sales (103)

Another bail-out plan approved June 23, 2010 by the ObamaAdministration, the "Keep Your Home" program. California will receive$699.6 million to "work with lenders" to make principal reductions.Under the new program, there will be a $50,000 cap on principalforgiveness.

Since property values in Riverside County havedropped 50-60% that leaves the majority of homeowners more than $50,000underwater. But wait! The state will be asking lenders to 'MATCH" theamount the state spends on principal reduction - dollar for dollar!

Thebiggest obstacle I see with this is the success of this program willdepend on the cooperation of the lending industry.

Let's look atthe rest of the bail-out plan. 1.5 billion will be given in all to fivestates; California, Arizonia, Michigan, Nevada, and Florida. Each statewill use their portion of this money differently.

As forCalifornia, it will use its money for principal reduction, mortgagereinstatement, unemployment mortgage assistance, and when all else failsTransition Assistance which is actually a HAFA Short Sale with aone-time payment of up to $5,000 to relocate.

The plan is to takeeffect before November 1, 2010. Hummm, that will give the banks plentyof time to come up with a plan of their own.




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There's a lot of chatter on real estate blogs about the steep increase in foreclosures and short sales in Palo Alto.Unfortunately many sites post stats from a company called Realty Trac which tracts everything from a Notice of Default through a listed bank owned property.  Many things can happen before a home with a Notice of Default actually gets to be sold by the bank, but unless you read the fine print carefully it is easy to confuse a house that is behind a few months in payments with an actual bank owned property on the market for sale.
 
Most bank owned homes as well as short sales (where the seller owes more than the home is worth and the lender/lenders have agreed to accept less than the amount of the mortgage to release the debt) are sold through the MLS.  So to see how many of these distressed sales have hit the market in the last year I went to the MLS and looked.  
 
Here is what I found for single family homes:
 
Bank owned properties sold in last year:             4
Current Pending sales of Bank owned:                2
Short Sales sold in last year:                             3
Current Pending Short Sales                              1
Current Active Short Sales                                 1
For condo/townhomes the numbers are:
Bank owned sold:                                             2
Bank owned pending sales:                               1
Short Sales sold:                                              3
Short sales pending:                                         4
Short sales active:                                            2
As you can see this is not a huge number, especially since the total number of homes sold in Palo Alto in the last year is 369, making distressed sales account for less than 2%.  There have been 97 condo/townhomes sold in the same period making the distressed sales about 5% of that market.  These numbers are not enough to have any impact on the price of homes in Palo Alto at this point.  The percentage would have to increase several fold before Palo Alto prices are affected by distressed properties.  I am not saying that this is or is not going to happen, that is a discussion for a future post, just that it has not happened yet.
Marcy Moyer
Keller Williams Realty
D.R.E.  01191194

 

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Connecticut Senator Christopher Dodd, Chairman of the Banking Committee introduced his own Financial Reform Bill recent however, it didn’t have bipartisan support and died on arrival however, the White House bill that is likely to be brought to the floor on Monday has a very similar outline.

What specifically got my attention was the $50 billion fund, that will be raised out of fees charged to banks. This fund is suppose to be used to liquidate failing banks. Now, it doesn’t say anything in particular about using that money to liquidate bank nonperforming assets in the form of short sale however, follow me down the rabbit hole for a while.

This is an election year and, the last thing a politician wants is to be seen as is someone who is pro business and, pro Wall street, however the financial crisis has gotten worse than anyone will admit and therefore, the government realized their folly with the philosophy, “everyone gets to stay in their home.” So, now….here we are, elections in November, the Country is PISSED OFF at incumbent politicians and the banking crisis is worsening due to the enormous debt and weakening dollar so, what can a politician do?

They find an enemy, in this case, big banks and they find a victim, in this case, defaulting homeowners. Now, regardless of how you feel personally about who is really responsible for this calamity, let me assure you, the media is going to spin this as if it’s all the banks fault so, just a bit further down the rabbit hole, come on……you know reading my blog is like watching a naughty movie on your company laptop, you may not ever say you do it but, we know, oh trust me, we know.

Ok, I digress.

What these politicians need to do is get rid of these toxic assets on these bank portfolios now, under a capitalist system, the banks would be left to deal with the problem on their own however, that isn’t the reality of the situation. So, these politicians in control of these banks tell them that they need to do more short sales however, the banks say, we can’t take the loss.

Well, the Government can’t give them a direct bail out because, it’s not popular at the moment so, the Government decides to charge the banks fee which is essentially tax payer money anyways because the bank is Government owned. The Government then “banks” these fees at the Fed and makes the fees available to banks they determine need to liquidate some non performing assets. So, in essence, it’s a Government bailout with taxpayer dollars however, it’s hidden in the guise of bank fees.

So, how did I make the stretch that these fees would be used to create an influx of short sales? Well, I can’t tell you my source but, let’s just say, no politician in their right mind wants to be charged with kicking homeowners out of their home, no matter if the homeowner can afford the home or not. This is especially true with Progressive politicians because, keep in mind, they are following the Franklin Roosevelt 2nd Bill of Rights that says everyone gets a home.

Ok, now that I took you on a trip to Wonderland, let’s come back to reality.

America’s debt spending is weakening our dollar in foreign markets. This is why we are seeing gold prices rise. This is important to understand because, we don’t want to end up like Greece in the next 24-36 months, if not sooner. A continued weakening dollar, increased fuel prices, lower home prices, lack of real job growth, more defaults, more upside down homeowners, a tightening credit market, lack of industrial production in the country, higher taxes for everyone and we are gearing up for a perfect storm for hyper inflation.

The Government has to do something, right?

I got an idea.......JUST STOP DEBT SPENDING!

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Hamp and Hafa Programs-UPDATES NOW ADDED 4/30

Hamp and Hafa ProgramsI've reviewed much of the Hamp and Hafa Programs and honestly, it seems tough to use it if the homeowner has a 2nd lien(2nd Mtg) on the home, or has already moved out, or is unemployed.

