[urbanrealtor]

First, this is speculation but it makes sense given the existing incentive structure.
On its face, it would seem really obvious that a bank would want a short sale rather than a foreclosure.
This is because a bank incurs significant additional outlays when it becomes a landlord:
-trash outs
-key change
-attorneys
-repairs
-deed recordings
-tenant negotiations (usually a few thousand just in cash-for-keys)
In a short sale, all they do is approve a number and collect a check. If there is a junior lien or liens, the senior lien holder will authorize some paltry pay out to them (like $5000 on an $80000 second)
Generally a senior lien holder’s net is substantially higher in a short sale as compared to a foreclosure.
The monkey wrench here is greed.
Many times seconds will insist upon an unrealistic number or on a payment outside of escrow (which is illegal) or that they maintain the right to follow after the closing.
First lien holders (who are, as a rule, more cooperative) will sometimes insist on a large unsecured promissory note upon close (which basically amounts to a mortgage without a house) or will require that they retain the right to follow for the additional funds after close.
Recourse-heloc lenders will often follow on any short seller.
Outside of California, lenders follow borrowers (or sell the rights to follow) on almost every loan. Usually, the only out is bankruptcy (since people losing their houses don’t generally keep large holdings to pay on bad debts). Banks will often (though not always) not follow foreclosed upon people because it is assumed that walk-aways have no money and short sellers already are more motivated to make a debt as whole as possible.
Some states give protection to foreclosees that do not exist for short sellers.
In these cases, there is an institutional incentive that favors foreclosure.
And make no mistake, those added costs to the banks come out of taxpayers’ pockets.
Making a more sweeping rule like the one was suggesting would simplify this incentive structure dramatically.
It would turn it into a binary system:
Either you short sell and get more (as a settlement) or foreclose and get less (as a salvage). For junior liens it would be a choice between little (in a short payout) and nothing (when the senior lien forecloses and wipes out the junior lien’s interest).

I suspect this would wipe out a lot of bad debt really, really fast (and without the benefit of squatters and stolen appliances).

And then I would get to work on Mideast peace and world hunger and the ozone layer…

[urbanrealtor]

First, this is speculation but it makes sense given the existing incentive structure.
On its face, it would seem really obvious that a bank would want a short sale rather than a foreclosure.
This is because a bank incurs significant additional outlays when it becomes a landlord:
-trash outs
-key change
-attorneys
-repairs
-deed recordings
-tenant negotiations (usually a few thousand just in cash-for-keys)
In a short sale, all they do is approve a number and collect a check. If there is a junior lien or liens, the senior lien holder will authorize some paltry pay out to them (like $5000 on an $80000 second)
Generally a senior lien holder’s net is substantially higher in a short sale as compared to a foreclosure.
The monkey wrench here is greed.
Many times seconds will insist upon an unrealistic number or on a payment outside of escrow (which is illegal) or that they maintain the right to follow after the closing.
First lien holders (who are, as a rule, more cooperative) will sometimes insist on a large unsecured promissory note upon close (which basically amounts to a mortgage without a house) or will require that they retain the right to follow for the additional funds after close.
Recourse-heloc lenders will often follow on any short seller.
Outside of California, lenders follow borrowers (or sell the rights to follow) on almost every loan. Usually, the only out is bankruptcy (since people losing their houses don’t generally keep large holdings to pay on bad debts). Banks will often (though not always) not follow foreclosed upon people because it is assumed that walk-aways have no money and short sellers already are more motivated to make a debt as whole as possible.
Some states give protection to foreclosees that do not exist for short sellers.
In these cases, there is an institutional incentive that favors foreclosure.
And make no mistake, those added costs to the banks come out of taxpayers’ pockets.
Making a more sweeping rule like the one was suggesting would simplify this incentive structure dramatically.
It would turn it into a binary system:
Either you short sell and get more (as a settlement) or foreclose and get less (as a salvage). For junior liens it would be a choice between little (in a short payout) and nothing (when the senior lien forecloses and wipes out the junior lien’s interest).

I suspect this would wipe out a lot of bad debt really, really fast (and without the benefit of squatters and stolen appliances).

And then I would get to work on Mideast peace and world hunger and the ozone layer…

[urbanrealtor]

[quote=mp7444]I have no idea… How does it work?[/quote]
Send me a private message or email (urbanrealtor at gmail dot com) and I will respond with the tax and ownership record.

ocrenter is right.

Don’t post the address.

I wasn’t thinking.

edit: or ask another agent.
Seriously, it takes all of 5 minutes.

[urbanrealtor]

[quote=mp7444]I have no idea… How does it work?[/quote]
Send me a private message or email (urbanrealtor at gmail dot com) and I will respond with the tax and ownership record.

ocrenter is right.

Don’t post the address.

