This document provides an overview of the foreclosure market and opportunities for buying foreclosed properties. It discusses the three stages of foreclosure - pre-foreclosure, auction, and bank-owned - and outlines the availability and potential savings at each stage. The document also examines national foreclosure trends, best markets for buying foreclosures, and top banks to work with for REOs and short sales.

1. FINDING & BUYING FORECLOSURES
with Foreclosure Market Outlook

2. What we’ll cover today
• What is RealtyTrac?
• What is ‘Foreclosure?’
• Why Buy a Foreclosure?
• The 3 Foreclosure-Buying Opportunities
• Foreclosure Market Overview & Outlook
• Best Markets for Buying Foreclosures
• Best Banks to Buy From
©RealtyTrac Inc. 2012, Not for Distribution 2

3. A BRIEF INTRODUCTION TO REALTYTRAC

4. WHO RELIES ON REALTYTRAC DATA
©RealtyTrac Inc. 2012, Not for Distribution 4

5. WHO RELIES ON REALTYTRAC DATA
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6. WHAT IS ‘FORECLOSURE?’

7. Foreclosure Overview
What is ‘Foreclosure?’
•Foreclosure is a process that allows a lender to recover the
amount owed on a defaulted loan by selling or taking ownership
(repossession) of the property securing the loan.
When does foreclosure begin?
•The foreclosure process begins when a borrower/owner
defaults on loan payments (usually mortgage payments) and the
lender files a public default notice, called a Notice of Default or
Lis Pendens.
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8. MOTIVE: WHY BUY A FORECLOSURE?

9. REASON 1: AVAILABILITY
Nearly 1.5 million U.S. properties in some stage of foreclosure
REO inventory
REO inventory
represents 16-
represents 16-
month supply at
month supply at
current REO sales
current REO sales
pace
pace
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10. AND MORE COMING
3.2 million U.S. delinquent mortgages
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11. EVEN MORE POTENTIAL DISTRESS
12.5 million mortgages seriously underwater
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12. DON’T MISS OUT
23 percent of all
23 percent of all
residential sales in the
residential sales in the
second quarter were
second quarter were
properties in
properties in
foreclosure or bank
foreclosure or bank
owned
owned
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13. MORE DISTRESSED SALES
Short sales that closed before aa
Short sales that closed before
property started the
property started the
foreclosure process increased
foreclosure process increased
18 percent from 2011 to 2012
18 percent from 2011 to 2012
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14. BIGGER INCREASES IN SOME STATES
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15. REASON 2: POTENTIAL SAVINGS/PROFIT
Average price of these foreclosure-
Average price of these foreclosure-
related sales subtracted from average
related sales subtracted from average
price of non-foreclosure sales.
price of non-foreclosure sales.
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16. DISCOUNTS VARY BY MARKET
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17. BUT PRICES RISING – A GOOD THING
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18. REASON 3: LESS COMPETITION
• Only about 20 percent of properties in the foreclosure
process are already listed for sale
• Only about 15 percent of bank-owned properties are
listed for sale
• The foreclosure auction is not for many buyers (more
about that later)
• Condition of some foreclosures turns off many buyers
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19. THE 3 FORECLOSURE-BUYING OPPORTUNITIES

20. THE 3 STAGES OF FORECLOSURE
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21. PRE-FORECLOSURE
• Contact the owner to make offer
• Purchase from “distressed” homeowner
• Often short sales (but not always)
• Average discounts of 26 percent in second quarter
• More than 600,000 on RealtyTrac
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22. SAMPLE PRE-FORECLOSURE HOME
List price is above
List price is above
estimated value, but
estimated value, but
the property has been
the property has been
in foreclosure for 323
in foreclosure for 323
days so the owner and
days so the owner and
lender may be willing to
lender may be willing to
deal.
deal.
The loan history shows
The loan history shows
three outstanding loans
three outstanding loans
on the property, which
on the property, which
may make aashort sale
may make short sale
more difficult.
more difficult.
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23. FORECLOSURE AUCTION
• Purchase at public auction
• Contact trustee to verify auction dates
• Often requires full payment in cash
• High risk, high reward
• More than 300,000 on RealtyTrac
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24. SAMPLE AUCTION HOME
List price is $10,000
List price is $10,000
below estimated
below estimated
market value, but
market value, but
auction date is not until
auction date is not until
Oct. 10
Oct. 10
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25. BANK OWNED
• Work with listing agent if listed
• Contact bank to make offer
• Be persistent if not listed
• Submit offers online
• Average discount of 37% in second quarter
• More than 500,000 on RealtyTrac
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26. SAMPLE BANK-OWNED HOME
The list price for this
The list price for this
duplex is $12,000 below
duplex is $12,000 below
estimated market value,
estimated market value,
and the property has
and the property has
been bank owned for
been bank owned for
105 days
105 days
More details about how
More details about how
to purchase this Freddie
to purchase this Freddie
Mac property is in the
Mac property is in the
listing description
listing description
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27. FORECLOSURE MARKET OVERVIEW, OUTLOOK

