If a home is about to go to foreclosure, and the home is located in a new development where the Builder has severily slashed prices, then the Current Market Value of properties in that development are tied into the Builder's prices.
It doesn't matter if the home owner put 0% or 10% or 20% or 25% down. It doesn't matter if the home owner obtained a 1st, or a 1st and 2nd mortgage.
The home owner purchased a home and paid $500,000 for the home. The home owner put 10% down. The home owner obtained financing for $450,000. The builder is now selling the same home for a net of $300,000. If an offer came in somewhere between $290,000 and $325,000, then the banks will probably accept the offer.
Why do you ask, would a bank accept that offer?
Now, let's say the home owner obtained a 1st mortgage for 80%. That would be $400,000. There would have to be a 2nd for $50,000.
Now, the builder has to appease it's stock holders and salvage any profits, and cut losses, and needs to dump it's inventory, at the expense of current home owners within the subdivision. They are just doing business and we cannot blame the builder.
So, the home owner can't make any more payments, the 1st or 2nd mortgage is about to foreclose. When the mortgage company forecloses, they put the home on the auction block, nobody bids on the property, and the bank will now own the property. And they paid a great price (legal fees, advertizing fees,carrying costs, etc) to now own a home that they will have to sell at an even greater discount (to compete with the Current Prices that the Builder is Selling the Same Property for).
Would the 2nd mortgage company foreclose on this property? Probably not. Can anybody guess why they wouldn't?
There are subtle "Other Conditions" that need to be considered.
Question: Is the house worth at least $168,000? Did your agent do a CMA (competitive analysis) for you? You'd hate to pay more for the house than it's actually worth.
Hope everything works out.
i think this is good. Of cause my home sold for a lot less then I wanted but time are not good.
Yes the home i got is worth a lot mor e then $168
thank everyone for your answers
Susan posted another update at the link below.
Customer Service Representative
[[Would the 2nd mortgage company foreclose on this property? Probably not. Can anybody guess why they wouldn't?]]
With the number you have described, the second mortgage holder position is wiped out (300,000 < 400,000, and second mortgage holders position is below the 400,000 of the first mortgage holder).
If the second mortgage holder decided to foreclose, there will be no bidders. Why?
Any bidder on a foreclosure action initiated by the second mortgage holder would have to satisfy any other lien holders that are AHEAD of the second mortgage holder.
- real estate taxes owed (most likely, in most states), and
- the first mortgage.
So suppose someone bids $1 on the foreclosure. In order to obtain the rights for the property, that bidder would have to satisfy the $400,000 owed to the first mortgage holder FIRST. So bidding even $1 on that auction means having to spend at least $400,001 to get the title on that house. But recall that the going market rate is around $300,000 - so effectively any bidder in that situation would be grossly overpaying for it.
So foreclosure by the second mortgage holder would not attract any rational bidders. Plus the process of going into foreclosure costs money and resources.
[[[In my opinion, whether or not an offer is accepted by a mortgage company (or mortgage companies), is soley dependant upon the Current Market Value of the property being purchased. IT DOES NOT MATTER WHAT IS OWED ON THE PROPERTY! ]]]]
That SHOULD be the case, but may not be. Several reasons:
- that current market value might be hard to determine, or put in other words, different participants might have a different view on what that value should be,
- would the bank rather keep an asset that has a paper value of $350,000 or accept a cash payment of $300,000?,
- accepting a lower payment might mean booking certain losses right now, which will be included in the current quarters earning report. I know the right, ethical thing to do is to come clean and do the rational thing, but I am sure we will see bad news come out from many banks in the next few quarters, indicating that even the losses that have already been declared were not ALL the loses.
Just want to let everyone know that Susan posted additional information about this topic at the link below.
Customer Service Representative