Why are Banks Still Foreclosing?

Can anyone think of a more value destroying transaction than foreclosing a home in a dead real estate market. There are more than 700 houses in Detroit listed for less than $3000. And there not selling. In this climate banks can’t possibly expect to recover much of anything from a foreclosed. Considering legal costs, taxes and maintenance the banks would surely be better off just letting the borrower stay in the house. And of course all of these foreclosed homes are killing property values, which leads to more foreclosures. And I haven’t even talked about the impact on evicted individuals.

Governments should offer reduced taxes on foreclosed properties if the former owner is allowed to remain in the house. This is a win win win solution. The borrower gets extra time in the home to figure out there next move. The city can stabilize property values by keeping a glut of foreclosed homes off the market. But the big winner is the bank who can hold on to the house at little cost until the market improves.

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