Knoxville Foreclosure Watch

Welcome back, Foreclosure watchers. In this week's edition, the on-market foreclosure listings are at roughly the same level as last week, while pendings are up and closings are down.

Here's the break down -

Knox County Foreclosure Property Statistics as of 4/23/08 *

Current On-Market Listings - 161
Average Asking Price: $135,060
Median Asking Price: $88,000
Most Expensive New Listing: 7 BR, 5 BA, approx 7300 sq ft home in Sequoyah Hills
Least Expensive New Listing: 3 BR, 1 BA, approx 1100 sq ft in Bon View in East Knox
Honorable Mention: 4 BR, 2 BA, approx 1400 sq ft in Red Bud Hills in South Knox

Current Pending Sales -100
Average Asking Price - $96,958
Median Asking Price - $79,900

Closed Sales April 16, 2008-April 22, 2008 - 4
Average Asking Price - $102,950
Average Sales Price - $103,000
Median Sales Price - $106,450
Average Days on Market - 77





*Data taken from KAARMLS on 4/23/08 for Knox County single family residential properties only, and does not include condos or PUDS.

Any thoughts on this week's edition? I'd love to hear them below.

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Lose Some Pride or Lose Your Home?

It's been a long week and it's only Tuesday. So, let me unwind after a hard day in the housing mines by telling you a little story...

I recently listed a very nice home in a very nice neighborhood. The owners were very nice people. Everything, in fact, was awfully nice and swell until my phone rang early one Friday morning:

Caller: Hi, is this Suzy Trotta?

Me: Yes, how can I help you? [I have very good phone manners]

Caller: I'm calling about the foreclosure property you have for sale.

Me: Um, I don't have any foreclosure properties for sale.

Caller: Have you looked in today's News Sentinel? Cuz you do now.

Sure enough, an examination of the KNS foreclosure notices showed that my nice little listing was due to be auctioned off on the courthouse steps in two weeks. I called the number given in the notice, thinking this must surely be some bizarre mix-up. I mean, my sellers were such nice people.

The helpful woman at the law firm told me that yes, indeed, my listing was going to auction and the reason was that the current owners had not paid their mortgage in 7 months.

7 months.

I was completely dumbfounded. My nice little sellers? Those sweet folks whose dining room table I had sat at just a few weeks before? What the fudge?

I decided to call my clients to figure out what was going on.

Me: Hi, Mrs. Seller. Great news. We had two showings this week. And by the way, did you know your home is possibly going into foreclosure?

I waited.

One Mississippi...

Two Mississippi...

Three Mississippi...

Mrs. Seller: Why, yes, we did.

So there it was. They knew. They knew! My next immediate thought was, "Why in the world didn't they tell me?"

I know, I know, the simple answer was because they were embarrassed. But is suffering embarrassment worse than going into foreclosure?

Luckily we wound up being able to do a short sale and everything turned out pretty ok. Instead of going into foreclosure, those folks will now have to pay taxes on the amount of money the bank lost on the short sale and suffer the damage of the missed mortgage payments on their credit report. Still, much better than foreclosure, trust me.

My role in this situation was not to judge. I never really found out what prevented them from paying their mortgage, but that wasn't my business anyway. The fact was that my clients were still really nice people. They were just really nice people who go in over their head financially. Scheisse passiert as the Germans say.

No, my job was to sell that home before auction and I somehow managed to pull it off. Yes, that's the sound of me tooting my own horn. Toot! Toot!

But I'm not just telling you this story to show off my superior home selling skills. There is a actually a moral in this story that I think is very important:

If you are in trouble with your home financing and have missed payments or know that foreclosure is looming in your future, do not keep this information to yourself when listing your home. I know you want to try to sell it and pay the bank off and hope the whole mess just goes away without any of your friends and neighbors ever finding out. And I get that. I really do.

But the fact of the matter is that while real estate agents can certainly help you in this situation, we can only help you if you ask us to. If we know up front what your situation is, we can start working the phone immediately. Calling your loss mitigation coordinator. Calling investors. Calling other agents who know other investors. We can try to help you work with the bank to try and arrange a short sale. And a short sale, while not being the answer to your prayers, will still be much, much better than foreclosure.

So swallow your pride and ask for our help. Losing a little pride is a much better option than losing your home to foreclosure.

This Week's Poll is Up

As usual, it's to your left over there.

This week's question is in honor of my super fun week spent trying to work a foreclosure sale and a suprise short sale (as in, "Suprise! We haven't paid our mortgage in months!).

Question of the Week: What is a Short Sale?

Q: What is a short sale?

A: A short sale occurs when a seller does not have adequate funds to pay off their loan and the lender agrees to accept a lower amount, usually in order for both sides to avoid foreclosure.

In a normal sale, the seller must come up with the full loan balance in order to pay off the bank. In a typical short sale, the seller is allowed to sell the property for less than the outstanding loan amount, with the lender agreeing to accept the loss.

Banks will sometimes agree to a short sale when it will be cheaper and faster than going through the foreclosure process. However, not all lenders will even consider short sales, and even if they do, it is not a simple process.

In order for a lender to consider a short sale, the seller must provide proof of economic hardship to their lender, usually in the form of a written hardship letter as well as an exhaustive financial report detailing all earnings and spendings. According to Realestatejournal.com:

you must prove that you really can't pay your loans -- and that the reason is new, not something that you concealed from your lenders when you originally applied for the loan.

In addition, the seller must also provide the lender with an estimate of how much the sale will cost the lender. This is usually done by providing an estimated HUD-1, which tallies sales price, loan balance, accrued interest, closing costs - including agent commission if applicable, and unpaid property taxes.

