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What's Coming Our Way? More Short Sales, More REOs?

By
Real Estate Broker/Owner with Broadpoint Properties Cal BRE #01324959

No matter where you look, no matter what you read, you hear that more is coming our way. But, more of what?

I went to a meeting last week where everyone was speaking about the fact that asset management companies are holding back the properties that have already been foreclosed--waiting until the prices rise before listing those properties for sale. Then, just one day later, I went to another meeting where folks said that this just was not true--that the banks need their money, so they unleash those properties once they got into the bank's portfolio.

So, where are all of these people getting their information? Obviously not from the same place--because they are completely conflicting reports. When someone gives an opinion, it is extremely helpful to back that opinion up with supporting documentation--just like they used to teach us in school!

All I can say is from my own personal experience in the state of California. I know of a few agents who have had short sale listings go to foreclosure. Within just a day or two, the new listing agent (the one who works with the asset management company) is contacting that short sale listing agent to get the "low down" on the property and make sure that the short sale listing is cancelled on the MLS. My logical conclusion from that experience is that if the asset menangement companies were not going to be listing those properties anytime soon, then no new REO agents would be contacting those short sale agents.

My second bit of personal experience touches on how much easier it has gotten to postpone a foreclosure. Just a year ago, it was pretty touch. Now, it can be done in just a phone call or two. If the banks wanted to foreclosure, then why would they so readily agree to postponing the foreclosure?

And, lastly, check out this chart:

This chart shows the 5/1 ARM adjustments beginning in 2006. If you follow the chart, you will see how many anticipated adjustments are occuring in the next 14 months or so. If this data is accurate (and I have no reason to believe it is not), it would not paint a rosy picture of the number of individuals who may be facing foreclosure due to inability to make future mortgage payments

Why would banks hold back all of these properties? When I look at all of this information, it does not make sense.

I would love to hear your $.02  But, if you comment, please be prepared to back up your opinions with data--just like they taught us in school!

Melissa R Zavala
Broker, Realtor®
DRE #01324959
Broadpoint Properties, Inc
Short Sale Expeditor®

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Comments(4)

Carla Muss-Jacobs, RETIRED
RETIRED / State License is Inactive - Portland, OR

My brother-in-law Bruce, told me a story once.  He was a big fish type, always making up stories and embellished some fantastic tales.  I'm not sure if this is a real story or not.  What is real is that Bruce told me this story, farse or otherwise.  It might be false, but sounds plausible.  So . . . here goes: Bruce said that Henry Ford the automobile magnate was called "Stupid" . . . he was belittled by this comment, and apparently Ford sued his competitors for slander.  When on the stand, attorneys grilled him, asking him very hard questions . . . in an attempt to prove he was, in fact, stupid.

Of course, some of the questions couldn't be answered without a Ph.D in science, for example. So Ford was baffled.  But then, in his own defense Ford said, "I might not know the answer to the questions, but I have phones on my desk, and I know exactly which phone line to press to get to the right person who WILL!"

I was going to forward your blog to some folks I know at Credit Suisse to get their take, but notice it's a Member's Only post.  I will say that it seems we'll be out of the woods with the ARM resets at some point in the near future.  We can see the light at the end of the tunnel -- trying to keep this positive!

 

Aug 10, 2009 12:27 PM
Nevin Williams
Fairway Independent Mortgage Corporation - Cary, NC
Senior Mortgage Advisor

Hi Melissa - the only thing that comes to mind (no data to back it) is that portfolio lenders (those who do not sell the loans to the secondary market) are in a position to be able to hold off until values rise.  Agency loans (owned by Fannie/Freddie or some pension fund somewhere) must get these properties off of their books or face a "liquidity" problem and begin to dry up their warehouse line (money they use for lending to people) without a replenishment.  The troubles faced by Taylor Bean and Whitaker and their warehouse line (Clolonial bank I think) is one example of this.  My .02 anyway!

Aug 10, 2009 01:28 PM
Sidney Jimenez
Keller Williams - Miramar, FL
CDPE, Short Sale Expert, 954-665-9449,

MELISSA,

We are in a long trending cycle that started in the Summer of '06 and will continue for the next several years. The problem that arises from this is that most people rely on the National media or NAR to get a feel of what is happening in the marketplace. Those numbers used by those institutions are manipulated to mean what they want it to mean. For example, on Wall Street you can make a $100 million dollar profit but your stock goes down because you were expected to make $150 million. On the other hand you stock price can rise because you might not has LOST as much money as anticipated. We no longer just see the profit and losses, we now measure how much. If someone says we should do better, then all the PROFIT doesn't matter.

We are currently on a leveling trend that will again spike towards the end of this year. The chart you are using has been making the circles with the CDPE for the last couple of years and we have been trying to get agents to realize that we are in this for the long haul. Yes, the Sub-Prime mortgages are pretty much out of the system, but we now have to deal with the Atl-A or Option Arm mortgages (those were marketed as "Pick-a-Pay") And those are going to take another 2 years to work themselves through.

There will be plenty of Short Sales for everyone for quite some time. The REO's, in my opinion, will be a constant trickle for a longer period of time. The difference will be that Lender will try to find a way to control the flow of the REO's in order to try and keep the downward spiral in prices in check by limiting inventory. you can be sure that is a big reason the new Rent Programs is working it's way through Washington.

If they can limit their exposure and continue to have income from those properties them theoretically they can sell these properties at a higher sales price than they can today, thereby, mitigating their losses over a longer period of time. The same premise as their attempt to modify the loans for a 3 to 5 year time frame...just buying time.

Aug 11, 2009 02:19 AM
Satar Naghshineh
Satar - Amiri Property and Financial Services Corp. - Irvine, CA

http://www.eforeclosuremagazine.com/foreclosure-market/banks-withholding-foreclosure-properties-to-boost-sales

http://blogs.wsj.com/developments/2009/07/21/are-banks-holding-a-shadow-inventory-of-homes/

Aug 11, 2009 07:12 PM