Short Sale Ripple Effect…
When a bank declines to do a short sale what happens next??
First, why in the world would a bank deny a short sale? Here are a few reasons:
1. The bank may make more money by foreclosing & money is the name of the game!
2. Selling price too low — this ties into number one — If the bank doesn’t get close to fair market value then it may be better to foreclose on the property and sell it at a trustee’s sale for a higher price. So for those of you staying up too late and ordering those late-night-real-estate-guru CDs telling you that you can make millions by buying underpriced short sales, think again! You can probably pick up some decent deals but back-to-back escrows, double-escrows, and 7 figures aren’t gonna happen!
3. This particular loss mitigator is just an idiot. There, I said it! Most are not…most loss mitigators do exactly that: Mitigate Losses. They realize the best thing to do is to get what they can, approve the deal, and move on. These are the people we love to deal with — they understand their job and they are good at it. The bad ones are the ones killing not only their own company but also homeowners, neighborhoods, towns, cities, states, and the nation as a whole.
Let’s talk about #3 for a minute. When a bank has a legitimate offer on the table, a willing buyer, a strapped seller, and a bigger net via short sale than foreclosure, why in the world would they still deny the short sale?
By doing so, the homeowner ends up in foreclosure. Another person that will NEVER do business with that bank again. Another person who now has to worry about bankruptcy. Another person who now will suffer the effects of a foreclosure on their credit. Another person who now due to bad credit may not be able to obtain a good paying job or be able to feed the family or have the credit behind them to get them through rough times. Another responsible person who tried to do the right thing and got shot down by the SAME LENDER WHO SAYS THEY ARE TRYING TO HELP PEOPLE!!??
It gets worse….by allowing the property to go into foreclosure, the property values in that neighborhood just dropped. Which means more and more people in that neighborhood have just lost even more than they thought and are further upside down than they were yesterday. Which means more and more people thinking about short selling….or worse, more and more people just walking away from their home and going into foreclosure. Which drives down home values EVEN FURTHER!!
Multiply this by hundreds or thousands of neighborhoods in your city and it starts to really add up. Now add other cities…neighboring states….the entire country….you get the picture.
This isn’t doom and gloom here, this is reality! Yes, short sales are being approved by the thousands and it’s almost ALWAYS better for everyone involved to do a short sale over letting a property go into foreclosure…so why in the world would certain lending institutions allow this kind of short sale ripple effect to take place?
Why would they allow these type of horrible employees to not only work in their company but to give them the power to deny a homeowner a right to a better future??
95% of the loss mitigators out there ARE NOT THE BAD GUYS!! They are doing a great job helping distressed homeowners out of a bad situation and in doing so are helping their lending institution recover more money, helping neighborhood stability, and helping our nationwide economy as a whole.
It’s that remaining 5% that is giving the rest of the industry a bad name and ruining it for everyone involved. It’s amazing but that 5% is discouraging growth and economic stability, driving down home prices, and forcing us into an even deeper depression than we are already in. They’re losing money for their employer (the bank), they’re losing commission themselves (yes, a lot of these people are paid based on how much money they recover), and no one wins. Every time a bad loss mitigator denies a legitimate short sale, a small piece of what’s left of America crumbles….I don’t know everything but I do know that in my book that makes that person a complete idiot.
But you tell me — what do you think??
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1 comment
I used to be an Army officer and one thing I know about an organization that big and disjointed is that they have a lot of stuff going on, and the magnitude of the bureaucracy can prevent them from doing the right thing for the bank. There may be confusion over who is the loss mitigator, or who is his supervisor, and who has final approval. Their may be micromanagement going on, meaning one person in Omaha is individually approving all cases. In any case, buyers may be better off skipping over the short sale, and getting themselves a great deal on a foreclosure, a resale home, or a new home in this market.
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