Real Estate Blog - WHY DO THE BANKS DO SUCH A TERRIBLE JOB OF SELLING FORECLOSURES??

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WHY DO THE BANKS DO SUCH A TERRIBLE JOB OF SELLING FORECLOSURES??

* * * * HARD CORE REAL ESTATE TALK * * * *

FAX THE OFFER TO 222-555-8888. YOU WILL BE NOTIFIED OF ANY DECISIONS IN 2-8 WEEKS.

Over the past year, we've read many posts by real estate agents and brokers detailing their frustration trying to SELL foreclosure or short sale listings.

LET'S SET THE STAGE.

Buyer is fully approved for more than the list price.
Buyer is non-contingent and ready to take possession.
House has been on the market for more than 6 months.
House has been reduced in price from $379,900 to $299,000.

Buyer's Agent has a few questions about the existence of other offers and tries to contact the listing agent. Buyer's Agent gets Listing Agent's voice mail with the instruction: "Fax offers to 222-555-8888. You will be notified in 2-8 weeks of any decisions.

BUYER'S AGENT WRITES AN OFFER FOR THE BUYER AND FAXES IT TO THE LISTING AGENT FOLLOWING THE INSTRUCTIONS IN THE MLS LISTING.

Buyer waits 3 days and calls his agent.
Buyer: "Have you heard anything?"
Agent: "No, the agent says it may take weeks to get an answer."
Buyer: "Call the listing agent and tell them that if we don't hear something in 24 hours, we'll buy something else."
Agent: "I'll do that and get back to you."

AGENT CALLS LISTING AGENT AND LEAVES THE MESSAGE THAT THE BUYER IS WAITING 24 HOURS FOR A RESPONSE OR THEY WILL BUY SOMETHING ELSE.

No response from listing agent in 5 days after leaving many telephone messages. Buyer instructs his agent to withdraw the offer and show him other properties, IF the buyer's agent is lucky. Often, a buyer will hold his agent responsible and move to another buyer's agent. This is one of the reasons so many experienced buyer's agent decline to work with buyers who include foreclosures in their search for a home to buy.

The above is a "worst case" scenario. But, the result is the same in that the property has been listed for months, has lost significant value and there is a viable buyer and offer on the table that goes nowhere.

WHY DIDN'T THE LISTING AGENT RESPOND TO THE BUYER'S AGENT'S CONTACTS? Because the listing agent:

The listing agents has no authority to negotiate for the bank.

The listing agents has no management authority to do anything other than transmit the buyers contract offer.

The listing agent has many listings from the same mortgage company and would be bogged down all day on the phone if they took a personal contact approach.

The listing agent has given the foreclosure listings low priority because the mortgage company listings pay far less than consumer listings.

WHY DOESN'T THE MORTGAGE COMPANY THAT FORECLOSED ON THE PROPERTY ACT IN WAYS THAT WOULD MAKE THESE PROPERTIES MOVE FASTER??

BECAUSE THEY DO NOT KNOW WHAT THEY ARE DOING!!

The mortgage company employee that is in control of the portfolio of foreclosures,

is NOT a real estate agent, real estate broker,
has never sold real estate,
has no understand of the real estate market,
does not have any experience negotiating real estate sales,
is a salaried employee and will receive a pay check no matter when the properties in their portfolio sell or for how much.
final decisions for price, terms and conditions for ratified contracts is not in the authority of the loss mitigation clerk communicating with the listing agent.
final decisions on contract approvals are often scheduled weekly or bi-weekly by committee.

The primary reason these transactions are so difficult for the buyers agents, buyers and listing agents is because the neither the mortgage company nor their representatives communicating with the listing agents have no experience selling real estate.

Real estate agents and brokers sell a lot of real estate. We know how to manage a real estate transaction. We also know that the bank or mortgage company property owners have no experience or knowledge about selling real estate and getting the contract to the settlement table.

They have never been to real estate school.
They do not have a real estate license.
They have never showed a home to buyers.
They have never written an offer for a buyer.
They do not understand the industry standards for real estate brokerage.
They do not understand that "time is of the essense" when selling homes.
They have never presented a contract to a seller.
They have no understanding of the real estate market.
They do not understand the limitations of the "as is" clause.
They have no knowledge of real estate brokerage.
They have no knowledge of condition or inspections.
They have no understanding of disclosure.
They have no understanding of presenting offers, counters timely.
They get paid whether or not the contract closes.
The bank addendum is ignorant of state required seller disclosures and consumer protections.

The skill sets required for employees of the mortgage companies for loss mitigation representatives are not transferable to real estate sales or real estate brokerage.

FACT: BANKS AND MORTGAGE COMPANIES DO NOT KNOW HOW TO SELL REAL ESTATE.

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988.

Posted by Lenn Harley, Real Estate Broker, Maryland & Virginia on 09/16/2008 07:28 PM

Comments (112)

Mortgage Mess in the Mortgage / Finance Channel

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Originally posted at: MD, VA Foreclosures, First Time Buyers Grants, CDA Loans MD, Rehab Loans MD & VA: WHY DO THE BANKS DO SUCH A TERRIBLE JOB OF SELLING FORECLOSURES??

Post is included in group: Mortgage, Foreclosure & Elder Abuse Housing Fraud
Post is included in group: Realtors®
Post is included in group: SubPrime Loans and the real estate market.
Post is included in group: The Ninety-ninth Percentile

112 Comments on WHY DO THE BANKS DO SUCH A TERRIBLE JOB OF SELLING FORECLOSURES??

SEP

2008

Lenn, I have to agree with you here. I think a loan servicing co. should enter into a national partnership with a national re firm to handle their reo portfolios. What would you propose?

