Agent's Advantage Indiana

Working an FHA Short Sale

Thu, 04 Aug 2011 20:42:06 GMT

An FHA Short Sale is now one of the easier and most predictable processes around in the Short Sale world. It does require a little adjustment from the usual procedure.

Normally, first a Buyer is put under contract and then the process is started to qualify the Seller for a Short Sale. Often the first offer is not accepted and there is a lengthy process to find out what the Lender will approve. The Lender’s BPO is not done until that first offer is made, so it is often hard for an Investor or an end Buyer to know whether it is even worth making an offer. The process could be subject to the whims and experience level of the loss mitigator assigned to the file. Each Lender has its own set of rules and requirements. The process is long, complicated and uncertain.

Enter the streamlined FHA process. First, at least one owner has to be living in the home to qualify for an FHA Short Sale and the owners must be at least 31 days delinquent. By maintaining a resident owner in the property it is expected to remain in better condition than homes that are abandoned before foreclosure.

Next, the Seller must be approved into the Pre-Foreclosure Sale Program for hardships typical of most Short Sales. Once that form is received the Lender will order an “as is” appraisal and will use that number to draft an approval letter to the Seller on the HUD 90045 form. The form will specify the date by which the property must be sold in order to avoid going back into the foreclosure process.

The Seller will have 90 days to sell the property. For the first 30 days the maximum discount the FHA will allow will be 88% of the “as is” appraised value. There are strict rules as to which sales expenses HUD will pay on the Seller’s behalf. At 60 days the allowed discount will be 14%, and at 90 days the discount maximum will go to 16%. If the sale is not closed within that 90 period the Seller will lose the $1000 incentive that HUD will pay toward the Seller’s expenses and the Seller may be put back into the queue for a foreclosure. The Lender will also pay for up to $2500 for a second lien holder, but the first $1000 of that will come out of the Seller’s incentive. The Seller may pay up to $1000 of the Buyer’s expenses and forfeit the incentive in order to attract a Buyer. Sellers must also pay their own portion of property taxes, HOA fees and other liens or use their incentive for this purpose.

For the Investor the advantage is that the approved sales price and discount is known up front to take much of the guess work out of the decision whether to make an offer or not. The process should be faster than most Lender proprietary Short Sales. A disadvantage is that an Investor who plans to flip the property has limited room for profit when there is a second set of commissions and fees on the B to C sales side and has no equitable interest to begin marketing for an end Buyer until their offer is accepted by both the Seller and the Lender.

Investor and Agent: Common Goals and Interests

Wed, 03 Aug 2011 19:25:06 GMT

Investors are not always easy to work with from the viewpoint of the Agent. On the surface their goals are quite different. The Investor wants to maximize profit and take possession of property at the least possible expense. Agents want to maximize commissions and get the highest value possible for the Seller.

On second glance, the goals are not all that different. Where those interests intersect is in helping distressed Homeowners to make the best of a bad situation. Very often, an Investor will step in to a home that has been neglected because of lack of finances to make repairs when no end Buyer has been willing to take the property on. Sometimes a fairly simple rehab project is all that is required to make the home attractive to an end Buyer after an Investor has worked a little rehab magic. In a case of distress the common goal is to get a result that removes the Homeowner from a bad situation, gets the Lender out from under a losing property, makes the Investor a little profit and the Agent a commission, and provides an end Buyer with a good home at a reasonable price. By working together cooperatively an Agent who specializes in Short Sales and the Investor can help to get a distressed property back into productive use and provide a multiple win for all concerned.

Common interests also come in to play with bank owned sales. While the GSEs and Lenders will give preference to end Buyers, the fact is, the vast inventory of REOs will not be moved without the participation of Investors. Investors often work in bulk to move many units at one time. They often have the ability to scale projects to work on several deals at the same time whereas with individual Homeowners the purchase is one and done. Often Homeowners do not have the cash needed to rehab a foreclosed property while the Investor has private and hard money resources that can be put to one or more rehab project at a time.

The needs are growing in the rental market for Investor-Landlords. As much as we would all like to see everyone’s American Dream to include purchase of a single family home, the fact is, that dream will be on hold for many Americans for many years. A growing number of families will be renting homes and apartments for the foreseeable future. Helping the Investor-Landlord to find one or more properties that can be rented for good cashflow is a growing niche for Agents to explore.

Why Robo-Signing Crisis May Never Be Resolved

Wed, 27 Jul 2011 18:03:11 GMT

A Reuter’s investigative report reveals that during the heat of the housing boom between 2004 and 2006 more than half of all new mortgages were securitized and bundled into trusts that were owned in pools by large investors such as insurance companies, public retirement funds, and major public institutions. During that time many of the major lenders, including the largest subprime lender at the time, Countrywide, often failed to provide the note and mortgage documentation along with the assignment of the debt to the trust. Many of the original documents were shredded and simply no longer exist.

Sheila Bair, before she left office as head of the FDIC, called for an audit of such records. Others have been reluctant to take up the call for an audit fearing that the results would put the mortgage industry in a tailspin.

The shady state of documentation for so many of the loans from the mortgage boom period has led some mortgage holders to forge and otherwise create new documents to present to the courts to justify foreclosure. This documentation problem has certainly slowed down the foreclosure process, but it has not stopped it cold.

A second study by the Associated Press confirms that robo-signing goes on unabated despite state and federal investigations and an agreement in April with 14 major lenders promising that the problems that led to the document irregularities would be cleaned up. County officials in at least three states have reported that documents with known robo-signer names have been filed in the last several months. These documents contain the same name written in multiple handwriting styles.

The problem is not confined to foreclosure documentation. New loans, refinancing, and assignment of loans have been filed in several states using common robo-signing allegedly forged names and signatures. Some of the suspect signatures include “Linda Green,” “Bryan Bly,” “Marshall Isaacs,” and “Crystal Moore.” These names are on hundreds of recently signed documents despite evidence that these individuals are no longer employed in the banking industry. False signature on mortgage documents and false swearing of accuracy are illegal and punishable by a prison sentence.

Despite the seriousness of the robo-signing scandal, it appears that no sanctions have actually taken place among the 14 banking industry companies that signed the government consent decree in April. Banking probes continue in at least five states, New York, California, Michigan, Delaware, and Illinois.

What should the Agent do if a client presents documents containing suspect signatures, or where critical documentation such as the note or mortgage is missing? If the client is having difficulty obtaining a Short Sale or a Loan Modification and faulty documentation is suspected, suggest that the homeowner contact their state Attorney General’s office or a local attorney specializing in foreclosure defense. When pressured, a lender with highly suspect documentation is likely to settle for a solution short of foreclosure rather than to risk a foreclosure backfiring in court.

The Plusses and Minuses of Strategic Default

Thu, 14 Jul 2011 22:51:33 GMT

The social stigma surrounding strategic default is beginning to break down as the pain of the last recession continues to drag on into a third year and a double-dip recession is threatened. People see their friends and neighbors move on with their lives following a strategic default and it causes others to wonder if it would be the best move for their own family situation. Sometimes, it is the best, most strategic move; sometimes it only brings pain beyond any initial calculation. The moral of the story is: understand the risks and benefits before taking the dive into strategic default.

If in your own quest for the best moral and ethical path, you are comfortable that strategic default is in the best interest of your own family, move on to consider the plusses and minuses.

There are some benefits to strategic default: It may make available for up to a period of two years the money that would have been spent making mortgage payments to save or invest in other ways. There is an almost instant sense of relief that good money is no longer being sent after bad. For at least a little while it seems as if you are able to move on, where before you felt trapped.

There are some very real negatives to consider, and some potential land mines that may not be felt for years after the strategic default:

1. Expect an immediate hit to credit rating. Expect as much as a 200 point decline in credit score. You may be able to negotiate with the lender to remove the late charges for the many months that it takes to negotiate the default. If not, these late charges against the credit record could go on for months and even years. If your business and family life depends heavily on obtaining new credit, then strategic default is not a good idea as credit will be impaired for at least six months up to as much as ten years.

2. Expect the Lender to sue for deficiency. In more than half the states the Lender is allowed to sue for deficiency and in most cases they win. Even in the states with rules against deficiency judgments the rules often do not apply to investment, non-owner-occupied properties. The protections may be voided if the mortgage is not the original one or if there is a home equity line of credit attached to the property. There are so many exceptions that it is in the end very likely that the Lender will pursue a deficiency judgment, particularly in the case of someone who strategically defaults.

The deficiency may not happen in the year or two after the default. The Lender may well wait a few years until the former property owner has had some time to rebuild resources. That’s when the Lender’s collection agents will swoop in to exercise the judgment.

Those who may choose to exercise a strategic default must first make sure that current and future resources are protected by having most assets held in and owned by a trust. If you do not own those assets, then they cannot be taken from you later in a judgment by a creditor or the IRS.

3. The third bad effect of a strategic default is the 1099 that will be filed for any forgiven amount of the loan. If the strategic default is for a homestead it may be possible to get this amount forgiven by filling out the appropriate IRS paperwork. If, on the other hand, the property does not qualify as a homestead and the defaulted owner has assets, then it may not be possible to get an exemption by virtue of insolvency. Again, by protecting other assets inside a trust, it may be possible to shield against a large tax bill for a forgiven loan.

It is vital that anyone thinking about executing a strategic default consult with a local tax attorney and accountant in get the best possible advice on the consequences that will apply in a given state and personal situation.

The New Trend to Watch in Real Estate: Rentals

Tue, 12 Jul 2011 15:40:43 GMT

The housing crisis is creating millions of renters out of individuals who were formerly home owners. The economic crisis has also delayed the move-up of renters into first time homebuyers because of consumer uncertainty about job stability and the difficulty of qualifying for loans. According to Zillow’s Stan Humphries, 1.2 to 2.2 million individuals are “transitioning out of homeownership and into the rental market” as a result of foreclosure or other life circumstances. Marcus & Millichap estimate the number of new renters being pushed out of home ownership to be around 2.5 million.

The National Association of Realtors® estimates that it will take the average borrower 14 years to save the 20% down now typically required for a qualified residential mortgage (QRM) under the Dodd-Frank Act. That will significantly delay new entries into home ownership.

The new trend toward renting is already having an effect on increasing rental rates and decreasing vacancy rates. Marcus & Millichap’s 2011 apartment outlook is very bullish on the rental marketplace. The first quarter of 2011 saw vacancy rates plunge 180 basis points to 6.2% year over year. Demand for rental units grew by 242,000 units, and yet only 74,000 new rental units were added to the marketplace during the past year. Effective rental rates grew by 2.3% year over year through the first quarter of 2011 to average rents of $1036, up from $962/month.

Conservative analyst, Mike Larson, however, warns that the growth in the rental marketplace is exploding too fast as the result of the easy availability of private investment capital. Many over-priced deals are being snapped up by hungry real estate investment trusts (REITS) leading to a rolling bubble of over-priced projects throughout the country. Larson advises investors to dump all REITS now because they have become severely over-priced.

One Tucson developer, Steve Quinlan of Miramonte Homes, believes the next big thing in rental housing will be in luxury rentals. Quinlan attributes the sudden surge in interest in large and luxurious apartments in the large number of former homeowners who strategically defaulted. These individuals bailed on their mortgages not because of financial need, but because of economic advantage. With the exception of the default on a home, their credit records are generally stellar. Based on the demand from former homeowners, Miramonte is building small luxury developments in several markets where the units are large (3 and 4 bedrooms), have two car garages and private backyards, much like the single-family residences that were abandoned by these potential renters.

The new rental trends are certain to spark new areas of opportunity for Agents who are tuned in to what is going on within their own local markets.

Helping Homeowners With Under Water Mortgages

Tue, 12 Jul 2011 15:36:06 GMT

Depending on your area of the country, from 10% to 60% of all homeowners have mortgages that are more than the value of the home. Nationally, on average, around 25% of all mortgages are higher than the home value. In the past there was very little a traditional real estate agent could do for this group. Now there are a few options, if the Agent is able to think outside the box a little. Not all of these options will yield a commission for the Agent, however, the Agent who proves knowledgeable and helpful in solving an under water mortgage issue is more likely to future business from that homeowner.

1. Loan modification. A homeowner who is having trouble paying their mortgage has the option of asking the lender for a loan modification. Refer the client to a non-profit housing counselor to determine if a modification is feasible and to assist in preparing the paperwork. Most modifications involve changing the loan to a low fixed rate mortgage and occasionally involve a principal reduction. Sometimes back payments can be put off to the end of the loan.

2. Short Sale. When a loan modification does not work, or in not appropriate for the homeowner’s circumstance, then a Short Sale may be necessary. Many lenders are showing greater eagerness to settle a delinquency with a Short Sale than to foreclose. Paperwork is becoming standardized, timeframes are in many cases becoming shorter, and loss mitigators are becoming more cooperative about settling for less than the full mortgage.

3. Buying the note. Some investors are finding it faster and less complicated to simply buy the note from the lender, and then to either negotiate a loan modification with the homeowner or to foreclose and resell the property to someone else. Lenders will often settle for 20-60% on the dollar for a note deal.

4. Rental. Owners who need to move, are unable to sell, and have the resources to hold on to the property, can consider renting out the under water property and waiting for the market to improve before selling. A variation is “rent to own” or “lease option” where the tenant pays a non-refundable down payment and has the first option to buy the property at a set price for a defined period of time.

5. Mortgage assignment. Many owners cannot afford to hold on to a property that is under water long term. In order to buy another property they need to be released from the ownership of the first property. This can be accomplished if a buyer can be found who will agree to continue paying the existing mortgage in exchange for the deed. While there is generally the possibility that the lender will call the loan due as a result, the reality of the situation is that few lenders will do so as long as the mortgage continues to be kept current. As long as the mortgage is at a reasonable interest rate and is not more than 10-20% above current market value, it is relatively easy to find buyers who have the income and financial stability to qualify, but would not otherwise be able to qualify for a traditional mortgage in today’s tight lending environment.

In most of these scenarios the Agent who works as a “matchmaker” between the distressed homeowner and a willing renter or buyer should be able to qualify for a fee or commission.

Negotiating: Knowing When to Escalate

Tue, 12 Jul 2011 15:34:43 GMT

In order to deal with more Short Sales and Deeds in Lieu of Foreclosure the major lenders have vastly increased their teams in loss mitigation within the past year. The level of training and general ability also greatly varies from lender to lender and employee to employee. Dealing with this variation in quality makes the negotiation process a challenge.

While we strongly recommend that it’s more effective to let our team of experienced negotiators handle the variable mob of new people on the lenders’ teams, we know that many of you like to negotiate your own deals. Here are a few tips to help you decide when to keep working with the loss mitigation specialist you’ve been assigned, or to buck the case up to the next level.

Each lender has a specific timeframe for each step of the Short Sale process. Find out what that normal timeframe is up front and track it for each case you do with that lender. If the response time goes past that expected date, send an email with a copy to the supervisor or the head of the loss mitigation unit indicating that the expected time for response has been passed and request that they get back to you immediately on the case.

Sometimes a negotiator will try to reach their designated lender contact several times with no response. In this case, contact the general information number for the Loss Mitigation or Short Sale department and ask if there is some reason for the delay such as the file being reassigned or closed without your knowledge. It is not unusual for lenders to close files without telling the homeowner’s negotiator. The most frequent reasons for closing the file are lack of documentation or a decision on the part of the lender that the offer price is too far apart from the amount the lender wants to receive. If those situations can be rectified, then you have a case for reopening the file.

If a lender’s team member is not giving the response that you know is normal policy or practice for the lender, or the loss mitigation team member is consistently late in giving a response, buck the concern up to the team supervisor or department head. If there is a deadline for foreclosure just weeks away, or a closing that is drawing near and you do not have what you need to move forward, then it is time to express your concern to a higher authority.

Whenever possible, of course, it is best to gain the trust and respect of the person originally assigned the Short Sale case file. Be consistent, timely, and unfailingly trustworthy and your cases will win approval faster and more frequently.

Getting the Seller On Board with a Short Sale

Tue, 12 Jul 2011 15:28:14 GMT

There is no question that working with homeowners in distress takes a particularly compassionate bedside manner. It also takes an Agent who is willing to “tell it like it is” in a way that will break through the shock and denial that often haunts a homeowner who has an underwater mortgage and needs to sell.

Here’s how the scenario so often plays out: The homeowner in an average neighborhood knows that a neighbor sold several years ago for $240,000, and Mr. Homeowner expects that he will make the same. He contacts an Agent who informs him that houses in the neighborhood are now selling for a maximum of $180,000, a 33% reduction in value. By July 2011 Mr. Homeowner’s mortgage is down to $201,000. If he sells at $180,000 he will owe about $18,000 in sales expenses and closing costs and another $21,000 in mortgage expense. There is no way he can bring $39,000 to the closing table.

If Mr. Homeowner can afford to hold on for awhile, he will be tempted to list at $220,000 and the house will languish on the market for months with little or no activity. That type of listing is generally not worth the Agent’s time, unless it is likely that the over-priced, unrealistic listing can soon be turned into a more productive Short Sale.

If Mr. Homeowner is financially distressed, or must move because of a new job elsewhere, he will eventually come around to the reality that the house must be sold as a Short Sale. It is likely to take some hand-holding to get Mr. Homeowner through the grinding process of organizing all the hardship documentation and arranging for a professional negotiator to work on behalf of Mr. Homeowner with the lender. That’s where the Agent’s expertise and ability to build rapport with the client will be needed.

The Seller’s Agent also needs to be able to explain to Mr. Homeowner why a Buyer offer that is lower than the area market value may be in their best interest. Often it is time-consuming to find an end Buyer who is willing to stick through the Short Sale negotiation process. Therefore, the best Buyer to allow the negotiation process with the lender to begin is an Investor-Buyer, who needs to be compensated for taking the time and potentially tying up some resources to get the Short Sale process started. That Investor-Buyer needs to be compensated for their time, effort and the risk that they are taking in the Short Sale. There must be some room for negotiation, and therefore the first offer is going to be something like 40-60% of market value. The approved Short Sale will probably be in the 15-20% range off of market value, but could be more if the lender is eager to get the property off the books.

Getting the homeowner to understand the practical reality of how a Short Sale is negotiated is one of the harder jobs for the Selling Agent. Homeowners need to understand that distressed homes are valued less than non-distressed property in the same neighborhood. Often selling to an Investor is the fastest way to get the distress situation cured so that the homeowner can move on.

Are Latest Case-Shiller Housing Stats a Reason for Optimism?

Tue, 12 Jul 2011 15:27:03 GMT

A month after the Case-Shiller home price index hailed the official start of a double-dip recession in the housing market, the housing index showed an uptick. The twenty market index showed a .7% increase in prices while the 10 city index showed a .8% increase, seasonally adjusted. Both indexes remain below their 2010 levels, the 20 city index by 4.0% and the 10 city index by 3.1%. There were new lows posted for several cities including Charlotte, Chicago, Detroit, Las Vegas, Miami and Tampa. On the other hand, Washington, DC and San Francisco each saw sizeable jumps in home values between March and April.

Robert Shiller believes there is some cause for optimism in that momentum is on the side of seeing a bit of a rally during the summer months. Still, the market is weak and in the doldrums. Don’t expect any rapid turnaround of home prices.

Agents should take some comfort in the seasonal thaw of the housing market and should make the most of it. The fact that there are still so many distressed homes on the market is a good indication that there will be many months to come of depressed prices and lower sales levels among non-distressed homeowners.

The significant shift that we see in the recent statistics is that instead of seeing a huge surge of REO properties on the market, the lenders will be making a much more concerted effort to resolve distress situations through loan modifications and Short Sales. When distress is solved short of foreclosure it saves time and money for lenders. Values do not sink as far when homes are sold via Short Sale compared to those that are repossessed by lenders and eventually sold as REOs.

For Agents who have been avoiding getting into the Short Sale market, now is the time to reconsider. Lenders are streamlining the Short Sale process so that in many cases these sales are taking place within 60 to 120 days rather than taking the six months to one year that has been common in the past.

While it still takes an experienced Negotiator to get the most out of the deal, it is possible for Agents who specialize in Short Sales to do very well in this climate of greater lender support for this solution to the foreclosure problem. There is also great satisfaction in knowing that you are helping many who are in distress situations that are beyond their control.

Are We Headed to Another Recession?

Tue, 12 Jul 2011 15:11:14 GMT

Many conservative economists are raising the warning signals that the U.S. economy may be headed into troubled waters again just two years after the end of the last recession. Normally, we see about five years between economic cycles. The relatively weak recovery from the recession of 2008 has caused some analysts to become concerned that the current rebound will be cut short.

Here are some of the reasons for sounding the recession alarm, according to Money and Markets analyst, Mike Larson:

--Personal spending in May gave the worst performance in 10 months.

--The Dallas Federal Reserve Bank showed the worst total for manufacturing in 11 months, down 17.5% in May. The New York and Philadelphia Federal Reserves also showed tanking manufacturing indexes.

--Home prices are hitting historic lows in many cities, and home sales continue to be anemic, despite the slight seasonal uptick.

--The Conference Board’s consumer confidence index fell in June to 58.5%, down from 61.7% in May.

--Banks and companies continue to hoard cash rather than spending on new loans, capital improvements or hiring.

--The government continues to stalemate on the debt crisis. The federal government’s plan to under-write the debt crisis did not work.

--The value of the dollar continues to sink as our debt partners begin to lose faith in the ability of the U.S. to contain its debt crisis.

In addition, the economic growth rate, according to Goldman Sachs, is sinking. Initially, it forecast a 4% growth rate for the U.S. economy in the second quarter of 2011; now it expects the rate to be half that. Macroeconomic Advisors expected the second quarter GNP to be at 3.5%, and now it expects it to be 2.1%. The Federal Reserve Bank has downgraded its annual projection from 3.9% down to 3%. Federal Reserve chief, Ben Bernanke, confessed this week that the “headwinds” may be stronger than they originally thought.

While few economists predict an out and out recession, many advise extreme caution. What should the prudent Agent or Investor do? Those who buy should buy low and expect a little more price volatility before things stabilize. Professionals in the real estate market should look for value for their clients. Ultimately, the more distressed property that can be brought back to performing status, the sooner the marketplace will heal itself.

Three Arguments Against Agent-Negotiated Short Sales

Thu, 16 Jun 2011 15:37:19 GMT

Most Agents working with distressed homeowners feel very protective of their client’s situation and want to do everything possible to make sure they get out with the best possible results. Some Agents feel that the best way of protecting the client is by controlling every aspect of the transaction, including the negotiations with lenders.

Whether you use an outside professional negotiating service, or you do the negotiating yourself, it’s important to keep track of results and to come up with a new plan if the process is not leading to consistent successes.

--Take a look at the number of Short Sales you have negotiated altogether. Unless you have personally negotiated dozens of them and have worked with the loss mitigation teams of most of the major lenders and servicers, you may not have enough experience to know the hidden negotiating traps.

--Count the number of Short Sales successfully completed against the total number of Short Sales negotiated. Is your success rate 66 to 90%? Unless you are closing two-thirds of your Short Sales or more, your client would be better served by a professional negotiator with a better success rate.

--Tally the amount of time you spend marketing deals where you are not negotiating a Short Sale versus the amount of time you spend on marketing and finding a buyer for the deals you do negotiate. Are you short-changing the marketing process by spending the time on the phone with a loss mitigator or in front of a computer screen filling out Equator forms?

The first argument against the Agent-Negotiator is one of effectiveness. Most Agents do not do enough of these transactions to have the kind of success rate that clients deserve when they entrust the Agent with a Short Sale.

The second argument against the Agent-Negotiator combination is one of priorities. The best and highest use of an Agent’s time is in marketing listings and finding buyers. That’s at the heart of professional real estate. Short Sale negotiating is more of a banking or a legal function and is more suited to someone with mortgage lending or legal experience.

Remember, if you try to negotiate yourself and you make a mistake, the results can be devastating for a family’s financial well-being. There are real liability issues in negotiating Short Sales. Are you sure that you are compliant with the FCC’s MARS (mortgage assistance relief services) regulations, and with the many different state and local compliance requirements? Are you familiar with all the new timetables and compliance issues that will soon be required for Fannie Mae or Freddie Mac Short Sales?

The bottom line is, don’t risk the liability of negotiating Short Sales on behalf of your clients unless you and your brokerage are compliant, effective and able to fulfill completely your real estate-related functions first and foremost.

Dealing with the Ornery Seller

Tue, 14 Jun 2011 13:21:13 GMT

We were reviewing some of the distressed properties in the area that don’t currently have Agent representation with one of the more experienced Agents in our market and we came across one homeowner the Agent wouldn’t work with because the owner is “just plain crazy.”

There is good reason to avoid individuals who are so alienated from society that they come to the door with a shotgun, or they are so reclusive they won’t even open the door. Some homeowners, unfortunately, are mentally ill or so depressed by their situation that unless a guardian is assigned to take care of their interests, nothing can be done to help them save the house.

Even some less extreme owner situations may not be worth the Agent or Investor’s time. Homeowners must show a certain amount of responsibility for filling out paperwork in a timely manor. They must be willing to follow the Agent’s advice on complying with the process. They will need to be willing to allow home inspectors, BPO Agents, other Agents and prospective Buyers to walk through the property with a 24 hour notice. The Homeowner who will not participate even in these limited ways with the efforts to save the home from foreclosure is probably not going to make a good Short Sale client.

On the other hand, almost all homeowners facing default are going to be in a state of depression, confusion, anger or concern. There are several things that a Short Sale Agent should try before giving up on the average distressed Homeowner who needs a Short Sale. It is worth some effort to get people who have genuine hardships past that state of confusion and on to a potential Short Sale. Here are some ideas that may help to take the edge off the ornery seller:

1. Identify the distressed owners in your area as early as possible and introduce yourself personally to them. The sooner you introduce yourself to the potential Short Sale seller as someone with the knowledge and experience to help them with a viable solution to foreclosure, the more likely you will be to get the listing. It will probably take three to seven contacts using a variety of marketing methods for your name to float to the top of memory once the Homeowner is finally ready to admit that they must sell in order to avoid foreclosure.

2. Be truthful and up front about the Homeowner’s options. If they have not sought the advice of a non-profit housing counselor or they might be able to qualify for a loan modification, give them the information they need in order to explore these avenues first. The Agent who is most helpful in providing all the options up front is the one the Homeowner will remember once the decision to go for the Short Sale is made. This is an important trust-building step that takes time, but in the end will solidify a relationship that is most likely to steer the Homeowner successfully through to closing.

3. Once the Homeowner is comfortable with the Agent and the Agent fully understands the Seller’s situation, then the details of what the Homeowner can expect can be laid out as necessary. Details like pricing, what to expect from the BPO, what may happen in the negotiations given the details of the lien-holders involved, what the Investor-Buyer’s expectations will be, all the steps required in the process—all these details will be confusing and overwhelming. Go over them over a period of time as each situation comes up answering all the Homeowner’s questions and concerns. If trust has been properly built, then the Homeowner will recognize that the Agent is steering the process in a direction that is in the Homeowner’s best interest and the process will go more smoothly.

Fannie Mae Issues New Delinquent Mortgage Standards

Mon, 13 Jun 2011 15:33:01 GMT

Fannie Mae has issued two new servicing guide announcements, SVC-2011-07 and SVC-2001-08 which detail the way delinquent loans are to be handled. These documents provide the guidelines that were announced as part of the Federal Housing Finance Agency's (FHFA) Servicing Alignment Initiative.

