Many distressed homeowners have found that if they are unable to make mortgage payments they are frequently not foreclosed on for many many many months. It appears as if many banks are trying to release foreclosures in a way that will not further depress prices and want to keep these delinquent homeowners in a home so that it is not vacant for long periods of time, which further devalues their investment.
However, this does not seem to be the case for Palo Alto.
While Palo Alto has had very few foreclosures come to the market, the ones that have are not in the delinquent phase for long. If a homeowner misses 3 payments the banks can record a notice of default. In Ca. they must give the homeowner 90 days to cure the default or they can set a date for the trustee sale, where the bank can buy back the home or an investor with all cash can purchase the home if they pay off all the liens. Since most homes in foreclosure have larger liens on them than the home is worth, investors do not often get to buy at the courthouse auctions.
In many areas the time between the notice of default and the trustee sale is quite lengthy, over a year in many cases. Sometimes it is because the owner tries to get a loan mod, or do a short sale, but sometimes it is because the bank is just not ready to take possession and sell the home.
For the few foreclosures in Palo Alto this has not been the case. There have only been 2 foreclosures in Palo Alto in the last year that have come to the market. In both cases there was only 4 months between the notice of default and the notice of trustee sale. There is one home that actually was purchased by an investor at the courthouse auction and that one also had only 4 months between notice of default and notice of trustee sale (I think the investor may have held the second loan but it is a little confusing as to what actually happened).
So the moral here is don’t get behind in your Palo Alto mortgage. The banks know this is an easy place to re-sell their assets. If you cannot pay your mortgage do not hide your head in the sand and hope for the best. Contact a professional (accountant or tax attorney) and then either try to modify your loan, sell as an equity sale or short sale depending on your equity, or do a deed in lieu of foreclosure if you only have one loan (click here for an article I wrote on the deed in lieu of foreclosure process, and its benefits for underwater homeowners).
Keller Williams Realty