I have to agree with you completely. Of course, there are some exceptions to the rule, and some agents who work in foreclosures handle things pretty well, but it is about time for the banks to wise up. By the time the property is foreclosed on, it is already a "stigmatized property" in a sense. Buyers are going to expect to be able to lowball, and real potential homeowners just don't have (or need) the kind of patience necessary to make one of these deals work. There are so many homes on the market that are listed traditionally, with eager sellers who are happy to get back to you! If the banks would approach these sales as realistic sellers, prepare the property, price appropriately, market well and above all, return phone calls....we might not be in such a mess...and they would CERTAINLY be able to recoup more of their money.

Great post. You voiced my frustrations perfectly...saved me the typing!

As always, Lenn, you do an excellent job of stating the reality. Imagine what might happen if thos eresponsiblew for selling short sales and foreclosures worked on commission, and had a quota to meet.

Brendan's point is well taken, too. Real sellers? Nope that they aren't, and they don't know how to be, nor seemingly care to be. If no one is held accoutnable for clearing the books, well....

Jeff

Yes the banks are terrible. In thier defense they are overwhelmed. Ive had clients make offers and it took so long for answers they moved on, only to get notice weeks or months later thier offer was accepted.

You couldn't have said it any better!! This is why 'real' sellers are fetching 5-10% more because buyers are DONE with the wait, multiple offers, addendums and BS that go along with that as-is, special warranty deeded property!!

Lenn,

You are so right! They make it so difficult to work with them.

Even better is the "after" the ratified contract service. Most (not all) of the agents are overwhelmed or under trained. They ask the buyer agent help in finding out how to order condo docs or are less than cooperative in getting the buyers agent information on the sellers title company. We end up doing both sides of the transaction just to keep the deal from falling apart and then they offer us a fraction of the commission that we should be earning. I'd like to see a system where we get to rate the agents on the other side of the transaction after the deal instead of them getting high five's from the bank because they closed one in the inventory.

Lenn, all we can hope for is Congress never passes the bill for banks getting into real estate and opening real estate companies.

~ EXACTLY ~

I called a foreclosure listing agent and his voicemail says "Please do not leave a message for showing instructions. They are in the MLS. Due to high call volume please do not expect a return phone call for 2-4 business days.". WOW

Ok, I get the showing instructions part - taking those calls all day long can be a real drag.

But I go to his website to look for another phone # and it is this same #. Geeze. So a brand new potential customer will be hearing that same message? How many do you think will leave him a message? Guess he doesn't want to be bothered. Insane.

I faxed the offer and emailed him to attempt to 'non-invasively' get a confirmation of receipt. And maybe an idea of how long we might be waiting for a response from the bank. No answer back yet, been a day and a half...fun fun.

Good post. I was going to mention that this would turn the heat down for banks getting into real estate, but someone already mentioned that. Bottom line is, banks are all about lending money, they don't know how to sell real estate.

Lenn...here's one bottom line. Banks are hurting. They don't want to HIRE AND PAY more people to assist them in paring their losses. So stupid really.

Michael. I'd rather see competition. Let the banks give negotiating authority to the listing agent, pay the listing agent a good fee and get rid of the properties. They could whittle the excess inventory down in a year. At the rate they're going, the properties are losing value every day they sit. Or, the banks could hire brokers to to the job for them. They clearly cannot do it themselves.

Brendan. If the banks had any market knowledge, which they do not, they'd know that the purposeful delays they inject in their systems costs them money. Lots of money.

Jeff. Indeed. This logjam is rediculous. Countrywide is more interested in making another loan to the prospective buyer than getting rid of the inventory. Like buyers who are already pre-something are going to want to let the seller owner of the foreclosure finance it too????

Mike. Anyone who is active in the market has experienced the same.

Renee. Good point. I understand why the deed is "special warranty", but it should generate more of a discount that these properties do.

Pippa. And the properties sit and sit and sit.

Cindy. Indeed. The banks have no knowledge of what the real real estate world is like and has no basis to judge the competency of their agent or themselves.

Michael. Competency has nothing to do with that. Lobby money controls that. So far, the NAR has out lobbied the banks in this matter.

Susan. Multiply that a million times over and you have a picture of our foreclosure sale market.

Jerry. You got the message. Thanks.

Larry. They are losing money because their choking on foreclosures. They could get rid of some of the foreclosures and make some good loans.

More and more buyers will start walking away from waiting for a foreclosure or short sale to go through..sellers that aren't up side down will probably command a little more. Lenders and banks should take into consideration that they have competition.

The whole thing is ludicrous. We don't have that many in my immediate area and I have not immersed myself in said market because the very few people who do them have it pretty much locked up - but the FRUSTRATION that the pros are feeling when they get no response is palpable. HELLO - here is a BUYER - WHAT are you waiting for?

Another factor is that most of the banks are not in the same state as the property. Lenn. Will you send this to EVERY bank in the US please?

Lenn, and in many markets (including inside the Beltway in the DC Metro area), the real estate agents on both sides (but more often the buyer brokers) are often unfamiliar with the process. They don't prepare their clients for the very tricky, winding, rutted road that stands between them and Dream House.

EXACTLY EXACTLY EXACTLY!! How many more times can I say it? Oh MAN...this process makes me crazy! I had cash buyers who wanted to close in 7 days. It STILL took three weeks to get an answer from the bank. In those three weeks, my buyers were going nuts. GOOD STUFF!!