The first set of guidelines documents the timeframe for response to delinquent homeowners and compensation that will be offered servicers in order to manage the delinquent file. The timeframes from the day the case is referred to an attorney for foreclosure to the completion of the foreclosure process will vary from state to state and depends considerably on whether the state uses a judicial or non-judicial process. Timeframes on the chart at e-fanniemae.com varies from 120 days in most non-judicial states to 570 days in New York City. Fannie Mae will track servicer performance, making allowances for delays caused by bankruptcy, probate, military active duty, contested cases, etc. Compensatory fees will be required of servicers who get behind the timetable without a reasonable cause.

The second document details delinquency management and prevention strategies to be used by all Fannie Mae servicers. Servicers will be expected to contact delinquent borrowers early and often. The contact strategy is called Quality Right Party Contact, or QRPC. The servicer is to determine the appropriate borrower contact (borrower, co-borrower, or authorized third party), get to understand the issues behind the delinquency, and advise the borrower on foreclosure alternatives and look at all the options that are appropriate to the case before referring the case to an attorney for foreclosure.

Between the 45^th and the 60^th day of delinquency there is to be a property inspection. Other inspections are required closer to the date of foreclosure, especially for abandoned property, or to remain in compliance with state and local property statutes.

There are now strict call center rules for pick up and routing of incoming calls within specific timeframes and specific outbound calling guidelines for collection attempts. The guidelines dictate the number and frequency of calls to be made until some resolution is reached. There are also a Fannie Mae-produced series of letters to send to delinquent clients. Its sample delinquency letters are available to servicers at its e-FannieMae website.

There are additional specific communications to be sent to the borrower just before and after being referred for foreclosure. The borrower can still request a Borrower Information Package to request a foreclosure prevention alternative even after being referred to an attorney for foreclosure. Fannie Mae has designed a standard information packet to be used by its servicers.

It’s important for all Short Sale Agents, Investors and Negotiators to have a clear understanding of what clients are going to be facing when they go delinquent on loans that are underwritten or owned by Fannie Mae. In general, it should mean greater consistency among servicers, less time waiting for a response when we phone in for a client, clearer timelines and greater willingness on the part of loss mitigators to discuss alternatives to foreclosure.

What’s in Fannie Mae’s Crystal Ball?

Thu, 09 Jun 2011 14:16:27 GMT

Every quarter Fannie Mae economists try to project out national housing trends for the next two years based on what is happening this year and has occurred in the past two years. The April 2011 Economics and Market Analysis became available on April 11, 2011.

Actual data comes from a variety of sources: the Census Bureau, Federal Reserve, the Mortgage Bankers Association, the National Association of Realtors®, and other reputable sources of housing data. The projections are those of the Fannie Mae economists and its Mortgage Market Analysis panel of experts.

Here’s what Fannie Mae sees in its crystal ball:

Home sales will increase about 5.7% in 2011 over 2010. In 2012 Fannie Mae economists forecast that home sales will improve by 8.8% and by 5.2% in 2013. Home prices will decline by .9% in 2011 nationwide and will show a modest 2.2% gain in 2012 and an improving 5.3% gain in 2013. By the end of 2011 median new home prices will have declined about $6,300 to around $163,000.

The 30 year fixed mortgage rate will average 5.1% in 2011, and will gradually rise to 5.6% in 2012 and 5.9% in 2013.

In 2011 the percentage of refis to new loans is 40%, while in 2012 the refi rate will drop to 22% and in 2013 be about 23% of the total new loans accepted. Fannie Mae expects ARMs to represent only 6% of applications in 2011, but will climb to 11% of loan applications in 2012 and 13% of the applications in 2013.

There are, of course, some unknowns that could change the housing forecast:

--Very narrow housing finance rules could raise the mortgage rates, limit the options for adjustable mortgages, and lower the number of homes sold.

--The model assumes some continuing improvement in the unemployment picture and slow economic recovery. A change either to slower or faster recovery will impact the housing market.

--A more stringent settlement than expected between the State Attorney General group and the Lenders caught in the robo-signing crisis could delay even further the foreclosure process and delay recovery. On the other hand, if Lenders are required to settle more distressed properties with loan modifications, Short Sales or Deeds-in-Lieu of Foreclosure then fewer new foreclosures will be added to the backlog and the impact on housing prices should not be as long or severe.

Fannie Mae can be expected to consider any of these changes as they occur for their revised quarterly analyses.

Foreclosure is Everyone’s Problem

Mon, 06 Jun 2011 13:46:45 GMT

Many wonder why those who live and work in states that are not heavy foreclosure states should care about the foreclosure crisis. After all, about 78% of all foreclosures occur in only 10 states. Nevada, Arizona, California, Utah, Idaho, Michigan, Florida, Georgia, Colorado and Oregon are the leading distressed property states at this time.

Foreclosure has both local and national impact. Even states with few foreclosures will experience distress within those neighborhoods where foreclosures occur. A 2008 study for NeighborWorks America concluded that for every home that goes into foreclosure their neighbors lose about $5000 in value.

Most communities of any size has seen at least one neighborhood become pock-marked with abandoned and distressed homes. The NeighborWorks American report mentions a study from Austin, Texas, an area that by-and-large avoided the worst of the housing crisis, there were still blocks with vacant buildings that had 3.2 times as many drug-related calls to police, 1.8 times as many calls about thefts, and twice the number of violent calls as blocks that had no vacant buildings. Foreclosure breeds blight and blight breeds crime.

The foreclosure crisis has had a toxic impact on home buying and selling throughout the country. Consumers read about the high rate of foreclosure and the huge shadow inventory and it makes people cautious about putting their own home on the market, even when few of those problem properties exist locally. Consumers are now primed to expect a bargain no matter where they are when shopping for a home. The current slow-down in home sales has been blamed more on lack of consumer demand and the continuing foreclosure crisis than on the current state of the economy or unemployment levels.

The other national impact of the foreclosure crisis that is having a massive effect on home sales everywhere is the tight credit situation. Lending standards are much more stringent in response to the foreclosure crisis. Lenders can no longer afford to take a risk on borrowers with blemished credit records or without income that is consistent and easily documented. As a result, there are fewer qualified buyers of homes throughout the country. The regulation changes under review at the federal level to reform the nation’s housing financing are on course to tighten the credit standards even further. It is possible that next year at this time only 60% of the families that qualified for a home loan last year would still qualify under the new rules.

So, yes, the foreclosure crisis is everyone’s problem. It impacts the masses of people who now have to rent because they can no longer qualify for a home loan. It impacts everyone who plans to sell a home within the next several years and anyone who is looking to buy a home. It impacts every Agent or Investor trying to help distressed homeowners wherever they are located.

Foreclosure and Bankruptcy Don’t Always Wipe the Slate Clean

Thu, 26 May 2011 22:24:49 GMT

One of the myths that distressed homeowners seem to believe is that when they file for bankruptcy, or they let the house go to foreclosure, they will be rid of some of the nasty hangover liens that plague the property. Unfortunately for some of these homeowners, non-payment of a homeowner’s association fee, a HELOC loan or a tax lien may just relieve the problem temporarily. Eventually the lien will come back to life nastier than ever to haunt the former homeowner in years to come.

It is critical that the Agent or their negotiator talk specifically about these additional liens and make it clear what is most likely going to happen to them during the course of a Short Sale and to contrast that with what will happen if they are not addressed and the property goes into foreclosure or the owner files for bankruptcy. In many cases the negotiation that takes place as part of a Short Sale may be the best deal that will be offered for the write-off of large portions of these additional liens.

Homeowners are liable for fees such as the HOA dues until such time as ownership is transferred over to the bank or a new party. These fees cannot be wiped out in bankruptcy. Even if the former homeowner has long since turned over the keys, if the property is sitting in some shadow inventory the HOA may still be accumulating under the original owner.

It is very much in the homeowner’s best interest to have the Short Sale negotiator come to a settlement with the HOA for payment of a fraction of the amount owed. A similar opportunity to have a professional negotiator go to bat for the homeowner may not come along except during the Short Sale process.

Similarly, a HELOC is really a secured consumer loan and it survives the sale of a property in foreclosure or bankruptcy. Having a Short Sale negotiator on the homeowner’s side gives the best chance at a reasonable settlement at a fraction of the original debt amount.

Convincing your Short Sale client that they are on the best possible path in trying to sell prior to a foreclosure may get a little easier when you dispel the myth that these types of debts will fall away in a foreclosure or bankruptcy. It is far better to deal with them up front during the Short Sale negotiation and then come up with a plan for the payment of the agreed upon settlement with participation from the Investor/Buyer or the Agent if needed to supplement what the homeowner has available to pay at closing.

Freddie Mac Housing Outlook is Guarded

Fri, 20 May 2011 11:45:43 GMT

The latest Freddie Mac economic outlook report was published last week. The report, titled “Better, But Still Not Good Enough,” by Freddie Mac chief economist, Frank Nothhaft, indicates how strongly the sick housing market is tied to the continuing high unemployment rates.

Despite 244,000 jobs added in April, the most in almost a year, the improvement in the job market is not happening fast enough to reabsorb all the jobs lost since the recession. April was the 27^th month where the unemployment rate has topped 8%. At least a quarter million jobs per month must be created in order to make a significant dent in the economy.

Extended periods of unemployment have a detrimental effect on the financial stability of households. The single most important factor in the rise in delinquencies among prime home loans has been unemployment or significant loss of income among workers who have previously been very stable and reliable in repaying their loans. Extended periods of unemployment have also contributed to the high levels of redefault for those who were initially accepted into the Making Home Affordable loan modification program. Even though the improving job market will mean fewer new delinquencies will occur in the housing market, the extended periods of unemployment for those who have already lost their jobs will lead to an extended period of high levels of serious default and continued high levels of foreclosure.

Nothaft also observed that housing prices have not bottomed yet in many markets, although he believes they are close to their nadir. Freddie Mac’s Home Price Index declined 2.8% between December 2010 and March 2011 and will continue to decline as long as the market is dominated by distressed property.

On the positive side, the report notes continuing extraordinary affordability in the housing market spurred on by low mortgage rates and low housing prices.

While the economy will be spurred on with accelerating job growth in the second half of 2011 Freddie Mac expects continuing high levels of unemployment and long term job loss combined with high levels of serious mortgage delinquency.

The housing market just can’t seem to catch a break!

NAR Angles for Reliable Housing Finance Market

Fri, 20 May 2011 11:43:59 GMT

Few would argue with the fact that the financial market for housing has been sick for a very long time. First, too lax standards allowed almost anyone who was breathing to purchase a home. Now, even highly qualified professionals with high credit scores who just don’t have W2-type income are getting denied. Members of a housing panel at the Legislative Meetings and Trade Show of the National Association of Realtors® believes it is time for the pendulum to swing somewhere between these two extremes.

The housing market needs reliable financial backing in order to recover, and panel members expressed the opinion that the current proposals to eliminate or greatly curtail the GSEs are simply naïve. David Katkov, executive vice president and chief business officer of the PMI Group said that, while private financing works in other countries the United States housing market is simply too big and complex to survive on private financing alone. Steve Brown, NAR first vice president nominee for 2011, said that without a viable replacement for Fannie Mae and Freddie Mac the housing market will be severely restricted and will cost much more for consumers.

NAR officials also questioned the latest provisions of the Dodd-Frank Act, which was signed into law by the Obama Administration in July 2010. The Act greatly limits mortgage options outside the QRM (qualified residential mortgages) standards of 20% down payment and no more than 28% of gross income devoted to mortgage payments. FHA and VA loans will be exempt from this standard, but few other exceptions exist for those who cannot meet QRM standards. The Act also requires 5% of the risk to be retained by lenders on securitized loans in order to discourage risky lending practices.

According to an NAR study 60% of recent home buyers put less than 20% down. It takes the average worker 14 years to save the necessary amount to make a 20% down payment on a median-priced home. The NAR would like Congress to come up with a QRM exemption that will include an array of fixed and ARM loan instruments that require between 5 and 20% down and include mortgage insurance. The NAR argues that properly crafted and underwritten, these types of loans can be safe and will insure that enough people can qualify for loans to spur growth in the housing industry again.

Do you believe the housing industry can recover without government intervention in the housing financial markets?

We’re Officially in Double-Dip

Thu, 12 May 2011 13:18:04 GMT

According to Clear Capital’s national home price index the housing market has officially hit bottom—again. Nationally prices have dropped .7% below previous lows recorded in March 2009. Prices have declined 11.5% over the previous nine months, the fastest decline since 2008.

The West, Northeast and South regions have all officially crossed the double-dip line according to Clear Capital’s HDI. The Midwest region may not be far behind. All major MSA’s tracked by the HDI were in decline quarter over quarter.

There is strong evidence of the impact of the huge shadow inventory of foreclosures on market pricing. This combined with the worse than usual slowdown in sales over the winter has led to the double-dip situation.

REO saturation nationwide has increased to 34.5% of total sales volume. In mid-2010 the REO portion of the market was closer to 20%. This REO saturation even exceeds the increase that occurred in 2008 when REOs reached about 32% of the total market. Both 2008 and now the increase in REO sales precipitated a decrease in home prices.

Clear Capital is concerned that the impact of REOs on the marketplace will continue to depress home prices through 2011. During the last decline in 2008 home values were turned around by the economic stimulus. We have no such government intervention awaiting us this time.

While this is depressing news for the average homeowner and Agent, for those Agents and Investors focused on this distressed marketplace it means that a new round of distressed homeowners is in the offing. Now is a great time to market to neighborhoods that have experienced heavy price declines because of high foreclosure activity and other distress situations. Recognize that there will be a greater willingness on the part of most lenders to mitigate loss through some measure short of foreclosure. The Short Sale specialist Agent or Investor is perfectly placed to be able to help those homeowners who can no longer afford to stay in a property that is worth less than the mortgage that they are paying and want to move on in their lives by selling through a Short Sale.

FDIC Releases its Report on Foreclosures

Wed, 11 May 2011 12:36:12 GMT

The FDIC’s examination of foreclosure practices in the banking industry was released. The report shows that a majority of the foreclosure activity in the U.S. between 2006 and 2011 has been among the top 14 FDIC insured lending institutions, and all 14 have entered into consent orders with the government to clean up these practices. The FDIC reviewed the foreclosure procedures in the role of the back-up regulator all insured depository institutions.

The investigation found that foreclosure processing problems have been far more common at these large institutions than at community banks and other smaller lenders. It was the large agencies that were examined specifically, although the results should be noted by all lenders.

The lenders what were selected for study included eight national banks regulated by the Office of the Comptroller of the Currency (Bank of America, Citibank, HSBC, JPMorgan Chase, MetLife, PNC, US Bank, and Wells Fargo);

two institutions regulated by the Board of Governors of the Federal Reserve System (GMAC Mortgage, LLC, an affiliate of FDIC-regulated Ally Bank, and SunTrust); and four thrifts regulated by the Office of Thrift Supervision (Aurora Bank, OneWest Bank, Sovereign Bank, and EverBank).

The problems that the FDIC found include: inadequate staffing to handle the onslaught of foreclosures; affidavits were signed without reading the documents; affidavits indicated that they were being executed under oath when they weren’t; and servicing fees were in a few cases incorrectly calculated both in favor of and against the borrower. The study found relatively few instances of where some aspects of the original mortgage and note paperwork was missing. All servicers were lacking in good internal audit and quality control procedures.

The report is quite critical of MERS and LPS handling of mortgage transfers. Both are accused of “engaging in unsafe or unsound practices that exposed the member institutions to unacceptable operational, compliance, legal, and reputational risks.”

Best Foreclosure practices are outlined:

--Foreclosures are to be brought in the name of the note-holder;

--Foreclosing entity must be in possession of the note and have valid documentation that shows any change in ownership;

--A good faith effort to find the note should take place before filing for a lost note affidavit;

--All attestations must be legal according to the laws of the jurisdiction where the mortgage is held;

--Specific protocols are outlined for what should be included in the foreclosure notice;

--Any practice of giving bonuses to attorneys or servicer staff based on the number of foreclosures that are processed should be stopped.

Handling a Short Sale Deficiency

Thu, 05 May 2011 14:52:32 GMT

No homeowner likes to face the prospect of paying on a deficiency judgment or having to agree to a non-secured promissory note in order to get a Short Sale approval from a lender. The reality of the matter is, in some cases a deficiency will need to be paid by somebody if the homeowner wants to avoid foreclosure, particularly if the homeowner has other assets.

Deficiency is the difference between what the Lender nets in a Short Sale and the amount remaining on the mortgage and includes also the amount of shortage in paying off second mortgages and other liens against the property.

An Agent or Investor should never promise that they will negotiate away any deficiency, although skillful negotiators are often successful in considerably reducing the amount that will be required to settle the loan.

Agents should also recommend that homeowners take the lender approval letter to their legal counsel in order to discuss their options. An approval letter is a legal document and should be explained by a competent attorney, not an Agent. If the language in the approval letter is unclear concerning the deficiency, the legal counsel should get that clarified for their clients.

Except with a few certain lenders a one lien-holder Short Sale is generally going to be handled by issuing a 1099 for the tax liability rather than a deficiency. Lenders cannot demand both a deficiency payment and issue the 1099 (which will get the debt off the lender’s books).

Second mortgages and mortgage insurance are different situations. When the second mortgage comes at the time the first mortgage is negotiated (purchase money second) it is generally released with a 1099 and no deficiency. On the other hand, a HELOC is technically a secured consumer loan and that almost always triggers an attempt by the holder to collect the deficiency. In a foreclosure the lien position is wiped out, not the debt itself. Therefore, going through foreclosure is not going to wipe the HELOC off the map either.

What a skilled negotiator is often able to do is to get the amount of the debt on a second mortgage or other types of liens reduced to between 5% and 20% of the value of the loan. Some lenders will give a choice between a reduced cash payment, and an unsecured promissory note for the full balance.

The other situation that generally triggers a deficiency is mortgage insurance. Whether the private mortgage insurance (PMI) is borrower-paid and is included up front on the mortgage records or is lender paid (MI) and not spelled out on mortgage documents, the lender is almost always going to ask for a deficiency or a promissory note in order to continue covering this insurance for the lender’s benefit.

One strategy for taking care of these deficient liens is to ask the end buyer to participate in paying off these liens. In some cases the transactional buyer (the B buyer and an A to B/B to C sale process) will have enough leeway in their net profit to absorb the negotiated settlement costs of a lien. As long as this expectation is built into the discussion up front with the buyer, it can often be built into the deal on the buyer side of the HUD-1.

Where Home Affordability Rules

Wed, 04 May 2011 12:48:32 GMT

Deutsche Bank has published its list of the most affordable metropolitan areas in the U.S. A major factor in determining affordability is the calculation of whether it is more cost-effective to buy a home or to rent in the area.

Now is a good time to break out the marketing campaign to attract renters in the following cities, all of which are deemed more affordable for home ownership than for renting right now. Here are a few ideas for getting out the word:

--Send a post card campaign to lists of renters in A and B class rental communities showing how to calculate the rent vs. buy decision and listing your qualifications as a buyers’ agent.

--Host an open house for prospective home buyers at your agency or some neutral location such as a local library or bank community room. Briefly go over the benefits of home ownership compared to renting and tips for becoming financially qualified for home ownership.

--In conjunction with a local mortgage broker offer free home ownership readiness analysis and pre-qualification for prospective new homeowners.

--Write articles on the subject of home affordability in your area on your blog; offer a give-away item on your lead capture site that offers rent-buy analysis in exchange for a prospective buyer’s name and phone number.

There are neighborhoods in almost any community where it will be easy to demonstrate affordability compared to renting. The following metropolitan areas are especially ripe for this type of advertising:

Atlanta: Rents exceed mortgage payments by as much as 50%.

Buffalo: This market is fairly stable and has good job prospects.

Cleveland: Rents exceed mortgage payments by about 25% right now.

Jacksonville: Rents exceed mortgage payments by about 20%.

Las Vegas: As the foreclosure capital of the country, there are a lot of great deals available in Las Vegas.

Memphis: Neighborhoods are being cleaned up and being made available for new developments.

Orlando: One of three Florida cities where it is notable less expensive to buy than to rent.

Rochester, NY: The second largest city in New York, and one of the most affordable in the country.

St. Louis: Rents are 23% higher than the average mortgage payment.

Tampa/St. Petersburg: Retiring baby boomers are discovering the affordability of Tampa/St. Pete for owning compared to renting.

Study your own area to determine where home ownership has the edge in affordability and target that area for your buying and selling activity.

Preparing Buyers for Ownership

Thu, 28 Apr 2011 18:38:06 GMT

One of the tragedies of the mid-2000s bubble is that anyone and everyone were getting qualified to own a home. Many of those people had iffy job stability, low credit scores, and little savings. When the crash came there was nothing to fall back on when a job was lost or exotic mortgage products skyrocketed with higher rates. Now those folks are in worse condition than ever and may never be able to qualify again after suffering a foreclosure.

Agents are often the first line of defense in determining whether a prospective buyer is qualified to be a homeowner. Unfortunately some, including many who tried it and failed during the recession, will never be able to qualify for home ownership again. Others, with some counseling and help, can get back into the game. A knowledgeable Agent can make all the difference between success and failure in preparing buyers for ownership.

Here are things that an Agent can do to get potential clients ready to buy a home:

1. Suggest a HUD-qualified housing counselor or a mortgage broker who is willing to work with clients to analyze FICO scores and suggest ways to repair credit. Credit scores must now be in excess of 620 for any hope of getting a loan approval. Credit records are often riddled with errors. Debtors can substantially improve credit scores inside of six months to one year by writing to each of the three main credit agencies, Experian, Equifax, and Transunion to clear up any errors. The creditors must respond to verification inquiries by the credit agencies within 30 days, and if they do not then a derogatory notation that has been formally questioned must be removed.

2. Those hoping to qualify for a mortgage must also be very careful about paying all bills on time. In the past it was possible to obtain a mortgage with one or two late payments on the record. Now each ding is counted against the debt to income ratio and quickly tilts the decision against approval. Counsel clients who are not initially able to qualify to be very careful about paying every debt (or at least all those reported to the credit companies) on time.

3. Encourage clients to set aside savings each month for as long as it takes to be able to pay 20% down on a conventional loan. Buyers gain a lot of choice and flexibility when they can qualify for a conventional loan. For those who cannot raise the cash or maintain the credit by themselves, consider taking on a co-signer to the loan. Parents and grandparents are often willing to take on the financial risk, particularly if the home is highly affordable compared to a rental and is a good investment.

Sometimes it will take several years to cultivate a potential client into one who eventually buys. This is not much different than the situation we were in prior to the loosened credit standards of the 1990’s and 2000’s. The Agent with some patience will find the clients who have been helped past the credit crisis coming back to buy with a much higher likelihood of success.

What Determines Foreclosure Experience the Most?

Fri, 22 Apr 2011 12:34:19 GMT

When a homeowner decides to stop making house payments, what determines their experience with the foreclosure process more than any other? Their lender, you say? Good guess, but incorrect… The key factor in determining what will happen to the homeowner is their state.

Lenders have fairly similar practices when it comes to processing defaulted loans and foreclosures. Some of that is regulated, and even more is about to be regulated in the aftermath of the robo-signing scandal. If the homeowner draws an inexperienced or uncooperative loss mitigator it is usually possible to buck it up the line to get a different person. So lender practices are not usually the telling factor on how the homeowner will be treated in a foreclosure.

The processes that dictate how the delinquent homeowner will be treated and how soon will depend on whether the state where the property is located files judicial or non-judicial foreclosures, and the specific state laws associated with foreclosure.

The timeframe that can be expected for foreclosure varies greatly from state to state, and judicial states almost always take longer. A recent Standard & Poor’s study shows that timelines for processing foreclosures is approximately twice as long in judicial than in non-judicial states. The S&P study also finds that approximately three times as many homes in judicial foreclosure states stay in the pre-foreclosure process to an 18 month mark compared to non-judicial states.

If a homeowner finds an irregularity in the paperwork in a judicial state it can be brought up by the homeowner appearing at one of the pre-foreclosure court hearings, while a homeowner in a non-judicial state will need to file a lawsuit in order to bring paperwork and other problems to the attention of the court and in order to stop the foreclosure process.

State laws also dictate whether the creditor can file a deficiency judgment in order to make up the losses on a defaulted loan. Whether or not a deficiency judgment is allowed is related to whether the homeowner has recourse or a non-recourse loan. In general non-judicial states trade off faster settlement of the foreclosure for ability to file for a deficiency judgment, and the mortgage will dictate a non-recourse loan. Those living in judicial foreclosure states are much more likely to see the lender petition the court for a deficiency judgment, which is an unsecured money judgment, because the mortgages for property held in judicial states are generally resource loans.

There are many other factors that relate to what the troubled homeowner can expect depending on their state and locality. Some states have federal funds to help unemployed homeowners pay the mortgage. This may prevent or forestall a foreclosure. Some cities and states have imposed regulations to require housing counselor intervention or attempts to resolve the situation with a loan modification before a foreclosure can be filed. Sometimes these locally and state-mandated programs resolve the delinquency before it reaches foreclosure.

While the treatment of troubled homeowners should get equalized somewhat as regulators put in place a foreclosure review process, the state will always dictate the specific laws that govern the process.

Helping Military Families Get Their Due in Distress

Tue, 19 Apr 2011 19:03:03 GMT

One of the problems being discovered in the aftermath of the mortgage documentation controversy is that some lenders have ignored active service member legal rights.

The Service Members Civil Relief Act of 2003 (SCRA) Section 303 assures that active military personnel, and in some cases their dependents, cannot be foreclosed upon while in active duty or for 90 days following active duty without a court order. There is also an automatic 90 day stay in all court and administrative proceedings related to the service member.

The obligation must have started before the active call-up of the service member and be secured by a mortgage or trust deed. The “sale, foreclosure or seizure of the property for a breach of the obligation” can only be validated through a court order granted before the sale of the property.

Lenders for credit cards, mortgages and other debt instruments are also obligated to reduce interest rates to no more than 6% during the life of the service member’s active duty. Lenders are also forbidden to accelerate the payoff of loans during the service duty period.

For those who are renting the service member can terminate a lease without penalty if going into active duty. The service member tenant cannot be evicted during the active duty without a court order.

Penalties for violating the laws regarding service member financial relief can be charged with a misdemeanor, and they must make restitution for the illegal seizure of service member assets.

In January 2011 Freddie Mac issued a rule to its servicers that it would give at least a nine month moratorium on foreclosures following active duty of a service member with a loan backed by the VA or another GSE through 2011.

Other lenders have not been so cognizant of the SCRA requirements or sensitive to the particular vulnerability of military families. In January JP Morgan Chase was charged with violating the SCRA by overcharging some 4000 active duty military families on their mortgages and foreclosing on 14 military families.

Marine Captain Jonathan Rowles had been charged by Chase as much as 10% while he was on active duty. Chase now admits that it was slow at implementing the interest changes for active service members like Rowles. When Rowles fell $15,000 behind in his payments Chase foreclosed. Chase has now set up a $2 million fund to refund charges to military families who were overcharged, and have promised to give back foreclosed properties. Rowles says that this in not enough.

