Short Sales: Banks Blocking Way Out Of Foreclosure Crisis
"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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- AndreaKnoll
- added this
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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!
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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.
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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. -
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.
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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.
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They have a stranglehold on our health care system as well. Got love those good fellows.
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- kennymotown
- 6 months ago
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