We will never get out of the home value tailspin we are in unless we show the real and total amount the banks are paid on foreclosed properties. The entire amount is not what they sell REOs for. They also get paid by the guarantor of the loan. Few loans are not guaranteed by some arm of our government or seudo-government. Take a V.A. Loan. If a V.A. loan is foreclosed and the bank is owed $200,000 and sells it for $175,000 they then go to the V.A. for the ballance by way of the guarantee. The same is true for FHA, fannie, and freddie or, for that matter, if the guy that owns the local bowling alley guaranteed a loan, they would go to him too.
So what incentive is there for the banks to try to get the highest and best offer for a home and reject any offer even if it is way below market value or replacement cost? There is no incentive. They just get the bad loan off their books and hold out their hand for the guarantee to pay up. That is also why they are taking their time on shortsales and loan mods. They must write off the loan mod or short sale loss because it is voluntary whereas a foreclosure is involuntary which triggers the guarantee.
Yet the appraisers only include what a buyer pays and not what the bank actually got for the home. Therein lies the problem causing free fall of prices. Why has nobody figured that out? Most likely becuse the banks are in control of the market, the appraisal system, and Washington, not to mention Wall Street. I can't imagine a politician raising the issue if his reellection warchest was at stake. The banks fill the pockets of politicians as a way of getting their way on Capitol Hill. They are buying our country and selling us out.
I spoke to a loan officer asking for the full dosclosure of the amounts that the guarantee pays on various loans. Her research came up blank. Obviously onbody in the banks wants to disclose this or bring it to public attention. Well I do.
It's time to make this public and ask why. It's time to revisit the appraisal system and have the actual amounts the banks get for liquidating the REO inventory included in appraisals. Until that happens you can be certain that the value of homes in this country will be further diminished. It is a sad situation when our product, the American Dream, becomes a nightmare. It is sad to see the lifetime of the working class pouring money into their homes month after month on the promise that it would be their retirement nestegg only to have their nestegg broken, scrambled and poached. It is sad to see indeed.
There is something that we can do. Pass this idea around and see what we as REALTORS can accomplish by informing the public since the banks refuse to.
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