Living Beaverton - Your guide to everything Beaverton

head_left_image

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


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?

Respect Realty LLC (Expect More)

 

At Respect Realty, LLC our agents believe in 100% dedication to client satisfaction.  We specialize in property and land acquisition around the Portland Metro and Vancouver, WA area. We delight in working with first time home buyers and sellers to guide them from start to finish. Our doors are always open and we are always happy to assist you with your real estate questions.

 

Reach out today, we look forward to talking with you!

 

Todd Clark and Seraina Aguayo (Owners of Respect Realty)

Respect Realty LLC (Expect More)

(503)564-3130

info@RespectRealtyNW.com

www.RespectRealtyNW.com

 

Thinking of buying? Start your home search by clicking here
Thinking of selling? Find how much your home is worth by clicking here

 

Don't forget to follow us on Social Media to keep up with the latest real estate information

Facebook

Twitter

Instagram

Pinterest

 

Comment balloon 36 commentsRespect Realty LLC • July 01 2009 06:19AM

Comments

You have described what a short sale is. . .short you expectations about conventional wisdom.. they operate under their own rules. . .making sense isn't one of them

Posted by Fernando Herboso - Broker for Maxus Realty Group, 301-246-0001 Serving Maryland, DC and Northern VA (Maxus Realty Group - Broker 301-246-0001) almost 10 years ago

Your experience is a typical example. This is why many buyers and their agents should be very selective with short sales. If the lender will not respond, move on to another property.

Posted by Roy Kelley (Realty Group Referrals) almost 10 years ago

I would love it if someone, somewhere, was actually listening to you!  And to all of the rest of us who go through a variaton of the same scenario ALL THE TIME!  It's OUTRAGEOUS!

Posted by Janna Scharf, Coeur d'Alene Idaho Real Estate Expert (Keller Williams Realty Coeur d'Alene) almost 10 years ago

Todd, I've been there and had to put up with this also.  And, we bail these idiots out too!!

Posted by Gabe Sanders, Stuart Florida Real Estate (Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales) almost 10 years ago

I sure hope that you have sent this out to as many members of our government as you possibly can. They just have to be shown that enabling an addict only creates more addiction.

Posted by Jim Palmer, Washington County, Florida (Chipola Realty - Chipley Office (850) 638-2777) almost 10 years ago

I hope some people with connections here will find this and email it or better yet send to the banks. It is ridiculous how much MORE money they are loosing by their delays. Not only that but we lost a home, 40K over asking price because the buyers wanted the drain field inspected.

They accepted a offer 20K under because it had no inspections.

So that is 60K they could have made.

No wonder... they are loosing money, yet we keep giving them money.

They are NOT lending they are hording and making their balance sheets look good.

Posted by Missy Caulk, Savvy Realtor - Ann Arbor Real Estate (Missy Caulk TEAM) almost 10 years ago

The main problem is staffing to handle the requests. They are loaded with paperwork. The banks must hire more people to do this but wont.

Posted by Chip Jefferson (Gibbs Realty and Auction Company) almost 10 years ago

Todd - I wonder how much more money is lost by their way of handling business. It is very sad, to say the least.

Posted by Petra Norris, Realtor, Lakeland FL Homes for Sale (Lakeland Real Estate Group, Inc.) almost 10 years ago

Excellant insights Todd. Thanks for the post.

Posted by Michael J. Perry, Lancaster, PA Relo Specialist (KW Elite ) almost 10 years ago

These stories make me feel like I lead a charmed life, Todd. Have dealt with a variety of lenders and have not (yet?) faced such horrendous delays on my Short Sale listings. Clearly, these nightmares occur regularly - even for other agents in my area. Inexcusable!

Posted by Irene Kennedy Realtor® in Northwestern NJ (Weichert) almost 10 years ago

Todd, I have several short sales now where we are on the third Buyer. Keeping the Buyer motivated and on track is one of the biggest challenges when it comes to short sales. The Lender are getting slower. Chase actually told me last week that they have 90-120 BUSINESS days to even acknowledge receipt of the short sale package!!! It's crazy out there.

Posted by Bryant Tutas, Selling Florida one home at a time (Tutas Towne Realty, Inc and Garden Views Realty, LLC) almost 10 years ago

These banks have no incentives to work productively because no matter what they do they will be propped up by our government.

Posted by Home Loan Search.Online (Home Loan Search Online) almost 10 years ago

I agree.  Been there on one listing.... two years later the bank is still trying to finish up a foreclosure on the property.

Posted by 1~Judi Barrett, BS Ed, Integrity Real Estate Services -IDABEL OK (Integrity Real Estate Services 118 SE AVE N, Idabel, OK 74745) almost 10 years ago

Todd, so true. Ever since the 'full faith and credit' of the United States was pledged behind our banks (think S&L crisis) the banks haven't been worried to lend because they are protected not only by the FDIC but by the taxpayers themselves via inflation and tax increases.

