What is going on with banks halting their foreclosures and what does it mean to you?
First, let me explain the issue in laymen’s terms. Lenders are overwhelmed with loans that are in default due to the economy and they possibly took short cuts when processing the typical foreclosure procedure. The recent findings are that some of the foreclosure paperwork was not signed properly or reviewed properly, which could have resulted in a homeowner getting foreclosed upon that should not have happened. This obviously has creating a legal nightmare. Plus, lenders are scrambling to find the documentation due to the fact that the loan has been sold numerous times from investor to investor electronically through securitization.
In light of this news, some title companies are not willing to insure title, therefore, if buyers cannot get title insurance, they will not be buying a foreclosed home. So Bank of America and many other lenders have halted the foreclosure process to examine the paperwork and systems that are currently being used.
Another fact - REOs (bank owned homes) are also being halted.. not just homes that are in the foreclosure process.
What does this mean to you? Good news and bad news.
Bad news first! With foreclosures being halted and REOs removed from the market... it is inevitable that the inventory of distressed property will continue to grow and then when the issue is resolved..... Baamm! The market is flooded with distressed homes, surely driving down values in all communities, including your home. We have been in desperate need to clear up the distressed and shadow inventory.. banks have been reluctant to release all of their inventory in fear of driving down the market; however, depending on how long the foreclosure moratorium lasts, lenders may not have an option but to speed up the foreclosure process and unload their inventory (REOs).
Now for the GOOD news! If you are a seller considering selling your home.. it is time to get off the proverbial fence... and DO IT NOW! With the majority of BANK OWNED (distressed) inventory off the market, which accounts for nearly 1/3 of all home sales in the US, you will have less distressed competition and should be able to net a higher sales price.
That’s the GOOD NEWS! Less homes on the market, less competition!
Many of you have been wanting to sell and then you see a comparable down the street for 20% less than your home so you decide NOT to sell. But now there is a good chance that the listing has been removed from the market. How about another scenario. Say your neighbor was in the foreclosure process and was about to be listed for 30% below market value, but not anymore.. there is a FORECLOSURE MORATORIUM.. yyipppeee!! But how long will it last?? Don't wait to find out. Would you rather wait until there are 3 REO homes on the market in your neighborhood priced 20%-30% below the estimated value of your home, or put on the market right now without the distressed competition and get top dollar in this economy?
Okay, maybe you decide to wait it out.. do you have 3 or 4 year.. or more? There are almost 7 million distressed loans currently, not including REOs. We are expecting maybe 4 to 4.5 million TOTAL sales in real estate this year. Many analysts are looking at these numbers and are projecting it to take anywhere from 3 to 5 years to clear up the distressed inventory and that was before this foreclosure halt.
Maybe you answered, "Yes, I have time, I do not plan on moving for 4 or 5 years!" Frankly, it doesn't matter... for 2 reasons! 1) With the massive amounts of distressed sales that will continue to hit the market over the next few years, do you think comparables of your home will go up or down? If you don't have a ton of foreclosures (lower comparables) in your community yet, sell now to get the highest price. 2) Interest rates are at all time lows. Can you imagine getting a 30 yr fixed rate in the low 4s or 15 year fixed in the 3s? I am not a psychic, but these rates will not last.
Unless you are extremely comfortable with your payment and/or size of your home and you have all the features you ever wanted and have the lot that you want and plan on staying for the long term (10+ years), then you may want to sell!