Here’s my explanation of why you don’t need to worry about mass foreclosure.
There’s been a lot of talk recently about a flood of foreclosures entering the market next year. People are understandably worried that this could negatively affect the market like in 2008. However, in my opinion, you don’t need to worry about a flood of foreclosures, and today I’ll tell you why.
During the last market crash, I worked with banks selling foreclosures and homeowners trying to avoid foreclosure. I’ve been on both sides of the issue, and I can say confidently that our current market is very different from 2008. Once I explain the process of foreclosure, you’ll understand why a flood isn’t coming.
When a homeowner stops making payments, the bank is legally required to approach the homeowner and help them with their issue. Banks cannot start foreclosing immediately. Usually, a bank needs to wait three to six months before they can file for foreclosure depending on the state.
Once a homeowner files, they have some options. First, they can contact the bank and try to renegotiate their loan. Banks are legally required to review their application, and this process also can take three to six months.
After both of these processes are complete and the renegotiation is denied, the homeowner still has the option of selling their property. If their loan is worth more than their home, they have the option to short sell. The bank is also required to review this process, which can take another three to six months. Noticing a pattern?
If the short sale isn’t accepted, then the bank takes control of the property, and it becomes an REO, or real estate-owned property. The bank will then approach a broker, such as myself, to sell the property. We fix it up, present the owners an offer to move, maintain the property, list it, and eventually sell. This all takes 30 to 90 days, minimum.
In total, the process from a homeowner missing payments to having their house listed on the market takes about a year and a half. Now that you understand the whole process, you know that we don’t have to worry about a flood of foreclosures for a long time. If you have any questions about today’s topic or anything else, please reach out to me. I am always willing to help.