There have been similar cases reported. Recently the New York Times reported that the Justice Department was investigating Saxon Mortgage, a subsidiary of Morgan Stanley, for foreclosing on around two dozen military families between 2006 and 2008 allegedly in violation of SCRA.

Because of low pay, frequent moves, and disruptive long tours of active duty it is difficult for many military families to maintain consistent financial stability. The economic downturn which occurred just as the military effort abroad was heating up has left military families reeling trying to make ends meet. The SCRA financial benefits are a way of recognizing the special service to country of our active military and their families as well as the particular economic vulnerability of our men and women in service.

Why Can’t Americans Get a Loan?

Fri, 15 Apr 2011 15:02:12 GMT

The Federal Reserve has done its share in keeping interest rates low for the last several years. In the past low rates was a sure way to entice would-be homeowners into the market. Having a home is still the American dream, but fewer and fewer people can achieve that dream.

The Federal Reserve indicates that nearly a quarter of the people who apply for a loan are turned down—and that’s when they apply. Many more don’t even bother to apply because they know they would be denied. Millions have damaged credit scores because of a foreclosure or bankruptcy, or both. Those with as much as one late credit card or mortgage payment in the last two or three years will be turned down. Many know that standards for approval have been tightened and are discouraged from trying.

The average credit score for those applying for a loan with Fannie Mae or Freddie Mac underwriting has risen to 760 from 720 a few years ago. The average FHA score has gone from 660 a few years ago to 700. Very few loans are actually made to those with scores under 620 even though it is theoretically possible to get a loan approved down to 580.

The higher down payment requirements are also stopping potential homeowners from applying for a loan. The median down payment is now 15%, while during the boom years a loan could easily be secured zero down. Now most programs require a conventional 20% or more down. FHA and VA loans are among the few exceptions. Now FHA loans are more expensive because of higher mortgage insurance requirements.

It used to be that sellers could give larger concessions to help buyers reach their down payment needs. Now those with less than 10% down can only receive 3% seller concessions; those with more than 10% down may be able to get up to 6% in seller concessions. On a $200,000 loan with 10% down a buyer may be able to get $6,000 paid by the seller, but will still need to have $14,000 in hand to bring to the closing table. In this economy that is a lot of savings.

The 20% down payment requirement is even more of a burden. On an average-priced home of $190,000 that is a hefty $38,000! In a state like New York or California where the average home price could be $500,000 or more, the down payment issue is nearly an insurmountable problem in bringing new people into the housing market.

New bank regulations have been proposed which will require banks to keep in-house 5% of riskier loans, such as those with less than 20% down. This will have the effect of discouraging banks from making loans with less than a 20% down payment, and that will knock first time home buyers right out of the market.

The immediate impact may be minor, since the GSE’s and FHA are exempt, and therefore 90% of the mortgage market will not be impacted right away. On the other hand, the government will be reducing the role of Fannie, Freddie and FHA over the next five to seven years, and at that point, the impact of the new rules on the mortgage market will be significant.

In the future, the mortgage market appears to be gearing up to look more like the market of the 1970s and 1980s than the 1990s and 2000s—for good or ill.

Getting Social

Wed, 13 Apr 2011 17:27:59 GMT

Even Google has come to the conclusion that social media is important to determining the importance of online content. Savvy Agents and Investors can benefit from the trend.

Right now Google is implementing +1 on search results and ads so that searchers can let others know which bits of information they like best. The +1 likes can be shared in GChat, Gmail, Google Reader, Buzz, and will soon be available for Twitter. Eventually, Google will include the option to post the +1 symbol on pages and other content. Google has posted a short video about the Google +1 button.

Here are two critical but simple ways that Agents and Investors can gather in the social buzz:

1. Make sure that all blog posts have several social media buttons embedded so your readers can bookmark the articles they like best and can buzz it up with their friends and social network. Wordpress.org has around 216 social media widgets right now to add to your basic Wordpress blog. Right now the most popular widget for sharing is the “Sexybookmarks” that shows the major social media icons arrayed across the bottom of the screen with the message “sharing is sexy!” If sexy is not in keeping with your blog—don’t worry; the right combination of icons and style has been designed and are waiting for you to download the plugin.

2. Build a Facebook fan page. It is not enough to have a personal FB page and not one that is specifically dedicated to your business. It is also not sufficient to simply build a business fan page that has the busy look and feel of a typical Facebook profile. First, start building a fan page in a way that makes it easy for readers to identify and respond to a call for action. Specifically, give away something valuable in exchange for name and email information so you can use the Fan Page for list-building and long term relationship-building. Secondly, use the Fan Page for branding. Your Fan Page should be easily distinguished from others in your market. Third, build an interactive relationship with your fans by asking questions and soliciting opinions.

Making social media work for you is more a matter of doing the right things once to set up your social media system and then dedicating small amounts of time to letting the fan base know what is new, unique and interesting that is coming down the pike for your company, and involving the fans in sharing their opinions. It need not be an overwhelming burden.

It’s the Details that Count in Working with Loss Mitigators

Thu, 07 Apr 2011 12:24:27 GMT

Here are just an accumulation of some tips and tricks that may make your Short Sale negotiations a little more successful:

1. When dealing with Bank of America on approval of an end Buyer please take note that they have begun rejecting 401k statements as legitimate proof of funds. They want to see the money in a savings or checking account. The reason BOA is giving is that no one knows what the stock market will do and funds shown in a 401k today may not be there tomorrow.

2. A growing trend among Lenders is for all of their negotiators to contact homeowners or their representatives by phone only. They can receive documentation by email, but some Lenders no longer allow their negotiators to send out anything by email. Chase, specifically, has set this rule recently for its negotiators. The reason seems to be a matter of liability. They are less likely to be sued over something that is indicated verbally than some statement put in an email.

3. The magic phrase to be looking for when an approval letter comes is “full lien release.” These words mean that the Lender will not be seeking further financial restitution from the Homeowner.

4. When the end Buyer is getting an FHA loan keep in mind that FHA will only allow a 1% concession based on the loan amount, not on the purchase price. That might seem like a small difference, but it might scuttle a deal if the paperwork is not done correctly. For example, on a $200,000 purchase price with 10% down, the 1% concession would be $1800, not $2000.

In general:

Pay attention to details. If you get something wrong on the HUD-1 it could cause you to have to start a Short Sale all over with some Lenders (most notoriously, Bank of America).
Always be courteous and follow Lender instructions and requests. They may be frustrating and seem down-right idiotic sometimes, but don’t take that out on the Loss Mitigator. In most cases the problem will be with a company rule, not something the Loss Mitigator has direct control over.
Avoid all the hassle and potential for error by using our negotiation services. Using our negotiators will save you 40 or 50 hours of fax and phone work with Lenders and will probably increase the likelihood that the Short Sale will close quickly and with a positive outcome for everyone concerned.

Are Servicers Playing Fair with Loan Modifications and Short Sales?

Tue, 05 Apr 2011 14:03:21 GMT

The Center for Responsible Lending (CRL) has drafted a report entitled “Fix or Evict? Loan Modifications Return More Value than Foreclosures.” The title says it all in terms of what CRL researchers found out about servicer behavior when it comes to really helping homeowners avoid foreclosure. Servicers routinely do what is in their own best interest, not in the best interest of the homeowner, and not in the best interest of the investor who holds the note.

Between 2009 and 2010 foreclosures outpaced loan modifications by 12 to 1 for both proprietary modifications and HAMP modifications. Loss rates for investors when a foreclosure is the route that is taken to solving a delinquency are very high: around 49% of the original investment value for a prime loan, 59% for an alt-A loan, and 75% for a sub-prime loan.

Servicers are supposed to evaluate what is the best course of action—a modification, a Short Sale or foreclosure—using a net present value (NPV) test. Based on actual and projected capacity the servicer is to compare the expected cashflow from a modification against the alternatives. The option giving the note investor the best return should be the option that is selected.

The CRL researchers compared the relatively low number of approved modifications against the expected results, including in the model the expected and actual default rates that have occurred with modifications. Under almost all the scenarios run by the researchers loan modification was the option that resulted in the most financial benefit for the investors.

CRL estimates that by 2014 a total of 13 million foreclosures will have taken place if they stay on current pace, a direct loss to investors of $1 trillion. The direct loss in property value to neighboring properties of foreclosures by 2012 will have reached $1.9 trillion. The report argues that much of this loss is unnecessary because other less devastating options are available and are clearly not being used even when cost-justified.

Some have blamed the investors for not approving loan modifications, particularly when the loans are securitized. Studies have simply not found that to be the case. Loans have been modified in about the same percentage for securitized and non-securitized loans. The study results also indicate that the redefault rate is not to blame for low loan modification rates. The redefault rate under different scenarios was calculated in to the NPV equation in the CRL study and loan modification still came out the winner most of the time.

The report concludes that the low loan modification rates are not due to servicers acting in the best interest of the note investors but are instead most likely linked to servicer self-interest along with poor borrower preparation and lack of communication between borrower, servicer and investor. CRL encourages the government to step in with regulations that require the servicer to explore thoroughly all options before proceeding to a foreclosure, and to share their net present value findings with both investors and borrowers. The incentives given to servicers presently for holding on to defaulted loans must also be studied further and fixed.

Goodbye to McMansion Living

Fri, 01 Apr 2011 17:21:53 GMT

One of the themes that came out of the recent Fannie Mae report series on renting vs. buying is that fact that large homes are a dying breed. People just aren’t buying those larger homes any more.

There are solid demographic reasons for the shift away from mega-houses. The average household size is quickly declining, as is the number of married couples with children in the general population. It is the married with children group that is 2.5 times more likely to own than to rent, and that group is on the decline.

In 1990 56% of all households included a married couple; in 2009 that percentage was down to 50%. In 1990 49% of all families had children under 18; in 2009 that percentage was down to 46%. The average household size was 2.6 people in 2009; 2.7 in 1990; and 3.3 people in 1960.

The demographics are driving down the size of new homes. Between the height of the bubble in 2006 and Q2 2010 there was a 6% decline in the square footage of new homes being built, whereas between 1978 and 2006, according to the Fannie Mae Trends 2 report, median new home size rose 36%.

Younger respondents seem to be more likely to move because of space issues. With the percentage of the population composed of larger families in decline, the demand for housing to accommodate larger families will also decline.

The recent financial meltdown has brought about significant changes in the housing market sooner than the projections might have anticipated and one of the segments that is most impacted is the luxury home market, those homes costing over $750,000. At one time there was a frenzy to trade up to McMansions. Now only 1% of the sales in February were for homes of $750,000 or more.

Are these trends temporary where we’ll see the rise of new McMansion neighborhoods as soon as the financial crisis lifts, or is this a more permanent trend? According to Paul Emrath, National Association of Homebuilders, not all of the change in home size trend is temporary: “Part of the current home size decline may again be a temporary recession-related phenomenon, but part can also be attributed to trends in factors like the desire to keep energy costs down, amounts of equity in existing homes available to roll into a new one, tightening credit standards, less emphasis on the pure investment motive for buying a home, and an increased share of homes sold to first-time buyers. Not all of these trends are likely to reverse themselves immediately at the end of a recession.”

Fannie Mae Studies Rent or Own Decision Process

Wed, 30 Mar 2011 11:35:52 GMT

Fannie Mae has published several reports on the behaviors, economic conditions, demographics and lifestyle considerations that go into making the rent or buy decision.

The reports are based on several themes. Theme 1 is about ownership aspirations. Theme 2 covers lifecycle housing choices and demographics. The economics of owning vs. renting is reported in the Theme 3 document. The impact by racial, ethnic and immigration factors is reported in Theme 4.

The study is based on a combination of rent vs. buy research, a telephone survey of 2,041 random respondents and 1,566 focus interviews conducted in July and August 2010 in Washington, DC and Phoenix.

Different motivating factors impact those who buy versus those who rent. Buyers are most highly motivated by lifestyle issues or by stages of life issues. That is, those who are married and have kids are the most consistently going to consider home ownership a necessity. As people age they also experience increasingly higher levels of home ownership. Older people have accumulated the resources to make home ownership more financially possible. The driving motivating factor for those who are renting is financial ability. Those with financial issues will continue to rent even if they aspire someday to own.

The vast majority of home owners and half of the renters believe that they would be better off owning than renting. Even the Great Recession has not shaken the dream of the typical American to achieve home ownership. It may simply take renters longer than was once the case to reach the home ownership goal. A total of 66% of the respondents felt that home ownership is a safe investment over the next 5 years while only 16% felt the same way about stock market investments.

It is clear that most prefer to live in a house than in an apartment. Even renters find single family home life more satisfying than multi-family living in many instances. The current trend of more single family homes coming back into the market as rentals could end up changing the dynamics of home ownership over time. We don’t know yet whether moving into a single family rental will sufficiently satisfy renters who prefer a single family home life style, or whether economic issues will become the determining factor in whether these people eventually buy or continue to rent.

Home ownership aspirations remain high across all ethnic and racial lines. For minorities the incidence of home ownership seems most related to affordability and ability to qualify financially. In 2009 76% of Caucasians who responded to the surveys were home owners. The same applied to 63% of the Asian-Americans, 55% of multi-racial individuals, 52% of American Indians, 51% of while Hispanics, 50% of Pacific Islanders, 47% of black non-Hispanics, and 34% of black Hispanics. Because ethnic and racial minorities do not own homes to the same extent as their white counterparts, and because the percentage of minorities in the population is growing, it is expected that home ownership will fall by 4% by 2050.

The study shows that the American desire for homeowner ship and the belief systems around whether they are better off financially and in terms of lifestyle by owning a home does not vary substantially by race or ethnicity, age or income level, nor do studies of separate cities show much difference in believe system from city to city. What does vary is the ability financially to achieve and hold on to home ownership given the current financial crisis and anticipated crises in fuel availability. Affordable housing issues must be addressed in many parts of the country if we are going to continue to see expansion in home ownership.

The Truth about Finding a Mortgage or Refinance Loan

Thu, 24 Mar 2011 12:36:05 GMT

There has been so much negative news about getting a loan that once might think that no one can qualify. The rules for underwriting a loan have definitely tightened up, but millions can still qualify, and there are still a number of special programs to help those who are more credit-challenged.

The FHA recently announced that they would accept applicants for loans down to 580 credit scores. Previously, the FHA credit floor was 620. While those who want to qualify with a down payment of 3.5% will need to have the higher credit score, those with 580 scores may be able to get FHA loans as long as they put in a 10% down payment.

The impression that many Agents and Buyers have that it is difficult to find lenders who will accept applications down to FHA limits turns out to be true. A 2010 National Community Reinvestment Coalition study found that only 5 lenders had policies that allowed for underwriting loans for applicants with credit scores as low as 580. That study also showed that 65% of lenders refused to handle loans for people with credit scores below 620 and 22% would not take applications for those with credit under 640. Some community leaders believe that turn-downs based on credit scores that are between 580 and 640 could be considered racially discriminatory, but mortgage specialists point out that lower credit scores are highly predictive of whether the mortgage will be successful.

Another mortgage truth that is little understood is that there are still options for people who are having trouble paying the mortgage because of unemployment. While the government’s foreclosure programs are under heavy scrutiny for elimination, they are still in place. Legislation to end these programs may not pass the Senate, or the President may choose to veto any effort to eliminate the foreclosure-fighting government programs.

One in particular is directed to help unemployed homeowners in the hardest hit unemployment states. There are programs in place in at least 19 states to help unemployed homeowners by providing up to $3000 per month in mortgage payments for up to 36 months.

There are also loan modification possibilities for homeowners who are behind on their loans. So far about 3 million homeowners have received a loan modification. A little-known option for those who are current on loans but up to 15% upside down on the mortgage is a Short-Refi. This particular program has only helped 245 homeowners since it was started several months ago, but it is still on the books for those who need to refinance and do not have the equity to qualify.

Financing Alternatives

Wed, 23 Mar 2011 16:55:11 GMT

Finding financing for clients is one of the most difficult challenges in the current real estate climate. The Agent who thinks outside the box is likely to find some solutions that go beyond the traditional lenders. Homeowners willing to think outside the box can also profit despite the slow market.

The alternative that is growing in popularity is owner financing. Buyers who need owner financing in order to qualify for a home are plentiful because at least 50% of potential homeowners cannot get a traditional home loan. People without W2 and other verifiable income don’t qualify for traditional lender financing. People with damaged credit or previous foreclosures or bankruptcies won’t qualify without credit repair and several years of waiting. Fewer people can make the higher down payment standards that most lenders require.

Many owners can’t sell, or can’t sell quickly enough, without offering financing. In many communities days on market for a traditional sale exceeds six months. Those needing to sell faster can get an edge up on the competition by offering owner financing.

Between 25% and 27% of all homeowners nationwide owe more than market value. A technique that is gaining recognition as an effective, if unconventional, way of selling a home that has no equity is called “mortgage assignment” where the house is sold subject to assignment of the mortgage to a new buyer. Other people become responsible for paying mortgages all the time and lenders rarely exercise a “due on sale clause.” Homeowners and Buyers who consider this option need to know that that acceleration of the loan for assigning the mortgage to someone else is a possibility, although a rare one. Buyers who can’t get traditional financing are often willing to pay 10% to 20% above market value for the privilege of being owner financed.

Owners with more equity might consider a “rent to own” or “lease option” instead. Unlike “mortgage assignment” the deed is not transferred until the Buyer’s option is exercised. The option payment is generally non-refundable but can be applied toward the down payment if the option is exercised. Until the Buyer finds financing and exercises the option they make rent payments.

Another approach if there is some equity is to “wrap” the existing mortgage with a second or with a mortgage with a higher interest payment that provides a little higher payment than the mortgage that the owner is continuing to pay. Again, there is a small possibility that the original mortgage holder will call that first mortgage due if permission is not gained to create the wrap.

Tax advantages go with whoever is named on the deed, so for an assignment of mortgage that would be the new Buyer and for a rent to own the current owner gets the advantage until the option is exercised. If the rent to own Buyer defaults before they exercise the option to buy contract the owner only needs to evict and all option and rent payments are forfeited. If someone who has been assigned the mortgage is now the deed holder then a foreclosure will be needed to take back the property if he or she defaults.

Owner finance is not an ideal solution for most individuals in need of selling a house. Sometimes it is the only way a property can be sold in a reasonable period of time and at a reasonable price without hurting credit or missing payments. It becomes, in effect, the best of a number of negative options.

Centering a Real Estate Business on Investors

Fri, 18 Mar 2011 12:41:31 GMT

One of our associates talked with a Real Estate Agent this past week who is about to open her own brokerage with a business model centered on services to Investors. She looked at the agencies already open and concluded that few other agencies in the MLS area have Agents who are focused on serving the needs of Investors, and brokerages do not have policies that recognize Investor needs either.

Agents looking for a niche would do well to analyze the market to see whether there is a similar opening for an Investor-friendly brokerage in their own area.

Here are some of the considerations that could make working with a boutique Real Estate Agency attractive to an Investor:

1. Quantity commission reductions for repeat services. Unlike retail homeowners Investors are likely to use a good Agent’s service over and over in order to buy and sell investment property. Brokerages make up the difference in commission by repeat and quantity business.

2. Expertise in marketing to and servicing distressed homeowners. Understand that the sooner the Agent can get to the distressed homeowner the more likely a solution will result short of foreclosure. It’s also important to start a listing at a price that is realistic within the marketplace and, if that means beginning the process for a Short Sale, that should be done as soon as possible.

3. Develop an extensive Buyer’s List that distinguishes between different types of buyers. Transactional buyers are Investors who will buy subject to an acceptable Short Sale approval and the ability to find an end buyer. The advantage to working with a transactional buyer in a Short Sale is they will generally stick with the Short Sale throughout the process and get the process started. Buy and hold Investors look for good wholesale rental deals and generally can buy quickly for cash. Rehabbers will buy wholesale and sell retail after a property is fixed up. Obviously, some retail buyers also look for bargains from distressed properties and belong on the Wholesale Agent’s Buyer’s List. All of these types of buyers will have different expectations, look for different types of distressed property, and have somewhat different pricing expectations.

4. Be prepared to think outside the box. The norms for retail Agents are often just the opposite for wholesale Agents. The highest price is not necessarily the best price. The nicest looking house is not always the house that will bring Investors flocking to buy. Selling fast and making up in quantity of deals what is lost in size of commission is the model that the Investor-friendly Broker will use.

Stock Investors are Flocking to Real Estate

Thu, 17 Mar 2011 12:43:50 GMT

Hedge fund manager, David Ackman, a noted contrarian investor, has started building his portfolio of single family homes. He is certainly not alone among big-time stock investors who are beginning to look at the real estate market to diversify. Warren Buffett is another well-known investor who has begun to add real estate holdings—in his case by adding to his portfolio a manufactured home builder and several real estate brokerages.

Why is Ackman concentrating on the single family market?

First, prices are down to historic lows. In some areas prices are at levels that have not been seen since the late 1990s. While prices have not stopped falling in areas that continue to be hard hit with foreclosure, other areas, including many cities along the coasts and inland job powerhouses in Texas, have appeared to turn the corner on the price decline and are primed for at least modest appreciation.

Second, the supply of distressed property available at wholesale prices remains high and will be around for a long time. At least 11 million homes are in some form of distress: homeowners have under water mortgages, they may already be in pre-foreclosure, or the homes have already been foreclosed and are in the inventory of homes that are bank-owned. Overall, prices have been pushed about 34% lower since the height of the housing market in 2007, and most of that price fall is the result of large numbers of distressed property in many markets.

Third, the cost of borrowing for real estate is lower in many instances than the cost of a margin account for stocks. Well qualified investors can still get loans for commercial real estate and for holding small numbers of residential real estate. Private money is also readily available for real estate investors right now, often at attractive rates.

Fourth, the long term prospect for investing in real estate is positive for appreciation because building has not yet kicked in in most markets. As jobs increase and people start moving again demand will outstrip supply in many communities. In those cities there will be upward pressure on home prices and rents in response to demand. There should be at least a three year window when prices will increase before supply begins to catch up in communities where building has been curtailed for years.

Contrarians like Ackman and Buffett usually peg their investments right by going in the opposite direction from the average investor. They buy low and sell high by getting in to markets that are still unpopular with the majority. Right now the housing market is one of those unpopular investment classes that are ripe for the picking by contrarian investors.

The Good, Bad and Ugly about Fannie Mae and Freddie Mac

Thu, 10 Mar 2011 17:26:24 GMT

Are you a foe or a fan of mortgage giants Fannie Mae and Freddie Mac? The GSEs have their share of supporters and detractors. It is clear that significant change will take place over the next five to seven years in the size and influence that these agencies will have, and they may even be scrapped altogether.

Federal mortgage assistance began in the 1930’s as a response to the Great Depression and has been greatly expanded over the years to include buying mortgages on the secondary market and providing loan guarantees so that private investors will feel safer investing in these types of securities. The Federal National Mortgage Association (Fannie Mae), specifically, was founded in 1938 with the purpose of securitizing mortgages in order to expand the secondary mortgage market. The Federal Home Mortgage Corporation (Freddie Mac) was started in 1970 to further expand the secondary mortgage market. By increasing the secondary market these entities increase the supply of money available to fund mortgages. Currently the GSEs support 90% of all mortgages written in the U.S. Most agree that this is too much influence in the mortgage markets, and it is too expensive to maintain.

In June 2010 both Fannie and Freddie were delisted from the NYSE because the value of each stock has fallen below the $1 per share mark for over 30 days. They were put under public conservatorship in September 2008 to stabilize the financially strapped mortgage giants. The GSEs have continuously required financial boosts from the Treasury Department to stay in business since they began to take on an increased role in buying up non-performing assets from the nation’s lenders in order to free up capacity for these lenders to make more loans.

The Administration has proposed severely limiting or eliminating Fannie Mae and Freddie Mac within the next seven years and the debate is ongoing in Congress as to which of several options is most appropriate. Of those economists who have weighed in on the future structure of Fannie Mae and Freddie Mac there seems to be some consensus that they should remain with a role as loan guarantors but should be limited as mortgage holders except perhaps in the most dire economic circumstances. In the current budget crisis most agree that something must be done to reduce the public expense associated with maintaining the GSEs.

The paring down of Fannie and Freddie, however, will cause some inconvenience and pain for the average consumer. Among the expected changes if Fannie Mae and Freddie Mac are considerably reduced:

1. The 30 year fixed mortgage may become a thing of the past. The 30 year mortgage has been a standard since the 1950s and it is in danger of becoming an expensive novelty if the GSEs no longer participate in loan guarantees. Longer terms make mortgages more affordable.

2. Private mortgage insurers will cost more, as will closing costs. It may become impossible to lock in a loan without an added fee. Down payments will be higher than they have been under government-backed programs.

3. Mortgage rates will go up. Estimates of the extra cost to mortgage buyers are from one to three points.

4. Many argue that without the GSEs recessions such as the most recent one would be much worse.

Change is going to happen in the impact that the GSEs will have in the future. The degree of change and timing are yet to be determined.

Making the Short Sale Buyer Stick

Tue, 08 Mar 2011 13:13:21 GMT

Agents often identify the problem of keeping the Buyer on the hook through the long and arduous Short Sale process as one of the most frustrating things about working on distressed sales. The situation is not hopeless; there are proactive ways to cut the likelihood that the Buyer will walk before getting to the closing table.

First, when the Short Sale is anchored by an Investor-Buyer who plans to quick turn the property, that Buyer has every incentive to stick with the sale until the process is complete. That Buyer is only likely to pull out if the approval comes through with a price that will not lead to any profit with a resale to an end Buyer. Often even when the profit has evaporated the B Buyer will simply bow out in favor of that “C” Buyer perhaps for a small assignment fee rather than to see the Short Sale fail.

If at all possible hold off on identifying an end Buyer until the Short Sale has been approved or perhaps after the Lender’s BPO is in place. As long as the end price is attractive for a 30 day sale the end Buyer can be recruited quickly near the end of the process. This method should especially be possible to use for properties that will be attractive to buy and hold Investors.

If you are looking for a retail end Buyer then a longer period of time may be needed to attract that person, and there are several questions that should be asked in order to assess how likely the Buyer is to stay the course. These include:

1. How soon the Buyer needs to be in the property. If the timeframe for possession is soon, then a Short Sale is probably not the right property for them to consider.

2. Is the Buyer flexible about the price and terms? If the Buyer is limited in what they are able to bring to the table, then a Short Sale is not the best vehicle for them because the Lender rarely accepts the initial offer. If the Buyer can’t afford to wait beyond April 17 they may be stuck with higher mortgage insurance expenses that could add hundreds of dollars each year to the cost of the loan.

3. Does the property have a lot of repairs and can the prospective Buyer afford to make them? There will be little to no possibility of negotiating with the Lender or the Seller to make these repairs before the sale is completed.

4. Can the prospective Buyer stand to wait perhaps months on end with little information about what is going on and little control over the situation? Buying a Short Sale is not a game for the impatient or the control freak.

5. How much does the Buyer really want the house? Are there many other houses that would match their needs at a reasonable cost, or is this “the one” they want?

If your prospective Buyer can pass the test with these five questions, then chances are strong that they can wait out a Short Sale even if the time to close is months away.

The Web is Your Best Friend When It Comes to Marketing

Fri, 04 Mar 2011 22:04:05 GMT

These days over 80% of all buyers start their home search online. Sellers also often begin their effort to find the right Agent and to compare home prices by doing online research. In today’s competitive climate the difference between a successful Agent and one that is unable to attract any business often comes down to online marketing.

