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Many people get really confused about what exactly hyper inflation is and how it will affect the housing industry but, hopefully I can make it a bit easier to understand.

First off, hyperinflation is when inflation is very high or just out of control. What this specifically means is, in general prices for goods and services rise to really high levels. When prices rise, then you as a consumer get less and less for the same amount of money. This is known as a loss of purchasing power. A rudimentary way of explaining this is by asking you a question, do you remember when gas was less than a dollar a gallon? Many of us most likely do however, in this example, it’s not so much hyper inflation as it just is inflation. Hyper inflation would be if we went to bed tonight with gas at $2.35 a gallon and tomorrow morning we woke up with it at $5.00 a gallon. The $2.35 you paid yesterday for a gallon now won’t buy that same gallon and you as the consumer have lost out. This is hyperinflation in a nut shell.

Now, how does hyperinflation come about, well….truthfully, we don’t completely know. That may sound a bit strange but, we really don’t have a good understanding that anyone think causes hyperinflation however, we do know that something must happen before hyperinflation becomes certain.

One of the most noticeable fundamental causes of hyperinflation is when governments increase the money supply drastically. Many people don’t realize why a government would do this intentionally but, it’s actually fairly simple to explain. The government is trying to debase the currency. Basically, the government knows if they print more and more money, ultimately, it loses its value and inflation increases. This inflation is used by the government to pay off government bonds. Ok…..I know that got really confusing but, think of it this way. If everyone and their mother has dollars……and it’s not hard to get them, you don’t have to do much for them, then they are worthless and in return, prices will rise because it takes more and more dollars to get that same gallon of gas that you bought yesterday for $2.35 vs. today it will cost $5.00. By the government reducing the power of the dollar, they can make more and more dollars with less and that allows them to pay off government debts however, this process lowers the standard of living for the people by destroying our purchase power.

Now, why is this important to understand now?

Most likely, you haven’t been paying attention to government bonds and our currency standing in the world but, because our government is debt spending, we are ultimately printing and printing and printing more money than we have. In fact, we are doing this at unprecedented rates. It just so happens that in the first term of President Obama, this country has spent more money than all the previous 10 Presidents combined. My point is, our Government has drastically spent money….drastically. This has had a negative impact on our currency’s value and we are seeing this exemplified in our currencies fall in value against foreign currencies.

This will debasement will cause prices to skyrocket very quickly. My example may be a bit drastic but, make no mistake, hyper inflation is a real concern for many economist and now with even more spending coming with the HealthCare reform, along with a lack of job recovery, continued bank failures, ever increasing toxic assets held by Fannie Mae and Freddie Mac, along with stimulus after stimulus, it would not surprise me to see our economy make a correction on its own and we could find ourselves in a very bad situation very quickly.

To explain to you just how serious this is and just how bad this could get, remember when the credit markets froze and people were telling President Bush, towards the end of his term he better act or the banking sector was going to fail……..well, what do you think they were talking about? We are leaning over the edge of an economic catastrophe and our government hasn’t done anything to correct the problem. I heard one government official say something to the effect that the fundamentals of our economy that caused the problems in the first place haven’t been fixed and all we are doing is spending as much as possible to cover it up. He also mentioned that when the proverbial doo-doo hits the fan it will be much worse because we are drastically debase our currency more than we ever have.

How does this affect the housing market?

Well, when a loaf of bread cost you $150.00 dollars, not because it’s packaged in gold but because a dollar isn’t worth anything….imagine what happens to a house.

“Can you tell me the benefit of attending all these conferences?”

Networking

The sad fact of the REO Industry is, if you don’t know someone, you most likely aren’t going to make it in this business. It’s a fact and sadly enough, the vast majority of you out there trying to succeed in REO know this because you are struggling to get just your first REO but, YOU HAVEN’T DONE A DAMN THING ABOUT IT!

Instead, you send me silly questions like, “Can you tell me the benefit of attending all these conferences?”. COME ON, do I really? Seriously?

