subject: Banks are to blame for much of the real estate losses: Short Sales gone wrong in San Diego [print this page] Banks are to blame for much of the real estate losses: Short Sales gone wrong in San Diego
After a few years of this distressed real estate market one would think that the banks would now have systems in place to facilitate a smooth and quick short sale.
For those of you that are not aware, a short sale is when the bank agrees to let the property sell for less than what is owed on the mortgage. The reason banks are pushing short sales rather than foreclosure is that they make more money if the property sells in a short sale - often times 15% - 30% more.
I would like to make the public aware of what role the bank plays in the real estate distressed market. The bank merely services the loans in most cases. These mortgage loans are mostly owned by investors that purchased them in the secondary market. In other words, when a home goes to foreclosure or short sale, it is the note owning investor that ultimately loses money.
Recently I was involved in a short sale on a property in San Diego. I worked closely with the homeowner to ensure that the bank, received all the paperwork they had requested. The bank approved the short sale at a certain purchase price after two months of negotiating. This means that when an offer comes in on the property, the bank in turn contacts the investor to discuss the current market values and the investor makes the decision to move forward with the sale or counter offer. The purchase price was approved and the offer was submitted to the bank for the amount approved. We lost our first buyer but quickly found a new buyer at the required approved price and submitted the offer to the bank with all supporting documentation. While the above was going on there was a Trustee Sale date (Foreclosure Auction) set for four weeks away. We reminded the bank that they needed to postpone the auction because we had given them the full price offer they had requested. They said that it would be done and not to worry.
We spent the following weeks calling the bank daily to remind them to postpone the auction date as it was still active. After three weeks and hundreds of calls and emails the property went to auction on the courthouse steps, selling for 25% less than the offer we had presented to the bank!
I feel it imperative to point out that the ultimate loser on this bank-bungled transaction is the homeowner that now has a bad credit rating due to the foreclosure and also the investor that owned the loan on the property. The investor now receives 25% less than offered, and all the bank does is shrug its shoulders. They have no explanation, and quite frankly, simply don't care! These banks are notorious for not assisting homeowners, and telephone hold times are sometimes over thirty minutes.
There are new government programs to further simplify the short sale process but these programs are still a work in progress.
I believe there must be a way for Banks to stand accountable for the 25% loss the investor suffered due to their incompetence. This happens every day. These losses are substantial and it is a shame that banks are not held accountable. I wish I could speak with the investor that owned the loan and describe how incompetence and lack of caring cost him/her a substantial amount of money. I am sure that investor was not even aware that this had taken place.
This kind of practice must be exposed as investors throughout the country are taking huge losses due to this kind of incompetence and attitude. It is important to point out that not all banks operate in the same manner. For example, Wachovia, Wells Fargo and GMAC seem to be the most capable when facilitating short sales.
