10 states where bank-owned homes will soon flood the market
Foreclosure can be a long process. It starts when a homeowner defaults on a mortgage and a bank or financial institution repossesses the home. And it ends when the bank sells the property to recoup the loan's unpaid balance.
The homes that banks repossessed in the third quarter of 2015 were in the foreclosure process for an average of 630 days -- the longest since real estate data company RealtyTrac started keeping track in the first quarter of 2007. The foreclosure process increased year-over-year in 28 states. In three of the 10 states with the highest year-over-year increases in total repossessed properties, the process took longer than 1,000 days.
Legal and legislative delays, including new laws regulating foreclosures in states like Nevada and Massachusetts, caused homes in some states to be caught in the foreclosure process for longer than usual.
Last quarter, however, saw a 66 percent increase in homes clearing those obstacles to complete the process, RealityTrac found. This means those homes will be flooding onto the market in the next six to 12 months.
Florida didn't quite make RealtyTrac's Top 10 -- coming in at No. 11 because its comparatively low 34 percent increase year-over-year meant the total number of repossessed properties held steadier than other states. Still, it actually had 22,252 homes repossessed last quarter, which is more than any other state on this list.
This extreme influx of bank-owned homes for sale may be good news for deal-seeking real estate investors. If they find the right bank-owned fixer-upper in the right location at the right price, they could see returns of up to 50 percent or more.
Will more "for sale" signs be popping up on repossessed properties in your neighborhood?
Here are the top 10 states with the country's highest third-quarter increases in repossessed homes.
New York
Increase in repossessions: 469 percent*
Average time in foreclosure: 995 days
The 4,435 homes banks reclaimed in the Empire State last quarter have been stuck in the foreclosure process for an average of 995 days -- more than 2.5 years. That's about 58 percent higher than the national average of 630 days.
*Source: RealtyTrac
New Jersey
Increase in repossessions: 351 percent
Average time in foreclosure: 1,177 days
New Jersey had more bank repossessions than any other state on this list last quarter: 6,858 in total, a 351 percent increase over last year. It was eclipsed only by Florida, according to RealtyTrac, which had a whopping 22,252 bank repossessions during the same period. New Jersey's homes have also been in foreclosure for an average of 1,177 days, longer than homes in any other state in the Top 10.
Nevada
Increase in repossessions: 255 percent
Average time in foreclosure: 683 days
Nevada is one state in which new laws governing foreclosure may have slowed down the process on some homes. Nevada Assembly Bill 284, which took effect in October 2011, added stricter requirements to the foreclosure process. The 1,916 homes reclaimed by banks in Nevada last quarter had been in the foreclosure process for an average of 683 days.
Arkansas
Increase in repossessions: 154 percent
Average time in foreclosure: 708 days
Banks repossessed 803 homes in Arkansas last quarter, a 154 percent increase from the previous year. These homes were in the foreclosure process for an average of 708 days -- almost two years. The length of foreclosures in the state has been growing relatively steadily since it hit a low of just 87 days in the first quarter of 2009.
Massachusetts
Increase in repossessions: 93 percent
Average time in foreclosure: 783 days
Like Nevada, the passage of a new law governing foreclosures may have slowed down the process for many homes in Massachusetts. The Act Preventing Unlawful and Unnecessary Foreclosures took effect in June 2013 and created several additional steps lenders must take before foreclosing on a home. It also gave homeowners the possibility of modifying their loans to avoid losing their homes.
In the third quarter of 2014, banks repossessed 814 homes in the state, up 93 percent over the previous year. Those homes were in the foreclosure process for an average of 783 days -- just over two years.
Pennsylvania
Increase in repossessions: 87 percent
Average time in foreclosure: 723 days
Lenders repossessed 5,257 homes in Pennsylvania last quarter, up 87 percent year-over-year. These homes were in the foreclosure process for an average of 723 days -- almost two years.
Oklahoma
Increase in repossessions: 73 percent
Average time in foreclosure: 653 days
The foreclosure process in the Show-Me State is getting shorter, unlike in many other states, according to RealtyTrac. While Oklahoma had 1,169 bank repossessions in the third quarter -- a 73 percent increase year-over-year -- it took these homes an average of 653 days to go through the foreclosure process, down from 727 days last year.
Ohio
Increase in repossessions: 61 percent
Average time in foreclosure: 689 days
Lenders repossessed 6,350 homes in Ohio last quarter. That's up 61 percent year-over-year. The homes were in the foreclosure process for slightly longer than last year: 689 days, up from 681 days in 2014.
New Mexico
Increase in repossessions: 50 percent
Average time in foreclosure: 1,022 days
The number of repossessions in New Mexico has jumped 50 percent since last year, with banks repossessing 636 homes. They were in foreclosure for an average of 1,022 days -- almost three years.
Utah
Increase in repossessions: 40 percent
Time in foreclosure: 1,017 days
The Beehive State rounds out RealtyTrac's Top 10 list, with a 40 percent increase in bank repossessions last quarter. The 539 homes banks repossessed in that quarter were in the foreclosure processes for an average of 1,017 days -- almost three years.