtyTrac’s report, the term “monthly foreclosure filings” includes lis pendens filings,  default notices, foreclosure auctions and bank repossessions. A total of 124,419 such events occurred in January.

At least in part, the increase was the result of the “holiday lull”, which is the period during the fourth quarter during which lenders typically forgo foreclosure actions, only to start making up for lost time in January. Yet and still, January marked the 40th consecutive month in which foreclosure activity declined on an annual basis, with filings down 18%.

“California foreclosure starts jumped 57 percent from a year ago, following 17 consecutive months of annual decreases,” according to RealtyTrac’s vice president Daren Blomquist.

On the one hand, actual scheduled foreclosure auctions jumped 13% in January compared with December. On the other, that specific activity remains 8% down from one year ago. This equates to 38 consecutive months in which scheduled foreclosure auctions nationwide have decreased on an annual basis.

And, the foreclosure process was initiated in the case of 57,259 properties in the U.S. in January, which represents a 10% increase over December, yet remains 12% less than last year.

My partner and I are being foreclosed on. Why did I get served with papers when I am not on the note, just on the deed?

The note is the obligation to pay, so it sounds like your partner may have to wage that battle alone. However, everyone that may have an interest in the disposition of the property will typically be served when the lis pendens is filed. That would include all of the parties on the deed, the HOA or condo association, second lien holders, etc.

It is not too late to structure a short sale just because you were served with foreclosure documents. In most cases, a short sale is the best option for the owner and lender. Please call us direct for more details.

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As an owner, can you really get paid by the banks for short selling your house?

Yes. Many lenders (not all) will pay you, as the homeowner to cooperate in the short sale of your property. This is referred to by the lenders as “relocation assistance”.  This assistance is based on a number of factors, including the loan balance, current value of the property and the loss severity rate. At least one major lender has recently increased their limit on relocation assistance payments to a whopping $45,000!

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What happens to a rental property that I own after my bankruptcy?

After your bankruptcy/debt is discharged, you are still the owner of record. Liability associated with the property typically resumes at that point.  After discharge, the bank may choose to file a foreclosure action or they may prefer to entertain a short sale proposal from you.

Some lenders will choose to actually pay you at closing for cooperating with a short sale after bankruptcy. In one such instance, our client received a check for $20,000. You should of course consult with your attorney before pursuing any post-bankruptcy real property action.

As always, please visit us at or for questions, email us at

Ed & Terri Smith, Broker Owners
RE/MAX Coastal Properties
850-837-5500 x1

We have read about how you can just deed your home to a “holding” company to avoid foreclosure. Does this work?

The one word answer … No! All standard mortgages today include a clause known as the “due on sale”. This clause states that if you sell, convey or transfer ownership of the property, the lender may invoke their right to acceleration, meaning they can “call the loan” making the entire balance due and payable.

Also remember that the mortgage, note and deed are entirely different animals. The deed only establishes ownership. It is the note that establishes who owes the money. The mortgage merely attaches the note to the property. You could deed a property to someone else, but the underlying note and mortgage (your obligation to pay) remain intact.

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Are the foreclosures and short sales drying up? Fewer of them seem to be available for purchase.

Yes, they are. Distressed properties only represent 20% of the sales market this year as opposed to more than 40% just two years ago. Foreclosure filings are down an average of 37% as compared with last year. Strong buyer demand for distressed properties has caused the average sale price for such properties to increase by 27% as compared with last year as well.

The low interest rates that we are seeing have played a significant role in the reduction of distressed inventory. Call us for a list of what’s available today and be ready to act quickly!

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I submitted a contract to buy a bank owned property…

I submitted a contract to buy a bank owned property. The bank didn’t counter with a price, but responded by asking me for my “highest and best offer”.  How should I respond to them?

The banks will often utilize the “highest and best” counter when presented with multiple offers on the same property.  It’s their way of keeping everything fair and balanced, and helps them realize the highest net as well. We are seeing as many as 17 offers at a time on our bank owned listings, many of which actually sell for more than asking price. If it looks like a great deal to you, it will look like a great deal to others as well. Our advice is to make your best offer first and try to come in under the wire.

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What does shadow inventory mean in real estate?

Shadow inventory generally refers to distressed properties that are not yet on the market for sale. These properties “shadow” the active inventory in that they will (or should) be on the active market sometime in the near future. For statistical purposes, shadow inventory is included as a segment of the “unsold” properties.

Shadow inventory consists of those properties in some stage of default or foreclosure, as well as properties already owned by the foreclosing lender. Because many lenders are now accelerating their foreclosure actions against delinquent borrowers, the actual shadow inventory is expected to decline as such properties graduate to the “active for sale” market.

Year-to-date, foreclosure filings are up 142 percent in Okaloosa County and 63 percent in Walton County. Destin, Ft. Walton Beach, Sandestin and 30-A are all represented in the equation.  

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The Calm Before the Storm?

Due to the cessation of foreclosures following the robo-signing scandals of 2010, the backlog or “shadow inventory” of bank owned properties has grown significantly. Locally, actual foreclosure sales are down over last year by 50%. However, lis pendens (foreclosure) filings are now up 100%.

This would tend to indicate that we are in a lull, the period in which the lion’s share of the foreclosures have been absorbed by the market and when the banks are resuming foreclosure action. With the banks more aggressively pursuing delinquent homeowners, many expect a surge this year in bank owned inventory. Another consequence will likely be more short sales as more delinquent sellers begin looking for ways to avoid foreclosure.

The impact that this may have on Emerald Coast real estate values will depend much upon demand. Demand has been steadily increasing  over the past two years. Should this trend continue, the negative impact of additional distressed inventory on the market may be negligible.

Foreclosure and Delinquincy Rates Still High

According to Lender Processing Services (NYSE: LPS),  there are now more than 6 million delinquent mortgages in the U.S.  A delinquent loan is any loan that is at least 30 days past due, which of course includes those currently in foreclosure.  LPS is a loan servicing conglomerate that maintains a database of roughly 40 million mortgage loans at a given time, which gives them considerable perspective in terms of national trends and statistics.  According to their calculation, the mortgage delinquency rate (MDR) is nearly 8 percent, which does not include mortgages that are in the foreclosure process. Therefore, the national  foreclosure inventory is now estimated to be nearly 2.1 million. The actual mortgage delinquencies then total 4 million.  Of those delinquencies, a staggering 44.3% are more than 90 days delinquent.