GBU, Lenn!

Fact; Banks and Mortgage Companies do Not Know How to sell Real Estate!!!!

Lenn, You said it all in that simple statement and as a listing agent for REOs I try to get back to buyers agents on a daily basis but some of them don't beleive me when I tell them it's out of MY hands when it comes to making a deceision and I will call them as soon as I have any information.

I gotta agree with Patricia...part of the problem is compounded by buyer agents who don't know the process and don't counsel their clients properly. I paint worst case scenario with my buyers and they are well prepared for the long, tedious wait, the pitfalls and the negatives. They have to be highly motivated if they want to survive the process!

Neal. Absolutely and in some communities like Florida where there are many foreclosures, seems to me that a smart bank who took a pro-active position about liquidating these assets could mitigate some of their losses.

Ruthmarie. Agreed. It is a strange culture when you have something for sale, along comes a buyer and the seller ignores them.

Ellie. HA! This went to every bank in the U.S. at approximately 10:21 a.m. ET.

Patricia. There are some good foreclosure properties in inventory in this area. Selling them is not easy because the buyers don't understand the value and opportunity. However, I believe that the barriers created by the banks are the biggest problem.

Elizabeth. It's insane. I agree.

Cameron. I know it's not the listing agents' fault. However, unlike you, communication with bank agents is not always easy either.

Susan. That's the only way to proceed. I agree. One of our buyers just closed yesterday after a 5 month process. Insane.

Lenn, this is so good you did it twice. I am going to re-blog this one, so if you delete one, don't delete this one.

Lenn, Fantastic post. I have to re-blog this (with your permission). I have lost 2 short sale listings so far this year. In both cases I had brought offers very close to the asking price, but the lenders decided to sit on my offers. Finally, both homes were foreclosed and came back on the market at a lower price as an REO!!! In one case my client ended buying the house for much less than she had originally offered!!!!

From the very beginning of this whole short sale and REO fiasco I used to say that banks would save themselves a lot if they hired Realtors to handle their short sale deals.

Lenn, I agree some of the agents for the banks are terrible with communication, or the lack of, and since I also work with buyers I get the same lousy treatment and it's enough to make you scream.

Fred. Thanks for alerting me. I had a lot of trouble getting posted today because AR kept going down. I guess my first attempt worked. Anyway, I can't delete it completely because the comments would lose their points. I just pointed that post to this one and deleted the content.

Thanks for reBlogging it. I appreciate it.

Mana. Be my guest. I always enable reBlogging except for some Members Only stuff.

Cameron. I scream regularly.

Lenn,

I think ours may not be as bad because we have been dealing with this alot and for a while. I believe we lost the #1 spot for foreclosures but I'm certain we are still up there. :)

With the newest news of buyouts, bailouts and such I foresee many others walking away from their obligations....

Amen to all of that

This is exactly why I stay away from short sale and foreclosures.

Lenn,

There is one major reason for this difficulty and protracted process...lawyers! lawyers! lawyers! Thanks, Fran

I have two tons of empathy for you. I'm in the end of loosing a deal with what must be the most patient buyers on the planet. Offer on VA foreclosure was written march 16. Doesn't look like it's going to close even when sometime in May I had a signed contract. The seller withdrew from contract due to title issues. Title issues now solved and now Ocwen doesn't handle VA foreclosures anymore, they are being transferred to Countrywide and reassigned. This whole REO business is enough to make any agent insane.

And all those things you mentioned in the blog are the reason they (banks and lenders) are going under left and right! Many of them do not understand nor do they do business well.

Lenn- The ultimate is a matter of in good times and in bad times, no matter what or when, the lenders do not know how to sell real estate and have never gave any understanding to the term, time is of the essence and they are notorious for NOT respecting time clauses and closing dates in the contracts.

Lenn so very true. Part of the problem is the listing agent(s) who is/are handling these files are so burdened that we get these voicemails and call and call and call and call. I have finally sent faxes, backed up by emails with voicemail stating that I need a response from the listing agent by the end of the day or he'll/she'll be doing a fancy tune with the board in explaining why they are not responding to the buyer's agents.

Banks are banks. They are in it for the money and that alone. They have no idea about real estate and rely upon what I would consider "speculative" observations on conditions of the subject property, the true value from a qualified appraiser versus the drive-by scenarios which are hardly my idea of qualifying the true value of a home based upon it's current condition. Their methods are a little dated like back to maybe the '40's when it comes to understanding how to find the value of a home. They have no idea that people destroy these homes inside, or that even during the short sale process, and during the time of ownership, alterations have been performed on the property without permits and done by a friend of the family who "moonlights" to make extra money and because he is saving the owner of the home money, they feel they are getting a deal when in total actuality they are creating a nightmare. Drivebys should be outlawed, if I can say that.

Nice Post Lenn. Really nice!

Lenn.. This is a GREAT blog. I've been asking this question for months. Should have blogged about it.. but didn't glad you have.

I've run across this problem twice this year.. and both times it took too long (or never) got a response from the bank.

If banks are in such dire need of money.. why are they dragging their feet with this?

valerie osterhoudt

I have found this to be true for short sales, but not foreclosures, the most recent ones I have sold, the sellers(bank) have been very responsive and easy to work with.

Lenn: Wow, I thought I was reading EARLY only to find that you've already received not only tons of comments, but that little gold star!

