Contrary to popular belief, banks do not want to foreclose. Actually, it has become the last thing they want to do. So why are there so many foreclosures? 1 in 7 homes in the US is in some state of foreclosure and the Chicago market where I work as a short sale realtor is in line with national averages. 7 out of those 10 homeowners do absolutely nothing about it, so your bank has no choice but to foreclose. This is one of the most traumatic experiences a family can go through and some may be in denial or simply not aware that foreclosure alternatives like a short sale exist.

Why would a bank want to help a homeowner complete a short sale? A home could lose 20-60% of its value if it is foreclosed on. When buyers see a foreclosure, they automatically assume you have hidden problems and want a massive discount because so much is unknown about a vacant home. Estimated losses for a short sale are 13-21% and the homeowner stays in the home, possibly paying the mortgage, utilities, and some maintenance fees. The foreclosure costs for a bank are astronomical when you add in the attorney fees, months without payments, retention costs, the inability to obtain a loan against a nonperforming asset, and other costs of selling involved.

The biggest contributor to the downward spiral in home prices is the effect a foreclosure has on a neighborhood. Just 1 foreclosure in a neighborhood can drop the prices of all surrounding homes by 30%. So if Bank of America owns 20% of the loans for a neighborhood, you would lose millions of thousands of dollars in loan values ​​and increase the chance that other homeowners will let their homes go into foreclosure.

Most major banks are now HAFA compliant or Home Affordable Foreclosure Alternatives. This program has set guidelines for response times, slows down the foreclosure process. Postpones a foreclosure sale date and offers up to $3,000 in moving expenses for the homeowner. Some banks like Chase now offer up to 5% back to homeowners for completing a successful short sale.

The other word that is synonymous with foreclosure is vacancy, and vacant homes have been shown to increase crime. So my job as a member of my community, and you as a member of yours, is to spread the word about how there are alternatives to foreclosure.