A good website adds to credibility and helps to brand you. Even if as an Agent you are included in a brokerage website, have your own independent site as well to help brand yourself and make your services stand out. It’s neither expensive nor highly technical to create a website these days using a simple Wordpress or similar blog template.

The website should include your unique sales proposition or slogan that tells the community something about your focus, specialty or unique service. An “About” page should go into more detail about your focus and your credentials. Include testimonials from satisfied clients with your credentials or on a separate page. Your current listings and listings of recently sold properties will also be included on the site. If you don’t have your own listings currently perhaps another Agent from the same brokerage will allow you to co-list one or more of theirs.

Make sure you have a contact form on the website. In order to get people to contact you it is helpful to have a give-away that will be useful to either the home seller or the home buyer. When you get a contact make sure that you follow up. A quick follow up with a personal phone call or email will demonstrate that you are a real person and that you care about discovering how you can meet the needs of your contact. By adding these contacts to your buyers’ or sellers’ lists you have an opportunity to follow up regularly by sending out a periodic newsletter or email messages with tips that will be useful to the buyer or seller. This way, even someone who is not ready to buy or sell immediately will still have your name top of mind once they are ready to take action. Make sure that you have their verified opt in before beginning regular communication via email.

In order for the site to receive good search engine ranking do a little keyword research and make sure that the descriptions that you use on the home page and your other active pages include the exact keywords that people in your area search when they are looking for an Agent to either list property or buy property in your area. Google Keyword Tool is one free source of information for real estate terms that are searched most highly in your area. Look for “long-tail” keywords (multiple word keyword phrases) that fit the focus of your website but are still searched frequently enough to draw regular traffic to your site. Ideally, the keywords that are targeted will attract 80 searches a day or more. (This may not be possible in a smaller market.)

Another key to ranking highly in the search engines is to keep your website freshly updated with new information. Include a news feed, or add headlines from your blog on a regular basis. Keeping a blog or a newsletter is a good way to be seen as an authority in your field and the “go to” person for the kinds of services you specialize in. Ultimately, that is what you want to achieve with your website—the credibility of being widely recognized as the best Agent in your market segment.

Now is Not the Time to Get Discouraged

Thu, 03 Mar 2011 17:06:36 GMT

Reports from the NAR indicate that Agents are getting weary of the constant struggle to sell homes in a market where fewer people can qualify for a loan even when homes have rarely been more affordable or interest rates lower. At the same time at least 5 million American homeowners are still in danger of a loan default. The need has never been greater for the expertise of those trained to bring home sellers together with home buyers.

Now is not the time to throw in the towel; it’s time to think outside the box. There is no question that Agents are greatly needed to walk homeowners through the Short Sale process and help them organize hardship files. Agents need to stay in close touch with the Short Sale process to make sure that lenders stay on track. They need to make sure the lender’s BPO Agent gets all the information they need to make an informed decision on the price.

While values continue to go down, and will continue to do so as long as do much distressed property is on the market, any Agent who take the opportunity to fill up the pipeline with as many Short Sales as possible will eventually reach a point of perpetual deal flow. It is possible to make up with quantity what has been lost in quality deals.

Short Sales do not need to be the scourge of the real estate business. By working with a professional negotiating team much of the more frustrating part of the process can be farmed out to experts who are used to working with Lender Loss Mitigators. Frustrated by Buyers who can’t wait through the long Short Sale process? Switch your tactics to use an Investor Buyer as the one who waits through the process. Investor “B” Buyers have no reason to back out of the deal. The more deals they have in the pipeline, the better. Getting the process started with a “B” Buyer provides some time to find the right end Buyer once the price is approved and it is clear what the final profit spread is likely to be.

If Short Sales aren’t your thing, perhaps REOs will be. These two distressed property types represent 30-50% of the home sales in many markets. In fact, according to Campbell Surveys HousingPulse survey, January sales were 49.6% distressed homes. Agents who specialize in these areas will find that business and job security are good and will continue to improve for several years to come.

Improving the Foreclosure Help Process

Thu, 24 Feb 2011 13:54:09 GMT

There are some lessons to be learned from a recent Nevada Association of Realtors (NVAR) survey of distressed homeowners in that state. The report from the study, “The Faces of Foreclosure,” really helps to put the human element into the foreclosure equation and brings some clarity into what is going wrong with the process.

Nevada is a particularly useful laboratory for this research because Nevada has led the list of foreclosure states almost since the beginning of the crisis and has almost five times as many foreclosures as the national average. In the fourth quarter of 2010 one in every 31 Nevada residences had some sort of foreclosure filing according to RealtyTrac.

The August 2010 survey reached 500 Nevada homeowners in who had received at least one foreclosure filing in the past 12 months. Almost half had lost their home by the point of the survey, 16% had been helped to avoid foreclosure and 30% were still in the process.

Of these homeowners 86% had attempted to get in touch with lenders about their distress situation. Real Estate Agents were contacted 40% of the time, so obviously Agents play an important role in getting help for these people. Only 23% had worked with a foreclosure counselor.

Attempts to get lender help were met with numerous obstacles and 58% said that they received no help on alternatives to foreclosure from their lender. Only 12% found their lender very willing to help. The biggest problem was finding someone consistently who could deal with the problem authoritatively. Clearly, there is a need for lenders to increase both quality and quantity of staff capable of making some decisions about appropriate foreclosure alternatives.

HAMP hasn’t helped these distressed homeowners. Only 3% reported that they received positive help through the HAMP program, while 7% said going through HAMP actually hurt them and 15% said HAMP made no difference in the process. Only 41% of the respondents had even heard of HAMP and only 25% had used this program. Another 5% said they didn’t qualify for HAMP and 24% said they knew of the program but didn’t use this process.

The government’s HAFA Short Sale and Deed-In-Lieu program, HAFA fares even worse. A whopping 61% of the respondents didn’t know about HAFA, while 10% said they used the program and only 2% said they’d been helped by it.

Homeowner experiences with Short Sales of any kind have not been encouraging. While 35% of the respondents had tried a Short Sale, only 10% had been helped by the Short Sale, 9% said it made things worse and 16% said it made no difference. The biggest problem cited to failure by 56% of respondents was the complexity, slowness and confusion generated by Short Sales. A total of 61% of those surveyed said that simplifying the Short Sale process would have helped them, and this is one of the biggest take-aways from the survey.

Lender processes must be streamlined and particularly those that relate to Short Sales. NVAR’s report agrees that there is no one magic bullet that will stop foreclosure, but servicer attention to make the process faster and easier and to have one authoritative point of contact within the lender’s operation for each distressed homeowner would help. Lenders must make every effort to contact distressed homeowners and make a clear assessment of realistic alternatives to foreclosure very early in the distress process. Eliminating or reducing deficiency judgments is another way lenders can get more distressed homeowners through the process.

What can Short Sale Agents do? Off-loading as much of the contact with lenders as possible and assisting with preparation of hardship documentation are two positive steps. Make sure the negotiator handling the homeowner’s case is highly trained and experienced. These negotiators will have the greatest success getting to the lender decision-makers and coming out with a successful deal.

5 Ways to Ban Boring Advertising

Thu, 24 Feb 2011 13:51:55 GMT

The newspaper is riddled with boring Agent ads that fail to differentiate one Agent from any other. Each day each person is exposed to about 3,700 marketing and sales pitches. What most people see is boring and utterly forgettable. What you must do with your ads is to stand out from all the overwhelming clutter of messages.

The Agent ad that annoys me the most are the business card ads in the local paper is some slight variation of this: there is a picture of a perky Agent with the slogan, “Pam knows real estate.” As a licensed Agent I would hope so! The problem is, presumably every Agent “knows real estate.” What is Pam’s specific niche or specialty? Is she a Short Sale specialist? Does she work exclusively with luxury home sellers? What is her unique sales proposition?

Here are five ways to stand out from the crowd and to amuse, inform and make your services memorable in the minds of potential clients:

1. Don’t assume that you are your customer. What you like may not be what they like. You may be uncomfortable with over-the-top or amusing advertising, but your clients will remember it. If you are unsure, do a number of different advertising pieces and track response.

2. Look for ideas in obvious places. One of the most memorable to come out of the Internet marketing field in recent years, for example, was a napkin that a marketer used to scribble a flowchart of his process to make money. He copied the napkin and gave away the image as a give away in exchange for sign-ups to his list.

3. Also look for advertising opportunities in less obvious places. A well-known Investor in a beachfront community sells luxury homes by holding crazy open house events that feature him being shot out of cannons or doing motorcycle stunts. Marketing expert, Rich Schefren, calls this over-the-top form of advertising “outrageous advertising.” These types of spectacular events attract plenty of press. When you score a feature article in the local press, an interview on local TV with B-roll (a short segment with your message), or you simply put that video out on YouTube, your message can go viral quickly.

4. An ad can be turned into an “advertorial” and put out as a news story, even if it is not specifically featured as such in the press. Copies of that advertorial can be sent out in mailings to potential clients as part of your credibility package.

5. Don’t be afraid to create and use a “swipe file” of the best examples of advertising that may work for your situation. As long as the ad is in a different market, avoids using trademarks of someone else, and is changed to fit your situation, there should be no copyright or trademark difficulty.

You’ll find that using a little imagination to separate your advertising from all the rest is both fun and a much more effective than the vast majority of ads from the competition.

Sleuthing the BPO Agent’s Motivations

Thu, 17 Feb 2011 13:19:55 GMT

Do you find that certain BPO Agents consistently over-price a Short Sale or leave certain important mitigating factors out that should have caused the price to be lower? If this Agent is a frequent thorn in the side to your Short Sale business it is time to do a little investigative work as to why this is occurring and to do something about it. After all, the BPO is arguably the single most important factor in determining whether your Short Sale will be approved or not.

There could be several factors going on that could lead to frequent bad BPOs:

1. The Agent is from out of the area and hasn’t bothered to do the research necessary to know that the comparables that he or she is choosing are truly similar. He or she might not be bothering to go inside the home, or may be sending some inexperienced assistant to gather the data about the house. The Agent may simply take the last listing price on the MLS and make that the BPO price, despite evidence that this price was too high to get the property sold.

2. The Agent may be comparing distressed properties with retail, non-distressed sales rather than comparing the Short Sale property with others that have sold in a distressed situation.

3. The Agent may have some ulterior motive. For example, if the BPO Agent is also a major REO Agent in the area, there may be a conflict of interest. An Agent who expects to get a high percentage of the failed Short Sale deals in the area as REO listings may have a vested interest in pricing the BPO high in order to sabotage as many Short Sales as possible. Agents who act from this type of ulterior motivation do both the Lender and the Homeowner a huge disservice.

There are several things the Short Sale Agent or Investor can do when it is clear that the BPO is way off the mark:

1. Insist on being present for the BPO so that you are assured that the property has been thoroughly inspected inside and out by a qualified Agent and that the BPO Agent has your documentation that led to your offer price.

2. Ask for a second BPO from a different independent BPO Agent. Give the Lender your reasons why you believe the first BPO was in error. The Lender may require a few weeks pass before the second BPO can be done.

3. Do some deeper investigation if necessary into the motivations of the BPO Agent and their background. Is that Agent also a major player in the REO marketplace? Do they have a record of high BPO’s? Have they received REO listings for properties where they were the BPO Agent for a Short Sale? If you can document a pattern of conflict of interest this should be reported to the lenders involved and to the local MLS.

Dealing with a Demanding Loss Mitigator and Other Negotiation Tips

Tue, 15 Feb 2011 14:04:17 GMT

Tip # 1:

Every so often an Agent or Negotiation Specialist will run into a bank Loss Mitigator who asks for far more detail than the usual package requires. Why does this happen?

Sometimes the Loss Mitigator sees something in the package that causes some question. Perhaps the financial statement varies dramatically between the two or three month sample that was turned in and they want a full year to average things out. Sometimes they’ll be digging to find out if there are more assets than are indicated in the package. Sometimes they simply ask because they can.

More likely, that the Loss Mitigator is simply answering to the requests of a number of other decision-makers and may have been asked to gather more information. Some of those other parties involved in the typical Short Sale are a Loss Mitigator for the private mortgage insurance company, the investor holding the note, or an auditor within the lending institution.

First make sure that you have a good working relationship with the Loss Mitigator so that they are likely to respond cooperatively when you ask where the request for extra paperwork came from. They should be willing to tell you, particularly if the request came from the note investor, private insurance carrier, or inconsistencies they see in the paperwork.

Tip # 2:

When you send any follow-up documentation not only send it directly to the Loss Mitigator specifically assigned the case, but also to the general Loss Mitigation fax number where you probably first sent the hardship package. This way, the Loss Mitigator has the latest information quickly and can follow up more expeditiously, but if the file is tossed by the Loss Mitigator there will still be a complete copy of the file in the lender or servicer’s general repository. Without a complete set on file if the case is reopened all the paperwork will have to be re-faxed.

Tip # 3:

Those dealing with Bank of America second mortgage will find that lately they have been making two options available. The homeowner can accept a deal for a small amount paid at the Short Sale closing and a promissory note for the remainder, or a higher amount at closing in order for Bank of America to make the remainder uncollectable.

Tip # 4:

In dealing with the Equator system you’ll find that after a certain point you can’t go back a step or two. For example, if you submit a file and part of it is lost, you can’t go back to add the missing part; you must start all over. (The joys of working with an unforgiving system!)

Likewise, if the negotiator approves the file and assigns a closing date and you need to change the closing, the change can’t be made within the system. The Loss Mitigator may agree to one change manually, but there will be very little flexibility to change a date once it is set. Once again, a need for extension may cause the case to start all over again.

A better idea: Agents, if you are stuck in endless sessions on the phone with Loss Mitigators or with unforgiving computerized systems trying to get the documentation straight, reach out to our team of Negotiators. They’ll save you countless hours of time and get the job done effectively because they deal with Loss Mitigators all day, every day.

More Economic Disaster is Imminent

Thu, 10 Feb 2011 13:39:21 GMT

Just when Washington and Wall Street have begun to tout a slow, but steady recovery, some economists have begun to warn of another threat that may topple our unstable economy.

Money and Markets and its publication, Safe Money Report has been warning recently of the impending collapse of a number of our state and local governments. U.S. states are $3 trillion in debt and many are being forced to take draconian budget-cutting actions in order to keep from defaulting. Over 100 major cities and other local government units are likely to default in the near term. The federal government has even been discussing the possibility of allowing states and cities to go bankrupt, eliminating their obligations to pensioners, current employees and creditors. Over 250 municipal bonds have already defaulted and investors are bailing out of bonds quickly.

The U.S. government is also in trouble and doesn’t have the funds to bail out the states and cities. We have a social security deficit of $130 billion this year a full 5 years earlier than anticipated. Medicare is the largest and fastest growing piece of the deficit out of control. The federal government owes over $187,000 per U.S. family of four. This is setting up a situation for massive cuts in benefits and increase in taxes.

Taxes are in danger of skyrocketing. Minnesota and California are talking about boosting sales and other taxes. Illinois has already boosted income taxes.

The best defense is a good offense, according to Martin Weiss and Mike Larson of Money and Markets. These economists and reporters were very accurate in their predictions prior to the burst of the housing bubble and predicted accurately the companies that would fail as a result of the financial crisis of 2008. These economists argue that the last recovery was completely bought and paid for by the Federal Stimulus programs of 2008 and 2009, and the federal actions have only made the problem worse.

What does this mean for the housing market? It means that the crisis will continue even longer because governments at all levels will be laying off more workers, failing to pay pensioners, and leaving the poorest of the poor with fewer options. Meanwhile taxes will go up, in some cases dramatically, and fewer people will be able to afford to own homes. Rental, particularly of the cheapest variety, will become even more in demand than now.

Once again, investment money will sit on the sidelines until the economy sorts itself out again. They will need to park the funds in the strongest banks, not in any of the hundreds that are likely to crash and burn as the economy weakens again. Some of these investors with money on the sides could be encouraged to put funds into multi-family rentals and distressed housing and notes.

For Investors and Agents the best strategy is exactly what we have been recommending for the last two or three years—concentrate on getting in the middle of distressed transactions and stay clear of most buy and hold investment positions for now. Stay within the wholesale market with Short Sales and REOs until the retail market returns. That return is not likely for at least two or three years, and some predict an even longer time frame before some state of normalcy is reached.

Impact to Homeowners if Mortgage Tax Deduction is Eliminated

Tue, 08 Feb 2011 18:38:39 GMT

The National Association of Home Builders (NAHB) has recently published a study, Who Benefits From the Housing Tax Deductions? That concludes a congressional bill to end mortgage tax deductions would disproportionately impact middle-class homeowners. The tax structure would become less progressive as a result of this major change to the tax laws.

The report shows that the people to benefit most are taxpayers with incomes between $50,000 and $200,000, and households with larger numbers of members. Those earning less than $200,000 get 68% of the mortgage deduction benefit and 77% of the real estate tax benefits. Bob Nielsen, chairman of NAHB, indicated that "Proposals to reduce or eliminate the mortgage interest deduction are short-sighted and would harm the economy and job creation at a time when housing is poised for recovery." The change in policy would break trust with the American people, and especially those who depend on this deduction to meet household expenses.

According to the study conducted by the neutral Joint Committee on Taxation (JCT), every income group below the $200,000 mark had a more progressive income tax with the two property-related deductions than without them. This conclusion breaks down the common argument that the real estate-related tax deductions are not progressive. The report indicates that "for taxpayers with less than $200,000 in adjusted gross income (AGI), the average tax benefit of the mortgage interest deduction is equal to 1.76 percent of AGI. For taxpayers with more than $200,000 in AGI, it is equal to 1.5 percent. This is clearly indicative of a progressive tax benefit."

Another aspect of the study was to examine the relationship between housing tax benefits and household size. This factor was studied to see whether the criticism that the mortgage interest deduction causes people to purchase larger and more expensive homes than they need is accurate. Based on IRS 2004 data, the report concludes that the average benefit of the mortgage interest deduction rose rather steadily with the size of the household. In other words, "Larger households and families require larger homes. And larger homes require additional mortgage debt to finance, particularly for younger homebuyers, who are or may be in the process of having children. These greater home finance costs imply larger deductions for mortgage interest and real estate taxes."

With these impartially prepared conclusions it is important for Agents and others to lobby congress officials against the proposed changes to the tax code that would eliminate the mortgage and real estate deductions. These changes, if they became law, would only deepen the housing recession and discourage the middle class and first time buyers from home ownership.

Agents, Are You Feeling the Pinch of Fewer Buyers?

Sat, 05 Feb 2011 13:12:53 GMT

The drop in sales volume over the past few years has put a monkey wrench in traditional methods of finding buyers. Referral marketing slows down when there aren’t as many sales each year. Recent reports have indicated that there are at least eight states that are running out of home buyers—Arizona, California, Florida, Georgia, Illinois, Michigan, Nevada and Oregon. If your state is one this list, now is the time to try something new to attract the increasingly scarce homebuyer.

One strategy is to look for non-traditional buyers. Many Agents still avoid those potential buyers who cannot qualify for a conventional or FHA mortgage because of credit flaws or lack of a down payment. The vast majority of would-be buyers fall into this category these days. There are ways to serve the homebuyers who do not qualify for a traditional loan right now.

1. Look for sellers willing to finance buyers through rent to own or lease option strategies. Sellers who are downsizing and have lots of equity in the home may well be willing and able to give the buyer a two or three year period to improve credit in order to apply for a mortgage on the house. Part of the lease option down payment can be the Agent commission, or it can be arranged to pay part of the commission at the time the property is leased, and part when the house is actually sold.

2. If the home mortgage is only moderately under water and the payments are current, the owner may prefer to complete a mortgage assignment rather than a Short Sale. The ideal buyer in this case is someone with good income, but who has been unable to qualify for a mortgage because he or she is an entrepreneur without regular W2 income, or is currently rebuilding credit. In these situations the mortgage assignment fee that is paid by the buyer will include the commission for brokering the deal.

3. Look for non-traditional buyers to take on Short Sale deals. Instead of concentrating on the dwindling supply of first time homebuyers market to cash buyers in your area and build your buyer’s list for those looking to either flip property to end buyers or to investors who will rehab and hold these properties as rentals. You can find investors and cash buyers by looking at the recently solds in the MLS or in the local recorder’s office and picking out the cash sales. Cash buyers may also be attracted by signage in high traffic areas, print advertising in the local classified pages, or by social networking at local Chamber, real estate investment or business groups, or by online advertising through sites such as Craigslist.

There are loads of non-traditional buyers to keep the pipeline of people looking for single family homes to buy. It just takes marketing outside the box to find them.

The Art of Negotiating a Great Short Sale

Tue, 01 Feb 2011 15:11:24 GMT

In a Short Sale there are many interests at stake making it always a challenge to reach a closing. The Agent with a keen sense of the art of negotiation will be more likely to be successful. Here are a few keys to the fine art of negotiation for Short Sale Agents:

1. Stay calm, polite and professional. Sellers under the stress of impending foreclosure are often going to be difficult to work with. Buyers may be increasingly nervous and suffer buyer’s remorse as the negotiations with the lender drag on. The lender’s loss mitigator is just an underpaid employee who is beset with too many cases to resolve and may be less than cordial. Don’t react negatively to other people’s stress, anger or rudeness.

2. Keep control of the situation. Make sure that the files sent to the lender are complete, well organized and sent all at one time. Make sure that they are confirmed to have arrived, and check back regularly to know when the file hits each stage of the process and specifically who to contact once the file is assigned to a mitigator. It is especially important that your offer price is well supported with comps and that you meet with the BPO agent at the house to make sure he or she has a copy of all your supporting data and understands the reasoning behind your offer.

3. Know the end goal and negotiate with the goal in mind. Leave some room in the offer so that when the lender counters you have someplace to go with the price and other details of the offer. Don’t reveal all your cards up front and always have some things you can give away in exchange for something that is more important to you.

4. Leverage your strengths. That leverage may be the property’s strengths or weaknesses relative to others in the neighborhood, the amount that the lender will save compared to taking the property to foreclosure, the strength of your buyer, etc.

5. Go for a win-win-win between the homeowner, the lender and the buyer so that everyone feels satisfied that they have come away with a fair settlement.

The Massachusetts Foreclosure Case: Broader Implications

Fri, 28 Jan 2011 14:21:59 GMT

Earlier this month the Massachusetts Supreme Judicial Court determined that two foreclosures brought forward by US Bancorp and Wells Fargo were illegal because the lenders had not proven sufficiently that they owned the mortgage notes. The mortgages had been bought and sold in bulk a number of times before the foreclosure. The mortgages were not reassigned individually and therefore it would be difficult to prove that these lenders actually owned the notes.

With this precedent set there are many class action suits in Massachusetts and elsewhere set to be filed with similar bulk mortgage circumstances. The plaintiffs in these class actions hope to “unwind” the faulty foreclosures or prepare the way for more favorable settlements.

More recently, the Supreme Judicial Court of Massachusetts has said that it will hear a case where a foreclosed home has been resold, and the attorney for the former owners claim that the resale was invalid. If the Massachusetts court rules for the former homeowner, the Investor who bought the property from the bank will lose out because the title from the Lender was invalid. The home may be awarded back to its original owner.

In the mean time Lenders, Homeowners and Investors in Massachusetts are simply waiting for the Massachusetts high court to hear arguments in the case sometime in April.

This also has wide-spread implications throughout the country calling foreclosures into question retroactively as well as prospectively for any mortgages that were sold in bulk without individual title transference. Courts in different jurisdictions will probably rule differently, but those that fall into the Massachusetts camp will effectively close down foreclosures indefinitely.

This, of course, is a boon not only to homeowners, but also to Short Sale Investors. It is likely to make lenders much more cooperative with Homeowners who wish to get approval for a Short Sale, and to those who want to work out a loan modification.

For Agents who have been involved in REOs now is the time to switch to finding Short Sale sellers to replace the uncertain business that bank owned homes may bring for now.

Typical Title Problems

Tue, 25 Jan 2011 21:03:25 GMT

It’s always important to have a good title company around to catch the potential title problems well in advance of a closing. It’s a good idea for Agents to have a good idea of what might trip up a deal and help to get them resolved early, or to avoid the losers that are unlikely to close.

1. Survey and easement issues. Easement issues include portions of a property that the city, utility companies or other entities may have established so that they can build a road, place utility systems, or possibly claim part of a yard in order to widen a road. At times an easement will render a lot unusable for building purposes. Poor survey work may have resulted in a neighbor putting a building on part of the property in question. When something as permanent as a building encroaches it may not be easy to resolve the error and clear the title.

2. Liens are perhaps the most common title problem on distressed property. They vary widely in size and seriousness. In some states mechanics liens will remain in force for only a short period of time unless the lien-holder takes the homeowner to court and gets a judgment. City liens for violations such as failure to remove trash and debris from a property might be negotiable and the city might be cooperative about removing the lien in order to get an abandoned property sold just as long as the original nuisance is removed. Federal, state and property tax issues may be more serious and difficult to remove, but often they can be reduced if the homeowner can show hardship.

3. Death and divorce make it difficult to get the sign-off on a sale from all owners. Heirs may be spread around the country and may have different expectations on what should be done with a dead parent’s house. Divorced owners may be so estranged that the one who is already out of the house may wish to have nothing to do with helping out their former partner. Unless all parties agree to the sale, it’s a no deal.

4. The robo-signing scandal is calling into question the validity of title on foreclosed property all over the country. In particular, Massachusetts courts have recently refused to honor some foreclosures calling into question the status of title of these properties. Fortunately, a Short Sale avoids this type of title issue because the Homeowner is giving their consent to the sale, as well as the Lender.

How to Get PMI Removed

Fri, 21 Jan 2011 13:21:56 GMT

Private Mortgage Insurance is the extra amount owners pay each month to ensure against default on a property. It is generally required of loans that do not have a 20% down payment. It must continue to be paid as part of escrow until the loan is paid down to 80% of the original value of the loan. It often represents a significant payment each month adding a thousand dollars or more each year that the homeowner must pay in order to assure the Lender that there is money set aside to pay for the property if the homeowner defaults.

The Homeowners Protection Act of 1998 helps to regulate PMI and the circumstances by which it can be removed. The law provides a requirement of disclosure to the homeowner that the insurance is being charged and the circumstances that will call for its removal in all mortgages written on or after July 29, 1999. On post-July 29, 1999 loans the owner can initiate a request to have the mortgage insurance removed when the loan balance reaches 80% of the original value of the property. The request must be made in writing. When the value reaches 78% of the original value the Lender must automatically remove the PMI provided the payments are current.

Second mortgages are not subject to the same rules, nor are non-owner-occupied properties. The rules for the application of mortgage insurance are covered by the loan documents for these non-owner-occupied, second mortgage or pre-7/29/99 loans.

For pre-7/29/99 loan originations the rules are slightly different. There must be an annual written statement detailing the rights of the homeowner to request the cancellation of the PMI and contact information for the homeowner to use in getting in touch with the proper channels for making the request. The original loan document determines when the mortgage insurance may be removed for these earlier and non-owner-occupied loans. In some cases the mortgage insurance may be applied indefinitely, while for others the mortgage insurance may be applied until the loan balance is at 80% or market value or even 70% of market value.