I will say that I think that the mortgage company employees need to buy and sell their own homes once every two years so that they can be reminded that there is a human factor involved--despite the fact that this is a financial investment, homebuyers are ulitmately looking for their 'dream' home and there IS emotion involved on their part. When these mtg. co. employees don't have the courtesy to give their listing agents an update, that drives everyone nuts! Perhaps if they bought and sold every two years themselves, maybe they would learn a little something about real estate too!

Every company is different, but I have found that you have to get to the loss mitigation dept. and I have found that you have to stay on top of your contact. Get it to the board a quick as possible because they will make the decision no matter what. It has to go to the board and most boards meet every 30 days and go over short sales for that time and make decisions.

Here is how I package a deal,

I include a hardship letter from the sellers and it has to be hard, not just the market is bad if that is all you got forget it. Job loss, medical crisis someting that means the seller cannot pay this loan back. I have my only little things also.

They want to know how close is the offer to the loan.

I include a HUD 1 from the title company ( this is a must)

The Board will want an appraisal less than 30 days old if they don't have one they will order one. I furnish them with two BPO if possible one from me and one from another agent at another company that I work closely with.

I take photos of the comps and the home and send with the package.

Preapproval letter for buyers, make sure it doesn't show more than the offer ( common sense you would think).

Even with these your looking at 60 days depending when the board meets but if these are not done try 4 to 6 months.

Lenn - It seems that some companies are much harder to work with than others, and the gummiest I've experienced usually involved middle-man companies that gooed up the process even further.

The worst seem to be the mortgage companies that use attorneys as middle-men, and are under contract with only a specific title company that really knows how to foul things up, from tax proration to keeping track of where the file is!

Lenn...

Wow, the last line says it all, they don't know how to sell real estate, do they? I had an accepted offer from a bank (in writing and signed by all parties) and they kept yammering about clean copies of the contract and according to the listing agent, they thought the house was still for sale and were looking for more offers! WOW.

I think what it boils down to is that the person making the decision does not understand that they live or die by the deal. One would think that after the events of the last couple of days, as well as the expected bank issues that folks in loss mitigation would figure out that when they screw up they are going to blow the jobs of everyone at the bank.

Maximize shareholder value.

This is not a hard concept to grasp... or shouldn't be. It's drilled into every first year business student. There are only so many off balance sheet SIV's to pour these loses on to. For the love of Pete, the disaster is at the banks door... I agree that loss mitigation doesn't have a clue but are the CEO's asleep at the switch? The short answer... yes. If they weren't they would move heaven and earth to get those REO's off their books...even at nickels on the dollar.

I think most of the time buyers are not aware of how the process work, they don't understand it is different than dealing with a regular seller. The buyer's agents should educate their buyers upfront so as to prevent a lot of frustrations on everyone. The REO listing agents should also take the initiative to educate buyers agents who do not know the process. Response in a timely manner and explain.

My favorite is something that is now unfortunately common around here with the REO listings:

Showing Instructions: Email Listing Agent.

If we're lucky, they'll include their email address. They don't always. And if you do email them, they won't respond. Forget faxing the offer. We can't even get the combination to get access to the vacant home. This is what happens when banks insist on only using combo lockboxes and won't allow the combination to be listed in the private MLS remarks.

Seeing these companies in action makes it clear to me why so many are going out of business. They're killing themselves.

I am an REO broker in the Inland Empire and I'm selling some of the toughest real esate in my area. Many of the houses that I have listed are in pretty bad condition and in rough areas. Most of my business is concentrated on a few properties with a local regional bank in Southern California and I can proudly say that I personally respond to all the inquiries on my listings. The assett manager is so impressed with my timlieness on reports and BPO's that he will be soon giving me more properties to list in the Inland Empire, one of the regions hardest hit in Southern California; I hope to provide the same quality of service once my business grows.

Under most state laws banks do not have to be licensed to sell real estate. In my opinion they should hire persons that were previously licensed or have an understanding of it. Since banking is a clean job, these positions pay almost nothing. The persons working there do not care. At the end of theday they will make about 5 calls at 4:45PM and leave a message on your voice mail. When you return the call immediately, you'll find the office is closed for the day. Just like relocation companies.

Lenn,

My buyers ask me every day why the process is so long, drawn out and complicated. I still don't have a good answer for them; ready, willing and able qualified buyers with all their ducks in a row still can't make a lender respond any faster.

What is there to decide? The listing agent on a short sale I have the buyer on just told me yesterday that we just have to wait 2 more weeks for the payoff demand letter. This is for a contract that my buyer and I wrote in May. The lender (WAMU) is using another 2-week time period to get us a payoff that takes minutes to produce.

My worst one ~ we wrote a contract in January that we've never received an answer for!

If they would just let us do our jobs, this mess could go away much faster...

It is a serious pain!!

Lenn, - banks not only don't know how to sell Real Estate. IMHO they want all of us - public, Realtors and especially government - to beg them, Please learn how to sell Real Estate - and finally get here. Slow processing, ignoring the basic rules of selling Real Estate plus absolutely unrealistiic pricing - that's the rules of New Era of Real Estate - the Banks in Real Estate Era. Sad! What we the professioanls can do about it? It's not one or two bad guys - that's the whole industry standing against civilized way of selling Real estate. Thank you for your great post!

What about their adendums? Can they seriously hold up in court?!

Banks, like other organizations, have to have some senseless rules and procedures. These rules and procedures don't make sense to us...they make sense to them. We have to deal with them not to spite them, but inspite of them. Look at the bright side, next year there will be less banks.

Great post Lenn. I warn my buyers a hundred times when they mention foreclosures/short sales that they are in for a long ride. Then, I tell them "when you decide to walk away after wasting all that time, the bank also gets frustrated because of the time they've wasted and the process starts all over."

