WHY DO BANKS TAKE SO LONG TO GET A PROPERTY ON THE MARKET?
The average man on the street may find himself bewildered by the delay involved in banks putting up their foreclosed properties for sale. Many times, it may take from three, four or five months to several years before these foreclosed properties are finally available to the ordinary buyer. There usually is no obligation placed on banks to sell their properties in time; they have no incentive to do so. Except in cases where it may result in a more profitable outcome as opposed to not doing so.
A foreclosure occurs when a lender takes possession and control of a house when a mortgagee fails to pay his debts on the house to get the credit back. Where one does not pay his or her mortgage for let’s say three to six months, this can lead to foreclosure if such is the collateral for the credit.
To help you understand better the causes behind this boggling delay; here are a few reasons you may not get to see that bank-owned foreclosed property out on the market early:
Real Estate Agent
There is always a need for a competent real estate agent who understands the market well when a foreclosed property is to be sold. Getting a suitable person for the job might take much time than expected.
Number of foreclosed properties
In some cases, the number of foreclosed properties might be many that the bank needs to go through many processes on each of them. If these processes are not carefully handled, the buildings might not be disposed at the right market values. As a result of this, the banks employ asset managers to manage the property and other assets while they attend to the procedures that might be unnecessarily cumbersome. All these processes and period of recruitment of the managers delay the disposal of the buildings.
Most of the time, banks prefer considering large real estate investment companies before putting up to the public for sale. If the companies are not interested, they could contact agents with A-list buyers. If none of these works, they would then contact real estate brokers and then ordinary buyers. Thus, every property owned by the banks might have gone through all the people above who might deliberate over it for a period. So, if you see a property that has been foreclosed but not yet listed, it could be because some set of people are interested in it.
The interplay of Demand and Supply
Several banks often reduce the number of foreclosed properties they list to regulate the market. Apart from that, they often consider a period where people would want to either rent or buy the property at a very high rate. Most of the time, it is usually during the Winter.
Another reason for the hoarding is the price. Based on economic law, the rise in supply at the expense of demands will affect the price negatively. So sellers maintain foreclosed inventory until the best time to sell it and make huge profits without affecting the market equilibrium.
Duty to Investors
The bank has a duty of care to its investors in respect of the foreclosed property. Bank must put the property up to the best rate on behalf of its investors. Thus, they spend much time strategizing and studying the property to ensure that they sell it to the highest and best bidder.
At times the banks are not just trying to stall the foreclosed homes or looking for a climb in real estate fortunes, the foreclosed homes may be delayed from being made available on the market, due to the stringent and complex laws that may govern foreclosures in your area. There are states in which the litigations for a foreclosed home could last as long as three months or even more.
Now that you have known some reasons why banks delay the listing of foreclosed properties, you should not be surprised if a bank delays foreclosed property for listing.