These 3 very REAL reasons occur in a majority of the short sales I've witnessed or have been involved with. Nonetheless, I’ve posted this information because there are those that MAY benefit and I wouldn’t throw any program out the door without reviewing the specifics of your sellers NEEDS!!

Now, little about "Hamp", this program is for loan modifications and generally involves the maximum payment of 31% of the sellers total income before taxes to be paid towards your loan. Once these numbers are established, proof of ability must be supported and then there is a 3 month test period to see how able the owner is to pay, dosnt work if unemployed, and it dosnt work in many cases. But, again, I would’nt throw anything away without review against their particular needs.

If the Loan modification fails or if an application to skip the loan modification is requested and accepted, then you can move right into a Hafa short sale program.

HAFA:The Good:

1-Homeowners will be released of all responsibility with a satisfaction of lien from the lender.(This is excellent,(many short sales may still hold owners liable for the deficient amount that the lender lost)

2-There is a "pre-aproved" short sale Listing along with the Minimum sales value. (Saves time, easier for buyers to buy!!!-The pre-aprovals are done in 10 days-YAY

3-Homeowners are given $3000.00 towards relocation from the lender at closing.( An excellent aide to families moving to their new home)

4-If the homeowner had attempted a Hamp Modification, then all the same docs and info will be used, no repetitive docs.-( This saves time!)

HAFA: The Bad:

1-The property can't be sold to a relative, friend or anyone with a close relationship to the seller.Must be an ARMS LENGHTH transaction, therefor a 90 day period must occer before an investor may re-sell.

2- The buyer may not re-sell the property for less than 90 days after closing. Nor can they rent the home back to the previous owner.

3-The difference between the remaining amount of principal you owe and the amount they receive from the sale must be reported to the Internal Revenue Service (IRS) on Form 1099C, as debt forgiveness. In some cases, debt forgiveness could be taxed as income. The amount paid to you for moving expenses ($3000) may also be reported as income. It is suggested that they contact the IRS or their tax preparer to determine if you may have any tax liability.I understand the 1099 will be issued.

4-If you have a real estate license you can’t earn a commission by listing your own property

5- The seller must also be able to deliver marketable title free of any other Jr. liens. They will allow up to three percent (6%) of the unpaid principal balance of each subordinate lien, in order of priority, not to exceed $6,000 in aggregate for all subordinate liens, to be deducted from the sale proceeds to pay subordinate lien holders to release their liens. They require each subordinate lien holder to release you from personal liability for the loans in order for the sale to qualify for this program.

****If the Jr. Liens agree to the HAFA short sale, then they are required to release the sellers from any and all liability. These negotiations will probably be left up to US, the REALTORS. It may be difficult to do and many 2ndary lenders will not accept this, every case is different), most will laffffff

6-The seller must live "IN" and maintain the property, HOA dues and or maintenance fee's. The seller will, in most cases be making payments up to a total of 31% of his gross monthly income

In the end, these programs may help some people… but it’s going to take a savvy realtor to help make it happen!!

Regards!!-- HOPE THIS IS HELPFULL!!!!!

Rose Mencia, Broker

Sundance Realty South Florida, Inc., 1926 Hollywood Blvd. suite 212, Hollywood, Fl. 33020 cell: 786-208--6804

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Here are the basic eligibility requirements.

* The property is owner occupied.

*The mortgage loan is a first lien mortgage and originated on or before 1/1/2009.

*The mortgage is delinquent or default is reasonably forseeable.

*The current unpaid principal balanceequal to or less than $729,750.

*The borrower's total monthly mortgage payment exceeds 31% of his or her gross monthly income.

The lender must evaluate and offer a HAMP mod to borrower before consideration to HAFA options.

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Coming up in April! HAFA (Home Affordable ForeclosureAlternative) which allows homeowners who did not qualify forHAMP (Home Affordable Mortgage Program) to exit their loan,do a Short Sale, avoid a Foreclosure, leave their credit intact, and befully released of future liability for the debt.

However, HAFAdoes not include Fannie Mae and Freddie Mac loans. They have justreleased their own version of HAFA called Alternative Modification (AltMod).

In both these programs, the homeowner must havepreviously tried and been denied a permanent loan modification. And, inboth these programs the second lien holder does not have to play or beobligated to release future liability if it does decide to play. Forthat situation we have the 2MP (Second LienModification Program). 2MP has been in effect for almost a year but BOAwas the only servicer participating. Wells Fargo just got on board thisweek.

Although there are some who did actually qualify for apermanent loan modification, for the majority these new programs arejust prolonging the agony of many homeowners who feel their life is inlimbo. Unfortunately it is delaying the inevitable and manipulating thetiming of the foreclosure wave.

Would love to hear your comments.
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Alarming News for Short Sale Negotiations

By Ann Bone

http://blog.metrobrokers.com/2010/03/15/alarming-news-for-short-sale-negotiations/#more-1219

(This is posted with permission from my brokerage, un-edited)

I’ve been peppered with questions about a rather alarming article being circulated over the past couple of weeks, written by a well-respected real estate attorney in the Atlanta market area. The thesis of the article is that real estate agents may be committing a felony when assisting sellers seeking short sales by participating in any negotiations with the sellers’ lien holders. This is supposedly because the Georgia Residential Mortgage Act of 2007 requires any person who negotiates mortgage loans to have a mortgage license (which 99% of real estate licensees lack) and that working with the sellers’ lien holders is “negotiating a mortgage”.

Why raise this alarm now, in 2010? It’s being whispered that some (not all) mortgage brokers and lenders are angry at being required to become licensed in Georgia and are looking to make examples of real estate practitioners who they see as encroaching into lender territory.

March 31, 2010 marks the “drop dead” date by which mortgage brokers, mortgage lenders and the independent contractors working with them who solicit, process, place or negotiate mortgage loans for others or who work on renewing or refinancing mortgage loans for others must be licensed by the state or exit the mortgage business. The state and federal exams each applicant must pass are onerous, to say the least. I’m hearing that over 70% of the applicants are not passing either the state or federal exam and having to retest prior to March 31, 2010. It’s high stress time in the Georgia mortgage business, especially for the less reputable mortgage companies.

