Sunday, March 28, 2010

The rest of the story

The recent rains have ushered spring into my front yard with these wildflowers..

I promised an interesting update on a failed short sale that I detailed in my March 4 post, "One step forward, two steps back" . Here is my description from that earlier post;

Another short sale fell apart this week when the bank (Wachovia) returned a "must-have" net higher than their year-ago number. This particular property was first listed in the MLS as a short sale in January 2009 for $119,000. After no showings for two months the price was dropped to $99,000 and an offer of $99,000 was received and submitted to the bank. Two and a half months later the bank returned with a price of $124,000. That buyer went away and the MLS price was raised to the approved price, $124,000. Five months later a bank representative called the listing office to ask what needed to be done to move the property. The listing broker suggested a price drop to put it back in line with the comps. Price was dropped to $99,000 but it received no action and, with the bank rep's blessing, the price was dropped again to $89,000. A full asking price offer was received and submitted with expectations of fast approval. Response was faster this time with the geniuses at Wachovia responding four weeks later with a must-have net of $117,000 which would mean a selling price of over $130,000 to pay off the back taxes, condo assessments and closing costs.
And now for the rest of the story. The buyer, of course, walked away at the bank's "must-have" price. The unit went to foreclosure the following week and Wachovia sold the unit to an investor, having just one week earlier turned down $89,000 cash. To add irony to incompetence, the investor immediately sold the unit to the original buyer for the rejected $89,000, obviously at a profit. The buyer winds up with a good property at a good price, the investor makes a quick, easy profit and Wachovia throws an eight inch stack of new $20 bills out the window. That, ladies and gentlemen, is a glimpse into the madness that prevails in short sales these days.

"Welcome to my nightmare. I think you're going to like it. There'll be some more when you come down."
____Alice Cooper


  1. Doesn't the investor still have to pay back taxes on foreclosure and if so the bank would have had to sell for 89k minus profit and taxes. How did the investor know the buyer? Bank employee/investor cohoots maybe?

  2. The investor had a few expenses to pay, the largest, past due condo fees. Taxes were already paid for 2009.

    It is a simple matter to search for a withdrawn property on the MLS and find the broker who had it listed before it foreclosed and also whether or not it was under contract. The investor contacts the broker, offers a quick close and if the buyer is still interested, it's a done deal. It's a risk that the buyer will have moved on but if it was purchased at a low enough number, another buyer can usually be found to sell to at a profit.

  3. Larry
    From our earler exchange on this blog: Am I correct that had the bank bought the property at foreclosure, the bank would been responsible for only 6 months of condo fees? Are you free to disclose the price the property sold at?
    Thanks for closing the circle on a very informative series of events. Where are Brevard forclosure auctions advertized and are the results listed anywhere more timely than at the Brevard Tax site?

  4. Yes, if the bank is the high bidder, which they weren't in this case, they are only liable for 6 months of past due fees. However, the investor in this case outbid the bank and became liable for all past dues. Doesn't make sense for the bank, huh? They let it go for less than $50,000. The investor had to settle past due fees, normal closing cost and pay the Realtor involved but came away with a decent profit.

    Sales are held every Wednesday at the courthouse. If you'll email me I'll send you the link to the list of upcoming properties.

  5. This is from the business office of a bank that wants you to trust them with your money!

  6. The average interest rate on 30 year loans jumped to %5.31 from %5.04 over the last seven days.Six percent is just around the corner. Washington would have us believe the reason for this increase is the improving economy. I say--what improvement---The drop in consumer borrowing should be the tip off. Things are no better now than this time last year. Sure the markets are up--but--thats the big hedge funds getting even again. Thats not mom and pop back in the markets with gusto. Gasoline prices were down--but--speculators have come back like bee's to the hive. $3.50--$4.00 this summer is possible. It's $3.00 in my area already.That jump in price alone is a back pain for the average person that might have been looking to buy property. I have to think the housing market has to fall another 15-20