Banks Foreclosed Properties offer process, Unfair and Unethical

Banks Foreclosed Properties offer process, Unfair and Unethical
(First posted on May 3rd, 2013)

Ok, I am getting really tired of banks and their foreclosure properties. But is it the bank or the Real Estate agents that deal with them? I am assuming it is the banks, because after many many many offers on foreclosed properties, I seem to be getting the same response to my clients offers, “Please send you best and final offer”… What is this???? First, the bank goes days past the offers expiration time (If the website, you now need to submit your offers too, has an expiration slot), second, they are one of the main reasons the market is the way it is….. But now they are causing the slow recovery of the market by playing these games…

Now you’re most likely asking, what games? Well, with the hundreds of bank owned properties that I have dealt with (bank owned can also mean REO, Foreclosed, and lender owned), I would turn in an offer (which has a normal day or two expiration time) and several days later, I get an agent saying that they have multiple offers and needs my clients “best and final offer”… That’s funny, most of these properties been on the market for months, maybe even years, and all of a sudden, when I turn my offer in, you have multiple offers… That soooo strange… But what’s even funnier is, when they reject an offer, because they accepted another offer, it seems to stay on the market for a long time as active… So strange…

With the amount of Bank Owned/Foreclosed/REO properties that are in the banks inventory, and yes I understand that if they put all of them on the market, it could crash a certain areas market. Yes that would be bad. However, playing games to get more profit for them which causes these properties to remain on the market way too long, and yes, IT CAUSES PROBLEMS WITH THAT AREAS MARKET TOO…

Now I am going to explain how the foreclosure process works, for those new to the market. Say poor Joe Schmoe fell behind on his mortgage, he tries to make up his payments but the bank tends to charge extra for every month that it the total owed is not paid in full. So now, Joe has huge mortgage payments and the bank wants to take the property (foreclose).. Let’s speed up the process, after many months of threats, paper work, and in court; the bank finally forecloses on Joe. Joe is kicked to the street. Now you would expect that bank would be put right on the market, OOOOOHHHHHH how wrong you would be!!!!! First they are going to winterize the property, which means, they are going to turn off the water and drain the pipes so that they won’t freeze and burst during the winter. Hence the name winterize.. Now they just wait. Wait.. still waiting. While they are waiting, animals are getting into the property, making a nice home for them, kids are breaking in, vandalizing and having parties, and metal scrappers are breaking in to stealing all the metal to sell. Now, months or even years later, the bank says “hey... Let’s put this property on the market at a price to recover the amount we lost”. GREAT IDEA…. Let sell a place at full price which the property is now a shell… Brilliant..

Think the story is done? If you did, you would be wrong again….. Because even though the property might have many people coming to see the place, it’s not going to sell quickly, why? Well the place is so worn down; most banks won’t approve a loan for it, let alone FHA.. LOL (sorry that’s pretty funny). And the normal home buyer doesn’t want to buy a place at full price which they need to completely fix up. So these properties tend to stay on the market for long periods of time. Therefore, most of these places are going to have an investor/house flipper people who put in an offer. However, these investors can’t pay the whole amount that the bank has lost on the property; they need to make a buck too!!!! So these investors factor in how much it would cost to renovate and overhead cost, how much they could make on the property, and give an offer that they can afford to purchase it at and still be able to make a profit. Normally this offer is going to be much lower than the bank is asking for. Normally, the bank will reject the offer right off. Then the property will stay on the market for even longer as the banks slowly bring down the price every couple of months. Then after such a long time, the property sells for most likely close to the price the original investor offered, to another investor. You can’t make this stuff up.. Banks are too funny.

Now you’re asking, what is so great about investors???? That’s an easy question, please, all of you, think about those home that you use to or still do lived near. The crack houses, the elders that couldn’t take care of their properties, the vacant properties, all of the properties that drive an area Real Estate Market prices down. Investors come in and buy these properties up and turn them into beautiful homes (I stress, if done right). This helps the areas market prices, even though the original purchase is low, but the resale is much higher. Furthermore, they help to increase supply and affordable good home to buyers. How is this a bad thing? Most banks blame the Real Estate Market Recession to the investors; of course, it has nothing to do with the banks just handing out subprime loans like they were candy… No it couldn’t be that…Granted I’ve seen places that investors have tried to rehab and failed. I’ll admit that. But, I have only seen a few. How many millions of people lost their homes to foreclosure in the past five years? I always remember a saying from my Certified Distress Properties Expert Designation (CDPE) class, “People buy a house, they lose a home”.

I know, I know, this sounds like a rant, which I think is well over due. It is one thing to throw out all the rule of the offer process, however, it is a completely a different thing when one forces a bidding war, days after an offer has expired. Now if it is the agents that are doing this, then shame on them, it is completely unethical and unfair, and they should be punished Even if it is the banks that are forcing them to do it, they should be punished. However, I believe it is the banks that are the true culprit. And I truly believe that the government, the states real estate boards, the Realtor Association, and the Real Estate community at large needs to fight back and stop this unethical practice. The banks have screwed the real estate market enough. They should feel the hurt as much as the home owners are; they are the ones who created this problem in the first place…