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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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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It has recently come to my attention that a friend of mine in another state is being sued by a Seller he represented in a Short Sale transaction because he didn’t disclose the fact that the homeowner was selling short in a recourse state and could potentially be sued herself for a deficiency judgment. Needless to say, the seller was issued a deficiency judgment by the court in the amount of $48,000.00.
The seller ended up filing bankruptcy to rid themselves of the judgment but, bankruptcy was something they were wanting to avoid all together, hence the short sale.
The seller’s argument is that the agent did not explain the process and potential risk therefore he was incompetent to practice such a highly specialized real estate transaction and should have never engaged the short sale.
The seller also argued that none of the documentation the agent submitted to the bank protected the seller from any future deficiency judgment and proper due diligence was never done.
The case isn’t resolved at this time however, I would like everyone to chime in and give their thoughts. As soon as I learn more about where this went, I will tell ya.
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41 Charged in 5 Mortgage Fraud Cases
by alissandria obrien of Preservation Monthly 06/24/2009
....15 individual defendants and four businesses purchased distressed properties, including from the U.S. Department of Housing and Urban Development, and then resold them for fraudulently inflated prices approximately two to three times the purchase price.....
Link to see the full article. http://www.preservationmonthly.com/story_2012.htm
I have blogged on this over and over, each time, I get all kinds of hate mail and personal attacks but, as i have been saying since last year, when this started taking off in my area, it's fraud.
by the way, I am not going to argue with anyone if it is or isn't.....I have contacted my local FBI office and was told that if anyone has a question about this process, they can call them directly and they will help you understand just why it's illegal.
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I went to a closing for a shortsale referral from Titanium today. In Oregon the seller and buyer sign docs, back to the lender for review, then after approval it goes back to escrow and funds 24 to 48 hour turn around. so this will close on Friday ...... 1 Year and 3 months from the time I knocked on the door as a Titanium rep. (with Wamu now Chase). Turns out that they have been pretty helpful during this ordeal.
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I came across a blog on another networking site and got into a bit of a debate as to what exactly a Short Sale is and isn’t.
I need to explain that I am a HRC (Housing Retention Consultant) with Titanium and I have the RDCPro (REO Default Certified Professional) Designation through RealEstateEducate.com lastly, I am working on a Short Sale training program I hope to present to NAR (National Association of Realtors) for acceptance in their Continuing Education Program. In other words, I kind of know what I am talking about, just a bit.
Ok, so back on topic, what is a Short Sale?
Per Wikipedia a Short Sale is defined as…,
“a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold.”
The above definition is absolutely correct however, I have heard, read, and had described to me that a Short Sale is more than as described above by Wikipedia.
Some define a Short Sale as…,
a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold and, where the bank forgives the remaining debt.
Let me be very clear, a Short Sale is no promise that a bank will forgive the remaining debt!
I wrote a blog back on 9/8/08 on REOPro.NING.com that highlighted the use of unsecured promissory notes by banks to secure future payment of the remaining debt before they offer an approval for the short sale. In that blog, I made it clear that some banks are using the unsecured promissory note while others aren’t.
In closing, a Short Sale approval doesn’t guarantee a forgiven debt so be careful when you discuss what a Short Sale is so that you don’t set an expectation that you simply can’t fulfill.
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First off, thanks to Steve Adkins for spuring me to provide more detail on this subject and providing insight on the details of how exactly this scam works!
I recently wrote a blog titled, “Short Sale Scams Dupes Un-Suspecting Realtor…Are You One?” which created such a stir that now I am prompted to write this blog specifically concerning Short Sale Option Contracts.
So, here is how this happens.
You’re in the office making calls or whatever else you do and you get a call from a “investor” who sees you have that short sale listed on 666 Money Pitt Lane and, wants to know if you would write up his Option Offer with no terms or conditions.
You’re all excited because by all intents and purposes this is a really good offer, no conditions, no terms, no contingencies…..right,……wrong!
He has one condition and that is, he has the “option” to purchase the home at any time before the foreclosure sale date. He doesn’t outline any price or contingencies at this time but, who cares….your seller surely isn’t going to mind because they really don’t have any skin in the game because they aren’t getting any money in return for the sale anyways.
