Real Estate and All That Jazz: Desperate Homeowners, Bargain Hunting Buyers and Unsavory Home Inspectors: Another Perfect Storm?

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2. Working with a few Short Sales lately, I discovered a pattern that made me take notice.

Here you have a Seller who is facing losing their home. The Lender has agreed, the SS package is in, and the Buyers are convinced they got a raging good deal. Let's stop here and examine the particulars.

The Lender has done a BPO and come up with a figure that no one is yet privy to. The buyers have put in an offer of $410K but then decided to recant and come in lower. Why? Well, it seems that the Inspector they hired has decided there is "foundation damage" due to the hairline cracks in the plaster walls (a characteristic of every single home of this vintage). A "foundation expert" comes in and of course there are old posts and sills (house was built in the 40's), and although there is no immediate danger he "suggests" some supports and beams be replaced for more stability..... to a tune of $8500. The owner had a thorough inspection 4 years previous and there were no foundation problems found.

The roof was older, but still serviceable, and the Buyers claimed they need a new roof. A "roofing expert" came in and declared "Oh my, this roof is older than Methusela and needs to be taken off immediately and replaced". NO LEAKS were found anywhere. 4 years previous, the same owner had the roof inspected and was told that it was old but it still may last 5-8 more years. In other words, it is still quite serviceable.

So now Buyers feel justified to lower their offer to $380K.

The Buyers know they are purchasing an older home. They also know the owner is in financial hardship of some sort or there would be no Short Sale. The Inspectors, and Roofing and Foundation Contractors need work. Is this Buyer being demanding? Sure, I would be too---he doesn't want to end up in the same position as the owner. Move on to another Buyer? Perhaps, but this is the only offer. And the property fell out of escrow once at $436K, because that Buyer found another home. 

The point is, do you see what is happening here? It's another perfect storm---desperate owner, demanding Buyer and unsavory inspectors/contractors bending the "truth" for the benefit of the Buyers. They see an opportunity, a ~loophole~ where they can manipulate the sales prices.

The Lender may counter-offer, but if they can't get a Buyer to pay what THEY think the property is worth, how is foreclosing going to solve this problem? Put the house back on the market? They have the same exact Buyer issues, maybe even worse, because REO's may fetch even less money (considering the costs of foreclosure.)

This artificial manipulation of the market is happening everywhere and I hear other agents discussing similar scenarios. My fear is that this is another Perfect Storm and is hindering recovery of the industry. Any thoughts?