Are We There Yet?

Ideation — Wed, 13 May 2009 03:59:41 +0000

Everyone is talking about the “bottom” of the real estate market and if we have hit it yet. As far as I can see here in Southern California, we’re in the trough and have a bit more “devaluaing” by the banks until we hit the proverbial bottom. And it appears that is the case for all the “boom” areas of the last 5 years. Florida, Arizona, Nevada, Georgia, DC, Maryland, etc. The bottom won’t come until banks stop foreclosing on homes and builder can start building and selling homes at a profit. And that won’t happen anytime soon - given the economy, job losses and the fact that 80% of homeowners who purchased in the last 5 years are underwater. So, strap on your boots and get ready to start wading, cos’ the bottom is going to be pretty muddy….

What’s the difference between a short sale and a loan modification

Ideation — Mon, 09 Mar 2009 21:32:01 +0000

I was thinking the other day that banks are really “short changing” the system and perpetuating this ongoing problem with foreclosures. And you really have to wonder why?…. Could it be that there is something “in it” for them? In my infinite wisdom, I started pondering why a bank is willing to allow a homeowner to do a “short sale” and sell a home for less than the mortgage owing on the home, but they are not willing to do a loan modification and lower the principal balance. Why? In the end, the new transaction (short sale) is going to net them substantially less than what they are owed and they will be taking a loss on the transaction. And, they will have considerable carrying costs to go through the foreclosure process, list the house with a Realtor, maintain the home until it sells, etc… So… wouldn’t it make more sense for the bank to negotiate with the owner of the home to make the mortgage payment more affordable and keep the owner in the home than taking a much more significant “hit” on the asset with a short sale? They may even be able to get the owner to “pay more” for the home than they could get from the “market” since the owner has a vested interest in the property. Not everyone bought their homes with zero money down and many have put substantial money into their homes through improvements. It would seem that the banks would use the “first line of defense” in working with a distressed homeowner to keep the value of the asset at it’s highest. Instead, they are intent on “dumping” homes on the market and destroying the homes values, the neighborhoods and the communities we all live in across the country.