Now, here is where it gets even more interesting. As a part of the investors “option” to buy he mandates that he negotiate the Short Sale with the bank. He makes it all sound great because he has a guy who is on hold with the bank right now just waiting to get this negotiated and sealed for you, because he wants to make you BIG money on the deal. In fact, he has such good relationships with this bank he promises you (the Realtor) don’t have to do anything, he can do it all for you! To make you more confident that this is good for you, he offers you a cooperative agreement for both the Listing Side Commission on your original listing and the Buyer’s Side Commission when he turns right around and re-sells it to his “firm”….DOUBLE COMMISSION…WOO HOO!!
All he needs is your client to withdraw their listing from you, agree to have him (the investor) represent them, list the property with his firm and, sign a limited Power of Attorney saying that he (the investor) is representing them so he can negotiate with the bank.
Once all this is done, the “investor” receives all the offers from the general public, negotiates all the offers and behind the scenes is negotiating a much lower sales price with the bank for the purchase of the property by his firm.
In other words, all these offers from the general public are being held back…they aren’t being submitted to the bank. Instead, the “investor” is negotiating his own offer trying to get the price 20% or more less than his highest received bid from the public.
So once the “investor” gets a high enough offer to satisfy his greed he then exercises his own option to buy the property. Keep in mind, he is purchasing the property at the bargain basement price he negotiated with the lender directly.
Now he works the offer to close and, you get the commission for the listing side, your seller walks away from the home happy to be out from under the debt burden and what do you know, the investor has found a buyer who needs representation who wants to make a great offer and the investor wants you to be the selling agent, because you were so good to work with before.
The offer “your” buyer wants to make is $35,000.00 more than what you just sold it for to the “investor”….wow, he is making out like a bandit! When in actuality he is involving you in mortgage fraud!
Just to make this a bit more clear….watch the money.
1. You list the Short Sale for $50,000.00
2. Investor comes in, takes the property over and list it for $30,000.00
3. Investor negotiates with the bank and gets approval for $25,000.00
4. Investor receives an offer from general public for $55,000.00
5. Investor exercises his option to buy and closes for $25,000.00
6. Investor instantly sells the property to the general public offer for $55,000.00 making a profit of $30,000.00 off of an offer that should have gone to the bank.
In other words, the investor made off with $30,000.00 of the banks money! You profited twice from the deal so, you are involved in a scam if you knew it or not!
THIS IS MORTGAGE FRAUD AND THE FBI DOES INVESTIGATE.
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Fifteen new foreclosed or short sale homes came on the market, about one in every six homes being listed in the Prescott Arizona Area MLS system, and one quarter of the closings were distressed sales in Prescott, Prescott Valley, Chino Valley, Dewey-Humboldt and the outlying areas of Yavapai County. This shows a marked decrease from last week’s numbers.The difference between what newly listed traditional homes and Prescott foreclosed/REO and short sale properties per square foot remains large at a 40% discount.News has been mixed last week with positive housing numbers coming out of California and the Phoenix area, but news of more foreclosures on the horizon as load modifications fail and banks are removing moratoriums on foreclosures. Watch this space for more info!The percentage of foreclosed/REO/short sale new listings on market increased from 17% to 18% this week. Last week 48% of the pending sales were REO or short sales, and this week they made up 33% of the deals going into escrow. The percentage of REO/short sales that closed last week went from 56% last week to 26% this week. REO/short sales sold about 92% faster than traditional resales.See the full report on our main web site.You can get this report sent to you via email. Sign up here.Read more…
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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The REO (real estate owned) foreclosed home market is hot right now in the Prescott area with many homes priced under an already depressed market price.When banks price REOs under the market price, multiple offers are often the response. This means buyers can be up against stiff competition for that bank-owned home.It’s not unusual for some bargain-priced REO homes in the Prescott area to receive 3 or 5 offers. Sometimes the bank will throw out all but two offers and then ask the selected buyers to resubmit what is called “Highest and Final” offer. Sometimes the bank simply accepts the best offer at inception, or they can start over. Fun isn’t it?If you’re wondering how you can make your offer rise above all the rest and be the winning offer, here are the top 10 tips to win the REO multiple offer game with right packaging, price, terms and conditions:1. Know What the Bank Note Is For and What they PaidAsk your foreclosure