What will happen to the Real Estate market when Lenders halt foreclosure sales?
As you all know, banks such as Bank of America, Chase, GMAC, etc...are halting foreclosures or putting a moratorium on judicial and non-judicial foreclosures sales across the country. The banks claim that they need to examine their documents associated with foreclosing on homeowners to make sure they are in compliant with State Laws. They want to make sure all the 't's' are cross and the 'i's' are dotted on their foreclosure documents before they foreclose on a property.
Basically, all this is going to do is pro-long the inevitable. Homeowners that are in foreclosure, that are in default of their payment, will eventually get foreclosed on. The only way the bank will not foreclose on the property are if homeowners make their payments and pay off their back payments if they are in default, and bring their payments current, or sell the house. This is basic foreclosure. Of course homeowners may negotiate with their lenders to modify their loans or accept a short payoff if they sell the house. Other than that, lenders have the right to foreclosed on properties that are in default. Make no mistake, homeowners that are not making their payment will get foreclosed on, even if the lenders halt foreclosure sales temporarily until the bank gets caught up on their paperwork.
So what will this do to our real estate market? This means the real estate market will take longer to recover! Those millions of properties that are being foreclosed on across the nation will eventually be available on the real estate market for sale, 6 months from now, a year from now, or maybe two years from now. The longer it takes for those properties to be sold, the longer it will take for our housing market to recover. How, do you say? Let say your neighbor is in foreclosure, as soon as your neighbor's house goes on the market as a 'distressed' sale, whether it's a bank owned sale, or a short sale, or a Trustee's or Sheriff Sale, the sales price of that home will be below market value! And if there's enough 'distressed' sales in your neighborhood or area, the fair market value of those homes in that neighborhood or area, will go down! And if the lenders will take two years to process the foreclosure, it will be that much longer that neighborhood will recover from foreclosure sales. Meanwhile, the homeowners that are being foreclosed on, the ones who haven’t been making their payment will live in that house for two years or however long it takes for the lender to process the foreclosure, payment free!
Now tell me, who is the victim, if any, in this market. Is it the homeowners who are being foreclosed on, or the lenders who are foreclosing and not getting any payment for years on a property and spending our tax dollars for legal fees to foreclosed on each property, are the victims, or perhaps the neighboring homeowners who are current on their payments on their homes that are going down in value because of their neighbors foreclosed homes. It is $500 cheaper for me to rent a house similar to my house than make payment on my current house loan. I can't even refinance my house because the value of my house is less than my current loan. And if the government do away with the mortgage interest payment as a tax deduction on your personal income tax, then there will be more people walking away from their over mortgaged home, and renting houses for less than their monthly mortgaged payment. There will be no incentive for people to own their house, other than for investment purposes, such as rental properties, or own their home outright without home loans.
The bottom line with the lenders halting foreclosure sales is that America will take longer to recover from the current housing market. This is not all bad news...if you are in a financial position to buy homes for investment purposes, now is a good time to build your wealth. Buy properties, rent them out for more than your house payment, and when those house payments are paid off, then you will have retirement rental income!
