Here is a funny story I read online today.

In San Clemente California, a house was sold to two different sellers, at the same time. You can read the whole story here, but I will give a short synapses, with my personal commentary.

Douglas Garhartt and Brandon Lively  bought a 3-bedroom condo on March 11. The seller had been in default on his mortgage and Garhartt and Lively purchased the place as a short sale for $365,000.

But on March 15, OneWest Bank, the bank that was involved in the short sale, sold the same property at auction for $346,896 to a group of real estate investors.

So those appear to be the basic facts. Both buyers are trying to figure out what to do, and who is at fault here. But most likely first buyers who purchased the short sale will get to keep the house, while the investors will be left trying to figure out how to get their money back.

So what happened here? From a Realtor’s perspective, this goes to the heart of what I have been telling clients for a long time. These big banks have different departments that do not effectively communicate with each other.

You have a Loss Mitigation Department that works on trying to modify loans, short sale, etc…to keep the house from being foreclosed on. And then you have the Debt Collection/Foreclosure department that is following their old fashioned method of hounding and harassing the borrower, and foreclosing. Foreclosure is the most expensive option the banks generally have.

One would think that the banks would want to do everything they could to minimize their losses, yet they continue to foreclose, and lose more money. You would think that they could assign one person/department to work with the homeowner, and their representatives (ie…Realtors, Bankruptcy Attorneys, etc) and come up with a solution that worked in the best interest of all parties.

But it is so clearly illustrated by this article what actually happens in these large banks. If the executives at these banks wanted to really make a difference, save their companies money, etc…they would look at this story, talk to the people on the ground, and change the core way they do business.

Since that isn’t going to happen, what can the average person do, and what lessons can be learned.

The big lesson is the risk of buying a house on the courthouse steps. You don’t get title insurance on the courthouse steps, and basically have to pay cash. That is why the short sale buyers will most likely keep the house. They have title insurance. So either they keep the house, or the title company has to pay them back.

The investors on the other hand will most likely need to spend more money to litigate a settlement, either from the bank, or the title company that was involved.

If you are in the Ashland or Medford Oregon area, and want to talk more about this, don’t hesitate to contact me. adam@agentinakilt.com