Foreclosure: Who or What Can We Blame
There isn’t a person unscaved from the harsh reality of the recent rise in foreclosures.
The statistics are alarming as the world of real estate sees the market shift from a sellers
market to a buyers market. As I drive through the streets of Chicago there is a sea of
boarded up properties that bring a gloom to some neighborhoods. Illinois is ranked 15th in
the nation among foreclosures and 84% of Illinois foreclosures are here in Chicago.
Is it the adjustable rate mortgage, or are there bigger culprits? According to Irvine, Calif-
based RealtyTrac Inc., 45% of foreclosures are a result of job loss while 28% of
foreclosures are attributed to ARM resets at a higher interest rate. Mortgage fraud is
responsible for only 9% of foreclosures. As a result of urban revitalization and the surge in
condos, there are several other factors that must be taking into consideration. Lenders were
eager to give a 100% financing and allow the homeowner not to escrow their taxes. These
homeowners are in total shock when twelve to twenty four months after their purchase they
received their first fully assessed tax bill that might be double what the homeowner had
We are only in the infancy phase of foreclosures. Between October 2007 and December
2008, 900 billion dollars in ARM’s will reset to a higher interest rate causing the avalange
to thrust forward with additional force. Most homeowners were well aware of the fact that
they had acquired an ARM at the time they purchased or refinanced their property. What
they didn’t realize was that their property might not continue to appreciate or that over
forty lenders would leave the market place leaving high LTV borrowers and borrowers in
need of a stated loan with no option of being able to refinance their property. The ARM has
proven to be problematic but it’s only one of the numerous problems that the homeowner
has to face.
Always use empathy and not judgment when dealing with a seller/client who is facing
foreclosures. There was a time when foreclosures only plagued the lower income now
trends are showing that the middle income and affluent are also being affected. Sellers are
in desperate need of an educated Realtor® to help them as they are being approached daily
by scam artist looking to drain them of any equity they might have left.
Over the past year foreclosures business has increased by double digits. Now is the time for
Realtors® to educate themselves on how to service their clients in this foreclosure driven
market. REBAC has designed an information packed 8 hour class that allows Realtors® to
hone in on there buyer agency skills, learn how to unveil opportunities for their
buyer/clients in pre-foreclosures, unveil the secrets on how to negotiate a short sale and
still earn a commission, and complete an elective for the ABR designation.
There is light at the end of the tunnel. Realtors® have to go back to the basics. The first
step in this process is to receive the proper education and training on the foreclosure
process. If business isn’t coming to you, you have to go where the business is and currently
that is in foreclosures.