I don’t like government involvement, so maybe this idea will get the banks attention

By
Real Estate Broker/Owner with Respect Realty LLC 200311024


No more bailoutsOn August 1st, 2008, I took a listing on a short sale that I thought would sell quickly. It had one heck of a view, the bank was only going to be shorted about $15,000, and at the time, my client was even willing to sign a promissory note for that amount.

Great news! We had an offer in within 3 days. This was the one for this client and the offer was a full price plus closing costs. The bank was going to make out great, this was a slam dunk… or so I thought.

It's eighty days later and the bank is making promises that it was in the final stages. The buyer has now walked as they felt the house had dropped in value in those 80 days and was no longer a good deal. (And they were right, 7 more homes came on the market in that area, 2 priced less.)

So, back on the market we go and now the bank was going to be losing $30,000 because of their delay in responding. It took us a couple weeks this time, but we got another offer. Now this one is not a full price offer, but close. This time the bank was going to lose $35,000 if they accepted this offer. But, once again, they delayed and delayed, having to order another BPO they said because it had been more than 90 days since the last one. (Well of course it was, because you were so slow on responding to the last one.)

Once again, around day 45, the buyer walked because the bank kept making promises of tomorrow, tomorrow, tomorrow, that never came to pass once 5pm rolled around despite me being on hold. (It was apparently time to go home.)

Finally I found another buyer and it was a cash offer, but it was about a $60,000 loss for the bank, but they were ready to close that day. The bank took their time again and we were finally ordering the HUD last Friday when the buyer found a better deal next door by $15,000 and it wasn’t a short sale. They could close in 7 days. (HE JUMPED)

So basically over the past almost year, the bank has thrown away $60,000 and maybe even more now that the home has been sitting vacant for almost a year and needs some repairs before it is livable again.

So, here is my proposal to the government.

stop signSTOP ENABLING THE BANK! The banks have done this to themselves! The banks claim they are losing millions and millions of dollars because of short sales and REOs but, that is because they are slow to respond. Tell the banks that they will get no more help, no more bailouts, and will not be able to loan another dime until their short sale process is streamlined!

Imagine if they had an answer for that first buyer within 30 days, they would have only lost a few thousand if they had countered the offer. Heck, the only reason we listed the home that low is because we knew the owner was going to have to at least short sale it for the commission plus a few thousand and in order to get an offer we had to make it less than the competition. But, if they had a process that was less than 30days, I’m sure I could have gotten them an offer that would have only lost them about $5,000. But, instead, here we stand with a home that is worth $60,000 less than it was last August.

So, please, stop letting the banks beg you for money or don’t let them lend another dime until they fix their own internal problems that are causing the loss. The new HVCC (Home Value Code of Conduct) makes it so appraisers have to include short sales and REO properties in their appraisals. That isn’t fair to a home owner that is willing to sell their home immediately and not take 90 days to say “Yes, we will sell it to you” and then another 45 days to close.

The system is broken. Throwing money at the problem isn’t the fix, the fix needs to be taken care of internally and the only way to do that is to cut them off until they fix their own problem. You don’t keep giving a child with an addiction to money, more money, do you… thinking the addiction will stop if you give in to them?

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Ambassador
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Connie Harvey
Pilkerton Realtors - Brentwood, TN
Realtor - Nashville TN Real Estate

I'm going out yet again today to find a home for my clients. Their house is sold, inspections and appraisal complete. The house they think they want has "potential short sale" written in the remarks. The tax records show that they borrowed 20k more than the current asking price in 2007. It just looks like a nightmare waiting to happen.

Jul 01, 2009 02:13 AM #18
Rainer
74,325
Dan Magstadt
Paramount Residential Mortgage Group, Inc - Lake City, FL

I totally agree - I had a realtor ask me about my LinkedIn status yesterday: Dan is showing borrowers that short sales may not be the best way to go - They can take 6+ months for approval!!

I described situations much like your example and he agreed with me. I'm pushing many borrower's toward bank-owned properties vs. short sales.

Jul 01, 2009 02:53 AM #19
Rainmaker
575,448
Terry & Bonnie Westbrook
Westbrook Realty Broker-Owner - Grand Rapids, MI
Westbrook Realty - Grand Rapids Forest Hills MI Re

Too bad they don't have to stand up in front of the owners of the bank and explain why they do this on a regular basis and end up throwing money out the window because of poor process. Too bad for all of us.

Jul 01, 2009 02:59 AM #20
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Ralph Gorgoglione
Maui Life Homes / Metro Life Homes - Kihei, HI
Hawaii and California Real Estate (800) 591-6121

You are SO right on they money (no pun intended).

Short sales have just about paralyzed my partner and I.

It accounts for a majority of our business,and we're doing it, and it's brining the money in.

But we both are suffering from major burnout to the point where we have to step away from the business for a while to re-group and re-juvenate.

We both love what we do, but the stress from short sales is just too much.

Jul 01, 2009 03:20 AM #21
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Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

if you do short sales like we do and you do, you see how things work very well with companies like Homecomings, and how you can descend to the gates of Hell with Chase and BOA. Could we have at least a somewhat uniform system?

Jul 01, 2009 03:27 AM #22
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Larry Bettag
Larry Bettag - Cherry Creek Mortgage - Saint Charles, IL
Regional Vice-President

I've had this same exact experience here with my clients and with my father.  My father walked after 1 year of waiting....give me a break.  I could go on, but you captured my feelings and thoughts.