28. PAST THE PEAK NATIONWIDE
March 2010 was absolute peak
March 2010 was absolute peak
with rolling average of 336,909
with rolling average of 336,909
total foreclosure filings
total foreclosure filings
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29. 5+ YEARS ELEVATED FORECLOSURES
• From January 2007 to Aug 2012 nationwide
• More than 9 million foreclosure starts
• These can be NODs, foreclosure lawsuits or scheduled
foreclosure auctions, depending on the state
• Nearly 4.5 million completed foreclosures
• These are REOs, or properties repossessed by the lender
through foreclosure
• More than 1.9 million pre-foreclosure sales
• Typically short sales or sales at foreclosure auction
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30. REO DECLINES DRIVING DECREASES
22 straight months
22 straight months
of year-over-year
of year-over-year
declines starting in
declines starting in
November 2010
November 2010
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31. REOS REBOUNDING IN SOME STATES
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32. AND A RECENT JUMP IN STARTS
66Percent Increase in
Percent Increase in
Q2 2012 first annual
Q2 2012 first annual
increase since the
increase since the
fourth quarter of
fourth quarter of
2009
2009
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33. STATES WITH BIG INCREASES
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34. IMPLICATIONS
• Fewer opportunities to buy bank-owned in the short
term except in some select states
• But increase in foreclosure starts mean more short
sales in the next six to 12 months and more REOs in
next 12 to 18 months
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35. DISPOSING OF DISTRESS: REO SALES
REO sales decreased 31
REO sales decreased 31
percent from aayear ago in the
percent from year ago in the
second quarter of 2012
second quarter of 2012
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36. DISPOSING OF DISTRESS: REO SALES
REO price increased 10
REO price increased 10
percent annually in second
percent annually in second
quarter, biggest increase
quarter, biggest increase
since Q3 2008
since Q3 2008
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37. REO SALE ACTIVITY SUMMARY
• From Q1 2007 to Q2 2012
• More than 2.7 million REO sales nationwide
• Average REO sales price nationwide spiked 10 percent in
Q2 from year ago, but still down 22 percent from peak in
Q2 2008
• Average REO sales price in Q2 2012 was $155,892, 37
percent below average non-foreclosure price
• Accounted for 12 percent of all sales in Q2 2012
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38. DISPOSING OF DISTRESS: SHORT SALES
Pre-foreclosure sales hit 3-yea
Pre-foreclosure sales hit 3-yea
high in first quarter of 2012
high in first quarter of 2012
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39. DISPOSING OF DISTRESS: SHORT SALES
Short sale discount hit all-time
Short sale discount hit all-time
high in second quarter
high in second quarter
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40. SHORT SALE ACTIVITY SUMMARY
From Q1 2007 to Q2 2012
•More than 1.9 million pre-foreclosure sales nationwide
•Average pre-foreclosure sales price decreased 1 percent in
second quarter from year ago and was down 28 percent
from peak in Q1 2007
•Average pre-foreclosure sales price of $185,062, 26 percent
below the average price of non-foreclosures
•Pre-foreclosure sales accounted for 11 percent of all sales in
Q2 2012
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41. FORECLOSURE MARKET OUTLOOK
• Foreclosure activity in late 2012 and into 2013 will
continue to increase off artificially low levels of 2011 and
early 2012 – but not in every market.
• Foreclosure activity will not return to the peak of 2010
(depending on market), and foreclosure activity will
resume its downward trend in 2013.
• Biggest increases will come in states with the biggest
backlogs created in 2011: Florida, Maryland,
Massachusetts and eventually even New Jersey and New
York
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42. PRICES AND PRICING SETTING STAGE
• Average price of foreclosures up in some areas, in part
because of artificially limited supply
• Detroit foreclosure sales prices up 18 percent
• Miami foreclosure sales prices up 9 percent
• Phoenix foreclosure sales prices up 18 percent
• Lenders are pricing bank-owned and short sales more
aggressively
• “We’re pricing things to sell.We’re not holding onto anything thinking that
values are going to come back … I don’t think anybody is in that mode.
… It’s almost like you have to price properties to sell or your inventory is
going to explode.” – Executive with mortgage servicer in Wisconsin whose
company services mortgages nationwide.
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43. BUYERS & INVESTORS READY
• “Investors are back, they’re paying cash, they’re excited about
the deals they’re getting and they’re buying multiples” – Kandy
Clayton, broker/owner at Clayton & Associates Real Estate in Sandy, Utah
• “We have a backlog of buyers we are working with that just
can't find the right home based on the homes that continue to
come to market. 2012 will be a nice turnaround year and
once interest rates begin to rise we believe many of these
buyers will come off the fence and make a move before this
market changes.” – Ian Whitelaw, broker/owner at Central Properties Group
in Oakland County, Mich.
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44. MORE INVESTOR PERSPECTIVES
“It’s easier to get short sales than REOs.The banks just are not
releasing the properties on the market. It’s an artificial supply
shortage.With short sales they are more willing to deal.”
– Bill Bronchick, president, Colorado Association of Realtors
“I don’t care about retail. I’m buying cash flow and return. I buy
cap rates.We’re buying at 2001 and 2002 levels.”
-- Dan Valentine, investor in Phoenix
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45. BEST MARKETS FOR BUYING FORECLOSURES