Ok, in the spirit of giving, let me give you a golden nugget. If you are paying your expensive conference ticket, expensive plane ticket, expensive hotel ticket, expensive rental car fee, food and whatever else but all you did was attend the conference………..it most likely was a waste of your time! I know this may come as a surprise to you but, let me share a golden nugget with you. Ready?

Most of the business done at a conference isn’t done at the conference. It’s almost all done at the after parties. In fact, I know this to be true because most of the business I have ever received came directly from the parties afterwards that I was lucky enough to attend. In fact, ask any major player and they have at some point attended a party that allowed them to network with some decision makers who ended up liking them and catapulting their careers. To explain to you just how important the parties are, I know people who are coming in for just the VIP Poker Party RealtyPilot / REOPro is hosting and for nothing more. To further my point, how many times, at a conference have you been walking around and happened to bump into the VP of Fannie Mae………..NEVER! Why is that? Because she isn’t attending the conference so much that she has breakfast appointments, lunch appointments, dinner appointments and parties to attend to do nothing more than N.E.T.W.O.R.K! Yeah, you might see her on a panel speaking or walking through the hall very quickly with an entourage rushing her to the next speaking engagement but, when she is done speaking….she is out of there to her networking events. It’s your job to do all you can to be at the same events she is at or, you are going to miss out on an opportunity of a life time!

It’s at these networking luncheons, dinners and parties where these VIP’s let loose. They get a couple drinks in them, they are around others that they know or have heard of and they get comfortable. They don’t have to worry about reporters, lookie lous, wannabes so, they let down their guard and if you made it in the party, they consider you a part of the club. It reminds me of that scene in Titanic when Jack Dawson, played by Leonardo Di Caprio gets invited to dinner by Rose’s finance, whom I can never remember his name. Jack goes and gets himself a tux from the unsinkable Molly Brown and off to dinner he goes. The movie makes it a point to showcase that he was graciously accepted into the elite club even though he was a 3^rd class ticket holder. This is the pinnacle of networking, getting accepted or invited into a ultra exclusive club or party and then making the most of it. Using your Nerve, Charm, Charisma, and Wit to showcase who you are and what you can do for them.

People, the clue phone is ringing so answer it will ya?

This past month, I had the good fortune to be assigned a higher-dollar asset. The property was a 3500 square foot, 5 bedroom, 6 bath home with a 3 1/2 car garage and a pool on 4 acres located in the Greater Orlando Area. The house, which I named "The Palace", was built about 5 years ago and although it has recently been abused, it had certainly once been someone's dream home. It was custom-everything including 10-20 foot ceilings, high end cabinets and granite countertops, a sunken wet bar, a huge loft that was set up as a video room, etc. Amongst other things, the property is unique in that most homes in the area are located on small subdivision lots, not acreage.

As a State-Certified Appraiser for 20 years, when it came time to do the BPO, I went the extra mile and spent about a couple of hours just doing research, not only looking for comps, but also contacting the county to talk to them about land values, etc. I made a point of studying each of my comps and really analyzing the similarities and differences between them and my subject property, considering all amenities that I thought might play into the market value. In the end, I came up with a value of $515,000 on the property.

A few days later, I got a call from the asset manager asking if I would revisit my BPO since the second opinion appraisal had come in at a "significantly different" value than mine. She didn't tell me, but I guessed that the other value must have come in lower, which worried me because I certainly didn't want to end up with an overpriced listing that I couldn't sell.

One thing that I did note in her conversation, was that she mentioned that the appraiser was a man, and I specifically remembered that it was a female who had called the office looking for access information and grumbling about the difficulty in finding comps. It became pretty obvious to me that the report was being done by some associate in their office and not the agent that the bank believed they were assigning to. I went back and spent more time reviewing my BPO and opted to stick with my value.

The asset manager came back to me a day later and told me that if I felt that confident about the value, that she would push the client to go with mine over the other one. She then told me their value had come in at $399,000! I was panicked that I had just set myself up for disaster!!

The bank chose to list the house at $505,000 and I am THRILLED to say that I had two offers in the first 48 hours, and in the end we took a contract for $515,000, which has subsequently closed...commission in the bank account!!

