The Big Bad Wolf of Short Sales

The Big Bad Wolf of Short Sales

Would you let a wolf guard your sheep or count on a trained and loyal sheep dog?

This is what a lot of homeowners are doing when they allow an investor to sell and negotiate their short sales. They are called investors because they want to make money on the deal. In my opinion, this is perfectly ok! We live in America! But I, as the home owner, would not want them to make their money on me!

Here's an example: One of my clients received a call from an investor the other day explaining to them that they would buy the home and resell it and not charge any Realtor fees. This sounds great, but here is the truth: The investor will try to get the home at a discount so he can resell at a profit. Depending on the homeowner's situation, this could harm the client. Secondly, 90% of all short sales are not good investor’s purchases, unless the property is in major disrepair. The investor tries to get such a low price for the home that the banks will never take the deal and the home usually goes to foreclosure.

This is my advice - Find a real estate agent that is an expert in short sales. Remember the buzz word in the real estate community right now is "expert short sale agent", so everyone is claiming to be an expert. Here are two very important questions to ask an agent before you list your home with them: How many short sales have you successfully closed on the listing side? If the answer is below 50, I would keep looking. Secondly - Who does the negotiating? If the agent says that they do, be very careful, because they better have a team behind them doing everything else because short sales are very labor intensive. I don’t believe you can be an expert and not have a staff behind you. My team has successfully completed hundreds of short sale negotiations and we learn something every day.

There are times that investor purchases make good sense. If the property is in bad shape, if the seller's main goal is to stay in the house as long as possible, or the sellers of the home are going to or have filed bankruptcy. In some cases it does not matter what the home sells for, so investor low price purchases are fine. But in most cases, find a real estate agent that is a true expert.

Written by Nick Shivers

The Strategic Foreclosure

The Strategic Foreclosure
If you have money in the bank but can barely make your payments, maybe you are considering negotiating a loan modification with your lender. Unfortunately, these are taking forever to get approved and the likelihood of them lowering the principal balance is very low. So what can people do that are $50,000, $100,000 or more underwater on their homes, but that could continue to scrape by and make their payments?
We're not attorneys, but we speak from experience, having handled hundreds of short sale transactions in the past three years. We can't advise you to use this approach, but many of our clients have used a certain strategy with their upside down properties, especially when they are wanting to stay in their homes. We are located in Portland, Oregon and have helped people all over the country with their short sales. It is critical that you and your Realtor know the state laws relating to foreclosure. In Oregon (and in many other states), this is a non-deficiency state, so the 1st mortgage lender has no recourse after the foreclosure or short sale. Consequently, we can use this to negotiate a full release of debt with your lender, so you can sell your home for less than is owed and avoid a foreclosure on your record. The reality is that this process takes time, and auctions are normally postponed when there is an offer on the home. Some homeowners we have worked with haven't made a payment in 2 years while we have continued to negotiate with the lender.
The bottom line is if you are in trouble financially and anticipate not being able to make your payments comfortably, immediately make contact with Realtors like us who know the in's and out's of the foreclosure and short sale process. We can come up with creative solutions that will ultimately give you favorable results and make the best out of a tough situation.

Written by Nick Shivers

Confusing and Contradictory Reports

More Confusing and Contradictory Reports about Oregon

In contrast to the last national news article that we wrote about, at least one writer thinks Oregon is positioned for a rebound. A new report from Moody's Economy.com and msnbc.com states that Oregon is one of 5 states that is well positioned for a job recovery in the last quarter of 2009. This is well ahead of the projections for the other 45 states, and this is mainly due to the high-tech industry centered in the Portland Metro area. There has been less spending throughout 2008 and 2009 in high-tech, and the expectation is that businesses on the sidelines of needing to upgrade their technology will be coming back into the arena with their dollars. The Silicon Forest is ready and waiting for those funds, and will respond in kind with new jobs and new opportunities. With our unemployment currently at 12.2%, this is welcome news! However, with all this confusing speculation in the media, what's the best way to make sense of the market? This is another reason to be certain that you are working with Realtors like us who are thriving in the local market and know the great opportunities right here in our community.

Written by: Nick Shivers

http://www.msnbc.msn.com/id/30991972/

Is Portland real estate really a bad investment?

Is Portland real estate really a bad investment? No way!

Let's be honest, Oregon's unemployment numbers are terrible. With 11.6% of the population without a job in April, this has a powerful impact on our housing market. This is the leading factor in some people's condemnation of our investment potential, but let's take a step back and look at the big picture of what makes the Portland Metro area unique: Relocation of California residents to our area accounts for a fair share of what fueled the local housing boom in past years. This will continue indefinitely, with an estimated increase in Portland's population by 1 million people by 2020. Our quality of life is excellent and is a magnet for those looking to upgrade to lovely communities without the huge coastal price tag. The Urban Growth Boundary restricts sprawl (see Phoenix, AZ for contrast) and preserves rural areas. Quality mass transit is ever expanding, and we continue to be a model for cities worldwide in our 'Green' developments.