I wasn’t thinking.

edit: or ask another agent.
Seriously, it takes all of 5 minutes.

[urbanrealtor]

[quote=mp7444]I have no idea… How does it work?[/quote]
Send me a private message or email (urbanrealtor at gmail dot com) and I will respond with the tax and ownership record.

ocrenter is right.

Don’t post the address.

I wasn’t thinking.

edit: or ask another agent.
Seriously, it takes all of 5 minutes.

[urbanrealtor]

[quote=mp7444]I have no idea… How does it work?[/quote]
Send me a private message or email (urbanrealtor at gmail dot com) and I will respond with the tax and ownership record.

ocrenter is right.

Don’t post the address.

I wasn’t thinking.

edit: or ask another agent.
Seriously, it takes all of 5 minutes.

[urbanrealtor]

[quote=mp7444]I have no idea… How does it work?[/quote]
Send me a private message or email (urbanrealtor at gmail dot com) and I will respond with the tax and ownership record.

ocrenter is right.

Don’t post the address.

I wasn’t thinking.

edit: or ask another agent.
Seriously, it takes all of 5 minutes.

[urbanrealtor]

[quote=north park girl]Thanks everyone. Dan, I think I’ve met you before, when I was checking out a condo in Hillcrest a few years back. I’m passing along the advice, I appreciate it. It’s always nice to know that there are people willing to take the time to give advice to some anonymous poster on the internet 🙂

It looks like the lot has been on the market since January. Interestingly, my friend had negotiated down the rent by offering to sign a six-month lease (it was advertised as a month-to-month). I don’t know why the landlord would have agreed to that.

What happens if that place sells sooner rather than later? Would the new owner be able to kick her out before the lease ends, or do they have to honor the remainder of the lease?[/quote]

If it was at the condos by the Ralph’s, then yeah, that was probably me.

Anyhoo, the lease supersedes the sale.

The buyer would have to be notified of the lease and would either be beholden to it or could buy you out.

I would make a point of asking for written explanation what happens to the deposit, who receives the rent and for a copy of the initial walk thru.

I would not pay rent until you get those things.

That is why email exists.

So it can be printed and pointed at when a dispute arises.

[urbanrealtor]

[quote=north park girl]Thanks everyone. Dan, I think I’ve met you before, when I was checking out a condo in Hillcrest a few years back. I’m passing along the advice, I appreciate it. It’s always nice to know that there are people willing to take the time to give advice to some anonymous poster on the internet 🙂

It looks like the lot has been on the market since January. Interestingly, my friend had negotiated down the rent by offering to sign a six-month lease (it was advertised as a month-to-month). I don’t know why the landlord would have agreed to that.

What happens if that place sells sooner rather than later? Would the new owner be able to kick her out before the lease ends, or do they have to honor the remainder of the lease?[/quote]

If it was at the condos by the Ralph’s, then yeah, that was probably me.

Anyhoo, the lease supersedes the sale.

The buyer would have to be notified of the lease and would either be beholden to it or could buy you out.

I would make a point of asking for written explanation what happens to the deposit, who receives the rent and for a copy of the initial walk thru.

I would not pay rent until you get those things.

That is why email exists.

So it can be printed and pointed at when a dispute arises.

[urbanrealtor]

[quote=north park girl]Thanks everyone. Dan, I think I’ve met you before, when I was checking out a condo in Hillcrest a few years back. I’m passing along the advice, I appreciate it. It’s always nice to know that there are people willing to take the time to give advice to some anonymous poster on the internet 🙂

It looks like the lot has been on the market since January. Interestingly, my friend had negotiated down the rent by offering to sign a six-month lease (it was advertised as a month-to-month). I don’t know why the landlord would have agreed to that.

What happens if that place sells sooner rather than later? Would the new owner be able to kick her out before the lease ends, or do they have to honor the remainder of the lease?[/quote]

If it was at the condos by the Ralph’s, then yeah, that was probably me.

Anyhoo, the lease supersedes the sale.

The buyer would have to be notified of the lease and would either be beholden to it or could buy you out.

I would make a point of asking for written explanation what happens to the deposit, who receives the rent and for a copy of the initial walk thru.

I would not pay rent until you get those things.

That is why email exists.

So it can be printed and pointed at when a dispute arises.

[urbanrealtor]

[quote=north park girl]Thanks everyone. Dan, I think I’ve met you before, when I was checking out a condo in Hillcrest a few years back. I’m passing along the advice, I appreciate it. It’s always nice to know that there are people willing to take the time to give advice to some anonymous poster on the internet 🙂

It looks like the lot has been on the market since January. Interestingly, my friend had negotiated down the rent by offering to sign a six-month lease (it was advertised as a month-to-month). I don’t know why the landlord would have agreed to that.