buyer’s agent to find out the bank’s purchase price on the Trustee’s Deed. Compare that price to the price the bank is asking. Then, look at the amount of loans that were once secured to the property. Usually, the amount the bank will accept is somewhere between the original mortgage balance(s) and the foreclosure sale price. BUT, don’t put TOO much emphasis on these numbers when they are low. It a property is worth $300,000 and the bank is holding a note for only $100,000, they are not going to take $100k for it. They not not against making a profit on the rare occasion when they are not upside down. They’ll likely hold out until a reasonable offer appears.2. Know the Comparable Sales DataMake sure you know what properties have been selling for in the immediate area, both REO and traditional sales. The bank already got this data when they received their Broker Price Opinion (BPO) to determine the listing price and might have another BPO once the offers were reviewed. If the comparable sales for REOs has been $120/sqft in the neighborhood and you are offering $90/sqft, you can expect a counter at best and most likely will never hear back from the bank.3. Do an Analysis of the Listing Agent’s REO Pricing RecordMost REO agents focus as listing agents for REOs, and often they do not list any other type of property. Since REO agents deal in volume, they typically apply the same pricing principles to all their REO listings. Have your foreclosure buyer’s agent pull the history of the listing agent’s listings to determine the list-price to sales-price ratio. If most of those listings are selling for, say, 5% under list price, then you will have some guidance as to how much you need to offer.4. Know your Competition - Ask About the Number of OffersIf there are no offers on the REO home, you can probably offer less than list price and get your offer accepted. However, if there are more than two offers, you may need to offer above the asking price. If there are 10 offers, bear in mind that some of those offers might be all cash. Banks like all cash offers. If you are obtaining financing, then you may need to increase the price on your offer to be considered.5. Prepare an Offer Summary as a Cover SheetThis is aimed at simplifying the process for the Asset Manager, who, will more often than not, have 400 - 500 properties under management and often in multiple states with vastly different real estate contracts. This cover sheet will have the basics only (Price, Terms, Concessions, Closing dates, etc.).See a sample cover sheet. If you are an agent and want one emailed to you in Word format, just contact me.6. Choose a Closing Date Before the End of the MonthTry to have close of escrow on or before the 25th of the month. Banks are assessed their handling charges on the first and if they have not received the check before the end of the month then there is an additional charge for them.7. Submit Your Loan Status Report or Proof of Funds with your OfferIt goes without saying that you do not want to submit an offer without showing the REO manager that you have the means to purchase the home. If you are getting a loan, then it’s of paramount importance to submit the Loan Status Report (LSR) with your offer. If you are paying cash, you need to show proof of funds. Often buyers submit copies of money market account or bank statements (with the account numbers obscured) to show that they are capable of completing the purchase.8. Give Enough Time for the Bank to RespondUnlike homeowners who are typically working on one transaction at a time and can respond within 24 or 48 hours, REO asset managers usually hundreds of homes they are trying to dispose of. And since many of these are getting multiple offers, the amount of workload can be be overwhelming. This is why we suggest allowing 7 - 10 days as the response time on offers. Sometimes responses will come much quicker, but other times even longer. Manage your own expectations for response as well and make sure your agent is following up.Don’t take it personally when you don’t hear back…it’s not personal, it’s business!9. Don’t Try to Choose your own Title CompanyChoosing the escrow company who will help close the transaction is normally the buyer’s decision, but when buying a bank-owned home, buyers need to be flexible. One of the items that your buyer will need to be flexible about is that the bank will, more than likely, want to choose the title and escrow companies. This is due to the fact that they have significant amounts of title work done during the foreclosure process so they usually want to stay with that title company. Please be aware that many of the escrow and title companies that banks choose to use are not local, and that they are usually low bidders who are overwhelmed by transactions as well. They will have traveling notary services or local options for document signing, but don’t expect the same service you get from your favorite escrow officer. If you are an agent, take an active role in trying to help the title company get the contacts they need locally, like the HOA information, etc.10. Shorten the Inspection Period and Don’t Ask for Repairs at the Offer StageIf other buyers are asking for 15 days to conduct inspections, and you ask for 10, you will be deemed the more serious buyer. Banks, just like traditional sellers, don’t like the “Free Look” that the Arizona contract offers buyers during