An old real estate axiom goes that once a home has gone through foreclosure, and the sooner a lender can sell the property the better. After all, a non-performing asset is bad for a lender's books and the sooner the escrow closes, the quicker the lender will be able to recover his losses. However, recently an appraiser paired the online foreclosure databases (found at either Realtytrac.com or ForeclosureRadar.com ) against the statistics found in the local Realtor MLS (multiple listing system) inventory, and noticed something rather peculiar: the datasets don't reconcile.
He discovered that the number of foreclosures posted in Online sites far exceeds the sum of listings and sales found in the realtor multiple listing system by about 70%. Does this really mean that 70% of foreclosures posted in onlines databases ARE NOT listed or sold? If so, what might be happening to these homes? Are Lenders holding the foreclosures back from being sold because these Zombie banks are insolvent and can't afford to take the losses? Or is something else happening? Well, here are three other scenarios which may help to explain the data disconnect.
1. MisInterpreted Data. Most internet websites will usually count a home as being a foreclosure when the homeowner has missed making three payments and a Notice of Default has been recorded. They don't take into account the fact that a homeowner may still be able to reinstate the loan and take the property out of foreclosure. Thus, the homeowner may never have needed to list the property in the realtor multiple listing service to begin with which is why it doesn't show up in the realtor MLS system, and yet shows up as an online foreclosure.
2.Short Sales. Online websites do not differentiate short sales from foreclosures. A short sale takes place when an owner owes more than the selling price, and wishes to sell the property at fair market value. The lender may agree to reduce the principal to help the owner do so, but it takes on average about nine weeks to review and approve a short sale package. During this time to an Online website, the property will be counted as a foreclosure and at the same time not show up in the MLS statistics as either an active listing or a closed sale.
3. Loan Modifications. To an online Foreclosure website, someone trying to modify their loan might appear to be in foreclosure because they may have missed making several payments. The online site will show a property as being in foreclosure even if the lender has agreed to postpone the late payments. And the property will not show up in the realtor's MLS database because the owner has no intention of selling.
The possibility also exists that other logical explanations may exist for why some homes that are foreclosed on don't immediately show up in the marketplace. The lender may be trying to collect money from an insurance claim, or there may be government banking regulations involved. Then again the idea of a bank filled with over-worked Zombie-like personnel waiting on customers like a scene ripped out Night of the Living Dead doesn't seem too far-fetched these days, does it?
He discovered that the number of foreclosures posted in Online sites far exceeds the sum of listings and sales found in the realtor multiple listing system by about 70%. Does this really mean that 70% of foreclosures posted in onlines databases ARE NOT listed or sold? If so, what might be happening to these homes? Are Lenders holding the foreclosures back from being sold because these Zombie banks are insolvent and can't afford to take the losses? Or is something else happening? Well, here are three other scenarios which may help to explain the data disconnect.
1. MisInterpreted Data. Most internet websites will usually count a home as being a foreclosure when the homeowner has missed making three payments and a Notice of Default has been recorded. They don't take into account the fact that a homeowner may still be able to reinstate the loan and take the property out of foreclosure. Thus, the homeowner may never have needed to list the property in the realtor multiple listing service to begin with which is why it doesn't show up in the realtor MLS system, and yet shows up as an online foreclosure.
2.Short Sales. Online websites do not differentiate short sales from foreclosures. A short sale takes place when an owner owes more than the selling price, and wishes to sell the property at fair market value. The lender may agree to reduce the principal to help the owner do so, but it takes on average about nine weeks to review and approve a short sale package. During this time to an Online website, the property will be counted as a foreclosure and at the same time not show up in the MLS statistics as either an active listing or a closed sale.
3. Loan Modifications. To an online Foreclosure website, someone trying to modify their loan might appear to be in foreclosure because they may have missed making several payments. The online site will show a property as being in foreclosure even if the lender has agreed to postpone the late payments. And the property will not show up in the realtor's MLS database because the owner has no intention of selling.
The possibility also exists that other logical explanations may exist for why some homes that are foreclosed on don't immediately show up in the marketplace. The lender may be trying to collect money from an insurance claim, or there may be government banking regulations involved. Then again the idea of a bank filled with over-worked Zombie-like personnel waiting on customers like a scene ripped out Night of the Living Dead doesn't seem too far-fetched these days, does it?
About the Author:
Robert Boog is a real estate broker and author of three (3) books on selling real estate. His latest is called Mortgage Modifications Made Easy. An excellent free report on loan modifications for a brief time can be downloaded at his website
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