Are banks hindering the real estate recovery?

However you slice and dice the question, the answer is : Yes.

I am sure we all have experience in selling or buying short sales and REO's. And maybe in your neck of the woods, it is different (?), but here in California ( San Fran Bay Area), I can assure you that banks are NOT making the right decisions and are indeed preventing real estate values to stabilize or go up slightly. Here are some examples:

•1.     Representing a buyer in short sale, and have an accepted offer from the seller AND the bank. However, a couple of days before close of escrow, the bank foreclosed anyways, and the property was bought at the county court house steps for $50,000 less than the accepted short sale offer. Not only does this not make sense from a business / financial perspective, it also lowers the area prices by $50,000 on equivalent homes.  

•2.     Representing a buyer in a REO condo purchase. Have an accepted offer from the bank, and are going through the mortgage  underwriting. The lender ( for the buyer) decides NOT to do the loan, even after appraising the property for value, because the original developer still owns (and rents out) about 40% or so of the total number of units. Results in to the buyer walking away after spending about $400 for appraisal and $400 for inspections. The condo unit sold for $75,000 less than the short sale offer. All the condo owners in this complex now have property for sure "under water" because of this stupidity of the bank. This may result in these owners "strategically walk away".

You tell me the banks are NOT preventing real estate to rebound?

Now that I am on a roll, let me present you with this question: Banks are always hiding behind their explanation that short sales take longer becuase they need approval of the investors behind the MBS in order to accept the short sale offer. As I said in my investment meetings with consumers here: that is  a lot of Italian sausage.  Let's think about this just a little futher up the process chain. If the bank forecloses, like in the example I gave, how much "approval" from the investors did they need/get to foreclose? Nada, zip, nothings etc. 

Antoine