Short Sales vs Bank Foreclosures

I think this video by Jim the Realtor on Youtube gives great insight on what banks are doing wrong. We already know they made many bad decisions on loans from 2-5 years ago that are now coming to haunt them as delinquent accounts which will eventually become foreclosures.

The loans are in default and they have a chance to modify the loans (loan modification), take a short sale, or foreclose on the property. They will be taking a loss on all 3 options, but going through foreclosure and having it becoming a bank REO is the most expensive option for that bank. So why would they take the option that costs them the most?

It the opening segment of Jim’s video he talks about the bank not going through with a short sale, spending about $30 to $50,000 to foreclose on the property, and then later put it on the market for a lower amount than what the short sale would have brought in (which would have minimized their losses). Banks like these do not deserve bailouts and should be taken over the FDIC when they become insolvent.

The houses you will see are nice foreclosures in the city of Carlsbad. I don’t think there are too many banks making jumbo loans to buy these types of properties and probably less people who actually qualify. The actual buyers who purchased in the last few years are probably now underwater.