In the end, because I took the time and interest in really nailing the BPO, the bank, the asset manager and I all ended up making more money. I am a hero to my asset manager and she is a hero to her client, the bank. The appraiser who dumped his assignment on his associate; well I doubt he is going to get much more BPO work from this company and I think he just assured himself that he won't be listing REO's for them.

I just received an email from a company that contacted me to complete a BPO on a property. Located on the river, in a rural area. Since it is rural, there are not a lot of comparables. I was worried it would be returned to me since there is a large variance in prices.

After closely reviewing what I thought was a BPO that I prepared, I noticed that "Quality Control" has made $75,000 adjustments on the form as well as a few others.

I was shocked. What is the point of me doing a BPO if their so-called Quality Control department is going to make adjustments? Obviously they know the market much better than I do.

This infuriates me -- I just wish I knew who the client is, because this is just wrong and they need to be made aware of what is going on. It helps give more power to those that think we as agents should not be doing BPOs in the first place. Maybe there should be more concern over what the BPO companies are doing to the reports once they receive them.

I don't know if anyone else has ever experienced this or not, and maybe I am overreacting....it just seems wrong to me though.

Payments and Promissory Notes for Second Lienholders in a Short Sale

This questions was asked by someone in a different listserve that I belong to but would like to share with this group and get your take on it. I have included the original question in addition to my expansion of the question.

ORIGINAL QUESTION:

In a short sale, it’s a pretty common practice, I think, for the second lien holder to require something beyond the standard $1K-$3K consideration for release of their lien. For example, Payoff amount for second lien = $15,000, Consideration from first = $1,000. Second lien insists on, say, $3000, and accepts a promissory note at the table from the seller for $2,000. Performance on the $2,000 promissory note will be considered “full satisfaction” of the obligation and is not listed on the HUD. Property closes, First takes loss of $25,000, Second takes loss of $14,000, with expectation of $2000 recovery.

Does this violate RESPA or any other law? (I think not, as the second has the right to collect on their remaining balance, but others say it is a violation.)

MY EXPANSION OF THE QUESTION:

I am finding recently that not only are the 2nd lien holders asking for $3,000 at closing which would appear on the HUD-1 but, also for the Seller to sign a Promissory Note for 10% of the principal balance left on the 2nd lien. I am not a lawyer, but from those I have talked to this doesn’t seem to be any kind of violation. It is a way for the 2nd lien to recover part of the deficiency. The problem area seems to be if the Seller agrees to sign a Promissory Note, the transaction goes through and the Seller then files for Bankruptcy. Would this be considered fraud if the Seller signs the note with the intention of filing for bankruptcy later?

The other scenario I see happening more often, which MSNBC recently did a report on, is the 2nd lien holder doesn’t want a promissory note. However they still demand 10% of the principal above the $3,000 the 1st lien is offering, and suggest that the buyer, seller, or the agents pay it directly in advance so it is not part of the HUD-1. In the MSNBC report they mentioned Bank of America and JP Morgan Chase. I have had both of these banks and others suggest exactly this type of thing. This clearly seems to me to be defrauding the 1st lien holder and would be a violation.

On a side not but somewhat related topic. It is my understanding that Oregon Real Estate Board is looking into whether Realtors are over stepping their bounds by negotiating short sales and could possible prohibit it or create some very stringent guidelines on the process.

In addition the Oregon Attorney General is questioning some business models of Short Sale Companies that charge a Fee. Many lien holders refuse to pay an attorney fee or short sale fee that appears on the HUD-1. So companies are asking the buyer to pay for the fee which would then not appear on the Seller’s side of HUD-1, but the Buyer could then ask for the amount of the fee back in closing costs which most lien holders will agree to up 3%. If the Buyer can’t pay the fee because FHA lenders won’t allow such a fee on the Buyer’s side of the HUD-1 they are asking for the agents to split the fee. Is this a RESPA violation? The DOJ’s concern seems to be one of disclosure. Is the lien holder aware the Buyer is willing to pay extra money for the transaction to go through and that those funds are going to a third party (Short Sale Company). Also is who is the Short Sale Company really working for if they contact with the Seller to negotiate the Short Sale on their behalf, but then require the Buyer to pay the Short Sale Company, who in return often asks for the money back from the lien holder in closing costs. Seems like a lot of gray area, and I would be interested in hearing others take on it.

