Banks and Bad Decisions Part II

Here’s the (my) Answer to WHY
Banks Make Such Crazy/Illogical/
Sometimes Stupid Decisions! (Part II)

(Yes, that means there will be a Part 3!)

Why do banks make such illogical decisions?

• Like change the FHA ‘how long you have to be on the deed
  before you can resell it’ 90 day Seasoning rule.  They
  just changed it in February 2010 allowing you to resell the property
  after a 2nd appraisal.
• Like HAFA’s rules when you close a short sale insist you
  hold the property 90 days before you resell.
• Like banks taking their houses to foreclosure when the buyer is
  a Company.  (LLC, Corp, Etc.)
• Like banks not accepting offers from companies (LLC, Etc.)?
• Like take a house to foreclosure sale when there is a qualified
  offer on the table but it wasn’t submitted more than 21 days
  or 14 days before the sale date.  (Lazy?)
• Like Fannie wanting to start making homeowners who do
  a short sale responsible to pay the unpaid balance and
  not let those who walk away from their house when they really
  could afford the monthly payment to not get loans through Fannie
  for as long as 7 years.
• Like only give help to people who are way behind in payments
  and not to the struggling homeowner who is giving up lots to
  just keep making their mortgage payment and not have a life?

Ok, my answer probably won’t explain all of the above.  But it certainly
will explain the first 5.

First:

Their logic is not based on our logic.

Our logic believes they should do what they can to get rid of their inventory
not create more inventory.  Sell the house when there is a reasonable offer and
not devalue the neighborhood.  If there is an offer they should take it – within
reason, of course, so if there is data to say the offer is Fair Market Value,
they should take it.

Our logic believes this is a capitalist country/society and if we have
specialized knowledge to allow us to resell the house after repairs or
not and make a profit - we should.  If we find the somebody else who wants
to pay a little bit more and we can get it closed WHILE BREAKING NO LAWS,
we should get paid for that knowledge and skill.

It still is a capitalist society.  Not to defend the banks but…We/they are also run
by the Constitution where we still have the right to freedom of speech
so the banks do have the ability to make those decisions on

• who to sell it to and
• who not to sell it to

as long as they do not discriminate among the protected classes.

However, a good business decision (on a small business basis – not on a
large business because obviously they are too big to fail LOL) would seem
that they should take the offer and sell it to a buyer today to cut their losses.
Even if the buyer might make money when they resell it.  It’s not likely that the
bank will make that money later.

Here is the Likely Scenario

• The bank will take it back through foreclosure.
• It might not even be listed for sale for 1-2 years, and maybe 2 days
• It won’t sell for another 6-24 months and
• The possibility of the Fair Market Value continuing to drop

The house will bring even less money later than selling to
someone who will make a profit today.

The bank won’t make the profit we would because of time and
they don’t have our knowledge.

A logical decision would seem to be to cut their losses now, put somebody
in the house and the bank stop paying taxes, insurance, upkeep (cut grass,
winterize the pipes, worry about the pipes being stolen, etc.) and just making the value of the house less.

Or they will leave it in the defaulting homeowner’s name and make them
responsible for all of the above even it went to foreclosure.

Tomorrow I will answer WHY for a different reason than they are a capitalist
company and the right to make what appear to be stupid decisions and they
want the extra money but will never get it.

Sorry for the delay.  I had more to say that I thought I did.  However, this
scenario is a great one to run through the next time the bank gives you any
of these reasons why they can’t accept your short sale.  Ask them if theyrealize they will make less money if they don’t sell it today versus months in the
future.

Deb McMillan
The Short Sale Queen® and Coach
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