Market for Existing Homes - is it Bifurcated/ Split ?

[gunDriller]

i have looked at some listings and notice 2 categories of homes -

1. Foreclosures, hopelessly caught up in a humongous mess/ spiderweb of f'ed up documentation. which means it's a bad idea to buy them without having an attorney review all the paperwork.

but the attorney is not a magician so it might be a bad idea to buy them, PERIOD.

2. Homes held by family trusts - recent deaths, homes held "free and clear", etc. Bank will Finance.


so what i'm wondering is - well, are the foreclosures kind of like "paper gold", whereas the "free and clear homes" are like "physical gold" - aka the real thing ?

i would think the free and clear homes would be worth a much higher price - because they can be bank-financed.

banks won't touch the foreclosures. there's boatloads of condo's in San Diego near the beach. i looked at one - 2 BR 2 BA (2 Bathrooms is a must) - for $180K. bank wouldn't touch it - the condo complex had some kind of HOA litigation ... in addition to a spiffy racket club.

[FreeEnergy]

So it is time to start "Gold for Homes" program? :D

[Filthy Keynes]

Keynes says: "Since 'Cash For Clunkers®' was such a raving success, we need to stimulate the housing market. Let's call it "HOUSE ON FIRE!®" and we can give CASH to the lucky HOMEOWNERS! They can even get Alice Cooper's Greatest Hits for FREE!"

Keynes says: "Creating wealth is easy, and it's orgasmically fun! Let's burn our way to prosperity! It will create MILLIONS OF NEW JOBS, and less supply means housing prices remain elevated!"

http://www.youtube.com/watch?v=-JShCmX2sm8

http://www.ihs.gov/MedicalPrograms/PortlandInjury/otherimages/indexpic/flash/HouseFire_2.jpg

http://www.insuredimaging.com/ShadowRidgeRoadFire%5B1%5D.jpg

[PatColo]

Good question. I've maintained for years, as the foreclosure tidal wave was obviously brewing, and now materializing, that it'll devastate all home values. Solvent home owner/borrowers who felt secure in their jobs etc didn't want to hear this, it was easier to imagine that the foreclosures around them were private tragedies, somehow magically compartmentalized from the value of their home/nest-egg. They worked hard and played by the rules, kept up with the payments & maintained their property; how could the rug get pulled out from under them? But I said the foreclosures dotting their town/neighborhood are their new comparables.

The truth is somewhere in between; imagine 2 identical houses next door to each other, both for sale. One a foreclosure, the other a conventional sale with clean title etc. The conventional sale should get more, because the easier financing opens it up to a wider market (more competition to bid price higher), while the foreclosure will have a smaller market of all-cash buyers, who also assume the risk of title problems (http://www.nakedcapitalism.com/2010/09/latest-real-estate-time-bomb-title-of-foreclosed-properties-clouded-wells-fargo-dumping-risk-on-hapless-buyers.html). But, the foreclosure(s) are also public-record comaparables which bring the area's values down, for good reason as they reflect macro-economic distress in the area, regardless of how secure/etc the solvent home owner/borrowers in the area may feel about their own micro-economic situation; all boats fall with the tide. The conventional sale won't get its 2006 peak price, it'll get whatever the 2010 market will bear. And the foreclosure should fetch some amount less (??) than its conventional-sale comparables in the area, for the reasons above.

So yes, all-else-equal, foreclosures will generally fetch a lower price, but both foreclosures & conventional-sales will be trending in the same direction with the tide, which IMHO has a good ways to fall yet... and I'm not even getting started on my speculation that "low tide" will be when TPTB abolish the institution of private property altogether (http://gold-silver.us/forum/general-discussion/cbs-60-minutes-mortgages-walking-away/msg42838/#msg42838), probably globally.

more: http://patrick.net