What happens if that place sells sooner rather than later? Would the new owner be able to kick her out before the lease ends, or do they have to honor the remainder of the lease?[/quote]

If it was at the condos by the Ralph’s, then yeah, that was probably me.

Anyhoo, the lease supersedes the sale.

The buyer would have to be notified of the lease and would either be beholden to it or could buy you out.

I would make a point of asking for written explanation what happens to the deposit, who receives the rent and for a copy of the initial walk thru.

I would not pay rent until you get those things.

That is why email exists.

So it can be printed and pointed at when a dispute arises.

[urbanrealtor]

[quote=north park girl]Thanks everyone. Dan, I think I’ve met you before, when I was checking out a condo in Hillcrest a few years back. I’m passing along the advice, I appreciate it. It’s always nice to know that there are people willing to take the time to give advice to some anonymous poster on the internet 🙂

It looks like the lot has been on the market since January. Interestingly, my friend had negotiated down the rent by offering to sign a six-month lease (it was advertised as a month-to-month). I don’t know why the landlord would have agreed to that.

What happens if that place sells sooner rather than later? Would the new owner be able to kick her out before the lease ends, or do they have to honor the remainder of the lease?[/quote]

If it was at the condos by the Ralph’s, then yeah, that was probably me.

Anyhoo, the lease supersedes the sale.

The buyer would have to be notified of the lease and would either be beholden to it or could buy you out.

I would make a point of asking for written explanation what happens to the deposit, who receives the rent and for a copy of the initial walk thru.

I would not pay rent until you get those things.

That is why email exists.

So it can be printed and pointed at when a dispute arises.

[urbanrealtor]

[quote=briansd1]I think that America is still a paragon of political and economic stability as compared to the rest of the world.

The Dollar will remain the reserve currency for the foreseeable future.

Interest rates will move higher but the cost of borrowing will remain manageable because there is a glut of liquidity around the world as countries try to create corporate giants to compete against our own multinationals.

A lower Dollar will allow us to compete with the rest of of the world.[/quote]

I think that is an oversimplification of the scene in evidence.
Internal inflation (and, lets be honest, no inflation is strictly external) will benefit borrowers and punish savers.
I don’t think that is necessarily a bad thing at an academic level but if a large percentage of board executives start feeling broke, we will feel that in corporate actions (layoff, reduced outlays).

A cleaner way to create broad private deleveraging is to pass a law that restricts recourse on home loans.
Like “any loan for 1-4 units is non-recourse”.
That would keep the negative incentives that cause people try and avoid short sales but would leave banks in the position of either negotiating with due haste or foreclosing quickly.
That would tighten up distress markets and reduce informations sets significantly.

[urbanrealtor]

[quote=briansd1]I think that America is still a paragon of political and economic stability as compared to the rest of the world.

The Dollar will remain the reserve currency for the foreseeable future.

Interest rates will move higher but the cost of borrowing will remain manageable because there is a glut of liquidity around the world as countries try to create corporate giants to compete against our own multinationals.

A lower Dollar will allow us to compete with the rest of of the world.[/quote]

I think that is an oversimplification of the scene in evidence.
Internal inflation (and, lets be honest, no inflation is strictly external) will benefit borrowers and punish savers.
I don’t think that is necessarily a bad thing at an academic level but if a large percentage of board executives start feeling broke, we will feel that in corporate actions (layoff, reduced outlays).

A cleaner way to create broad private deleveraging is to pass a law that restricts recourse on home loans.
Like “any loan for 1-4 units is non-recourse”.
That would keep the negative incentives that cause people try and avoid short sales but would leave banks in the position of either negotiating with due haste or foreclosing quickly.
That would tighten up distress markets and reduce informations sets significantly.

[urbanrealtor]

[quote=briansd1]I think that America is still a paragon of political and economic stability as compared to the rest of the world.

The Dollar will remain the reserve currency for the foreseeable future.

Interest rates will move higher but the cost of borrowing will remain manageable because there is a glut of liquidity around the world as countries try to create corporate giants to compete against our own multinationals.

A lower Dollar will allow us to compete with the rest of of the world.[/quote]

I think that is an oversimplification of the scene in evidence.
Internal inflation (and, lets be honest, no inflation is strictly external) will benefit borrowers and punish savers.
I don’t think that is necessarily a bad thing at an academic level but if a large percentage of board executives start feeling broke, we will feel that in corporate actions (layoff, reduced outlays).

A cleaner way to create broad private deleveraging is to pass a law that restricts recourse on home loans.
Like “any loan for 1-4 units is non-recourse”.
That would keep the negative incentives that cause people try and avoid short sales but would leave banks in the position of either negotiating with due haste or foreclosing quickly.
That would tighten up distress markets and reduce informations sets significantly.

[Author]

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