Understanding Short Sale Decisions "I love hardball... until they learn that short sales can save them
[the bank] money, they are just going to keep losing..." Wrong! I responded. The banks know!
So went the comment just over a year ago.
Well I too love hardball! I love knowing more about how things work than my opponent. I love winning for my client!
Respectfully, most people and very few Agents have any idea what the banks have to consider before accepting a short sale.
Banks face absurd regulation with regards to foreclosures and REO's.
Banks face absurd political pandering. Government programs and pronouncements implying consumer entitlements, but providing no such mandate!
Banks face absurd public ideas of what the bank nets on a foreclosure or REO sale! It gets even more absurd and confusing when there is PMI or FHA insurance involved! PMI and FHA pale in confusion with a VA guarantees!
Then there are the subordinate loans, if a bank forecloses they don't have to worry about subordinate loans.
If the bank settles with the debtor (accepts a short sale) they may throw a bone to the subordinates, but they rightfully see every dollar paid a subordinate as coming out of their pocket.
If the buyer offers to pay subordinate lenders, the second et. al. the bank rightfully again sees that as a higher sales price and more of their money.
The bail out money was never meant to aid the individual debtor! This money wasn't extended out of concern for the debtors, but rather to maintain the system and size control there of.
(More absurd political pandering, there is nothing wrong with a bank failure, no matter how big! Since the Great Depression the FDIC has protected depositors. It wasn't meant to save stock holders for they lose all or most of their equity eather way, the same as if the bank had failed. This money was used to take control with out using the word "Nationalizing!" Just like and no more honorable or honest than a third world dictator!)
We don't know what the bank nets! We only know the sale price, and the net proceeds to the bank on the HUD-1. The bank knows what PMI, FHA, or the VA will pay in addition to the net from a short sale.
The bank knows that PMI, FHA, or VA are not obligated to pay any thing when the bank settles!
The bank knows what how much PMI, FHA, or VA will settle with them for and how much they are obligated for if the bank should foreclose.
The bank also knows state law and if the debtor is collectible!
The bank also knows all those pesky regulations, none of which make much sense, some of which are nothing short of draconian! Little things like the bank can't operate single family residential properties, SFR, defined as one to four family housing units. (This is why banks don't rent SFR's, but do operate apartment projects.)
A bank simply can not judge an offer by the sale price alone.
All of this may be mute! Remember those subordinate mortgages! They are held by banks too! And, they're being ask to take a near total loss! Additionally, there may be other liens! In a short sale no one is obligated to take a loss! If the bank chooses to foreclose they don't have to worry about subordinate lenders or liens and they get the full benefit from any PMI, FHA, or VA!
As I said: I love hardball! I love knowing more about how things work than my opponent. I love winning for my clients!
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