NAR is out to take the valuation money through the new HAFA program. Looks like appraisers could take another blow. Is short sale fraud the next big dirty deed from the industry? Modification? Short sale? Which is best?

http://www.thinkbigworksmall.com/mypage/player/tbws/25173/1632849

opportunity. REITs that have been able to raise money are positioned for opportunistic buys. Cash heavy REITs wont have to rely on banks for loans and are waiting for banks have to unload non performing loans.These are going to be the winners here as some banks can no longer hold back on foreclosures. Stock market investors will often try to pre position themselves, to buy before the rest and hope to reap greater profits. They arent always right and they can certainly be too early.

Home Trends Price Stability
Case Shiller: Slowly Getting Better
Small Banks In Trouble

I'm sure that I'm not alone in my thoughts and that this is going on in more places than just SW Florida but it bothers me more and more. What is it? The REO agent's that just don't seem to do their assets justice.

I pride myself in my work. I treat REO listings the same as a traditional listing. They get equal attention (most of the time more). They get the same amount of advertising, the MLS description is written to SELL the property and I always have a multitude of pictures of the property. Signs are placed on the property immediately and someone is always available to answer questions about the property.

On the other hand, I see BIG REO agents in my area that just don't appear to be putting any pride into their work. You have agents that put only one photo of the property into the MLS.....and that pic?....it came directly from the tax assessor's website, so they didn't even bother to go out and take a photo themselves. There is one agent in the area that takes a picture of the inside of the toilet bowl and puts it in every one of his listings. And oh, some of the MLS descriptions! "Bank Owned Property" .....that took a lot of thought!

We all know how difficult it is to break into the REO business. It is very aggravating to know that I would do the best possible job for these companies if I had their listings yet I see these other agents that just don't seem to appreciate what they have.

Alarming News for Short Sale Negotiations

Here is my story you tell me your opinions.

Sep 2009 COMPLETE short sale package is sent to both first and second. First lien holder receives it uploads in there system and within 3 weeks we have a negotiator. Chase on the other hand, I call they verify the package has been uploaded in there system however it takes 4-6 weeks for a negotitaor. Here we are in January and we finally get a negotiator assigned. She goes through the file everything looks good,no other documents needed she wants to know what the first will offer them to release the lien.

I send over the HUD again with the dollar amount the first will give. She verbally agrees to it, I ask for a letter of approval with those terms she says she has to send it to review and I should hear back soon. Well 3 weeks later after numerious calls and emails she finally emails me back and says OH I DONT HAVE THIS FILE ANYMORE I SENT IT TO THE RECOVERY DEPARTMENT,SO YOU NEED TO CONTACT THEM. Im like really in the middle of all our negotiating you sent it to another department"? She said yes didnt give me any info on who to contatct or any contact info.

I call Chases 800 number and find out who to contact after another week or so the recovery department finally answers. Of course he's rude and arogant. He askes me to resubmit the whole package again and call him back on Tuesday. Well Tuesday,Wed,Thurs,fri,Mon you ge the idea roll around and of course he doesnt answer and no one else can give me answers. Finally 3 weeks have gone by and he answers and claims he hasnt recieved anything,so I resent it MAGICLLY this time he receives and askes me to call back again on TUesday. So I do and to my surprise he wants $40,000 for a full release or $20,000 for release of lien with the seller signing a note. Im flaburgasted considering the seller only owes less than $70,000 on the second. He will not budge on the figures. He says and I quote " I gave you the 2 numbers I will accept either you pay one of those or we close the file out,I will not accept anything less we have already charged off the loan as a loss and so we dont need to negotiate further. Im completley speechless, here we have a willing and able buyer no closing costs,20% down etc a seller who is desperate to get out from under his feet and a bank who is completley unwilling to help. I feel Chase doesnt really care about these homeowners... What are your thoughts??

http://www.hafaprogram.com/

Link to find out if a lender is in the HAFA Program

http://www.makinghomeaffordable.gov/contact_servicer.html

The above info sounds like short sale will probably be the primary sale in real estae. The process does tone down unreasonable homeowners who might trash their home due to stress and frustration of loosing their home, if they don't get some help or responds from their lender(s). I am assuming working with the homeowners on their distressed property will help them realize they need to go due to lack of income or not enough income to keep the home.

