BANKS MANAGE RISK ?

Everyone knows by now that we are in a housing “correction” to put it nicely. The price of homes has been in a free fall for the last twelve months (at least) and the market for new home construction is, well, ugly. The largest builder in Iowa closed its doors a few weeks ago and told its employees to go home. And it had over 200 homes in various stages of construction.

In a recent meeting I had with a senior banker he indicated that his bank did in fact have  foreclosure inventory on the books and would have more. But the Polk County Sheriff’s office was backed up four months due to the high volume of properties going to sheriff sales. WOW that is saying something especially for a conservative (financially) state like Iowa.

So the market is going down everyday and most (no spin) experts are predicting we are nowhere near the bottom. Then why wouldn’t bankers want to sell their foreclosures sooner rather than later? (An ordinary sales method’s typical time on the market is 7-10 months, in his market). An accelerated auction sales method usually produces a sale in 45 to 60 days or less!
 
After 20 some years in this business I still scratch my head when people won’t do what’s obvious to everyone else. Or is it?  I’m a big Apple computer fan, wish I owned more stock, and I came across this web post on Roughlydrafted.com that kind of helps explain the situation. It discuss some of the reasons Apple is up (Mac sales were up 50% last quarter) and Microsoft has had a run of bad “luck”.

“The extreme difficulty of big corporations to take bold risks underscores both the unique success Apple is currently enjoying and the morose series of failures Microsoft is suffering. Steve Ballmer has tried to demonstrate that he can take risks and execute; he presided over Vista, the Zune, and the dropped acquisition of Yahoo. Ballmer’s failures have demonstrated that risk taking is not synonymous with success. That is of course why bean counters avoid risk in the first place. However, this all leaves Microsoft stuck in an unpleasant limbo between not excelling enough to be successful in its expansion efforts, and not failing enough to be able to take the kinds of ballsy risks needed to pull off spectacular results.”  You can go here to read the rest of the post.

Real estate auctions are scary and risky to a lot of people. To those of us in the real estate auction industry a properly conducted real estate auction is no more risky than an ordinary sales method, especially when net proceeds are considered. However, it is also painfully obvious that we have a long way to go in reducing the perceived risk associated with an auction sale. Especially, when it comes to our most difficult clients, bean counters.

I’d love to hear your comments on real estate auctions, but please leave the whole Microsoft - Apple debate to another forum. Thanks.