Let’s review some of the foreclosure theories of today’s world.

BUNK #1 – Banks are holding back properties.

In San Diego’s North County Coastal region, there aren’t many REOs not on the open market.  The video tours you’ve seen over the last few days covers almost all of the ones listed on foreclosureradar that are bank-owned, but not on the MLS, and two of them came on the MLS while filming.

BUNK #2 – Banks are delaying trustee sales on purpose.

Only those behind the scenes could verify, so I don’t know for sure.  I think the reasons you see delays between the initial NOD and the eventual sale has more to do with the borrower – and in particular, their realtor.  Between short sales and loan modification requests, the loan servicers have to be inundated, and it has to be easier to postpone a trustee sale another month, than to efficiently handle each file.

BUNK #3 – Banks don’t want to mark to market.

The name-brand banks like Countrywide/Bank of America don’t own these loans, they sold them years ago to MBS-buyers, and are now just administrating.  The servicers earn transaction fees by facilitating the trustee sales – if they are delaying, it’s because the MBS-owners are so ticked off at them, and they don’t want to know or experience reality.

BUNK #4 – Foreclosures cause lower prices.

An old wives’ tale in today’s world.  Bank-owned listings ARE the market, and are selling for retail.  Why? Because the servicers have a duty to their MBS-owners; they get at least one appraisal done, and price them accordingly – if the list price is too low, buyers bid it up.  As long as they hit the MLS, they sell for full market value, the massive internet exposure ensures it.

Regular sellers think that foreclosures undermine values, but that’s because sellers are addicted to their dreamy sky-high price from yesteryear.  You regularly see REOs listed for $50,000 to $100,000 under other regular sellers, but guess who is right about price?

BUNK #5 – “Stealing one from the bank”.

Very unlikely, see above.

BUNK #6 – Foreclosures need work.

As more McMansions get foreclosed around North County, you’ll see less destruction of property – I think some of the newer ones will be in great shape, based on what I’ve seen so far.  Why?  I don’t think the homedebtor is that desperate, and the free rent helps.  It’s a relief to not make those big monthly payments for months or years, and besides, have you ever tried to move a built-in fridge?  McMansion owners won’t bother on their way out.  Plan on a good coat of paint and new carpet, just like in all houses for sale.

BUNK #7 – The coming foreclosure tsunami will overwhelm the demand.

I’m not so sure of that – the foreclosure numbers have been fairly steady for the last 18 months, and the REOs have been gobbled up.  It would take a lot more.

The local market has been able to withstand 3,000 to 4,000 NODs monthly, and they would have to get into the 5,000-and-up level, which I think is very possible.  If there were 1,000 foreclosed McMansions that hit the open market in the same quarter in North County Coastal, and the demand wasn’t there, then price will fix it – once you get around $700,000 the available loan possibilities open up. 












With the lack of well-priced inventory throughout the coastal region, buyers (and realtors)  would welcome some good buys!  Buyers have been VERY frustrated with this season’s offerings, and either the regular sellers need to get off their high horse, price-wise, or the buyers will gladly wait for the tsunami.

Any others?

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