Banks Gone Wild (long) - Posted by T.J.

Posted by Wayne-NC on April 26, 2006 at 12:13:00:

And it applies everywhere. It’s not common anymore! I remember the days when it was and I am not that old. I’m glad that I am getting old. If I weren’t, I’d be dead! Besides, I want to get old as I’ve never been there before. Just think, age has been denied to so many. Even at middle age, I forgot more than most people know. Cheers!

Banks Gone Wild (long) - Posted by T.J.

Posted by T.J. on April 26, 2006 at 02:39:19:

To make a short sale long. Have the banks lost it? Has the market gone so crazy that these guys want to gamble and just take the chance of selling the property after the sheriff sale? to make an extra 5k hardly seems worth the risk!

Got a lead(from a mailer), met the buyer and signed the contract(good start to any investors day) What the seller failed to tell me is that they now owe 50k more than my offer. I spoke to the lender AMC Mortgage loss mitigation person today and he informed me of this fact and told me that the bank would be looking to obtain FMV for the property. I said the house was in need of repair and at FMV the bank would have a property that sat on the market (we have done deals in this area within a couple of blocks in the last 12 months). He asked me if I was an investor and I told him I was (not sure if that is good or bad theses days to tell the banks) He also told m that if I am interested in the purchase of this house he can set up for a full appraisal that they will pay for (what ever happen to just a BPO). He also told me that if I didn’t buy the house he was sure someone else would!(I am sure he is right, but not at the FMV price) They also asked me if the owner still lives there(which they don’t) but I said they do, I assume that it is easier for them if they don’t, one less step they must take. She said that it would take two weeks. Has anyone done a short sale with AMC. Maybe I should have just offered to buy the note at a discount.

I also met with an attorney thats is handling another matter for us with a property that we purchased at sheriff sale, they represent several lenders for homes in our area as attorney on the writ for our local sheriff sale. I asked him if he has a list of properties would be returned to the lenders. He then told me the bank send them directly to there real estate brokers they feel they will get a better price on the open market rather than selling them to investors. Am I loosing it or does it seem that banks are in the business of selling houses, contrary to many of the gurus teachings. It used to be that we had more deals than we had time or money. We used to make offers to listed REO and they would take a substantial discount! And now at a time of rinsing interest rates that I speculate is going to drive up the foreclosure rate and create a retail buying slowdown in many markets, seems to me the banks have gone wild! Or perhaps just our sour grapes cause they not giving us what we want.
Just a late night Rant!

Re: Banks Gone Wild (long) - Posted by Anna

Posted by Anna on April 26, 2006 at 12:35:51:

Its an interesting post. We were wondering the same thing.
We have a pre-foreclosure property and it has a 1st and a 2nd. 1st was in foreclosure.
We tried to negotiate with the 2nd and they wouldn’t even budge. we even gave them a Brokers price opinion that would just cover the 1st and the amount to bring the loan current.
I dont know if they do an appraisal as soon as they take the property. But they refused to take less. I brought the loan current since there is a possibility that I can negotiate with them again since 1st loan is the one in foreclosure and there is some room for me to make a profit.
Will keep you guys posted.

Re: Banks Gone Wild (long) - Posted by Mark (SDCA)

Posted by Mark (SDCA) on April 26, 2006 at 09:41:02:

The big banks (BofA, Countrywide etc) have long had their own repair crews, brokers they worked with and were looking for FMV.

Re: Banks Gone Wild (long) - Posted by M. Osterman

Posted by M. Osterman on April 26, 2006 at 08:57:31:

How do you tell the homeowner that they’re going to get a tax bill for the amount of the discount of the loan? And, do you offer to help pay them that since your the one who’s going to profit?

Re: Banks Gone Wild (long) - Posted by lukeNC

Posted by lukeNC on April 26, 2006 at 08:50:32:

i’ve said this many times.

short sales are a numbers game.

Sometimes the lenders will take a number that is outrageously low, other times they won’t budge.

I had one where the lender took $150k on house they were owed $210k on and the house was easily worth $225k.

I had another where the lender was owed $600k on a house that was worth $520k, they would not go lower than $600k. They foreclosed and ended up selling it for $325k 3 months later.

Exact same situation on both, the houses were in good shape, there was no pmi, etc…

It boggles the mind…

I have found that the lenders will discount dramatically on homes with lots of repair needed, so I concentrate on those.

I still like them, they take no money at all to do them, either borrowed or out of pocket, and there is an endless supply.

