The past few weeks have become more and more exciting in the Mammoth Foreclosure realm. From attending Trustee’s Sales (aka auctions), to “cash-for-keys” negotiations between lenders and former owners and tenants, to sometimes disgusting “trash-outs”, to seeing happy new owners settling into a once-foreclosed property, there are few dull moments. And the paperwork, endless forms, and seller confusion and delays continue. But all of this action reveals critical insight into the Mammoth real estate market conditions.
I’ve come to the conclusion (duh Paul!) that today’s foreclosures in Mammoth are far less a statement of the current local economic and real estate condition and much more the result of the give-away lending (and consequent gambling) and the market hyperbole of the 2005–06 era. And go figure that many of those being foreclosed on in Mammoth today were active (and likely newly minted) in the mortgage business in Southern California at the time they purchased––and many of the loans were acquired in other people’s names!
While the foreclosure pipeline is filling here in Mammoth and Mono County, the overall numbers still remain on the low side and with no major concentrations in any single market segment. And the overall inventory in Mammoth remains steady. (And if you follow my theory of “scrubbing” the inventory data, the inventory could actually be considered on the low side, and with plenty of mediocrity and overpricing still in the mix.)
While much of our work has been dealing with the “unfortunate” side of these foreclosures––the personal soap operas and victim theatrics (we haven’t seen a true “hardship” case so far), the myriad of property management concerns, preparing the properties for the market (all referred around here as Tasks, Tasks, Tasks), etc., our thinking is now turning towards making the buying process more explainable and understandable to the interested buyers. While the process remains similar to buying any other real estate in Mammoth, there are some real differences, and not understanding them can make-or-break a transaction.
Like I have stated in previous Foreclosure columns, the sellers of the REOs are unemotional and non-delusional. They have no clue about The Airport and new air service, Starwood Capital, the new logo or branding, or the latest important (and meaningless) press release. It’s all business, and definitely no monkey business. But they do have policies and guidelines (that vary greatly) and they, sooner or later, become motivated sellers. And what we have experienced is some frustration on the behalf of the buyers who are looking to tie these properties up. Most of these REOs/foreclosed properties are being handled by asset managers who are inundated with files and work––to the point of being overwhelmed. Almost all communication is electronic with much of it in fill-in-the-blank spreadsheet format. Not exactly like presenting an offer to Mr. Seller at the proverbial dining room table. And much of this communication is happening at odd hours because asset managers are working late or from home or maybe even from a foreign country.
And the seller’s motivation is a moving target as well. In our present national economic environment some of these sellers are seriously motivated to get cash back on their books as quickly as possible (imagine that)––so they are pricing very aggressively. (We currently have an Indy Mac REO–––and according to a memo this morning it is business as usual in their department.) And some of these lenders don’t appear to really care and are displaying patience with the market before they slash the price. Some are sitting on unrealistic and lagging appraisals. Some are trying their best to make the next loan (with incentives) for the new buyer. And again, some are just so backlogged that everything seems to be lost in cyberspace. And just when we think all is lost––voila!––it all gets resolved.
Ultimately, buyers looking to grab one of these REOs need to be counseled on the variables in the process––not necessarily minefields but the wild cards. Buyers get to complete all the normal due diligence. But when making offers they need to understand the reasons for things instead of being set up for excuses. And hopefully the reward for their patience is a very good buy and the start on years of enjoyment here in the Sierra. Enough for now, I’m heading up to the Village to check out a 2 bedroom that was foreclosed on last week.