Foreclosures are growing part of the New Orleans area real estate market - NOLA.com

Other times, the homeowner appears to have run out of rebuilding money, as evidenced by a palette of tile in the kitchen waiting to be installed. Realtors Chris Granger,The Times-PicayuneForeclosures in the metro New Orleans area have ticked up in the past year, and the trend has created opportunities for some consumers who are in the market to buy a house. Realtors say buying a foreclosed home takes time and patience. In still other instances, the homeowners have walked away from a home filled with Chinese drywall. In many cases, illness, job loss, divorce or death brought about financial ruin. More often than Bonnette would like, the home is still occupied when she knocks on the door. Tenants have no idea their landlord was facing foreclosure. When Realtors like Bonnette are hired to dispose of bank-owned homes, the sales find their way back into the regular Realtor-assisted sale data, dragging it down. For the first time in recent memory, there are enough distressed sales that they're starting to affect home values across the market. RealtyTrac, a California firm that tracks foreclosures, says it doesn't know whether a bulge of soon-to-be foreclosed homes exists, but it has noticed that foreclosure activity in the area seems uneven. Of course, every foreclosed home creates a new opportunity for someone else. The house needs a new roof and air-conditioning, and parts of the electrical system need to be brought up to code because the utilities have been turned off for more than six months, but Hebert is undaunted. Bonnette is in charge of selling about 500 homes that banks have taken back at foreclosure. When she gets the properties, they're in all different states of repair. Falling home prices gallery (7 photos)Hebert bought the home with a special Federal Housing Administration loan that makes money available for the renovation as well as the purchase of the property; in his case he got an extra $10,000 to cover repairs. The total note will be less than what Hebert has been paying in rent, and the renovated home will be worth more than what he paid. Buying a home from Fannie Mae or Freddie Mac often comes with low downpayment requirements and assistance with closing costs. Hebert's mother found the house in April, yet it took four months for the deal to close because it takes longer to get answers from a big bureaucracy than it does from an individual seller, and every step requires lots of paperwork. And even though Hebert had been preapproved for the special FHA 203(k) loan, inspectors need to come out and assess the scope of work needed on the property before everything could be finalized. Heightened short salesWhen homeowners are facing the risk of foreclosure, many get special permission from banks to try to sell their homes at a loss in a procedure known as a "short sale" that is becoming increasingly common in the New Orleans area. For example, if a home is listed for sale at $185,000, and the homeowner owes $175,000 on the mortgage, but the best offer he can get on the house is $165,000, the bank might allow him to sell it at that price. The homeowner loses his equity in the property but avoids foreclosure and keeps the option of returning to the homeownership world sooner. The bank avoids the expense of having to pay Attorneys to foreclose on the property, and avoids the risk of coming back into ownership of those properties. View full size"The last thing in the world the bank wants or the investor wants is the house. Everybody wants to avoid that," said Jerry McCoy, vice president of servicing partnerships focusing on state and local issues, at Chase bank. The goal, McCoy said, is a "graceful exit" for a homeowner in trouble. But the lender won't accept payment for less than the value of the mortgage lightly. McCoy said banks want documented cases of financial hardship caused by things like death, disability, unemployment or underemployment before agreeing to a short sale. That's a big negative to lenders, and is weighed heavily since a mortgage is typically a person's largest debt. The benefit to borrowers is the possibility of a quicker return to the world of homeownership. Fannie Mae won't back loans made to borrowers who have lost a home to foreclosure for three to seven years after the event, depending on the circumstances, meaning that banks are unlikely offer them a mortgage loan for that period of time because they can't sell the loan. But in short sales or a deed in lieu transaction, the waiting period is only two to four years. She said they're hard to execute, because there's a lot more back and forth among the homeowner, the bank and the prospective buyer to make sure the price is fair and that the bank is getting all it can for the property. If the homeowner and the bank have been upfront with each other, have come up with a joint game plan and gotten a realistic sense of the home's value, a short sale can close in 90 days. But some banks are better than others at short sales, and deals can languish for months. If you lose the buyer, you have to start all over again. Those who hang in there are people who either really love the house or are looking for a bargain, Vastola said. Short sales can be a tremendous opportunity for the buyer with stamina to get a deal, but the blood thirst for a deal can start to drive down home values across the market. According to a RealtyTrac analysis of homes in foreclosure in the first quarter of this year, homes in default that sold before going to sheriff's auction went for 22. When the bank sold the properties after taking them back in a foreclosure, the discount jumped to 40. Banks shedding homesLatter & Blum's Bonnette said that banks want to get rid of homes so they're not having to pay to maintain them, insure them and cut the grass, because the costs add up. Banks will list homes at fair market value when they put them up for sale to the public. They hope to get that price because they don't want to deflate their broader market and contribute to the risk that other homes in their loan portfolios will become worth less than the value of the mortgage. Bank-owned homes are often marked "third party REO inventory" in Real Estate listings. If bank-owned homes don't sell in a reasonable amount time, which varies by lender, banks are more willing to entertain offers. Or, they may try to offer incentives to the buyer that won't be as consequential for the sales price, such as paying the closing costs if the deal is completed by a certain date. This material may not be published, broadcast, rewritten or redistributed. Without these high paying jobs in the area, we are seeing first hand the effect of trickle-down economics. They had a two year phase delay due to Katrina and other Fed $ propping them up. Many can't and never will be able to afford their own residence. However banks made the loans, bundled them and sold them as "assets"Just because there is not a law against something or a law that permits something means that humans need to do something that is unethical and amoral. The forclosures now are from citizens who 'qualified' at a higher standard. Its due to local job and economic shifts, which is more troubling. All this time in the past few years, homes in my neighborhood stayed at the same price. The banks played a major role with the credit default swap bundles. Community Rules apply to all content you upload or otherwise submit to this site.