Banks don’t always operate logically - Posted by David Krulac

Posted by David Krulac on April 26, 2006 at 06:16:05:

nothing has changed. the banks are all different. many want FMV, many are inflexable, many don’t know the market, and many lose money on the deal.

I bought one that I tried to buy pre, they wanted too much. I tried to buy the same house at the sheriff sale, they wanted too much money. I ended up buying after being listed and topping 4 other bidders for 20% less than they wanted before and they had to pay the real estate commission. If they would have accepted 25% less at the sale or before the sale, I would have bought then and they would have netted more. Go Figure.

Re: Banks Gone Wild (long) - Posted by DaveD (WI)

Posted by DaveD (WI) on April 26, 2006 at 09:48:52:

There are ways around that. Most folks losing their house are pretty broke anyway, and can ask the IRS for forgiveness of that “gain.”

And no, the seller doesn’t get paid anything from me, because the lender won’t allow them to “profit” from the sale. Boy, you sure have noted lots of potential phantom funny money flying around, don’t you think? Don’t sweat it. Deal with the real.

Re: Banks Gone Wild (long) - Posted by Ken-Orlando

Posted by Ken-Orlando on April 26, 2006 at 17:06:37:

How do you go about purchasing these short sales then, Luke without using your own funds or borrowing money. Are you doing a Double Close or taking on a partner with all the money to complete the transaction.

I haven’t done any short sales yet but I understand that most banks won’t accept a short sale that has an Assignment fee on the HUD1.

Re: Banks don’t always operate logically - Posted by JT-IN

Posted by JT-IN on April 26, 2006 at 20:11:47:

Hi David:

A couple things may have applied in the instance of why the Bank didn’t take less, pre-sale, and not at the sale… Could be two reasons: 1) May have been PMI involved… even w/o taking less, they can sell for less after the sale, and still get more, if they collected the claim on PMI. 2) Deficiency Judgment. (not available in all states). Many Banks are all hung up on being able to obtain a Def Judg. Few actually follow thru and obtain them, and even fewer, of the ones that obtain the deficiency, actually collect them…

Well, after consideration, there is a 3rd reason, and maybe this one is most prevalent. Bank personnel rarely if ever get fired for the decision that they didn’t make. As in the fact that they DIDN’T accept less in short sale or at the sheriff sale, but if it sells on the open mkt for less, then that is the value… and Loss Mit didn’t originate the loan… If they Bank got killed on the open mkt, then go talk to the originators of the loan, that costs the Bank the loss. If they willingly decide to sell the loan or the paper short, they can be under extreme scrutiny if one of the Board later says, “What did you do that for…?” They then become the person who cost the Bank the loss…

Just a couple of things to factor into the equation… and #3 is the most prevalent, as I have been told by friendly Bankers… “I am NOT making that decision!!! (gulp)”.


Re: Banks don’t always operate logically - Posted by Wayne-NC

Posted by Wayne-NC on April 26, 2006 at 10:24:18:

Very interesting, but stupid. (remember that)? Did you point this out to the bank? Are they aware of what actually happened? If so, I am curious to know their response. To me, it is always nice to increase someone’s learning curve as it improves the success rate next time around.

Re: Banks Gone Wild (long) - Posted by M. Osterman

Posted by M. Osterman on April 26, 2006 at 09:55:18:

Hmmm…If your answer to my question is “Deal with the real” I wouldn’t even want to deal with “the real”.
Thanks for your input.


Re: Banks Gone Wild (long) - Posted by lukeNC

Posted by lukeNC on April 27, 2006 at 17:32:42:

i negotiate a fully assignable deal with the lender(s), then assign my contract to another investor for cash upfront.

Re: Banks don’t always operate logically - Posted by David Krulac

Posted by David Krulac on April 27, 2006 at 06:51:07:


In this specific case no PMI was involved.

Here it is possible to get a deficiency judgement, but this specific owner like most others had little or no assets, and had declared bankruptcy also. Rarely does the bank go after the former owner because its not a profitable endevour.

You’re right they would rather make the no decision decision and let the market place dictate the price and wash their hands of the whole mess.

Re: Banks don’t always operate logically - Posted by DaveD (WI)

Posted by DaveD (WI) on April 26, 2006 at 11:59:46:

I remember that. You are aging yourself, Wayne. LOL. I’ve had banks say “we don’t do shorts, and no, we don’t take less if we sell the note, either.” But for some reason it’s OK if they get killed afterwards. What a deal! “Buying” for a buck, sell for 50 cents.