I am a real estate professional and homeowner in Las Vegas, NV. As you surely know, Vegas has been hard hit by foreclosures. We continue to have a high number of foreclosures in process and a substantial number of bank-owned homes available in our local real estate market. All the major banks and mortgage servicers have homes for sale in our area: Wells Fargo, Bank of America, Deutsche Bank, Chase, etc.. In addition, they are lien holders for the thousands of additional homes owned by people attempting a “short sale”. Thus, the banks collectively control over 75% of our real estate market before even considering their role as a lender for new sales.
The banks are using this position to further drive down prices, and exacerbate the decline in property values. This is a direct threat to Americans’ retirement accounts and municipalities’ tax rolls. Moreover, it has the potential to drive builders out of business altogether as it is impossible for them to compete with ludicrous prices well under $100 per square foot.
Banks are setting prices locally around $70-90 per square foot for nicer foreclosed single family homes that need a minimum of work. For under $60 per square foot, the property needs serious work but is still habitable. Only once a property is priced under $45 per square foot are homes “gutted.”
The initial low price is designed to bring in many offers in a short period of time – often dozens and sometimes over a hundred in just a few days. This feeding frenzy of bidding is hidden under most MLS systems. While locally, the final sales prices is a matter of public record, that is not true everywhere. The bank’s goal is to quickly get rid of the property no matter what, minimizing maintenance/utility costs, taxes paid, and homeowner’s association fees due.
This combines with the new appraisal rules in a toxic fashion. Under HVCC, many inexperienced or out-of-area appraisers are choosing to use these artificially low priced homes as comparables to non-distressed sales. They do this without regard or even knowledge of the condition of the properties in question. In one recent case, an appraiser compared a home that had been recently renovated to a home that was in desperate need of work. Thus, the values of all local homes are deflated by the big banks dumping inventory.
This practice is almost certainly not limited to our local market. These issues threaten the long term housing stability of our nation. Banks collectively control our markets, and they must be made to “play fair” rather than distorting prices for short-term gain. I have not even addressed the abusive practices of banks towards the potential buyers of these homes: mandatory pre-qualification with the lender that owns the property; contract addenda that strip the buyer of many protections they have under their original purchase contract; capricious and arbitrary closing dates. Nor have I addressed the bank-imposed labyrinth of frustration faced by all participants in a short sale.
If any other industry attempted these business practices, the Federal Trade Commission would investigate sanction them. As much as the various states would like to come down on these and other abusive activities, the big banks are federally regulated and thus almost untouchable by state authorities. It is time for the Feds to investigate the big players in the foreclosed property market, punish those whose actions hurt both home owners and home buyers, and make sure that all parties follow the law.
Thank you for your consideration.
In closing: Follow up on the Baucus Plan. I guess it was written for his *ahem* other constituents.