Recently an appraiser wrote on a blog that he had paired the online foreclosure databases (found at either Realtytrac.com or ForeclosureRadar.com ) against the statistics found in the local Realtor MLS (multiple listing system) inventory and noticed something rather sinister: the datasets didn’t reconcile.
He discovered that the number of foreclosures posted in Online sites far exceeds the sum of listings and sales found in the realtor multiple listing system by about 70%.
Does this really mean that 70% of foreclosures posted in online databases ARE NOT listed or sold? If so, what might be happening to these homes? Are Lenders holding the foreclosures back from being sold because these Zombie banks are insolvent and can’t afford to take the losses?
Or is something else happening? Well, here are three other scenarios which may help to explain the data disconnect.
1.Erroneous Foreclosure Data. The numbers reflected by Realtytrac.com and Foreclosureradar may not be giving a true and accurate picture of foreclosures. Internet companies are great at tracking raw data, however, they may be counting a property as a foreclosure twice: once when the homeowner has missed three payments (as in a Notice of Default) and twice: when the property has been sold at auction. Also a homeowner who reinstates his loan months earlier will often still be counted as a foreclosure on an online site.
2. Short Sales. A short sale takes place when the owner wishes to sell the property at fair market value, but owes more than what the home is worth. After finding a purchaser and collecting his financial data, the homeowner then makes a request to his lender(s) to reduce the principal balance of the loan(s) so that the sale can be consummated. Because a Lender often takes about 9 weeks to review the owner’s application and purchase contract, the Lender can appear to be acting like a Zombie. The auction date for a short sale may be waived by the lender or extended in order to close escrow, and for this reason it can appear that the house may be at eminent risk of foreclosure on an online site ” yet not show up as either a listing or sale on the realtor’s database.
3. Loan Modifications. To an online Foreclosure website, someone trying to modify their loan might appear to be in foreclosure because they may have missed making several payments. The online site will show a property as being in foreclosure even if the lender has agreed to postpone the late payments. And the property will not show up in the realtor’s MLS database because the owner has no intention of selling.
Naturally this does not explain everything. There will still be homes that fall through the cracks; damaged properties with toxic mold for example, that will be placed on hold while the lender settles with a knuckle-dragging, insurance company.
There may also be a logic explanation for the disconnect that might have more to do with the government regulations that banks have to follow than anything else. But the idea of a Night of the Living Dead scenario, filled with understaffed zombie bank personnel walking the earth while they are doing the best they can under these current challenging circumstances, that uhmmmm, that could never happen, could it?
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