We have properties listed at every price point, in every city in the Metro area, and we get offers on all of them. People want to live here! The Northwest did not experience much of the extreme highs of the housing bubble, and was over a year behind the nation in experiencing a downturn. Nationally, people are coming to grips with real estate being a long term investment rather than a get rich quick scheme. And when it comes to great places to live, Portland continues to get lots of positive media attention and deservedly so.
The long term outlook for this area is very strong, and most likely this will be the time period everyone looks back on and says: "If only I had bought then". Consequently, the best choice you can make is putting a qualified real estate professional on your side that understands the art of negotiation. We're here to help you get that great deal!
Written by: Nick Shivers

Article for the post

5 Housing Markets That Have Further to Fall
By Sarah Morgan, SmartMoney.com
Jun 30th, 2009
Think twice before buying a house in these cities any time soon.
Home buyers looking for a bottom in the real estate market may have been encouraged by housing data released earlier this week. Sales of existing homes rose 2.4% in May, according to the National Association of Realtors. The increase was a little less than most analysts had expected, but it represented the second straight month of improvement. Meanwhile, sales of new homes dipped 0.6% in May, continuing a trend of fairly flat months so far this year, according to data released by the Commerce Department.
Don’t get too excited – it’s still too early to say the housing market bottomed out, analysts and economists say. Distressed properties still account for about a third of all sales, and 29% of sales were to first-time home buyers, who are currently benefiting from an $8,000 tax credit.
The sales trends are telling. “You’re not really seeing a lot of move-up buying,” says Richard F. Moody, chief economist and director of research at Forward Capital, LLC. “There are so many vacant homes and so many foreclosures that [there’s] not the normal trade-up pattern that you would have traditionally seen,” Moody says.
Housing prices fell nationwide during the first quarter, according to Standard & Poor’s Case-Shiller Index. The decline appears to be slowing: in February and March, the annual rate of decline did not set a new record, but home owners should take little solace in those numbers. “Based on the March data… we see no evidence that that a recovery in home prices has begun,” David M. Blitzer, chairman of the Index Committee at Standard & Poor’s, said in a statement.
All of this less-than-terrible news has left analysts cautiously optimistic that much of the country will start to see housing prices rise sometime in the next year or two. Looking at the nation as a whole, today through the spring of 2011 may be the window for those looking to buy a house at the bottom of the market, says Gary Hager, president and founder of Integrated Wealth Management, a New Jersey-based financial planning company.
A few markets where the housing crisis started earliest have already shown signs of bottoming out. Early-suffering cities like Denver and Boston are now seeing slower declines in home prices, which could indicate they’re already poised for a comeback.
And in some areas, buyers have seized on rapidly falling prices. Existing-home sales rose 9% in the Midwest in May, according to the National Association of Realtors.
“There will be regional differences in the turnaround,” says Maureen Maitland, vice president of index services at Standard & Poor’s. “Most economists I talk to are expecting the beginning of the turnaround to be sometime next year,” she says. However, she added, “the last market may not turn around for two or three years.”
For those hoping to buy at the best possible price, we’ve got a list of five cities where home prices may still have farther to fall. But keep in mind, getting a house at a discount is still not necessarily a house you can afford.
“In light of the housing market boom and bust, consumers should feel very comfortable financially” before deciding to buy, says Lawrence Yun, chief economist for the National Association of Realtors. “They should not try to overstretch their budget to get their dream home.”
1) Detroit
Housing prices fell 4.9% in Detroit in March, according to the latest reading of the Case-Shiller Index. That marked the city’s largest monthly decline since January 1991, when S&P’s backlogged data begin. Houses in Detroit are currently selling at 1995 prices – and with prices still falling so fast, it’s hard to say when the city will rejoin the 21st century.
“Detroit is Detroit because of the auto industry,” says Maitland. The whole Midwest is hurting from car companies’ woes, but Detroit is hurting the most.
2) New York City
Anyone who was hoping to see Wall Street suffer from the financial crisis can relax. New York may have avoided the nationwide implosion in home prices early on, but the city saw its largest-ever monthly decline in March, at 2.5%.
“New York may not be out of the woods,” Maitland says. “Because of what’s going on with the financial markets and the layoffs on Wall Street, New York may be one of the last places to turn around.”
3) Phoenix
Home prices in Phoenix have fallen 53% from their peak in June 2006, and the 2009 data suggest they’ve got farther to go. In March, prices in Phoenix fell 4.5%.
The Southwest has been one of the hardest-hit regions in the mortgage crisis. The region still faces a glut of recently-built homes.
“In Phoenix, you had some of the worst excesses,” in terms of overbuilding, Moody says. “The surplus of houses is so great that it could take two or three years” for prices to turn around. However, a steady influx of new residents into the region suggests the long-term prospects for the market are sound, he says.
4) Portland, Ore.
In the Northwest, median home prices are down but they remain above the national average. Portland’s prices fell 2.1% in March. Home prices in Seattle were down 2.0% for the month.
“Portland’s still going down,” says Dave McCarthy, president and chief executive of Integrated Asset Services, a real estate valuation and asset disposition and management company that collects data on the housing market.
The city “has remained pretty strong but they’re starting to feel some of the effects,” he adds.
The local labor market may be playing a role, Moody says. Portland’s unemployment rate was 11.6% in April, according to the Department of Labor. That’s well above the national average for the month (8.9%).
The Pacific Northwest bubble was among the last to burst, which could mean the market will be among the last to recover.
5) Minneapolis
Housing prices in Minneapolis fell 6.1% in March, the largest monthly decline of any metro area since data tracking began in 1987.
More than half of all March home sales in Minneapolis were due to foreclosure or short-sale activity, according to the Federal Reserve Board’s Beige Book, which gathers information on regional economic conditions. Foreclosed homes tend to drive prices down because “the bank’s best interest is to get the asset off their books” as quickly as possible, Maitland says.

