Dana, the banks will sell at discount just to recover the money they can and make those funds available for more funds.
There is a somewhat complicated "rule" in banking. The have to keep in reserves certain amount of money to cover themselves for the loans they have generated i.e. if they have a 100K dollars loaned out there, they are mandated to maintain maybe 30K in reserves
(I don't know the real %). If the loan for that 100K dollars default then they cannot recover that money but also can't use the 30K in reserves. Also, the banking system is allowed a high leverage so they can loan something like 10 times what they actually have in reserves (again, this is a simplistic way to put it as, i'm sure, there are better ways to explain it) so every dollar they have tied in reserves is money they can't loan. Can somebody please explain this a little better?
Anyhow, the banks will sell at a discount, write off the loss and move forward with the money they can recover.
I do know it is happening currently in my area --the hot market of Washington DC.
please take a look at this example. I was after it but I was a couple of weeks late as somebody else had already made an offer. The estimate is above $450K and it was sold for $292K
http://www.zillow.com/search/Search...+s+lincoln+ave&citystatezip=20164&GOButton=GO
By the way, I found this property using my friend's RealtyTrac account.
There is a somewhat complicated "rule" in banking. The have to keep in reserves certain amount of money to cover themselves for the loans they have generated i.e. if they have a 100K dollars loaned out there, they are mandated to maintain maybe 30K in reserves
(I don't know the real %). If the loan for that 100K dollars default then they cannot recover that money but also can't use the 30K in reserves. Also, the banking system is allowed a high leverage so they can loan something like 10 times what they actually have in reserves (again, this is a simplistic way to put it as, i'm sure, there are better ways to explain it) so every dollar they have tied in reserves is money they can't loan. Can somebody please explain this a little better?
Anyhow, the banks will sell at a discount, write off the loss and move forward with the money they can recover.
I do know it is happening currently in my area --the hot market of Washington DC.
please take a look at this example. I was after it but I was a couple of weeks late as somebody else had already made an offer. The estimate is above $450K and it was sold for $292K
http://www.zillow.com/search/Search...+s+lincoln+ave&citystatezip=20164&GOButton=GO
By the way, I found this property using my friend's RealtyTrac account.