I have often wondered what they would do with the file if it were their money

Banks are not equipped to handle this many foreclosures. For bank employess it is practically professional suicide to be associated with foreclosures. The best employees, if possible, avoid that department like the plague.

That's a powerful last line! The responses, or lack of responses we get from banks when we have buyers who want to buy a foreclosure, is second only to the horrendous lack of responses we get from short sale banks. And it's proof that banks should stay out of real estate!

SEP

2008

Hi Lenn- It's hard to find a normal sale in CA. right now. We are at the mercy of REO listings and short sales. The thing that gets me is that in listing description, the Agent states that buyer must get a pre-qual from the Bank who owns the property in order for your offer to be submitted. Now lets say that offer does not get accepted, and you locate another property to put an offer on. Now in description it requires Buyer to get a pre-qual from its Bank. How many pre-quals/pre-approvals does one buyer need? Very frustrating!

It is a sad situation indeed. There are buyers who want to buy but who are turned off by the process and the total lack of respect they get from the banks. And the addendums, don't even get us going on those. Good post.

Anybody with experience dealing with short sales and REOs won't argue with your conclusion. The comments prove that, now what? What is the solution to this mess?

LENN and lastly, they have no repsect for those of us who do!

Last, they don't know what they don't know.

Lenn, excellent scenero's that we deal with every day.

Now another grip I have in Mi is that the banks turn off the utilities, sump pumps quit working, basements flood, now you have water, and mold in somecases. They end up having to spend more, much more money on repairs than they would have a utility bill.

Then when the inspection comes along, the buyer agent is responsible for getting the utilities back or or the listing agent. It is a flipping mess.

Miriam. That's a good one. Absolutely right.

Allison. You are so right. It is to their detriment, but they really don't care.

Yolanda. The property owners get to write the rules. Unfortunately, this time it's the banks and they don't seek counsel.

Bob and Carolin. Thanks. I think I have to add something about the addenda. You're right.

Denise. Their requirements are the result of the fact that they don't know what they're doing.

Lisa. Right you are. Short sales are harder to manage for buyers than foreclosures, but they're all difficult.

Tigard. If the banks were smart, they would hire some experienced real estate brokers with knowledge of market trends, disclosures, consumer protection laws, property promotion, listing management, etc. and clean out the backlog. Not only would they make a lot more money for these asset sales, they would get some good public relations.

Terry. They'd return the agent's phone call in a nanosecond.

LaNita. Consumers are not treated with the respect they deserve when they offer to buy a foreclosure. The banks should expedite the process to protect their shareholders interest in the asset disposal.

Ernst. I don't believe the procedures are necessary. I believe that they are the result of a company trying to perform in a field that is not their core business. Real estate brokerage is not like selling a depository or loan product.

Abacus. I have found that their addenda are negotiable.

Svetlana. Thanks for joining in. At least we are all in the same boat. Who knows, perhaps a bank or two will read this post and make some improvements. Sure.

Emily. Agreed.

Lynn. You voiced my biggest complaint. They do not communicate. The basic tenent of a successful business is to communicate with a customer. They don't consider home buyers customers. Their customer defaulted and they put all home buyers in the same niche.

Jim. Relocation companies are far easier to deal with than banks. Not that they understand real estate sales, they don't.

REaction. Good for you. The underlying problem is often the bank/owner's lack of timely communicatin. How is that going?? You many communicate but has the bank made the process more timely and responsive to the buying needs of the consumer??

Tim. Indeed. First they make the bad loans, then foreclosure then drag out the process of selling the property on which they foreclosed after making the bad loan.

Don. Goodness. I've seen that one, e-mail listing agent. What on earth are they thinking.

Abacus. How about the listing agent educating the bank about real estate sales and let them know that they are shooting themselves in the foot with the processes that take months.

Jesse. Indeed. These are potential liquid assets in an industry that has seen liquidity evaporate.

Lane. Right. It's hard to have any sympathy for a bank going under these days. When I see an investment bank going under, all I can think is that they choked on a loan bone.

Richard. Good point. We know how many years it takes for most real estate agnets to grasp this business. Yet, the banks use processes that serve to hinder sales, not promote them.

Lynn. Good point. Although, if the sale actually gets to the title office, that's some progress. Think of how long it took to get there.

Lenn I love the way this is laid out. You have a theory, consider the facts and observations, and come to the right conclusion. It is soooo frustrating to deal with foreclosures and short sales. When will they learn????

Michael. Perhaps the banks will begin to talk to each other. Granted, short sales are bad, but foreclosures can be very difficult to explain to home buyers.

Valerie. Good question. The bank personnel who design their foreclosure sale processes have no real estate knowledge.

Barb. I agree. Of course, those "drive-bys" started before the foreclosure even took place. Many of the BPOs start prior to the auction. Besides, what does the bank expect for $50-75?

Katerina. Good point. When I have a question about a sale, I go immediately to the contract. When the seller is a bank, they go to their internal asset disposal process. They ignore the contracts.

Sheila. Right. They are good at taking our deposits, making secured loans. When it comes to real estate sales, they haven't a clue.

Lane. You said the "C" word. Countrywide is one of the most difficult to deal with in foreclosure sales in my experience. They still try to cram their mortgage business down the throats of the foreclosure buyers. Geez.

Fran. I'm sure the lawyers advised the banks about title matters, etc. They probably were involved in the asset sale procedures too.

