Blog : REO

Lake Geneva Foreclosure Update

Lake Geneva Foreclosure Update

Foreclosures. They’re interesting, and awful. Awful to be a party to a foreclosure, awful to be a neighbor of a foreclosure, awful to be the bank foreclosing.  There are no real winners in the foreclosure game, at least immediately. Long term there are many winners, in the same way that a forest fire cooks some rabbits while it chars a vacant mountainside but after the smoke clears and the damage is surveilled, new growth can begin.  The easy thing now is to forget about foreclosures. To pretend they don’t exist, to wish they hadn’t. But that’s not the smart way to go about our lives, and so we’ll take a look at the Lake Geneva foreclosure scene to determine if there’s anything afoot.

First things first, let’s check the MLS. As the local MLS scratches and claws to try to remain relevant, much like Blockbuster tried to remain relevant and MySpace, too, they’re implementing different search fields to prove they’re at the cutting edge of technology. They aren’t, but they’ve given agents an opportunity to mark listings as “REO/In Foreclosure, and Shore Sale”. That’s something, so let’s search. Walworth County, Singe Family, both distressed selected: Seven total listings. Two under contract. Nothing priced over $250k.  Year to Date there have been 72 such sales in Walworth County, all but five priced under $300k (the most expensive was a mid $400s Delavan Lake property).  Looking back to 2014, when the MLS function either didn’t exist or wasn’t readily used,  there were 170 such sales in the MLS.

There are two other methods to check for brewing foreclosures, both involving public records searches. Looking at scheduled Sheriff’s Sales, there are just 19 scheduled at the moment. None of those involve any Lake Geneva vacation home real estate, and most are in the lower price ranges of our primary home market (sub-$200k).  For a reminder, the Sheriff’s Sale is a step in the foreclosure process. An owner/borrower still has a redemption period that typically extends past the Sheriff’s Sale, but this is usually a last, fatal step in the foreclosure process.

Taking it one degree deeper, let’s look at the Lis Pendens filings over the past 30 days. Remember, a Lis Pendens filing is essentially a notice of default. The bank is telling the borrower: YO. You owe us money. We aren’t messing around. Pay up or we’re going to foreclosure.  There are a  handful of filings,  but from what I can see there’s only one recent LP filing that affects the vacation home segment. That is a filing on a home in a lake access association that lacks a boatslip, or a view. Nothing looks to be in trouble on the lakefront, excepting the property that with IRS entanglements on the North Shore.

Beyond the lake access markets, one item of surprise. Geneva National looks clean. GN, for those who didn’t know, had some significant foreclosure trouble during the last downtown, as volume dried up and foreclosures pressured valuations.  My assistant Vicki closed on a GN foreclosure this fall, but these properties have been few and far between this year. Overall inventory has dropped considerably in GN, and without any foreclosures brewing (there may be one or two that I don’t see), GN is poised to continue its very healthy recovery.

Foreclosures will be part of any market, no matter how healthy. A foreclosure here and there can be a positive for a market, as it provides a bit of liquidity when inventory is low and removes property from weaker hands. Today, the ownership base at Lake Geneva looks to be as strong as ever, and a decided absence of foreclosures appears to be the new normal.



Lake Geneva Foreclosures

Lake Geneva Foreclosures

The first foreclosure I bought was in 2009. January of 2009, to be exact. The home was ugly, the property decent, the list price somewhere around $249k. In January of 2009 there was some sense that the market was bad, but what wasn’t clear yet was just how bad it would get. I bought, perhaps premature in the downward cycle, but I bought because I needed a place to live and had recently sold my primary home in Geneva National. As a broker who writes about vacation homes only, and as an audience that seeks info on vacation homes only, it’s sometimes forgotten that people buy homes primarily so they have a place to live. I admit I tend to think people buy homes so they have a pier to swim from. Anyway, I bought that house, that foreclosure, and I fixed it up.

I bought that home for $177k, put about $60k into a remodel, and sold it for $274k in the summer of 2012.  Had I bought that home in 2011, and sold it in 2014, the gain would have likely been far more significant, due to the lower purchase price and the higher sale price.  Prior to that property, this was the first foreclosure (REO) I had ever bought. Since that property, I have not bought any others. It’s strange to me to think about that, and I wonder why I didn’t buy more real estate when things were bad.  The only answer I can come up with is that I wasn’t interested in the project, because foreclosures here tend to be projects. I love projects, but I tend to only love the next one once I’ve forgotten about the tribulations of the last one.