If you have more than one mortgage, loan, or lien on your property, odds are you will have to go through this process for each lender or institution you owe.

While the essence of a short sale is that the lenders allows the seller to "come up short" when paying off their loan balance, not all lenders are so forgiving - and the government definitely isn't. According to Realestatejournal.com:

Some hard-nosed lenders may insist that you pay the difference between what the buyer pays for the house and what you owe on the mortgage. Others may forgive that portion of the debt -- but unfortunately, Uncle Sam won't. "Forgiven" debt is considered taxable income.

A short sale is not an easy way to get right side up in your upside down home. There are risks and downfalls. It will go on your credit report, although it will not be as devastating as a foreclosure would be. There is a lot of negotiating and hard work involved, and as the bank is often willing to pay a real estate agent's commission, having an agent help you through the process is a good idea.

Below are some more resources with information on short sales -keep in mind that short sale procedures vary from lender to lender and region to region, so make sure to check with a real estate professional in your area if you have any questions.

The New Exit Strategy: A Short Sale [Business Week]
After the Short Sale: Taxing What Isn't There [REALTOR.org]
Short Sales Set Sail Again [Realty Times]
Short Sales in Real Estate [About.com]

Link Round-Up: Signs Your Housing Market May Be in Trouble Edition

What are some signs your housing market may be in trouble?

1. Your pipes are worth more than your home. [msnbc.com]

2. Your bank is paying you not to trash your house when you move out. [Realestatejournal.com]

3. In your city, "Buying in bulk" refers to more than shopping at Sam's Club. [The Real Estate Bloggers]

Knoxville 7th Best Place to Buy Foreclosures

Forbes.com just named Knoxville the 7th best place in America to buy a forclosed home, and no, that doesn't mean our housing market is tanking. It's actually a good thing.

Forbes is saying that Knoxville, and the other 9 cities on their list are places worth investing in not only because their real estate markets are not totally tanked, but also because they're actually showing signs of growth.

According to the article:

"Only today's bravest buyers would consider homes in cities like Las Vegas and Tampa, where rampant foreclosures are sinking already weak real estate markets.

But in markets in other cities, where there are hints of stabilization, foreclosed properties might be a good investment. "

Hey, I'll take a hint of stabilization over signs of certain demise any day.

To come up with the list, Forbes looked at median home price, spread between median prices and foreclosure prices (foreclosure savings), annual foreclosure rate, and median home price change from 2006 to 2007. Here are the stats for Knoxville:

Median home price: $125,150
Foreclosure savings: $30,696
Foreclosure rate: 0.6%
Price change 2006-2007: 3.43%

And yes, that 3.43% price change is a good thing.

I've listed all 10 cities on the list below.

1. Charlotte, N.C.

2. Raleigh, N.C.

3. Nashville, Tenn.

4. Oklahoma City, Okla.
5. San Antonio, Texas

6. Albuquerque, N.M.

7. Knoxville, Tenn.

8. Seattle, Wash.

9. Indianapolis, Ind.

10. Washington-Arlington-Alexandria

Foreclosure: It Takes Two to Tango

There's a great post today over at Generation X Finance about a story that ran on CNN yesterday. The story was about a couple who lost their home to foreclosure and are now living in a camper. On the surface, this sounds like the saddest story in the world. Until you hear the details:

1. Couple buys 2,700 foot home in Las Vegas for $265,000 with a no money down,interest only loan.
2. Thanks to the booming Las Vegas real estate market, the home doubles in value in a year.
3. Wife loses job, and the couple takes out a home equity line of credit to help pay the bills that are piling up, inlcuding the mortgage.
4. Couple tries to sell their home, but the Las Vegas housing bubble has burst.
5. Broke and unable to sell their home, the couple takes out another $35,000 loan to pay the mortgage.
6. Couple home is foreclosed on by the bank and they are now living in a camper.
7. Couple blames foreclosure on lender, saying their loan docs were "confusing and hard to understand."

The bolded parts of this story are the mistakes that Gen X Finances says the borrowers made. I know what I think about all of this and if you read Gen X Finances original post, you'll know what they think too.

What do you think? Were these people taken for a ride by unethical borrowers or did they dig their own financial hole? Should borrowers in general take more responsibility for the current mortgage crisis?

Knoxville Foreclosures

Interesting article today on knoxnews.com about Knoxville foreclosures as compared to the rest of the state and country. There's good news and bad news. The bad news is:

• There were 2,770 foreclosure filings in Knoxville in 2007, which is a 47% raise from '06 filings.


• 6 out of every 1000 Knoxville area households entered some stage of foreclosure in '07

Before you head for the hills, here's the good news:

• Out of 100 major metro areas, Knoxville ranks 72 in foreclosures. Compare that with Nashville at 59 and poor Memphis at 13!


• Although delinquincy rates on subprime mortgages in Tennessee as a whole are 3-4% higher than in the rest of the country, delinquincy rates in Knoxville were only 9.9% at the end of '06 as compared to the country's average of 18%.

It goes on to say that there is no glut of foreclosed properties in the Knoxville market, as anyone perusing http://www.firstpreston.com/ can tell you. Again, take a look at the Memphis foreclosures for a comparison. It's night and day.

And although regular home sales were down 10% in Knoxville in '07, we know from KAAR sales data that homes are still appreciating in Knoxville, always a good sign.

So what does this all mean? It means what a lot of people have been saying all along -- Knoxville is a great market. Very few markets in the country will not be affected in some way by what's happened in the mortgage industry, but, relatively speaking, Knoxville is doing pretty durn good. I just don't think the mortgage crisis can keep Knoxville down.

Forgoing Foreclosure - knoxnews.com