Why would real estate licensees be suddenly singled out for retribution? Well, could it be that REALTORS, those real estate licensees who join a Board or Association of REALTORS and pledge to adhere to a National Code of Ethics, were supportive of the efforts to force licensure upon the mortgage industry?

Real estate practitioners have been required to be licensed in Georgia since 1925. Anyone printing a business card or setting up a web site could call themselves a mortgage lender until the 2007 passage of the Act. And those active in the mortgage business prior to 2007 were “grandfathered” until the upcoming March 31 deadline.

Coincidental to the 2007 passage of the Act, the mortgage meltdown gained momentum in Georgia.

Reasonable people have discerned that unknowledgeable buyers and homeowners over-borrowed on over-valued properties. No one wants to allow that to ever happen again and the reins have been tightened by all parties involved in the real estate financing transaction – the real estate licensees, the appraisers, the lenders, the closing attorneys and the title companies. Please note that all the participants listed were licensed by the state in 2007 except the lenders.

Please don’t misunderstand me; this is not a blanket criticism of mortgage lenders. The reputable lenders will survive both the licensing process and the current economic downturn.

Today, though, real estate licensees are being threatened with prosecution for listing properties with outstanding mortgage obligations in excess of the current market value and assisting those owners in the process of proving to their lenders that an offer to partially pay off the total indebtedness may be better than forcing the lender to eventually foreclose on the property.

Since when is paying off a loan “negotiating”? And, since most mortgage loans have been packaged, sold and resold, perhaps multiple times, exactly which lender would negotiate with the final mortgage holder of a specific mortgage? The mortgage lender which originated the loan? And are they still in business?

Keith Hatcher, the Governmental Affairs Officer for the Georgia Association of REALTORS (GAR) has stated that it is his opinion and the opinion of key elected officials who serve on the Ways and Means and Banking and Finance committees that it would be a stretch to interpret the Act in this fashion and that this is not the intent of the Act. GAR is, in fact, working with the chairman of the Ways and Means committee to draft an amendment to the Act which would clarify that it is not a violation of the law for real estate licensees to assist in the negotiation of short sales.

__________________________________________________________________________________________

Granted, this story is about the State of Georgia, but because some of the licensing for lenders has federal connects, it may apply to other states. I did get word this afternoon (after this was written) that State Law Makers addressed this issue early today but an official statement should be released soon. More to come as I get it.

This should not be considered Legal Advice in any form, I only wanted to bring this to people attention as we all may be affected by this. Scary to say the least!

Steve Adkins - REALTOR

Better Homes and Gardens Real Estate Metro Brokers

404-843-2500

www.The-Adkins-Group.com

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I haven't taken a buyer out in months. I have been concentrating on Short Sale Listings. But, I had an open house recently in order to attract some buyers for one of my listings. Suddenly, I acquired two buyers who didn't even know if they qualified for a loan. They both wanted to see homes that included a pool, views, and acreage, for no more than $100,000.

Now....it all came back to me. I was so busy early last year running around with buyers, getting them pre-approved, writing multiple offers until midnight, searching the MLS, calling listing agents begging for information so I could write a winning offer. No wonder I got burnt out.

But this time it was different. There are almost no REOs for sale; mostly Short Sales. And with those Short Sales the listing agents actually called me back with a variety of stories such as "the buyer just walked", "the buyer didn't qualify" please submit an offer. Which brings me back to my Open House. For some reason, I wasn't getting any interest in this listing that would have sold in 5 hours last year. That feeding frenzy seems to be gone. Maybe buyers are still avoiding Short Sales, maybe they too are burnt out putting in offer after offer only to get their credit ruined after so many "cross-qualifying" credit inquires.

It could be just a weird month in Southern California, a fluke, but anyway I am putting in two offers tomorrow. One on a STANDARD SALE....unheard of in this area. The other on a Short Sale that has no other offers. Maybe I'll be doing more Open Houses.
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Understanding Strategic Defaults

