Community | May 08, 2009 | 11 comments

Short Sales: Banks Blocking Way Out Of Foreclosure Crisis

source: http://www.huffingtonpost.com/2009/05/08/short-sales-banks-blockin_n_199099.html

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AndreaKnoll
Brett Ellis, a real estate agent in Fort Myers, Fla., was thrilled when he got an offer for a property in Bell Tower Park in May 2008.

"It was a gorgeous property on the corner lot," Ellis told the Huffington Post. The owner, who had lost his job, wanted to sell the apartment for a loss rather than go into foreclosure, a strategy known as a short sale.

The offer was for $350,000, and Ellis, who is a certified distressed property expert trained in executing such sales, knew it was as good an offer as he was going to get in this market. He immediately sent the paperwork into the bank.

He waited for four months. The bank finally told him it wouldn't take anything less than $400,000 -- a price Ellis was sure he could never get. In September, the buyer's agent called to say, "You know what, we gotta move on, we gotta buy something else."

Now the property is sitting vacant as it slides into foreclosure. Its former owner's credit is destroyed, and the house is losing value every day. "God knows what the condition is today," Ellis said, adding he'd be surprised if the property is worth more than $290,000 when it resurfaces on the market. Add in the legal expenses involved in a foreclosure, and the bank cost itself a hundred thousand dollars more that it otherwise would have.

It's a scenario that plays out constantly, everywhere in the United States. In a time of collapsing real estate values, where one in five homes are now under water, a short sale is increasingly the only option before foreclosure. It is less damaging to credit scores and spares the homeowner the shame of foreclosure.

It is also a better option for banks: According to one analysis, short sales resulted in loan losses of only 19 percent, compared with an average loss of 40 percent on homes sold after foreclosure.

So why aren't these sales more widely used?

....Banks have little incentive to untie those bundles. Since mortgages are listed on the banks' balance sheets at the value of the original loan, if they complete a short sale they must record a loss on their balance sheets. That would explain why banks drag the process out as long as possible. In Ellis' case, the property is sitting vacant a year after the first offer, allowing the bank to list the original value on its balance sheet all along.
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11 comments // Short Sales: Banks Blocking Way Out Of Foreclosure Crisis

  • kennymotown
  • justadad
    • 0
      justadad  
    • kennymotown:

      Weird!

      Medicaid,
      Medicare,
      Medi-alerts;

      Help, the "caring-compassionate" have NOW risen for falling the children (i've fallen) and NOW I/they/we can't be righted. (further, all the king's horses and all the kings/queen's men, can't put humpies together again).

      IV-mainliners certainly do need be brought to further light.

      IV-A,
      IV-B,
      All the way,
      To IV-E;

      Thefts continued and facilitated from the needy,
      While we IV-mainline the greedy.

      It really is a dark, decrepit and disgusting disease.

      - just adad

    • 3 years ago
  • justadad
    • 0
      justadad  

    • Part of our now more enlightened M.A.F.I.A..

      These entities meet on regular occasion for structuring agreements of grave impact upon . . .
      Mind you, predatory pricing facilitated via IV-mainlining.

      Yeppers, needs of the needy regularly usurped and compromised in favor of fated attempts to satiating insatiable greed of the greedy of openly suspect creed.

    • 3 years ago
  • carmalite
    • 0
      carmalite  
    • justadad:

      Its just too much isn't it? Its like we had an almost quite revolution and the corporations and the bloated finanacial sector won the bloodless coup. Bush and Pauly gave them money, and they threatened to fold the country up and leave if obama did not give them more.

      We have been defeated without a single fatality on the feild except for a few people who committed suicide because of Madoff and the market.

    • 3 years ago
  • justadad
    • 0
      justadad  
    • justadad:

      And very cleverly executed, we might add.

      So now, ladies and gentlemen, sit back and enjoy the show.

      "Magically" before our very eyes, renderings for the self-evident axis of evil . . . of course, of abroad.

    • 3 years ago
  • carmalite
    • 0
      carmalite  

    • The bottom feeders are coming. And some of the executives who used to work for country wide formed an LLC to buy these properties at pennies on the dollar. The parasites made sure they got the people coming and going. Stealing all they can at the expense of ordinary citizens.

    • 3 years ago
  • masterzip
    • 0
      masterzip  
    • Image

    • My brother has lived in his home w/out paying mortgage for over a year, it is the exact same story where the bank keep asking for more money from the buyer or then takes too long to respond to real offers.
      The banks have a specific reason for doing this. It is to show the government that non-paying clients like my brother are still valid and good assets, so they can claim more stability and get greater TARP funds.
      The bank has turned down offers in the past that are $100,000 greater than is being offered on my brothers home today.
      Banks are organized crime/criminals masquerading as a public corporation.

    • 3 years ago
  • kennymotown
    • 0
      kennymotown  

    • I agree AndreaKnoll, the banks as the stress test proved have to raise capital and just assume the loses for now. It's going to be a long time till houses ever reach an appropriate level of worth. My guess is another at least 20% to fall in value.

    • 3 years ago
  • pissedoffinarkansas
    • 0
      pissedoffinarkansas  
    • kennymotown:

      Those "stress tests" are a f%&*ing joke. They predict a false 10% or so unemployment rate. We are already at 9%!! What happens when Chrysler's bankruptcy is felt by the workforce? What about GM's? Most people can only afford to pay monthly bills with no "disposable" income to speak of and those that do are starting to save it in earnest. That means nobody is buying all the crap that is available to waste our money on. That means rising inventory for business and production slow downs which means.... anyone... anyone...? That's right!! More lay-offs and less "disposable " income. Which means less buying, which means more inventory, which means(you should be getting the picture). Now this is a little over simplified but it is a nasty little cycle isn't it?
      Now I'm no economist but even I can see that we are probably headed to at least 11-11 1/2% unemployment (using the gov. skewed system of measuring the numbers).This scenario only shows the weakness of one part of these so called stress tests. Be careful people! This is going to be a lot worse the PTB are going to tell you.I don't know exactly how we are going to get ourselves out of this but we need to look past what we are being told and fix this ourselves. Whatever that might mean. Good luck!

    • 3 years ago
  • AndreaKnoll
    • 0
      AndreaKnoll  

    • This is one of the reasons why house prices aren't failing like they should. Banks aren't selling because they'd rather have the higher "value" on their books, than what their property is actually worth as cash in hand -- which is another reason they have their begging hands out to the government for tax payer money. Meanwhile, much of he middle class, never mind the working class, still can't afford to buy a home.

      The banks should be forced to sell the huge amount of vacant property on their books before they get any more bail-out loans!

    • 3 years ago
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