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FED Shut-down of ANB Perpetuates "Smoking Gun" Theories

by Jeremy Larkin

In case you didn’t know it already, Federal regulators shut down ANB Financial National Association banks (a.k.a “ANB”) last week after discovering "unsafe and unsound" business practices there.

 

If we were living in the gun-slinging Wild West as portrayed in the old John Wayne films, I think ANB (Arkansas National Bank for those who aren’t aware) could have certainly been considered an “Outlaw.”  Those who know anything at all about them today know that they were considered heroes during the real estate boom, yet in the nearly 3 years of decline since then there have been few kind words for their “aggressive” lending practices.

 

As a matter of fact, I have heard MANY very influential people, especially those in the banking industry, make fairly strong comments to the affect of ANB being one of the key “culprits” in creating the real estate troubles faced in Washington County today. Why?

 

Well for starters, because they didn’t lose $100 Million (wow) last year because their clients were writing bad checks. They lost it because they, like many others, appeared to be handing out loans like $.10 Oriental Trading Company party favors. Many in the community feel that the ANB’s of the world were fairly frivolously processing loans for too many people who had no business being in the business. And yes, there were many who did. I like to refer to it as the “$1,000,000 spec home loan on an $80,000 Income.” Looking back, it doesn’t make much sense, does it?

 

Personal Responsibility?

So it begs the question: can any ONE lending institution be solely at fault? Of course not. However, can any ONE lending institution be largely at fault? Who knows? But with ANB’s shut-down last week ‘smoking gun’ theories will be perpetuated, and a lot of people will say they “got what they deserved.”

 

It also brings up another interesting twist that many of us didn’t consider: guilt. As local commercial broker Graig Griffin so nicely put it in his recent blog post for Utah CEO Magazine, “There is no question that greed played a role in the rise and fall, but I did not expect remorse — no, this is real guilt.”  Me neither, but I guess I’m not surprised.

 

I think this is another “personal responsibility” issue, quite frankly, and our Nation’s economy is being torn to shreds because of the general lack of it. Everyone wants to point fingers, place blame, search for the “smoking gun.” The smoking gun is, quite simply, in the hands of the entire greedy public. We may all be to blame for the emotional wave of speculation and property appreciation, (which was largely smoke and mirrors we are finding out), that went on in recent years.

 

I guess we should have all seen this coming, but as I wrote in an earlier post this week, the prospect of easy money is so seductive that most people just ignore the obvious writing on the wall, or perhaps they just can’t read it?

 

Thankfully, FDIC will be insuring those who had deposits of less than $100k, and Little Rock’s own Pulaski Bank should be assuming all loans, but it doesn’t change the fact that a lot of people got themselves into some pretty stupid loans in the past few years.  I’ll bet a lot of starving spec builders are now wishing they would have taken the time to read the “fine print” on the walls of the real estate market some 3 years ago. What do you think?

Your agent tried to warn you, but you just wouldn’t listen. You thought you could save some real dough buying a short-sale. Now months have passed and you didn’t even get the home you wanted!

 

This can either be a long or short post. It all depends on how much convincing you need, which will then determine how much you elect to read.

 

If you’re a Buyer, you’ve probably been enticed by all sorts of real estate-sexy terms like “short sale”, “foreclosure”, or “bank-owned.”

Yes, just hearing those words may have you turned on for a “killer deal” as we speak.

 

As a Seller you’ve heard those same terms and they’ve had more nasty connotations. You  might have said to yourself, “those are things that happen to other people, not me.” Or perhaps you have even become aware of the fact that those very bank-owned, foreclosure, or “REO” properties are robbing you BLIND of your equity. And they are, believe me they are, but that is a discussion for another day.

 

However, this post is mainly devoted to Buyers. After getting really excited about the short-sale, you call your agent and tell them you want to make a really low offer and save some serious cash. Your realtor knows better, and tries to dissuade you from making the offer. “Let’s find another home” he or she says, but you just think they want a quick sale. You can’t be stopped. You are one savvy buyer and hell-bent on making a good deal.

 

Weeks pass, and still no word from the listing agent. Your agent tries and tries to call the listing agent to find out what is up, but they always get the same response: “we’re waiting for approval from the bank.” As the weeks pass, so do other buying opportunities on properties with great equity in them and that you can actually close on in 3-4 weeks. You, of course, are still living where you don’t want to and it’s driving you nuts.

 

Finally after say a 4-6 week wait, the bank comes back and tells you: “Sorry, we can’t accept your offer. Please bring us a higher offer.” Or better yet, “sorry we received a higher offer than yours and we will be pursuing it.” Or let’s say that they actually accept it. Now they need you to close within an EXACT number of days or it is dead and they have to reapprove…yuck! (Hey that 4-6 week scenario may be conservative...I've seen MONTHS pass before approvals).

We will be closing a short sale transaction next week. It took us 5 months, 7 offers, and probably 100 calls to the bank to get to this point. I am hearing figures of only 10% of short sales making it to the closing table, but who can be sure how many really do?

 

But it is a “short” sale…can’t I save money?

Here is the deal: The very NATURE of a short-sale is that the bank is taking a loss on the deal. Why in the world would they want you to give you a good deal in the process? Sure they need it sold, but they aren’t stupid and they will make dang sure that they exact every penny they can out of the deal in the process. They don’t care about you, me, or even the Seller – only their bottom line.

 

What is it with Human Nature?

There is nothing more compelling than the thought of either saving or losing money. Buyers in today’s market live in absolute fear of buying something that may lose value, or that they might have saved money on in some way. Sellers suffer from the same malady, only from the opposite perspective. They notion of selling their home and “leaving money on the table” is almost too much for most Sellers to bear. That is their hard-earned money dammit, right? Well not really. The equity you have on paper is just make-believe until you sell and get it out – just like the stock market.

 

So what DO you buy?

There are hundreds of phenomenal buys sitting right under your nose in our market right now, being offered by either A: motivated sellers with the equity to negotiate, or B: Motivated banks who have already foreclosed on the property (the short-sale never worked) and they have it back on the market at a great price so they can get rid of it quickly.

 

Any while you’re at it, please take caution with so-called “short-sale” or “foreclosure specialists.” These are usually just brand-new agents looking to cash in on the current market, or unscrupulous investors who want to save money at your family’s expense. If it seems too good to be true, it probably is.

 

Summary: Short sales are a necessary evil in today’s market, but they do suck. They suck for several key reasons:

1. They are, in essence, a "mirage." They look good from afar, but they end up sucking the life and energy out of everybody involved in the process: Buyer, seller, agents, Title Company, mortgage lender, the whole works. If you can avoid them, do.

2. As a segway to #1, statistically, you will probably never get that home. Really, you probably won't. You will either give up before the bank approves, or someone else will outbid you in the process.

3. Because of #1 and #2, they don't even end up being the "great buy" you wanted. I just sold one in downtown St. George for $9000.00 OVER the listing price! Yes, you read that correctly, OVER. Does that sound like a good deal to you?

Buyer beware, what more can I say?

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Photo of Jeremy Larkin - The Larkin Group Real Estate
Jeremy Larkin - The Larkin Group
Keller Williams Realty
50 E 100 S, Suite 300
St. George UT 84770
435.767.9886
Fax: 435-359-5085

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