Plans To Ward Off Foreclosures In Arizona

Posted in Foreclosure, November 10th, 2008 |

The plans to ward off foreclosures in Arizona are not comprehensive enough to tackle the problem in its entirety. In the Valley there are more than 7,000 foreclosure victims. They are trying to dispose of their houses through short sale according to the Arizona Regional Multiple Listing Service. A short sale takes place when the value of the house becomes less than the loan amount. This can be done with the permission of the lender who does not want to go through the time consuming costly process of foreclosure. This way in a short sale the loss is less for the lender while the borrower avoids the ignominy of foreclosure.

Despite efforts less than 5% have managed to sell their houses. In such cases foreclosure becomes inevitable. More foreclosures mean more problems for the region.

Many are of the opinion that the bail out package initiated by the government will not be able to tackle the problem of short sales. If the number of short sales increased it would slow down the foreclosure flood. But there are no signs of foreclosures peaking.

There are a number of factors that are hampering short sales. Primarily many of the lenders are not talking with the borrowers about short sales. Some of the borrowers who are facing foreclosure wait for too long before trying to contact the lenders. Realtor Mike Orr says that he is not seeing much success in short sales with either the buyers or the sellers. For interested buyers the time taken by lenders becomes too long and tiresome. The sellers on the other hand run out of the grace period allowed before foreclosure proceedings start. He said, “Sellers often run out of time if they are already behind in their mortgage payments.”

With supply over stripping demand because of the continuous flow of foreclosed houses coming into the market, the sellers are offering huge discounts to be relieved of the properties. Thus with so many units ready to be sold in the general market the buyers are reluctant to wait through the short sale process.

The lenders have taken possession of about 30,000 foreclosed houses this year here in the Valley. Many of these are sold at absurdly low prices – much below the loan amount. In short sales also the price is well below the original purchase price. Realtor Randy Kutz thinks, “short sales are the best solution out there for the borrower, the bank and the buyer.”