Foreclosure Auctions Slow to Unload Inventory

Sushil Cheema reports:

While the number of foreclosure auctions is soaring, many transactions aren’t taking place at asking prices because some lenders are demanding too much, brokers and investors say.

So far this year 2.22% of all homes in the U.S., have entered the foreclosure process, according to estimates by the Foreclosures.comWeb site. By the end of the year, as many as one million homes in the U.S. may be in foreclosure.

Many investors, who make up the bulk of active bidders at auctions, say the banks are asking too much for the homes. So far this year, 748,381 homes—or 46% of the foreclosures—have gone into the possession of the banks as real-estate owned, or REOs, because no bidders were interested in them at auction.

With the banks’ inventory piling up as the properties fail to sell, the banks will likely have to discount their prices more in order to unload the homes, real estate experts predict. Such discounts could continue to drive the broader real estate market lower.

Few people placed bids at a recent auction run by the Sheriff’s office in New Jersey’s Bergen County. “If you want to go back a few years ago, it was standing room only,” said Don Pfleger, a real estate broker who said he has bought about a dozen properties at auction over the past several years. “Now it’s getting thinner as the weeks go on, as more and more properties are up for sale.” On this day at the end of September, only three of the 23 properties on the block went to a bidder. The remaining 20 went back to the banks. Eric Van Auken, a real estate broker who runs the Sheriff Sales Online site, has attended the auction in Bergen County weekly for the past 10 years. Up until the recent housing downturn began, he would personally buy properties at auction to fix up and would sell about one a month. But he’s purchasing foreclosed homes less frequently since the current real estate market downturn began because of the “ridiculous values” banks are demanding for them, Mr. Van Auken said. “We didn’t want to pay what they were willing to let them go for.”

Individual buyers looking for deals at auctions will likely not find one, says Foreclosures.com President Alexis McGee. Making it harder for individuals: it is generally not possible to examine the properties in person before buying them and buyers must have money with them to make a down payment on the home.

Mr. Van Auken predicted the banks will have to further slash their prices to attract buyers, which could pressure regular sellers to lower their prices for their homes as well. “For the average person putting their house on the market, it’s going to be very difficult,” Mr. Van Auken said.

Counties that run the auctions also suffer when the houses on the market fail to attract bidders, said Bergen County Sheriff Leo McGuire. The county collects commission on any sales. When the banks buy the properties back after they fail to sell, the county gets little money. “”There’s so many effects that this economic downslide is having,” Mr. McGuire said.

 

Read the story and watch the video here.

Presented by Klemens Raab | Community: Foreclosure News, News 

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