There is little incentive for Lenders to remove the PMI on the properties not covered by the Homeowners Protection Act and the owner may need to petition to get the PMI removed. In order to get the Lender to drop the insurance the owner may need to provide written documentation that shows:

--The original loan documentation highlighting the rules for removal of PMI.

--Documentation showing that the balance meeting the removal stipulation has been reached.

--Alternatively, an appraisal showing that the property has appreciated to the point where the current market value exceeds the point at which the PMI is eligible for removal.

Check back with the mortgage company if no response is received within 30 days.

While the terms will vary from Lender to Lender in general a request to remove PMI will require that the loan be at least two years old, and the loan to value for the property should be no more than 75%. If the property meets these criteria then it is probably worth asking the mortgage company to order an appraisal—which the owner will be required to pay—to submit along with the request for removal of the PMI.

If the loan is not within a few scheduled payments of reaching the amount indicated in the loan documents by which the PMI may be removed, it may be worth paying down the principal on an accelerated basis in order to reach that point more quickly.

5 Ways for Agents to Save on Taxes

Tue, 18 Jan 2011 14:57:13 GMT

The average Real Estate Agent gets clobbered each year with taxes. The reason is as a self-employed professional the Agent pays 15.3% in employment tax (FICA) and in addition, potentially may owe 25% or more in Federal and State income taxes.

Here’s a typical example. An Agent makes $100,000 in 2010 and pays out $15,300 in FICA. Their combination of Federal and State income taxes is 25%, or $25,000, leaving only $59,700 in after tax income. That’s not enough to keep most families from worrying about how to pay for the mortgage, health insurance, the kids’ braces or their college education.

Here are six ideas for saving big bucks pre-tax:

1. First, conduct your real estate business through a professional LLC or by using a Sub-S corporate structure. By earning an income as a company rather than an individual a wealth of possible deductions open up. In the Sub-S scenario, elect to take a reasonable amount of earnings as salary and pay FICA on that portion. The rest is paid as a distribution as a shareholder in the company. Let’s say, $50,000 of the amount earned is taken as salary and $50,000 as a distribution. The FICA has just been cut from $15,300 to $7,650.

2. Build up your retirement income in an IRA or a 401k. You can defer (as of 2010) $16,500 to a 401k pre-tax, or up to $22,000 if you are over 50. With a profit-sharing plan as much as $49,000 can be dropped in the retirement plan per member, and it is deducted pre-tax from earnings.

3. Add your spouse as an employee for legitimate, documented work and put as much as $16,500 of the salary into a retirement plan pre-tax. Your spouse will pay a little FICA, but the retirement contribution we be taken out pre-tax.

4. As a self-employed person the Agent can deduct 100% of medical insurance premiums, but other medical expenses are still subject to the 7.5% of adjusted gross income floor. However, by setting up a flex-plan, a health savings account, or a medical expenses plan medical expenses can be paid from pre-tax dollars. With a medical expense plan employees (for example, your spouse) can bring medical receipts for expenses not covered by the health care plan for reimbursement with a memo to the owner, and the reimbursement becomes deductible from the first dollar, not after 7.5% of income.

5. Take advantage of Section 179 of the Tax Code to take a depreciation deduction for capital expenditures for the business on an accelerated schedule.

These are just a few of hundreds of legitimate deductions that are available to the Agent and other professionals who work inside an LLC or S-Corp rather than as a sole professional proprietor.

5 Ways for Agents to Save on Taxes

Tue, 18 Jan 2011 14:57:11 GMT

Here are six ideas for saving big bucks pre-tax:

5. Take advantage of Section 179 of the Tax Code to take a depreciation deduction for capital expenditures for the business on an accelerated schedule.

These are just a few of hundreds of legitimate deductions that are available to the Agent and other professionals who work inside an LLC or S-Corp rather than as a sole professional proprietor.

Making Your Success Predictable in 2011

Thu, 13 Jan 2011 15:11:01 GMT

Many Agents have had another rough year in 2010, but 2011 does not need to be another down year for enterprising Agents. Here are some ways that you can take your real estate career in hand and write your own ticket to success in 2011:

1. First, get over feeling sorry for yourself. The age of plentiful peak-of-market sellers and buyers is over, and in many markets full recovery may be several years out. Feeling defeated will only bring about defeat.

2. Employ social media to full advantage. It will become as important to have a Facebook Fan Page for your business in 2011 as it has been for the last several years to have a well optimized website that competes well for top keywords in Google. Advertising in Facebook is far more targeted than in Google and the other search engines because the likes, interests, profile, causes and events that Facebook members write about and sign up for are all taken into consideration. Video is also becoming a key tool to separate out those who attract buyers and sellers from those who do not. Tools such as Tubemogul and TrafficGeyser can help you syndicate your videos widely on the Internet.

3. Online advertising is not just about getting the ad on Craigslist anymore. You must keep your website updated with fresh information every week. You should write articles for ezine directories, real estate networking sites, Linkedin, and other sites to establish your authority in your field and to drive traffic to your main site. There are tools that will allow you to blast your ads to many sites at one time—TrafficGeyser is just one. Employ these tools to save time and have the maximum reach.

4. Find new niches to specialize in. If you have been avoiding clients who need a Short Sale or have steered clear of showing bank-owned property to clients, now is the time to get involved in distressed property sales. In most markets they represent at least 25% of all sales. Short Sales do not have to take up inordinate amounts of time if you work with an Investor-Buyer with access to TheAgentMagnet where Short Sales will be negotiated on your Seller’s behalf by industry experts.

5. These days clients are looking for options to tough housing problems. It’s hard for the majority of clients to qualify for a traditional loan. Many are confused about foreclosure and the options that may be available to avoid foreclosure. The more options that the Agent can provide, the more likely the real estate transactions will reach the closing table. Be flexible. Look for legal, but unconventional solutions such as locating an Investor who will lease option a home to a client with less than perfect credit.

Helping Older Distressed Homeowners

Tue, 11 Jan 2011 15:49:51 GMT

This year marks the beginning of when the first batch of baby boomers will turn 65, and many of these people will begin the process of retiring. The Social Security Agency estimates that of 80 million baby boomers the first waive of retirement and disability claims are about to hit Social Security offices around the country increasing claims by about 1 million annually by 2017.

Many of these boomers are in for a rude awakening. Many refinanced during the salad days of the mid-2000s and now are faced with the inability to downsize and move to retirement-friendly communities because their homes are among the millions with under water mortgages. It is a myth that the vast majority of older Americans have already paid off their homes.

Many did not plan adequately for retirement and placed too much reliance on home appreciation in order to finance retirement. The first thing a boomer nearing retirement should do is to take a thorough look at their finances and with the help of a financial planner come up with a strategy for repairing the damage that the weak economy and failure to adequately plan for retirement has wrought on so many.

For those who need to continue to work past the traditional retirement age, or who will be working part time, perhaps the best option is to stay in the current home and to refinance or work out a loan modification in order to reduce monthly payments. That extra money can then be set aside towards eventual retirement. Many boomers, unlike the previous generation, are likely to prefer staying in place for a longer period of time anyway, if their finances allow it.

For those who face health issues, are laid off at or close to retirement age, experience the death of a spouse, or other hardships that require moving out of the old homestead, a Short Sale will be the best option to avoiding foreclosure. A Real Estate Agent may well be the first point of contact for those who are feeling the pinch from a hardship and perhaps for the first time in their lives are facing some challenges making ends meet. They are usually proud of their long, productive records of working hard and paying their debts on time and are understandably embarrassed that the situation has changed and perplexed about what to do about it.

The Agent should be prepared to answer some of the basic questions about options and direct the older client to other free or inexpensive resources to getting additional questions answered. Always make sure that the client has spoken with a free HUD-approved housing counselor if they have any questions about the most appropriate option to meet their particular situation.

In increasing numbers Agents will be running into situations where elderly clients are showing signs of age related dementia or Alzheimer’s and may not be able to cope with the hardship paperwork and the complex decisions surrounding the Short Sale of a property. In this case, see if a family member, an estate attorney or a social service agency can assist on the homeowner’s behalf.

Lender loss mitigation specialists may not be sensitive to how important it is for older homeowners to maintain their credit in order to find decent retirement housing, an appropriate rental or assisted living once the home is sold. Older distressed homeowners have less time to recover from a credit hit than those who are younger and able to be reemployed. Negotiating the Short Sale as quickly as possible will generally be in the best interest of these older clients so they can move on to a new housing situation, and hopefully one more appropriate to the age and condition of the client, as quickly as possible and with as little impact to credit or the pocketbook as possible.

Top 5 Real Estate Headlines of 2010

Fri, 07 Jan 2011 13:27:22 GMT

It always helps to inform what will happen in the New Year by looking back on what happened in the old year. Here were the top 10 real estate news headlines of 2010:

1. Major servicers caught in foreclosure documentation scandal. In a June 7, 2010 deposition for a Maine foreclosure proceeding Ally/GMAC foreclosure documentation processor, Jeffrey B. Stephan, admitted that he and others on the document execution team of GMAC barely have time to look at signatures and a few numbers on the thousands of foreclosure documents that they sign off on per month. This revelation led to discovery of irregularities in handling foreclosure paperwork at several other large servicing agencies and law firms, and a halt to foreclosure proceedings for six weeks or more between October and November of 2010 in several judicial states Several servicer including Bank of America, JP Morgan Chase, and Ally/GMAC halted foreclosures while investigating the mess. While most Lenders had gone back to processing foreclosures by year-end, the documentation melt-down is expected to slow the process of handling foreclosures well into the new year and cause many judicial districts to take a much closer look at foreclosures before granting them.

2. Interest rates hit a 50+ year low at 4.17 percent for 30 year fixed mortgages. In early November 30 year fixed mortgage rates hit a half-century low of 4.17 percent on Freddie Mac’s index, anticipating the release of Treasury bonds by the Federal Reserve Bank. While rates have steadily climbed since reaching this historic low, they are expected to remain around the 5% mark through much of 2011.

3. Homebuyer tax credit gives boost to housing market early in the year. The Homebuyer tax credit officially ended April 30, 2010, but was extended until June 30 in order to allow homes that were under contract by April 30 to close. Since 2008 the Homebuyer tax credit helped 3.3 million homeowners and cost taxpayers $23.5 billion. While it helped boost sales in the first half of the year, it may also have been responsible for a precipitous drop in home sales through much of the second half of the year in most housing markets. It may have mostly caused people who would have bought anyway to move a little sooner rather than generated a lot of sales that would otherwise never have materialized.

4. Home prices continue to plunge. In the September/October S&P/Case-Shiller Home Price Index all twenty of the major markets that are followed were down. The 20 city composite fell by 1.3%. Overall the prices have been falling for five months in a row. Six of the cities reached the lowest average prices since the market high points in 2006 leading Case-Shiller analysts to speculate that a double-dip housing recession is “almost here.”

5. 25% of all home mortgages are under water. This startling statistics is due to get worse if we are, in fact, in a double-dip housing recession. Coincidentally, about one in four real estate sales in 2010 were distressed property sales. Here are some factors that are strong indicators that 2011 will again be a big year for distressed home sales: 39% of consumers in a Pew Research survey indicate that they would consider defaulting on a negative mortgage. Unemployment continues to range between 9 and 10%, a big factor leading to the need for families to get rid of unaffordable mortgages. The “shadow inventory” of homes already bank owned, or being foreclosed upon stood at an estimated 2.1 million as of August, according to CoreLogic. That inventory is growing.

Should You Charge Fees for Short Sale Negotiation?

Thu, 06 Jan 2011 19:58:12 GMT

Agents who do their own Short Sale negotiation are often tempted to charge for the added 30 or 40 hours of service that is required in the process of submitting Short Sale documentation to the Lender and staying in constant phone or email contact with the Lender’s Loss Mitigation Department sometimes for months on end until the case is settled.

Furthermore, the laws regarding negotiation services are complicated and diverse. Some states require negotiators to be licensed real estate agents. Some require lawyers. Some require negotiators to be licensed by a given state department. Many states, including Florida and California, forbid up front fees. Some allow them as long as fees are properly disclosed to all parties. Some states only allow attorneys to charge fees for Short Sale or Loan Modification negotiation. Oregon and several other states allow licensed debt management companies, mortgage brokers or real estate brokers to negotiate Short Sales, but real estate agents are specifically forbidden from charging for the negotiation process outside of their normal commission.

An Agent from Arizona recent wrote in an article for Short Sale Daily News that because HUD is now often denying special Short Sale negotiation fees on the seller side (paid for by the Lender) Agents are now often putting those fees on the Buyer side. In a recent court case a Seller sued the Seller’s Agent for charging a $1500 fee on the Buyer side, arguing that because of the extra fee they were unable to find a Buyer for the Short Sale and the home subsequently went into foreclosure. The court found for the Seller against the Agent.

The situation is so fraught with challenge that the best move an Agent can make is to allow an experienced negotiation team to do the negotiation for you on the Seller’s behalf. Agent’s Advantage uses former loss mitigators to negotiate with Lenders. They are experienced in dealing with most of the major Lenders, and in most states. They do not charge Sellers or Agents for the service because they are taking part in the Buyers side of the transaction. These professional negotiators work to make sure that the Agent or Agents involved get their full commissions. Working with Agent’s Advantage saves the Seller’s Agent time and allow the Agent to get back to the activities that the Agent does best, finding Sellers and marketing to Buyers.

Online and Mobile Marketing Frontier: Local Advertising

Wed, 29 Dec 2010 13:26:00 GMT

Among the last groups to embrace online advertising are local brick and mortar merchants. While Real Estate Agents tend to be a little ahead of the curve when it comes to using the Internet to reach potential clients, most Agents have barely scratched the surface.

The first thing the Agent or the brokerage needs to do is to claim Google’s local place page. Google has actually created almost 50 million place pages for local businesses entities around the world. Only 2% of these free online web pages have been claimed (about 4 million businesses worldwide have been listed). Simply go to http://www.google.com/local/add to add your business. Filling out company name, address and other pertinent information will get the business listed in Google Maps and will create a content page for the business. On that page you can add photos, videos, links to related sites, and a description of the business. Make sure your page has several relevant tags for your business category and specialties.

If your business has reviews at Yelp, or are listed in Four Square or various national or local citation directories, that information will also appear in your Google Places webpage. The more citations and reviews a local business has and the more content-rich the Google Places webpage is, the higher the ranking for the Google Places page will be in the place listings in Google search. You can keep track of usage statistics via your page dashboard.

Bing and Yahoo have similar Maps and Place information listings for businesses, although they are not quite as highly developed or as frequently searched.

Mobile advertising is also going local. There are over 50 million smartphones among the 5 billion cell phones in this world, and yet advertising via text or SMS is in its infancy. It is as easy to rank highly in smartphone advertising now as it was for online computer advertising in 2002, and those who get in now can dominate the market with fairly small effort or expense.

Several websites specialize in helping businesses to set up simple smartphone and text advertising campaigns including Beastmobi, Mofuse, and MobiSiteGalore. WordPress also has a mobile landing page plugin.

Mobile traffic for text, mobile landing page and other types of mobile advertising can be bought from the search engines Google, MSN AdCenter, and Yahoo Mobile. Another good specialized source for mobile is Admob.

These are just a few of the growing advertising tools available for marketing to local buyers and sellers. Since over 80% of the initial contacts made by potential real estate clients start online, any Agent who fails to optimize an online and mobile presence within the local marketplace is missing the boat.

Distressed Owners: Not Your Traditional Sellers

Wed, 22 Dec 2010 22:16:55 GMT

For the Agent in any market battered and beaten with Short Sales and REOs the days of making a call on a potential client in a $600 suit or driving up in a Mercedes are over. Leave home the gold and diamond jewelry as well.

Clients will only feel comfortable with the person they know, like and trust. If as an Agent you come off as flaunting your success and wealth while the distressed homeowner is about to lose everything forget getting the listing. Try to match what is appropriate for the situation of the clientele.

Remember that Short Sale sellers are probably facing the lowest point in their economic lives. They may be in the middle of selling half their worldly goods at an auction or garage sale to have enough money to pay the deposit on a rental or to pay off old debts. They may have sold their newer car for an older used one. They may be on food stamps and unemployment.

Most Agents are by nature extroverted and vivacious. For the Short Sale clientele, tone down the cheeriness a tad. Think more the tone at a reception following a funeral. Remember that most Short Sale clients are in some stage of the grieving process over the almost inevitable loss of the home.

Plan on listening; don’t talk much during the first session with a prospective Short Sale client. (Keep in mind the old adage that we were given two ears and one mouth for a good reason.)

Each of these families has their own situation to share. It is important for them to get that story on the table and this is your chance to let them know you are listening and you care. They are certainly not finding a sympathetic ear when they talk with the Lender. Much of the information that pours forth will be useful in building the hardship case.

Have a short but thorough presentation prepared that will cover the basic mechanics of a Short Sale, its benefits, and a comparison with any other options available to the family. If they have not sought a government-approved non-profit housing counseling, recommend that they do so before signing up for a Short Sale and give them the contact information. Then give your experience and background, and the contracted services you provide. This information will be pretty much the same in each presentation and the length will be predictable. Take the time to answer the Homeowners’ questions.

Keep it simple and keep the close a soft sell, or no sales pitch at all. The prospective clients should appreciate your simple, direct, professional and empathic approach.

Stages of Grief: Both Homeowners and Agents Go Through Them

Thu, 16 Dec 2010 16:11:26 GMT

Everyone who goes through a period of emotional turmoil and loss will experience the different stages of the grief process.

The grief process for a distressed Homeowner is quite recognizable. The first stage is denial. The Homeowner believes that the situation can be salvaged and so he borrows money from friends and family or from a 401k to make ends meet. He hides his head in the sand when the first payments are missed and avoids asking the Lender, Agent or Housing Counselor for help.

In the second stage the Homeowner experiences guilt and pain. He blames himself for losing control of his finances and for losing the house. The second stage moves on to the third stage, which is anger and blaming others. In this stage the Homeowner believes it is all the bank’s fault and he may lash out by getting verbally abusive to anyone who calls from the Lender, or to others who try to help. He may do physical harm to the home he is about to lose.

The fourth stage of grief is depression. In this stage it is hard for the Homeowner to function. He may give up on looking for a job or extra income. He may fail to prepare paperwork to fight for a Short Sale or Loan Modification. He may move out of the house and make it as hard as possible to be found.

Finally, in the fifth stage there is some light at the end of the tunnel. The Homeowner may receive an encouraging visit from an Agent or a Housing Counselor who can show the Homeowner some options. Having someone else to work through the process can feel like a tremendous burden is being lifted. At that point it is time to move on to plan a new future and then to experience some acceptance of what has happened and hope for the future.

Agents caught in many years of deteriorating home sales may well experience a similar grief process. Often Agents have the burden of their own housing dilemma in the middle of a crisis of maintaining a professional career.

Often denial is a particularly long stage for the grieving Agent. Many are stuck in the past thinking that the old days will return soon if they can just hang on. When the old methods fail to work and traditional clients fail to materialize, the realization that the Agent is in trouble can lead to any or all of the other negative stages of grief: guilt and pain, anger and blame, or depression. It is hard to turn around a career while going through any of the first four stages of grief.

Fortunately, there are options. The resourceful Agent can bounce back by recognizing that there is help. We have helped many Agents and Investors systematize the process of finding and picking the best Short Sale leads and working effectively with each client in order to complete the Hardship Package for the Lender, work with the BPO Agent to understand the offer, and find an end Buyer quickly. The system makes it easy to rinse and repeat with several clients each month so that the Agent can clearly devise a plan for a bright future.

The disaster of the current economy and the negative housing market need not lead to a permanent state of grief for the Agent who concentrates on the many Short Sale opportunities that exist today.

Meeting the BPO Agent: How and Why?

Tue, 14 Dec 2010 16:42:46 GMT

Even experienced Short Sale Agents often miss one critically important step in the Short Sale process: meeting the BPO Agent.

Some are under the impression that it is against the latest BPO and Appraisal rules to meet the BPO Agent. This is not a problem as long as the meeting is done correctly. The rules were set up to make sure that the BPO Agent is not unduly influenced or coerced into a particular finding. The Lender can’t make compensation dependent on a particular property value; the Buyer can’t bribe the Agent into reaching a given price.

The Buyer or the Buyer’s Agent can, however, legally provide all the data that was used to come up with the offer price. The BPO Agent can be met at the house to have specific details that led to the offer price pointed out (and to insure that the BPO Agent actually takes the time to walk through the house.)

Without this well researched data from the Buyer’s Agent it is not uncommon for the BPO to be just a cursory drive-by or for the last listing price for the property to become the de facto BPO price. That price may or may not have reflected the property distress condition. The comps gathered by the BPO Agent may or may not be properties in a similar distress situation.

Here are some tips for maximizing the likelihood that the BPO will be as accurate as possible:

1. Make sure that the property has been taken out of the MLS active listings until after the BPO has been completed.

2. Take the lockbox off of the property so that the Agent will need to be called for any showing.

3. Let the BPO Agent know that the Homeowner expects the Agent to be present for all appointments. This makes it less likely that the Homeowner will be questioned by the BPO Agent without the Agent present to intercede.

4. Have your own BPO done prior to the Lender’s BPO Agent appointment. Provide a copy of this BPO to the Lender’s BPO Agent.

5. Converse about the property while you walk through the building with the BPO Agent. Accomplish this as quickly as possible without giving up on thoroughness. Point out all the flaws in the property and the neighborhood and distress conditions that led to your offer price.

6. Furnish a copy of the offer and your justification for it.

By tactfully and professionally working with the BPO Agent the interests of the Buyer and Seller can be maintained without breaking any of the rules of conduct for the BPO Agent.

Hate Short Sales?

Mon, 13 Dec 2010 14:40:35 GMT

Short Sales in many markets are really unavoidable. Any Agent who wants to stay in business must accept Short Sale clients. So, why do Agents hate Short Sales so much? Fundamentally, Short Sales take a different skill set, more time, and a higher tolerance for paperwork and tracking than most Agents have.

The Short Sale skill set requires not only a great bedside manor with distressed homeowners, something that Agents often are gifted at doing, but also a cagy and astute set of negotiating skills with Lender Loss Mitigators. Loss Mitigators like to eat Agents for lunch—or at least it feels like that sometimes. How many Short Sale deals have you heard of where the Agent thinks they’ve got a deal but the day before closing find out that the Loss Mitigator has nixed an inspection fee or cut the Agent’s commission a percent or two? Lots, I bet. It really takes a negotiator who is in the ring with Loss Mitigators full time to get to know and counter all the punches that the Loss Mitigators like to throw.

The Agent who is not on the phone with the Loss Mitigator on a weekly, or even daily basis, will often find (or suspect) that the Short Sale case has landed at the bottom of the pile never to reach the top.

Loss Mitigators hate to see files trickle in a bit at a time. Never send in a Short Sale file until it is complete. The frustration of obtaining and organizing all the Short Sale documentation and getting it faxed or mailed out in one piece drives many Agents crazy. Often documents are lost on the other end, and they must be faxed multiple times.

Short Sales often take months to close, and they are less likely to close than a standard retail deal. Therefore, it takes having many Short Sale deals in the pipeline in order to assure that there will be one or two closings a month. This multiplies the time and frustration needed to make a living of Short Sales for the average Agent.

All of these frustrations are understandable reasons why Agents hate Short Sales. It doesn’t have to be that way. A negotiated for you Short Sale is the answer to systematically growing a Short Sale business without all the headaches of dealing with the Lenders and their tactics. Agents get to do what they do best: find and work with Sellers and Buyers, while Short Sale experts take care of the rest.

Understanding the Federal Appraisal Standards

Mon, 06 Dec 2010 19:15:18 GMT

The standards for appraisals on property underwritten or owned by federally insured institutions have been revised. The standards document, Interagency Appraisal and Evaluation Guidelines, is the result of a coordinated review by the Office of the Comptroller of the Currency, Treasury (OCC); Board of Governors of the Federal Reserve System (FRB); Federal Deposit Insurance Corporation (FDIC); Office of Thrift Supervision, Treasury (OTS); and National Credit Union Administration (NCUA).

The original appraisal guidelines implemented Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) and were first published in 1994. It was recognized that new regulations were needed because of the tremendous advances in information technology, and the economic reversals that have led to newer lender-related legislation and greater participation in the ownership and underwriting of property by the GSEs.

The guidelines reaffirm the requirement that the appraisal process be independent from the loan acquisition process. The document details types of communication and information sharing that is appropriate and communication that can be construed as coercive or unduly influential. It discusses appraiser qualifications and makes it clear that lenders are not to pick appraisers specifically because they are the lowest cost, provide the highest values, or assure the shortest turnaround times.

The guidelines also confirm that a BPO may not be used to meet minimum appraisal standards for a new loan origination.

The independence of the appraisal process from the loan and collection processes remains the critical element of the guidelines. The appraiser cannot have any direct interest in the property. The supervisory lines between the appraiser and any loan or collection process must be completely independent. There are some exceptions outlined for small, rural institutions.

It is ok to provide information to the appraiser, including a copy of the sales contract, but there should never be any indication of coercion in the process. It is also ok to provide supporting documentation and comparables used in the valuation, and to correct any factual information about the appraisal. The lender must define clearly the channels of communication that are appropriate to use in getting this supplemental information to the appraiser.

The lender is not allowed to communicate an expected or minimum valuation that would be acceptable. The payment for the appraisal cannot be conditional on the actual sale of the property, or contingent on a specific valuation. Continued use of the appraiser’s services cannot be contingent on giving a certain valuation.

The appraiser must hold the required state certification or license in order to be selected to evaluate a property and have the requisite knowledge and training in order to render an authoritative and unbiased appraisal. They must be independent of the lender’s loan or collection process, and they cannot be selected by the borrower.

The estimate of market value should consider actual current market conditions and “as is” value of the property. If a prospective value is given it should be based from the “as is” current value and explain the basis for the “going concern,” “value in use” or other special value opinion given.

There are thresholds that trigger the need for an appraisal rather than a BPO or some other valuation method. They include: Property valued over $250,000, a business loan of $1 million or more where real property brings in rental income or would be used as collateral for the sale; there has been substantial market value change and a refinance is needed.

Lenders also consider the borrower and property risk levels in determining whether to require a full appraisal or a less extensive market valuation.

It is particularly important for Agents to understand how to communicate the valuation data that led to the offer price to the appraiser in a way that does not violate the appraiser’s independence of judgment. The guidelines do give the assurance that it is perfectly appropriate to make these materials available for the appraiser.

The Pain Behind the Statistics

Fri, 03 Dec 2010 02:27:02 GMT

The recent report by the State Foreclosure Prevention Working Group (SFPWG) that 60% of all seriously delinquent loans end up sliding into foreclosure despite all the efforts by government and social service agencies, Agents and Investors to get these distressed owners to stop the foreclosure process is indeed discouraging.

It set us to thinking about the reasons behind that high number, and the more we thought about it, the more—unfortunately—the number made sense.

The robo-signing paperwork mess has impacted Investor, Agent and Homeowner alike with a deep suspicion that distressed property is not going to clear the process. In fact, new statistics from the Campbell Survey show that 24% of all Short Sales and 12% of all REOs scheduled to close in October failed to close because of the paperwork controversy. Hopefully, that is a temporary glitch, but it is nonetheless one that breeds mistrust.

