Lake Geneva Foreclosure Update

I admit to taking at least some delight in watching the folly of the foreclosure market. Once, a commenter on the blog accused me of being an ambulance chaser. This is not an accurate accusation, as I’m not really chasing anything. I’m really just sitting back with a snicker on my face as I watch some of the more ridiculous real estate ventures crumble. I do not celebrate the personal loss that foreclosures can represent, but I enjoy watching a market work as it weeds out the weaker properties or efforts that have no business succeeding. It’s in the folly of misunderstood market assumptions that I find a slight hint of reassurance as I trust in the market to make the ultimate decision on who succeeds and who, unfortunately, fails.

I’ve been pacing this morning. Pacing back and forth. Watching the lis pendens filings unfold in front of me, and charting the path of some foreclosed properties that have been returned to the market mostly as speculative ventures. I’ve been watching one particular property, and I’ll leave my description limited so as not to indict those who have misplayed the market to such a degree that the end result can be nothing but catastrophic. I’m certain this situation will play out in markets across this great nation, and so far I see only one property in the Lake Geneva market that might be inflicted by this disastrous cycle. Beware the property that was a foreclosure, and will some day be another foreclosure. Buyers are buying foreclosures. This much is true, be it a Lake Geneva truth, or a Palm Springs truth. Buyers will, many times, ignore market realities and opt solely for cheap, even if the cheap property isn’t in the best of locations or has underlying market conditions that will effect the liquidity of that property moving forward. It’s in this “buy cheap” mentality that many foreclosures have been purchased with the immediate intent on creating a speculative flip. The problem is that many of these potential flips are going to head right back into foreclosure, this time with a new owner being dragged down and a new bank being blamed.

There is one such property in Lake Geneva. It was purchased a couple years ago from a bank. Then it was renovated in a miserable fashion. And now it has returned to the market, spiffed up and ready to sell. It is also grossly overpriced. It is a property that doesn’t fit the market now any more than it fit the market before the first foreclosure. It is a property that is a mistake, and it is a property that I half expect to see returning to yet another bank and being offered in yet another sheriff’s sale. It’s a shame really, as mistakes like this can be avoided by doing some simple research. If you’re thinking about flipping a property, please do your homework. Talk with agents in the specific market you’re looking to flip in. If it’s Lake Geneva, talk to me. Even if you’re not going to list it with me, just ask me. I’m happy to give my opinion about what might possibly be a huge embarrassing mistake.

The depth of the foreclosure trouble afflicting the nation is more than likely being underestimated by most. Even by the pundits. When you consider the foreclosures affecting many investors who have cross collateralized residential property with commercial, the ramifications of a single foreclosure proceeding can affect several markets at the same time. Walworth County foreclosures have not slowed, and if anything the frequency of the lis pendens filings that signal default appear to be on the rise during 2011. Much of this doesn’t make sense to me, and it speaks to the limited advice that I believe those facing foreclosure ultimately ask for and hopefully receive. One trend I see is that properties up against a foreclosure are often not listed on the open market. Why? If your note is in default and you have the possibility of recouping some equity in the property through a sale, why on earth isn’t there a sign in your yard?

I see this often, and it’s a huge mistake. I see properties with lis pendens filings that sell to buyers who are oblivious to the fact that their chosen seller is in a battle for their financial lives. Brokers are not yet in the habit of checking for financial trouble before negotiating on behalf of a buyer, and that lack of curiosity by them is a boon for those buyers working with me. A large estate went under contract this month and closed this week for $3.5MM. The property, most likely unknown to the buyer, was also the subject of two lis pendens filings that signals the homeowner was in some sort of financial trouble, or at least disarray. Wouldn’t it be wise to know that if you’re a buyer looking at purchasing a multi-million dollar home? You’re right. Only if you’re trying to hammer out the best deal would that be important.

There are other foreclosures brewing, though not enough to cause any alarm in the vacation home market here. The usual suspects remain steeped in trouble, those condotels at Grand Geneva and the Abbey, as well as timeshares at the Grand. Those timeshares remain a mystery to me, as they continue to sell at a rapid pace even in the face of ongoing foreclosures of the previously sold units. People must really, really, love those free meals in order to trade a free meal for possible financial ruin. There is a foreclosure that I see starting in Cedar Point Park, and possibly another in Country Club Estates. Something to be aware of- single foreclosures here and there in Cedar Point and Country Club have done little to impact the overall pricing of those associations. The reason those select subdivisions have been able to absorb the considerable downward pressure on pricing that is typically caused by foreclosures is simply because of their large size, and consistently available inventory.

I don’t see any other foreclosures actively affecting the lakefront market on Geneva at the moment. There is the short sale in Fontana that might still be available, and another possible short sale in the works on the south side of Geneva. If you take nothing else out of this rambling post today let it be this. Who you choose as your agent is important. I don’t really care if you sort of know that person through a friend who went to school with their nanny. It’s not about who your agent knows, or how recognizable their name is, it’s about how smart your agent is within this market. If they can’t dig deep enough to figure out the back story behind a property you have some interest in, then the affiliation with your friend’s nanny probably isn’t that important.

Photograph by Ideal Impressions Photography