"SOL" Homes: Virginia MLS Foreclosures, REO, Short Sales Defined + Email Alerts

Newspapers are filled with talk of the flood of foreclosures, but none that I have seen have taken a step back and defined all the different industry words for my new industry word: “SOL” (S* Out of Luck) Homes ™, and how to buy them. 2-3% of MLS listed homes are SOL in Northern Virginia. Can your agent find them?

It might seem odd that I’m writing about how to buy foreclosures listed on the MLS since some might have just finished reading my article Attn. Market Timers! The EXACT Best Day to Buy!

Well SOL homes can get you a 5-15% discount* if you

  1. Know how to search for them, AND
  2. You have patience
  3. You aren’t picky!
  4. Fully understand the risks of buying “as is”

* Side shout: BusinessWeek did a great job in their article This Old Foreclosure Buying directly from a bank avoids some risks, but don’t expect a steal They both dispelled the 30-50% pennies on the dollar mentality people equate with foreclosures and how foreclosures of a year ago are different today, they no longer occur mainly on courthouse steps. They use the MLS)

So, let’s go over the SOL terms:

  • Pre-Foreclosure: term used by agents or sellers that are in the process of being taken to the courthouse steps since they have defaulted on their mortgage (didn’t pay it). They want to sell the property before it gets foreclosed on, and oftentimes before it is taken over by the bank. Banks sell them on the MLS through Realtors (learn how to find these later in the article). Here are some examples of Fairfax Pre-foreclosures on the MLS.

  • Foreclosure: Technically a foreclosure is a house that is being auctioned off at the courthouse steps. Many people use this word incorrectly to represent a house that is in Pre-foreclosure, or has already been foreclosed on and taken over by the bank (see REO).
    Traditional foreclosures aren’t occurring on the courthouse steps as much (see BusinessWeek Art) since the amount owed (the starting price for the auction) is TOO HIGH. So when the minimum price is too high on the courthouse steps, the banks take them over and sell them on the MLS through Realtors. (learn how to find these later in the article) Here are some examples of Arlington Foreclosures on the MLS and don’t forget Realtors that can’t spell and leave off the E in “forEclosure”: Virginia Forclosures

  • Short-Sale: Usually an MLS listed house that is heading toward foreclosure. The deal requires 3rd Party Approval (the bank) because the seller is trying to sell for BELOW the loan amount and is hoping that the bank will approve the deal, and eat the loss. Only about 5-15% actually get to closing since banks oftentimes say, “no” (blog post coming soon, so sign up). For example, a $500k home was bought with 100% financing. If the market price is now $450k, a seller can a) bring a $50k check b) try a short-sale c) let the bank foreclose. With a short-sale, the bank eats the $50k. Note that the seller still gets a taxable 1099 for the difference (at least for now). This process is seen as being better for the seller’s credit vs bankruptcy and foreclosure. The benefit sometimes to the bank is lower foreclosure costs and re-marketing hassles.

    Examples of “Short Sales” in Alexandria on the MLS. Note that some listings say “not a short sale,” they will come up in an MLS keyword search.

  • REO- Stands for “Real Estate Owned”, but it really means Bank Owned. I guess buying a B.O. house wasn’t too appealing. These are homes that were already “foreclosed” on. Nobody bought them on the courthouse steps and the bank took it over and is attempting to sell them, usually (but not always) for a discounted price.

    Examples of REO Bank Owned in Virginia on the MLS

  • Bank Owned (same as REO)
  • Third Party Approval- If you see this in a listing, it is probably a Short-Sale and it is warning the agent that some extra paperwork and time will be required.
  • Auctions, “Buyer’s Premium”: Some auctions require a 2-10% “premium” be paid on top of the winning bid. So if you bid $500k, you have to pay $550,000. In my opinion, it is a marketing trick that auction houses use to trick sellers by saying “you pay nothing, the buyer pays our commission.” Just make sure you do the math, your NET is what matters.

