Contrary to popular belief, banks to do not want to foreclose. Actually it has become the last thing they want to do. So why are there so many foreclosures? 1 in 7 homes in the U.S. is in some state of foreclosure and the Chicago market where I work as a short sale Realtor is right in line with National averages. 7 out of those 10 home owners do absolutely nothing about it, so their bank has no choice but to foreclose. This is one of the most traumatic experiences a family can go through and some may be in denial or just not know there are foreclosure alternatives like a short sale.
Why would a bank want to help a home owner complete a short sale. A home could lose 20-60% of its value by foreclosing. When buyers see foreclosure they automatically assume it has hidden problems and want a massive discount because so much is unknown about a vacant home. Estimated loses for a short sale are 13-21% and the owner stays in the home, possibly paying the mortgage, utilities and some maintenance fees. The costs of foreclosing for a bank are astronomical when adding attorney fees, months with out receiving payments, holding costs, inability to borrow against a non-performing asset and other selling costs involved.
The most important contributor to the downward spiral of home prices are the effect that a foreclosure has on a neighborhood. Just 1 foreclosure in a neighborhood can drop the prices of all surrounding homes by 30%. So if Bank of America owns 20% of the loans for a neighborhood than they would lose hundreds of thousands of dollars in loan values and increase the chance that other home owners would let their homes slide into foreclosure.
Most of the major banks are now complying with HAFA or Home Affordable Foreclosure Alternatives. This program has set guidelines for response times, slows down the foreclosure process. Postpones a foreclosure sale date and offers a maximum of $3000 in moving expenses for the home owner. Some Banks like Chase are now offering up to 5% back to home owners for completing a successful short sale.
The other word that is synonymous with foreclosure is vacancy and it's proven that vacant homes increase crime. So my job as a member of my community and you as a member of yours, is to spread the word how there are alternatives to foreclosure.
Why would a bank want to help a home owner complete a short sale. A home could lose 20-60% of its value by foreclosing. When buyers see foreclosure they automatically assume it has hidden problems and want a massive discount because so much is unknown about a vacant home. Estimated loses for a short sale are 13-21% and the owner stays in the home, possibly paying the mortgage, utilities and some maintenance fees. The costs of foreclosing for a bank are astronomical when adding attorney fees, months with out receiving payments, holding costs, inability to borrow against a non-performing asset and other selling costs involved.
The most important contributor to the downward spiral of home prices are the effect that a foreclosure has on a neighborhood. Just 1 foreclosure in a neighborhood can drop the prices of all surrounding homes by 30%. So if Bank of America owns 20% of the loans for a neighborhood than they would lose hundreds of thousands of dollars in loan values and increase the chance that other home owners would let their homes slide into foreclosure.
Most of the major banks are now complying with HAFA or Home Affordable Foreclosure Alternatives. This program has set guidelines for response times, slows down the foreclosure process. Postpones a foreclosure sale date and offers a maximum of $3000 in moving expenses for the home owner. Some Banks like Chase are now offering up to 5% back to home owners for completing a successful short sale.
The other word that is synonymous with foreclosure is vacancy and it's proven that vacant homes increase crime. So my job as a member of my community and you as a member of yours, is to spread the word how there are alternatives to foreclosure.