Should Banks Just Foreclose?

I've been speaking with a great many frustrated real estate buyers in the greater Sacramento area lately and the one thing I hear repeated over and over is that they have been looking for houses for a while and not been able to buy any.

But it's a buyer's market, you say.

And I agree. However, there are certain areas where short sales are the majority of homes for sale. Which home buyers hate. Picture this: drive down a street and see every other house for sale. Asking price is about half of what the sellers paid for it about three years ago as a new construction. The homes look great, and there hasn't been much time for even normal wear and tear. The home buyers are thrilled. They call the number on the real estate sign.

Three months later, they're still driving by the house they've made a full price offer on, wondering what in the world happened.

What's happened is that the lender who needed to approve the short sale has not responded. At all. Not even to say that they have received the offer and are considering it.

Meanwhile, the asking price on every other house on that block has fallen even further, as frustrated Realtors try and generate some interest in the inventory.

Would this problem just be resolved if the banks decided to foreclose on these properties? Yes. Why aren't they doing it? Beats me. Maybe they are waiting to unload some of their existing REO inventory before taking on more. Maybe they're waiting to see what happens with the market like the rest of Sacramento.

Unfortunately, by waiting for the statistics, they're creating statistics. They're creating lower list prices, which is making other homes, including REOs harder to move. Now that's irony for you. Or karma. Depending on how you choose to see it.