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Old 06-11-2010, 09:00 PM
 
Location: Arizona!
675 posts, read 1,268,826 times
Reputation: 1089

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Alternative title: Why are the banks so stupid?

We are looking to relocate to the Phoenix area, and found a property we fell in love with on a visit last December. It was a short sale, owned by a home builder/investor who got in a little too deep with multiple properties. We had our agent run comps to get an estimated value and we came in at about 90%.

The seller agreed, and off it went to the bank. After nearly 3 months of increasing frustration we got word that first had accepted but the 2nd wanted the seller to pony up 50% of the deficiency. He wasn't willing to go there, and the deal died. On March 1st the foreclosure process started, and the auction was set for June 1st. We gave up on it and started looking at other places.

But, on May 28th, the business day before the auction, the trustee site posted the opening bid and we were amazed to see it was going to start out at well below the first mortgage, and in fact it was about 55% of what we had offered!

We got our realtor involved and she and her partner went down to the auction. There were 8 other bidders but they all dropped out quickly- they were apparently just looking for a deal to flip. We ended up winning it at about 62% of what our offer had been.

Stunningly bad judgment by the bank to turn down our short offer, and let it go to foreclosure. I mean we were willing to pay over 50% more in the short sale than what we ended up paying at auction. Why are these banks making these bad decisions? I'm sure there are many properties where shorts are turned down and the subsequent auction nets far less. We are still in shock at this turn of events. I am going to send the bank a very nice thank you note for turning down our offer!

And the best part is- our move is next week, and we can move straight in instead of renting while we continued our search!
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Old 06-11-2010, 09:08 PM
 
Location: Sterling
104 posts, read 395,321 times
Reputation: 28
Wow! What an amazing and awesome story! Glad it all worked out! We offered on a short 2 months ago and are still waiting. Very frustrating!
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Old 06-11-2010, 09:39 PM
 
Location: In transit...
377 posts, read 828,466 times
Reputation: 272
Why do banks make bad decisions you say?
IMO - greed. And may be an instant gratification?

We recently made an offer on a foreclosure. We went back and forth with counter offers a few times,
and then got stock on a difference of $1500, the bank would not budge.
This house needed extensive repairs, so we walked.
The house is currently on the online auction going for 25,000.
Just like you, we were willing to pay much more.

The economy would recover in no time if banks adjusted ALL mortgages to the current market value.
Any bank would be better off adjusting, let's say, a 150,000 mortgage to 80,000 and still collecting close to 200,000 (or is it 300,000?) after 30 years, than selling this house as a foreclosure for 40,000.
People would stop losing homes. Cities, counties and states would get the tax revenues they so desperately need.
People will have extra money left for shopping and other activities that support many businesses.
Business will start hiring again. And so on and so forth.
You get the picture.

I am not an economist, but nearsightedness of financial institutions is evident to any person who can think logically.

Some banks, however, are starting to wake up and smell the coffee. I am curious to see how far this "reaching out" will get.
BofA reaches out to troubled homeowners - Real estate- msnbc.com

Last edited by IndigoLight; 06-11-2010 at 09:43 PM.. Reason: Clarity
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Old 06-11-2010, 09:45 PM
 
Location: In transit...
377 posts, read 828,466 times
Reputation: 272
Zathras, congrats on your purchase
I love Arizona
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Old 06-11-2010, 09:51 PM
 
1,465 posts, read 4,897,834 times
Reputation: 860
I am glad you got a great deal on a house you wanted. Fantastic.

However, I do not believe the bank made an error. There are things that happen in the background that they may not be revealing. Maybe the property had PMI that paid off on the foreclosure giving them full loan value minus sales price. Maybe the government gave the bank money to cover their loss. I feel it is very unlikely the bank lost much. But it doesn't mean you didn't make a killer deal. Good for you.
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Old 06-11-2010, 10:24 PM
 
Location: Columbia, SC
10,377 posts, read 20,183,931 times
Reputation: 9336
Quote:
Originally Posted by DowntownVentura View Post
However, I do not believe the bank made an error. There are things that happen in the background that they may not be revealing. Maybe the property had PMI that paid off on the foreclosure giving them full loan value minus sales price. Maybe the government gave the bank money to cover their loss. I feel it is very unlikely the bank lost much. But it doesn't mean you didn't make a killer deal. Good for you.
The bank made a mistake. The MI will cover any loss whether ss or foreclosure. The cost to foreclose is much more significant to the bank than the cost to accept a ss. The loss on the amount of payoff received on the auction is much larger than if accepted on a ss. In a nutshell, the banks aren't run very well. They have a foreclosure division and loss mitigation division that do not work in conjunction with the other. In fact, they don't even like each other because if one succeeds in their job, the other fails.
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