St. Paul Real Estate: The Man on the West Coast

There are currently 1624 registered vacant building in St. Paul, MN. The number goes up every month, and many of them are in foreclosure. Of the 2009 single family homes currently on the market 716 or about 36% of them are in some stage of foreclosure. Many of the homes that are in some stage of foreclosure that are on the market are vacant but not registered , many do not have for sale signs in front of them .

The data used to determine how many homes are on the market in various stages of foreclosure came from the MLS. Since listings are not categorized as foreclosures much of the data had to be gone through manually looking for phrases like "bank owned", "corporate owned", or "subject to bank approval".

There is a man on the west coast who is responsible for hundred's of files. Some of those files represent vacant homes in St. Paul that have been foreclosed on.

One of his files is the vacant home on your block, the home that has been on the market for the last ten months. People have tried to buy the home but have had to move on because the man on the west coast has too many files and it may take him a month or two to look at an offer on one of his files, and then another week or two to accept, reject or counter the offer.

He is doing the best he can. The bank that employs him is a little short staffed. The files he has are his responsibility and his alone. If he calls in sick or goes on a vacation the files just sit and his voice mail box fills up. One of my clients made a good offer on one of his files but he can not give us an answer becasue he does not have time. My client will have to extend his current lease and with draw his offer, and another home will sit vacant when there is someone who wants to live in it and can afford to buy it.

Banks can't sell real estate and they own too much in our city. Home values are going down in some of our neighborhoods as vacant properties owned by banks sit on the market months longer than homes owned by individuals and it is going to get worse because this is just the beginning of the foreclosures we will see.

First time home buyers flock to these low priced listings but in most cases they can not get financing for them because there just are not any programs available for first time home buyers that will finance a home that needs repairs.

The city turns off the water in the homes becasue the bill has not been paid. They will not turn it back on so that a buyer can have the home inspected. That means that if the home is in good enough repair for FHA financing the FHA inspector can not do his job and the lender will not fund the loan.

Last month there were 1591 registered vacant building in St. Paul, a huge percentage of them are foreclosed properties. This month there are 1625 registered vacant buildings. We have only seen the beginning and six months ago was the time to take action. It isn't too late for the city to take action and set some standards for "bank owned" properties. They should be forced to sell the property or fix it up or both. There should be a limit on how long it can sit vacant. There are buyers for some of these properties but they are almost impossible to buy. There will be more foreclosures to come, this is just the beginning.

The new foreclosure pause program is an intriguing idea, but it involves banks renegotiation payments with consumers. Since foreclosure process is only frozen for a period of time and it takes banks months to respond to anything I don't see how it can possibly work.

" The banks, which include Bank of America Corp., Wells Fargo & Co., Washington Mutual Inc. and Countrywide Financial Corp., said the program would start with a letter to homeowners more than 90 days delinquent that lays out procedures to qualify for a ``pause'' in the foreclosure process. The homeowner has 10 days to respond so the lender is able to weigh payment options."

The homeowner may be able to respond in the 10 days but I just don't have the kind of imagination it takes to imagine a bank responding to anything other than a late payment in anything less than a few months.

Comments

Ron Tarvin said at February 13, 2008 at 05:48 AM

This is SPOT ON! Banks can not sell real estate. It's not because they can't but rather, they do not have the manpower to invest to get it done!

The other thing that is so important in your message is the fact that so many hurdles go up to the sales process: The utiliites being off, the slow process of the bank, the unrealistic view of value from someone who does not personally know your market. These hurdles almost assure that homes will sit vacant. When I sit with someone and try to explain the short sale process to them, they often wonder why a bank would do such a thing but the key is right there. They are owning more and more properties that they do not want to own and do not have the manpower to resell in a timely manner to keep them from owing taxes and all other fees that make it even harder on the bank to sell!
Sarah Cooper said at February 13, 2008 at 07:34 AM

