Math that makes NO cents...

One lazy day last month I was sitting at my computer when an email comes over from a client.

"Tim, the house we made an offer on last month is back on the market. It is on the market for a lot less than we offered. Can you tell me what is up with that?"

What happened next was truly puzzling. It also is something that most clients (and this Realtor) don't fully understand.

First, a little background. The home is in Lake Arrowhead, CA. My client is looking for a second home. We went up to Arrowhead in April and looked at 7 homes (5 REO, 1 Resale, 1 Short Sale). As usual my client loved the short sale. It was a quaint Chateau just outside of the "woods" in Lake Arrowhead. The home was built in 1963 and has a very nice view of the lake. However, because it is outside of the "woods" it does not have access to the lake. The home was listed for $279,900. We ran a comp check and determined that this might be a bit high, yet we made a full price offer because of the short sale status. The listing agent said that they had already done a BPO and had approval at $325,000. Side-note...it is amazing to me how many listing agents list homes BELOW their approval price.

After a few weeks of waiting, the bank came back saying, "we will not go lower than $315,000." I advised my client not to raise their offer. I felt that the home was actually overpriced at $279,900. We sent over comps on the property showing the bank closed sales in the area (out of the "woods") for $240,000. We let them know that we were still willing to pay $280,000 (my clients really liked the place).

"No," the bank said.

My client was disappointed. We moved on. We have continued looking in the area finding nothing that knocked their socks off.

After a very short month...I got the above mentioned email.

The house was back on the market for $218,000. This bank had an offer for $280,000 that they would not accept 28 days before. On this day, they were about to accept a "full price" offer of $218,000. Literally, they cost themselves $62,000 + any foreclosure fees (usually $20,000-30,000).

We have a couple theories as to why this happened. 1.) The seller didn't qualify for a short sale, so the bank would rather foreclose than help out the seller. 2.) The lost mitigation departments at banks pay their employees more for the disposition of an REO than they do for a short sale.

These are just theories...all we know for certain is that when short sales are involved banks make no cents!