46. BEST MARKETS FOR FORECLOSURES
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47. BEST MARKETS FOR FORECLOSURES
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48. BEST BANKS TO BUY FROM

49. BEST BANKS TO BUY REOS FROM
1: Ally Financial (Formerly GMAC)
Avg. REO Sales Price: $60,254
Avg. Percent Savings: 60%
Avg. Time to Sell: 104 days
2: Wells Fargo
Avg. REO Sales Price: $83,530
Avg. Percent Savings: 43 %
Avg. Time to Sell: 157 days
3: Citigroup
Avg. REO Sales Price: $68,406
Avg. Percent Savings: 49%
Avg. Time to Sell: 167 days
4: U.S. Government
Avg. REO Sales Price: $93,941
Avg. Percent Saving: 30%
Avg. Time to Sell: 187 days
5. JPMorgan Chase (Tie)
Avg. REO Sales Price: $98,864
Avg. Percent Savings: 41%
Avg. Time to Sell: 203 days
5. Bank of America (Tie)
Avg. Sales Price: $120,801
Avg. Percent Savings: 27%
Avg. Time to Sell: 187 days
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50. BEST BANKS FOR SHORT SALES
1. PNC Financial Group
Avg. Pre-Foreclosure Sales Price: $133,015
Avg. Percent Discount: 40%
Avg. Days to Sell: 151
2. Government Entities (Fannie, Freddie Mac, HUD)
Avg. Pre-Foreclosure Sales Price: $127,618
Avg. Percent Discount: 42%
Avg. Days to Sell: 154
3. Ally Financial (Formerly GMAC)
Avg. Pre-Foreclosure Sales Price: $143,410
Avg. Percent Discount: 35%
Avg. Days to Sell: 188
4. Ocwen Financial
Avg. Pre-Foreclosure Sales Price: $126,071
Avg. Percent Discount: 43%
Avg. Days to Sell: 168
5. Sun Trust Banks
Avg. Pre-Foreclosure Sales Price: $151,308
Avg. Percent Discount: 32%
Avg. Days to Sell: 207
6. Bank of New York Mellon
Avg. Pre-Foreclosure Sales Price: $155,488
Avg. Percent Discount: 30%
Avg. Days to Sell: 283
7. Bank of America
Avg. Pre-Foreclosure Sales Price: $166,389
Avg. Percent Discount: 25%
Avg. Days to Sell: 223
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