The Foreclosure Moratorium: An Opportunity for Mom & Pop Home Sellers?
With the latest scuttlebutt in the housing industry centering around a rising political push for a large scale foreclosure moratorium by leading lending institutions, most are aware that Bank of America became the first to issue a temporary nationwide pause in foreclosures this past week. Though B of A is the first to stay their executions across all fifty states, JP Morgan Chase and GMAC agreed to halt foreclosures in the 23 states where foreclosure is a judicial process. The pressure to do so originated over procedural impropriety in several specific locales, and has snowballed into wholesale questioning of the internal processes of the major banks. Mounting concern over erroneous foreclosures spawned the voluntary cessation (expected to last several weeks). While Wells Fargo has spurned calls to do the same, it would not be surprising to see more institutions yield to the rising pressure and follow suit.
What does this mean? Plenty has already been written about this with homeowners facing foreclosure and prospective buyers in mind, so I won’t belabor those perspectives here. Suffice it to say that while any additional quality control that can prevent people from wrongly losing their homes to foreclosure would be a good thing, the upshot in terms of market reaction is likely to be a collective shrug of the shoulders. Not content to simply halt the actual act of foreclosure, B of A is temporarily taking their inventory off the market while the review is ongoing. It’s been posited that fewer listings will translate to a possible surge in prices, but this is pure mularky. The market simply does not react in a matter of a few weeks to any stimulus, as it takes time for consumers to make heads or tails out of new developments and how they translate to negotiable strength. On the contrary, I think this will make buyers who are already non-harried take even more of a wait and see approach. Rather than buying what is left, those who are not under a time crunch to get into a new house will probably just wait for the moratorium to end and for the withheld inventory to flood the market. In essence, we could be looking at an unintentional buying moratorium as well.
Though it would be foolish to anticipate a surge in values, the one segment of the consumptive spectrum that stands to gain from this turn of events is the non-distressed homeowner. With a small window opening for mom & pop home sellers to compete with significantly fewer bank homes for buyers, I would not be shocked at all to see a percentage gain of resale home sales while overall sales volume remains flat, or even declines slightly, in the coming weeks. I expect many buyers will choose to wait it out, but there are those who do not have the luxury of time. Be it a job relocation, family circumstances, etc, there are always buyers who need to buy now. With fewer distressed properties on the market, and likely buyer uncertainty over how this will translate to the short sale arena (will B of A process short sales while foreclosures are in limbo, or pause all such decisions? Will short sale sellers temporarily remove their homes from the market in anticipation of a reprieve?), this could be the traditional seller’s best opportunity to vie for buyers in quite some time.
Again, don’t misconstrue the knee-jerk hypothesis. The value of your home is not going to spike due to this temporary phenomenon, nor are you suddenly in the catbird’s seat. For those in an equitable position to sell, this window merely represents the best possibility to attract a buyer in months.
No screwing around – price your home right and get it sold while there are fewer alternatives for buyers. As a regular seller, with the tax credit gone as a buyer incentive and microscopically low interest rates and low prices not translating to appreciable gains in sales/values, you have to leverage every conceivable strength in this market to accomplish your goals.
Ready to sell your Scottsdale home? Contact us today to schedule a no-obligation consultation, but do it fast. When the moratorium ends and the holidays are fast approaching, it will be time to hunker down for another long, cold winter.