Lake Geneva Foreclosure Update

Someday, someone is going to spend a lot of time studying the foreclosure phenomenon of the past five years. I don’t know who that someone will be, but I’m certain that it won’t be a Realtor. That’s because most agents view foreclosures either as opportunities or obstacles, but rarely as a subject of study. I admit to being in that group, finding foreclosures both tedious but necessary, though I do watch the foreclosure filings just to keep both hands firmly around the neck of this market, you know, to check the pulse of it. Today, we discuss the foreclosure climate at Lake Geneva.

In 2009, there were foreclosures. Those were the foreclosures of owners who were so far out over their skis that even the slightest gust of awkward wind blew them into a tailspin, into the trees. These owners were the sorts that gambled, the sorts that didn’t see real estate as anything but a perfect opportunity. These were the sorts that also routinely ate free at buffets for listening in on timeshare sales, and these were the sorts that also bought those timeshares because, well, because why not? These were the first to fall, the overextended that had approximately no margin for error.

In 2010 and 2011 and 2012, more fell. Millions more. Some of these were the overextended types, but many more others were hard working Americans who fell on difficult times either through job loss or illness, and others still were simply crushed under a mountain of debt on a property with seriously diminished value. There were hard luck cases, strategic defaulters who wished to lose their home but keep their BMW, and there were plenty somewhere in between. But now it is late 2013, and these foreclosures persist. So who are these new foreclosures that have joined the game at this very late date?

Some are those who have been routinely fighting the foreclosure bug. I see foreclosures, or at least one, pending in Fontana today that I have seen in default off and on since what feels like 2009. These are owners that have been up against it, and have been fighting it. These are either owners that simply love their real estate so much that they don’t want to lose it, or these are those who feel a moral obligation to pay that note for no other reason that they promised they would. There are these noble types, but there are less honorable motives held by others. Some have been gaming the system for years, alternating between default and almost-default, keeping a bank on the hook because either the note is a jumbo and the lender desperately doesn’t want it, or simply because the owner has taken advantage of various (failed) modification programs and government assistance. Either way, it’s late in 2013 and the market looks mostly recovered, until you check the Lis Pendens filings.

And that’s what I do, to make sure my buyers (and those horrible buyers that glean information from me and then buy from someone else) understand that markets with foreclosures are still markets that need to be approached carefully. While these reports begin to feel mundane, and I effectively just arrange the same words in a different order, paying attention to foreclosures and possible foreclosures is one way we can make sure we have a rounded view of the market, one that isn’t prone to the breathless pontifications of others that find their basis purely on emotion and not on fact. With that, this:

I see at least two trouble spots in Country Club Estates at the moment, both properties with LP (lis pendens) filings against them. I see at least one foreclosure in the works affecting the Abbey Hotel property, but it should be mentioned that this property has been slowly cleansing itself of troubled ownership. Long term the prognosis for the Abbey hotel is strong, even if the sales prices of those individual hotel rooms may not be matched for many, many years. There is a possible foreclosure in the South Shore Club, though I’m betting that property doesn’t end up going REO, and if it does it won’t be for a long time. That’s because lenders avoid REO’s on multi-million dollar properties in the way that I avoid I-80.

There are two foreclosures percolating in Cedar Point Park, both off water properties. There is something amiss on a lakefront in Geneva Oaks, and while multiple lien holders jockey for position, this will certainly become an REO property at some point in the coming months, unless someone can snag it at sheriff’s sale first. Speaking of Geneva Oaks, there is an REO property there, off the water, with a hefty price tag on it. This is becoming a troubling norm with REO properties- prices that instead of undercutting the market to ensure that inventory is quickly absorbed seek to best the market, by pricing above the competition. I think Fannie Mae is emboldened by their profit margins of late, and this confidence is putting some of their REO properties at list prices that are not attainable. As a result that inventory drags on the market and to me is a more damaging action than a quick sale at an under-market price.

Abbey Springs looks foreclosure free, and Geneva National, while struggling a bit even now, is weeding out this toxic inventory and should be positioned for a continued mend into 2014. Except foreclosures to continue at an elevated rate, for the rest of this year and all of 2014, at least for Walworth County and the greater Midwest. Prices are rebounding, yes, but ever so slowly, and that slow gain will not stem the tide of owners that have fought the good fight but are now, at this very late date, tired and worn out.