"Government Should Encourage Foreclosure"...Really?????
According to an article today in Forbes.com, the government should be encouraging banks to foreclose houses. Why? Because then we would quickly work through all the distressed inventory and we could get back to a normal housing market.
Really???????
What about the 'Shadow Inventory' we already have?
It is reported that between 700,000 to 3,000,000 foreclosed properties are being held by the banks in order to avoid flooding the market and depressing prices further. Remember, paraphrasing one of my favorite blog post titles
"To you and me it's a home, but to the bank it's scrap metal." Paraphrasing one of my all time favorite blog post titles, let's remember that banks do not behold a house the way a buyer or even a Realtor® does. Banks are all about the bottom line, about moving the money around. That house is like a hot potato to them and they want to liquidate it so they can stuff their coffers with what they like to hold - cash.
They can't sell the ones on the market fast enough now and many houses are in bad shape due to being vacant and unattended and sell for much less than if they had been sold as short sales while they were still occupied or the owners had the electricity on.
In a perfect world...
In a perfect world, we could clear up all this mess quickly. Banks and investors would cooperate with sellers trying to salvage some of their credit and dignity in a short sale and there would be no need for foreclosures. The process would be streamlined. Homeowners wouldn't vacate properties and leave a blight on the neighborhood.
That is not the case. Thousands of homes across the country are sitting vacant. If a flood of new homes hits the market, what is the chance of all or many of them selling? Lending guidelines are very strict right now and unemployment is at an all time high.
According to an article today in Forbes.com, the government should be encouraging banks to foreclose houses. Why? Because then we would quickly work through all the distressed inventory and we could get back to a normal housing market. Really???????
What about the 'Shadow Inventory' we already have?
It is reported that between 700,000 to 3,000,000 foreclosed properties are being held by the banks in order to avoid flooding the market and depressing prices further. Remember, paraphrasing one of my favorite blog post titles
"To you and me it's a home, but to the bank it's scrap metal." Paraphrasing one of my all time favorite blog post titles, let's remember that banks do not behold a house the way a buyer or even a Realtor® does. Banks are all about the bottom line, about moving the money around. That house is like a hot potato to them and they want to liquidate it so they can stuff their coffers with what they like to hold - cash.
They can't sell the ones on the market fast enough now and many houses are in bad shape due to being vacant and unattended and sell for much less than if they had been sold as short sales while they were still occupied or the owners had the electricity on.
In a perfect world...
In a perfect world, we could clear up all this mess quickly. Banks and investors would cooperate with sellers trying to salvage some of their credit and dignity in a short sale and there would be no need for foreclosures. The process would be streamlined. Homeowners wouldn't vacate properties and leave a blight on the neighborhood.
That is not the case. Thousands of homes across the country are sitting vacant. If a flood of new homes hits the market, what is the chance of all or many of them selling? Lending guidelines are very strict right now and unemployment is at an all time high.
While I appreciate the author's intent to end this housing crisis quickly, one of the roots of the problem right now is unemployment and nothing a bank does regarding quickly or slowly taking back a house is going to change that. Let's not make a worse problem by foreclosing thousands of houses quickly and kicking people out on the streets who are still in their homes barely hanging on, hoping they can get a job or their employment situation improves.
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