In 2010 foreclosure sales were halted over failure to provide adequate mortgage documentation. Two years later an agreement was reached with state attorneys general over their practices. Banks are now free to release homes they own to auctions after many months of delays. Delays caused in some cases by states that required a lengthy court approval process for every foreclosure. In other cases, states passed laws to slow down the foreclosure process or lenders bungled their handling of foreclosure documents. Now we have a kind of pre-spring cleaning.
The Washington Post writes, “In October alone, nearly 60,000 of those (foreclosed) homes were scheduled to be auctioned off by banks, up 24 percent from the previous month and seven percent from a year ago, according to RealtyTrac, a housing data firm. That’s the highest level since May 2013.”
When a home is auctioned, buyers are typically real estate investors with deep pockets, who are buying without seeing the house. They have little idea of the house’s condition and in some cases there are occupants of the house. Homes that don’t sell at auction are typically then offered for sale in the traditional way, so if investors don’t spot the bargains they want, there may be more foreclosures available for the general public to purchase.
According to RealtyTrac Baltimore topped the list of the 20 largest metropolitan foreclosure areas, where one in every 435 homes was in some stage of foreclosure, just ahead of Miami and Tampa.
Overall, foreclosure activity increased from a year ago in 10 of the nation’s 20 largest metro areas. Among them was Washington, D.C., which does not require court approval of foreclosures.
While the foreclosure problem is still a part of the real estate landscape, clearing up the backlog of homes owned by the banks will go a long way to relieving the supply pressures on housing prices and satisfying demand from first time homebuyers.