San Diego real estate blog - Peter Toner

In San Diego we have all come to the reality that a large majority of our market is “distressed” – in the status of Short Sale, Notice of Default or Foreclosure. It is clear from the sales stats that the main areas being affected by the mortgage crisis are those in the outer communities of San Diego County. In an article by San Diego Reader statistics were quoted for areas that are at the highest level of distress. In National City 70 percent of homes listed for sale are in distress, Lemon Grove is also at 70 percent, Spring Valley is hovering at 40 percent and Chula Vista being the hardest hit is at 72.6 percent. North County is also being affected with Oceanside and Escondido being in or above the 70 percent range for distressed homes.

So what does this mean if you are a buyer? Well for the past four months an agent on our team has been searching diligently with their client trying to help them find that “perfect” home. Eureka!! They finally find the home, only to learn a “Notice of Default” had just been recorded on the property. The client’s immediate reaction is great that means I’ll get a “Foreclosure deal!” Reality is that isn’t quite the case, yet.

The recording of a Notice of Default occurs 3 months prior to a formal filing of Foreclosure. What does this mean to our buyer? They either have to try to go through the trials and tribulations of a Short Sale (which in itself can take months to get a lender approval on an offer) or wait out the 3 months after the NOD is filed and hope that in the meantime the lender doesn’t accept an offer. The buyer would then need to wait for the Foreclosure to be filed and the home is released in a Trustee’s Sale…but is it worth the risk and the wait….

It depends on the buyer’s circumstance. Remember once it goes to Foreclosure, the home is sold at a court house auction. The opening bid will be determined by the foreclosing lender which is usually set to the total amount that is owed on the home (ie original loan amount and arrears). Should the starting bid not be met, the status of the home will then change to REO (Real Estate Owned). The bank will then list the home for sale (not always immediately) and hopefully will do so according to the market value of the home. That may be the ideal time for a buyer to step into the sale…. after all the legalities have been completed and the home is at REO status. Bear in mind that you may be also competing with other bargain seekers at this point.

Our advice? It makes the most sense for a buyer to hunt for their “perfect” home with the help of his or her Realtor. A home that has been priced properly according to the market and matches the criteria of a home that the buyer would like it to have. Should you happen to find that home is in distress, make sure that you know all the in’s and out’s involved before jumping into “rough waters.”