Popular opinion and personal viewpoints are mutually exclusive ideas. There are times when the two overlap but a true personal perspective is driven by real life, personal circumstances and is not always at the behest of popular or even rational thought.Popular opinion relates to generalities. As a framework, what moral guidelines should we follow as a society to establish order and maintain peaceful coexistence? Personal views tell us if, in the heat of the moment, with the additional emotional burden of personal experience added to the situation, our answer would be the same?The issue of Strategic Defaults creates such a moral dilemma. Most agree that it is morally reprehensible to blatantly disregard commitments or contracts. Regardless of whether it's a nickel on the playground or a million dollars in the boardroom our social contract is that both parties are bonded by trust and an expectation that each will follow through on their pledge. To that end most would generally agree that Strategic Defaults are wrong.But what if it were you? What if you came to realize similar behavior was acceptable from someone other than you? What if your choice directly impacted the comfort and well being of your children? What if walking away from an upside down mortgage was socially acceptable? How would you decide what to do?Calculated Risk - Why Banks LendLet's first consider why banks lend at all. Business. They want to make money. Simply put they have identified a need in the market (capital) and have devised a way to benefit (profit) by delivering their product (money) to the marketplace. They provide a fundamental service to our capitalistic system and without it we would fail.If you were to buy any type of real estate other than your primary residence you would notice that your lender would require a larger down payment and likely charge you a higher interest rate. The reason for relaxed standards when buying your primary residence is two-fold. First, the federal government has decided that widespread homeownership is a social benefit to society. Second, the banks understand that shelter is a basic need. Thus if things go bad, you are less likely to walk away from your home than any other real estate asset.Throughout most times in recent history, banks would not lend to everyone. Interest rates were related to the banks cost of funds, and a borrowers credit worthiness. However in the past decade lenders threw caution to wind. Loans were given to borrowers without requiring proof or documentation supporting the stated income on their loan applications and haphazard policies were in place to insure the banks were lending against collateral that could support the loan. Unadulterated appreciation is the elixir that makes every loan look safe, every investor look like a genius, and allows every homeowner to feel safe in their decision to pay just a little bit more than they could afford.In moderation these cycles of growth do no harm and are always followed by periods contraction allowing market fundamentals to catch up with values. However unabated for too long, we find ourselves unable to absorb losses without devastating impacts across the economy. Someone is always left holding the bag. From the banking perspective, good banks absorb bad banks, certain lending practices come to an end, losses are taken and passed along to shareholders or the taxpayers, and the whole cycle of calculated risk is started again.Taking the Loss - When it's Time to Walk AwayIn the business world knowing when to cut your losses is not just an admirable trait, it is critical for survival. From the smallest start up to the largest conglomerate the idea of not throwing good money after bad is commonly followed and the primary determinant of success or failure.In his article, "The Way We Live Now, Walk Away From Your Mortgage" New York Times columnist, Roger Lowenstein cited several good examples of this practice. From private equity firms deciding it's a better financial decision to close the factory than keep it running, hedge fund managers leaving to start fresh with new funds and new investors after their existing investments turn sour, Sam Zell allowing the Tribune Company to file for bankruptcy, to banks themselves deciding to complete strategic defaults when their own real estate investments go bad.In another recent article for Bloomberg News, Dan Levy quotes Morgan Stanley spokeswoman Alyson Barnes describing an "orderly transfer" of five San Francisco office buildings the bank purchased at the height of the market; they paid $6.7 billion in 2007. Ms. Barnes goes on to explain "This isn't a default or foreclosure situation," rather she suggests "We are going to give them the properties to get out of the loan obligation." Doesn't that sound just like a strategic default?This bank practice of cutting losses and maximizing returns is not limited to commercial investments. This past Friday I had to personally inform one of my clients that the bank felt it was in their financial interest to foreclose rather than allow a short sale on their personal residence. I presented Litton Loan Servicing with an all cash offer, which would have allowed for a full payoff of the first trust deed on which they were foreclosing. I requested an extension so my client could negotiate with the lender on the 2nd and 3rd trust deeds. I explained that the seller was willing to sign a promissory note with the second to avoid the foreclosure and further clarified the non-contingent; all cash offer would fully satisfy the debt owed to Litton Loan Servicing.Their response: It's in our financial best interest to foreclose on this property. Tell your investor to go to the court steps and buy it there.Artificial Support - The Consequences of a BailoutIn a recent policy white paper published by Luigi Zingales, along with colleagues Paola Sapienza, and Luigi Guiso, the trio asserted their belief that a public policy aimed at helping people in arrears with their mortgages could have devastating effects on the incentives to strategically default of people who can afford to pay their mortgage if it is perceived to bail out people unjustly and thus undermine the moral commitment to pay.They point to moral norms in society, which prevent people from defaulting in most circumstances but caution that "the effectiveness of moral rules, in turn, may be affected by economic policies that may undermine a sense of fairness."The Kellog School paper by Mr. Zingales, et. al was followed by another white paper from University of Arizona professor Brent T. White, suggesting that many homeowners continue to make payments even when they are significantly underwater, not because it's in their financial best interest, rather because of social impacts like fear, shame and exaggerated anxiety over the perceived consequences of foreclosure. Mr. White goes on to suggest that government policies and other "social control agents" encourage homeowners to stay in potentially bad financial situations. He states, "Norms governing homeowner behavior stand in sharp contrast to norms governing lenders, who seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility" (see my two examples above).So how can we seek to work through the estimated $4 Trillion in excess housing debt encumbering residential property across the nation? Clearly, the burden cannot be placed solely on the shoulders of the borrowers without risking a backlash when it's no longer socially taboo to default on your mortgage. Equally, allowing the banking system to collapse by forcing the full load upon them would have far reaching consequences from which it could be difficult to recover.Band aid approaches and government programs that do not address the root of the problem simply prolong the pain and unequally distribute the relief by placing income limits on participation and targeting only those who have already defaulted on their obligations.Clearly, we will not see a full housing recovery until the majority of excess debt is removed from the system. Loan modifications, short sales, deeds in lieu, and foreclosure are the four most common ways to deal with the problem. The most devastating and costly impact on everyone results from a foreclosure. Short sales are a viable alternative for some but still force owners to leave their homes. Further, banks continue to treat the process as a temporary menace remaining understaffed and inconsistent in their policies and procedures; deed in lieu even more so.Loan modifications simply don't work without including a principal reduction, so far an elusive task for both the government and banks. Even Barney Frank who has long pushed for "cram down" legislation forcing banks to write down principal balances with the help of bankruptcy court judges realizes this is an unrealistic possibility. Yet, the New York Fed, in a December staff report No. 417, recognized that loan modifications that reduce loan balances are far less likely to re-default.Nick Timiraos at the Wall Street Journal highlighted this point in a piece he wrote last week. In his article he refers to the fed study noting, "modifications that write down loan balances can double the reduction in re-default rates achieved by payment reductions alone."If we are to keep people in their homes and/or avoid mass foreclosures, we must make short sales more efficient and reduce principal loan balances as part of the loan modification process.The Fallout - Less Credit, Tighter StandardsAll of this will clearly come at a cost to the American borrower and taxpayer. Business concerns burned once typically learn from mistakes and seek to avoid such pitfalls in the future. If borrowers who can still make their mortgage payments "strategically default" because it's in their financial best interest, we can all be assured that qualifying for loans will be more difficult in the future and costs will be far greater.In light of our current circumstance, I don't see too many no-documentation, negative amortization, 100 percent loan to value loans in our immediate future. Ultimately fewer Americans will be able to achieve the dream of owning their own home and will remain renters. Additionally, fewer lenders will be around to provide loans for the masses.Another possibility is that fewer borrowers will attempt to fit a square peg into a round whole. What I mean by that is, if a borrower's income cannot support buying in a market they desire, perhaps they will consider seeking a purchase in an area that fits their budget rather than "fibbing" on their loan application and getting in over their heads to stay local. Perhaps house values won't rise beyond reason and without support from the sound economic principles. Finally, perhaps banks will become more financially sound and make more prudent decisions, reducing their risks and ultimately providing good loan products to capable borrowers. That doesn't sound too bad.We all learned on the school playground that we should honor our promises. Currently, most people still see strategic defaults as morally reprehensible, but I wonder for how long? It seems not too long ago short sales were a foreign and unacceptable concept. Regardless, as some of our banking leaders suggest, sometimes an orderly transfer is warranted to get out of a loan obligation and sometimes it's simply in our financial best interests to let a home go to foreclosure.Allan S. Glass is a real estate broker in Los Angeles, California specializing in REO and Short Sale transactions. Allan is also a featured blogger on Realtor.com. The ASG Real Group has over $1 billion and 17+ years of transaction experience.
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In the most simple of terms a real estate agent serves a fiduciary responsibility to the client. This legal and ethical relationship of confidence and trust bonds the client to the agent in reliance of protection and aid during the transactional process. For the real estate broker and agent, the fiduciary responsibility is a clearly defined relationship requiring specialized knowledge, dutiful care, and pragmatic repose.Traditionally, the mechanics of a real estate transaction allow for a seller to financially gain by selling their asset to the highest bidder. In these cases the broker/agents role includes advising on how to best position the property for sale, qualifying the potential buyers, negotiating for the highest price, and maneuvering through the logistics of escrow. But what happens when profit is removed from the equation?What is a Realtor’s® fiduciary responsibility in a short sale?First and foremost, a real estate professional should understand how the term is defined. According to the 2004 edition of California Real Estate Practice by Lowell Anderson, Daniel S. Otto, and William H. Pivar, a fiduciary duty is one of good faith and trust. “The agent must be loyal to his or her principal, placing the principals interest above those of the agent. An agent’s actions, therefore, cannot be inconsistent with the principals interests. The agent cannot act in a self-serving manner to the detriment of his or her principal.”According to the National Association of Realtors a fiduciary responsibility is like an OLD CAR. the acronym used to account for the six duties outlined by NAR. These responsibilities include:1. Obedience - the duty to promptly obey and follow all legal instructions of the principal2. Loyalty - the duty to act in the best interest of the client, putting their interests above others, including your own3. Disclosure - the duty to disclose all relevant facts affecting decisions of the principal during the transaction4. Confidentiality - the duty to safeguard a principals secrets, unless doing so violates disclosure laws5. Accounting - the duty to account for all funds and proceeds entrusted to you by the principal6. Reasonable Care and Diligence - the duty to use all of your real estate skills in pursuit of the principals affairs, including the responsibility of knowing when you are beyond your scope of knowledgeTwo TransactionsShort sales actually involve two separate transactions that occur simultaneously. The first is a real estate transaction, where the defaulted seller enlists a Realtor® to find a ready, willing, and able buyer to purchase real property. Most agents are very qualified to handle this part of the equation as it falls squarely within the scope of expertise shared by all. Like most other non-short sale transactions the agents and brokers are paid for this work by way of a real estate commission earned upon the successful completion of a sale.The second transaction in the short sale process is a financial transaction. This occurs between the principal and the one or more lien-holders with financial claim against the real estate in question, over and above the net purchase price offered by a buyer in the first transaction mentioned above. Unfortunately many Realtors® attempting to handle this transaction do not have the technical expertise nor the experience to dutifully represent the principal in this matter. This transaction has legal ramifications, tax consequences, and can carry significant financial impacts. Additionally, unless an agent imposes a negotiation fee, paid by the lender on the HUD-1, they do not get paid for the work on this second transaction.Understanding Who is the ClientIn a world of REO’s it’s sometimes lost on the listing broker that his or her client is not the bank during a short sale. Quite the contrary. If you were to ask a loss mitigation representative at your local bank how they view a defaulted seller requesting a short payoff you might be surprised to find that the relationship is considered adversarial. Anything and everything collected by the banks representatives can and will be used against the defaulted seller when negotiating a settlement.Effective customer representatives, asset managers, and loss mitigation specialists while sometimes warm and pleasant are building the banks case against your client with each and every financial document you share. You are not working together to find a solution. They are looking for ever last possible dime they can extract from your client before writing off the balance as a loss. Agents would be well advised to understand the dynamics of this relationship and exercise the utmost care with their approach in negotiating debts.What Constitutes the Best Offer?As I mentioned above, a defaulted seller walks away from a completed short sale with the same amount of money in their pocket regardless of the purchase price. Zero, zilch, nada. The short lender in the transaction will, as condition of their approval, specifically address this point and strictly prohibit the defaulted seller from any form of financial gain. As is the case in most distressed sales, the best deal is often not the highest priced offer, rather it is the offer that presents the greatest “surety of closing” to both the distressed seller and bank accepting the loss. My point here is not to contend that price is completely irrelevant; rather i’d suggest when reviewing multiple offers, consider how much staying power the potential buyers possess along with other intangible assets like buying / investing experience, and patience.I’ve seen short sales completed in less than 90 days and I’ve heard of short sales that have taken longer than a year to complete. In most cases, the difficulty in closing a short sale is keeping an interested buyer motivated to close. It is not uncommon for retail buyers to submit offers on several short sale listings hoping at least one in the group will be approved by the lender absorbing the loss. The unfortunate reality is that many families cannot wait for months to make a housing decision. Parents need to accommodate work needs, kids have school schedules, and families, especially in this market, have other options.How to Get the Ball Rolling - Offer TacticsThe short lender has no interest in discussing a short sale transaction unless a qualified offer is in hand. To address this issue, temptation sometimes drives a distressed seller and their agent to submit an offer, any offer, to the bank even if the buyer isn’t real. The use of “straw buyers” is a dangerous practice and walks an agent and their client down a slippery slope. Even if the principal suggests or demands the use of these tactics, the agent has a fiduciary duty to be obedient along the letter of the law. It is the agents responsibility to be aware of both legal and illegal practices and inform the client when such lines are crossed.Only substantiated offers from real buyers should be accepted and/or submitted to the lender with a completed short sale package. If a home is languishing on the market, an agent has a responsibility to investigate and inform the seller what may be causing the problem, why buyers have not written offers, or why agents are avoiding showing their property. If a defaulted seller has waited too long into the foreclosure process to allow for normal marketing time, the agent has a responsibility to price the listing appropriately to allow for maximum interest from the buying community.Putting it All TogetherFiduciary responsibilities require a broker / agent to enact a responsible business plan incorporating a full awareness of the real estate process. Understanding what can be done legally, determining who exactly is the client, discerning the clients objectives, protecting client interests, and diligently advocating on their behalf are primary to the agent / client relationship. Although the agents expertise and experience are relied upon for guidance through the real estate transaction, the agents fiduciary duty is to put the clients interest and desires above their own.Short sales present a unique set of circumstances that likely contradict common practice due to the absence of profit for the principal, and the cumbersome financial transaction that accompanies the real estate sale. Broker / agents taking short sale listings bear the burden of responsibility to their clients to know when they are in over their heads. It’s not enough to simply declare yourself a short sale expert because distressed assets are the only properties selling in your marketplace.Brokers and agents must understand the primary objective of the seller in a short sale is to avoid foreclosure. This objective is met only if and when a bonafide offer from a real buyer is submitted and approved by the lender modifying a debt. If you take a short sale listing, the bank is not your client and is not working in tandem with your principal to accomplish their goal. It is incumbent upon the broker / agent to understand this adversarial relationship, protect the interests of their client, and maintain a modicum of confidentiality on their behalf. A broker / agent who accepts a short sale listing must be willing to put subjective viewpoints aside and present all potential options objectively to the client. Finally, a broker / agent must understand from both the buyer and seller’s perspective the correct legal procedures necessary to complete the sale of property in imminent default.The responsibility is great, but the reward of helping a client avoid foreclosure is even greater. If you educate yourself, understand the process, remain objective, and focus on the client’s goals your fiduciary duty can easily be maintained.Allan S. Glass is a real estate broker in Los Angeles, California specializing in REO and Short Sale transactions. Allan is also a featured blogger on Realtor.com. The ASG Real Group has over $1 billion and 17+ years of transaction experience.
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HYBRID REO ASSIGNMENTS

