Foreclosure Hurts

Posted on July 24th, 2008 by saman

Everyone who is involved in foreclosure really get hurt. Foreclosure hurts those people who lose their homes and property. It hurts banks as it cost them money. It hurt the economy. So it should be avoided at any cost and it is possible to avoid it. Foreclosure destroys the life of the homeowners. The homeowner takes a devastating hit on his credit when he loses his home and property at a sale of foreclosure. It ruins the quality of his life for years to come. For everyone those who are involved in foreclosure, there is a better answer and that answer is short sales.

To take back a home from foreclosure, a bank spends a maximum average of 50,000 dollars. Because of no bids for the house, literally 9 times out of ten, a bank is bound to take a home back when it is offered for the foreclosure sale. The bank will have to pay more on the property from this point on. These costs include real estate agent commission, appraiser’s fees, maintenance cost, utility bills and rehabbing costs. These costs are associated with holding a property. The federal will place restrictions to do a business on the banks ability. It may reach to a point when the bank will not get any permission to make any new loans.

Foreclosure hurts economy in all the ways that is mentioned above. Because of the damage to his credit report, most of the doors are closed to a homeowner. So he cannot contribute to the good of the economy. He neither can buy a new home soon nor can he buy a new car. He cannot buy anything. And when we will realize that our nation is facing a vast number of foreclosures, significant money will be taken out of the economy.

The banks face most of the problems because the foreclosures are significant. Major dollars are removed from the economy when the banks are restricted from making any loans from borrowers with good credit. The foreclosed homes in the bank books are referred to as Real Estate Owned (REO). These lead to a lack of desirability in the neighborhood where the houses are located.

Business start leaving the area to make a decent profit and property values drop. Most of the lenders offer loan modifications, work out programs, forbearance plan and some special payment options to keep these REO’s. These programs help a person who faces financial problems in their home. People have had to deal with drop in income when facing the difficulties or problems. If we can catch up on the payment only then these plans will be offered. For example a bank can ask a borrower to pay and a quarter for four months and a payment and half for two months. Avoiding foreclosure is very much important for all of us. So it would be better if we try to get into one of these programs. The people who are facing foreclosure, for them the best answer would be short sale.