Steve Vennem…, Real Estate Pro in Pine Springs, MN

Why do banks disregard offers during a short sale and put it back on the market when they get it back at a?

Asked by Steve Vennemann, Pine Springs, MN Sun Aug 24, 2008

lower price?

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At the bank, they have a department called Loss Mitigation. In an effort to curtail costs, they hire monkeys to work for bananas. The problem comes in when the banana truck arrives, all the monkeys drop the files they are working to get a fresh bunch of bananas. After the bananas are picked through they fling poo at one another before starting to work again.

You need to find out what the banana delivery schedule is, hijack the truck and take the monkeys back to jungle.
0 votes Thank Flag Link Tue Aug 31, 2010
Some banks use formulas to sell their properties.

If a listing has an offer, then the buyer backs out, they have an in-house system that can state "if this happens, then go back on the market at a certain price so much less than the old price.

I was representing a buyer on an REO, we offered OVER asking price,our offer was not accepted, the winning offer backed out, and they want BOM with a price lower than the what we offered....so we offered MORE than the first offer...and we got it. We determined that the lender was working from formulas that did not in fact represent market value.

It appraised for more than our purchase price.
0 votes Thank Flag Link Tue Aug 31, 2010
Keith Sorem, Real Estate Pro in Glendale, CA
MVP'08
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I'm not sure the banks have a magic formula. Many bank contacts get far too emotional with the process and how it is impacting their employment. There doesn't seem to be use of evidence based research on pricing. An appraiser may come in from a different state...I just had one come from Madison, WI for Minneapolis, MN?!? When pricing my properties and doing comparisons, I find the Case Shiller Index has been most accurate for setting the actual sale price.
0 votes Thank Flag Link Tue Aug 31, 2010
Mnlakeplace,

Your question takes for granted that the bank (like sellers) has emotions and/or a bottom line. The reality is that nobody knows what the formula is that the bank uses (except the bank) and why they choose to accept some offers and reject others. Ultimately they are working with algorithims, balance sheets, and other complicated financial instruments to determine whether or not an offer is acceptable at that given time. While it makes the most sense to us that they sell it at the highest possible price in the shortest amount of time - often this doesn't play into their formulas.

You also assume that the bank has the benefit of foresight and knows what the property will sell for in the future. Right or wrong they may assume that they can sell it for more if they control the entire transaction, but the reality is that don't know what it will sell for - no more than you or I do.

Cameron Piper
Web Reference: http://www.campiper.com
0 votes Thank Flag Link Tue Jul 14, 2009
My guess it wasn't submitted properly. Or it was to short.
0 votes Thank Flag Link Tue Jul 14, 2009
Thanks for the clarity, Scott. I love this forum for just that purpose. Follow up question, what if there is no PMI on the loan? What's the bank's incentive then not to sell during short sale or to decide on a list price that's ridiculously out of range of the real market? It seems like they are ignoring their own BPOs. Any ideas?
0 votes Thank Flag Link Mon Aug 25, 2008
The main reason is money, in a short sale they can only lose money. When they foreclose, and the borrower has private mortgage insurance the bank can recoup some or all of the lossses. In a short sale they are wiping out money with virtually no chance to recover it. As well as if the borrower had a 80/20 loan and has a second mortgage or equity line, the 2nd mortgage compnay will get zero in a short sale in most cases and why woul dthey want to agree to it. The price they buy it back at auction is a percentage of what the origional first mortgage was. They need to complete the auction to wipe out any liens or other mrotgages so they can sell it on the open market. this is wherethe pmi compnay will cover the difference between what they sell for and what was owed.
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Sun Aug 24, 2008
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