Short Sale, Foreclosure and Strategic Default

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Friday, October 19, 2007

San Diego short sales or no sales

Homedex reported the median real estate property in North County San Diego, declined by 5% in september. The number of single family detached homes declined by 39% since same time last year.

In my opinion we have 3 major factors contributing to the lack of sales. Homes were overpriced because of the availability of cheap money inflating the prices.

Now we have the flip side, although interest rates are fine, only people with steady income, 2O% downpayments and 6 mos of deposits can get the good loans. (there are some other loan products coming back on the market, but you get my drift).

So lets say you are considering a $1,000,000 dollar house in Carlsbad or a similar area in San Diego like Poway, Rancho Bernardo, Ecinitas etc. If you can even get a jumbo loan for $800,000 you will still need a very high paying steady salary, (perhaps over 200 thou a year and about a quarter million in cash.

That cash number is no longer pretend equity in your current home, it is real cash. How many people in that situation are going to buy a short sale or foreclosure in Carlsbad right now when they suspect they might have a shot at ocean view property in in Del Mar or La Jolla next year.

The other fact that is contributing to the drop is the way short sales are being marketed in California and florida. Ironically although I hate the concept I have advised my clients and Realtors that have to be out ahead of the pack. Mark the property low and bring in offers. Who cares if the bank rejects the first one, it gives the buyer and seller a chance to feel out the bank. After the first offer is rejected my client will know whether he or she will have to push the bank on TILA or Respa issue or if the bank is going to agree to refrain from collecting on the deficiency an or agree the debt is disputed.

Personally, I believe it will be better for everyone if the MLS would refuse to allow listings which have meaningless prices which are "subject to third party approval". Short sale clients will be much better served if the banks are forced to pick a price.

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