Legislation doesn’t move quickly. Seems to me we might have been overly optimistic to think a bill to keep the financial systems moving could be written and passed in a week. It might have been extra-overly optimistic in an election year.

 

I have faith Congress will do something. And none of us know if it’ll work, whatever it turns out to be. Questions of how many taxpayer dollars to risk, how they’re administered, with what oversight, how much return for the risk, and most importantly – for how much bounce in the polls – are all good things to consider.

Let’s assume Congress answers all of those questions correctly. Then what? The experts who rightfully pin the credit crunch on the problems in the mortgage market have also demonstrated an underlying problem is the current housing market.

The underlying problem in the housing market? Too much inventory, and too much REO inventory.

In today’s real estate market, it’s a painful experience to buy REO property. There are buyers out there trying, but it seems the banks have so much inventory that they don’t know how to sell it. A few recent stories are the best way to illustrate:

A property in St. Louis Park was listed for $155,000. A buyer submitted an offer at list price. The bank countered at $225,000. Not surprisingly, the buyer couldn’t qualify for an additional $70,000. The property is still on the market.

A buyer submitted an offer on a property in Minnetonka. They were told it could be two to four weeks to get a response. After four weeks we called and were told it was in the system, they’d get back to us. Again a couple weeks later, and another week later – continued brush-offs. After ten weeks, the loan officer called and learned that the file had been lost. The buyer was disillusioned and didn’t re-submit. The property is still on the market.

A short-sale listing in Minneapolis home was on the market for 30 days, listed for $325,000. A buyer wrote a low offer, and after negotiations agreed on a sale price of $310,000. After the contract was signed (subject to bank approval), the bank ordered an appraisal. The appraisal came in much higher than the market had agreed to pay – so the bank refused to sell because they have a “rule” that they won’t take an offer less than 95% of appraised value. In this case, they wouldn’t sell the property for less than $345,000 – $20,000 more than the list price. The property is still on the market.

On another short-sale listing in Minneapolis: the bank refused consider a short sale because the homeowner had been paying their mortgage on time. To get out of an unaffordable situation, the homeowner stopped paying the mortgage and listed their home. Along came a buyer, offering less than the bank wanted to accept. The homeowner, after not paying their mortgage for eight months, had plenty of cash on hand and offered $10,000 to their bank on top of the buyer’s offer. Their bank said no. The property is still on the market.

Whether we call new legislation a bailout or a buy-in, it’s my hope someone with power starts to understand what nearly every real estate agent deals with daily: too much foreclosure and short-sale inventory owned or controlled by banks who show no motivation to get it off of their books.

Congress isn’t talking about it. The National Association of Realtors, state Realtor associations, and local Realtor associations are either completely ineffectual or absent.

What’s the next step after Congress spends billions more of our money?