less than one million properties (900,000 homes and some 3,000,000 people). . . in Florida alone . . in foreclosure and nationwide about about five milion and 15,000,000 nationwide . . is a more accurate number. June should go outside for for some fresh air and go to a courthouse filng desk and see the frightened children.

Servicers are not motivated to sell the incorrect term REOs.

The ‘owner’ of the real estate is usually overseas (large pension funds, hedge funds, and other institutional entities).

Therefore the Creditors are just do not want to take the significant losses - yet.

Until the servicers (U.S. banks) - start to truly run out of cash options (no more Asian bailouts, Fed cannot cut rates further, and Congress is done dropping money off to mailboxes) - then AND ONLY THEN shall they be motivated to trade the massive amounts of inventory.

Until that point - just wait.

The servicers are just goofing off and are not truly motivated.

It’s obvious the system needs to be streamlined. I’ve heard it can cost upwards of 30% of the home’s price to foreclose. You’d think at that cost the banks would invest money in designing an effcient sales model for REO properties.

I am a successful real estate agent with 9 years experience and I have found selling foreclosed homes to be less profitable than new construction or resale properties because of the time required to deal with banks.

Jason,

It actually costs about 20% of the home’s value to foreclose. Not coincidentally, once upon a time…

Also, I imagine that REOs are less profitable to real estate agents on a percentage commission model swimming in the shallowest end of the price pool.

Readers, have you had problems finding a foreclosure to buy?

That’s also a problem, no one is buying. On top of the already discount price people are expecting, a forclosure is expected to be even lower..

Like booms, many busts are magnified by group thinking. And once busts become severe enough, they prompt changes in the national mood that ramify well beyond economic affairs. Benjamin M. Friedman, in his 2005 book, The Moral Consequences of Economic Growth, cites abundant historical evidence that when economic prospects look bleak—especially for long periods of time—intolerance, racism, and other reactionary impulses flourish. As more people experience hardship, trust between them tends to diminish, and the social fabric itself seems to fray.

If home prices keep dropping, more bailouts of banks and broker-dealers likely will be necessary to prevent the paralysis of the financial system and a severe loss of confidence in our economy and economic institutions. And if we aim to stop foreclosures, with all their ugly consequences, from spreading further, many, many homeowners are going to need loan refinancing—which will need to be provided or backed by the government. Bailouts of investors and prospective bailouts of unwise or unlucky home buyers have stirred a lot of controversy, and indeed, financial bailouts are, for many reasons, unsavory. But given the severity of the current financial seize-up, they are needed—not to prop up Wall Street profits or housing prices, but to prevent a fundamental loss of economic confidence and to maintain a sense of social justice for those of modest means. Losses of confidence and trust can mount with surprising speed, and beyond a certain point they become very difficult to recover from. — Robert J. Schiller, July, 2008 issue of The Atlantic Monthly

Foreclosures do not have any “ugly consequences”, enough with the half-wit attemps at socialism. Foreclosures is a measure of US markets’ efficiency. When the foreclosures stall and flounder, like they do now, it only points to more downfall in real estate values.

the biggest problem with foreclosures is that there’s no guaranteed outcome for the buyer. I know 2 separate couples who tried to buy a home in foreclosure, offered what it was listed at, waited 8 weeks and were then told that the offer was rejected. they weren’t told why the offer was rejected, but a wait that long is too long and too much of a headache — they moved on and bought non-foreclosure houses.

if sellers and lenders seriously want these houses to move, they need to have all of their ducks in a row and be realistic to buyers from the get-go. If they can make it possible to quickly settle a foreclosure, they would do better at attracting buyers.

“Sense of social justice” - I believe many have already commented on this. What is this concept again? How can it be so perverted, as to mean the opposit - an implied government guarantee on certain economic value?

And by the way, thanks to the author for the foreclosurepoint.com reference. I found the site extremely useful! You can obtain FREE foreclosure listings with addresses, sq. footage, etc. These would certainly need to be supplemented by the local county assessor records, which most interenet users can do online today. This way you link sale history, mortgage and deed info to the address listings. Can anyone advise on where the current loan balance info can be obtained on the foreclosed properties? This seems to be the last missing link.

Bank shareholders ought to be complaining about this, as the banks are not efficiently turning these properties / not maximizing the amount they could get, (minimizing loses), thus, the banks are not maximizing shareholder value.

