Real Estate

[jmen24]

You are correct, I did a quick check as you made me think, the sale has to be made in order to show the loss. The reason for holding a default mortgage is that they can stem the time to apply that loss on the books. That is the reason for not being in a big rush to off load these homes.

I guess I should elaborate a little bit. I made a quick call to a friend in the know to clear this up and that is where the response above came from (I am learning more everyday!).
The difference is really in how the bank is held, a large publicly held bank is not interested in taking a quick loss on an asset as it lowers their overall value in the market and you would not want to invest in a company that is taking a big loss, quarter after quarter.
A smaller privately held bank is more interested in reducing exposure to stay in business, and the loss helps them reduce the tax burden.

If you subscribe to the Registry Review you get a listing every week of the current foreclosure auctions scheduled, you also get the name of the person that defaulted as well as the name of the bank that is holding the note. The auctions held by small local banks are more likely to yield a better deal than the ones held by larger banks, but this is also leading small banks down a bad road, with little they can do about it.

But one thing to remember is that you are not going to get a property in a foreclosure auction for a huge discount if the property has any kind of potential value above what is owed. Most of the deep discount properties are complete headcases. We have looked at homes for clients in the last few months that they were looking to purchase through foreclosure, one still had the old school way of insulating the floor (newspaper laid in layers under a rug) because it did not have a single source of heat, other than a centrally located fireplace in the losest level (200 yr old home) or any insulation in the walls.