Learn How To Start Investing In Real Estate
Learn How To Start Investing In Real Estate

Foreclosures in Judicial States Indicate Future Bargains

Written by Than Merrill

With the housing sector well on its way to recovery, single-family homes continue to experience a drastic increase in value. A distinct lack of inventory, in association with record-low mortgage rates, has encouraged prospective house hunters to test the market. However, the accelerated rate in which homes are appreciating has many potential buyers concerned. Some prospective buyers are beginning to worry that they may have missed their opportunity to acquire a home for the lowest available price. First-time buyers, in particular, may fear they missed their opportunity.

If you are one of the many individuals who believe the opportunity to purchase a cheap house has come and gone, do not fret. According to experts, some states are still experiencing a spike in foreclosure rates, indicating that more deals are on the horizon.

While RealtyTrac has confirmed that foreclosures are in a perpetual state of decline across the nation, several geographic regions are continuing to experience spikes. States in which the foreclosure process is particularly lengthy have seen the most drastic increase in foreclosure filings.

According to RealtyTrac, the first half of 2013 witnessed approximately 801,359 distressed property owners file for foreclosure. In June, this number represented a 35 percent decrease in the rate of foreclosures for the United States as a whole. However, while overall foreclosures fell, so-called judicial foreclosures surged 34 percent.

There are 23 “judicial states,” in which the courts oversee a lengthy foreclosure process. “If it is a judicial foreclosure, then it goes through the court system and the bank has to sue the homeowners,” explains Carey Frankel, a Realtor based in Ponte Vedra Beach, Fla. “This is a lengthy process that delays the time from default to actual possession of the property by the bank,” Frankel says. A non-judicial foreclosure, by comparison, may only require the lender to notify the owners that they are in default before putting the home up for auction.

RealtyTrac’s data acknowledges that 28,296 properties were scheduled for a judicial foreclosure in June. The majority of the properties subjected to judicial foreclosure were in the following states:

  • New Jersey foreclosures rose 103%
  • Florida foreclosures rose 100%
  • Maryland foreclosures rose 94%
  • New York foreclosures rose 66%
  • Illinois foreclosures rose 65%

Many of these properties in these state are predicted to come to market in the next six to 12 months, says Daren c, vice president at RealtyTrac. “If you missed the bottom of the housing market, this might be the last chance to get a bargain on one of these foreclosure homes,” he says.

Despite a drastic decline in foreclosure rates, these states are still stuck in the wake of the recent bubble crisis. Many blame the lengthy foreclosure process associated with each of these states. According to Blomquist, “particularly where a backlog of delayed distress has built up, thanks to a lengthy foreclosure process.” Regardless of the process, however, experts suggest that now is the time for lenders to dispose of distressed properties. Rising home rates will allow them to facilitate home transactions at auctions or on the open market. Prospective homeowners would do well by themselves to look in these areas for a potential bargain.

It goes without saying, but the biggest bargains may not always be in the most desirable neighborhoods. “It’s hard to find a bargain price these days because there’s been such a recovery,” says Bradley Hunter, chief economist of Metro Study, a housing market research and advisory firm based in Houston. Many developments built in the latter years of the property boom were further from schools and urban centers. “If you’re willing to make a bit of a commute, you may be able to save more money,” he says. “In 2005, the motto for those looking for a new home was ‘drive till you qualify.’”

There still remains more of an opportunity to acquire a cheaper property in the previously mentioned judicial states. Foreclosures in non-judicial states plummeted two-thirds from their previous high, from 72,863 in January 2010 to 24,933 in May 2013. By comparison, foreclosures in judicial states were at 37,522 in January 2010, but were still around 30,297 in May 2013.