the inspection period. If your agent can’t make everything happen within 10 days, (home inspection, termite inspection, special inspections) ask why not. Sometimes banks will pay for repairs, but typically will not agree to do so at the offer stage. If there are serious problems are found during a home inspection, try to renegotiate after your offer has been accepted. Banks are much more likely to offer concessions once your offer is in the hopper, especially if the repairs are required as a loan condition.Bonus Tip: Offer to Split Transfer Fees if You Ask for Any Concessions at AllAs a rule, banks do not like to pay transfer fees, but if the buyer offers to split those fees, the bank will feel more amenable to accepting the offer. We suggest offering 50-50 splits on all transfer fees and do not ask for further concessions like seller paying buyer’s escrow costs, etc.Keep all of these tips in mind when you are making offers and you will experience far less frustration and and much more success when trying to buy bank-owned properties in the Prescott area.Bonus Tip #2: Write your contract in English and not legalese.Forget what the last CE instructor taught you at your renewal hours, and go back to writing the contract in plain English.Want to see an example of how not to write a contract?Read more…
I have many clients who call me looking for deals on short sales and foreclosed homes in the Prescott Arizona area market including Precott Valley, Chino Valley and Dewey-Humboldt. Many think that short sales are better deals than foreclosures, but his is rarely the case.What the difference?The short sale process has many moving parts that must be aligned in order for the sale to close. First of all, the lenders have to agree to a short sale, but sometimes banks won’t agree to a short sale without an offer. This means that the home has been listing for a price that the bank hasn’t agreed to, and once the offer comes in, the bank will assign a loss mitigator to review the process. This could take several months and most likely will involve a counter offer by the bank close to the loan amount…regardless of whether or not the loan has any bearing on market value. Then the games begin.When you buy a foreclosure in the Prescott area, the process is much more straightforward and the prices are set by the bank and not a by the homeowner and REALTOR, who have nothing to lose by listing it below market value. In fact, it stimulates demand and clients for the listing agent and the homeowner thinks there is progress because people are looking at their home and making offers.That’s not to say that all short sales are not good buys. The key to success is being prepared and having a full understanding of the process.For links to more information, see my Prescott AZ Area Foreclosures BlogRead more…
Heard this morning from a very reliable source that REO assignments are going to double for the 2nd quarter (Apr/May) of the year. Also, we should be seeing even more investment, foreign and domestic, in tangible assets such as real estate due to the oversupply of money and lack of confidence in financial markets. Would not be surprised if we see a shortage of inventory towards the end of the year. Especially since the latest policy of rental leases in lieu of foreclosure, recent short sale appeal and more foreign and local real estate investment due to oversupply of money.
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Realtors, do not advise your sellers to stop making payments on their monthly mortgage when they are participating in a short sale.
Why, you ask.
Banks consider many things when determining if they will accept a short sale and of those many things they consider, the Seller’s Net is the most important.
Now before I get ahead of myself, understand that in a short sale, the homeowner isn’t walking away after closing with anything other than debt and when I say “Seller” I am specifically talking about the bank and when I say “homeowner” I am talking about the actual person residing in the home or at the very least, is responsible for paying a monthly mortgage on the residence.
Ok, with that being said, back on task. The seller’s net sheet is affected, positively or negatively based on the monthly payments or lack of payments by the homeowner. So, if the homeowner isn’t making monthly payments then the amount of loss the bank incurs increases monthly. Let me assure you, increasing monthly expenses on the part of the bank isn’t going to make it easier for them to accept the short sale. Ultimately, they have a bottom line and granted, they aren’t going to share that with you. Because of falling values chances are you priced your short sale to sale in 30 days or less which most likely means you may very well be at the bottom of the banks bottom line, by the time you get the first accepted offer.
In other words, any additional expense the bank is forced to incur because your homeowner won’t pay, can’t paying or isn’t paying his monthly mortgage, the more likely it’s just more cost effective to simply foreclose.
My advice to you homeowners, pay as much of your monthly mortgage as possible so that you have a better chance to close the sale.
My advice to you Realtors, you better be getting monthly updated pay off statements and sending in monthly revised estimated HUD-1’s otherwise, you may get a nasty surprise the day of closing when the bank refuses to close.
