The Truth About Foreclosures By Patricia Tan
Go Global
The Truth About Foreclosures, Bargain Priced Property And The Loonie!
By Patricia Tan
Florida is now acknowledged in international circles as THE place to buy real estate. There is growing evidence that the prices in many parts of our state have bottomed and started on the road to recovery, but buyers are still hesitant and search for data to support a buying decision. One key indicator that many buyers research is the number of foreclosures in a market. Another deluge of foreclosed properties will surely mean prices will drop further, right? Many investors look to the press for market indicators to support a buying decision, but news articles often tell conflicting stories.
Mark Twain attributed the 19th Century British Prime Minister Benjamin Disraeli with the saying “There are three kinds of lies: lies, damned lies, and statistics”, and readers could undoubtedly apply this to the foreclosure statistics they read in the press. So what do consumers need to know about foreclosure statistics?
First, readers need to understand that there are three situations that can be measured and reported as foreclosure statistics – The first, Lis Pendens, indicates that legal action has been taken on a property. After receiving a Lis Pendens notice, it is still possible for the mortgage holder to rectify the delinquent mortgage or sell the property as a “short sale” and avoid foreclosure- this can lead to a huge discrepancy between the number of Lis Pendens notices and the number of actual foreclosures. The second situation is when a Notice of Sale is filed. This notifies the mortgage holder that the property has been scheduled for foreclosure sale on a particular date. Finally, Real Estate Owned (REO) indicates that the mortgage holder now owns the property.
To illustrate how measuring these different stages of a delinquent mortgage can influence the perceived rate of foreclosure, let’s look at some “foreclosure statistics” from Tampa over the period March 2006 to February 2009. Over that period, there were 16,229 Lis Pendens issued, 3,429 Notices of Sale, and only 2,635 REOs. Tampa had more Lis Pendens than any other Florida market. However, the number of REOs was significantly lower than other markets. Cape Coral, for instance, in the same period had only 13,101 Lis Pendens, but a whopping 4,426 REOs.
As this news of Florida’s stabilizing prices spreads to different parts of the world, we continue to see a steady stream of overseas buyers, many of whom are looking to purchase our bargain-priced properties. But how does one identify a bargain? Traditional wisdom tells us that REO, or bank owned properties often present the best possible deals, but practical experience may show us that this is not actually the case in today’s real estate market. Prices achieved for foreclosed properties are often used by appraisers when determining the market value of a home offered for sale by a home owner who is not in distress. In effect, prices for distressed properties set the tone for the rest of the market, and actually become the market price. What this means in many situations, is that homes offered for sale that are not short sales or foreclosures, may be purchased at prices similar to distressed properties, but may be in much better condition and purchase transactions may proceed more smoothly.
We recently conducted a series of seminars in Toronto, and exhibited at a real estate expo there. This gave us the opportunity to share this kind of statistical information – whether “lies, damned lies or statistics” – directly with consumers and fellow real estate professionals, and to answer many of their questions about the state of the Florida real estate market. We also partnered with a Canadian real estate attorney who discussed the pros and cons of holding Florida property in the most tax efficient manner, and with Royal Bank of Canada who have attractive financing options available to Canadians buying property in Florida. In addition to our bargain priced properties, Canadian buyers have another great reason to invest in Florida properties now, and that is the favorable exchange rate – the Loonie reached parity with the U.S. Dollar again. As international real estate professionals, we have to be knowledgeable about the world currency markets, and how they impact our business. Working with another company who specializes in this area certainly enhanced our value proposition while we were in Canada.
It is seldom that several factors come together to make the perfect time to buy real estate. Canadians have that situation now – A strong currency, low mortgage rates and rock bottom Florida home prices. I am sure we will see many Loonies being invested in our real estate market here – no doubt some driven by foreclosure statistics, but many more by our attractive Florida lifestyle.
Patricia Tan was born in England, and moved to Sarasota in 1997. Her career afforded her the opportunity to live and work in many countries around the world, including Australia, Hong Kong, Singapore, Malaysia, Indonesia, Germany, France, Belgium, Netherlands and the United Kingdom. She spent five years as a Director of an American real estate franchise in England in 1990s. Patricia has served as Chairperson of Sarasota Association of REALTORS®’ International Council, and serves on Florida Association of REALTORS®’ International Operations Committee. She currently works as International Sales Director for Prudential Palms Realty. Patricia may be reached at 941-487-5107 or patriciatan@prudentialpalmsrealty.com.
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Tags: Foreclosure, Lis Pendens, Loonie, Notice of Sale, Pat Tan, Patricia Tan, Real Estate Owned, REO