Jul 01, 2009 03:30 AM #23
Rainer
21,079
Robert Ott
Century21 Beal Inc. - College Station, TX

Short sales and REO; what a nightmare! I'm so thankful I do NOT have to deal with this market unless I volunteer. I put myself in the buyers shoes and wonder what kind of an idiot does the seller take me (the buyer)for?

Jul 01, 2009 04:17 AM #24
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Paul S. Henderson, REALTOR®,CRS,
RE/MAX Professionals. - Tacoma, WA
Tacoma Washington Agent/Broker & Market Authority!

Amen Todd, As long as our short sale clients are treated like numbers instead of human beings we will not see any change!

Jul 01, 2009 04:30 AM #25
Rainmaker
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Ann Cordes
Century 21 Randall Morris and Associates, Waco - Waco, TX
Home Ownership is Not a Distant Dream

I hear a deafening silence from those Rainers in the banking biz!

Jul 01, 2009 05:34 AM #26
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Paul McFadden
Paratex - Seattle, WA
Pest Control, Seattle, WA.

Todd: Thanks for the post. Due to the banks ineptitude, is it any wonder they're failing left and right? I remember years ago a high-up banker at a known bank in the Northwest told me they never want to be in the real estate business. Perhaps that's why they muck up so many of these deals! Have a great day.

Jul 01, 2009 07:35 AM #27
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Erica Ramus
Erica Ramus - Ramus Realty Group - Pottsville, PA - Pottsville, PA
MRE, Schuylkill County PA Real Estate

I have no faith in the banks to make any logical decision ever. I had a short sale that had a FULL PRICE Offer and the rejected the sale because their out of town appraiser said it was worth $10,000 more. SO the buyer agreed to do it--and the bank rejected that one too! Buyer walked after 4 months.

 

House came on the market and was listed BELOW the 2 offered prices. It sold 9 months later for half the price we had originally from the buyer. Idiots.

Jul 01, 2009 08:14 AM #28
Rainmaker
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Kim Dean
www.RealFamilyRealEstate.com - McKinney, TX
d + b real estate, McKinney, TX REALTOR Broker/Own

Todd - you hit the nail right on the head. Just did a short sale with Chase, and it's a miracle it ever closed. I'll be glad when the day comes that Short Sales are a rare occurence - not saturating the market like they are now.

Jul 01, 2009 08:29 AM #29
Rainer
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Diane Dames
Broker Associate & Leasing Consultant@ Lions Share Realty - Victorville, CA
The Real Estate Chick

DITTO...DITTO...DITTO...did i say DITTO!!!!

Jul 01, 2009 08:36 AM #30
Rainmaker
316,376
Liz Loadholt
Liz Loadholt- AgentOwned Realty- Covering SC - Mount Pleasant, SC
Realtor--Broker-in-charge - Trainer--Relocation Director Covering SC

Todd ----- everyone above has said it all --- I, too, wonder how much money the banks have literally thrown away --- You are right, you don't give an alcoholic a drink --- not if you like the person.

BTW -- congrats on yet another feature --- go, man.

Mama Liz's Signature

Jul 01, 2009 09:00 AM #31
Rainmaker
1,569,469
David Saks
Memphis, TN

The bank plays roulette with the house, Todd, in a short sale. The house is the ball, the market is the wheel, the buyer is the numbers board. Gambling is a disease that's killing banks en masse'.

Jul 01, 2009 10:01 AM #32
Anonymous
Mary

I know this is so off subject Todd, but you still owe me a cruise. lol

Jul 01, 2009 10:58 AM #33
Rainmaker
1,554,524
Carla Muss-Jacobs, RETIRED
RETIRED / State License is Inactive - Portland, OR

Banks want the inventory AND the bail out money.  They can't control the owner if they want to put it on a short sale . . . but they can SIT ON IT the property. And they are.  Why?  Because they WANT the foreclosure!  They want the inventory, the bail out money AND the tax write offs on all those - boo hoo hoo, sob, sob -- foreclosed properties they have.  They ARE having their cake and eating it too.  They want to have the vast amount of inventory on their books to take a LOSS -- and keep in mind 95% of property owners ARE paying their mortgage, which is almost entirely INTEREST payments. 

Jul 01, 2009 12:27 PM #34
Rainmaker
600,708
Brian Burke
Kenna Real Estate - Lone Tree, CO
Broker & Advising Expert-Denver Luxury Real Estate

Common occurrance seems to be the concensus. So if yours lost around 60K multiply that by thousands... ouch! I agree with Ralph too, not that we do many short sales but burn out describes the situation perfectly. ~Rita

Jul 01, 2009 03:37 PM #35
Rainer
229,183
Ryan Shaughnessy
PREA Signature Realty - www.preasignaturerealty.com - Saint Louis, MO
Broker/Attorney - Your Lafayette Square Real Estate Partner

Todd - Instead of letting banks who had loose underwriting standards fail, we decided to prop them up so they can continue to make stupid decisions.  We should have pulled the plug and cut off the cash on Day 1 - not after we have spent billions in Tarp funds.

Jul 01, 2009 06:03 PM #36
Rainer
138,157
George & Arlene Paukert
Road to Wealth, Inc. - West Palm Beach, FL

Todd, the government wants to be involved, that is what they are actually trying to have happen. Soon the government will own the banks and the real estate industry like they do the automobile industry.

Jul 01, 2009 11:03 PM #37
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