Banks and bankrupt car washes

[Patrick H. Crowe]

I need help with understanding this. As most of us know there are many car washes "under water". In point of fact quite a few, at least here in the midwest, are abandoned, vandalized, eyesores. So I've been trying to buy one, maybe more.

Here's what I've found, to my amazement. Now as vain as this will sound to my few critics I have some fair and reasonable idea of what washes are worth since I wrote the Car Wash Appraisal Handbook, which has, more or less been unquestioned.

The washes I've looked at are abandoned, vandalized, closed down over a year, froze up and the lenders have them priced way, way beyond, many times beyond what they could possibly be worth. Why?

Here's what I'm told. NPR did a piece about this. If the report I was given was correct and if I understood it, the banks are better off with the bankrupt washes on their books claiming they are worth much more than they are than they would be to sell them at fair market value. Why?

Here's where I'm confused but apparently if a bank claims a wash is worth 190K when it's worth less than 25% of that amount, they can keep it on the books, somehow, at 190K level. If they actually sold it for 40K they would have serious actual losses to deal with so at least for the time being, they price it way beyond what it could possibly be worth because that's less indicative of their gross incompetence than the sale would be. HUH?

Could this be?

Patrick H. Crowe

 

[Earl Weiss]

sounds exactly right and partialy how they got into the mess to begin with. Overvaluing the collateral securing the loans. Now it seems the govt. is checking the health of banks befor giving them $ . Reflecting a higher value on may assets may make them look solvent. It seems the govt may also be buying these assets as part of the bailout. So, even if the govt gives them a % of value, they get more by overvaluing it. Then the govt takes the loss when they try to sell.

 

[robtl]

Wouldn't a bank trying to get government monies be better off showing knee deep in water than just ankle deep?

HELL, I'm so far down what do I know!

 

[mac]

I don't know for sure, but many, many banks are selling houses for 5 to 10% of the loan value at auction. Just read about all the houses selling in Detroit for pennies on the dollar. Don't know why banks in the midwest would be doing the opposit. But then I'm not a published author either.

 

[rph9168]

Has anyone heard anything about a new "green loan" program the government is sponsoring? I think it only pertains to commercial construction but I was wondering if it might also include such things as reclaim and water and power efficient equipment. If it does it might help loosen some money for loans in our industry.

 

[washnvac]

It seems to me it would make more sense for lenders to work with the existing owner, who may be under water. So what if they have to redo the loan, and stretch it out for an addtional 5-10 years. That would seem easier to me than going through the foreclosure and auction process, and cheaper. And, it possibly puts a performing loan back on the books.

 

[pitzerwm]

The problem is that the bankers aren't use to helping you only screwing you. Its like the frog and the scorpion, they are just built that way.

 

[Earl Weiss]

They also either can't think outside the box, or in some cases are not allowed to because of regulations and investor owner rules. They must follow their strict marching orders no matter how little sense they make. At least an good banker will admit that they have no choice and their hands are tied by rules that do not aply in a given situation, although this may be of little comfort. In some instances smaller is better when it comes to banking flexibility.

 

[Red Baron]

At least an good banker will admit that they have no choice and their hands are tied by rules that do not aply in a given situation, although this may be of little comfort. In some instances smaller is better when it comes to banking flexibility.

Exactly. My banker is of the good variety and he has had fits lately with new banking regs. I'm trying to build a house on land on which a corner is in a 99 year flood zone. My banker says that because of Katrina, he has to jump threw a jillion hoops designed to take money from people who likely will never face a flood, to fund those who choose to build/live 13' below sea level. The new post-Katrina red tape has added about $2500 to my cost to build. And gues where most of that $2500 is going?

 

[Sequoia]

Banks

In addition to owning a 3-bay SS, I'm a licensed Real Estate broker in several states.

I've been trying to bottom feed on bank-owned condos, and had an interesting experience. I've made all-cash, over-the-asking-price offers with virtually no contingencies and had them ignored. I even let the offers stand for several months with ..... no response.

Since that makes absolutely no sense as the offers are for properties listed in MLS for the purpose of being sold, I researched it and found that mid-level bank personnel are terrified of two things. One, if they step outside of even the tiniest or most obscure regulation it will cost them their job, and the regs aren't always easy to figure out. Two, they are afraid of me. As a R.E. broker, they perceive that I know something that they don't. Their fear is that I will buy it, re-list it and sell it a week later for a profit. Shudder the thought-- if that happened they would get marked down on their next performance review.

I don't know if Patrick has approached these folks modestly or with bravado as an "industry expert" and "published author and scholar" but I can muster a guess about why nobody wants to do business with him on his terms.

 

[Patrick H. Crowe]

Sequoia:

Your assumption that "nobody wants to do business with him on his terms" is both insulting, unsupported by facts and shows a level of defensiveness common to your posts. Moreover it's just plain wrong.

