Five short sale listings and some statistics; all listed at current fair market value, all are investor/speculator owners. Total amount currently owed to lenders on these is around $1,635,000.
Based on current fair market value estimates the net proceeds to the banks at close of escrow on the sale of these will be $900,000. That is five residential properties listed as short sales with an unrealized loss of $735,000.
Do you think the banks are holding these properties on their books with the asset value at what is owed, or what is likely to be reality, the actual net proceeds number based on current value and likely sales price?
They know how many properties they are holding currently, but they may not know the extent of future unrealized losses. They may not want to know reality. They may not want anyone to know.
Locally 62% of the active listed residential inventory is vacant. It is very difficult to know how large the number of unlisted institution owned properties currently is but it is clear that number is growing. The banks are holding many properties today.
As one agent and five properties with $735,000 in unrealized losses, who knows the magnitude of yet to be realized bank losses? We have given these same banks billions in tax payer dollars.
I believe we are headed to an all time historic high in institutionally owned residential real estate, and the commercial properties are next. Institutions like Fannie Mae and Freddie Mac are essentially government owned.
Many of the major banks are carrying very large and growing inventories of real estate and yet to be realized losses. The manner in which this inventory comes back into the market not only has the potential to have a huge negative impact on property values, but also in lost tax payer dollars.
From my view and from my personal experiences dealing with these institutions, they get an F for efficiency at every level. I get the distinct impression that the institutions do not really want to sell these properties right now. Keep in mind when they do sell they must take the loss, for real.
They are working through a small percentage, but at this rate the distressed properties are by far out pacing any efforts to clear the market, the numbers of bank owned properties are growing.
As the commercial paper market cracks and defaults, the foreclosures will rise and lead to more bank owned real estate, and more unrealized losses.
This deleveraging process appears to me to have some long legs to run on. When the dust finally settles, it will be those tax payer dollars, our money that will have to deal with reality.
Chris W. Miller
ERA Brokers Consolidated
Mesquite NV 89027