Well last week I received a very interesting assignment from Titanium, I was asked to offer the home owner a "VOLUNTARY" Short Sale and cash for keys. In the past I have received assignments where I have to deliver the home owner bad news that their modification was not approved and encourage them to do a short sale, but never cash for keys. Also the other type of assignment that I have received in the past is the deed in lieu with the lease contract, and the lease contract or cash for keys for tenants.It is interesting to be in the middle of this evolution in the default mortgage industry. I was reading today that most lenders are embracing short sales, according to NAR 10% of all transactinos last year were short sales, and the number might increase this year. Also the number of home owners in default status keep on raising, and since most of the lenders are trying to stay away from the toxic inventory, we might see an increase on short sales, some of the new laws and regulations are pushing the lenders to approve the short sales quicker, the only problem is that the buyer's lender has to charge less or find a way to roll in the closing cost, or the buyer will need to cover the closing cost, the way it should be. Since most lender only allow a max of 3% for seller's contribution, and most seller's don't have money to offer any type of contribution.I just wonder how many new combinations of REO/ShortSale/Rent Options type of assignments will come up in the future. It seems that at this point mostly is trial and error, and because some of these assignments are like a mix of the "traditional" REO and loss mitigation and new ingredients throw in the mix, I like to call them HYBRID assignments, because technically they are one thing, but the procedures are similar to something else.About my assignment the home owner is an investors that has moved out of the state, and the house is a vacant boarded up shell, so I didn't get to list that property.Please share some of your experience with this type of hybrid assignments and what work and didn't in your situation.
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Ok, I have to give credit to Robin Rowland for tipping me off to this originally. I made a few calls and here is what I've found out.....Bank of America has contracted withREDCto process their Fannie Mae Short Sales using the REOtrans/Equator portal.They also will be working some of Wells Fargo short sales, Metlife short sales and GMAC short sales as well.The idea is to help speed the process up, but hey we all now how that is!There will be an additional 12 page welcome package to fill out and have sellers sign...UGH more paperwork! But hey if it moves a Bank of America Short Sale down to 60 days WHOA HOO!!I wouldn't count on that just yet, but maybe they can prove me wrong. This is a case where I would love to have them prove me wrong! LOL!Oh, and it is supposed to get even better for the seller .....Debt to be considered Paid or Settled with the Deficiency FORGIVEN!!I can't wait to see one of the Short Sale Approval letters to see if it is true.They are only doing Fannie Mae and they have to be assigned from the bank. They have a way to check your loan to see if they can request it go thru them.They are only processing Nevada Short Sales, Arizona Short Sales, California Short Sales and Florida Short Sales that are Fannie Mae.
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NAR Report Third Quarter