My brother in law is in a nearly new neighborhood that is already in decline because of initial extra-easy builder financing that readjusted too high for homeowners to keep up with. Homes are empty and neglected and his pretty house drops it's value as more and more go into foreclosure. He'd like to move but can't compete with banks' rock bottom prices. People who would buy his pretty house do not want to live beside empty houses with grass that goes unmowed in the warmer months. It's a cycle that's bad for everyone.
Linda Davis said at February 13, 2008 at 08:34 AM

I have a semi-written blog in my files called "The Lady in Texas". Same story.
Nate said at February 13, 2008 at 11:29 AM

This is a great take on working with banks to try to buy foreclosures. Many of these homes require much more money from the buyers to make repairs after they are purchased, and a lot of additional time getting a deal together. Prices on many of these don't reflect this yet.

Pre-foreclosures are just as bad. Often these homes had all their equity withdrawn, but little of it put back into the home. Even if the bank will agree to a low-ball offer as part of the short sale process, buyers still need additional cash to begin paying for repairs or updates that weren't done by the previous owners.

Considering that in recent years we've been catering to home buyers with little to no money down, these properties target a much smaller pool of buyers. Those who have considerable savings. It's going to take years for the pool of buyers with significant savings to increase, especially during a potential recession.

The truly sad part to me, due to the age of the housing stock in many of our cities neighborhoods, is that these homes don't handle years of neglect very well. Having them sit empty for years while they are in foreclosure will not end well for the homes or their neighborhoods. Many of these are beautiful homes that deserve better.
Patient Buyer said at February 13, 2008 at 09:57 PM

Teresa-

Here is an excellent post from calculated risk that explains a little bit why the bottleneck occurs on short sales.

calculatedrisk-(dot)-blogspot-(dot)-com/2008/01/phone-hustlers-dislike-short-sale.html

or:

http://tinyurl-(dot)-com/2vc653

If you have not read this blog before, I highly recommend it. One of the best mortgage and finance blogs around.

PB
Kaye Thomas said at February 13, 2008 at 11:27 PM

Teresa,
These pictures coupled with your strong words make a compelling story. Banks truly have no idea about what to do with the real estate they now find themselves owning.

When they finally get around to actually putting these homes on the market they are usually listed with someone who knows nothing about the local community and as you note is too far away to properly service the listing.

They did the same things in the 90's with their REO inventories. They wind up "owning " these properties far longer then they should and lose far more money then necessary because of a complete lack of understanding about the real estat market. It will only get worse as more of these properties hit the market.
Jack Boardman said at February 14, 2008 at 03:05 AM

Many of the home pictured have "good bones" and would be worth preserving--I fear for their future.
Teresa Boardman said at February 14, 2008 at 05:48 AM

Jack - thanks for making the point about the houses with "good bones". As we both know some of the homes are Italinate style and are old and fairly rare. They are very nice houses. There is a brick italinate in the pictures just a few blocks away from us and it is a favorite of mine. I may go inside to see what kind of potential it has it might be a good candidate for a rehab. Brick houses are also fairly rare in the area.

PB - the link didn't work. I have sold homes that are short sales, I am sure I could add to the information.
Tara Jacobsen said at February 14, 2008 at 06:25 AM

The link PB gave was actually http://tinyurl.2vc653 - I went and read and it IS a good article!
Larry D. McGee said at February 16, 2008 at 04:28 PM

I agree with your post. Most of Denver is now considered a "declining market", even though our total sales in 2007 were equal to 2006 and 2005. The problem is that foreclosures are creating an artificial decline, and financial institutions move at a snails pace. Two thoughts: (1) Do you suppose that a a whole bunch of stockholders in financial institutions continue to "horribilize" the situation with media reports because they "shorted" the stock and are making millions on the institutions devaluation?, and (2), are the institutions reporting their loses to the media without consideration of what they may be recovering as foreclosures sell. If you "lost" a billion in foreclosure filings, but recovered 700 million in foreclosure sales, maybe the real loss was $300 million; not chicken feed, but 70% better than the media is reporting.