As many may have heard, many major lenders are freezing foreclosures. Current sellers may benefit in the short-term from fewer foreclosures on the market, which account for large percentage of transactions currently. RealtyTrac estimates that distressed sales account for a third of the residential real estate market, and depressing home prices by about 26%.
Many sellers have seen how a high number of distressed sales could affect their transaction, especially during an appraisal when there are a nominal number of resales which may not be direct comparables, too old, or located too far to be used.
This benefit may be short-lived however. Banks will address “robo-signers” which is at the heart of the matter. The term has been recently used to refer to employees of lenders’ employees who signed off on court / foreclosure documents without reading them first (the term refers to how employees automatically sign the large number of documents automatically, like a robot).
Mr. Cordray, of Ohio, last week became the first attorney general to sue a mortgage servicer, when he filed suit against GMAC Mortgage LLC. The suit also named as a defendant GMAC employee Jeffrey Stephan, an alleged “robo-signer.”
Once lenders have resolved these issues, foreclosures could start coming back to market, making the benefit for resales short-lived. As we approach the winter, the benefit altogether could be altogether diminished by the historically slower winter months.
Some attorney generals hope to address the issue of beyond robo-signers, and prevent foreclosure when homeowners are in the modification process.
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Sherwin L. Sucaldito, REALTOR®
Member of The Institute of Luxury Home Marketing
Member of the Real Estate Buyer’s Agency Council, ABR
Certified Residential Property Manager, CRPM