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August 17th, 2009 9:13 AM by David W. Welch
I am writing this to anyone who will listen at "the Bank". Currently there are 10,192 distressed properties listed by Orlando area real estate agents that are not REO properties. In other words these are short sales. I did not comb through all of these listings nor did I conduct any sophisticated statistical method. These are probably somewhat exaggerated numbers to prove a point. Let's just say there is a high likelihood that "the Bank" is not getting paid on these properties. Of that total 5,770 are active with an average price of $168,437 worth almost $972 million. The other 4,422 properties have contracts on them and have an average list price of $155,940 worth about $690 million.
More than likely the banks are not only not receiving mortgage payments, but they are probably not pursuing foreclosure at least not on the pending sales. The consensus is that the average short sale is taking about eight months to approve and another month to close. That is nine months of payments on the pendings that "the Bank" is not receiving. In the Orlando market alone, I figure nine months of interest at 6% on $690 million is about $31 million that the banks are losing while they are busy not approving the short sale. If these numbers continue, the total amount of annual interest income at 6% for the $1.66 billion is almost $100 million. These numbers are all based upon the list price, not the amount the banks are actually owed. If you consider prices are off by nearly 50% from the highs of 2005/2006 all these numbers could be double.
If "the Bank" is concerned that approving short sales will lead to more short sales, that argument just does not hold. There are already over 10,000 active and pending in Orlando right now. About a third of our active inventory is in a short sale status. People do not want to short sale their home. It is an alternative that is pretty much the last choice for many. There are people out there trying to use a short sale to cut their losses and move on. If "the Bank" does not want to approve a short sale for someone who can afford to make their payments, then foreclose on them. My point is make a decision, and let's keep this market moving in the right direction. The fundamental business decision is to divest your portfolio of under-performing or non-performing assets. Modify the loan, approve the short sale or foreclose. The faster "the Bank" gets past the short sale crisis, the sooner they can get back to doing what they do best - making loans.
Orlando Real Estate, David Welch Real Estate Optimist