Everybody in the land business seems to be talking about financing and the lack of it for land transactions. It’s obvious this is a big problem in our industry, however in talking to a broker last week I found an even bigger problem that the banks and government have created. The greater problem than not having money to loan is the banks inability to sell a distressed asset. The banks are in a broken system that cannot be fixed in the near future.
The conversation I had with the broker started off with this question. “What do I do when I have given my client (a bank) an offer for more than their property is worth and they still will not accept the offer?” My answer was to get all the comparable sales that you can and convince them that you are correct in your value analysis and that there is no way they can sell it for more than the presented offer. The broker said, “I have done that!” Well what happened? “They agreed with my evaluation of the property.” So what’s the problem? “The bank told me they can’t afford to take the offer.”
This conversation was very alarming. How are we ever going to get through this mess if we can’t sell the current inventory that are so called “deals” or short sales? These types of bank owned properties will help establish a bottom and set comps for the rest of the industry to baseline dirt values. What’s more alarming than the banks inability to sell is the FDIC is still allowing them to conduct business in this fashion. When do they think things are going to better? Will the bank recover next year and values return to 2006 prices? If that’s their business model, I wish someone will put a padlock on their door yesterday! To let these banks continue to operate this way and control such a significant part of our industry is pure stupidity.
Until banks fail or raise more capital (fail is the more likely option), be prepared to continue a flat real estate market. I would like to give a big “thank you” to the FDIC and the banks for keeping us floundering around for the last 3 years. I look forward to you guys keeping this incredible mess going. Thanks again!
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