13 Feb Spank the Bank! Confronting the Biggest Bully in the Neighborhood!
It is an unspoken reality that for those of us making our living in the real estate industry, we unfortunately continue to have to work in the “short sale” arena. I say unfortunately for a number of reasons, but first and foremost is the fact that as realtors we see firsthand how traumatic it is for the homeowner and the buyer when a short sale transaction becomes a casualty of disorganized corporate banking staff and understaffed bank short sale offices.
The issues of the short sale “nightmare” were, and continue to be, promulgated almost specifically by the banks themselves. It has created a growing and aggressive stealth movement towards forcing the banks to start being good neighbors with the real estate industry.
Anecdotally, in two very recent short sale transactions with major banks, (the lien-holders of the respective properties), none of the professionals on the realty side involved with the transaction, (realtors, title agents or closing coordinators), could get anyone at the bank’s short sales offices to respond to communications or queries of any sort. Phone calls, emails, faxes, and even an outreach by courier… “Holy Foreclosure Batman, I smell a rat!”
In one case the short sale price had been approved by the bank, the buyer had made a full price offer, the contract was fully executed, the home was vacant, (on a very short leash for foreclosure), and we still could not get the bank to respond! For two months we could get no answer of any sort from the bank or their representatives! It is an extremely unfortunate, but well known issue, (there is no doubt that all of the realtors out there are shaking their heads with the same nightmare stories of their own)… it’s got to stop!
Approaching the point at which this particular home was about to go on the chopping block at the county courthouse, the selling agent, (and myself on the buyers side), decided to take matters into our own hands and become more “proactive” at getting the bank’s reps to respond. We made a very aggressive effort to reach out to the people at the bank’s senior management level who COULD make a decision, while also convincing them of the need to respond.
Drafting an email to the CEO of the bank, along with a number of members of his board of Directors, VP of Short Sales, and numerous other banking officials, we started moving forward in short order to alert these officers to the shenanigans of their local office. After looking over that email with a fine tooth comb and making a number of changes, the email was sent to all of the bank officials and board members, copying the local bank short sale reps, (remember, the ones who refused to respond to our queries).
In a matter of hours, literally, after sending that email, we had numerous calls from the bank CEO’s office wondering why we were having problems and what they could do to help. Due to this “re-energized” focus on this case we ended up closing the sale only days later… after two months of senseless inactivity and non-response on the part of the bank office assigned to handle the case.
This particular situation ended up working out for the buyer and seller, but unfortunately it was just one of thousands of these cases occurring daily nationwide. The big banks and their short sales offices literally BULLY everyone involved in a short sale transaction, from realtors to title and closing agents, to the homeowners themselves! Why?… well, for the same reason a dog chases its tail, because they can! They know they can just refuse to answer any queries in reference to a particular transaction, and there is very little, if anything, that anyone in the real estate industry could do about it, (up till now). Think about it. What other phone numbers would you call? What other fax number would you use? What other contact point do you have? You all know the drill, and it’s not pretty.
Remember how we hated bullies in grade school? To be more specific, who do you know that doesn’t hate a bully? I always have and always will. Realtors and others in industries dependent on real estate sales must come together as a group to put pressure on our elected representatives to create better legislation to force banks to behave! We cannot continue to allow the biggest bullies on the real estate block to continue making their own rules to the detriment of the rest of the country and entire industries.
Obviously, the banking industry hasn’t received the message loud and clear that the citizens of this country are sick and tired of the crass, unresponsive way in which banks are handling their affairs… and specifically in this case, the administrative issues and transactions with short sales.
Short sale homeowners are certainly not happy that big corporate banks earning billions of net profit per quarter, are having their homes foreclosed on, in many cases, due to the shoddy, unprofessional work ethic, and haughty bank employees simply refusing to respond to realtors, title agents, closing coordinators and homeowners.
Obviously not all bank employees are “haughty” and / or have a poor work ethic. Unfortunately, I haven’t worked a short sale yet, nor have I spoken with a realtor who doesn’t agree that in almost every case at some point in the game one of those “special” bank employees ends up being an integral part of why the transaction is not moving forward.
Referencing the aforementioned net profits of the banks, and for some speculative insight, here are the 3Q 2011 net earnings for three of the major banks, Bank of America – $6.2 Billion, Chase – $3.1 Billion, Wells Fargo – $4.1 Billion. (These banks, just coincidentally, also have huge numbers of short sale properties on their books).
