Here is the catch,the standard legal disclaimer when a property is offered way below market,usually for short sales: "Listing price may not be sufficient to cover all encumbrances,closing costs,or other seller charges and sale of Property at full listing price may be conditioned upon approval of third parties."
In this one case the bank paid for quite a bit at closing: The bank had to pay $10k to "sell" the house. I'd like to see what that does to their balance sheet if they mark to market the rest of the foreclosed homes they haven't yet sold.
Back in the 70's Baltimore was selling condemned houses for $1. The catch was you had to actually fix it and live in it within a certain amount of time.
The bank actually paid $10K just to sell Was the address of that house 8111 Traverse Street or 112 Ocean Avenue ? Better known as the Amityville 'House of Horrors'
All of this is a prime (no pun intended) example of why the banks' finances are in a shitload of turmoil. Take that $1 house sold where it cost the bank $10k in slush monies just to unload it. If they were unloading it, then they had paper (a mortgage) on it. Add the $10k to the value of the mortgage at time of foreclosure, and that's how much their balance sheet took a shit on this one property. As holder of a mortgage, the holder has choices. If payments are late or not paid, they can either foreclose and sell it (and look what happens) or they can work something out with the current owner who is late on their payments, or they can foreclose and sit on it. Many banks are choosing to foreclose and sit on properties. If the mortgage balance is $200k, then it's a $200k asset on the books as long as it's sitting. If they unload it for a net of $50k, then they have to find $150k on their balance sheet to make up for it just to stay solvent. Once they choose to pay an attorney $5k to foreclose, take over maintenance, property taxes, lawn mowing, local ordinance liabilities (code enforcement is what its called here), risk of act of god (flood/ fire/ etc.), vandalism, etc. they have to be nuts to take all this on. Recognizing they (banks) are willing to do short sales, what I don't understand is why their greed is hurting their balance sheets. If Johnny owes $500k on his mortgage on a now $300k home and his income was cut in half because of the current depression, then why won't a bank work with him to prevent foreclosure. They will tell Johnny "as long as its not you, your friends or your family we will entertain a short sale." So now instead of mitigating the $200k descrepency such that each party eats $100k, the bank plays hardball and ends up getting a net of $225k on a $500k note. That's pretty stupid. During the Great Depression the few banks who survived worked things out with property owners. They told the farmers to keep working the land and earn what you can and if you earn enough, give us some money, and if you don't, then just hang in there until times get better. It will all work out in the end.
These "concrete-sequential" minded people just keep doing the same thing,and expecting different results every time. The true definition of insanity. ABC, 123, linear-locked mindset is good up to a point. But when do these "bankers" ever get creative? It's better to run the bank into the ground than break with outdated business models?
mgookin: I get what you are saying and it would make sense if these were isolated events; however, if word got out that all you had to do is get late on your payments, get an appraisal for $100k less than you paid, then presto you get a new mortgage for $100k less, it would avalanche the banks. Unfortunately, this is something we are going to have to muddle through. I don't know of any other way around it. We'll see more banks fail, but hopefully the system can withstand some regionals getting taken out and some of the big names consolidating.
I respectfully disagree. Who is it that are behind on payments and can prove a legitimate reason therefore? It's the recently unemployed/ underemployed and those who are victims of bad mortgage practices. The owners of those mortgages are as much or more to blame then the mortgagees. The bank/ mortgage origniator should know better; the homeowner is the victim. Any business enterprise has their balance sheet to consider. They can be greedy saying "I'm going to cause hell to anyone/ everone who is one day late at any cost" or they can say "I'm going to work things out when things don't go as expected." We all make choices everyday. Sometimes our choices are based upon greed and selfishness and sometimes our choices are logical. Choose well.
A guy here is looking to buy,got taken to a foreclosure thinking there would be a deal but the house wasn't that cheap,the bank also said that even if the listing price was offered,it still might not be enough! On top of that,the previous occupants had stripped the house literally bare,no carpet,appliances,cupboards,kitchen cabinets,the pool workings were gone,the garage motors were gone,even the garage doors had been unhinged and removed.
I grew up in Farmington and went down to the city with my mom when she was working(Teacher). I think that the housing market in detroit(city) is going to crack so bad that we'll finally get a rebirth. They are already doing deals involving hundreds of homes.(packages) for 3-20k/property. I see this only as a good thing.