Black Friday Foreclosure Shopping

The foreclosure market continues to boom as no relief appears in sight for stretched subprime mortgage holders. As the economy shows more signs of a slowdown, this trend is likely to continue.

Although the real estate industry would prefer otherwise, foreclosures continue to make headlines. The latest data showed superficial relief, with September foreclosures down 8% from some 243,000 in August, but still more than double last year -- and still with more to come.

It may be a harsh analogy, but I often think of foreclosure buyers as the forest-floor ants consuming the dead wood to clean the forest.


That means three things. First, as I see it, the sooner we get through this credit mess, the better. Second, the faster properties get through the foreclosure process and find buyers, the sooner we'll get through the mess. So third, foreclosure buyers clean out the dead wood (I like) and get great bargains in the process (I also like).

I can save how much?
My recent column broadly covers the discount you can expect from market value if you buy a foreclosure. It varies by region, but using information published by real estate portal and foreclosure specialists RealtyTrac, I saw discounts ranging from 15% in Hawaii to 40% in Alabama, with 20% and 25% being a rule of thumb.

Not bad. So then the next question, incidentally raised by several readers, is "how do I find those bargains in my area?"

Finding the for sale signs

To locate specific foreclosures in your area, RealtyTrac is a good place to start. Visit the nations #1 site for foreclosures and find homes for half the price.
The site lists foreclosures by ZIP code and foreclosure stage, ranging from preforeclosure property to bank-owned real estate. It's a broad and fairly deep picture of foreclosure availability in your area.

Some have found RealtyTrac less than precise, as the task of keeping up with foreclosure listing activity across the company is large, to say the least. And to get specific information on the property, RealtyTrac requires a $49.95/month subscription after a seven-day free trial.

But realize that RealtyTrac sits behind other real estate sites, so sooner or later you'll probably run into RealtyTrac. If you're serious about foreclosure shopping, you might want to sign up.

Combining sources
If you aren't ready to make the financial commitment or "come out of the closet" as a registered foreclosure buyer, there are several other paths which work surprisingly well:

Bank sales. To their chagrin, banks and financial institutions are going into the real estate business in a big way. Too bad for them, but you can find a lot of bargains on their Web sites: Bank of America, Countrywide and U. S. Bank have good listings, to name a few. Countrywide, for example, has 300 listings in California alone priced under $170,000.

Agency sales. Banks sell their "REO" (Real Estate Owned) but often hire agencies to do the job. Such agencies include Keystone Asset Management, Lenders Asset Management Corporation and HomeEq Servicing. Some of these agencies may operate bank sites, so you may see a similarity.

Government and government-backed lender sales. Government agencies ranging from FHA and VA to HUD and the Department of Justice sell real estate, visible through a single portal. And government-backed Fannie Mae and Freddie Mac also operate sites. The variety of properties available is, shall we say, wide, but Fannie Mae in particular lists a lot of solid mainstream real estate values.

Auctions and auction houses. Local and regional auctions are becoming bigger as banks and others pile up inventory. A real estate auction specialist will announce an auction of dozens, maybe hundreds of properties in a large region or metro area. Auctioneers include Real Estate Disposal Corporation (REDC) and Williams & Williams. Experience helps in playing this game, although the auctioneer sites walk you through the process.

Local real estate specialists. A lot of agents know about action in a particular area and can hook you up with the sellers. Good agents have their eyes and ears to the ground at all times, and get tips and hear about stuff coming on the market. You can often Google "foreclosures (area)" to get local listings.

Don't forget: reward comes with risk
Remember that, while foreclosure properties often sell at a healthy discount, you may run into poorly maintained properties. There may be other foreclosures in the immediate area, hurting the quality and value of your investment. Double check other adjacent listings and visit the area if you can.

Remember: Good value investors buy assets at the right time in the right place at the right price. Real estate is no different.

Mortgage rates fall to May 2007 levels

Mortgage rates fell last week to their lowest point in nearly six months according to the results of Freddie Mac's Primary Mortgage Market Survey for the week ended November 1.

The average rate for the 30-year fixed-rate mortgage (FRM) dropped to 6.26 percent with an average 0.4 point from the average the previous week of 6.33 percent with 0.5 point. This was the lowest average rate for the 30-year FRM since the week ended May 17 when it averaged 6.21 percent. One year ago this product carried an average rate of 6.31.

The 15-year FRM was down eight basis points to 5.91 percent with an average 0.4 point, a decrease of 0.2 point from the week ended October 25. This was the lowest rate for the 15-year FRM since the week ended May 10 when the average was 5.87 percent. One year ago the average was 6.02 percent.




The five-year Treasury-indexed hybrid adjustable rate mortgage (ARM) averaged 5.98 percent with 0.4 point compared to the previous week when it averaged 6.03 percent with 0.5 point. This is the lowest rate for this category of loan since May 17 when the average was 5.92 percent.

The one-year Treasury-indexed ARM averaged 5.57 percent, nine basis points lower than a week earlier. The average point was unchanged at 0.6. This rate tied with the last low that was recorded during the week ended May 31.

"October's consumer confidence fell to its lowest level since October 2005 as mortgage rates continued to decline this week to their lowest level in almost six months," said Frank Nothaft, Freddie Mac vice president and chief economist. "Continued market concerns about weaker economic growth and further declines in the housing market have kept mortgage rates low over the last few weeks.

"Although the third quarter gain in real gross domestic product (GDP) of 3.9 percent was stronger than market forecasts, the housing market has subtracted from GDP growth over the past twenty-one months ending in September. In its most recent policy announcement, the Federal Open Market Committee (FOMC) noted that the rate of expansion in the economy will most likely slow in the near term, due in part to a reflection of the intensity of the housing correction."

The survey of lenders conducted weekly by the Mortgage Bankers Association (MBA) showed a very slight increase in average rates for two of the three categories of loans it tracks.

The 30-year fixed rate mortgage had an average contract interest rate of 6.16 percent compared to 6.15 percent a week earlier. Fees and points, including the origination fee, increased to 1.08 from 1.05.

The average rate for the 15-year FRM decreased from 5.79 percent to 5.77 percent with fees and points unchanged at 1.10.

The one-year ARM also increased one basis point to 5.94 percent with points decreasing to 0.9 from 0.93.

All MBA figures are for 80 percent loan to value originations.

Mortgage loan applications decreased 1.6 percent on a seasonally adjusted basis from a week earlier and 2.4 percent on an unadjusted basis. Application volume was 8 percent higher than that recorded during the same week in 2006.

Applications to refinance represented 49.1 percent of all mortgage applications compared to 49.6 percent a week earlier while the market share of adjustable rate mortgages decreased to 14.2 percent from 14.7 percent.