Posted by Rob Minton
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This recession has certainly had it's share of head-scratchers. We've seen strange things happen in this economy that we haven't seen before. Especially with banks.
Everybody seems to put the blame on the banks. With their "creative" financing of real estate, the risky subprime loans that have created such a mess, it's easy to see why banks take the heat. On top of that, they seem backwards in their thinking, "modifying" mortgages to help those who stop paying but turning down refinances and yanking home equity lines of credit from those who DO pay.
And, you hear stories of banks accepting ridiculously low offers on short sales or foreclosed homes they have taken and listed for sale. At the same time, they're getting TARP money to cover their losses on their bad assets. Do you get the feeling that banks really don't know what they're doing, like they're in over their heads?
Consider the following excerpt from a story in the metropolitan newspaper in my town, Cleveland, Ohio. It's about an attorney, Marc Strauss, who bought a country club that had been foreclosed upon:
"Strauss, managing partner of Tanglewood National Golf Club LLC, had twice tried to buy the property, roughly 130 acres that includes the course, a country club and a pro shop. The longtime country club was foreclosed in 2007. The property, owned by Huntington National Bank, has been operating as a public golf course under the management of a court-appointed receiver.
In June 2008, Strauss offered $2 million for the property, in a deal that later fell apart as the nation's banking system crumbled. In March, he offered Huntington $1.2 million, which the bank rejected. During a public auction Saturday, Strauss won the bidding with an offer of $950,000 -- less than half of the course's appraised value, according to Geauga County property records."
Click here for the entire article.
Yes, a guy who tried to buy this club for $2 million a year ago got it for $950,000 last week. If you're the bank, don't you do whatever it takes to get that deal through at appraised value last summer? Don't you accept the $1.2 million the guy offered in March? No and no, the bank said, and wound up with less money. Great business practices. And these are the guys we're bailing out.
Of course, this is a great deal for the buyer. For waiting about a year, he got a property for less than half what he was willing to pay. I say good for him.
Don't believe there aren't other stories like this one out there -- there certainly are. This one happens to be well-publicized, but banks are doing things like this. There are deals to be had once properties go into foreclosure. Could you wind up finding a great property for pennies on the dollar?
Stranger things have happened.
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