Powayseller, agree, foreclosures will drive prices down.

My original question on how liquid a foreclosure is was geared to the number of people I suspect are upside down and won’t be able to afford their loan.

They basically have two options: negotiate a short-sale or go foreclosure.

For those houses, an investor could arrange the short sale and loan payoffs, but… it requires more experience to make money on it.

For the homes that end up worth $500,000, with $600,000 of loans. How liquid are they and how much downward price pressure do they have once they go foreclosure sale? How long can they sit as a REO, owned by the bank? Once they go to auction, investors, really professional foreclosure buyers, will buy them, cheap. That price doesn’t get reported. The question is, when they turn back around to sell, how discounted will they be?

I also recall another thing. I remember 1994 and listening to coworkers talk and needing to talk to the bank about forgiving a chunk of their loan or they’d walk away because they were so upside down.