Paramus Home Sold at Auction 20% below Judgement!
So for a while now people have been talking about how banks are not willing to let properties go at foreclosures without counter bidding to get the house to "market value" or to get their judgment back.
Well, Saxon Mortgage Services, Inc. didn't play that game. They were happy to get what they could for this foreclosure on Freeland St. in Paramus, NJ that went on the auction block yesterday.
Saxon was awarded a judgment of $525,361.66 for the home at 623 Freeland St, which was purchased in 2006 for $535,000. They were willing to let it go at auction for $413,000. That's over 20% below the judgement. Will other lenders start doing the same rather than going through the trouble of dealing with the hassle of an REO themselves?
Maybe, maybe not. Do a search on Saxon Mortgage and you'll find a page with 21 customers that claim to have issues with them. And even if other lenders continue to do the same, read this post that may give you a better idea where house prices are going.
I think we're going to see more homes like these that sell well below their judgment, especially if they were bought in 2006, the height of the housing bubble. Lenders are better off letting go of properties sooner rather than later. If they gain possession of the property, there are costs involved in selling the property through their REO division.
Foreclosures don't happen overnight. Saxon was awarded the judgement almost 6 months ago. Foreclosure usually doesn't happen until 3 months after the first missed payment. So for 3/4 of a year, this home was losing value while the lender was not getting paid.
The original sale date was for the end of March but it was not auctioned off until yesterday (mid June). There could be any number of reasons for this including but not limited to the borrower trying to negotiate better loan terms and/or a repayment terms with the lender.
But did the buyer get a good deal? Well, in 2003 the house sold for $210,000. The map photo may be out of date. It's possible that the house was remodeled/rebuilt to match the size of some of the other homes in the area. I haven't done a drive by to see. That's the only thing I can think of that would justify a doubling in price from 2003 to 2006. 20% off of 2006 prices isn't a bad deal. It's maybe were house prices will be this time next year. As an investment property. Eh? But if the buyer was a homeowner looking to get a good deal on their residence, not bad.If the photos are correct and it is still the same home and there were no major renovations or rebuilding. Is $430k for a 936sq ft ranch built in 1951 that sold in 2003 for $210k a good deal? I really hope the photos are out of date. Anyone more familiar with the area know?
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Tom,
Are you sure that this was a legitiamte sale? Why is the buyer an LLC? Something seems fishy, if you ask me. I am guessing that someone from the mortgage company bought the house for themself.
Posted by Donald on June 14, 2008 at 05:51 PM EDT #
"Are you sure that this was a legitiamte sale? Why is the buyer an LLC?
Something seems fishy, if you ask me. I am guessing that someone from the
mortgage company bought the house for themself."
Are you accusing the Bergen County Sheriff of holding fraudulent auctions? I highly doubt that would be the case.
Most people that buy homes at foreclosure do so as a business. Sometimes people will even set up a separate business entity for each property to isolate any
risk to that property.
There are a number of reasons why this could be an LLC that purchased the property. It doesn't make it any less legitimate.
Even if it was the homeowner or someone at the mortgage company buying the mortgage themselves, the mortgage company allowed it to be purchased at less than what the judgment was.
Posted by Tom on June 14, 2008 at 06:39 PM EDT #
I also just noticed that the name of the LLC is that of the street name. Perhaps one of these trusts bought the house that allows the homeowner to buy the house back at a later date? If the sale was truly legitiamte, then it should have flat out said the buyer's name.
"It's maybe were house prices will be this time next year."
I doubt that. Prices in Bergen County are only down 5% so far, and we are 3 years into the housing slump. So if the trend remains the same, we would have to have 12 years of depreciation to see 20% off peak prices.
Posted by Donald on June 14, 2008 at 05:57 PM EDT #
If it were a trust, it would say Trust not LLC. There are different protections for Trusts and if they were doing it for the owners benefit they would be better off forming a Trust instead of an LLC.
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Still. The mortgage co. let the house go for well below the judgment they were entitled to collect. Well technically they didn't sell the house, they sold the mortgage.
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The rate of decline in home prices hasn't matched that of the rate of decline in the house price to income ratio. Housing prices are down 5% but sales are down 30% according to the data that has been posted on http://www.njrereport.com and has recently been confirmed.
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Lenders are also not giving away loans like they used to so it's only a matter of time before home prices come down even more.
Posted by Tom on June 14, 2008 at 06:19 PM EDT #
The height of the housing boom was in 2006. That's only 2 years.
There was a housing spike in the late 80's. In 1990 the house price to income ratio for Bergen County was 4.27. By 1993 the ratio was 3.46. The low point was 3.14 which was in 1997.
In the latest housing bubble, the house price to income ratio reached 5.63 at its highest. It's down to 5.14 now and all indications are that it will continue to drop. My guess is that it's going to hit below 4, like it did last time. So unless people's incomes drastically increase, house prices will have to come down.
Posted by Tom on June 14, 2008 at 06:58 PM EDT #
Actually, I consider the height of the boom to be 2005 since far more houses were sold in 05 than in 06.
Posted by Donald on June 15, 2008 at 02:14 PM EDT #
If there were far more houses sold in 2005 but the median price still went up in 2006, then somehow agents and sellers were able to keep prices rising an extra year. In 2007 the average price was the same as it was in 2005.
It wasn't until this year that there was any meaning full decline in prices.
Imagine if next year some company magically develops a way to make gasoline out of something other than crude oil. It is cheaper and we can use the existing infrastructure of pipelines, refineries, etc. so that production can start immediately and consumers and most companies wouldn't even have to adapt. If the price of oil kept rising with US dropping it's demand, it would mean that OPEC would have kept the prices up by dropping their production. Well Real Estate agents can't make houses disappear so was the jump in prices from 2005 to 2006 "legitimate"?
Posted by Tom on June 15, 2008 at 03:34 PM EDT #
I want to buy a house at auction, but I am waiting for some decent hosues to be sold. I looked at the satellite image of the Paramus house on Zillow, and personally, it looks like a piece of you know what. And msot of the sold houses aren't in good areas either. Way too many houses in Englewood, Teaneck, and Garfield. Not exactly the choicest towns.
Posted by Donald on June 15, 2008 at 02:18 PM EDT #
You can't go by the satellite images alone as they are usually not up to date. They are just a reference. There was a house in Hackensack that appeared in the satellite images as just an empty lot. There was actually a new duplex on it. Someone bought it at auction for $300,000 and 2 days later listed it on craigslist for $380,000.
"And msot of the sold houses aren't in good areas either."
The good ones will get sold before the auction. You should pick up one of the http://astore.amazon.com/bergenforeclosures-20?_encoding=UTF8&node=9">book son buying foreclosures. I liked <a href="<a href="http://astore.amazon.com/bergenforeclosures-20/detail/0470122188/105-6408809-5763613">"Foreclosure">http://astore.amazon.com/bergenforeclosures-20/detail/0470122188/105-6408809-5763613">"Foreclosure Investing for Dummies"
There are going to be a lot of cases of homes being foreclosed where the judgment is more than the house is worth. Banks are going to have to decide if they are willing to let them go below the judgment or wait to take possession of the property then allow a short sell as a REO. To me, it doesn't make sense for them to wait. The longer they wait in this declining market the more money they lose on top of the expenses involved in managing and selling REO's.
Posted by Tom on June 15, 2008 at 03:44 PM EDT #