Sales Up Prices DownThis same story has been playing our for quite a while now. The trend towards lower prices will probably continue even as the recession winds down. Continuing job loss, a weak recovery and real problems in all real estate sectors, now focused on commercial property and Alt A high end homes, should keep a lid on prices. That said people are beginning to feel good again, or at least less wary. They are stepping out and buying homes and that is a good good sign. see chart hereExisting-Home Sales Surge While Price ModerateMost states saw rising existing-home sales in the third quarter, with price declines in many metro areas, according to the latest survey by the National Association of Realtors.NAR reports that total state existing-home sales of single-family and condos, increased 11.4 percent and are now 5.9 percent higher than the third quarter of 2008. Sales increased in 45 states and 28 states saw double-digit gains. Year over year sales were higher in 32 states and D.C. Buyers are coming back and in some parts of California we are seeing multiple bids and homes selling for more than list.During the third quarter, 123 out of 153 metropolitan statistical areas, 2 reported lower median existing single-family home prices while 30 areas had price gainsNAR chief economist,Lawrence Yun spoke of the the tax credit. He goes on to say: We cant underestimate just how powerful a catalyst the first-time home buyer tax credit has been for the housing sector. Its given buyers the confidence they needed to get off the fence and take advantage of extremely affordable housing conditions. The buying conditions this year are the most favorable on record dating back to 1970, but the tax credit is allowing buyers to set aside any reservations about waiting for a better deal.The decline in the national median price has moderated recently, and a shrinking supply of unsold inventory suggests we are getting closer to price stabilization in many areas, but we need a steady stream of financially qualified buyers to further reduce inventory and get us to a self-sustaining market, Yun said.Soaking up supplyForeclosures will continue to come on the market, but rising sales from the expanded tax credit should stabilize home prices by next spring and help to stem future foreclosures. To be sure the numbers are mixed and some areas are experiencing reversals, but over all we are beginning to pull ourselves up out of this slump. As long as we continue to see a Fed willing to support the markets until they are strong enough to stand on their own, we should be able top avoid a double dip. Encouraging was to hear the G20 come out with a continuation of supports. This recovery is still in the hands of policy makers.Thanks for Readingwww.yourpropertypath.comRelated ArticlesHome Values Boosted by Walking ConvenienceThe official figures indicate recession has endedGreen Homes and Sales Trends
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Changes to Short Sale Laws

