Comments on: Capitalism Works: Banks Take $.70/Dollar on Debt

By: Ariananurn

Ariananurn — Wed, 13 May 2009 08:47:39 +0000

Good work! Thank you very much! I always wanted to write in my blog something like that. Can I take part of your post to my blog? Of course, I will add backlink?

By: foxyladi14

foxyladi14 — Mon, 04 May 2009 22:16:47 +0000

it,s a mess.i feel sorry for all those folks losing their homes.

By: foxyladi14

foxyladi14 — Mon, 04 May 2009 22:06:27 +0000

i think you are right there.
also people move on average of every three or four years.

By: Ellen D

Ellen D — Mon, 04 May 2009 19:15:45 +0000

To Tricia Spiegel: My husband hates going into used furniture stores. I hate pawn shops.
Everyone is a softy somewhere about other people’s misfortunes.

By: FrenchNail

FrenchNail — Mon, 04 May 2009 15:49:55 +0000

Buying at auction is not for the fainted heart. You have to either pay cash or have your financing in place as a blanket financing with a bank, and most forclosed real estate has been vandalized or heavily neglected. Most of the time you cannot inspect them before buying and then you may have to deal with unlawful residents or bone fide but undisclosed tenants. Sometimes the damages are so great and toxic (illegal meth lab in the basement comes to mind) that your investment is not even worth those 70 cents on the dollar. (I heard of a multidollar mansion in Florida bought for a fraction of the price without the right of previous inspection, which turned out to be a complete loss but for land value. The property had been left to hundred of cats and the level of toxicity was such on top of the usual neglect that the only feasible solution was bulldozing it down.)

Right now there are so many good places on short sale (step before the foreclosure) that it make more sense for buyers to go that road.

That said. The reality of foreclosure and short sales is not on the court house front steps. It is in yours and mine front yard: If enough houses (2 or 3)on your block or subdivision have sold for 65-70 cents on the dollar, yours too is worth just that. It is called the comp system.

When you sell your house and the buyer applies for a mortgage, the bank appraises the house, meaning they look for comparable sales in the area. If one or two sales over the past six months is off the charts, it is disregarded, but if all or nearly all the sales are off the charts, they become the chart, hence they are the comparables. And if they sold at 70 cents on the dollars, the value of your house is now just that. And because Real Estate is a slow market in nature and because the rate of short sales and bankruptcies is still very strong (it acutally picked up again in 2009 Q1), real estate values are not going to go up soon. They may stabilize by the end of the year because of the inflation kicking in.

Yet I personnaly do not see the real estate values going up intrinsically until employment recede. Why would an employed pay a mortgage out of his savings for a house not worth what the mortgage is? How long would YOU take to make that calculation? Specially when you can rent a comparable house for less and not have to worry about real estate taxes and maintenance expenses?

By: Tricia Spiegel

Tricia Spiegel — Mon, 04 May 2009 15:43:01 +0000

I just think about the people who lost their homes. Maybe I am just an old softy with more heart than brains, but I could not purposely profit in that way.

By: Diana L. C.

Diana L. C. — Mon, 04 May 2009 14:14:09 +0000

This is a sign of capitalism at work, but I have to agree. Until unemployment figures get better and people can begin to think of purchasing first-time homes or trade-up homes times won’t get much better.

Those people buying seem to be people who aren’t hurting and can make the long-term investments without damaging their own lifestyles. When houses became investments rather than homes–i.e., places to live and build a future for families–things started getting crazy.

By: John Smith

John Smith — Mon, 04 May 2009 12:48:06 +0000

You have houses going for 50% of their original value and only a handful of people show up and the bid is in an open area? I don’t think that is signs of things getting better.