Banks are gambling with these proerties, making an all-in one-way bet on housing market quickly recovering. Some deja-vu!

It’s simple really. It’s done so that the people in charge of these homes allow their friends and relatives to get the first crack at them. Everytime I’ve inquired about finding foreclosed homes in NJ, I’m always told not to bother unless “I know somebody.”

Don’t forget the difference between buying out of foreclosure (the bank hasn’t taken it back YET) and buying it from the bank after they have foreclosed AND taken the property back. Buying it from a trustee sale/auction is wrought with hidden liens, 2nd mortgages, etc…that you can be stuck with over and above the foreclosing banks debt. Buying from the bank after the foreclosure is relatively straight forward where the bank supplies you with title insurance on your purchase. If they are not willing to provide title insurance, red flags should be popping up all over your world!!

Yes, REOs are all the rage. Nowadays MOST auctioned properties go back to banks, as there are often auction price reserves which are “at market value”, which translates to like 5% below the 2005 fantasy price. This is why most auctioned properties go back to the bank, and the bank already knows that the US Congress will make the US taxpayer foot any future bills, so they are free to gamble with REOs now.

Alternate, you cannot get current balance owed, BUT, when the trustees “Notice of Sale” is filed with the county recorder, you can see how much the minimum bid will be (once it forecloses and does not sell at auction, then consider this amount to be what the bank has in it). Often when the bank lists it they will ask over this amount. Also, through the recorder you can view a copy of the original “Deed of Trust” the borrower signed when they purchased the property. However, the original buyers acquisition price has nothing to do with market value or how much the bank will sell it for.

Try www.realtytrac.com - some basic information is free.

many homeowners are going to need loan refinancing—which will need to be provided or backed by the government.

My god, I cant believe you even typed that. No they dont. The borrower shouldnt have gotten the loan. Period. Loan refinancing? What does that mean? You mean refinancing for what the home is really worth? Well, why didnt it sell for that amount in the first place? Greed you say? Mr. Shiller, you smack of socialism. My tax dollars should bail NO ONE out.

a sense of social justice

Mr. Schiller, just what in the h*ll is that again? In order for there to be justice, someone has had a crime done against them. I dont see the crime here, no one forced people to sign mortage notes. Regardless of what you victim people are saying, most people knew they couldn’t afford what they were buying..

I sat out during the bubble and have excellent credit, great salary, and good job…

But it is really hard to find these properties. I completely agree banks should be chomping at the bit to get their assets in front of people like me.

There loss! I will find something eventually.

The current house price in California is still too high. People with good credit and salary can not even get loan.

Again, the banks do NOT OWN the houses…
They are just SERVICING them.
The media incorrectly thinks/states that banks have these houses on balance sheet.
NO, they do not.
Large institutional funds and overseas investors are the true creditors.
Banks are just more agents in the way that must ask permission from the creditors.
Hence, the massive time lag between offer and acceptance.
Until the banks are able to get out of the way and let the process of Creditor selling to Purchaser; then
the process shall continue to drag along.

Yes, finding REOs without paying a fee can be done. Two reasons why it’s difficult to find current REOs include:
1. Lenders don’t post their REOs because many investors falsely believe that if a lender has many REOs, one could offer 15-30% below market value & it’ll be accepted. That’s an unrealistic strategy. Rather Lenders looks at comps, property value, DOM etc.
2. Now Servicers manage REO properties. Traditionally they only share the listing with their contracted agents.
To find REO listings you need to find reputable REO Listing Agents.
My site has three links to REO Listing Agent services. Additionally a few Servicers gave me permission to post their REO listings on my site. If you’d like to find an REO Listing Agent in your neighborhood or search their REOs, for FREE, go to the Resources page at www.TheDefaultNews.com

A loan is an ASSET!

The loan DOES NOT sit on the side as a liability under the balance sheet!

Get your facts straight and if you don’t understand something or maybe you should not comment at all.

I do make mistakes too, but your comments were a bit tainted against a bigger point here. the bottom line is that in order to get markets working again we need to reach market equilibrium in pricing. Banks need to make this information readily available to the public so the buyers can come back into the market. otherwise, the market will continue to stall.

Additionally, banks traditionally only write-down 80% loaned value for like a year or so. they will show up to auctions and bid up to 80% the value. the problem is that most of the default assets on the balance maybe under that 80% mark, meaning only after a year or so on the balance sheet will the bank consider going under 80% mark.

