Mighty Bargain Hunter

Foreclosuers up 47% from same time last year

April 27th, 2007 | by mbhunter |

“If you owe the bank $1,000, it’s your problem.  If you owe the bank $1 million, it’s their problem.”

Foreclosures are on the rise and Rick Sharga, vice president of RealtyTrac, isn’t convinced we’ve hit bottom.  (I don’t think so, either.)

So not only are lenders helping out homeowners with risky loans to keep them out of foreclosure, some local governments — Euclid, Ohio, is one — are chipping in to renovate the vacant, repossessed properties to stave off slumping of prices on the occupied homes.  (Which means that the residents of those towns are paying for it through their taxes.)

Foreclosures are expensive for the lenders because legal fees and sale fees (auctioneer’s fees) are substantial.  Not that long ago lenders would let the properties go to auction because the appreciation was enough to cover all of the costs associated with the foreclosure, and the lender would recoup its losses.  Now, that isn’t the case.  This is a big opportunity for investors, because the banks are, in essence, more willing to split the difference (to some extent) between what’s owed on the property and what the net proceeds would be from the foreclosure.  Basically, the banks still lose (and the investor gets the property at a discount) but the banks lose less than they would at a foreclosure.

In general, lenders with a lot of foreclosures on their hands are still hurting regardless of how they get rid of the properties.  And connected investors will be able to take advantage.