Wednesday, August 27, 2008

Bankers are dumb!

I wanted to highlight a post by Ichabod that was very interesting. It really shows how slow the banks are to react to this downturn:

Actually, the bank needs to wise up and TAKE the short sales! With our market going downward (it used to be the kiddie slope, now its triple diamond slope!) the banks will make MORE money on homes through short sales. I had a home listed with a buyer wiling to pay $204,000 in April of '07- the bank wouldn't halt the trustee sale. They are now trying to sell it REO (after putting a town of money into the house for new carpet, paint, plus the monthly utility bills, hello?) for $100,000 LESS!

I had another house listed where the owner owed $254,000. I was trying to short sale the house, I had a buyer willing to pay $180,000 CASH, the bank said they refused to look at offers less than $200K. The house foreclosed (oh, and a transient broke in, flooded the bathroom, trashed the place) and the house sold REO for LESS THAN $120K!!! The funny thing is, the bank never even listed it for $200K!

One more boring example: I had a house listed For under $200K and had a buyer willing to pay $150K- the bank demanded $175K. The buyer was even willing to pay $175K if the bank would simply compensate him for the missing appliances- the bank refused, and foreclosed on the house. The bank then listed it for $134K! They never even tried to get $175 or even $150! It is still on the market for less than $100K!In conclusion- short sales are the best bet to a bank- but they have so much red tape, they are losing so much more than they really have to.

21 comments:

nddl04 said...

Happens all the time. I was looking at some homes in local neighborhood. There are two turn-key homes (one short sale the other by owner) available for 25k less than an REO listed down the street. On top of that, the REO is trashed and smaller than the other two properties by around 600sqr ft. We showed them the comps and they offered me a 3k "fix it" concession and absolutely refused to budge on the price ($130/sqr ft).

I guess that explains why it has been on the market for over two months with zero offers. But hey, the market is always going up right?

Anonymous said...

You should forward this story to your political reps. This is absolutley typical and we the tax payers end up paying for the bank's arrogance/stupidity, with government bailouts.

Ichabod said...

You know what my current problem is now? The bank has a second on a house. I have approval from the first. I am offering the second $6K- seconds are lucky to get $5K. They sent me a fax saying to give them 30 days to review the paperwork. I called yesterday... it was DENIED due to missing info (and they never called me). What was the missing info you ask? The buyer's name on the estimated net-to-bank sheet. I told the customer service rep I didn't have an offer at that price (I had many offers below what the second will take), that I was in the process of getting one. He told me the 30 days to consider will not start until AFTER they have a buyer's name. I asked the customer service rep point blank- rules aside, tell me, WHY? Why does it matter if you get $6K from the Jones buying the house or $6K from the Smiths? He said "because that is the rule." I told him, because of rules like this, the bank was unnecessarily losing probably millions of dollars. He said, "fine, we're losing millions of dollars. Maybe trillions. But that is the rule and that is the way it goes." I wonder if the shareholders know.

P.S.- I dared to open the Notice of Trustee Sale list this week...

448 houses scheduled for trustee sale from 8/25 - 9/3!!!

Anonymous said...

Bottom line: Short sales are shitty deals for buyers! Let the fucker go to foreclosure and pick it up from REO for much less.

xs10shell said...

A long time ago, in the age of the dinosaurs, I was always advised that banks don't want your home to go to foreclosure and will do everything possible not to, because banks don't want to be in the real estate business. I can see they are still in denial...

xs10shell said...

Friday before a long weekend coming up. Any thoughts on if there will be any bank closings by the Feds? BTW, when it comes to figuring a bank's value, are all these foreclosed properties considered assets or liabilities?

Henry said...

Perhaps it would be helpful to know a bit more about short sales. When you are trying to accomplish a short sale, there are more "players" involved than one would normally be aware..ie. If the "servicer" (collector of payments) were say BigBank A, they very possible do not own the note. The noteholder might be anyone from FANNIE/FREDDIE to Countrywide to a private fund. The servicer does not have the authority to agree to anything without the noteholders approval and permission PLUS on a short, the seller of the house must be in agreement and must pass the "income/assett" test that establishes them as qualified to do a short sale. Obviously this is a long, drawn out and many times not achievable transaction due to simple things....the paperwork to submit to the noteholder is not complete/correct and it will just be kicked by a box checking 19 yr old who works for minimum wage and whose only goal is to get to 5 o'clock. Now, when the short sale fails and the process of foreclosure is concluded then you are dealing typically with a single entity....usually a loss mitigation specialist who is over whelmed, over worked but has the ability to make some recommendations to get this collateral off the books.....Now at this point, the REO company is usually motivated to get the highest/best offer and get the thing closed--- yes at a huge but usually unavoidable loss .

