Fools Rush In

Looks like we’ve moved into a new phase of the foreclosure market.

I received two calls last week from successful bidders on property at sheriff’s sale.  For those not in PA, that’s how the counties manage the sale of properties – usually for unpaid taxes or mortgage foreclosure.

Bothwanted to know if they could purchase title insurance after the sale.  Since a Sheriff’s Deed can take several months to be delivered to the new owner, it’s not a risk most title insurance underwriters would take.   We weren’t able to help them.

What’s noteworthy:

1. Both called AFTER they purchased the property, not before
2. Both freely admitted that they really didn’t really know what they were doing when purchasing a property at sheriff’s sale.

Two thoughts:

1. It’s usually at the end of a cycle when neophytes get involved – remember the cab drivers recommending internet stocks?
2. There will be continued pain for distressed properties and neighborhoods as those who are neither experienced in nor ready for the challenges of turning around these properties assume ownership.

Is the foreclousure boom a bust?

Great article on the InmanWiki on the vocabulary of short sales.  We’ve been seeing a handful of short and distressed property sales for several months in the Philadelphia area. 

The deals we are seeing are from novices, not the “professionals/specialists.”  When amateurs get involved it usually marks the end of a cycle, not the beginning. 

Are the pundits wrong, and the coming foreclosure “boom” already coming to an end, or is this somehow different?