Foreclosure "Bait & Switch"

One-Item "Bait & Switch"

Bait and switch (noun): 1 : a sales tactic in which a customer is attracted by the advertisement of a low-priced item but is then encouraged to buy a higher-priced one.

--Webster's dictionary

Can "bait and switch" ever involve just one item?

I'd argue that it can.

Normally, of course, there's the low-priced "bait." When that's unavailable -- and it's always unavailable -- the customer is presented with the much more expensive "substitute."

With many foreclosures lately, it certainly would appear that the "bait" instead consists of the artificially low list price dangled in front of the public.

The "switch"?

The real -- and dramatically higher --price.

How much higher?

That all depends: on how many bids come in; how motivated -- and flush -- the bidders are; and on how many rounds of manipulative bid-raising they'll tolerate before they storm off.

If you want to auction off the property, fine, but then do it in public, and don't call for "highest and best" offers.

Bank Shareholders Cum Taxpayers

So what's so bad about all this? Two things.

One. Listing a $100k home for $50k (or $25k) is deceptive advertising. (See, "Sold Price: Almost 5x Over Ask").

We don't let automakers, pharmaceuticals, or cigarette makers (er, scratch that one) engage in such practices -- and we shouldn't let banks selling foreclosures do it, either.

Two. The banks own the foreclosures, but who owns the banks?

If it's a busted, toxic lender like Washington Mutual, Countrywide, or IndyMac, the answer is: us. That's because the government brokered their sale -- or what was left of their carcasses -- to mega-banks kept alive by taxpayer bailouts. Of course, that was after the FDIC -- taxpayers again -- made depositors whole.

Bank shareholders cum taxpayers have an interest in seeing that foreclosures are expeditiously sold off in a manner that is fair, transparent, and serves to maximize each home's selling price.

Instead, in many cases the process appears to be opaque, rigged, and designed to repel any Buyer unwilling to play the required games.