Excellent HAFA training is at http://www.assetplanusa.com/

For many of you who read my blogs often, this blog is going to sound like a broken record however, it’s choc full of good stuff so, glance over it anyways….why not?

Get Noticed,

Too many agents are going around, belly aching about how they can’t break in. They applied to 5 BPO companies and it’s been 2 weeks later and they haven’t heard anything or gotten 1 assignment. They can’t put in resumes with REO companies because they require at least 3 referrals and they don’t have that kind of experience. To all this moaning and groaning I say………and your point is?

If you are following the same routine as the thousands before you, then don’t expect any different of an outcome than the thousands before you received. Those of you who know me well know I have a television on in my office. Most of the time it’s glued to Fox News (yes…I watch Fox News and love it!) however, this one time I was watching Big Cat Diary and they happened to be following this herd of Wildebeest. The reporter was commenting on how they had to cross this river and it was very dangerous because it had 40 ft. long crocs in it. It was amazing to me to watch these thousands and thousands of animals crossing the river almost in a single file line, nose to rear. One after the other was getting gobbled up yet, none of them thought to themselves, maybe if we cross up stream less than 100 yards, it would be safer because the water was noticeably more shallow. Granted, these are just beast and, I know that but, it illustrates a very valid point. Many of you…..most of you are just following the herd. You don’t know to look up and around to see all the different resources available to help you successfully break into this business. You are so pre-occupied with what is beneath you that you don’t know or can’t look up and see a safer crossing up stream. What amazed me even more about this episode was, every once in a while, a lone Wildebeest would stop at the edge of the river, see it was just too deep, look up river and crossed on his own in shallow water….SAFELY!

My suggestion is to look up, see the resources at your disposal, don’t act like the herd! Write blogs, add forums, comment on others blogs and forums, contribute and you will get noticed. Start creating your reputation in this industry without ever leaving your office. I am afraid that just too many of you are too busy to look up and see the alternative route to the other side. Many of you will fall victim because you can’t look up, you won’t look up or, your just not cut out of the same cloth as those who do look up.

Provide Excellent Service,

Status quo isn’t good enough, it isn’t, trust me. This industry wants to be wow’d and, if you arent’ wow’ing it…….you aren’t wooing it. I know, that last sentence was a bit strange.

Let me put it this way. Just doing BPOs, just doing assignment, just doing, isn’t good enough. Excellent Service is Extraordinary Service and it’s that “extra” that makes all the difference. Yes, that was a reference to the movie Waiting and, if you haven’t seen it, you need to but, don’t go see the edited version…..you need to see the directors cut.

AMs and Pre-Marketers have seen it all so, what are you going to do to stand out. Granted, you’re most likely not going to write your resume on pink paper and spritz it with White Diamonds by Elizabeth Taylor but, you can do other things like, create a Personal Default Website that emphasizes your experience, knowledge and work area, that has always brought me luck. Maybe you can include your business card at the end of your email so if I want to add you to my contact database, all I have to do is click it once and boom, it automatically adds itself with no real effort from me. Maybe you could start writing a weekly column or contributing to a regular blog and help other with what you know. My point is, you can do a lot, why not?

Ok, now I am starting to rhyme….I got to end this or this is going to become some strange screenplay about a homicidal maniac realtor who talks to ghost.

Become an Expert,

This is the hardest thing to do because it takes a long time. Take what you know, publically share that information or, at least selectively contribute to our industry over a long period of time and you just became an expert. Depth of knowledge plus longevity equals expert.

Whatever you do, don’t become a schamiel because every schamozel will be out looking for you to tag on.

On a personal note, I am sure I butchered the spelling of those yidish words but, my spell check didn’t have them in the database so, forgive me but, I do now what they mean and they are used properly, at least so I believe.