    Examples of listings with the word auctions in them: Virginia Auctions on the MLS

  • Auctions, “Reserve price.” Sometimes this is also a marketing trick. I have seen $700k listed houses have a $690k reserve. They get people at the auction all excited to get a deal. The auction ends and they say, “sorry you didn’t meet the ‘reserve price’, here, how about a counter?” Sounds like a trick to find out who might be remotely interested in the property.
  • Auctions, “No Reserve.” If you are an Ebayer, you know what this means. The product will be sold, no matter HOW low it goes. If you see “No reserve,” it MIGHT be what I call a REAL AUCTION (send it to me, I’d love to see it)

Auction disclaimer: I am not an expert when it comes to Auctions. I still have yet to see ONE “real auction” in Northern Virginia. I think they don’t exist, but I can be proved wrong if you’d like (have at me in the comments section).

Dealing with SOL property are a PAIN. Expect counters to sometimes take several days, and sometimes months!

And an SOL home is NOT necessarily a better deal. Somebody might have paid $500k for it with 100% financing and the list price might be $480k as they feel the waters. I saw one short sale in my building that started at $600k (they paid $590k). It was overpriced, so it sat. Then the seller/bank got serious. They did a drastic drop to $530k. It sold for full
(while I had 4 people come to me wanting to offer $480k, and they missed out). This was 1 of 2 best priced units in the building over the last 2 years. Another short-sale came on and was sold in 4 days, so if you want these, be ready to act FAST.

So how many of these are there EXACTLY on the MLS?!

Homes that are SOL can be found by having your agent search the Realtor Remarks for keywords, or try it yourself on the new keyword based FranklyMLS.com: REO, foreclosure, bank, pre-foreclosure, foreclosed, forclosure*, short sale, auction, third party, 3rd party. *9% of the time this word is misspelled!

In Arlington:

Update to article: I thought I’d run some data from Woodbridge. To my amazement 35% were SOL! This blows my mind!

In Woodbridge

  • Today there are 273 MLS homes from $300k-$325k. 97 (35%) are SOL!

MORE DATA ON 6 NOVA AREAS: 48% of MLS homes are SOL (Foreclosure etc) in Herndon ($300k-400k)

This is shocking!

If you do plan to buy, you need a good agent to know when to spot a “better deal” (remember I don’t believe in “good deals” until you sell your place. See “Buyer’s Market?” No Such Thing As a “Good Deal”)


Have your agent sign you up for alerts based on your price range, area AND these SOL keywords in the Realtor Remarks (different than the Public Remarks). If your agent can’t do it, have them email me, I’ll show them how. If you don’t have an agent… (sorry I tried to hold off as long as possible) welcome to FranklyRealty.com . I’ll set it up for you.

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-Written by Frank Borges LL0SA Virginia Broker FranklyRealty.com

Ps. Please send typos and corrections. Disclaimer: Data gathered from MRIS’s MLS database. Distressed homes

  • 11
  • September
  • 2007
Posted in Buying Advice, Virginia Foreclosures | 26 Comments »

Attn. Market Timers! The EXACT Best Day to Buy!

 Frankly, the #1 questions I get are market timing questions like: “Have we hit bottom?” and “Is NOW the time to buy?” Well, after months of thinking and market analysis I’ve discovered the EXACT time you should buy, down to the DAY!

So you no longer believe the “Buy Now!” campaign from the National Association of Realtors. Especially since The New York Times quotes the former Chief Economist David Lereah as acknowledging he had gotten it wrong (more…)

  • 4
  • September
  • 2007
Posted in Buying Advice, Don't Miss Best Of, market timing | 37 Comments »

“Round Robin” Buying System. Unearthing The Desperate Seller.

Frankly, buyers say they want a good deal, but oftentimes they aren’t willing to go through the emotional roller coaster the buying process can put them through. A good Realtor will try to shelter the buyer from stress, but inevitably it is up to the seller and their threshold for being aggressive.

For the most part I don’t really believe in the idea of a “Good Deal” (more…)

  • 21
  • August
  • 2007
Posted in Buying Advice, Buying Risks., Don't Miss Best Of | 22 Comments »

“Buyer’s Market?” No Such Thing As a “Good Deal”

Some Realtors think their job is to make client’s feel all warm and fuzzy by making the buyer think that they got a “Good Deal.” Kind of like how almost everyone who buys a car walks out thinking that they got a steal of a deal!

