Off-market foreclosed homes choke supply
Written by Scott Blake on July 11, 2013
Banks and other mortgage servicers are holding many homes in foreclosure without putting them up for sale, according to local market watchers.
In fact, Florida leads the nation by far in vacant homes in foreclosure, with more than 55,000 homes in foreclosure sitting empty, according to a recent report by RealtyTrac Inc., a California firm that tracks foreclosures nationwide.
The situation is tightening the Miami’s area housing supply, helping drive up prices — perhaps at too fast a rate, market watchers say.
“The banks tell me [foreclosures] are still bogged down in the court system — that’s the [only] answer I really ever get,” says Ron Shuffield, president of Esslinger Wooten Maxwell Realtors in Miami.
“In most cases,” he adds, “banks want to get these properties off of their books, but they’re being held up in court…. Many of these cases are contested” by the homebuyers or the occupants.
However it plays out, Mr. Shuffield would like to see banks free up more homes in foreclosure and put them back on the market.
“We could handle another 4,000 to 5,000 units on the market,” he says. “It would temper the increases in price.”
A reason many homes in foreclosure aren’t back on the market is because a lot of those properties are occupied, either by buyers or renters, says Liza Mendez, of Pedro Realty International, chairwoman elect of the Miami Association of Realtors.
Removing those occupants sometimes can be time consuming. In other cases, banks or other mortgage holders allow occupants to remain in those homes as renters to provide a source of revenue and to keep those properties from being vandalized or falling into disrepair before the properties are resold, Ms. Mendez says.
In some cases, foreclosed homes are being resold with the occupants remaining there and becoming tenants of the new owners. “Some are being marketed with tenants in them,” she says.
“We have been seeing an uptick in [foreclosed] properties coming into the market,” she explains. “The banks had to clean up a lot of title issues” with such properties. “Some properties are now reaching the end of the [foreclosure] cycle.”
Once all procedures have been followed, she adds, “I believe properties are coming onto the market as soon as they’re ready to go.”
One of the first things to be done is an occupancy check to see if anyone is living in a foreclosed home — a job that’s usually given to the brokers and agents.
“Every lender or owner is a little different” when comes to handling those situations, Ms. Mendez says. “Some offer [occupants] cash for keys [to move out]. Some leave immediately. And sometimes evictions are done. There’s always a little delay if they go through the eviction process.”
In May, sales of homes in foreclosure and short sales of financially distressed properties in Miami-Dade County accounted for 40% of all single-family homes resales and 35% of all condominium and townhouse resales, according to statistics from the Miami Association of Realtors.
“We have a substantial amount that are occupied,” Ms. Mendez says. “We’re babysitting them, so to speak,” while the process plays out.
Of the 1,216 closed sales of single-family homes in Miami-Dade in May, 208 were foreclosure sales and 278 were short sales. And of the 1,672 closed sales of condominiums and townhouses in Miami-Dade in May, 319 were foreclosure sales and 267 were short sales, Miami Association of Realtors statistics show.
The statistics also show that the number of non-distressed sales rose in Miami-Dade in both the single-family and condo/townhouse markets in May compared with a year earlier.
Meanwhile, the number of foreclosure sales in both market segments dropped in May from a year earlier. And the number of short sales decreased in the condo/townhouse segment but increased in the single-family home segment, statistics show.
“The banks are becoming more agreeable to short sales,” Mr. Shuffield says.
“A lot of [distressed properties] are being sold to institutional investors,” he adds. “They’re buying foreclosed properties. They’re buying regular properties. They can rent the properties for three to five years and let them appreciate before selling them.”
Overall, the current trends are mainly positive for sellers, since non-distressed properties fetch much higher prices.
In May, for example, the median resale price of a non-distressed condo or townhouse in Miami-Dade was $265,000, while the median resale price of a unit in foreclosure was just $96,580, and was just $101,500 for a short sale, according to the Miami Association of Realtors.
According to RealtyTrac, the number of residential properties that received a foreclosure filing in Miami-Dade rose 19% in May compared with April and was 78% higher than in May 2012. Some of the area’s highest foreclosure filing rates were in Homestead, Opa-locka and Hialeah.
Meanwhile, according to Mr. Shuffield, the worst of the real estate crash has passed in more affluent areas such as the Brickell section of downtown Miami. Of 860 properties recently listed for sale in Brickell, he says, only 36 were listed as distressed.