Understanding Foreclosures From Different Viewpoints

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Chances are you, like most people, understand foreclosures only from the viewpoint of the resident in danger of loss. The fact is that foreclosures are, like all things, matters involving more than one viewpoint. To understand foreclosures more properly, it is important to know where the different parties stand on the field.

To review, for the troubled resident, a foreclosure means a loss of his or her home. This is inconvenient to say the least, and can be very problematic given the psychological investment that we put into our homes. Aside from the immediate loss, the process of foreclosure is humiliating and can damage one’s financial reputation. A foreclosure for the evicted resident is a total loss with no immediately redeeming aspects.

For the bank or lending institute to whom the property technically belongs, a foreclosure is not usually a gain, as we might believe. The house has already been paid for by the lender, so they are simply taking custodianship of something they already own – so it doesn’t add to their assets as such.

It can be a loss because the foreclosure means that the full expected amount will not be paid up; though depending on how many payments were completed, the bank may break even or gain financially. However, there are costs for foreclosures, such as taxes and fees, as well as payments to the various personnel involved. For lenders, foreclosures are to be avoided, but not too bad as losses.

For the repo men, a foreclosure is just another job. They do not take joy in evicting residents and forcibly taking away their properties. They are often subject to all sorts of abuse from the residents of homes slated for repossession. However, contrary to popular belief, most foreclosures are concluded in a relatively peaceful manner.

Repo men themselves want to avoid hostile or violent confrontations because there is the added risk of injury, property damage, and damage to their reputation as citizens. It is just a job that could be better if the evictees cooperate and act civilly.

For speculative investors, foreclosures are potential gold mines. Some view them as vultures feeding off and gaining from the losses of others, but it is a business opportunity. Foreclosed properties generally tend to sell for less than their market value because banks are anxious to be rid of this “bad” asset, and to recoup losses.

For the speculative real estate investors, buying foreclosed properties and selling them at a profit is the objective.

For the neighbors, a foreclosure of someone’s home can be treated with indifference, sadness, or a certain degree of dark joy – depending on the relationship of the evictee with the neighbors. However, a large number of foreclosures in one area can degrade the real estate value of properties there. From a financial standpoint, when many foreclosures occur in an area, the residents in the area lose some of the value on their property, at least until someone buys the foreclosed property.

From a government standpoint, foreclosures are undesirable because it raises public dissatisfaction and reflects economic instability, or errors in policies. Subsequently, these can cause a loss of trustworthiness in terms of investment value, and investors may begin avoiding the country (or state, or other smaller area).

Overall, while a certain number of foreclosures are acceptable and all but expected, national and local government units want to avoid many foreclosures.

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