I recently received a $500.00 compensation payment for a closed escrow on an REO property in Folsom, CA I was assigned in February 2011. Unfortunately, the $500.00 was approx. one-tenth the commission I would've earned had the property sold to a buyer in a traditional MLS sale. I had the property listed at $232,560 and had multiple offers with some as high as $220,000 which in my opinion were above market value considering the work that needed to be done.
However, the bank elected to sell the asset through a federal government sponsored Neighborhood Stabilization Program (NSP) to a "non-profit" buyer at a substantial discount. The tax records reflect the sale to the buyer at $182,500. The closing HUD reflects the sale price to the seller at $232,560 with a "purchase price adjustment" line amount of $50,226 being deducted. The buyer has since improved the property with new paint, flooring, roof and other items. I estimate they spent roughly $25,000 in repairs. The property is back on the market in 22 days and is listed for $279,900.
My preliminary investigations into this NSP is "grantees" can acquire properties with federal government grant monies at a minimum 15% discount, repair them and resell them to low-, moderate-, and middle-income homebuyers. My questions run deep on this one!!
Why would a bank sell an asset in this program at that kind of discount without being compensated in some way for the difference? Is the government using TARP funds to compensate them? Do they get a full tax benefit for the higher value identified on the HUD than what the market was even willing to pay?
How does repairing a property with $25,000 and upping the price 20.3% benefit a "targeted" buyer? How does something like this really stabilize a neighborhood? Why does there appear to be so much profit being generated for a "non-profit" entity? Does this neighborhood in Folsom really need to be stabilized? The questions could go on...
I'm more concerned by what might be really going on here than I am about losing my commission difference. I see many other properties being taken off the market in light of this program depriving other bonefide homebuyers the opportunity to acquire the property and benefit by the upside after improving it. In the case of this asset, many of the buyers that offered on the property were owner occupants. I have a feeling I will be writing more about this one.
