I often say “If you don’t like the market just wait 10 minutes”. Has it been 10 minutes?
There has been lots of talk about the shadow inventory and what it is going to do to the market. What we are seeing now is that banks don’t want to take a property back unless they absolutely have to.
Here is the real math. A bank can expect to take a 41% haircut when they take a property back through foreclosure. They have to buy insurance for it, maintain it, fix the things that are wrong with it, or at least some of them, market it, hold it through two or three buyers and then finally get out of it.
In a short sale situation, the bank isn’t outlaying any cash. They don’t carry any insurance, they don’t fix anything and they don’t have a non-performing asset on their books.
The big banks get this. The off shore investors in mortgage backed derivatives, not so much.
Currently a lot of loan modifications are what’s called “double tracked”. That is, while they are working on the modification they are also going through the foreclosure steps in the background. Unfortunately the result is the homeowner finds out the loan modification is denied and BAM! the home is foreclosed on the next day or so. It’s a reprehensible practice.
Alternatively, a foreclosure can be held at bay with a short sale and the homeowner can leave with some dignity. The National Association of Realtors reports that over 70% of the people who lose their homes to foreclosure never ask a professional for help.
What’s more, some banks are offering people up to $30,000 to short sale their home. HAFA allows for a $3000 payment to the homeowner to short sale their home, but there are conventional lenders out there offering a lot more money to distressed homeowners to short sale rather than walk away from their homes.
If you or someone you know is in a tough situation, call me, I’m here to help.
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