Who Is To Blame for the Short Sale Mess?!

I DO NOT feel sorry for the banks that are finding themselves in a situation where they are taking short sales (as in eating the difference between what they lend-ed to the seller and now that the property cannot sell for that, they lose some money).

It is so incredibly common, my last two listing appointments in the last week were both done where the buyers HAD equity at one time, but then they went and took out a "Home Equity Line of Credit" to pay off debt and the DARN appraisers, ya know, the bank approved appraisers, are the ones who say what the homes potential market value would be...And I always gasp and I mean gasp, at the price the appraisers say the home could go for. I mean in what stratosphere did they think a home that is not even 1000 square feet in an old, not highly coveted area could go for the amount they appraised this sellers home at???

Now this poor seller, who was clearly not money savvy when they are taking out a loan to pay off another loan (red flag bank, help them get back on track) is sadly, painfully upside down on their house. And then I have to come in and tell them they were screwed by their bank...Except I could never say that...After all, they were the ones that accepted and used the money/ loan, so they would feel I was secretly blaming them.

I come from the mind though that you cannot blame the people. We, as the people, can simply not know it all. People specialize: doctors, lawyers, teachers, because we simply cannot as humans know everything we need to know about every subject. That is why we trust, hire, and use professionals. Appraisers. Mortgage Lenders. Financial Advisers. Banks. It is their profession and we take their word that they are doing the best for us and helping us find the best product for our needs, but even more importantly, our best interests if our said needs are not good for us. A person may need $20,000 to pay off bad debt, but if their house can't be sold for that amount, then that is not their equity. The banks are taking high appraisals from their "approved appraisers" to get the go ahead to put more bricks of debt on this unsuspecting person.

I am telling you. People have no idea what the market value of their home is. Why should they? It is not their job to watch and know the market. It is why we have a profession. I spend all day analyzing the market and working up reports on it, reading, writing, talking about it. It is a full time job. Homeowners ALWAYS think its worth way more than what a true buyer would buy it for. But the banks, they should know better. Be conservative. Do right by their client and only lend them what they are absolutely positive they could sell their home for and that is their true "equity"...But on top of that, they have to account for all the fees and costs associated with closing and selling a home, so they shouldn't lend them the full amount of their equity because please, please help these people keep a little cushion to be able to sell their home comfortably. Hardly anybody has "equity" anymore, even after owning the home for 10 years.

You cannot tap equity twice. If you take out a home equity loan, a second mortgage, refinance to draw out cash, your equity is gone. And that alone is one thing that is hard for some to wrap their head around. You already used your equity, so they come to me and are shocked, appalled, and broken that they don't have equity. How are they going to pay for an agent? How are they going to sell it when all the buyers practically work with agents and now they can't afford one?

It all comes down to not thinking ahead, not being financially savvy, and they listened/ trusted their professionals that helped them take on all that debt. Surely they wouldn't lend it to them if they couldn't afford it? And that is the ultimate mental breakdown. Nobody could believe that someone would lend them money that they didn't think they could not pay back. It would be stupid. It would be bad business. Ah, and yet that is exactly what happened and unfortunately is still happening, even after all this...Can you believe it??? I CAN'T, which is why I hope this enrages you, sickens you, makes you take action in your own life, in your community, with your votes. Something has to be done here and the leak has not been fixed. We are still hemorrhaging. Banks are still overstating equity that people are still taking out. When is it going to stop?

Just another real estate rant by your vigilant, citizen who wants us to improve this world...Oh, and who also happens to be a real estate agent : ) in the Omaha Metro. If you would like to use my services... I am kind, considerate, and work my buns off to help you through this real estate cycle. I'd be happy to help.

www.ColleenWoodward.com

RE/MAX The Producers

"Selling Real Estate for the Cure and with Heart"