Quote:
Originally Posted by PornoMonster
Question,
How do the banks lose "real" money on a foreclosure?
I mean they get whatever was paid in for downpayment, if any payments were made with interest, and they get the fucking house back to resell. Also, how many times have the houses been resold.
Sure property values drop, that is the same risk the buyer is taking also.
The banks also go after the people for the Difference in price sold to price owned.
If they lose money they can write it off on taxes.
Banks can get insurance against the loan also.
Then now the big Bailout.
If you ask me banks can fuck off!
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Dude you serious or just foreign. I thought this stuff would have been learned in high school.
You want to buy a house from me. I am selling my house for 300K. You go to the bank and say, hey I don't have the money but I still want to buy it, can I borrow the money from you?
Bank says "ok" (if this was done in the early 2000's they should have probably told you to fuck off, but they loan you the money anyway.)
You tell bank, hey I will put up 5K, can you put up 295K for me. Bank again says ok. The bank gives you 295K and you give it to me plus your 5K. Depending on the state the deed / promissory note is handled differently so I wont even go there.
Let's check the score card:
Bank is out: 295K
You are out: 5K
I got my 300K and sold my house.
You then make 25K of payments (again lets leave out interest, at this point it seems like a foreign concept to most people here).
SO you paid 30K (initial 5K plus 25K)
Bank is still out 270K
You stop making payments... You get foreclosed on. How does the bank lose? They get the house back....
The bank is not a real estate company therefore they do not want house back nor do they want to own a bunch of rental property. They want their money back. So they sell the house at an auction. Ut Oh, the house sells for a lot less, how did this happen? It could have been because you over paid for it in the first place, or the real-estate values went down, or you trashed the house making it worth less, or you gutted it on your way out, or all of the above. Let's say it sells for 200K...
Bank put out 270K and got back 200K plus a TON of money in legal fees to go through the foreclosure process. So they lost 70K+
You lost 30K. The bank lost 70K+ Now lets add this to the equation, did you really lose 30K? No, you gutted the place on your way out and likely sold some of that shit on craigslist. You also didn't make any payments the last 6 months (living somewhere rent free???) If you were paying rent during that time you would have been out of pocket 6-12K. Then you also got to live someone where for the year that you were paying on it, which if you weren't living there you would have been paying probably the same amount as your mortgage (or close to it) in rent some where else.
So how much do you really lose, how much did the bank lose ?