Ask anyone who works heavily in the REO market like myself and it's no surprise to them that all of these financial institutions are in trouble.  Only the banks think it's a good idea to not negotiate with potential buyers during the short sale period, rely on old appraisals for values, foreclose and overpay for these houses, invest lots of money fixing them back up, and then sell them at a loss.  No other business could function in this manner before facing certain financial doom. 

I recently had GreenPoint foreclose on a listing while we had offers on the table.  The home was located in a neighborhood with declining values (over 50% of the homes that sold in the last 12 months were bank sales).  They relied on an old appraisal for their values and gave no respect to what was happening in the market.  So today, they will overpay for the listing, spend money fixing it up and relist the property for sale and sell it at the same price for which we had offers for.  Even when I offered up the entire commission, they still rejected the offer.  This occurs all the time. 

A few weeks back I went into a house days away from foreclosure that made my client throw up.  The seller had let the home go into disrepair and the home reeked of pet urine.  The value the bank placed on the property was UNREAL for the condition and would not budge.  Any day now, the bank will own this gem, will have to deal with the odor in some way to sell the property, and sell it for a loss to the bank.  It would have been in their best interest to have just sold it during the short sale period. 

So for all the big time bank bosses who read my blog daily, here's all you need to do to stop buying bad homes and selling them at a loss.

1. Update your assets (more like liabilities) value every week.  The real estate market changes every week. 
2. Hire a local representative to evaluate each property.  They can give you an idea of the condition of each property, the neighborhood, etc. 
3. On a short sale, share the value you want for the property as soon as the listing is signed, not after an offer is procured. 
4. Hire Negotiators with common sense.  I'm tough on negotiators because many hide behind poorly written scripts and never respond to offers in a timely fashion.  However, most make for bad sellers because they're so removed from the property, they haven't a clue about what they're actually negotiating.  I've had negotiators tell me they know the value of a particular property (one they've never seen) and they're 3,000 miles away.  It comes as no suprise when a re-appraisal is done and their values are dead wrong.
5. Trust your listing agent.  If you have someone who sells homes in that neighborhood and can produce facts to back up values in that neighborhood, it's probably the right conclusion that they know of which they speak.  Therefore, trust them to bring you the highest and best money for your home the first time.