Then there is the issue of seeming unending limbo that many homeowners get in to trying to modify a loan or complete a Short Sale. A story from one of our associates illustrates the point. The Investor-owner of a property in Cape Coral, FL discovered that the property was built with Chinese drywall and could no longer be rented. The Investor did not have adequate resources to repair the house, and so let the mortgage go pending a Short Sale. There were three attempts in all to complete a Short Sale and, while there was progress in getting the servicer’s loss mitigation agents to understand the devastating impact of Chinese drywall on the value of the property, the servicer was never able to get the original investor to agree to the sale. No doubt, the investor makes more from the mortgage insurance than they would from completing a sale. The owner was able to give the keys back with a deed-in-lieu of foreclosure, which is only marginally better for the owner than a foreclosure. Even this process took at least 18 months.

Tara-Nicholle Nelson relates a similar story in her “Tipping Points of Short-Sale Limbo.” Her friend had a property that needed a lot of repair. Trying to get a Short Sale accomplished led to failure, and she recognized that if she tried to get a loan modification she faced about a 25% chance of success, and the process might take 18 months or more. Meanwhile, the owner’s credit kept getting dinged with each month that went by with no solution to this problem coming from the Lender.

Nelson observes that humans need a sense of finality in their lives. Going through foreclosure to many will seem like a more acceptable solution than the unending uncertainty about what the Lender will do with an application for a Loan Modification or a Short Sale. It gets to a point where closing one unpleasant chapter and beginning the recovery process feels better than waiting for a potentially more positive, but uncertain, result.

As Short Sale Investors and Agents we can always move on. There will always be an easier and faster sale to negotiate. As we move on from the tough ones we need to be mindful that there are unfortunate, unlucky and emotionally scarred Homeowners that we are leaving behind in Lender Limbo.

New Trends in Real Estate Feature Compactness

Wed, 01 Dec 2010 21:52:37 GMT

The Urban Land Institute and PriceWaterhouse Coopers have published a report on “2011 Emerging Trends in Real Estate.” The analysis points to an end to the McMansion era.

Because of the unusually long and harsh recession spending patterns have been permanently changed for a large segment of the American population. As a result per capita square footage needs for housing will be much more compact in the future than they have been in the past.

New housing development will also be quite delayed, especially in areas most impacted by foreclosure. The next generation of buyers, those born between 1977 and 1994, will be looking for more compact dwellings in the heart of communities where work, recreation and educational opportunities are all within a walkable distance. As many as 75% of those from the next generation of home buyers who were surveyed expect to live in an urban area, and not in bedroom suburbs. That spells trouble for those bedroom communities throughout the country that expect to keep growing in order to provide more and more services to its citizens. That also means more affordable housing will be needed over the coming years in urban areas to house the people who plan to live and work there.

The trend may be good news for urban cores, but bad news for the baby boomers who will be trying to retire and downsize from their suburban McMansions. These homes may be hard to sell in the future and may be subject to considerable devaluation. Even without the different set of interests on the part of the new buying generation there are 3.6 million fewer potential homeowners since 2000.

With 2011 we have entered “the era of less”: lower profitability expectations, leaner industry, reduced availability of credit, and more restrained plans for development.

The report predicts that there will be winners in the real estate market over the next year. Those Investors who bought and sold at the right times and did not over-leverage are positioned to take advantage of tremendous bargains in strategic gateway areas. Segments of commercial real estate will make a comeback, again, in these emerging urban markets and in high quality investments. It predicts a comeback of the real estate market in 2011 in those market segments that are consonant with the emerging trends.

Will your real estate business be on the winning side of the real estate market trends in 2011?

Analyzing the Effectiveness of Your Website

Tue, 30 Nov 2010 18:25:41 GMT

How do you know who is checking out your website, how many hits are made, and which pages they check out? If you are using your site for list building you have one indication by looking at the number of new signups that you get for your free give-aways, access to your listings, or other incentives that you give for getting signups to your buyer or seller lists.

Listbuilding results just scratch the surface of what you can find out when you employ web analyzing tools on a regular basis. The most familiar tool is Alexa where the toolbar can be downloaded for free. The bar provides information about a given site, including reviews, number of sites linked to it, and traffic rank. For the web in general the Alexa toolbar will show hottest sites and hottest topics right now. That’s fine as far as it goes, but Alexa doesn’t tell the whole story.

There are many more free tools available to help you evaluate how your website is faring and to make suggestions on how to improve it. One download site for many of these free analysis tools is Web Resources Depot. Here are some of the tools that can be found on this site:

ClearWebStats

This tool provides detailed information on pagerank, indexed pages, the Alexa ranking, and an analysis of the value of the domain—just in case you are thinking about selling the site.

CubeStat

This is another valuation site that includes factors such as number of backlinks, page rank, whether the site is listed in Dmoz, and the age of the domain.

miniStatus

MiniStatus gives details on search engine results, social bookmarking site results, WhoIs, and W3C validation (e.g., the web markup validity of the code on your site). There is a Firefox plugin for fans of that browser.

popuri.us

There is a widget with this tool that will allow you to add the information on your site’s pagerank, Alexa and Technorati standing, and social bookmarking for your site.

QuarkBase

Use QuarkBase to find sites similar to your own, check your site’s popularity, see traffic information, and get your site categorized by site type.

Rankbuzz

This site will display your buzz according to Digg, Delicious, StumbleUpon, Reddit, and other social buzz sites. It also gives your Alexa, Compete, pagerank, Technorati, and other standings.

WooRank

WooRank covers Alexa, Delicious and other sites for your ranking and buzz levels. It lists the level of backlinks and checks whether your site has a sitemap and is W3C compliant. Even more is checked by WooRank.

Xinu Returns

Xinu Returns covers many of the same types of analysis as other tools, plus it shows how many times different HTML tags have appeared on your site.

Make it a regular habit to check your site’s popularity and health through use of the many free analytical tools available to the website owner and developer.

Loan Servicing Ills

Tue, 23 Nov 2010 15:25:45 GMT

The robo-signing mess is just the tip of a very big iceberg when it comes to problems that are endemic in the loan servicing industry. Congress may be focusing the immediate attention on the problem of faulty foreclosure paperwork, but there are many other concerns that make a number of common loan servicing practices uncomfortably predatory.

One of the major areas that can lead to abuse is that servicers actually profit by loans going into collections. There is very little incentive for servicers to cooperate on requests for a loan modification or a Short Sale simply because they make more by keeping the loan in the collection process. Servicers will sometimes purchase loans in collections from affiliated companies. The extra fees tacked on make it even more difficult for homeowners to climb out of the delinquency.

When loans are in default homeowners will generally let the insurance lapse, and the servicer will purchase another policy, called a forced-placed policy, often at several times the cost of the standard homeowner insurance. Often the servicer will have a financial relationship with the premium insurance carrier. Who loses? In the end it is usually the investor who holds the note on the defaulted property.

When the homeowner fails to make an escrow payment servicers will often place the scheduled principal and interest payment in a suspense account when only the escrow payment has been shorted, leading to a delinquency credit record and interest payments even though the basic payment has been made.

Some servicers will convert loans into simple interest when they purchase a group of loans as long as the original note does not prohibit that. Simple interest loans accrue daily rather than monthly and can be more costly and difficult for the homeowner.

Servicers often fail to report favorable payment history to the credit bureaus making it harder for homeowners to qualify for refinance. One wonders if that is, in fact, what the servicers have in mind.

Servicers are not required to give statements in any certain way. They are often incomprehensible and unhelpful in telling the homeowner what is needed regarding balances, escrow amounts, rate adjustments, fees, etc. As long as statements are allowed to be virtually unreadable, the abuses mentioned above can go on with little notice.

Since the Dodd-Frank reforms concentrated on loan origination none of the potential abuses of servicers were addressed. With originations mortgage shoppers have a choice; with servicing homeowners have no choice.

The Difference between a Mortgage and a Deed of Trust

Thu, 18 Nov 2010 22:55:18 GMT

Both mortgage and deed of trust documents secure loans with real estate. They do so in different ways.

Whether a state dictates the use of a deed of trust or a mortgage is a matter of state law. Some states allow either form.

Mortgages are agreements between two parties, while in a deed of trust there are three parties. The lender in a mortgage state is a mortgagee, while the mortgagor is the party borrowing the funds. In a Deed of Trust state the lender is the beneficiary, the one borrowing the funds is the trustor, and the independent party administering the Deed of Trust is the trustee. The trustee holds title for the benefit of the beneficiary.

States using a mortgage agreement also use judicial foreclosure procedures to return property to the lender when the mortgagee defaults. The mortgage is becoming a less popular instrument for securing repayment on loans because of the length of time required to foreclose in a judicial state. The advantage from the lender’s perspective is that a deficiency judgment can often be secured to collect the remainder of what is owed after sale of the property.

Foreclosure in a Deed of Trust state is generally faster because once the property is in default it can be turned over to the trustee for sale without going to court. The lender does have the right to collect rents on defaulted property. On the other hand, a lender cannot require a deficiency payment unless they separately sue in court for one, an expensive and time-consuming process.

Generally, homeowners have a right of redemption for time periods that differ from state to state when their property is secured with a mortgage. In Deed of Trust states there is no right of redemption following a trustee’s sale.

State laws change from time to time, so double-check with an attorney for current state law. To our knowledge, the states that are exclusively Deed of Trust states are: Alaska, Arizona, California, Colorado, Georgia (security deed), Idaho, Maryland, Mississippi, Missouri, Montana, Nebraska, Nevada, New Mexico, North Carolina, Oregon, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, and the District of Columbia. A few other states allow either form.

How to Rank High in Facebook Search Engine

Wed, 17 Nov 2010 16:05:54 GMT

Anyone who has tried to build a Fan Page on Facebook or use its advertising tools has wondered how to rank highly when people search using a Facebook search tool. AimClear, a Minnesota-based SEO research company, has published its third report on Facebook SEO Ranking Factors. Lauren Litwinka, aimClear’s publications director, summarized the report in her blog.

According to Litwinka, Facebook’s piece of the online search engine pie is still small at 2.7% of all U.S. searches, compared to Google’s 64% share. It is growing rapidly, however, having achieved a 48% increase in the past year. Facebook has now surpassed 500 million users and is growing fast.

Litwinka succinctly describes the problem: “Understanding why Application X ranks above Event Y but below Branded Fan Page Z (which, almost inconceivably, ranks below Community Page Q…) is vital knowledge for any company, community manager, advertiser or developer investing serious time & money in this unparalleled social frontier.”

What affects rank, and consequently search results is the personalization within your page: the pages you decide to “like”, the groups you join, the applications you use, the events you attend and the places you discuss or visit. “It” in the following discussion refers to a page, group, event, app, place, etc. on FB. The type of things that impact personalization are whether you and your friends like “it,” whether you’re invited to it, whether you’ve visited it before, and whether you’ve listed it as an interest.

The Autocomplete box, located in the middle of the FB page masthead, is the all-purpose search box. It will return 0 to 8 results, depending on what you type in, how new you are to FB, and how complete your personalization is within the community. Just like in Google, the autocomplete will try to populate with suggested results. Once you hit enter, you are taken to the number one result. What seems to rank in autocomplete are: your own profile with that name, events you are invited to, friends with that keyword in their name, and then a friend of a friend with keyword in the name. After that come questions with the keyword in it, and apps that you’ve used with that keyword. Down the list of what ranks are groups you’ve joined, pages you liked, pages relating to your interests, and a page a friend likes.

The “All Results” box used to be the de facto FB search hub until Autocomplete came along. Now only new users with no feed to bring about autocomplete results need to use All Results for a search results page. The order of ranking for All Results currently seems to be: people with keyword in name; pages with keyword in page; posts with keyword in post; followed by Bing search results outside of FB.

This is how aimClear sees it right now, but stay tuned for later updates. Facebook, like Google, is constantly tweaking those algorithms presumably to improve results and to make FB more useful.

What Will the Election Results Mean for Housing and the Economy?

Tue, 09 Nov 2010 19:19:15 GMT

If we believe the rhetoric the influence of the Tea Party candidates and other Republicans who will be swept into office in January will have some consequences that will impact almost every phase of American life. The full impact will probably not be felt until the next presidential election.

In the meantime, one of the main impacts is likely to be an impasse on the remaining Democratic agenda, unless the Obama Administration can find ways to bring about compromise. Some issues affecting the economic crisis will probably be moved forward by compromise. First and foremost, we can reasonably expect the Administration and the new leadership in the House to compromise on extending the Bush tax cuts, and probably to those at all, or most, income levels. Perhaps millionaires will be taxed more, but those at levels where small business leaders commonly land in the tax schedules will probably be spared. After all, it is through small business where most job generation will come to lead us out of this recession.

It is fair to say that there will be little enthusiasm on either side of the aisle to add more stimuli to the deficit, and yet everyone will be keeping watchful eyes on the unemployment situation and on any further significant slide in housing values or the foreclosure rates. Since the Administration is unlikely to get any more legislative packages approved that could infuse more cash into the pockets of the banks or individual homeowners, the way any further help for the housing crisis will take place will be through the Federal Reserve, the quasi government GSEs, and the administrative regulatory process.

The Federal Reserve will continue to buy up bonds and loosen the money supply to try to get Investors to spend money on riskier, higher return activities in housing, the commodities markets, and the stock market. Eventually, as consumers build confidence, more people will buy houses again and invest in mortgages. Every indication leads to the conclusion that it will be at least two years no matter what happens in the government before housing is back on track.

What is likely to happen is that lenders will continue to foreclose on seriously delinquent Homeowners, but within a more watchful and regulatory environment that will probably continue to take a long time to work through all the potential options. We may see a greater effort on the part of lenders to settle outside of the judicial process through more meaningful loan modifications (with principal reductions in many more cases) and more Short Sales. More stringent government regulation may make these options more attractive than the alternative of foreclosure. The Lenders themselves will, for the most part, need to come to the conclusion that these are better options than foreclosure. Project HOPE has been an example of where the Lenders themselves have been more successful than the government alternative (the HAMP program).

We hope that what happens, bottom line, is that the government will get out of the way and let private enterprise create jobs and pull us out of the slow housing market and the dismal economy.

The Next Innovation in Marketing

Fri, 05 Nov 2010 21:47:03 GMT

If you’ve been paying attention to technology lately you may have guessed the next big innovation that will change the way we communicate and market in the future: mobile marketing.

There are currently over 5 million cell phones in the world while there are 1.8 million computers. Of the 5 million cell phones about 51 million are iPhones or Androids, the two most popular smartphones.

We have all been impacted by marketing online. Every time we go online we experience advertising by email, websites, pay per click, pay per view, natural search of keyword-targeted articles and blog posts, and more. There are at least 15 common online marketing methods that have inundated online consumers over the last six or seven years.

The new mobile marketing has a potential for reaching at least 3 times as many people world-wide than computer marketing, and yet marketing via smartphones has only barely begun.

Currently in order to get top-of-the-search-engine listing in Google, Bing or Yahoo one must advertise using long-tail keywords of three or four words, or spend anywhere from $.25 to $12 per click to secure top ranking. Those using email marketing can expect no more than 15% of their messages to be opened. Headlines must really stand out from the crowd before an email will be opened, even if the customer is familiar with and likes the marketer.

On the other hand, text messaging, cell phone banner advertising and other forms of marketing on smartphones are so new that there is a 99% open rate for messages. People use their smartphones as miniature computers to gather information. Ranking for keywords using smartphone technology is still very easy because there is so little competition, and pay-per-click prices are still largely in the under $.25 per click range. These ideal conditions for mobile marketing will not last forever, but those who get in early will have the advantage.

Here’s the kind of marketing that Agents and Investors might do via cell phones: Squeeze page templates have been developed to gather cell phone numbers, names and email addresses via smartphones. Use them in the same way we do now on computers to gather lists of potential buyers and sellers. Each time you have a property to sell, blast out a video walk-through of the property via cell phone to your buyer’s list. Each time you hold a webinar for buyers or sellers in your area send reminders via their cell phones. Friends and followers will also use their smartphones to keep up with you on social media such as Facebook and Twitter just as they do via regular computers.

Essentially, any advertising that can be done by computer now, is, or will soon be available via smartphone. It does take special formatting, but these technologies are becoming commonly available now. To customize templates and determine your best smartphone marketing strategies, consult with a local online marketing company. They will most likely have at a consultant who is adapting marketing techniques to the cell phone world.

Is there a Silver Bullet Solution to the Housing Crisis?

Thu, 04 Nov 2010 19:13:38 GMT

The Center for Responsible Lending has calculated that since the foreclosure crisis began in 2008 about 2.5 million families have lost their homes. Another 5.7 million homeowners are in danger of foreclosure at this time. Between 2008 and the time that the crisis subsides CRL estimates that between 10 and 13 million foreclosures will be completed. That’s a staggering portion of the American population that will eventually be impacted by foreclosure!

Meanwhile, the Mortgage Banker’s Association is predicting that loan origination in 2011 will be lowest level since 1996. The high unemployment expected through 2011 and in to 2012 and the sluggish economy will lead to only a modest increase in home sales in 2011 of around 2% before a much larger increase predicted for 2012 of around 16%.

The HAMP program has been a notable failure in solving the problem. The Administration said it would help between 4 and 5 million households save their homes from foreclosure. In fact, barely over 466,000 have received a permanent loan modification under the HAMP program since its inception. Only about 1 million have received either a trial or permanent modification. The administration is now back-pedaling to say that the HAMP program has been meant to solve the foreclosure problem temporarily and was not seen as the permanent solution for millions of families. That’s not much comfort for the millions of families who are in immediate danger of losing their homes!

Many believe that the best thing that can happen at this point to lift the economy out of its doldrums is for lenders to switch tactics away from foreclosure processing and toward fast and effective processing of loan modifications with principal reduction as needed. When homes can’t be saved, then and Short Sales are a far better solution than foreclosure. These methods are almost always less costly to lenders, and much less time-consuming to complete than a foreclosure.

The housing market will not recover until the foreclosure problem is resolved. With as many as 11.5 million foreclosures possible before the end of this nightmare is reached, lenders must come up with a game-changer to keep as many as one in five American households from suffering irreparable economic damage. The housing market represents about 20% of the GDP, so any measure that solves the foreclosure problem faster will help the economy as a whole.

We are not suggesting that the fate of the entire U.S. economy rests in the hands of the lenders. We are saying that a swift sea-change in the way lenders treat the foreclosure crisis may help to lead the economy out of stagnation faster and with less negative economic impact than any other measure we can think of.

Looking for Job Stability?

Thu, 28 Oct 2010 14:31:34 GMT

Being an independent contractor like a Real Estate Agent does not come with an automatic paycheck and benefits. In slow times it is tough to just keep on doing what has worked in the past and expect it to keep the mortgage paid and food on the table. Since the end of the Homebuyers Tax Credit especially, many Agents are really feeling the pinch.

One of our associates was recently chatting with an Agent who has been reluctant to get involved in Short Sales. The one Short Sale he tried to do himself this year ended in the Lender pulling out of the deal practically at the closing table. Now, those things happen to the best of negotiators, but when there is only one to look back on during the year there is a better than average chance that the Agent will view it as a painful failure.

This same Agent was telling our associate that he would have to find some other part time work to survive the slow times. Her comment to him was that she knew how he might utilize his existing skills in marketing to Sellers and Buyers and what he already knows about Short Sales and make a steady income if he concentrates on finding those who need our help through a Short Sale.

Simply build and replenish consistently a pipeline of around 10 clients who have Short Sale packages in process and it almost assures that there will soon be at least one closing a month. Will you close every Short Sale? Not even the best Short Sale team can get every one. But chances are better than average that half or more of the 10 per month will close eventually. What it takes is for the Agent to joint venture with an Investor who has an efficient system in place. It’s good for the homeowner clients; it makes for steady commissions for Agents; it provides a consistent living for the Investor; the end Buyer has a lower cost property to hold for cashflow and appreciation.

For this model to work efficiently look for:

1. An experienced Investor with an efficient system in place. They should be able to provide professional Short Sale negotiation support, have at least 10 or 12 day transactional funding available for any Short Sale that will be flipped, and have a Buyers list to supplement the Agent’s own sources of possible end Buyers.

2. The best deals to look for are those in solid, stable neighborhoods at or below market average where homes are often rented out or purchased by first time buyers. In resort areas higher end properties may Short Sale and turn around to an end cash Buyer quickly also.

3. Make sure there can be at least a 20-25% margin between what the Lender will accept as a Short Sale price and what the property can be sold for in a 30 day quick sale to cover the transactional costs, commissions, some wiggle-room for negotiating with second lien-holders, and a profit margin for the Investor.

Any Agent who is struggling right now should seriously consider hooking up with an Investor who can provide the systematic support to get 10 or more deals into the pipeline consistently. Most parts of the country will support more Agents and Investors in the Short Sale market in order to help clear the huge glut of distressed homes.

With the credibility crisis the Lenders are now facing, we should find them much easier to negotiate with over the next few months until this crisis passes. Banks want to settle and we have the system to help them do that quickly and equitably!

What Are Chances Foreclosures Will Derail the Economy?

Thu, 28 Oct 2010 14:27:18 GMT

Last week Joseph Lavorgna, US chief economist at Deutsche Bank, and Mark Zandi of Moody’s were interviewed by CNBC last week and asked if they believed the latest foreclosure mess would derail the economy. Both showed cautious optimism that the worst of the recession is behind us and that the current robo-signing situation will be worked out without major damage to the banking industry or to the economy. Neither believes that the mess will trigger another round of bank bailouts by the federal government.

What they do see is a more prolonged period of weakness in the housing market where larger than average numbers of distressed houses will be on the market continuing to depress housing values. In the short run, Zandi pointed out, if the courts cause an extended delay in allowing foreclosures to be adjudicated we may even see a shrinking in the numbers of distressed houses on the market and housing prices may rise temporarily as a result.

In the long run, however, both Zandi and Lavorgna expect to see a decline in the housing market of another 5 to 10% before it slowing emerges from the price decline.

Both experts believe the housing market is too small a segment of the economy for it to sandbag the economy completely. They also see earnings growth among banks, historic low interest rates, and the freer availability of credit as signs that at least the major banks are ready to emerge from the recession.

The real driving source for the recovery of the economy, according to Zandi, is the unemployment rate. As long as that rate is high we will not see robust economic recovery. On the other hand, with the unemployment number starting to decline slowly that means that economic recovery is at least gradually starting to occur.

While Zandi and Lavorgna may be correct that the larger banks are now pumped and primed to survive and even thrive, there are 829 banks in danger of closing according to the FDIC’s Quarterly Banking Profile. Many of these are community and regional banks that never received the economic boost of a federal bailout. These institutions are far more vulnerable to failure simply by losing a few commercial customers to foreclosure. An article in the November 1, 2010 issue of Time Magazine called “Death of a Small-Town Bank” chronicles how greed and over-eagerness to accommodate hometown borrowers led to financial disaster for one small town.

We believe that the bottom has yet to be reached and that we still have a long and painful way back to full economic recovery. It will be 2013 at least before the majority of Americans have been restored to economic stability and are beginning to feel confident that the economy is on track again.

The Fed About to Print Money: What Will This Do to Inflation?

Tue, 26 Oct 2010 13:56:55 GMT

Inflation occurs when a country’s purchasing power falls because of an increase in prices and the value of money is decreased. This general problem makes it more expensive to buy goods and services. Inflation is a normal economic condition that occurs in moderation all the time, but goes out of control in cyclic fashion from time to time.

The CPI or consumer price index is the most common measure of inflation. The CPI measures price increases and decreases for goods and services. Another very important tool to measure inflation, the GDP deflator, measures price changes in goods that are produced in the country.

High levels of inflation hinder a country's economic performance and so the causes of inflation must be monitored and controlled as much as possible. Some of the causes of inflation are:

1) Government excess money printing and currency devaluation.
2) Increasing costs of production and labor.
3) High loan rates.
4) High level of taxes.

Printing excess money:

Most economists agree that the major cause of inflation relates to an increase in the money supply or a decrease in the quality of goods supplied. Money supply plays a more important role in inflationary pressure: the more money pumped into the economy higher inflation. If the money supply is not adequately controlled by the Federal Reserve Bank then the money supply can actually grow faster than the potential output in the economy, or the real GDP.

As a result, prices end up rising at a rapid pace to keep up with the surplus of foreign exchange. This is known as demand-pull, in which prices are forced upwards due to high demand. An increase in the amount of money in circulation relative to the capacity of the supply-side economics leads to increased demand, thereby fueling prices. Low interest rates correspond with high levels of money supply and allow for greater investment in large enterprises and new ideas that eventually leads to unsustainable levels of inflation and cheap money is available. The credit crisis of 2007 is a very good example of this at work.

Increased production costs and labor:

Another cause of inflation is the increased cost of production that leads to an increase in prices of finished products. Expensive raw materials lead to an increase in the cost of production that ultimately results in companies increasing prices of finished goods to maintain stable profit. Rising labor costs may also lead to inflation. As demand increases for employees, companies often choose to pass those costs to their customers.

High levels of loans and currency depreciation:

High levels of lending pose a danger to the economy for they may lead to increasing levels of inflation. The resulting international loans and high national debt must be paid with higher interest rates, which ultimately end up increasing prices for citizens of the country in an effort to keep up with debt. The government must deal with the gap created between import and export levels.

High level of taxes:

An increase in federal debt is paid either directly or indirectly by the consumer in the form of taxes and higher costs for goods and services.

A classic example of this cost-push inflation is the oil crisis after 1970, OPEC raised oil prices and as a result the U.S. experienced double-digit inflation during that period. Because oil is so common in many products a sharp rise in oil price led to an increase in many commodity prices. Periods of war and civil unrest often cause inflation as the government has to repay funds borrowed from the central bank. The impact is widespread and can be seen in everything from international trade, to labor costs, to product demand. In the end, prices always go up in the presence of cost-push inflation.

There will always be a certain amount of inflation in the economy to reflect the cost of living. When inflation begins to impact a widespread part of the economy it can go out of control very quickly and create hardship and misery for many. This is why the Federal Reserve’s proposal to ease the money supply is so critical to watch in order to assure that inflation does not spin out of control as a result.

Should a Short Sale Home be Staged?

Thu, 21 Oct 2010 18:27:39 GMT

Staging is the process of preparing a home to be sold in the fastest time and at the best offer. In this sense, every home should be staged whenever possible.

Getting a Short Sale sold quickly is all about having the best looking property at the best price compared to the equivalent property in the area. Getting a property to show well is not necessarily expensive. There are many staging ideas that can be implemented at minimal cost:

1. Landscaping. Make sure the lawn is mowed and the bushes are trimmed. If there is an automatic sprinkling system, keep that on to make sure plantings do not die. Remove debris from gutters. In colder climates, make sure the sidewalk and driveway get shoveled.

2. Remove the clutter and excess furniture. If the Homeowner is still in the house, this is an advantage to the resale of the property. However, many times the home needs a good job of decluttering and a good cleaning before potential owners start to visit. Remove extra knick-knacks, dust furniture, take out any broken or frayed pieces, etc. Make sure all windows are gleaming, carpets are cleaned, and floors are waxed. Vacuum thoroughly. Clean all appliances and fixtures in the kitchen and bathrooms. Make sure the dishes are out of the sink and put away.

