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Home Foreclosure Sales Lead To More Home Foreclosures And Bankruptcies
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This spring the usual surge of home listings were added to the real estate market in hopes of capitalizing on the normal spring rush of home sales. In the economy today there are very few traditional real estate trends that you can count on, and while more homes were added into the mix this spring, they are sitting on the market longer, and in most areas, the asking prices have dropped to their lowest level in almost a decade.

The flood of home inventory on the market right now is congested with foreclosed properties, whose rock-bottom pricing strategies continue to drive down home prices. With so many homes added daily into the competition pool, and with fewer qualifying buyers to purchase those homes, who knows when prices will level off?

Adding to that, many buyers who can qualify for loans are reluctant to purchase in this market for fear the trend will continue and their new home will soon lose value.

So what happens to those who've struggled to keep their head above water and choose to sell their home before being forced into foreclosure and to bear the consequences to their credit standing?

If they add their home to the market pool and the value declines below what they owe, they become another upside down homeowner who may be forced to walk away and into foreclosure. Once foreclosed it becomes a liability to, among others, the lender who's lost an income-earning loan, the pool of competing properties, and the homeowner whose credit has now taken a dive that will disqualify them from purchasing another home in the near future.

Unwillingly they become another cog in the wheel driving prices down, and costing the country money instead of making a sale which improves everybody's economy. It's a system that seems to only set itself up to recur again and again. How fair is that to those who have managed to stave off foreclosure and/or bankruptcy and are trying to sell their home fair and square?

It seems like it would be logical and a better business plan to help those who are still home owners stay in their homes and out of foreclosure. While recent legislation has created programs to aid those facing foreclosure, they were designed for home owners with subprime loans or risky mortgages. Those programs have unfortunately outlived the first wave of foreclosure cases. Today's primary cause of foreclosures is unemployment, and there is very little aid developed or being used for those distressed homeowners.

If it seems as if this is a circular process with no exit strategy, you may be relieved to hear that foreclosures have dropped significantly, and may conclude that the situation is beginning to take care of itself.

But reports of declining foreclosure rates are a bit of a false economy.

What it means is there are so many pending foreclosures that lenders are unable, and possibly unmotivated, to quickly evict homeowners, repossessing the home for release into the market. For instance, LPS Applied Analytics, a prominent real estate data firm, has calculated that at current pace it will take lenders 62 years to repossess the 213,000 severely defaulted or foreclosed homes in New York under its existing process.

Granted, that's the country’s most extreme case, (but not really by all that much). And if that's the case, what’s to prevent anyone from stop paying their mortgage and live free until someone finally gets around to evicting them? In 62 years you can raise a family - and save enough money to pay cash for your next home!


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