Lenn,

One of the biggest problems I see and you've heard it from me before is they simply don't care. They figured that they got their hand caught in the cookie jar one too many times and they won't take the blame so they would rather take their dear sweet time...try to get top dollar for poorly kept properties and expect a buyer to pay them more than it's worth and could care less about the condition of the property...they should also look into hiring agents that care about the way the property is put back out on the market. Just because they have an agent in their data base who might be a so called foreclosure expert doesn't mean they are going to keep up on the overall condition. I've seen property that was re-listed after the foreclosure with a different agent and that agent left the grass high in the sky...water running...etc. I know sometimes we have to deal with the owners cooperation but if you want to justify top dollar in this market or any market at least make it presentable. It's just another piece of meat to them.

Neal. Thanks. I also believe that it is a part of the fact that the banks are the ones who made the bad loans in the first place leading to the foreclosure and now they have to sell the home on which their borrower defaulted.

What is so sad in this mess is that they are costing their shareholders money by not taking on the job of selling real estate which is not their core business and they do it very poorly.

Most of the responses are complaints that I believe show limited understanding as to the banks problems. Its not about the Realtor! If banks were to just move the property at a loss as many suggest, that means that the loss goes against their books, and the asset goes away. Now the bank has to put more cash in reserve to meet requirements. That starts a downward spiral and since the banks have liquiditiy problems in getting cash would be forced to continue the spiral. They could do nothing but let the properties sit and it is still better to show the "false" asset instead of show a lower book value, which drops the stock price, etc.

Lenn, Great Post!!!

The Definition of Crazy:

Crazy: doing the same thing over and over and again expecting a different results.

So, with a pool 1.3 Million Realtors in the United States to choose from.Wouldn't you think that these large BANKS could implement an Emergency Task Force ( much like what we see with these catastrophic storms ) that would put licensed Realtors on the payroll of each Loss Mitigation Department immeidiately Nationwide to resolve this situation.

I'm sure there are thousands of Realtors Nationwide with a great deal of contract knowledge that would love a REGULAR/WEEKLY PAYCHECK.

A penny for your thoughts Lenn?

Paddy. They will not, ever learn. They have not the basic knowledge of real estate brokerage. Banks are used to taking deposits and selling financial products. Real estate brokerage is foreigh to them.

Lenn for all the reasons you site is why there should be some kind of regulatory board that oversees short sale and REO transactions. There are far too many of these stories and it doesn't seem like it is improving.

Bill. What a great idea. All they need is performance standards. Assets that have been on the books for more than 180 days should be deducted from that bank president's income package.

The banks have sent every listing agent a length of rope and attached instructions: Tie the hands of everyone involved with the tranasaction.

Ahh...you put if wonderfully Lenn. Now we're starting to see new shenanigans in Michigan (no split title closings) that is really going to add some confusion and fire to the mix.

I think many of these agents have high volume and sometimes...service is not up to par! I tend to agee short sale specialists for many of these banks...are nothing but telemarketers...order takers...

As a board we are working on proper verbiage in our mls...shortsale approved...or potential shortsale..and I know when you list these properties...you spend lots of time on the phone...returning calls but that is part of the business.

I do think will change...because it just can't go on this way much longer...we need service...we need quicker responses and we also need banks...not to attempt to sell houses.

Kris. The basic problem of course is that the banks have no knowledge of local real estate practices. This one is just another way of STEERING the title policy commission to a particular title company.

The bank is probably involved in a joint marketing program with a title company. RESPA is still split on that one.

I agree!

Lenn, I am late to this discussion so I have not read all of the comments. Please forgive me if I am redundant. I think that the bank likes to hire listing agents, no offense, that they feel they can also be in control of. If they had a strong agent trying to get the house sold it would upset their applecart. Like you said, they not being in our industry don't get it. But remember, anyone can DO real estate!!!!

I had one listing about 2 years ago that was a short sale in the beginning of that market. The banks made no sense to me, and they just shuffled me from one place to the other.

I am not surprised that the big banks are in the situation they are in, I think they should add a bit of common sense to their strategy!!

Lenn, I have a hard time understanding how RESPA can be split on this issue when in their rules it states:

"Section 9 of RESPA prohibits a seller from requiring the home buyer to use a particular title insurance company, either directly or indirectly, as a condition of sale."

Sounds like talkin out one ear yet listening with the other if there is no meat to their guidelines. HUD needs to step in and enforce their own rules.

Midori. No one needs to sell these properties more than do the banks. They just have no market knowledge of real estate brokerage.

Audray. Agreed. Funny thing is, as bad as they are with real estate sales, they haven't changed in all the years I've been selling. About the only thing changing is when a high volume listing agent has disclosures available by e-mail.

Kris. You know it's a violation. I know it's a violation. Once in a while, HUD comes down on a serial offender, but not often enough.

"They could do nothing but let the properties sit and it is still better to show the "false" asset instead of show a lower book value, which drops the stock price, etc."

I have to disagree. The problem was their decision to lend to anyone with a pulse who could make their mark on a 1003 and the HUD. Unfortunately it's too little, too late to worry about that. Their problem now is by sitting on these wonderful deteriorating, depreciating and costly non-performing assets, they're being eaten alive from the inside out. Attempting to hide those loses through creative accounting is contradictory to their core mission to maximize shareholder value and to a greater extent, their very survival. Those chiefs who take the bull by the horns and deal with it in an aggressive fashion might survive... the others? They will likely implode under the weight of all those NPA's and the resulting financial drain.

Jessee. I agree. Home Realty Group assumes that the asset will maintain their "book" value. Nonsense.