 

Posted by Christianne O'Malley, Exceptional Service - Delivering Results in Reno! (RE/MAX Realty Affiliates) almost 10 years ago

Todd:

The HVCC says nothing about the use of short sales or REOs in the preperation of an appraisal report.  As there is so much misinformation on the HVCC, I have included a link to the actual document below:

https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/appcode/pdf/hvcc.pdf

Using short sales and REO properties to compare a subject property that is an REO or short sale makes sense, as they may actually be COMPARABLE to the subject in terms of condition and other factors.

 

Posted by Jesse Skolkin (Independent New York State Certified Real Estate Appraiser) almost 10 years ago

Your description is exactly what happens in our area. So after a little research, I discovered a couple of items that affect the lenders "approval" process.

1) Most of the loans originated since 2000 have mortgage insurance, not necessarily borrower paid insurance as we commonly think, but BLANKET LENDER PAID insurance. Even if the LTV was 80% or less the lender paid the MI when they sold the loan, as many of the lenders anticipated the real estate decline.

2) In order to collect on the MI, the lender has to show X days on the market. I have seen anywhere from a minimum of 90 days to a minimum of 180 days. AND the lender MUST foreclose in order to get full payout of the insurance. This may help to explain why so many short sales go under contract, but a relatively small number actually close.

3) The payout on these policies is anywhere from 19% to 35% of the original mortgage issued. So our competition is the bottom line: if the bank gets and additional 19% to 35% of the original mortgage PLUS the asset to sell when they foreclose, what is their incentive to accept the short sale?

My feeling is - the lender should disclose the existance of MI (whether lender paid or borrower paid) and the actual terms of the policy. Lets get this out in the open so we know the real issues.

Posted by Denita Neuenhaus (Keller Williams Realty of the Palm Beaches) almost 10 years ago

Todd, Their decisions seem to conflict with their best interest.  We had one that we had sold short three times!  We worked over a year on it.  It was ultimately foreclosed on, listed with another agent and we have in escrow with our buyer for $90,000 less than they could have gotten a year ago!  The owner was in the property 18 months without paying. 

It seems like the banks keep expecting another government program that will help them if they work with owners.  Stall it long enough and they will get help.  What a strange situation it is.  I agree with you that they need to just let the chips fall where they may and this will get sorted out. 

Posted by Jim Valentine (RE/MAX Realty Affiliates) almost 10 years ago

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.

Posted by Connie Harvey, Realtor - Nashville TN Real Estate (Pilkerton Realtors) almost 10 years ago

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.

Posted by Dan Magstadt (Paramount Residential Mortgage Group, Inc) almost 10 years ago

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.

Posted by Terry & Bonnie Westbrook, Westbrook Realty - Grand Rapids Forest Hills MI Re (Westbrook Realty Broker-Owner) almost 10 years ago

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.

Posted by Ralph Gorgoglione, Hawaii and California Real Estate (800) 591-6121 (Maui Life Homes / Metro Life Homes) almost 10 years ago

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?

Posted by Joe Pryor, REALTOR® - Oklahoma Investment Properties (The Virtual Real Estate Team) almost 10 years ago

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.

Posted by Larry Bettag, Vice-President of National Production (Cherry Creek Mortgage Illinois Residential Mortgage License LMB #0005759 Cherry Creek Mortgage NMLS #: 3001) almost 10 years ago

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?

Posted by Robert Ott (Century21 Beal Inc.) almost 10 years ago

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

Posted by Paul S. Henderson, REALTOR®, CRS, Tacoma Washington Agent/Broker & Market Authority! (RE/MAX Northwest.) almost 10 years ago

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

Posted by Ann Cordes, Home Ownership is Not a Distant Dream (Century 21 Randall Morris and Associates, Waco) almost 10 years ago

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.

Posted by Paul McFadden, Pest Control, Seattle, WA. (Paratex) almost 10 years ago

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.

Posted by Kim Dean, d + b real estate, McKinney, TX REALTOR Broker/Own (www.RealFamilyRealEstate.com) almost 10 years ago

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

Posted by Diane Dames, The Real Estate Chick (Broker Associate & Leasing Consultant@ Lions Share Realty ) almost 10 years ago

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

Posted by Liz Loadholt, Realtor--Broker-in-charge - Trainer--Relocation Director Covering SC (Liz Loadholt- AgentOwned Realty- Covering SC) almost 10 years ago

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'.

Posted by David Saks ((retired)) almost 10 years ago

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

Posted by Mary almost 10 years ago

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. 

Posted by Carla Muss-Jacobs, RETIRED (RETIRED / State License is Inactive) almost 10 years ago

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

Posted by Brian Burke, Broker & Advising Expert-Denver Luxury Real Estate (Kenna Real Estate) almost 10 years ago

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.

Posted by Ryan Shaughnessy, Broker/Attorney - Your Lafayette Square Real Estate Partner (PREA Signature Realty - www.preasignaturerealty.com) almost 10 years ago

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.

Posted by George & Arlene Paukert (Road to Wealth, Inc.) almost 10 years ago

This blog does not allow anonymous comments