The smart banks will realize they are in an environment much different than they been in the past and get these bad loans off the balance sheet quickly. but a lot of these institutions are most likely scarred at this point. think about it! you are a bank manager who underwrote a bunch of garbage and now a loan that you underwrote is 50% the value of loan to asset. These bankers are shaking in their shoes probably everyday at work… unbelievable… the level of incompetency demonstrated by a compartmentalized socialist banking system. these people at these institutions should have spoken up, but a lot of them were probably acting as middle men and selling off the toxic crap into the secondary market or pushing into the market via freddimac fannie mae. This is what happens when you set up a system of “no skin in the game” philosophy… this is in fact socialism! i blame the corrupted level thinking of the CEOs, gov officials, and OCC/FED for not stating the obvious here. sure you raise interest rate to curtail the lending but that does not put skin in the game for the lender. that is why these banks/lender just manipulated option arm contracts when Greenspan raised rates to curtail negligent lending. this is the biggest reason why we have this real estate problem. sorry to go off topic.

bottom line the only thing to cure the real estate problem is price equilibrium. By allowing internet web-sites to bring buyers and sellers together of foreclosed properties is a good way to do so.

Get moving jacklegs! The longer the assets sit on the balance sheet the worse it is going to get for the banks.

Again, the banks are just SERVICERS…
The word securitization for a reason.
Banks’ balance sheets are full of obligations owed overseas.

To REO’s: you are not totally correct. Yes, the banks securitized these loans, but most (if not all) securitization agreements provided that if X% of loans went into default by X date, the bank had to (per the securitization agreement) take the loans back. And, that’s what happening. That’s why the banks are posting losses. If banks were only servicers, why are they posting billions of dollars in write-downs? It’s because they have some of these loans on their books.

DCM - good point; agreed.

I think that the banks most likely work in collusion with the foreclosure websites - i.e. the sites provide the banks with a regular payment in return for sending regulare foreclosure data their way. The only way to break this paid foreclosure site cycle would be to have a government subsidized website offering free foreclosure data and subsidizing banks to provide the government with information. It would help break the cycle of foreclosures remaining on the market.

If you could see the foreclosures I have seen, the majority are ridiculous. They are trashed & dirty. I probably haven’t seen it all but the worse I have seen so far is dog feces in two bedrooms and unmentionables. You wouldn’t want to see some of these homes. The owners deserved to lose the homes. I don’t care as there is no excuse for what they do to the homes when they leave. Noone held a gun to their head and made them sign a contract. They should have educated themselves as to what they were getting into instead of taking someones word in this day and age when you really can’t take people at their word.

I have bought foreclosed properties for years and the unwillingness of banks and servicers to facilitate quick dispositions this time around has really surprised me. Even all cash, no-contingency offers at listing prices are ignored for weeks.

Also, I have pound it virtually impossible to go to a foreclosure sale and not be outbid by the note holder. The banks seem to want to build inventories of decaying homes for reasons I do not understand.

My theory is that by taking the houses into inventory, financial institutions can avoid disclosing losses to their investors. They can’t delay the bad news forever and eventually the flood gates will open.

I don’t know enough about the financial institutions’ accounting rules no know if I am right about their motives; can someone please educate me?

Tom the Vulture, you are right on the money. Banks are biting the bullet, making an all-in gamble at the worst possible time. I believe selling these properties quickly would entail recognizing the principal writeoff immediately (in the current quarter). Carrying these dogs on the books allows them for gradual quarter to quarter accounting trickery, as they the properties are marked “to market”, which is probably a price for a comparable resale. It is wrong on so many levels, as REO market prices are very different from resale market values. SEC is looking the other way, as they are once again complicit in this real estate gimmikry.

Our team works with Countrywide who takes on REO properties from other banks, such as Deutch Bank, Horizon, Well Fargo and others. Countrywide does have a web site that is accessible by the public. The information seen on that site is for the most part provided by the Realtor that has the listing agreement for that property. A good agent that knows the REO system can save you money and time. Please do not mistake short sales, and foreclosures, with bank owned properties. They are very different components. Personally, if I was shopping for this type of product I would restrict my efforts to bank owned properties for many reasons. Not all will agree with me but then I like more control over the process. Simply stated, a bank owned property is analogous to a normal resale with some extra admisistration an a few pit falls that you need to keep a keen eye during the process. These is lots to be said about this topic however I am getting a little lengthy with this message.