Anyone ever have the short sale deal that makes sense collapse, only to see it go to sale via the foreclosure process and sell for less?
OK, that was a stupid question. But have you ever looked into why it didn’t work out when there was no apparent reason for it not to close? You know, the deal where even the contestants on “Are You Smarter Than A 5th Grader” could do the math and conclude that it is in everyone’s benefit for it to be approved and close?
While the White house continues with the “you ought to be ashamed of yourselves” lecture, they are still cutting backroom deals with the financial world via the FDIC every time they take over a failed bank. This means that its possible the owner of the note, which isn’t likely the loan servicer you are negotiating with, may have a financial incentive to let it go to foreclosure. The foreclosure may end up with a lower net to the lien holder, but what you may not know is the guarantee from the FDIC can mean a huge windfall.
Denver real estate broker Larry Hotz had one such situation. His clients wrote a full price offer. They ended up getting the property, but not via the short sale route, and for less money than they originally offered. Here is his account of a short sale gone sideways, where the lien holder made a profit of over $150k, and one reason why the FDIC estimates that bank closings will cost the taxpayers an estimated $100 billion from 2009 through 2013.
“If you had any doubts at all about the primacy of Wall Street over Main Street, your doubts should be laid to rest.”
Former Clinton Secretary of Labor, Robert Reich, November, 2008
The talking heads keep on talking, but at the end of the day, those living within the Beltway and those living on Main Street are still at the mercy of Wall Street. It isn’t a partisan thing as some on both sides of the aisle claim, while pointing at the other. It is just the way things are. Wall Street permeates politics. We all know how Wall Street made bank under Bush, but as Matt Taibbi of Rolling Stone illustrates in the article “Obama Big Sellout“, it isn’t changing under the current administration either.