Even though I haven’t indulged the REO, I have a tendency to watch for these bank owned listings. When one comes to market, usually by one of the brokers that specializes in that sort of thing (I have listed and sold three lakefront foreclosures, but never anything off-water), I pay attention. I look at the details. I look at the pictures. I find myself contemplating the idea. I wrote an offer on a foreclosure last year, a personal offer, and then when the bank didn’t negotiate, neither did I.  Last week, another foreclosure came to market, this one in Fontana, and cheap. I thought about it. I thought I should make an offer. It would need to be strong, at ask or better, and I thought about the possibilities for a while. A few minutes later I decided that it wasn’t for me, and I let the feeling pass.

But this is what foreclosures do, they incite a buying public to action, because even after seven years of seeing foreclosures with some frequency we have something programmed deep inside that assumes a distressed sale is a value. It’s a steal.  When the market was in rough shape, I’d receive emails often wherein the sender asked me about lakefront foreclosures. They were interested, they’d say. Foreclosures, foreclosures, foreclosures. I’d always respond with the same suggestion. What if I can find you a better deal on a better property that’s not a foreclosure? This was typically the end of the email exchange, because for many a foreclosure was the opportunity they wanted even though value was what they purported to be seeking.

Today, foreclosures are not so exciting. They exist, but in small quantities. Some of the foreclosure action around the lake is the same stuff we’ve been talking about for years. The Loramoor lakefront is supposedly foreclosed on and re-sold already, but I don’t know the exact details. The short sale in Williams Bay that’s been for sale for years is scheduled for another sheriff’s sale. There’s a sheriff’s sale pending over by the Lake Geneva Country Club. Another one in Country Club Estates brewing, and one in Country Club Estates that’s available as REO. There’s the large lakefront estate that remains under IRS control, and perhaps that sale will someday occur via public auction. But for now, for the rest of us, the reminder today is simple. Distressed sales do not always mean value, even though we’re programmed to believe that they do. Better value is found in properties that are merely aged on the market, as those are the deals we should be seeking. If one happens to be a foreclosure, so be it.

Lake Geneva Foreclosure Update

It’s been a very long time since I’ve written about foreclosures. You’d think, after the exposure that I’ve had to them, I’d write more often about them. You’d think I’d be a bigger fan. I did, after all, represent the Clear Sky Lodge seller (Bank Of America), and the South Shore Club seller (First Midwest Bank), and the Geneva Oaks Trail seller (A New York hedge fund). This level of lakefront seller side representation is unrivaled in this market. Considering I’m not any sort of REO specialist, and considering that I’m not on any short list of bank representation, there has to be some reason for the ownership of this specific REO segment. What could it be?

Well, silly, it’s simple. It’s because the banks don’t golf with any brokers here. They don’t have lunch with friends who invite their broker friend. They don’t hang at the yacht clubs or the bars. They don’t have influences here. They just look around the market, interview the good agents and then hire the agent that seems most up to the task. I suppose I should take that as a compliment, but maybe the market should view it as more of an endorsement. Either way, the foreclosure update.

The lakefront has been quiet in terms of distressed activity. There has been a property in the Lake Geneva Highlands flirting with foreclosure, and there’s the large property on the north shore that was seized by the IRS last year, but that’s about it. The foreclosure on the lakefront in Loramoor doesn’t seem to be progressing, but I’m not privy to those details so I’m uncertain as to the current status. There’s an active Lis Pendens at the county level, but that’s about all I know.

Off the lake, foreclosures haven’t stopped, but they’ve slowed to a very intermittent drip. There is a pending issue in Knollwood, and another in Country Club Estates. There’s an REO in Cedar Point Park that has a story to tell. A few years back, a seemingly cheap REO property in Cedar Point would have been pounced on immediately by an investor or an opportunistic end user. Value or not, the distressed portion made it look like a deal, and so the market responded. Today, there’s a beat up REO in Cedar Point that’s been sitting for quite some time. In the spirit of full disclosure, I actually made a bid on it last month. I thought maybe I should rekindle my love of the challenging renovation. Then I remembered that I hate renovations and didn’t engage in a negotiation. Besides, Fannie Mae only likes to negotiate with itself, by dropping the price with programmed consistency. They do this, and then when a bid comes they don’t negotiate. It’s a strange thing, until you realize that it’s a governmental agency and awkward inefficiency is what they do best.

Geneva National has shrugged off its ongoing foreclosure issues, and looks primed to have its best year in a very long time. This is a positive, and buyers should be encouraged to buy there so long as they remember the lesson of Foxwood. The once dazzling enclave of new construction has been foreclosed on. Early buyers paid handsomely to be part of this new development within Geneva National. Then, the market dried up and the developers bailed. This is why we don’t buy in unfinished enclaves within large associations. We just don’t do it. We buy inside of existing, all-built out areas, where we know what the market looks like and we can understand our downside. I like developers, I just don’t want to tie my future valuation to their whims.