Ken Harney writes and interesting post re Short Sale Fraud, but I didn't like the particular way it uses common terms. When he says
A comprehensive new study estimates they will lose more than $375 million this year alone when they sell undervalued houses to tag teams consisting of real-estate agents and investors
he seems to be targeting any and all real estate agents and investors. The article starts with "Are banks and distressed home sellers getting rooked" and they answer is, that they certainly are by a few unscrupulous agents and investors , but for the most part banks have screwed themselves by completely complicating the homes sale process with legal entanglements and ineptitude.
For two hundred years the real estate industry has been developing in this country and the industry has done all right, thanks. For years the banks have wanted to play a bigger role. Most of the industry has seen that having the loan originator, the title processor, the escrow closer, the realtor, the appraiser, and the inspector as separate unconnected businesses is a good thing and provides many levels of cross checking to keep fraud at bay.
There are big real estate companies which own title companies or have lending wings. Some companies even call themselves home and loan establishments in hope of convincing the consumer that one stop shopping is convenient and therefore better for the consumer.
So what is going on with the banks and short sales. The bank gets to control the seller like a puppet on strings. A short seller's home can be put at a reasonable price and the minute the realtor discloses that it is a short sale, no savvy buyer that is buying a home to live in will touch it. Why? Because it will take 9 months or longer to close and these buyers are buying a home to live in now.
Besides taking nine months to close, the sale might not ever close. Why? Because the banks lose money on a short sale but if they foreclose, there is the insurance that will pay them for their loss. All of that time is wasted and the home goes into foreclosure.
So, about the fraud? The banks are totally inept at handling real estate transactions. Multiple listing Associations across the country have developed forms over the years that work regionally and within state and federal laws favoring neither the seller, nor the buyer, but anticipate bringing a mutually acceptable contract on real estate to closing. Banks on the other hand have taken the position that their obligation is to their stockholders, and the bank's attorneys have left no avenue unexplored on how to extract every dime from every real estate deal that they can get their hands on.
- Banks feel they are above the MLS rules and regulations, so each bank has it's own rules to be followed.
- Banks have no respect for anyone one so they pay everyone involved fees they would pay their entry level tellers.
- Banks have to have control, and they get it when the have the right to approve a short sale.
- Banks take forever to complete any task.
With all of these control issues the banks have created a system ripe for fraud and there are people who saw that and they became real estate agents and investors and are now all over the banks with their game. If any of these bounders is ever brought to trial and found guilty I am almost positive that you will find that as a whole these people got into the real estate industry after 2007, and that none of these people ever acted like a true real estate agent whose job is to help a seller market their home and to help a buyer find and buy a home.
Most agents have the best interests of their clients at heart. We've always had a few bad apples, like every profession. You know who the bank caters to by virtue of having investors. And that includes every big bank. Feel sorry for them if you must. I surely don't.
Also published on Seattle Real Estate with Glenn Roberts