National Closing Center

Posts Tagged ‘stimulus’

Mia Saini of Forbes recently expressed her (quite controversial) opinion basically stating that the government should encourage foreclosures and short sales:

My solution is that the government should encourage banks, borrowers, and underwater homeowners to quickly foreclose their homes. Banks will be reluctant to do this because they will be taking a loss when the home sells at a lower price, but in the long term the housing market cannot move forward until all the foreclosures have been cleaned up. Foreclosures are a perfectly appropriate exit tactic given our budget deficit and the previous round of lackluster tax credits. (Read more.)

This has been sort of a tabu in a real estate world, however, this particular opinion is being expressed more and more often. Yes, the stimulus worked to a certain extent, but do we really need to spend more money on tax credits? It’s a trillion dollar question, but probably less and less people are comfortable answering it with a firm “yes.”

A massive industry cleanup might be exactly what we all need. Yes, there are going to be significant losses; but they just might be less painful in the long term as opposed  to a huge debt we are getting ourselves and our children into.

Ms. Saini did not mention short sales as part of the cleanup. I do, however, think that short sales might, in many cases,  be as beneficial as a tool invigorating the market, as foreclosures. Maybe even more so. There is only one condition: they got to be closed in a lightning speed.

Properly orchestrated short sales would be an incentive for near-underwater sellers to sell and bargain-hungry buyers to buy. There is no question that almost an short sale is in better condition that REO. If we could get short sales moving faster, we might not need any kind of credits and other incentives. Banks would get more of their money and sellers in trouble would recover faster to enter the market again, hopefully, as more responsible buyers.