I don’t believe in this. I am not hired to be a comforter. I’m hired to get the most suitable property at the best price possible, and to do so aggressively, if that is what the client requests (more…)

  • 12
  • April
  • 2007
Posted in Buying Advice | 16 Comments »

Realtor Rebates. Free Money or Expensive Savings?

This blog is supposed to be about the inside scoop on real estate right?

Well lets talk about a huge hush hush: Realtor Rebates!

Wow, I said it, and I put it in writing. A non-Rebate firm educating their customers (more…)

  • 6
  • February
  • 2007
Posted in Buying Advice, Don't Miss Best Of, Realtor Rebates | 56 Comments »

MRIS data, Average Sold/List Ratio: 98.6% or 92.2%?

Update: a Part 2 link is at the bottom.

MRIS stands for Metropolitan Regional Information Systems. They are the company that provides the Washington DC area MLS system for all Realtors. They also provide data to consumers and the press to reveal how the market is doing. The only problem is that the data is limited and can easily be misinterpreted without giving proper clarification.

When I first saw these numbers, I was shocked that the zip code 22204 was able to get 98.6% of the list price. Only a drop of 1.4%? How is that possible in such a slow market?

So I set out to recreate the numbers and I finally think that I understand how they came up with their data. I don’t question whether the data is correct, I just question how it is presented.

I believe now that the “% of Asking Price” means the “% of the last and lowest asking list price to the sold price, excluding seller subsidies.” So if a house was initially listed at:

Hypothetical example:
$600,000 Starting Price
$500,000 Lowered List Price
$495,000 Contract price
$10,000 Seller subsidy (about average for 22204)
$485,000 Net (counting the $10,000)

= a 1% drop using MRIS’s data
= a 20% drop from the top number.

So if you were to include the subsidy and the starting price, the price drop would be almost 20% lower, yet this hypothetical numbers would be reported by the MRIS as a 1% drop ($500k to $495k).

So back to recreating the actual numbers from MRIS. (My Excel document is available upon request.)

I took all homes for the period of 7/01/06 to 9/30/06. I found 72. This number is off from their their 128, I’m not sure why.

From this data I was able to come very close to recreating their numbers (option 1 below).

1) % of Final list price was 98.4% (vs their 98.6%, no big deal).
2) % of Final list price MINUS seller subsidy= 96.8%
3) % of Original list price MINUS seller subsidy= 94.25%
4) % of Highest price (prior Realtor or listing#) MINUS seller subsidy= 92.2%

Using the $600k example from earlier, #3 takes the starting price of $600k and counts the $10,000 seller to make a final closed price of $485,000. However #4 above takes into account if the listing had a prior agent with an even higher price. So with #4 I took the starting price of a house regardless of how many Realtors had tried to sell it, or how many times one Realtor relisted it to reset the Days on the Market.

So while the MRIS data is not necessarily incorrect, the public should know that it does NOT mean that the average house in that zip code only dropped 1.4% from what the seller started with. That number is probably closer to an 8% drop once you count the seller subsidy (which was near 0 a couple years ago) and the initial starting price.

Recalculated drop for 22204: 8% (92.2% of the starting list price, including subsidies)

Conclusion: Don’t assume information that is given to you is correct, question how the numbers are compiled.

Update: I have a Part 2 on this posting: Part 2: Illegal MLS Fudging. 20% Chance You’ll See 1.

And make sure you see the 22 other blogs on shady agent tricks and things that buyers should be aware of. Blog.FranklyRealty.com

– Written by Frank Borges LL0SA- Broker/Owner FranklyRealty.com

Videos at YouTube.FranklyRealty.com
Keywords: DOM DOMM DOMP CDOM Days on the Market, Housing bubble? Arlington, Alexandria, MLS MRIS, search, Homes, Real estate, Virginia, Alexandria, 22201, 22314, Fairfax Va, DC Realty, Realtor

  • 12
  • December
  • 2006
Posted in Buying Advice, data manipulation, Shady Agent Tricks | 3 Comments »