If you really rack your mind for explanations of the current real estate condition in the US these days I believe the term "Stalemate" best describes the dilemma. From what I am hearing from many agents... is that banks do not want to negotiate the price of "Bank owned" properties. Why? First of all it acknowledges that the assets of banks may not be as good as they would like you to believe. In fact it may point to the banks are really insolvent. Think of banks that hold 1000 mortgages at 600K. Perhaps today they may be worth only 350K each. How can a bank write this off under fractional banking? The banks cannot take a loss on any of these products without acknowledging they are insolvent or totally upside down. The banks cannot sell the toxic assets to anyone, the government is not buying the bad debt, and under fractional banking if they did sell a few of these products at a great loss only to infuse cash into the coffers to keep them fluid...they place them self in a position to lend less money, thus putting them in a more dire state. That is the nature of fractional banking. Fractional banking works on a multiplier effect. An example would be...If I place $10 in the bank... they can lend a $100. If they lose the $100 now they cannot lend $1000. That is basically how it works. That is why a new Federal banking rule that was supposed to take place last fall for bank reform - was postponed in implementation until next year. Otherwise you would know how bad things really are. So that explains a lot of what is happening in real estate. It is a statement. Banks are between a rock and a hard place to do anything. "Damnedif you do, damned if you don't!" It is a market where seller's want to sell but can't, and buyer wants to buy but realize things are not as they appear! That explains the buyers fear and aprehension. Buyers are frozen in place with the reality they can still lose more. Buyers may still be over paying in this market because there are too many new agents with little or no experience in these types of deals to advise their cleints. These agents do not realize they are being had! by the banks.
So hence the games of agents writing up offer after offer, and being rejected by the bank. The banks will come back and tell you there are other offers on the table, but will offer no proof of it. Why? Because there are no other offers, or if there are other offers they are 1000% worse than your own. Recently I was told on a foreclosure for myself, that there were 5 other offers on teh table. This is now 5 months later and the home is still active on the market with the same price. Smart or experienced agents would either demand proof in writing from the bank that they in deed have offers, or advise their clients to sign a release that you cannot verify if that statement is correct. They may even advise their clients to step back or with draw an offer. As a buyers agent you must be in a position to protect your client first rather than place the commission first. You must understand the rules of the game, and what a "Stalemate" really is. Just because a home is listed as a foreclosure does not make it a great deal! Until we start to see absolute auctions, banks are in a quandry of wanting to sell, but cannot take the loss. "Caveat Emptor! Buyer beware!"
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