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Okay, gang here's what's comming down the Pike!! When this program hits the streets short sales will truly be SHORT SALES.Anyway, myself and 4 of my agents were blessed with being selected and trained during the 5-Star Conference via Webinare, to be on the 4 front of this new program that will be comming to a city near you soon. When you see the words Home Telo's approved Short Sale , these properties will close in 30 days or less. Thats right lender approved short sales!! What a concept. Not all homes will qualify for the program and there will be a screening process. To some this up in a NUT shell this is how the program will work.A BPO is completed on the property within 72 hours of completing our BPO the lender will have had a 3 rd party apprasial or BPO conducted and sets a price at current market value they are willing to except for the home. The property will then be placed on the maket local MLS and www.bidselect.com where it can be bid on. Highest bidder assuming lenders price is met, will go into contract to close within 30 days.During the marketing time the home-owner has to maintain the home, remains in the home and is resposible for keeping it up for showing. The investors/lenders etc have finally figured it out!!!. It's cheaper for them in the long run to keep people in homes, maintaining them rather than them being vacant, and getting everything of value (A/C Units, Copper, Appliacnes, Light Fixtures etc) stolen.This should bring about some stability to the market and great opportunities for first time buyers that are overwhelmed when they step foot in some of the REO homes out there. They will have to be left for the investors to pick up at rock bottom prices,because they will be the only ones buying them when these short sales hit the market. This should be a WIN WIN for everyone.So Buyers Agents, When you see HOME TELO's you better act fast, because once this gets out , there will be 10-15 offers on each property, just like the turnkey REO's. That's my tip for the month...1 of 500 out of 135,000. If you were invited to the Round Up during the 5-Star Conference then you know what this means. For those of you that don't and would like to know shoot me an email if you can't figure it out..(Staci it was nice to see you at the Round Up!)
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The other day, I got a new property assignment. "Hmm," I thought, "that address looks familiar." Turns out, I had done an interior BPO on the property back in December of 2007, for a short sale. That was kind of a puzzler - I know I turned in a value higher than the contract price (the seller's agent met me out at the property and said, hey, this is our contract price) - but considering the location and lot size, the value I gave it was fair to all concerned.But OK, say that my valuation was hire than the contract price, and the buyer was not willing to come up. Strangely enough, this property was never listed for sale on the MLS. Incredible. Here you are, facing foreclosure - and you're not going to list the property for sale on the MLS to at least even try to get out from under a foreclosure?The whole strategy of "pocket listings" of short sales kind of confuses me, to be honest. I really think a Realtor is doing a disservice to their client by keeping a short sale a secret. Perhaps in some cases the client insists that nobody know - but c'mon, what shame is there in doing a short sale these days? About 1/3rd of all the listings on the MLS in my area are short sales or straight-out REO properties.Hmmm. Well, I've ended up with what should be a nice listing in a popular area. So thanks for that, but I'm sorry things had to work out this way. Now instead of being the nice Realtor who came to take pictures of your house to help you get out from under this burden, I'm the nice Realtor who's going to negotitate a Cash for Keys to get you out of the house. Sigh. All in a day's work, I guess.
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Common Short Sale and REO Myths.
I am shocked and this misinformation out there that is being passed as reliable. To combat some of these silly and often gullible myths, let me outline some for you today.
1. You can ridiculously low ball banks because they have built in projected losses on their REO’s and Short Sales. In other words, they all have a “sweet spot” selling price and if you know what it is, your offer will be accepted.
a. The first problem I have with this myth is to believe this silly idea is like saying that when they made the loan in the first place, they were betting on default. Let me assure you, that isn’t the case hence, the fall of the sub-prime market and resulting credit crunch. I don’t know any banker or for that matter any consumer, who took a risky loan with the idea they were intentionally going to default.
b. My second problem with this myth is that to believe it, you are assuming banks don’t have a clue as to market value. My goodness people, these are banks we are talking about. My point is, they are this nations monetary backbone, I would think they would know something about market value and fair pricing, wouldn’t you? Banks hire agents to go out and provide opinions on a properties value before they ever put it on the market. Typically they get more than one opinion from several different agents and therefore, they sometimes have more knowledge than the buyer’s putting in the offer!
c. The third problem I have with this myth is that is creates weird expectations and speculations on behalf of any prospective buyer. People who believe this can’t understand why their offer was refused. In fact, it puts a lot of Realtors in weird situations where they are writing up silly offers on homes that they know the bank isn’t going to consider. Then when the all to obvious counter comes bank, the buyer wants to be offended or looses faith in their Realtors abilities.
In short, this myth is bad for all involved. It creates hostilities, resentment and hardship. We as Realtors who work with REO’s and Short Sales must do a good job in educating our buyers or even other agents that yes, we will present the offer, it’s our duty however, DID YOU DO COMPS BEFORE SUBMITTING THE OFFER? If not, you might want to!
We have a lot more myths out there about Short Sales and REO’s I would love for you to share your ideas and thoughts…..thanks.
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