Some bankers don't always make good decisions
So instead of taking my buyer’s very attractive offer (there were multiple bids), the bank chose to become the owner of the house and lose even more money. Now that they own the property they are responsible for paying the property taxes, utilities and maintenance. At some point, they’ll put the property back on the market.
This makes no sense to me, but it isn’t the first time I’ve seen a bank make a decision regarding a short sale or foreclosure that made no sense. A couple of years ago a bank insisted that my buyer pay to have a foreclosed house rewinterized after having the plumbing checked even though it was July! Another time a bank made such unreasonable demands in the contract for a foreclosure that my buyers walked away from the deal.
As a former employee of a large, global corporation I understand that corporations have to follow procedures. However, they can get so caught up in avoiding liability and managing risk with their procedures that they miss their primary objective of making a profit (or at least minimizing losses). Foreclosures and short sales can be good deals, but be prepared to deal with the illogical.
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{ 6 comments… read them below or add one }
There were multiple offers? Who turns down multiple offer bids? CRAZY!!!
See that’s why I wonder about the whole minimizing losses thing. It makes me wonder if they’re not looking at it in a macro level: why worry about getting these homes off the books one at a time if they can be unloaded several at a time? Either by auctioning them off in lots to investors or just auctioning several individually, but on the same day? I’ve even thought that perhaps they’d go to some real estate company for an exclusive brokerage deal where they might be able to negotiate discounted commissions or some sort of kick back. Why go about things piece-meal if you don’t have to? Especially when you’re a giant corporation and all that matters is the bottom line? It’s assembly line house-unloading. Short-term you may have to pay more, but it costs you less in the long-term because you don’t have to worry about managing a long process.
I am not a banker, but I can posit that many banks are doing everything possible to delay writing down the value of their assets. While taking a a greater loss by foreclosing, they may actually be helping themselves by getting to the next quarter before realizing the loss on the balance sheet.
What makes absolutely NO sense for an individual can make sense for a large portfolio.
I avoid short sales all together. Stick to REO to avoid maximum hassle and illogic.
What say others?
Andy
http://www.1016architecture.com
Marie & Andrew, you both bring up excellent points! There may be benefits from an accounting/tax standpoint. I also agree that selling several foreclosures or REOs (Real Estate Owned by a lender) as a group may involve less costs. However, since the short sale my buyer wants was essentially “sold”, most of the work involved in that sale was already done. They just needed to approve the short sale and close it. It will be interesting to see when and how the bank decides to sell this REO. When I find out, I’ll let you know!
But people use to say that Short sale is a good thing… That is a way to run away from foreclosures. Isn’t the point? Why some people here talk to avoid it?
It’s amazing that so many short sales fall through. I found it best to look for REOs.
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