Thursday, April 15, 2010

Why I Don't Invest in Bank of America

I'm shopping for a home. Since we sold our last home due to outgrowing it, we've been renting. It's a buyer's market, so this seemed an auspicious time to shop.

Among the potential picks was a property located close to the Texas Medical Center and not far from a pool where underwater hockey is played. It's not far from my kids' school. The location had a lot going for it.

The asking price – when I first noticed the property – was north of $410K. The property was owned by Bank of America following a foreclosure, which occurred in 2009. In 2005, the house sold for $550,000. A deal in the making?

The Harris County Appraisal District thinks the land (ignoring the structures) is worth a shade north of $300,000. The house is old, and not good-old. The garage is a fright. We offered dirt value.

There is a good reason we offered dirt value: Bank of America would not let us inspect the property before it had a contract. We couldn't assume anything had value other than the dirt. Had Bank of America allowed us to spend a few hundred bucks inspecting the property, we could have learned more, faster, and shortcuted this whole fiasco by either finding the right price up front or discovering we could not agree.

Bank of America, which was conned into lending on the house in 2005 on the theory it was worth $550,000, apparently believed that there was still value in the structures, and made a counter-offer accordingly. We shrugged, said "Okay" and played ball: we bid on the assumption that the structures had some value. At the speed of a squatting glacier, we reached a price. It took Bank of America's property person a week to get around to signing the contract that Bank of America had written. I say Bank of America wrote it because they sent us an addendum that was full of a complete set of terms and stated that it superseded other agreements to the extent of any conflict. Once BoA's lawyers had done with that agreement, it really didn't matter whether or not there was another document: the addendum covered everything, and did so in BoA's favor.

While this was going on, I was informed that we wouldn't get a contract from Bank of America until we were pre-approved through Bank of America. I pointed out that I had been pre-approved by a financial institution with which I was actually willing to be in an ongoing business relationship, and that pre-approval from Bank of America couldn't do anything but reduce my credit. Bank of America was adamant. So we lost another day getting pre-approved by some loan agent at Bank of America.

Still, they took forever with the contract addendum. Then, they demanded we send another, "corrected" copy of the original contract we'd sent them – making corrections that the addendum was designed to obsolete, and which the addendum said were corrected in the addendum. It was a make-work project, and it took another half a week to get them to process. Their seller's agent also sent us a raft of papers that are apparently highly prized in the office, but which don't purport to be contracts and which don't have anyplace for a signature by the seller. They apparently like to paper their files with this crud. I told them I was through humoring them and left them with a keen idea what I thought they could do with their papers.

Then, they said I needed to put money into an escrow account "by noon". A day previously, the story had been that I could mail a check. Now, they wanted certified funds by noon. I considered driving to the place with cash, but I didn't have the time. TD Ameritrade will wire money without charge from individual accounts they categorize with mine, so I got the escrow company's information – Charter Title – and sent it there, for the benefit of L and myself.

Bank of America owns Charter Title.

Once it became clear that the house's exterior was covered in wood whose damage could not be diagnosed because it had all been concealed with putty and recently repainted (Bank of America said it wasn't required to produce the seller's disclosures Texas law requires, because it didn't know anything about the condition of the house), and that the structure that wasn't covered in putty and paint (the garage) was infested with active termites, and that the water heater was freely leaking and that standing water had pooled beneath the floor beams and was sitting there in the shade growing whatever is possible to grow in stagnant water shaded from the sun in the swamps of south Texas, and all the electrical work had been done by a weekend warrior with no concept of the safety codes, and the upstairs renovations had been done by the same dufus and almost all of the bedrooms had serious fire safety concerns, and ... and ....

As you can imagine, I didn't feel it likely I would succeed in educating Bank of America about the value of its foreclosure. Some of the structural problems would have been readily ascertainable in 2005 had a real inspection been done, but Bank of America apparently still doesn't think its properties are worth knowing anything about. Bank of America's ask price has drifted south of $370 on the property, but the cost to level the structures and haul off the debris will push the net value of the property below dirt value. Apparently, Bank of America hopes to hold the land until it's worth more.

So under the contract (which, following Bank of America's addendum, had no option period), I instructed Bank of America what features made the property unfit at the price we'd agreed. Knowing Bank of America was not about to put a cent into the property, this was tantamount to exercise of an option to cancel, because the consequence of Bank of America refusing to correct demonstrated flaws was termination.

So I asked for the escrow money back, a process that involves getting Bank of America's consent on a form (tick tick tick) and asking Charter Title how it planned paying me. I had an itch to demand certified funds by noon, but I was being nice. It went like this:

JadedConsumer: How will you transmit the escrowed funds back to us?
Charter Title: What funds?
Actually, their exact words were "We do not have this file here." They also had no idea where the file was, or if it even existed. Doing business with a Bank of America company is never as easy as you expect.

I have the wire confirmation showing their wire instructions were followed to a T, but their response – after having my money for two weeks, and allowing me to inspect the property following instruction they'd forbid it until earnest money was in escrow – was that they had no idea where the money was. Isn't the point of an escrow agent to be able to receive and hold money while a transaction is pending? What does Bank of America think it's doing with an escrow company that has no idea when it has money and no file explaining what it's to do with the funds?

Of course, this isn't the first time I've seen Bank of America pull some outrageous gaffe, but it's the most recent. Maybe I shouldn't've wired the money April 1.

Next time I talk about Bank of America I'll tell you about how they treat old accounts. Bottom line? If you want to invest in a financial institution, consider one with competence in financial matters.

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