Desperate BofA now paying short sellers $20,000 cash for keys

Nov 2nd, 2011  
by IrvineRenter  in Library News

Astute Observations

Astute Observation by Swiller
2011-11-02 06:40 AM

There *WILL* be prinipal reduction, but rather than homeowners getting the benefit, it will go through the foreclosure process, and then the banksters will use the crony capitalist system (aka facism) to deny the regular homeowner a chance to buy it for it’s REAL worth, and it will then be flipped for more corporations to make money off the debt of the american people.

IF, and that is a mighty big if, we lived in a free country ruled by the free market, then for sure I would advocate the foreclosures as it would drive down the price of homes and allow people to live affordably. But WE know this will never happen so I back principal reductions for HOMEOWNERS 150%.

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Astute Observation by Leviathan
2011-11-02 08:26 AM

Yes, you may be right.  But let me comment from my neck of the woods (upper middle class suburban Chicago). 

Foreclosures and short sales on good lots are being bought by developers, fixed up and put back on the market for what (in a healthy market) would be bargain prices.  A few sell, but many sit for months/years.  A few unreconstructed dumps are being bought and torn down by buyers taking advantage of availability and good prices in construction.  Many unrealistic sellers sit and wait, and sit and wait.  I see no signs of recovery, though decent entry level homes do sell quickly. 

Anything that would require a six-figure down payment to go with the top of a conforming loan (that’s anything above 500k round here) sits.  There’s your missing move-up buyer.  Around 1M sales pick up a tiny bit (guess gramma died and someone got their inheritance).

It is not a market that will absorb much shadow inventory.  Big investors coming in from out of town would not fare any better than local builders.  They would have to put money into these places, and there’s no reason to believe they would make a killing.  They will have carry costs to consider, and will want to offload quickly, which will keep prices reasonable.  Frankly, when I contemplate buying a “fixer-upper” and having the work done myself, I don’t see how I would do any better financially.

So that’s one thing to consider.  Maybe “investors” aren’t altogether the enemy.  I dunno.

Secondly, when I look at the taxes on places that are going to short sale or foreclosure I am dumbstruck at how high they are.  If I buy one of those places, taxes will go down to reflect the new price.  But if I get a mod it won’t (not to the same extent anyway).  Who is better off if lots of people get principal reductions?  Local authorities, that’s who.

So, you can fight your loan owner (over refi and principal), fight your 2nd lender, and fight your tax assessor to shave a bit off your monthly nut, OR you can let them fight over the carcass and move into a more affordable set-up.

Sorry to be so long-winded, but I think this is more complicated than it seems.

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Astute Observation by Perspective
2011-11-02 09:09 AM

“...Secondly, when I look at the taxes on places that are going to short sale or foreclosure I am dumbstruck at how high they are…”

That’s the beauty of Prop 13 in California.  There is certainty to your property tax costs the year you buy and every following year.  And when prices go down, the Assessed Value must decline to the fair market value of the property thereby lowering your property tax tab. 

It also results in certainty for California government.  Property tax revenue increases at a study rate and does not suffer huge downward swings.

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Astute Observation by IrvineRenter
2011-11-03 07:44 AM

Leviathan,

Thanks for you astute observation. You have a very good understanding of your market. We are seeing many of the same dynamics at work in this market. High end asking prices continue to fall and transaction volumes are very low which are both signs of a lack of a move-up market.

I hadn’t considered how principal reductions would benefit local tax revenues. It is certainly better for them if prices don’t get reset through a foreclosure.

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Astute Observation by kishore (renter)
2011-11-03 12:20 AM

There was a full page ad in Sunday’s OC Register real estate section about a company being able to obtain 20k-30k$ for short sellers. It was pretty shocking to say the least. Can this be happening in California too?

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Astute Observation by IrvineRenter
2011-11-03 07:42 AM

I haven’t seen it happening here in California yet, but it could. The main thing holding up short sales is money to pay off the second mortgage. If money becomes available to pay part of the second, many more short sales will happen.

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Astute Observation by kishore (renter)
2011-11-03 08:59 AM

I looked at the ad again. Its MacKenzie Advantage Team in Orange County. Their website according to the ad is http://www.macteam.com/

It’s a full page color ad in this Sunday’s OC Register Real Estate section.

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Astute Observation by Alicia
2011-11-03 10:18 AM

Presumably the 20k would be reported to the IRS and then taxed as income.

I’m sure it’ll be in the small print smile

So a tax bill and a deficiency judgement (depending), and the borrower thought they were getting a deal.  Same as it ever was.

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Astute Observation by Blair
2011-11-03 12:01 PM

I think the Antioch owners must have had a gambling problem because they did not use that $319,000 on interior renovations.  1983 anyone?

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