I don't know if anyone can agree with me on this since I'm not even sure that this is what really is going on. Lately I have been trying to figure it out but I just can't come to a conclusion. So far, this is what my thoughts and observations are. I don't know if I'm right or wrong, so if anyone has any thoughts on this, please share them with me! I would love to hear other points of views and understand it better.

Chulavista, CA. You see $700,000 homes listed for $600,000 or less. Owners of these properties have tried to refinance their loans and as we all know, it is very hard to do this right now because property prices are much lower than what they were when they first got the loan. Banks can not refinance because they would be lending an amount of money that is higher than the actual price.

For example: They bought the property when it was worth $800,000. It is now worth $720,000. Their mortgage payments have gone up so much because of variable interests going up, or their ARM period is over and now interest rates are higher and they can not afford it anymore. So, they try to refinance. The problem is that they can not refinance on the $800,000 because the bank is not willing to do it.

Property owners then have to look at their second option; short-sale. This is when the bank is accepting less than the total amount due. Very often this is more convenient for the banks than a foreclosure, but unless the new price makes more financial sense than a foreclosure, they will not approve it.

My hypothesis:

After trying to refinance, property owners start pushing for short-sales at prices that they know the bank won't approve. This saves them time. They are list their homes at surreal prices, fake prices that do not exist.This creates a mirage and false expectations to buyers, it generates leads and gives them more time to stay in their properties.

It makes me wonder; do owners really mean to sell their properties????