Question Details

Dianne Hicks, Real Estate Pro in Rancho Bernardo, CA

What do you think is going to happen to the Real Estate market in a couple of years when the thousands of people who have done short sales and had?

Asked by Dianne Hicks, Rancho Bernardo, CA Fri Feb 5, 2010

foreclosures start to re-enter the real estate market again as home buyers?

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In my humble opinion, that is an odd statement and or question. Logically, people need housing and people sell and buy. To what degree will be determined by need. Whether a person sold short or went into foreclosure is not a sign of the times but rather a condition of the times. Rises and falls, booms and busts are in effect part of the cyclical nature of the market. Under normative conditions, people will pay their mortgage and bills to the best of their abilities but if jobs are scarce, unemployment high, underemployment higher or undetected - what should they have done? We are a forgiving country, when they get back on their feet - they will buy again, sell again or whatever. What should they do - live in a tent by the bridge? Weird question.
0 votes Thank Flag Link Sun Mar 28, 2010
They will enter in the market again and hopefully by that time, all these houses in foreclosure today will be owned by qualified buyers. We will probably need to start building new homes and hopefully at more affordable price and not over price for these repeat buyers.
0 votes Thank Flag Link Sun Mar 28, 2010
having more time to think about it. Expect real banks to refuse them. But the government loans, those if still available and with lax standards could give a house to anyone with a pulse.
0 votes Thank Flag Link Sat Mar 27, 2010
I am reading alot about the banks being at fault for the credit crisis. You are obviously a Realtor. The Government is at fault. They pushed the banks to come up with the exotic loan programs. The banks made three times as much money on those loans. Which equaled more kickbacks to the politicians and government.
It's funny how the Realtors weren't complaining when all of their houses sold. And they made five to six figures a month. But now that things are more difficult, the people that approve the loans are at fault.

We went from one extreme to the other but it needed to be done. There are mortgage professionals closing 20-30 loans per month. And Real Estate Agent closing 5-10 per month. There is still money to be made in this business. The strong and determined will survice. The weak and brittle will not!
0 votes Thank Flag Link Sat Mar 27, 2010
I do not see it happening in a couple of years. Lenders are getting stricter. They are requiring a larger down payment. The people will buy again, but it will take them time to save more money and build up credit. The market will improve slowly .
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0 votes Thank Flag Link Sun Feb 7, 2010
Erica, great example.
Some will learn, some won't. We're in an era where homeownership is a privilege to those who earn it and not a right (remember when they told you that about your driver's license?)
I hope Barney Frank and Chris Dodd are paying attention!
0 votes Thank Flag Link Sun Feb 7, 2010
While I would like to be positive, I fear the repeating pattern of human behavior. 3 years ago I helped a young couple get out of a house they had over-paid for and over extended themself in. They were knee deep in credit card debt and over their heads in a mortgage. We got the house sold, I counseled them in getting out of debt and sent them to a lender who really spent time counseling them about their finances. The goal was to help them bring up their credit score. I helped them find rental housing till we could pay down debts and and get rid of the financial mess. They just called me because their landlord asked them to leave and they now need another place. They bounced checks on him and have no savings, and again are in debt. Only this time there is no house to sell. And their credit score is worse than ever. Will we ever learn?

I think people who have had short sales and foreclosures... some will learn big lessons and never do it again. Others will repeat this behavior, always blaming someone else (the lender gave me too much money, the realtor told me I could afford this house, the appraiser overappraised the house)...
0 votes Thank Flag Link Sun Feb 7, 2010
Dianne, great question.
Current FHA guidelines say three years from a foreclosure (short sale is treated same as a foreclosure) AND it was due to circumstances beyond their control. All the reasons used for the short sale hardship letters are going to be very relevant again. Have your clients save their hardship paperwork and any supporting documentation they may have. It's going to take preparation and discipline for these folks to re-enter the housing market.
Strategic foreclosures (short sales) who didn't truly have a hardship they can document I think will be very surprised when they apply for their next home loan and can't support the "circumstances beyond their control".
I did a post on my website with a success story.(see the link below)
There will probably be a lot of credit repair and credit management necessary to get these folks
"qualifiable" (?) and the time to start is now and not waiting until they are ready to submit an offer.
0 votes Thank Flag Link Sun Feb 7, 2010
The continuing victimization that is further perpetrated on those guided to the short sale option is inexcusible.
These people need legal counsel from day one that bankruptcy is likely the only RELIABLE outcome for their situation. Only those states that disallow deficiency collection provide adequate protection to the borrower.The lender in these states then are caught in the snare of their deceit and refusal to negotiate in good faith. Short sale places the borrow in a state of financial pergatory for up to 17 years. Why are real estate professionals pursuing this solution, building their business on this solution, when a successful outcome is rare and the long term benefit to the borrow possesses only a vapor of reality?