According to the Indiana Association of Realtors (IAR Advocate 11/06/09), it is now Indiana state law that lenders must acknowledge short sale offers within 10 days. Under the 2008 law, lenders then have 30 days from receipt of the offer to accept or reject the offer.There is an on-line complaint form that can be filed with the Indiana Department of Financial Institutions (DFI). The DFI uses the complaints to track and establish patterns with certain lenders and use regulatory authority to investigate.Additionally, the Homeowner Protection Unit of the Indiana Attorney General has enforcement authority over the complaints. The complaints should continue to be filed with the DFI, with the field that the Homeowner Protection Unit should investigate marked (Field #18 on the Indiana complaint).We repeatedly hear from agents that the reason short sales do not move to closing is that it sometimes takes the sellers months to respond to offers.I strongly suggest that every agent check and see if their state has a similar law on the books and let the lender know you know about it when submitting a short sale offer. I know somewhere on our future short sale offers will be a sentence requesting a response by a certain date “per Indiana Statute” as a reminder to the lender that there are statute imposed time limits in place. This would also do to notify the lender of the time limits if they were not aware of them.Perhaps we can use our state laws to move our short sales along and keep them from becoming “long sales”.I also strongly suggest that agents working with lenders as short sale reps make their clients aware of any local or state laws of this nature. Be aware that just like a like a REO AM, the short sale AM is most likely dealing with properties in multiple states and jurisdictions and it is our job to protect them and make sure our clients are within the local laws.
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ANOTHER WEEK? ANOTHER LISTING! AND MORE SALES!

Wow, where has this week gone? I was going to be a good REOPro member and blog daily and stick to it for two weeks at least. Hello??? I think my last blog was last weekend!I want to know why it is already the 10th of October? Do you realize what is just around the corner? Fall!! And with fall comes winterization, oh please existing inventory, SELL!!! The price is right, the homes are great and I am waiting with pen in hand!What do you mean you found a short sale down the street for less money? Yeah, they advertise it that way, but look at all the time you have to waste to get it and then there is no guarantee until you get it at the closing table! The agent guarantees it? They have a 100% success rate, let me check that out. Look at the stats, ONE short sale listing and ONE short sale sale, and look, it was their own home. OK, I guess that would constitute a 100% success rate.....I love marketing gimmicks.At least with a foreclosure you know what it is - AS IS and it is AVAILABLE NOW!! Thank goodness for the few I've sold to this week that don't know about Short Sales! Of course my short sale agent is keeping busy, so I guess that's why it is good to diversify and take care of both Short Sales and Foreclosure properties.Just had to remind you all that Fall is coming. Gear Up for those calls of frozen pipes and people trying to get inside to stay out of the cold and wet!I hope you all have a Better Than Great Day!
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This artice was sent to me by one of the MLS services we belong to. The source is: Realty Times - Bob Hunt, NAR DirectorI am certain that this will be of interest to anyone who does Short Sales.One reason that many real estate agents are less than enthusiastic about short sales is that, too often, a commissionectomy may be involved. By demanding a certain amount of net proceeds, the lender effectively cuts the commission that had been stipulated in the listing agreement. (To be sure, since March 1, 2009 Fannie Mae has prohibited its servicers from cutting short-sale commissions below 6%; and, as of August 20, Freddie Mac announced the same policy. But not all loans are held by those agencies.) Brokers and agents should be pleased, then, to learn of a recent court case that awarded a broker's commission when a lender sought to cut it just before closing.Thanks to the legal department of the National Association of REALTORS® (NAR) for bringing to our attention the Iowa appellate court case of Stewart v. All States Quality Foods. In that case, All States' lender, Highland Crusader Offshore Partners (Highland), was calling the shots on the short sale.Broker Larry Stewart and Iowa Realty Commercial had a joint listing agreement of a property owned by All States. The listing began in August of 2001, and was extended a number of times thereafter. At some point Larry Stewart Realty became the sole listing agent. The agreement called for a commission of 10% of the first $500,000 of gross sales price.In January of 2003, Stewart found a tenant for the property. The tenant took a five-year lease on the property and also obtained a right of first refusal in the event All States received an acceptable offer during the lease term.By May of 2006, All States' financial difficulties became such that its secured lender, Highland, sent a representative, Harold Kessler, to wind down the business of All States. Shortly thereafter Stewart, who still had a listing, received an offer of $120,000. Under the direction of Kessler, the All States manager signed a counteroffer of $140,000 which was accepted. Stewart prepared a net sheet showing proceeds to the seller of $105,982. On August 1 the tenant exercised its right of first refusal and agreed to purchase the property for $140,000.On August 24, Stewart informed the seller and the lender that the tenant was ready to close. At that time, Highland, the lender, indicated for the first time that it would not accept net proceeds of less than $130,000. Even though Stewart offered to cut his commission by 10%, the lender would not budge. The sale fell through.Stewart filed suit alleging breach of contract and intentional interference with contract. He claimed he was owed a commission because he had provided a ready, willing, and able buyer. The trial court agreed. Highlander filed an appeal.The appellate court affirmed the award. Highlander knew of the listing contract and the commission amount. It certainly had the right to ask Stuart to cut his commission, the appellate court confirmed, but not after the fact of the counteroffer. At the point of counteroffer Highland should have disclosed that they would not release the lien for less than $130,000. By not disclosing that, they misled Stewart into continuing to work on the transaction. The court found that "Kessler and Highland Crusader were engaged in a 'two-step process' of first securing a purchase price and then squeezing out as much net proceeds as possible.Now, this case doesn't mirror the facts of every short-sale commission squeeze, nor does it have authority outside of Iowa. Nonetheless, it presents a commission-reduction scenario that is similar to many short sale situations. Moreover, it may suggest a strategy that will be found useful by attorneys representing brokers and agents who have had the squeeze put on them. nced the same policy. But not all loans are held by those agencies.) Brokers and agents should be pleased, then, to learn of a recent court case that awarded a broker's commission when a lender sought to cut it just before closing.Thanks to the legal department of the National Association of REALTORS® (NAR) for bringing to our attention the Iowa appellate court case of Stewart v. All States Quality Foods. In that case, All States' lender, Highland Crusader Offshore Partners (Highland), was calling the shots on the short sale.Broker Larry Stewart and Iowa Realty Commercial had a joint listing agreement of a property owned by All States. The listing began in August of 2001, and was extended a number of times thereafter. At some point Larry Stewart Realty became the sole listing agent. The agreement called for a commission of 10% of the first $500,000 of gross sales price.In January of 2003, Stewart found a tenant for the property. The tenant took a five-year lease on the property and also obtained a right of first refusal in the event All States received an acceptable offer during the lease term.By May of 2006, All States' financial difficulties became such that its secured lender, Highland, sent a representative, Harold Kessler, to wind down the business of All States. Shortly thereafter Stewart, who still had a listing, received an offer of $120,000. Under the direction of Kessler, the All States manager signed a counteroffer of $140,000 which was accepted. Stewart prepared a net sheet showing proceeds to the seller of $105,982. On August 1 the tenant exercised its right of first refusal and agreed to purchase the property for $140,000.On August 24, Stewart informed the seller and the lender that the tenant was ready to close. At that time, Highland, the lender, indicated for the first time that it would not accept net proceeds of less than $130,000. Even though Stewart offered to cut his commission by 10%, the lender would not budge. The sale fell through.Stewart filed suit alleging breach of contract and intentional interference with contract. He claimed he was owed a commission because he had provided a ready, willing, and able buyer. The trial court agreed. Highlander filed an appeal.The appellate court affirmed the award. Highlander knew of the listing contract and the commission amount. It certainly had the right to ask Stuart to cut his commission, the appellate court confirmed, but not after the fact of the counteroffer. At the point of counteroffer Highland should have disclosed that they would not release the lien for less than $130,000. By not disclosing that, they misled Stewart into continuing to work on the transaction. The court found that "Kessler and Highland Crusader were engaged in a 'two-step process' of first securing a purchase price and then squeezing out as much net proceeds as possible.Now, this case doesn't mirror the facts of every short-sale commission squeeze, nor does it have authority outside of Iowa. Nonetheless, it presents a commission-reduction scenario that is similar to many short sale situations. Moreover, it may suggest a strategy that will be found useful by attorneys representing brokers and agents who have had the squeeze put on them.
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$8000 Homebuyer Tax Credit