Over many decades, involving many washes, I have done business with multiple folks both as a buyer, seller, consultant and published author.

Contrary to your false, defensive and insulting assumption in my experience folks tend to welcome doing business with a person who clearly knows what he's doing. I do.

I'll offer you some details. I know of 2 vandalized, abandoned, bankrupt washes in KCKS. I inquired about them in mid 2008. I learned the notes were held by WF bank in MPLS MN.

The bankruptcy attorney for the owner told me the bank has to move. Of course the bank blamed the attorney. I told both that I had seen the washes, noted the gas meters had been removed and that freezing weather was coming. Months passed. Both froze.

The banker finally told me to contact a colleague of his who handled the disposal of such properties. I had sent pictures, a copy of my book offering details on one of these washes which only I could possibly have because I owned it in '94, restored it and knew the bankrupt buyer and I waited.

Months passed. A R.E. agent contacts me. WF bank in MPLS has "given" the properties to sell. Price? Who set it? WF bank. Now these washes are urban core, one more so than the other. Neither has water or gas so a potential buyer has no possible way to test much, i.e. he/she has almost no basis to make an offer. 190K? Huh?

Enuf said. I tolerate your insults/misinformation because I know they are based on so, so little information and that a person of your pusallinimos attitude will assume the problem has to be with the buyer. So be it.

Patrick H. Crowe

 

[Sequoia]

Geez

You posed a question, and I provided a plausible response. What I experienced with condos may track with your experiences with washes, or perhaps they may not. It's only conversation.

Your response is insightful and suggests to me that I am on the right track.

 

[Patrick H. Crowe]

Dear Sequoia:

I genuinely appreciated the first part of your earlier response - - the part about your experiences with condos. It was on point and helpful to me.

Then you go wildly off point with unfounded personal accusations about me and how, unlike in your case, the problem in my situation has to be me, right? To what possible end? Defensiveness? Why stoop to that level? Authentic dialogue is contaminated by such, is it not?

Patrick H. Crowe

 

[Earl Weiss]

In case of bottom feeding on foreclosures, in the last 2 weeks I have closed 6 deals for a client who bought thm. BUT she had over 60 contract offers out there.

There are plenty of bottom feeding contracts for the lenders to sift thru . Like many things with this mess I think they have a problem handling the volume. It's even worse because as noted many proerties are not being properly cared for suffering freezes and thaws with extensive water damage. Making an asset that has lost a huge chunk of it's value due to market conditions worthless or having a negative value.

 

[JMMUSTANG]

My question is how do you guys find foreclosure properties?
I'm always looking through real estate listings online in my area and I hardly even find a car wash for sale normally.
Is there some web sites that list foreclosures?

 

[Waxman]

The actions of banks in these cases mentioned seem contradictory to common sense and making a profit or , at the least, losing less money.

It seems that if the bank's motivation is to lose the least possible on the deal where they own a foreclosed property of any type, they would at least do a minimum; leave heat and water on, fix broken windows, drain swimming pools, etc.

If lenders want to portray a 'community oriented' image, they will begin doing the minimum. Otherwise, they are contributing to blight in neighborhoods and business communities.

If they are purely profit-motivated to the point where they turn a blind eye to crumbling real assets, they do so in spite of themselves. Karma will get them for this, so they should beware.

 

[rph9168]

We have noticed in our area that for some reason banks either drive a hard bargain on foreclosures or seem totally uninterested in moving the properties. I think someone already mentioned it but I have been told by several people in the banking business that by keeping these properties they can show more solvency by using the listed value rather than taking a hit and selling as a foreclosure. Some banks here will even try to find someone to run them while they are on the books. Although we have had several washes sold last year by banks at quite a discount right now that does not seem to be the norm.

From past experience I have found that banks usually do not do well selling car wash foreclosures. Normally they can't wait to get them off the books.

 

[Sequoia]

Accusations

Patrick,

My accusation was that it was *me* that they feared in the transactions, as my merely having a broker's license transmitted to them that I had superior knowledge in the transaction and they, I believe, were fearful of that. And I believe it affected the deal and their willingness to work with me. Remember-- that was *me* I was describing, and not you, right?

Second, I wrote that I had no idea what your approach was.

I suggest you revisit your transactional discussion from the other party's perspective. If you have arrived at the discussion as the know-it-all, published scholar and expert, car wash appraisal author, industry expert since Adam and Eve, man who got 10 million Oprah-related views and TV interviews, blah, blah, then my point was that it might negatively impact your ability to conduct business-- similar to what I experienced simply from holding a Real Estate brokers license.

 

[ted mcmeekin]

As noted by others--if you are about to get a gift, you may have a bias to under value your assets--if you are trying to get a loan, you may have a bias to overvalue your assets. Different banks are in different situations with their corp office or govnment.

Ted

 

[BillClinton]

I have a fairly good vocabulary, but I'm unfamilliar with the word "pusallinimos". It isn't in the dictionary. Pat?