There will be a very large portion of the citizenry who will have credit blemishes such as bankruptcy....a VERY large population. This population of citizens will not be neglected. Banks will create credit products to bring these consumers back to the market place. Actually the banks are doing this NOW for those who have recent bankruptcies. However, an outstanding deficiency claim, can keep these citizens from entering into a viable maketplace for the next 20 years. Stop the short sale insanity!

There will still be buyers and sellers. Real estate professionals will still make a living. We are not, however, compelled to contribute to the long term carnage to be created in the wake of short sales. Stop the insanity!
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0 votes Thank Flag Link Sun Feb 7, 2010
Dianne: This has been on my mind a lot lately. For one thing many of them are older and are going to have limited income when they can finally get back on their feet. Income earning potential of the person who is 40-50 right now is going to be a lot less. Also, many are going to be receiving letters in the mail regarding the deficiency from their short sale or Foreclosure, stating that the bank wants to they are going to have no choice but to file Bankruptcy.

I hate to think what our future is going to be with so many people filing Bankruptcy. I think the young professional lawyer should definitely be going into Bankruptcy law, (unfortunately)!
Web Reference:
0 votes Thank Flag Link Sun Feb 7, 2010
I wish your crystal ball had not broke... we really could use it these days.

I am wondering if new guidelines will be put in place for them. Perhaps making them have a co-signer or more down or demands of always keeping additional funds in savings.... mmmm. I am just thinking that is going to be another big issue coming at us soon as we start to see some trickle back into the market.
0 votes Thank Flag Link Sun Feb 7, 2010
It is all going to depend on the lending environment. Easy money and parsing risk factors were the problem. Now the pendulum has swung the other way and even with 50% down you get conditions from underwriters. The lending environment is what will determine what happens and the government might be able to get the banks to behave in a certain way but then again the government might not be strong enough to regulate the few banks left that are "too big to fail".
0 votes Thank Flag Link Sat Feb 6, 2010
Jed Lane, Real Estate Pro in San Francisco, CA

First of all a lot of those people never had any business what so ever getting a mortgage. The only reason they did was the incompetence of lenders and the stupidity of AIG. So, an awful lot of them will not be coming back into the market.

However, there will be a lot that do qualify and when the economy gets better prices will go up again. There will be more bubbles, bit no one knows when the next one will be.

Regards, Mark
0 votes Thank Flag Link Sat Feb 6, 2010
I think once people get back on solid footing many will try again to buy a home. They will be more cautious and I think the lenders are going to make it very hard for them to qualify. It may take quite a while for potential buyers to save enough cash to meet the stricter lending guidelines of the future. FHA will probably be the dominant lending vehicle for a long time to come.

I am already working with sellers who are able, to offer the options of carrying the note for a while. That way the buyers can get back in a home sooner and get themselves re-established. They can work on their credit, get job stability behind them, and then refinance.

It will be interesting to see what actually happens. I keep telling everyone from Sellers to Buyers, my crystal ball broke last year and I haven't found a replacement yet.
0 votes Thank Flag Link Sat Feb 6, 2010
A lot never will come back.

Many of the rest will be unable to come up with down payments. I doubt a large percentage will do very much to get better fico scores.
Credit standards will be a lot tighter. IF the GSE's are really put out of business as Barney Frank is suggesting now, a lot of normal lenders will NOT accept people with that kind of credit history.

About that time, many of the loans made that seemed good today will be defaulting due to far to easy lending even in 2009. That will bring in more foreclosures.

The only real answer is no one can see that far ahead for only one reason. Governmental interference and changing the rules could mean anything could change that a realistic assessment would be based on. Without that interference, I suspect banks that had to hold onto any mortgages they make will not allow those bottom line killers to take another shot at costing the banks even more $billions.
0 votes Thank Flag Link Fri Feb 5, 2010
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