These properties often sell far lower than they could have 6-1-219 months earlier when banks could have sold but because they don't know what they're doing, let the properties deteriorate, the buyers walk and the market value drop.

Lenn, why don't you'd spend just ONE HOUR in a short sale room and report back the activity- I'm sure we could take up a collection here to provide the same wage offered to these short sale people. Bring a hidden camera so that we can see for ourselves just how it is that the person we want to reach is NEVER there. Sounds like a Dateline episode to me.

I want to know HOW this blog can reach the Bankers Association at large. Everything you said is 100% true. It's like Forest Gump, "Stupid Is as Stupid Does".

Some national association of bankers needs to post this on THEIR communication network and maybe the government WON'T HAVE TO BAIL THEM OUT!!

Laurie. We sold two foreclosures this week and it's fresh in my mind. I don't like to mix the short sale sagas with foreclosure activities. They are quite different. In fact, I haven't seen much if any change in foreclosure sales in 20 years except for the volume today and we don't really have that many.

Short sales have that middle person, the home owner, in the way.

3rd try to respond to this, I LOVE DIAL UP! Anyway, the story is short this time.

I just purchased REO from Bank X. Listing Agent was great, even he isn't from my company HA HA.

I just showed REO from same lender, but they had listed with agent not in the MLS that serves this area, or even in the next closest MLS. Try the next MLS, this agent doesn't even advertise in the area the property is in. Maybe the local agent is overwhelmed but this makes no sense--the same thing I tell every person that wants to deal with foreclosures. Nothing makes sense about how banks handle REO properties.

There are changes needed in foreclosures and how banks handle them, they are just too overwhelmed to change their MO right now.

Lenn,

It's MADDENING! We really do want to sell those houses for the bank......but they want us to wait 7 days to see if they got the offer, wait 72 hours to call again, wait 2 more weeks for the BPO, wait 45 days for an answer.......it goes on and on and on till you get a rejection 3 months later and are told to start over again if you want to submit another offer. NO THANKS! Too much work for little or no pay.

This is a great post for many reasons. First of all it serves to educate those who do not understand what is going on, and two it can possibly help and enlighten a few people. This one is really worth re-blogging. Thanks. Kudos for also doing such a good job of explaining it so many can understand it and learn.

Thanks Lenn for sharing this. I reblogged it (of course with proper credit to the wonderful Lenn). Now I can just have my clients look at the website for a great explanation of why this is taking so long. One set of my clients are trying to buy a house that has garbage 2 to 3 feet deep inside, doors are not secure and it appears that squatters are coming to sleep at night. My clients will clean, repair, update and turn the house, and have $ and good credit, BUT WE CAN'T GET AN ANSWER. What a way to run a railroad.

List and Sell (and hope someone at the bank has a clue about that too) Gary @ RentonHomeFinder

SEP

2008

I hate reo's just because you can't get an answer out of the people.

Makes buyers mad. You can tell them the process but they don't like it.

It is a difficult situation to be in. All we can do is inform our clients and wait with the rest of them.

"Choked on a loan bone"... that is priceless. I guess when you write your own future and do it poorly you have no one else to blame.

SEP

2008

Great Post, your right on, I have three contracts pending the forclosure, but the banks would not except since it is in the lawyers hands now.

Lenn, I did not read all the comments (because I sell REO's:) and I don't have time...joke. I "do" sell REO's and what I have found from being on both sides of the transaction is that some Realtors are overwhelmed with business which makes it very frustrating for the Buyer Agent and their Client.

Also, with the multitude of foreclosures going on, many banks are not getting full documentation before the house goes on the market. This is a bad thing and will lose many potential buyers.

I have a buyer now that is so upset with a transaction we had with an REO Realtor that if we find any other homes listed by that Realtor, she will not get involved!

I recently waited (I confess I did not wait stoically, but rather shot out emails and left messages daily) a month and a half after our highest and best. Finally, we pulled out ourselves and looked elsewhere. A week later I get a P&S in my email!!!!! It's almost laughable if it were not so frustrating.

So true. The last time I had an offer in to a pre-foreclosure, we didn't hear back from the listing agent for four months. By then, I looked on our MLS, and the listing had been cancelled. I have no idea what happened to the property. It is probably owned by the bank by this time.

Anyway, I try to avoid the type of transactions that are only around during ups and downs in the market. I don't want to become a foreclosure expert because when the market turns, there will be no foreclosures. Residential resale, new homes, and relocations are there in an up or down market, and that is where I try to focus my business.

Lenn by far the best post I have ever seen on short sales frustration. You hit the nail on the head.

Banks have employees doing the work who will get their check at the end of the week no matter how high the pile of pre-foreclosures is on their desk.

When and if the banks wake up and let us do what we do we will actually help them out of the mess they got themselves into.

Sincerely,

Bill

SEP

2008

Bill F. Actually, this post is directed to the problems with selling bank foreclosures. I'll get to short sales next week. They are even worse.

Troy. Don't be so quick to avoid foreclosures. They have always been around and over the years my buyers have made some very good buys. They're just in the news now because of the increase in numbers, but there have always been good buyers in foreclosures and always will be.

Karen. You bring up a very important point. WHY would a bank put a property in the MLS before they have title. Pre-foreclosure sales by banks are quite premature. In fact, it's probably unethical for the agent to list them and misleading for the bank to offer them. If you get to settlement and the bank can't transfer clean title, our contracts give the bank about 14 days to cure or the buyer can walk. Then on the other hand, the banks really don't care.