3. Paint the inside a neutral beige or off-white. Power wash the outside of the house and paint at least the front of the house, if needed. Some experts say a red front door will attract potential buyers.

4. Upgrade fixtures. Experts say that brushed nickel fixtures make the property look better than standard shiny brass fixtures. Make sure all outlets and lights work, and wall plates are on and clean. Ceiling fans can make an inexpensive good impression.

For luxury homes that are vacant it may also be worth the investment to hire a staging company to put furniture in main living areas. Some of these services will wait for payment until after the sale is closed.

In an environment where almost all sales are distressed, even the small and inexpensive details of making the home attractive can give a competitive edge.

More to Lose Homes than Originally Expected: Up to 20%

Tue, 12 Oct 2010 15:00:51 GMT

Amherst Securities Group LP has issued a report that warns that if policies do not change as many as 11.5 million borrowers may lose their homes. That number equates to one in five homeowners who are in danger of defaulting.

These staggering numbers are so potentially damaging to the economy (and unsupportable politically) that Amherst expects government will continue to tinker with programs for foreclosure relief until something works.

So far the track record for government foreclosure rescue programs has not been very successful. The August report on HAMP loan modifications shows that nearly half of those approved for trial HAMP modifications have failed to get permanent loan changes or have re-defaulted.

Amherst maintains that the recent improvements in the delinquency numbers are just temporary because it reflects wide-spread, but unsuccessful, attempts at loan modifications. The real picture: For every 20 first mortgages 9 are seriously behind in payments; six have been given loan mods, but half of those are on track to re-default; 5 are under water by more than 20% of the value of the mortgage and are defaulting at a rate of 20% per year. Not a pretty picture.

The answer according to the Amherst report is principal reduction because it will stem the tide of strategic defaults that is in the offing and boost the success rate of loan modifications. The issue of second liens must also be covered by any new government policy.

Amherst also recommends that the government provide incentives to Investors through the various federal housing programs to begin investing in real estate. Currently, credit is particularly tight for Investors and down payment requirements are high. If these lending constraints were eased more Investors would get in to the housing market.

Another Amherst recommendation is to make credit more available to those who have seen their credit records tarnished in the recent downturn. By requalifying people who need to give up the homes they cannot afford into homes that they are better able to afford more people will again be able to contribute to the economy by participating in home ownership.

This report is very opportune considering the latest robo-signing mess. Lenders are going to have to find solutions that keep owners in their homes—and quick! The solutions are obvious and they already have processes established to accept them. They are more loan modifications with principal reduction and more Short Sales. Simple as that!

What Investors Look for in a Good Agent

Mon, 11 Oct 2010 15:54:57 GMT

Successful Investors need good Agents to succeed. The days of Investor-Agent competition for the same small market of prospective home sellers is over, at least for the foreseeable future. We are in the age of cooperation now. The relationship between a successful Investor and the small group of Buyers Agents that they most frequently work with is as much a joint venture partnership as a Client-Agent relationship.

To a large extent, what the Investor will be looking for in an Agent are the same qualities he or she would look for in any business partner:

· A good match of skills and experience to complement the Investor;

· Loyalty—ability to bring in a constant flow of deals to that Investor;

· Discretion—living up to the non-competition/non-disclosure; agreements and fiduciary responsibilities that bind the Investor and Agent in a working relationship;

· Follow-through—ability to find and close a lot of deals.

In exchange for a somewhat closer and more consistent business relationship than the Agent normally has with non-Investor clients, the relationship with a successful Investor often yields a steady flow of deals that can lead to closings every month. Building that relationship means establishing a level of trust that goes beyond the normal client relationship.

Like other characteristics that Investors look for in an Agent they want to do business with are exactly like those that every client looks for:

· Proven track record. The Agent with the most Short Sale or REO listings will be the ones who build the largest Investor-Buyer lists and will be able to sort out quickly which Investors can also bring a deal to the closing table, and which cannot.

· Marketing ability. The Agent must have access to cash buyers and others willing and able to buy property quickly. A professional web presence is also critical. Agents with listings at the top of the search engine for keywords such as “foreclosure listings in (location)” or “short sales in (location)” will catch the attention of wholesale Investors and other buyers of these types of property.

· Willingness to provide access to online listings. Many communities offer Listingbook or IDX access to MLS listings through an Agent’s site. Many Investors will initially establish a relationship with an Agent in an area by requesting access to listings through the Agent’s online gateway and as they find deals that they will to follow up on the Agent’s willingness to check on the property and write offers will determine whether the relationship goes to the next level and becomes a regular pipeline of deals.

· Again, follow-through is critical. The Agent who wants to establish an ongoing relationship with a successful Investor must be willing to follow up with listing Agents and owners to get the Investor’s offers accepted and to help that Investor control the deal so that the offer is also accepted by the Lender.

What’s the Likely Impact of Lender Robo-Signer Scandal?

Wed, 06 Oct 2010 21:19:58 GMT

It appears that tens of thousands of current foreclosure notices, and recent foreclosures may have been filed without the assurance that they have been reviewed and that bank officers are fully compliant with all legal requirements. That revelation is causing servicers at GMAC, JPMorgan, Bank of America and several other servicers to stop foreclosure proceedings in 23 judicial mortgage states and audit their foreclosure paperwork not only on current filings, but also on foreclosed REOs.

What impact is this substantial bump in the road in the foreclosure process going to affect homeowners, Real Estate Agents and Short Sale investors? A year or two ago when it became well known that many times the original note is lost in the process of moving mortgages from lender to lender and servicer to servicer a strategy was developed to delay foreclosure in judicial states by appearing at the hearing and requesting that the original note be found. On rare occasion the judge would void the foreclosure when the original could not be produced or other irregularities in the foreclosure paperwork could be found. Most of the time, the requests merely delayed the inevitable foreclosure.

Time can be the friend of a family in foreclosure and to Agents and Investors who are trying to help them through a Short Sale. The extra time that is inevitable while the major lenders audit their foreclosure paperwork can be used to help homeowners complete their hardship files and for the negotiation process with lenders. If anything, the latest bank fiasco will make lenders even more anxious to settle through a loan modification or a short sale and to avoid the scrutiny that foreclosure filings are currently undergoing.

It is doubtful that the courts will award many people their homes back. Servicer officials who are caught committing fraud will probably we fined or receive incarceration, and lenders will suffer large fines and will take a ding in their credit ratings.

In the long run the process will probably be made fairer for homeowners and will take longer on average to complete because of the greater human oversight that will be expected and required by federal regulators. It is likely that this latest mess will negatively impact the length of time that it takes for the economy to grow out of the housing crisis.

The bottom line on the robo-signer snafu is that foreclosures are bad for everyone concerned and the lenders would be advised to make every effort to resolve a serious mortgage delinquency with a principal reduction or other mitigation, and in the event that the mitigation isn’t possible, approve a Short Sale as expeditiously as possible.

The fact that robo-signer situations were allowed to happen and that it is apparently so pervasive means that with new oversight foreclosure is about to get a lot more expensive for every lender. Settling soon and often while a home is in pre-foreclosure is the best prospect for getting these losers off a lender’s books.

Advising Those About to Retire

Fri, 01 Oct 2010 17:14:29 GMT

Agents are often faced with helping recent retirees to make the most of a bad housing market when the proceeds of a sale are a critical piece of the retirees’ portfolio that is expected to carry them through financially for the rest of their lives.

Many of these retirees have been waiting to move for several years now, stuck because of the declining housing market and unable to get enough for the house to make what is needed to retire comfortably. Others may have refinanced during the height and now they face an under water mortgage and ARM rates that will be going up eventually.

One approach is for the retiree/homeowner to ask for a loan modification. Lower retirement income can set up a hardship situation that may make it possible for the homeowner to qualify for a reduction in interest rate, fixed rate terms, and even a principal reduction.

A loan modification may make it possible for the retiree to continue to stay in the home for a few years longer until the housing recovery takes hold and all the pent-up demand brings up housing prices. In the meantime, if the amount that is saved through the loan modification is put into a security that earns at a rate that is above inflation then at least the retiree will be salting away a little more for the future.

For the owner who has a lot of equity but does not want to sell until housing prices rebound, an option is to rent out the home for a few years and rent or purchase a smaller retirement home for them. The amount earned from the renter may be enough to make the new home payments. There may also be some tax advantages to renting out the larger home.

A house swap may also be possible between people who are looking to move to a larger home of equivalent value and the retiree-owners who want to downsize. If both houses are free and clear they can proceed to closing without re-mortgaging the houses. If one or both have mortgages the Buyer will need to get a new mortgage in most cases.

If a loan modification does not work, and the home does not have any equity, then there may be little option for the retiree who needs to sell than to ask the Lender for a Short Sale. Lower retirement income and retirement fund losses may well have triggered a hardship situation. Ill health or an age-related disability may make the need to move to a home that is easier to maintain and navigate imperative. If done properly the Short Sale should not have a major impact on the credit rating, but the Homeowner may want to line up the retirement facility or apartment before triggering a default or completing the Short Sale.

Why Are HAMP Results So Paltry?

Tue, 28 Sep 2010 18:07:51 GMT

The Home Affordable Modification Program was supposed to help millions of Americans to negotiate reasonable reductions in their monthly payments in order to make it possible for more distressed homeowners to stay in their homes.

To date only 468,000 permanent modifications have been completed under HAMP. Only 33,000 permanent modifications were approved in August, a 27% reduction over the month before. On the good side, the number of trial modifications waiting to be judged for permanency has dropped to 95,000.

A major reason for the small number of permanent reductions under HAMP is that initially those added to the program did not need to show much documentation. In the end, many granted trial loan mods were unable to produce the documentation needed to complete the process. Some missed the trial payments, and some proved to already have payments that are less than 31% of their monthly payments.

Many people who started out with non-prime loans provided no or limited documentation in the first place. They could not prove sources of income, had unstable sources of income, or were missing documentation such as tax returns. They were able to get unstated loans in the past simply by showing up and asking for the loan. It is no longer easy to lie about income and get away with it, and the loan modification process has caught many homeowners in a lie they don’t want to admit.

Many families are hurting despite mortgages being less than 31% of total income because of high credit card and other debt. These distressed homeowners may be able to get budget relief by paying down revolving debt or negotiating for reduced credit card payments. For these folks, going on a credit diet is the solution to the problem rather than modification of the home mortgage. They should seek non-profit credit counseling to discuss options.

Many look forward to the addition of principal reduction to the HAMP program. October 1 is the implementation date for the principal reduction aspect of HAMP. The option is voluntary on the part of servicers, however the government is strongly encouraging this option in markets where loan to value has exceeded 115%. In remains to be seen whether there will be a significant increase in HAMP loans due to the principal reduction implementation, and whether this feature will increase the effectiveness of the program.

Is It Legal to Sell to an Illegal Alien?

Mon, 27 Sep 2010 20:57:45 GMT

Some months ago this question was answered in the Brian Ellis blog by contributor, Carole VanSickle. The question was precipitated by agents and landlords in Arizona who were caught up in the controversy of that state’s harsh regulations regarding illegal aliens.

What VanSickle concluded is that while federal law prohibits illegal aliens from remaining in the country without a proper visa, there are no requirements in lending policies that require proof of citizenship before a loan is taken out. Therefore, it is legal to have a loan on a home in the U.S. while being an illegal alien in this country.

An Individual Taxpayer Identification Number is required, although there are instances where lenders have ignored them in approving a loan, for example, when foreign nationals buy property in the U.S. There is no background check on the loan application for criminal activity, so the ITIN may well have been falsified in the application and there is little double-checking to assure that the number is correct. A falsified number on a loan application, if it were discovered, however, might be a reason for a loan to be terminated, since the applicant must certify that all of the information on the loan application is true.

Are illegal aliens a good credit risk? Are they defaulting less on loans than those who are citizens? VanSickle found little direct evidence one way or the other to support the claim of many supporters of more liberalized immigration rights that illegals default less on their loans. There is only circumstantial and outdated information on this subject to date. Earlier reports simply surmised that strong family and religious connections of many illegals, plus a desire not to call attention to them would keep default rates lower among these individuals than the general population.

It will be interesting to see if the strong anti-alien legislation leads to mass-migrations from the state of illegal aliens and abandonment of homes. In that state, where the laws have forced greater scrutiny of illegal status, VanSickle speculates that high foreclosure rates among illegals may well follow as a by-product. Only time will tell if Arizona’s new law will have an upward impact on foreclosures in that state among the immigrant population.

Why Has Canada Dodged the Housing Bullet?

Thu, 23 Sep 2010 12:53:02 GMT

While the U.S. housing market continues to wallow in low home values and foreclosures, our neighbor to the north appears to have largely avoided the dip in the housing market. How were the Canadians so lucky?

Both countries have a lot in common in their housing markets: a high degree of government-backed securitization and substantially high standards of living that has led to a similar rate of home ownership.

The difference according to a recent report by The Center for American Progress is that Canada more successfully regulated its mortgage industry while during the 2000s the U.S. engaged in a laissez-faire policy toward the industry. In the U.S. we saw the rise during the boom years of a variety of exotic mortgages—unstated loans, ARMs with teaser front end rates that adjusted after a year or two, etc. These mortgages were originated by unregulated lenders and the mortgage paper was then often sold off as unregulated private label mortgage-backed securities.

Exotic mortgages never caught on in the Canadian market, remaining less than 3% of the total base of loans. Private securitization of mortgage-backed loans also did not take hold in Canada. As much as 70% of all Canadian loans are either insured by the Canadian Mortgage and Housing Corporation (CMHC) or are securitized through the government entity. The credit risk in Canada has effectively been passed from the lender institutions to the federal government.

Those who would like to blame the crisis on federal GSE intervention should note that Canada also heavily underwrites mortgages through federal securitization. The difference appears to be in what happened when institutions like Lehman Brothers and Merrill Lynch got into the mortgage-backed security market and then the bubble burst. The credit crisis ensued followed by U.S. government measures to bail out the mortgage industry. The same crisis did not occur in Canada because private-backed securitization was very limited there.

Why didn’t Canada fall victim to the same laissez-faire policies during the 2000s? The report says that Canada has always done a good job of regulating the mortgage industry for risk and consumer protection, unlike the U.S. Secondly, the Canadian system provides incentives to lending institutions to become and remain regulated by providing credit protection through the CMHC.

As the new credit czar in the U.S., Elizabeth Warren, takes over her oversight role at the new Consumer Financial Protection Bureau, she would do well to study the experience in Canada for clues on how to repair the U.S. system to become more impervious to boom and bust housing markets.

New REO Policies are Enacted

Tue, 21 Sep 2010 20:15:32 GMT

Recently the Federal Reserve Banks of Boston and Cleveland collaborated on a study called “REO & Vacant Properties: Strategies for Neighborhood Stabilization” that has helped to define the most recent government policies on cleaning up neighborhoods that are riddled with abandoned and foreclosed properties. This is a comprehensive study of the problem and strategies for dealing with it.

The report documents in several markets the crater-like impact that long-abandoned bank-owned property has had on housing prices in many communities. In fact in the vast majority of states with an appreciable foreclosure problem the foreclosed property has resulted in downward pressure on prices for neighborhoods and whole communities. REOs have also had an impact on the cohesiveness, safety and quality of life in the neighborhoods that are highly impacted by foreclosures.

The report maintains that when REOs are purchased by Investors there is no incentive to keep prices higher in order to maintain property value. There may also be less incentive to rehabilitate the housing to livable standards before being resold. The foreclosure slowdown programs that have been meant to help homeowners have often resulted in destroying the value of abandoned homes as they have deteriorated over time.

The approach that is recommended and has now been adopted by the federal government through HUD’s Neighborhood Stabilization Program (NSP) gives Community and non-profit housing groups a better chance at buying and fixing up REOs before they can be purchased by private owners. Government and non-profit housing authorities will now get a “first look” for several business days in order to put under contract the homes that will positively impact low income neighborhoods the most. These public and non-profit organizations will be able to demolish, rehab, rent out or sell to low income citizens the houses that are purchase through the NSP program. The lenders who control about 75% of the REO market are participating in NSP.

These agencies will only be able to pay 1% below appraised value, something that will help to keep prices more steady within the affected neighborhoods. The backers of the NSP program maintain that by giving non-profits greater capacity to compete with private investors for REOs will speed up the process of bringing the nation’s supply of affordable housing back into productive use. There will be about a 12 day period before the NSP-participating properties can be put on the open market.

The NSP will only put a small dent in the neighborhood stabilization problem: $7 billion has been allocated to it. Still, it is a useful start using agencies that have a mission to improve neighborhoods and to provide affordable housing.

What to Look for In Hiring a Contractor

Mon, 13 Sep 2010 19:17:34 GMT

Most Agents and serious Investors have two or three “go to” contractors available to do those repair jobs that are necessary to get a house sold. Before trying out a new contractor make sure you know what you are getting before you sign off on a work order.

Having the lowest and best bid is not the only criteria for selection of a reliable contractor. Here are some things to look for:

1. Lead with your head and not your emotions. If you are representing a homeowner in a distress situation as the Agent you may need to be the analytical one to decide what home repairs make sense in order to get the property sold quickly. The Homeowner may be too traumatized by the financial situation to deal effectively with the repair issues.

2. Check the local building department or state professional licensing board for the contractor’s license. Only deal with licensed contractors. Make sure the license is not just for a particular occupation, but a professional license for someone qualified to contract for building jobs.

3. Make sure the contractor has at least the state’s minimum required level of liability insurance. In most cases the minimum will be at least $1 million.

4. Perform a thorough background check on the contractor. The Clerk of Courts or Recorder’s office will provide information on judgments and liens against the contractor and if there are any civil or criminal law suits pending. It could complicate your project if the contractor has unpaid judgments and liens.

There are several public records websites where you can buy civil and criminal background checks for $35 to $50 or less. You can also check with the local Better Business Bureau or Angie’s List for any consumer feedback on the contractor. Both are private membership sites, but do rate a large number of businesses.

If the contractor comes with references you can trust it may not be necessary to dig too deep to verify their reliability and honesty.

Every time you get a lead for a good contractor do these basic checks and soon you’ll have a sizeable “go to” list for the rehab and maintenance jobs that will help your clients to sell their property faster.

Getting to Yes

Fri, 10 Sep 2010 17:33:02 GMT

It’s our human tendency to say “no.” We learn that “no” is a powerful word in our vocabulary by the time we are four years old, and many people always prefer “no” to “yes” from toddlerhood on.

How do you get people to say “yes” when you are trying to make a sale?

First, you need to be confident in your own ability to make the sale. Unfortunately, we have only 3 seconds to make a first impression, and once that first impression is made it takes about 10 times the energy to turn around a bad impression. When you appear confident you set the stage for a good first impression. Make sure your credibility kit is front and center in your publicity so that people can see that they are dealing with an experienced pro.

First impressions count with houses also. Curb appeal is the equivalent of the first impression that a house makes. A small amount expended to put plantings in the front yard, have the lawn mowed, and power wash the front or paint the front trim will get many people in the door who might otherwise drive on by.

Determine what Buyers will perceive as the weak points and address those doubt-points first. Don’t trot out front what isn’t obvious, but do address in your sales copy those things that your potential clients are thinking. For example, being able to say that you have an approved Short Sale is likely to bring many more end Buyers in the door to look at a distressed property, than will bother to look at a property that is awaiting approval. Knowing that you’ve resolved a huge problem and can expect a quick closing helps to reassure Buyers.

Turn what people need into wants. The most successful sales people will understand what motivates their clients and will find the home that best matches their underlying desires and wants. Examples are showing people who are afraid of increasing crime rates homes in gated communities, or showing avid golfers property in golfing communities. These properties may be more expensive and in more exclusive areas than the Homeowner technically needs, but they satisfy some deep-seated wants. Show the client the benefit of paying the premium and making the financial sacrifice in order to make what they want a priority.

Often you’ll get to “yes” faster by setting up a scenario of urgency. This is why Agents and Investors will set up a round robin auction to show and sell an approved Short Sale. This sets a scenario where many prospective Buyers will be looking at the property at the same time and making bids that will be opened and considered all within a short timeframe. The auction generates a sense of urgency to placing a bid on the property.

These are just a few of the ways you can overcome objections and get to a “yes” on the properties you are trying to sell.

Why Blogs are Better than Websites for Agents

Wed, 08 Sep 2010 11:26:37 GMT

Many Agents are dumping their static websites for blogs—and are gaining in online traffic as a result.

Have you ever lost sales while waiting for a webmaster to put the sales data for a new listing on your static website? Well, wait no more. Blogs can be easily set up and managed without a webmaster. If you can manage to set up an email account or create copy using word processing software, then you have mastered most of the tools needed to create a blog.

Blogs can be set up to look just as professional and sophisticated as a traditional website. There are thousands of free templates available for Wordpress, the most often-used blog format. Many of these are very appropriate for a real estate-related business. There are also formats to suit any need. Blogs can come in one, two or three column format and can be set up to look like sales brochures, like newspapers, like a newsletter, photo albums, journals—anything that works for your particular message.

You can place your listings front and center on the first page of a blog, or you can have separate tabbed pages devoted to your listings. You can include a blog tab to keep your clients informed about the latest real estate trends nationally or locally, or you can add a news feed. You can include a sign up form to gather prospective clients and to give clients access to special reports and local listings.

All of these features are controlled through a dashboard on your blog site. The dashboard of the blog is also where you’d go to upload your sales listings, photos for your listings, add “widgets” that control the features on the blog, etc. Saving your files from the blog dashboard will automatically upload all of the data to your website hosting account without your having to manually do file transfers. Everything is done in plain English; there’s no need to understand html in order to maintain the blog. What you don’t understand intuitively is fairly easy to check out through trial and error without making a permanent change to the site.

Unlike static websites you can make a blog interactive so that clients and potential clients can comment and send their contact information to you interactively.

Google and the other search engines tend to more highly rate blogs than static websites because they are ever-changing and interactive. The better your page ranking in the search engines, the more potential clients will find you online.

What Does “The New Normal” Mean?

Thu, 02 Sep 2010 15:28:22 GMT

In July 2009 PIMCO co-CIO, William H. Gross, wrote an article for the investment company called “Bon or Non Appetit?” in which the author claimed we are now in a “new normal” state of the economy. The new reality is essentially half-sized, down from the super-sized appetite of our economic past. The new reality has consequences in every aspect of our economic lives.

Gross pointed out that before the great crash of 2008 and the “Great Recession” that followed everything was super-sized. We lived in McMansions that required jumbo mortgages or other exotic loans that average human-beings found increasingly unaffordable. Even normal houses increased in value at astonishing speed and because increasingly unaffordable. The same over-sized appetite was going on throughout the economy.

The new reality is that everything is half what it was before, and every indicator shows that this “half-sized” economy will bump along in this state for quite some time to come. It has become the “new normal.”

Since Gross many others have used the term to describe the new economic reality that appears to be here to stay:

--Timothy Geithner sees the “new normal” in terms of a raft of new financial regulations that will help to ensure fairer and more understandable rules for consumers for taking out a mortgage, borrowing for consumer products, making local bank deposits and withdrawals, using credit cards, and investing in derivatives and other forms of securities. These regulations also change the way government responds to financially troubled institutions. Those deemed “too big to fail” may be rescued or eased into bankruptcy in a way that does not take down the whole economy, while smaller institutions will get much less help.

--For Ben Bernanke the “new normal” is a continued use of monetary policy to aid what looks to be an extremely slow recovery. Expect no major changes in Federal Reserve or world economic policy any time soon.

In housing the new realities appear to be:

--Stagnant home prices for years to come, and therefore continuing high levels of homes that have underwater mortgages;

--High foreclosure rates for years to come because of expected continuing high unemployment rates and strategic defaults because of the underwater mortgage problem;

--Decreasing numbers of homeowners because of foreclosure and continuing difficulties qualifying for mortgages;

--Increasing numbers of cash buyers who are turning owner-occupied housing into rentals, or are opting out of the mortgage market for various other reasons.

--Continuing low interest rates for those who do decide to buy or refinance.

Over-all, the “new normal” in the housing market is a new conservative stance that will cause more people to hold off on buying decisions until they have either the cash to buy or are in such stable and well-paying positions that the risk seems tolerable to move to a new home. For now, consumers and businesses alike are saving their pennies in expectation of more rainy days ahead.

Why Aren’t People Flocking to Low Mortgages?

Tue, 31 Aug 2010 13:17:48 GMT

Buyers are just not entering in to the marketplace right now. With the prize of historically low mortgage rates at stake, why aren’t people jumping to get them?

We know it isn’t because people don’t want to move. There is considerable pent up desire by first timer’s to get into the housing market, and for those who are already in homes to move up. Of those who did move in May/June 2010, according to a survey by Relocation.com 18% moved from one home they owned to another owned residence. Another 12% moved from an apartment to a home. Another 15% moved temporarily to an apartment, but expect to move back into homeownership eventually. Only 6% moved from homeownership to a rental permanently.

The simple reason why people are not rushing to their nearest Real Estate Agent and Mortgage Broker to take advantage of the fantastic mortgage rates is because of the economy. The corollary is also true: the poor economy is why the interest rates remain at all-time low levels. It is one of the tools the Federal Reserve has in its arsenal to help get the economy moving again and, frankly, it’s not working.

Homeownership rates are still falling. According to an article by John Burns in Inman.com home ownership is down to 67.1%, the lowest since 2001, and headed down to around 61.7% once all the foreclosures currently in the hopper are played out. The people who lose their homes to foreclosure will be unable to buy again—except possibly through private lease options—for three to seven years. We have 7.4 million more homeowners unable to pay for a mortgage than we had in 2007. Continuing high unemployment is sending former homeowners into temporary rental situations, or to living with friends and relatives. Tightened loan policies mean fewer people interested in home ownership can get qualified—so people are staying put and concentrating on saving and paying down existing mortgages in order to eventually qualify for a new mortgage a few years down the line.

Consumer confidence levels and consumer paychecks must improve dramatically before would-be homeowners flock back into the housing market, regardless of the attractive interest rates.

There are several other reasons why the market isn’t responding now to the great rates, and may not for a long time to come:

--The population is aging, and as we age we tend to move out of our homes and into rental communities or life-care facilities.

--Young people are taking longer to get married and to start families. This delays home ownership for the up-coming generation.

--High levels of immigration lead to larger levels of renting. On average it takes seven years for an immigrant family to move from a rental to home ownership.

--More people are paying for homes with cash. They are shunning institutional lenders in the first place.

5 Tips to Make Social Media Work for Your Real Estate Business

Fri, 27 Aug 2010 14:32:43 GMT

There are several common excuses that Agents make in not making an effort to develop a web presence on social media. They think:

--It’s too much work. After all, most of us watch our kids spend hours pimping out their Facebook pages or responding to Twitter messages. Who has that kind of time?

--It doesn’t yield enough reward to be worth the time. Unless the sites are done right, this argument may be true. Undoubtedly, most go about social media the wrong way and waste time in the process.

Here are some tips to developing social media sites that will actually do your real estate career some good:

1. Don’t over do. Select the right sites to concentrate on first. People who fail at attracting the right kind of attention with social media are often not selective enough. They go after too many accounts and never spend enough time developing contacts in any one site. Check out Facebook, Twitter and LinkedIn and decide which appeals most, then concentrate on just that one to start. All have large real estate followings and you can build large networks of real estate contacts fast with each of them. Another very large social network exclusively for real estate professionals is Active Rain with almost 190,000 free members.

