BiggerPockets

So I get a call from one of the brokers I use and he tells me about this â"great duplex' foreclosure that started out at $199k, then worked its way down to $149k whereupon an investor bid $85k. Which the bank refused point blank.

Fast forward a few months later and several price drops to $99k and the bank is screaming at this broker to find the investor who originally bid $85k. Well that investor's gone but I'm around. So I take a look.

Well, during these long months on the market the roof starts leaking, the a/c above the ceiling overflows condensate, the ceilings start falling, the wallboard gets all wet, mold grows, vandals break windows, and fire ants invade the interior walls (this is slab-built). Did I mention the increase in drive-by shootings as this neighborhood suddenly worsened?

So I'm not bidding anything near what the bank thinks this wreck is worth, and no one else is, either. And brother, this property ain't fixing itself up alone any time soon. Pretty soon it will be boarded up by the city and scheduled for demolition at the bank's expense. Like a number of others I have watched.

Point being this is still TYPICAL BANK BEHAVIOR around here. And this particular bank has over 160 REOs here in NC, just one of several states where it does business.

Eventually the pendulum will swing the other way, probably too far over, I believe. But it will also probably bring along some wonderful bargains.

I'll tell you what I figure with that deal, Eddie -- it was either COLOSSAL STUPIDITY... or a little good ol' boy behind-the-scenes wheeling and dealing was going on.

Either possibility being a very rare thing here in the South..... NOT........

I agree that this is one of the strangest situations I have ever seen.

I have tried to figure out what would motivate a bank to follow this predictable path not once but multiple times.

Maybe it is just wishful thinking on the part of the lenders... as they all seem to still have their head in the sand regarding any sustainable recovery and home prices stablizing let alone increasing.

Two things going on here. First the banks are trying to satisfy new and revised regulations being handed down on an almost daily basis by government bureaucrats. Secondly, banks with their huge overhead and high break even costs are trying to find an efficient way to dispose of low priced properties. Very frustrating for us investors to deal with. We are used to handing over our cash and getting title to property. This works great in a capitalistic system. In our new socialistic system, government sponsered institutions (such as banks) must now consider all social directives, i.e, how the sale of the property impacts the neighborhood, if all protected groups have a "fair" shot at purchasing the property, if some public housing group wants that property, etc. Welcome back to Roosevelt era liberalism.

You've kind of depressed me, Don, with your explanation of the new Socialist REO system.

Then again, J Scott has filled me with a bright new determination to fight past bank rejection until my bid is finally low enough.

Seems so recent that I was merely half-evil (333).....

The action-arm of this post is "Where do you bank?"

Many are now taking action to essentially remove their funds from the coffers of these megoliths. Ally is one insitution offering rates which larger lenders are hard-pressed to match.

As the "buying public," our words must follow with the root of democracy - action. Complaining while banking at BoA, Wachovia and etc seems to be quite counterintuitive.

Right Eddie! Investors really need to establish banking relationships with several banks, ot one. No one bank can serve all the needs, especially those that investors require from time to time.

As to banks not accepting the first low offer, I can also see this, especially in a smaller bank, as saving face. They are going to have to admit that they made a loan with insufficient collateral and poor lending practices! Our Bank make a mistake like that? Why, we are never off that much! LOL Bill

Looks like the FDIC has responded to the video. I am shocked that they did.

http://www.fdic.gov/news/news/press/2010/onewest_lossshareb.html

Let's see now - first 2.5B is Onewest's loss, recoverable over a decade
or so after the heat blows over.

I particularly liked this statement - vague enough to lose even me if I
don't pay close attention the THIRD time I read it:

"Only 7% of loans OneWest services are owned by OneWest and covered
under loss share. Other institutions own the remaining 93% of loans
OneWest services. These loans are required to be serviced in accordance
with the owner institutions' agreements with OneWest."

One might wonder who those "Other institutions" might be, just for a
start. If Onewest took ALL of Indymac's mortgages and that only
represents 7% of its servicing biz, that must be one BUSY place during
the first 10 days of the month.

Oh, and the deal was "Competitively bid".. Did you get a bid request?
Mine was obviously lost in the mail and I must have forgotten to put the
secret meeting prior to public closing on my Blackberry.

Interesting coincidence found within..

//www.fdic.gov/news/news/speeches/archives/2009/spdec0809.html