Jack. Pre-foreclosures are very risky. Foreclosures are not nearly as risky, just annoying.

Lane. You can use it.

Pamela. True. Many buyers when told the facts, don't or cannot wait.

Brenda. It's an industry wide problem and not getting enough attention. Why doesn't the press pick up on this????????????

Gary M. Your buyers have more fortitude than most. But, I too have gotten some good foreclosure buys for folks. These days, there are some fabulous deals out there.

Michael. Thanks. It would be easy to write about title, mortgage insurance, forebearance, redemption, etc., but that wouldn't explain to the public why they must have patience when buying a foreclosure.

Diane. You describe what happens across the country every day, week, month. Banks do NOT know how to sell real estate.

Mark. It's awful indeed. But, they could change overnight if they simply listened to a few experienced agents and not try to control everything with a completely alien system to sell these properties.

Just the FACTS, Ma'am!! Boy you put it in the best terms I've heard recently! Great Blogging!!

Great blog! All so, so true! If they would listen to professionals, they'd net more money, lose less money, and not be in such need of federal bailouts! Somebody pass this blog along to McCain and Obama, how about?

SEP

2008

More than one person has told me and I have thought the same thing - the banks are waiting for the government to bail them out - and GUESS WHAT? That may be happening right now!

Banks have been trying to get into real estate for some years now. Now a loophole for credit unions has allowed our local credit union to start having realtors. My broker says banks do not do well in real estate and they won't last long. Just look at how they are handling the foreclosures and short sales.

SEP

2008

I admit I did not take the time to read all of the previous 102 replies to this post, so if someone else has covered this, I apologize for re-hashing it. Banks are a corporation, and no matter how friendly the teller you always go to is, they are not in a "people" business like we are. They are interested in two things- Maximizing profit and minimizing loss. Because they are a corporate structure and have shareholders that they are responsible to, every decision is made by committee... It's easier to spread the blame that way.

I work as a Home Retention Consultant with a negotiation service- We get asked by the lender to find the defaulted home owners and help them work something out with the bank if it's possible to do so. By the time the lender calls us, they just want to keep the property from being a bigger loss than it is setting itself up to be. Often this entails loan modifications, payment deferrals, and or repayment schedules for the arrearages... Did I mention that it's the LENDER who contacts us, not the borrower? I ask because even at that, it can take months to negotiate a workable arrangement for both the lender and the borrower- Sometimes longer than the borrower has left before auction. And all because the Loss Mitigation department and the Collection department and the REO department and etc are just that- They are departments, and none of them co-communicate. As you point out, Lenn, banks are not structured for real estate transactions, they aren't structured for the business we do. It's unfortunate, but it's the way it is- If they ever do get it right, they'll simply push real estate professionals out of the business or into their employ.

For us, the best line of defense with our buyer clients is full disclosure- "Yes Mr/Mrs Buyer, we can make an offer on this home. And I don't want to discourage you from it... This is a Bank Owned property, and as such..." On the listing agent's side, we can only do what our client (who, in the case of a bank is a committee) tells us they want- We can try (futilely) to tell the poor employee on the other end of the line why it won't work that way, they're still not the one in charge though. It's like giving your listing presentation to the adult children of the home owner- Sure they understand you, but it's not their decision to make.

SEP

2008

When I have a customer tell me they want to buy a short-sale or a foreclosure I know it will be months before we close. UGH

SEP

2008

I will give my two cents worth. Most of the banks have outsourced the skilled jobs in REO,Foreclosure and bankrutpcy. So the people managing the process do not have the skill set needed. Also lots of the people in the outsourcers do not have the skill set or have to many assignments to manage well. Also over the years there has been an effort to use computer systems to manage these processes taking out the decisions out of the peoples hands. So if someone makes a mistake they do not learn from the mistake.

This is from an old REO/Foreclosure/Bankrupcy manager that now sells realestate.

Keith. As I said, Banks do not know how to sell real estate.

Hi Lenn! I just wrote an Open Letter to REO agents because the whole thing is so frustrating!

SEP

2008

In working with short sales or bank owned properties I think that buyers do not understand that it is not up to the selling agent on how quick things happen. I think it makes the selling agent look bad too because the buyer thinks that they are not doing their job and really the bank is so overwhelmed with so many homes right now and their sometimes crazy policies that it takes forever for them to answer. It also really depends on the bank too but if when you submitted the offer you told your buyer what the agent had said about it taking weeks, I really don't understand why buyers don't believe us.

Norma. Our buyers believe us because we tell them the worst case scenario and remind them regularly. We also continue to look at homes.

OCT

2008

Lenn ...

Your post is right on the money ... I was in a foreclosure yesterday ... a 3 year old townhome in a nice neighborhood of Fairfax ... The kitchen and baths had been taken apart by the foreclosed owner ... The selling bank was unwilling to spend any money to make repairs, consequently two contracts had fallen apart because the property was found to not be habitable during appraisal!

No SALE!

Pete. That property doesn't have to sit. It's a good property for a home improvement purchase loan. Easy to do and it may be the only solution other than a cash buyer.

Lenn

I participated in quite a few bank REO sales , FDIC sales , and other FNMA etc. sales after the bank failures in the 80's. I honestly thought then and believed that many of them carried the assets as long as they possibly could to avoid the forced write off on their books once the asset was liquidated. I don't know what the rules are on allowable time to carry the assets like these, nor how often they must be reappraised if held. If an institution is avoiding selling for fear of being shut down after they sell them all, they might as well call it quits and get it over with.

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