Making Your Home More Affordable ( In Theory)

The Making Home Affordable program has just released a statement today saying that they will now refinance any Fannie Mae and Freddie Mac loans with a Loan To Value Ratio of 125%. This is only open to eligible homeowners with loans backed by them and begins on September 1st. The LTV limit was formerly 105%, and this opens up doors for millions of homeowners to take advantage of low interest rates even though they have no equity. Those homeowners with private investors holding the loans are still out of luck for the time being.

AND REMEMBER - ONLY 12% of all eligible loans that are currently be reviewed by the lenders are being approved!


Written by:
Nick Shivers

Banks Defrauding Banks

In short sale negotiations, we often run into a very difficult situation when there is a 1st and 2nd lienholder on a property: The 1st agrees to provide a small sum to the 2nd from the proceeds of the short sale, but the 2nd tells us that they will not agree to release the lien unless they get thousands more. The 1st refuses to provide any additional funds and tells us that they don't care where the money comes from for the 2nd, but it isn't coming from them. The seller is broke, the buyer wants a bargain, and consequently the property cannot be sold without the 2nd getting more funds. If the purchase price increases, the funds to the 1st increase, but the amount for the 2nd stays the same. No deal = Foreclosure.

These funds have to come from somewhere, and the 2 lenders are asking us to work within some very challenging and grey areas. We work for the seller and we need to get the home sold, so this requires creative solutions and, very often, financial sacrifices on our part to get it closed. If only the lenders could be cooperative and honest with each other to get these off their books.

The Mortgage Industry's 'Shadow Inventory

The Mortgage Industry's 'Shadow Inventory'

Due to our extensive experience with handling short sales, we encounter a wide variety of interesting situations involving lenders and their distressed properties. Some are surprising in a good way, but others are just surprising. Especially in the $500k+ end of the market, we have recently seen some unique situations that beg the question: What are the lenders up to?

A client for whom we had listed a short sale called us a week or so before his auction date saying that he no longer wanted to wait for the sale to go through and that he wanted the bank to take the home back and file bankruptcy. Complying with his wishes, we informed the prospective buyers that this sale was not going to go through and that we would soon cancel the listing. Through no action of ours, a curious thing happened: The bank did not foreclose, they postponed the date 30 days. Normally our sellers want us to postpone their auctions so that we can continue negotiating the short sale, but this was a unique situation. He was upset at us, thinking that we had done the postponing, but we let him know that this was done directly by the lender. What's their motive here?

Some of our clients have not made mortgage payments in a year, two years even. No auction date, no foreclosure. To foreclose or not to foreclose is usually a question based in math for the lenders when considering a short sale. They look at what is the most cost effective action to take that helps their bottom line. But to delay foreclosure, or not even start the process for certain higher end properties seems to reveal one consistency: Just because the lender forecloses doesn't mean that getting it off their books is going to be inevitable or timely. Few homes are bought at auction, so most go back to being bank owned. And they may continue to own it for a while...

