The waiting game

In Beverly Hills, high end foreclosures are rare. The debtors are sophisticated and know how to stay in a house for years while not paying a dime and the banks are reluctant to take a hit on distressed real estate when “everyone knows” the market’s turning up again. Same phenomenon here in Greenwich; the builders’ failed spec homes have gone to the auction block but most troubled homeowners are hanging on. Some of these houses are so buried in debt that they are never coming out from under it but does that really matter if you stay where you are for the next five years?

10 Comments

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10 responses to “The waiting game

  1. Anonymous

    How do you find the bank holder for a foreclosed property vs a title change for a $1.00? Is there a reliable website?

  2. Concerned homeowner

    It is silly for a bank to foreclose in a high end location like Greenwich or Beverly Hills. The market will eventually go back. Happens every 5-7 years on average. The bank will eventually recover principal, interest and penalties under the loan.

    It is probably a boon to the bank not to foreclose, because the interest skyrockets while the homeowner sits in the house not paying in full. A bank that foregoes collecting interest for a while will likely be sitting on a mini-gold mine at the end of the line because the fine print gives the bank so much money on account of non-payment by the homeowner.

    • I believe you’re right, CH, and even if they never recover the full amount due, they’ll still be better off than if they were to destroy the already-moribund high end market by flooding it with mansions.

  3. Zoltan

    The rise in home prices is illusory. So many owe more than their homes are worth that they cannot sell w/o bank approved short status. Sellers w/ positive equity in many markets are a minority so when buyers look, the truly available homes are relatively few, hence prices are bid up.

    Prices are headed lower.

    • Concerned homeowner

      Historically, the same thing happened after the crash of 1987. Lots of underwater homes. Afterwards real estate prices skyrocketed. Eventually inflation takes over and raises home prices. It may seem like forever, but history tells us that real estate prices go up over the longer term with inflation. The long term trend is not down. A house in Greenwich that was $100,000 in 1974 was $600,000 in 1986 and is $1.6 million or more now. Sure there were some drops along the way, but the basic trend is up, not down.

      People do not move for many reasons. Anyone who bought in Greenwich before the last price rise after 2000 or so has a capital gains tax to pay on sale. You do not pay capital gains tax if you hold till death. The capital gains tax keeps houses in Greenwich not only off the market but in some cases empty while the family waits for the owner to die before selling. It is also hard and expensive to move.

      • Zoltan

        RE prices were not so overvalued in 1987. Today’s crash is unprecedented in US history.

        And there is a long way to go, especially in markets like CT that fell late and have much further to go.

  4. Foxman 1

    It would not be a problem for the banks if they began marketing the high-end properties occupied by nonpaying deadbeats to interested buyers before foreclosing. They could significantly cut their losses that way.

  5. wickets

    “occupied by nonpaying deadbeats”

    Now that is a list the journal news should print!!!

  6. GreenITCH

    Re Foreclosures …. sorry to be hoping back and forth as had posted this on Gid’s blog as well but they seem to be doing A chicken soup poll ….as i do realize that houses under $ 1M, sold in Greenwich , probably account for less than 10% of the market, however in a town such as New Canaan being at top of this list was a bit surprising ,let alone the other CT towns regards

    http://online.wsj.com/article/SB10001424127887324481204578179823426813126.html?mod=WSJ_hp_EditorsPicks