Will A Moratorium on Foreclosures Help the San Francisco Market? A Reader Responds

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Here is a response to one of our posts about Foreclosures in our blog, from Ken Moll, President of GGB Capital LLC, here in San Francisco.  A bit too long for our comment section, so we're publishing this as a guest post::


"Now three months have passed and this moratorium “panic” is largely subsided as banks have for the most part resumed their foreclosure actions at a pre-moratorium pace.  Yet, the markets have still not fully recovered because of the attention this incredible error in judgment that has cast a spotlight on the banks and their deplorable handling of their backlog of homes and struggling homeowners.  Nearly everyone is now aware of the HUGE inventory of unreleased and delayed foreclosures that are likely to occur over the next two-plus years as lenders are fearful that anything but a controlled-release of this inventory would cause another round of plunging property values such that everyone would be a loser. This leaves a lot of people caught between a rock and hard place if they need to move anytime soon.

But why do prices have to continue to plunge?  We all have lots of ideas and explanations.  Here’s one you may not have considered: sellers are frustrated because they can’t attract enough qualified buyers. So, rather than enduring the 1-2% per month carrying cost and the uncertainty and oft times major inconvenience an unsold property portends, they keep lowering and lowering the price in the hope of attracting more interested buyers.  But, we know that upwards of 50%, and some mortgage professionals say even 60 or 70% of buyers who could qualify for a mortgage three years ago can’t qualify today because of much stricter lending standards.  Sure, some number of them didn’t deserve a loan and still don’t, but what about the A- and B borrowers who have been largely abandoned by traditional lenders? And what about the jumbo borrowers who are the mainstay of the Bay Area?  Are you willing to concede that there are probably at least some number of qualified buyers in this group that could qualify by most reasonable lending standards?  The question that raises: how can you attract them?

So, if the banks won’t lend, and the property owner is plain tired of sucking it in and painfully lowering the price every few months like most are forced to do to stay competitive, what if there was an alternative financing source that might stem the ebbing tide?  Well, there is, for some segment of the owners, at least.  That is, for those that own their property outright, which is between 25-30% of all properties in America, and for those who have sufficient positive equity to make the numbers work, what if the property owner became the lender? What if they acted like the bank and extended the financing to support the buyer’s credit needs and accepted a monthly payment for five, ten, or thirty years?  Well, they can. And it’s called seller financing, and it’s here today, and now capturing one in 25 mortgage transactions across the country, up from one in 400 some three or four years ago when anyone who could fog a mirror could get a mortgage.  Now they can focus on negotiating the terms of their private mortgage by attracting a larger segment of “near miss” borrowers who will readily accept marginally higher rates in order to move into the home of their dreams rather than just the selling price of the property.  It’s not a silver bullet, but it will sell more homes and help provide some degree of pricing support.

Here’s the bottom line: there are professionals out there than can help you evaluate if seller financing makes sense for you and offer assistance in putting the deal together.  Who’s that, you ask?  Well, of course, you already know the answer.  Call me and let’s talk with no obligation about how we can help as Seller Finance Specialists who are part of a nationwide network who have collectively bought more than 30,000 seller financed notes over the past 30 years – far more than ANYONE else in the U.S.  Pick up the phone and call now on 415-400-4077 or toll-free 877-GGB-4NOTES (442-4668) to find out how."