This from my Arizona Republic real estate column (permanent link):
If there’s one thing we can say we’ve learned from the housing bust, it’s this: The worst conceivable stewards of financial assets are bankers.
At every step of the real estate market’s retrenchment, the bankers have been right there, on the spot, ready to make precisely the wrong decision — days, weeks or even months late.
Can’t make your payments? Put the home up for sale. Will the bank honor an offer short of the amount owed? Maybe. Maybe in six weeks, maybe in six months. Will the buyer still be there when the bank finally responds? With prices declining by thousands of dollars a month?
So the bank has to foreclose on the home — at an imputed value far lower than it could have had from the short sale. And then it must list that home for sale at a still lower price.
But don’t waste your time looking for evidence of prudence or even simple greed in a lender-owned listing. The home will be filthy, with fixtures and smoke alarms missing. The kitchen range will have been stolen, thus to assure that the home is not accidentally sold to an FHA or VA buyer.
If the bank inadvertently approves a purchase contract for the home, it will do everything it can to avoid recouping even a tiny fraction of its losses. First the bank will attempt to savage the deal by completely rewriting the contract. And everyone involved in the process will be insanely overworked, so that even the simplest question will occasion a two- to five-day delay.
Absolutely nothing will be done to address even deal-killing defects. But because the decision chain is so convoluted, negotiations over problems will drag on for weeks or even months. That way, when the deal falls apart, as many do, the bank will be able to relist the house at an even lower price.
I wish I were making this up. I want to deride bankers as being clowns, but that’s unfair to the clowns. They produce wealth, rather than destroying it — and they dress better for work, too.
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