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Beaufort County foreclosure filings rise; Realtors hope bottom is near
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What is foreclosure?
Essentially, a foreclosure is a process in which a lender must prove to a judge that the borrower is in default on a
mortgage.
It begins when a lender files a lawsuit against the borrower. Once notified of the filing, the borrower has 30 days to respond to the lawsuit. If there is no response, the borrower is considered in default, and the lender asks the master in equity to issue a notice of sale.
A notice of sale containing a description of the property, the time and location of the sale is posted at the courthouse and published in a local newspaper three weeks before the sale date. In Beaufort County, the auctions are held on the first Monday of the month.
The lender can file for either a deficiency sale or waive deficiency. Under a deficiency sale, the lender doesn't expect the sale of the property to satisfy the debt and can pursue an additional settlement from the borrower. A deficiency sale continues for 30 days after auction date. During this time, anyone may place an "upset bid" -- a bid higher than the last bid amount.
If the lender waives the right to a deficiency judgment, the property sale is completed on the auction date. If the winning bidder is not the lender, the bidder must pay 5 percent of the sale price that day. The rest has to be paid within 30 days.
However, some properties are pulled from sale at the last minute if the lender and borrower agree to a repayment plan. If that plan fails, the property could be put up for sale again later. Some properties in the county have gone through the process several times.
The vast majority of foreclosed properties in Beaufort County are repurchased by the lender so the property can be resold and at least some of the loan amount recouped. They are known as bank-owned or REO properties (real estate owned by the lender).
If the loan is backed by a government agency, such as the Department of Housing and Urban Development or the Department of Veterans Affairs, the government agency would be responsible for selling the property.
What is a short sale?
It's an agreement between the lender and borrower that the bank will accept a sale price less than the amount owed on a mortgage to settle the note. The motivation for the bank is to avoid the lengthy foreclosure process. However, in most cases, a short sale is a black mark against a borrower's credit.
By Lisa Allen, The Beaufort Gazette
Chris Walker was on his way to Bluffton on Thursday to show six different properties to prospective buyers. Three of the properties had been seized through foreclosure.
Walker specializes in marketing such properties, but he said everyone connected with Beaufort County's real estate industry has been affected by the growing phenomenon.
Walker, co-founder of the Web site hiltonheadforeclosures.net, said the number of distressed properties in Beaufort County has climbed beyond his expectations. Distressed properties include both foreclosures and short sales. Short sales occur before foreclosure, when owners sell their homes for less than they owe and lenders forgive the difference.
Beaufort County's foreclosure filings, which don't always result in a bank seizing the property, increased
83.8 percent last year -- from 922 in 2007 to 1,695 in 2008, according to county data.
"We kind of thought we had seen the peak," said Walker, a Realtor with Dunes Marketing Group. "That does not seem to be the case."
Even so, the county still does not have as high a percentage of distressed properties as some of the nation's foreclosure hotbeds, Walker and other Realtors said.
The four states with the highest foreclosure rates last year were Nevada, Florida, Arizona and California. More than 1.1 million properties in those four states received a foreclosure notice, almost half the national total.
Many buyers in Beaufort County were affluent enough to put up larger down payments for their homes and avoid troublesome loans, local Realtors said.
The area, however, also attracted speculators, many of whom were left with dozens of stockpiled properties and only a trickle of interested buyers when the real estate craze of recent years lost steam.
The increase in foreclosures probably will continue well into 2009 and possibly beyond, the Realtors said, and might further depress property values throughout the community.
While appraisers once could disregard a nearby foreclosure when determining a property's market value, they have no choice but to mark down a house that's surrounded by properties that have been seized by a bank, said Mark Desjean of RE/MAX Island Realty.
Because buying slowed at the same time foreclosures rose, distressed homes have been joined on the market by a glut of other properties. As a result, those who bought at the height of the boom now might own properties worth 20 to 40 percent less than their purchase price, Desjean said.
"It's affecting values everywhere," Desjean said. "Anybody who's bought in the last four or five years is behind the 8-ball."
Distressed properties have contributed to making this the worst and most prolonged slump Desjean says he has seen in his 23 years in real estate. Owners of second homes have been among the hardest hit, he said.
"If things get tough, you want to get rid of those luxury items first," Desjean said. "You want to make sure you can protect the roof over your head."
A check of foreclosure notices in The Beaufort Gazette during the first seven months of 2008 indicates about
70 percent of the county's foreclosures occurred south of the Broad River.
Within southern Beaufort County, Bluffton typically sees more distressed properties than Hilton Head Island, Realtors said. That's because more homes were bought in Bluffton when the real estate market was booming in 2004 and 2005, and because Bluffton buyers were more likely to purchase lower-priced homes with mortgages whose monthly payments shot up later, they said.
Such buyers also are threatened by the prospect of increasing unemployment. Many owe more on their houses than they're worth.
"They're 9-to-5, working-class people who have just gotten caught in this thing," Walker said. "They have nowhere to turn."
Desjean believes the market is nearing its bottom, and he suspects it will rebound gradually. Future buyers will not purchase homes aggressively as short-term investments, he said, but rather with a longer-term perspective.
That should eventually help to stabilize the slide in home values, he said.
"The recovery will be slow and steady," he predicted.
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