Ichabod said...

Anonymous said...
Bottom line: Short sales are shitty deals for buyers! Let the fucker go to foreclosure and pick it up from REO for much less.

~~~

Sorry you think this- hope you aren't a homeowner. The more REOs that come on the market, the more the banks will drive down YOUR home value!
Yes, short sales SUCK. But it bothers me personally to see so many people who don't know what to do.
Yes, there are the investors and flippers out there and we don't care what happens to them- they don't either, their credit score is simply a business tool to them. But there is also the family who purchased a house finally big enough to hold their family- and they were doing great until the father passed away. Now the widow works three jobs seven days a week to barely make do, and she just got injured on the job and may be out 3 weeks. That is the type of person I am trying to help with short sales.

nddl04 said...

That's a lot of dead fathers and injured widows out there... approaching 500 a week.

I get your point, but I find it darkly humorous when placing this picture in context of our current real-estate economic disaster.

Anonymous said...

It is good that you want to help people. But I don't think short sales are the answer. The key to moving on is getting rid of these defaults,REOs & 80/20's. The bank is in the best place to do it. (after auction they own it outright with no other liens)
Short sales may help a few but I seem to see many just lingering and then coming back on the market, etc. We'd be better served to let the banks take their medicine, take the hit in the market and then start to move on.
One thing is for sure... no end to this until all these REOs and defaults stop. Adding 3 months to the foreclosure process can help a few but not the market as a whole.
There are investors who would take on some of these properties. With the current system it is difficult, the trustee sales are a mess. (much of that is due to short sales... that don't actually get sold) The ones that have a reasonable first should go to auction, no harm trying to SS the ones that were bought with 80/20's in the past 4 years. (those have no chance of being picked up at the trustee sale)
Trying to buy an investment at the trustee sales is a full time job and one that really needs to tools available to agents. (MLS, getting into SS before they go to auction, title websites, etc)
The "normal" investor who could and would add some rentals to his portfolio is screwed. That does not help our market. (sales or rental)

Jim in San Marcos said...

One thing everyone is missing here is that they think that the local bank they are talking to is the owner of the real estate. That's false, they are only managing it for someone thousands of miles away. The owner of the note has no idea of what is happening and is probably a hard ass wanting his note paid off.

The local bank managing the property gets paid to "manage" the property. They don't care if it sells or not. They get a monthly fee. Your local bank isn't stupid, they are milking the situation for all its worth.

The thing I find incredible, is the assumption that everyone thinks all of the loans are owned by a bank within driving distance to the house. The last I heard, Deutsche Bank which now owns over half of Detroit's foreclosed real estate is somewhere in Germany----Thus, the major disconnect between the loan holder and the bank managing the property

Ichabod said...

Jim, the Deutsche Bank in control of most of the REOs here in the country is actually in New York, but your point is well taken. This does increase the problem of places like Bakersfield selling REOs and Short Sales. Try telling people in Orange County or New York the houses here are "only" worth $100 per square foot- they'd think you're nuts!

Ichabod said...

Tuesday Notice Update:
9/2/08
Kern County

(Only) 192 Notice of Trustee Sales
276 Notice of Defaults

See you NEXT Tuesday!

Engineering Guy said...

Last week I watched my neighbors (!!!in Grand Island!!!)gut their home as they were foreclosed on. Trees, electrical fixtures, fireplace mantles were all hauled away piece by piece.

The classiness of some people is astounding.

Anonymous said...

Well if you watched your neighbors haul off the contents of the home and did nothing you are just as classy!! What is wrong with you???!!!!

Engineering Guy said...

Seriously, who do you call? I called my realtor and she had no idea either. How serious would I be taken to call the BPD and say "I think someone is stealing their house."

I got a lot of photos though. . .

Anonymous said...

OK, if you got photos and at least tried to do something then I apologize. And good for you for trying to do something!!!!! Sorry again.

Sammy said...

Hey Engineering guy, the house you were talking about, is it 12306 S********* Ct by any chance?

By the way grats on your new home in GI.

Engineering Guy said...
This comment has been removed by the author.
Engineering Guy said...

that's the house. I don't know the people's situation but the foreclosure process is a tough thing see happen and it affects everybody differently, I guess.

Thanks on the grats. Though it makes me wonder, do I know u?

**Deleted post above I was just trying to edit**

Sammy said...

I don't think I know you. It is just that I have been keeping track of pretty much all the homes in Seven Oaks area (especially the ones that have possibility of distressed sale) for over a half year via various websites (Realtytrac, Zillow, MLS, etc) I can guess with pretty decent accuracy with minimal infomation assuming there are no duplicate conditions, and just wanted to confirm. Also I drove around GI area alot looking for a house so that helps too. :)