The 'Shadow Inventory' is a nice way of describing the homes that the banks take back but have not listed for sale. The numbers are staggering, with RealtyTrac estimating it at over 600,000 homes nationwide. Clearly, if they listed them all at once, inventory would skyrocket and prices would spiral down. On the other hand, not listing them temporarily and artificially inflates prices, which is manipulating the market.

So perhaps the lenders are onto something. Don't foreclose on valuable homes and at the same time, drag your feet when considering short sales. Anyone that's attempted to negotiate a short sale or loan modification knows that the red tape and time line are enough to make you scream. If the big picture for them is really to let delinquent homeowners stay in these expensive homes, waiting for the inventory to decrease and prices to rebound, they must have a math equation at the heart of it. Perhaps that's because they are collectively controlling the market's 'Shadow' and can imagine and create the future by doing so.
Below I have included the article from the San Francisco Chronicle.

The San Francisco Chronicle:
Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources. And foreclosures, which banks unload at fire-sale prices, are a major factor driving home values down.
“We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market,” said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. “California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You’d have further depreciation and carnage.”
In a recent study, RealtyTrac compared its database of bank-repossessed homes to MLS listings of for-sale homes in four states, including California. It found a significant disparity - only 30 percent of the foreclosures were listed for sale in the Multiple Listing Service. The remainder is known in the industry as “shadow inventory.”
The number of foreclosures is not going to decrease any time soon. Sean O’Toole, Founder and CEO of ForeclosureRadar.com, told me that out of the 9 million mortgages in California, 2 to 3 million are upside down, which means their houses are worth less than what they owe on the bank. On top of that, anywhere from 700,000 to 900,000 households have stopped making payments and somewhere around 250,000 are scheduled to be foreclosed.
This adds up to a staggering number: a total of 3 to 5 million homes, one quarter of the 12 million households in California, are going to flood the market very soon. Nationwide, there is a two-year supply of unsold homes, twice what official statistics estimate.
To put it simply: banks are limiting supply in order to keep inflating the bubble. Keeping properties off the market makes sense for two reasons: it allows banks to engage in another round of brazen ripoffs by selling at least some of their properties at artificially high prices to a new wave of sucker investors (many of which are first-time home buyers). But more importantly, it allows the banks to avoid recording a loss on their balance sheets, making them look more profitable then they really are
It looks like the banks are all in on this racket together. Earlier this year, the industry had accounting rules changed to make this kind of market manipulation possible (meaning, profitable.) That’s what those new “mark-to-model” accounting rules back in April were all about. Instead of having the market determine prices, the changes allowed banks to value their assets based on a future projected worth to be determined by the banks themselves.
The change was pushed through with an aggressive lobbying campaign by the financial industry. For a measly $30 million in lobby fees, banks inflated their worth by tens of billions of dollars, instantly. Wells Fargo said the change boosted its capital by $4.4 billion in the fist quarter. In the second quarter, it is expected to increase banks’ earnings by an average of 7%.
It might be legal now, but it’s still fraud and flagrant market manipulation.
Here’s an account by the WSJ of how it went down:
The rules had required banks, securities firms and insurers to use market prices to help assign values to mortgage securities and other assets that don’t trade on exchanges — to “mark to market.” But when markets went haywire last fall, financial firms complained that the rules forced them to slash the value of many assets based on fire-sale prices. That contributed to big losses that depleted their capital and left several of the nation’s largest firms on the brink of failure.
Earlier this year, financial-services organizations put their lobbyists on the case. Thirty-one financial firms and trade groups formed a coalition and spent $27.6 million in the first quarter lobbying Washington about the rule and other issues, according to a Wall Street Journal analysis of public filings. They also directed campaign contributions totaling $286,000 to legislators on a key committee, many of whom pushed for the rule change, the filings indicate.
Rep. Paul Kanjorski, a Pennsylvania Democrat who heads the House Financial Services subcommittee that pressed for the accounting change, received $18,500 from coalition members in the first quarter, the second-highest total among committee members, according to Federal Election Commission records. Over the past two years, Mr. Kanjorski received $704,000 in contributions from banking and insurance firms, the third-highest total among members of Congress, according to the FEC and the Center for Responsive Politics.
The one obvious connection that is not being made is that this change in accounting, linked up with the shadow real estate inventory, is the shady base supporting our entire economy. Without the new rules, banks wouldn’t be able to pad their books in order to appear profitable. And without fudging the numbers, banks would never pass Geithner’s “stress test” or ever hope to to appear even slightly solvent.
It’s a twisted sort of logic, but it’s legal. It’s also very frightening. To think that all these empty homes I see around me are what’s keeping the US economy from total meltdown… If they had For Sale signs on them, the economy would tank even further. For now, these zombie homes don’t officially exist.
Ain’t the free market great?