Are the Banks receiving too much Bailout money?

Real Estate Agent with RE/MAX Cross Country

What is going on with the banks?  I have recently seen this scenario play out twice in the last month.  We have a contract, present it to the bank for short sale approval.  Bank orders a BPO(Brokers Price Opinion) and cancells the short sale because of "Insufficient offer".  Bank forecloses and relists the house as an REO(foreclosure) for 25% less than what our buyer could have closed on it for 3months ago.  Huh?  Just so you can see it in real numbers.  I will give you an actual scenario.

Seller had a contract with a cash buyer for 1million dollars.  In this case the bank would have sustained a minimal loss in the short sale, about 75k.  The day of closing the Bank decides the cash buyer for 1million is not enough and refuses to release the lien unless the buyer pays more for the house.  Buyer walked from the closing and the bank foreclosed on the property.  The house is now listed as an REO foreclosure for $750,000 and have no offers on the property. 

This did 2 things to create further loss to the bank, first is obvious.  The bank gave away $250,000(maybe more, the house has not sold yet) and 2nd Reset the market for the neighborhood thus affecting the value of the current homes in the area. 

Can anyone tell me how this makes sense? 

Comments (5)

John Walters
Frank Rubi Real Estate - Slidell, LA
Licensed in Louisiana

Ben it seems the banks are just sitting on the cash.  They find all kind of reasons not to lend.

Dec 18, 2009 02:00 AM
Ben de Anda
RE/MAX Cross Country - Corinth, TX

John, no kidding but it has gotten a little ridiculous.  The term Too Big to fail, infuriates me. 

Dec 18, 2009 02:53 AM
Robert L. Brown - Grand Rapids, MI
Grand Rapids Real Estate Bellabay Realty, West Mic

They're using the bailout money for the difference. It doesn't matter to them to play hardball with OUR money.

Dec 18, 2009 03:19 AM
Melissa Zavala
Broadpoint Properties - Escondido, CA
Broker, Escondido Real Estate, San Diego County

I have been wondering whether the infusion of bailout money has falsely made a little bubble or blip in our economy.

Dec 18, 2009 04:54 AM
Ben de Anda
RE/MAX Cross Country - Corinth, TX

Robert:  My thoughts exactly

Melissa:  Exactly what I'm afraid of.  Are we living in a false economy....again?

Dec 18, 2009 11:39 AM