That’s just three months earnings folks. Think about it.
Why do we allow banks to bully the parties involved in a real estate transaction? Individual realtors and brokerage firms are just the tip of the iceberg. All of the tangential businesses that revolve around a real estate sale realize a huge negative impact from laggardly bank employees just simply refusing to do their job professionally and in a timely manner.
Contrary to some populist belief patterns, the men and women of senior management running large corporate banks are not stupid! Neither are our elected representatives, (although some of you may disagree with that latter point). Why is it then, seemingly, that none of those individuals can see what we in the real estate industry see on a daily basis.
For instance, if a particular short sale is neglected by the bank and continues to be denied any attention for months, the buyers in the transaction most probably walk from the contract. The home then ends up being put back on the market, forced to continually lower its sale price to sell, or the bank moves in to foreclose on it.
Due to the recalcitrant bank staff, not only does that particular home’s price get lower and lower, (in order to sell prior to foreclosure), so then do the values of the homes around it become diluted. Previously where there were only one or two homes in a sub-division that were possible short sale candidates, the callous, maybe even devious inattention of bank “professionals” has diluted the equity in the surrounding homes so much, they now become short sales themselves. It’s a virus and this never ending idiocy goes on and on, simply because bank employees refuse to do their jobs! Any suggestion that this was bordering on criminal… would be an understatement.
Everyone in this country took a tremendous negative impact to their financial health over the last five years, and it is becoming tiresome to continue to listen to bank CEO’s whining responses to congressional queries with, “we just don’t have the manpower to handle all of those cases”. Really? A reasonable person would submit that if your corporation earns $6.2 Billion in net profit in just three months, you might be able to hire the staff necessary to process those short sales, or at the very least answer your phones.
After discussing these issues with a number of colleagues concerning some method with which to reconcile the plethora of problems manifest in a short sale transaction, we all came to the same conclusion. Banks will not start to be professional business partners until they have some reason to be.
Discipline is a necessary element of any behavior modification program, and the type of discipline needed now is parent-to-child type of discipline! Ipso-Facto – if you act like a child, you should be disciplined like a child… until you start to behave appropriately.
Not being a fan of “big government”, I would submit in this case, that our government is going to have to oversee some parenting responsibilities and to that end, a number of proposals surfaced that we believe will work.
First, a bank has to be held accountable for its inactivity in a transaction. In other words we’re going to have to “Spank the Bank” if they don’t behave. This disciplinary action should have some monetary impact on the bank’s bottom line attached to the individual transaction. For instance, if the bank is supposed to get back to you, the realtor, in ten days on a decision to accept or deny an offer, or send you an approval letter to sell, then they should take a hit on a daily basis for that refusal to respond by perhaps a fine of $250 per day, (taken off their bottom line from the sale).
Second, the bank’s team, office, or group handling that transaction, should receive some internal disciplinary financial action for their substandard time and resource management, that would come from that team or group’s budget,… $100 per day?, ( added to the upcoming total).
Third, the individual(s) working for the bank, assigned to work directly with that particular case should receive job or financial action for their delay and inaction… $50 per transaction per person?
Those three financial deductions would be totaled and taken off the bank’s bottom line for that short sale.
Here’s the best part, 90% of whatever money the bank ends up being fined on a daily basis due to its inattentive, slovenly attitude and unprofessional response time goes straight to the closing costs of that transaction, (taken off the final number of the HUD), to be split evenly between buyer and seller! The other 10% could go to fund short sale and foreclosure counseling programs. Let’s see how THAT sits with the bank. I would suggest that with those legislative requirements in place, all “short sales” would become “instant sales” overnight.
We could see bank employees finally start to answer their phones, respond to homeowners, get the right file to the right person, and finally “find” the financial packet that had been sent in months ago, THREE separate times!
The bottom line is that until this country’s legislators create some very strong language to actually hold the banking industry accountable, and we in the real estate industry along with other concerned groups and citizens make our voices heard forcing the banks to comply and cooperate, we will not realize any positive movement towards ending the short sale fiasco with the large corporate banks and their callous, haughty, unresponsive short sale departments.
Do NOT allow yourself to be bullied by a bank’s financial legerdemain and lack of professionalism! Think outside the box!
Let’s not watch our country continue to dig the “short sale” hole for another decade. For many people, doing nothing is doing something! In this case doing nothing is an invitation for the bullies to become even more aggressive.
Get involved! It’s time to take a stand!
by Robert Cox 12/28/11