Banks Warehousing Foreclosed Properties!?!
- Tim Brockman
- @ 3:41 pm
Are the banks warehousing foreclosed properties in order to maintain or stabilize the values of real estate? The reasons why they would do this I can only speculate about but it does cost money to own vacant property, and there is good evidence that the bank is holding far more foreclosures than they're attempting to sell.
Some time ago I built a little data collection program that allows me to monitor the Lis Pendens (the public legal notice of a pending foreclosure) from the local counties. One thing I noticed is, of the lis pendens filed about half result in foreclosure, its hard to say for sure how accurate that estimate is as they have fluctuated substantially with things like State emergency moratoriums, and often result in the home owner working something out at the last minute, such as loan modification, deed-in-lieu of foreclosure, or a short sale. This is kind of beside the point though, I only mention it to bring some process and deed in lieu to light. The point is, I've been paying attention to the number of foreclosures taking place and there's been a lot in this area. The strange thing is these numbers aren't reflected in the number of foreclosed properties on the market.
The first time I noticed this was about 4 months ago. Dave Thompson (a Celebration Florida Realtor I would highly recommend) and I were ridding through a Celebration neighborhood. He pointed out that you could always tell when properties in the area were distressed because the water gets shut off and the well manicured lawns start to die pretty quickly. He mentioned that he had noticed far more properties were on record as being owned by the banks than were on the market. This was something I hadn't really paid attention too.
After the court makes a judgement and a notice of sale is published interested parties go to the court house where the bank has a representative (generally a lawyer). At that point investors or people with a lot of cash on hand may make offers in a strangely informal auction and the banks decide whether or not to accept the offer. Generally if its much less than what's owed on the property the bank won't accept (which is going to happen in most cases in light of recent market events). Banks, unable to get the money they loaned on the property then take possession.
Banks have been taking possession of a lot of properties in this area. At this point I don't want to speculate as to an exact number, but according to RealtyTrac, Florida had 10,433 Notice of Foreclosure Sales posted in January alone. Only 5,594 bank owned properties were listed at that time. Rick Sharga, senior vice president of RealtyTrac stated the banks have an inventory of up to 500,000 foreclosed properties and only 30% were listed.
The purpose for banks doing this, one can only speculate. It could be a lack of efficient business processes necessary to take the sheer volume of assets to market. They could be holding off for the next round of bail outs, or tax benefits. They could be holding the assets to keep the market from getting anymore saturated than it is. Maybe they have some index that balances the number of properties they market with the cost of holding them, availability of funds and potential borrowers, price/rent ratios, market expectations, trust, pixie dust. Who knows?
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