National Association of Realtors Chief Economist Lawrence Yun said existing home sales will rise through the fourth quarter, but that the end of a federal tax credit that gives first-time homebuyers $8,000 will affect that pace if it expires in November. As per [FAR and Palm Beach Post]. I agree what is your opinion on the first-time homebuyers tax credit? I think they should leave it into play for another 6 - 12 months.
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I know we are all busy will the current state of residential Reo's; just like we were 5 years ago when any and everybody jumped in the market to sell real estate. As the residential inventory is getting bottled necked due to all the shadow inventory of foreclosures. Who's gearing up for the next big wave. I see as predicted that commercial Reo's will be around for a long time; and I'm looking for your feedback on how you're preparing for the next Tsunami in real estate in your market..
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OK I'm Certified ...Now What?

I've chatted with a few of you about the new NAR Certification course in Loss Mitigation. I got mine today and here's the scoop. Not much. I'm tremendously glad that NAR is doing something to address the reo segment. Obviously it's not going away any time soon even if it does slow down and the banks do a 180 and start helping people modify. That being said though, this course doesn't merit much in the way of certification. (Shhhhh. don't tell anyone I said so since I will proudly display my certificate).The biggest problem as I see it is the fact that it seems to be a 101 course and I think it would be much more effective if it were expanded and then done in two parts. My class had about 30 people and it was about evenly divided between those who were actively involved in REO and those who thought it might be a good thing to try. It is a good thing to try but the class that explains what cash for keys and trashout is should not be the same class that tries (not very well) to explain the intricacies of a short sale or a comparison of data upload platforms.I'd really like to see a weightier Certification that a beginning/intermediate/advanced level would bring. I also think they focused on short sales too much and as we all know there are few hard fast rules for those. They made some very good points about liability though and emphasized why all the T's must be crossed and I's dotted. Who has taken this so far? What are your thoughts?
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Pre-Approved Shortsales Breaking Out?

Well, I've bloged about this several months ago. Pre-Approved Short Sales!! I closed my first one 2wks ago and from list to close total time was 40 days. Yes 40 days, I recieved a list price 96 hours after submitting my BPO, which was priced 10K below my BPO value. I got multiple offers within he first7 days on the market and the property sold for 5K more than list price (Closer to my BPO value). My local board rules require us market any short sale as such, which in the past and sometimes hinders offers beacuse all of us know that there is nothing short about a traditional shortsale.This did not increase the time on the Market, as we advertised it as a HomeTeleos Pre-Approved Short Sale. This program has officially launched and you may see it in a City or County near you. Its true when you see HomeTeloes Pre-Approved short sale, then really are short sales. www.hometeleos.com I'd love the hear from anyone else if they are doing anything similar or have heard of any similar programs launching. I think it will be a matter of time before others follow if they have not already done so.
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