That was a pretty detailed post and was interesting for me. I specialize in Short Sales in the Santa Monica area. I am willing to bet the price banks could have gotten as a short sell vs an REO i sa lot larger then $12,000. For one thing in a short sale the bank has no costs to paint or make basic repairs. They have no costs for maintaining the property, getting the owners out of the house, cash for keys etc etc. On top of these costs the house itself are usually a mess vs a short sale where someone is living there doing the right thing. Yes I really believe your numbers are very low, Short Sale to REO. Has to be a much higher percenatge in the sell of short sale
Great post...I have pointed out the same information in the Hampton Roads area.
You would think the banks would do this analysis and realize that they are losing, per this example, $12,000 per home. They worry about pennies on carrying interest for dollars transfering through their systems but they will let this lump sum go on every home that moves to foreclosure.
Thanks, Jane.
I believe your analysis works in many, if not most communities. I ran some numbers for the Tucson market. (My town, Sierra Vista, Arizona, is too small to model this way.) Tucson is at the edge of my market area, and there have been lots of short sales, and REO transactions, there.
Your model showed the same trends for Tucson, though the numbers are a bit different. Still, there is a $10,000-$20,000 difference between listed short sales, and REO sales.
Lesson learned, I hope.
Be safe.
Mike
The difference is simple. If a bank agrees to a short sale, they don't necessarily recoup their loses from any government backed guarantees that might be in place. If they follow thru with the foreclosure process they recoup their investment and losses from entities such as Fannie Mae, Freddie Mac, etc.
Jane great post. It seems to make more sense to do a short sale, but there are other factors involved, like insurance which seem to derail them.
Brilliant post Jane. Bill and Cyndi in #4 above make a good point. I'd love to know how this specifically works out as it seems that there is actually a financial INCENTIVE for the banks to stick it to the Fannie and Freddie as they are being bailed out by Uncle Sam... well, ultimately, us.
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