2. Make the site specific to your real estate or a niche such as Short Sales. Keep your personal social accounts separate. Facebook only allows you to have one account, but you can build a fan page for your business or your work at an Agent or Investor. Make sure the profile description and the websites that are featured at the site all are related to your real estate activity and have keywords that describe your specializations and your market location. This way other members will search by keywords and will find your profile to form a connection or follow.

3. Start “friending” people who have similar interests and specializations. Don’t “friend” too many people in one day. This could lead to accusations of spamming. Over time, you can build up large networks of highly targeted, like-minded people.

4. If the social media site offers blogging tools, take advantage of them to share your thoughts across your network of friends and associates. You’ll be surprised how quickly you can build a following as an expert in a particular subject. Likewise, start or join groups within the social network in your areas of interest. Become an active member that others look to for advice.

5. Make all conversations two-way. When people contact you through the social network, respond to them with friendly, thoughtful responses. Conversations help to build trust and familiarity.

Agents, What Do the Latest Housing Trends Mean For You?

Wed, 25 Aug 2010 13:41:30 GMT

Long before the recession hit the housing market began to slump and tens of thousands of Real Estate Agents and Mortgage Brokers got out of the business.

Now there are unconfirmed stories that NAR may assist BP Oil in distributing Gulf oil spill impact money to Agents who have not seen a sale since the start of the oil crisis. There are slowdowns occurring in markets across the country, and Diane Olick (CNBC reporter and blogger) claims that the slump is not just because of the oil spill or the end of the homebuyer tax credit. We may be in a double-dip recession as we speak.

What are you going to do about it? Are you going to give up and find a different career, or are you going to expand your marketing or find new niches to go after in order to save your livelihood? The choice is up to you.

One approach to surviving in a slow market is to get up close and personal with your potential clientele. The report that Financial Asset Services, Inc. is going door to door to solicit distressed homeowners for Short Sales and Deed-in-Lieu of foreclosure deals may hold one key. Be proactive in going after distressed homeowners in your area. Obtain lists of people who have received a Notice of Default, or even pre-NOD distressed homeowners. Often individual markets will have list services. A national service to try is realquest.com. These folks are facing the embarrassment and stigma of foreclosure and may have stopped responding to mail and phone calls. Seeing a concerned Short Sale Agent at the door may be the way to break the ice.

At the other end of the scale, consider going large with your business. There is no reason why you cannot facilitate a Short Sale from another part of the country. If you make the initial contact to a potential Short Sale client, whether they are in your immediate area or not, you can make a referral fee by hooking that client up to an Investor willing to buy the property and, if necessary, an Agent in the immediate area who will make sure the property goes into the local MLS to satisfy Lender listing requirements. Being a facilitator allows you to participate in Short Sale transactions anywhere in the country with access to a computer and mailing lists of homeowners in heavily distressed areas.

It is clear that in order to be successful in these tough times Agents must become far more proactive than in the past.

New Ways to Attract Short Sale Clients

Mon, 23 Aug 2010 13:25:24 GMT

The days of being able to canvas a whole neighborhood with doorknocker flyers and pick up Short Sale candidates are over. It takes more sophisticated marketing in many cases to be the first and most effective voice amid the crowd of Agents and Investors looking for homeowners in need of a Short Sale.

Generally, homeowners go through the whole grief cycle before they decide that now is the time to put the house on the market at a bank-approved Short Sale price. They first believe that things will get better and tend to deny that there is a problem. The Lender may call with suggestions, or the Homeowner may begin to recognize the need to apply for a loan modification, and that is generally the next step in the process. It is generally only after the Homeowner has been washed out of the loan modification process, they get the official Notice of Default, or they find a job elsewhere and need to move, that a troubled Homeowner will make the move to call an Agent to list the home. How do you get to the Homeowner at just the right time when they are ready to list?

One approach is to create an information product—a brief guide or a video—that is directed to the “stop foreclosure” or “avoid foreclosure” market and offer that product as an incentive to sign up at a landing page that is optimized for “stop foreclosure” keywords for your local area, e.g. “Stop foreclosure San Antonio.”

The first contact should be simply information that will help the Homeowner decide whether selling the home is the right move for them. A good resource to point toward is Fannie Mae’s new KnowYourOptions site. About 90% of all real estate searches start online, and homeowners in foreclosure trouble start there as well. If you keep up the contacts using a variety of media from email to text messaging to blog feeds to offline letters and post cards your name as someone who can help will stand out above the competition. The key is, start with information before trying to sell homeowners on your services, and then keep up the flow of contacts.

Take the same simple landing page and add pay per click advertising to it localized to your community. Generally, local pay per click advertising, or targeted community-based ads in Yahoo or Bing search engines, are not that expensive compared to generalized and highly competitive PPC campaigns for more general foreclosure terms. AdWords advertising at the time of this writing for the term “stop foreclosure” costs the top listed site about $9.74 per click, while “stop foreclosure San Antonio” currently doesn’t have any AdWords competition and will be considerably less expensive to secure a top advertising spot.

The Rent or Own Fulcrum

Tue, 17 Aug 2010 14:21:01 GMT

Many apartment owners believed there would be a windfall of business when people started defaulting on mortgages. Instead, in many markets lease values fell, vacancy rates went up and owners had to offer concessions to get people to rent. What happened?

Those impacted by unemployment found that even with lowered rental rates they could not afford to move into an apartment when they lost their homes to foreclosure. They moved in with family in or doubled up with friends in houses and apartments that were already counted as occupied units. In addition, many homes, especially those under $150,000, have been bought by Investors and put onto the rental market in competition with apartment complexes. Sooner or later many of these houses will be offered to credit-damaged and first time homebuyers as lease option homes and they will eventually get back into the owner-occupied category.

Prices and vacancy rates are now beginning to stabilize and more people are ready to move out of the temporary housing situations into rental housing or home ownership. Clients with a foreclosure three years in the past and a credit score of over 500 (though more realistically, a score of 580 or better) may be able to qualify through FHA to purchase a home again, so those who faced foreclosure in 2008 or 2009 will be coming back into the home buying market in 2011 or 2012. In the meantime millions of families who might otherwise own will be inhabiting apartments and rental houses.

Those who have the credit and the financial where-with-all to consider buying face the age-old question of whether it is financially wiser to rent or buy. The low mortgage rates and reduced home values may tip the scales toward home ownership for many. Individual circumstances simply have to be charted out using a rent or buy calculator to know which is the best choice in any given situation.

Basically, the calculator includes the current rent, insurance and estimated annual rent increase for the rental unit compared to the purchase price, taxes, insurance, and loan information for the prospective home purchase. Maintenance expenses, annual appreciation estimate and sales expenses when the home is sold are also figured in. Estimate the number of years that the client plans on being in the house and the average rate the client would make on investments if the money used for down payment and expenses were saved instead. With those few facts the calculator can determine whether the client is better off renting or is ready to buy.

A key rule of thumb is if the client is only planning to live in the house for a year or two, then it is unlikely the home will appreciate enough in value to off-set purchase and sales expenses. On the other hand, if the client plans to be in the home for five or ten years, they may well be better off financially buying a home.

Attract Leads—Don’t Drive Them Away

Fri, 13 Aug 2010 11:21:15 GMT

Websites are critical these days to bringing buyers and sellers in to your real estate office. According to a 2009 survey of home buyer habits by the NAR, 90% of home buyers use the Internet as a source of information in their home search, and 28% find their Agent by searching online first.

Agents with no website are in the dark ages when it comes to marketing. Agents with just a static brochure type website are only slightly better off.

There are several problems with the static website. First and foremost, they generally do not attract traffic effectively. How many Agents spend thousands of dollars for an attractive brochure style website all to find no one ever visits it?

Google and the other search engines do not highly rank sites that never change. If all that ever changes is an occasional property, then the site may not stand up well against blogs and news sites that feature ever-changing information. One solution is to add a blog to the website and write articles relevant to real estate in your local area at least once a week. Dynamically link keywords in each article back to your main website in order to draw traffic back to the site that has the most information about you and the properties you are listing.

Static websites also rarely are well optimized for keywords relevant to the site. Always have your website provider SEO optimize the site so that the domain name, title, headers and metadata all reflect the keywords that people in your area will search to find listings of local properties. In highly competitive markets keywords need to be very specific. “Redondo Beach REOs” may make a better website keyword theme in order to get to the top of the search engine rankings than a more competitive term such as “homes for sale in Los Angeles.”

Attracting leads means not confusing potential clients with your call to action. Draw in potential clients through a one page “squeeze page” where there is only one action required: giving you a name and email address or phone number for follow up. Make that contact form “above the fold” and very obvious. Offer a free video series or a brief guide on a topic that will help to establish you as an expert in your field and give an incentive for people to provide their contact information. Offer potential clients a free service such as a CMA of their home’s value, or access to Listingbook or a public view of the MLS for signing up. The thank you page that confirms their contact information can take these potential clients directly to your main website or page of listings.

Be sure to contact each of the leads promptly. Nothing impresses potential clients more than a phone call within minutes after they have signed up for information from your website.

Using Google to Advertise Your Property Listings

Thu, 12 Aug 2010 16:18:50 GMT

Google wants to help local merchants, such as real estate agencies and local investor businesses, build traffic and sell products. Google and other online marketers have noticed that brick and mortar businesses have been more tentative in embracing the Internet than other types of businesses and have recently introduced several free tools to help local businesses gain customers.

First, you will need your own website where your property listings are advertised. To advertise through Google this site cannot be a replicated site from some major provider such as Active Rain or Connected Investors. You need to have access to the code and show up as the owner of the site. I redirect to your own domain name will not be sufficient.

Don’t panic. Setting up your own website is easy these days. Many blog templates are suitable for real estate buying and selling, and simple plug-ins can add squeeze pages to the site to gather contact information for buyers and sellers.

Once your website is up and running sign in to Google Base: http://base.google.com/base/ and fill in the information about your product type (real estate) and your website. Set up a data feed of your properties by putting the property information into a spreadsheet or an XML file as shown in the instructions for data feeds in Google Base. (If you are using Wordpress or another blogging format your site probably already creates an RSS or Atom XML feed.) Register the feed through Google Base and decide on the uploading method to be used.

Make sure that properties that are being listed have correct street addresses so they can show up properly in Google Maps as property for sale. Make sure the link works properly to identify the right location on the map. Photos and YouTube videos can also be uploaded to give prospective buyers a better feel for the property.

In addition, register your business with Google Places at www.google.com/places to get your business listed in Google Maps. Tags and “snippets” of information can be included so the map for your business comes up under the names of Agents or Investors, business name, descriptors of what you do, and events such as open houses and auctions.

Google Base and Google Places listings are free, unlike Google AdWords, the pay per click advertising tool that is also a way of drawing traffic. Admittedly, Google does not make using its free merchant services intuitive, but with a little trial and error anyone can take advantage of the huge traffic pulling power of Google with little time or effort required.

Best Bets for Finding All Cash Buyers

Thu, 05 Aug 2010 15:57:43 GMT

If you’re an Agent who works with Investors you’ll want to concentrate on finding all cash buyers in order to assure same day closings for your Investor deals. All cash financing has been used to purchase 26 or 27% of all homes bought in the U.S. for most of 2010, so attracting all cash buyers is a must- have skill for Agents in this economy.

The information about who has bought property recently with all cash is readily available online through most county public records. If you can’t download a list directly from the public records system or through the software available to your local MLS, ask the County Recorder if a downloadable file or printed list can be purchased from the County. Dedup the names and remove lenders who took back foreclosed properties.

Take note particularly of the cash buyers who have bought multiple properties in your area. Get to know the types of homes they are buying and the price-range for their buys, and then market to them the properties that match those specifications. Investor buyers are generally looking for homes under $150,000 they can fix up and resell for profit or rent out for cash flow.

With all the foreclosures in the market one would think that investors are the only game in town. Other groups are paying cash right now also.

NAR economist, Jed Smith, has analyzed the all cash buyer numbers and believes that they are comprised of 2% wealthy foreign investors, 12% local Investors, and 86% repeat buyers.

Foreign investors are flooding into vacation markets such as Miami Beach, SW Florida and other areas where luxury property is a bargain. Condo Vultures, Miami Beach realty, estimates that approximately 83% of the distressed condos being purchased in the Miami area are done so with cash, and many of the buyers are from Europe where it has always been more common for property to be purchased with cash. The exchange rate between the euro and dollar also make the U.S. housing market attractive to Europeans.

To get your listings before an international audience your realty should have a website accessible in more than one language and have Agents with multiple language skills. It is also possible to list in WorldProperties with a membership in this site.

The repeat buyer group includes baby boomers that are retiring and selling property in more expensive areas like New York and California for less expensive areas such as Florida, North Carolina, Tennessee and Arizona. The other group of repeat all cash buyers are those moving up from smaller homes and looking for larger replacements in more affordable communities.

Attracting the repeat buyer, especially those from outside the area, will require strong Web presence and advertising in media that appeals to baby boomers and retirees.

Home Prices Fall for Distressed Property Categories

Wed, 04 Aug 2010 17:58:04 GMT

The latest report from Campbell for the series “Inside Mortgage Finance Surveys” reveals a drop in home prices between May and June as sellers try to compensate for the end of the homebuyer tax credits. Campbell measures prices in various distressed property categories, as well as non-distressed. Campbell gathers its data monthly from a list of over 3,000 Real Estate Agents across the country.

Prices fell 6.8% for foreclosed properties in good condition; fell 6.3% for Short Sales; and fell 4.6% for non-distressed properties. Only rehabbed damaged foreclosures rose in value during the time period by 5.9% in June.

Thomas Popik, research director for Campbell Surveys, indicated that it is clear the peak of buyer demand generated by the homebuyer tax credit occurred in March and has actually been in decline since that point.

First time buyers in June made up 42% of the market, off from the high of 48% in March. Agents report that buyers are now just deducting the $8000 that originally was offered as a tax credit off the offer price.

Is the American Dream Dead?

Tue, 03 Aug 2010 19:27:58 GMT

Not according to a recent Relocation.com survey. America appears poised to move, and move into homes rather than rentals in many cases.

The ongoing survey on the moving habits of Americans shows that fewer families are moving specifically because of foreclosure. In February the same survey found 5% were moving because they had lost their home, while in June’s survey that number had dropped to 1%.

Fewer are also moving simply to find a cheaper place to rent or buy: in February 18% moved to achieve a lower cost of living, while in June this motivated only 7% of survey respondents. Only 4% moved in June because of job loss, while that number was 13% in February.

Of the 60% who were moving to rentals, 24% were former homeowners who planned to rent temporarily before finding a house to buy again. While the survey does not specify timeframe for the move back into owned housing, it does show the strong aspiration for those who have experienced home ownership to have that experience again. Relocation.com says that the data indicates a strong possibility that people not currently in owner-occupied housing will soon be looking for their own home.

Of those who moved to buy homes 4% were first time homebuyers, and 10% moved to larger homes or better neighborhoods. Another 18% identified themselves as current homeowners who moved to a new home, and 12% of former renters moved to an owner-occupied property. These numbers are up since February.

It would appear that America is on the move to follow the stronger job markets, a motivation that should fuel higher home ownership in the near future. Top destination locations in May/June were Texas, Florida, California, North Carolina and Georgia. Top cities included Houston, Chicago, Indianapolis, Los Angeles, Las Vegas and Portland.

Home ownership is still a very strong value in the American psyche. Individuals who have been temporarily side-lined by the economy are preparing to come back to home ownership by moving to lower priced communities and those that show the best job opportunities. Other studies show that Americans are buckling down to save and pay down debt. These are also activities that portend well for getting more Americans back into home ownership.

What About Bankruptcy?

Thu, 29 Jul 2010 14:41:33 GMT

Many homeowners feel they must make a decision between two evils—foreclosure or bankruptcy. More often than not, the decision is bankruptcy because it is seen as a way to avoid losing the house.

The problem is bankruptcy rarely stops foreclosure for good; it merely delays it. Individuals who fail to meet the stringent requirements of the bankruptcy will most often end up losing the house eventually and will thus have both bankruptcy and foreclosure damage on credit records.

In the case of bankruptcy homeowners can expect to lose all access to credit for the first six months to one year. At that point some of the so called “bad credit” lenders will begin to advertise cards with limited lines of credit, high interest rates and annual fees. It may be possible to apply for a refinance or FHA loan within 3 years, if substantial progress is made to improve the credit score and income levels are good. The bankruptcy will show on the credit report for 7 to 10 years and there will be credit ramifications throughout that period of time.

Foreclosure imposes similar kinds of restraints on credit and may lead to some lenders curtailing credit limits or canceling credit lines and home equity loans. The foreclosure will also stay on the credit report for 7 years or more.

In a Chapter 13 bankruptcy it is often very difficult for the homeowner to fulfill all obligations because the payments that are established are often even more burdensome than the original debt that led to the bankruptcy. Once payments are missed and the bankruptcy court dismisses the bankruptcy protection the lender will pick up foreclosure proceedings where they left off before the bankruptcy and unless a Short Sale or Deed-in-Lieu of Foreclosure can be arranged, the foreclosure will occur with all of the credit consequences the homeowner was originally trying to avoid.

Those who manage to be discharged successfully from a Chapter 7 or Chapter 13 bankruptcy may be able to save their homes. Most states allow exemptions from bankruptcy for homestead property up to some set dollar amount. As a practical matter, however, because so many find it difficult to complete bankruptcy requirements, many end up losing their homes anyway.

While sometimes bankruptcy is unavoidable, it is always less damaging to the credit and far less traumatic for a homeowner to arrange a workout with the lender. If they want to stay in the house then they should attempt a loan modification. If that is not possible, then the next best option is to sell using a Short Sale. Last, if nothing else can be arranged short of foreclosure or bankruptcy, then a Deed-in-Lieu of Foreclosure is a slightly less damaging option.

Facebook Fan Page and Advertising for Your Business

Thu, 29 Jul 2010 14:31:03 GMT

Facebook is the second highest ranking website on the Internet and generates 568,000,000 searches per day. For many people Facebook is preferred as a communication tool over email. Facebook profiles have their limitations. There’s a 5,000 friend limit with each personal profile making it less desirable as a business tool.

To make Facebook most relevant to business last year the Internet giant added the ability to create fan pages for businesses and personalities, and the numbers who can vote to “like” your page are not limited.

When you add a fan page for your business you are helping to brand yourself and giving customers an opportunity to help spread your message to their own base of friends by expressing that they “like” your fan page. This is true viral marketing!

The fan page is where you can post additions to your listings, announce new services, offer information about seminars and trainings for clients, and post observations about your niche or real estate in your community that will help to make you the respected authority in your area.

Creating a Facebook Fan Page is easy. Just click the link and it will bring up a new page generator on Facebook. Just indicate whether this page is for a local business, a product or service, or a public figure. Name the page something that will brand yourself or your business. Indicate that you are the authorized party to set up the page. Alternatively, you can use the create page feature to create a group or community page for a cause. Then click the create button and that’s it. The page is created!

Now add pictures, your logo, and share content with your fans. Invite your clients to follow your business activity through the fan page. It will be among the easiest ways possible to let clients know what is new with your business.

Another way to build clientele is to advertise via Facebook. Facebook reaches almost 116,000,000 users in the U.S. Pay per click advertising can be segmented by far more demographic factors than is available through Google or other search engine pay per click. Facebook advertising is not only more targeted than other search engine traffic, it is also more economical. Just click the Advertising link at the bottom of a Facebook page to get to the Advertising options.

Creating a Facebook Fan Page is one of the fastest and easiest ways to set yourself apart from the competition and to build a client base that knows likes and trusts you.

Make the Most of Craigslist Advertising

Tue, 27 Jul 2010 19:02:58 GMT

Craigslist is a very popular tool for listing houses for sale. This free online advertising site is a necessary evil for Agents and Investors who want to sell real estate. It is awkward to create ads that stand out, and it takes some creative posting to keep ads near the top of the page every day without causing the ad to be flagged for spamming.

There are several secrets to making a Craigslist ad draw traffic without being removed by the Craigslist police. First, create a different account for each type of campaign you will be posting. For example, set up a different campaign account for Short Sale listings, another for REO listings, a separate account for lease option property ads, etc.

To stay above the fold on Craigslist a new version of the ad should be posted twice per day at high use times of the day such as noon and after dinner. If the ads are seen as the same they will probably be flagged and removed because of Craigslist’s 48 hour posting rule.

For each campaign write several versions of the ad. The headline should be varied with different descriptors that make the property stand out from the crowd. Choose special features of the property that might be more desirable or unusual. Use keywords in the title that your buyers will be looking for—motivated seller, Short Sale, pre-foreclosure are examples of keywords that will be searched. Vary the description of the location.

The body of the ad may not have to be changed as often if the description is turned into a picture using a brochure making software such as Publisher and uploaded as an image. If the body is created as text then several versions should be created using different descriptors, pictures and other data.

There should be a “call to action” to send the viewer to a lead capture page where their contact information can be gathered, or to a central website where all of your available listings are posted.

Always follow up with each inquiry. Send free listings, a special report, or some other incentive to get interested buyers or sellers to be added to your list. If you have a number of listings of one type you might consider organizing a special bus tour of those properties, or offer a seminar giving prospective clients training on what to look for in a Short Sale or REO property. With follow up it is not unusual to close one out of ten leads gleaned from Craigslist.

Making the Most of Your Online Presence

Thu, 22 Jul 2010 20:39:53 GMT

Real Estate Investor, Greg Clement, as recently released an update to his popular SIMS marketing system. While the system is designed for real estate Investors, the same concepts apply equally to Agents. While the SIMS system effectively automates the process of marketing for Investors, it is possible for people to implement many of the same concepts by hand.

Here are some of the key elements to any online marketing plan:

1. Determine the focus of your marketing. If you are attempting to dominate the Short Sale market in your community, then you need to start with keyword research for terms that are most often used by ordinary people in searching for that type of property online in your community. The keywords must be specific and include the name or names of the communities in your marketing area and the kind of property you are selling. All of the domain names selected for every site must use the exact keywords with .com, .net or .org for the best results. Adding a modifier such as “site” or “online” at the end of the domain name is the second best choice.

2. There need to be sites that focus on attracting sellers of property in your target community, and other sites that are meant to for buyers. There need to be specific sites for each function and each location. So, if you want to go after Short Sales in two different communities, then both buyer and seller websites are needed specific to Short Sales in those two communities.

3. Something of value is needed to get prospective buyers and sellers to sign on to your contact list. Free reports can sometimes be useful, but videos offering free tips generally draw better than print information. A video can also tell the story of your services and why people should listen to you better than an all print website. Attach the free gift to the thank you page for a website called a “squeeze page” which is just a one page site that has just one purpose—to get a name and email address for follow up contact.

4. Blogs do a good job of establishing your authority in a particular niche and they provide a way for people to keep up with you by subscribing to get regular posts and by contacting you directly with comments.

5. Tie the sites together by driving traffic back to your main website using backlinking and other techniques to create higher authority ranking for your main website.

Set-up and maintenance for several sites is a large job and one that will for most Agents require some technical assistance. Help is available through sites like Elance, Rent-a-coder, and off-shore VA sites like ODesk.

Agents and the Mind-Set of Scarcity

Mon, 19 Jul 2010 18:26:47 GMT

Following the popular Homebuyer Tax Credit program most markets have slid back into what feels like recession again. Many Agents could be tempted to give up in despair.

There is still plenty of potential in the marketplace. It just requires finding less conventional buyers. According to ForeclosureDeals 31% of the home sales during the first quarter of 2010 were foreclosures. Agents who have not been mining the foreclosure market are missing out on a large segment of the marketplace, one that reaches well over 50% of the market in the harder hit areas. But where to find buyers with the new buyers effectively out of the market now?

There is evidence that, unlike new homebuyers, Investors are staying in the distressed property market. There are trillions of dollars in investment cash available and foreclosures are one way Investors can put cash to work for a relatively consistent return. Investors are usually repeat clients, so an Agent need only develop relationships with a few Investors to keep a steady pipeline of closings lined up.

How does an Agent find Investor clients? Find the local real estate Investors group and participate actively in the meetings. Search the local newspaper and Penny Saver and look for the “We Buy Houses” ads. Get your website online with a video that advertises your services to Investors and offer a free report or some valuable service such as a free CMA or BPO in exchange for Investor contact information.

Get to know the types of property and preferred locations of the Investors in your area and bring these people deals that fit their buying specifications. For the best of these Investor prospects set up a day each week or each month to see the most promising wholesale or Short Sale deals. By consistently looking for deals for several Investor clients you’ll be writing and negotiating offers frequently. Offers will be low and many will be rejected, but as long as there are a consistent flow of offers written, some will be accepted.

With distressed property deals you can make up in volume what you lose in higher purchase price and commission on any one deal. These deals are often faster and more certain to close because they are generally all cash deals.

The next time you long for the good-old days when it was easy to market for retail buyers and sellers, don’t despair. By refocusing to Investor-Buyers almost any Agent can support bottom line income at levels at or above what they were accustomed to during the boom years.

How Will Millennials Affect the Housing Market?

Fri, 16 Jul 2010 14:01:29 GMT

For the past 40 years assumptions about what will drive the real estate market in the future have been based on the buying needs and preferences of the Baby Boomer and Gen X populations. Now the Millennials, those born between 1977 and 2000, are beginning to reach their 20s. About 60 million Americans are in the early portion of the Millennial or Gen Y group (1977-89), and their impact will increasingly be felt throughout the economy.

What do Millennials expect, and how do their habits differ from those of previous generations?

The Baby Boomer and Gen X populations grew up under the assumption that the American Dream ultimately requires home ownership. Saving for the first house became a part of the plan for Baby Boomers, while Gen X’ers were able to buy in at a time when creative financing made it easier to qualify and to get into housing with a low down payment. Both Baby Boomer and Gen X generations got out and worked and became independent fairly early in their careers.

Millennials, on the other hand, seem to be delaying careers in exchange for graduate school or travel. They are bunking in with parents and doubling up with friends more so than previous generations. The economy is also seriously affecting the ability of Millennials to become independent and financially secure.

Instead of making home ownership a priority in their 20s like previous generations, the Gen Y group will most likely be delaying home buying decisions until their 30s. This will have a serious impact on the number of new housing starts that will be needed in the near term. The number of first time home buyers will also be curtailed somewhat over the next ten years or more.

The few surveys that have been done so far on the Gen Y population indicate that this group may prefer:

--Urban environments more than suburban;

--Townhouses and condos more than single family homes;

--Ability to live within 10 minutes of work and/or shopping;

--Smaller over all floor space and open floor plans with big kitchens and garage space;

--Less interest in formal dining rooms and game rooms than in more useful and practical room space.

It’s possible that as the Millennials begin to have families they will revert to more traditional large single family suburban home preference that has been most popular with Boomers and Xers. The family impact of Gen Y remains to be seen.

There is little question that between the expectations of the newest generation of adults and the current housing crisis there will be some dramatic changes in the housing market over the coming years that will affect patterns for new housing developers, Investors and Agents.

Selling Short Sales Fast: Attracting Cash Buyers

Mon, 12 Jul 2010 13:20:17 GMT

No matter how many marketing pieces are created to spread the word about a hot property, the one thing that will make or break a Short Sale is the price. Virtually any property can be sold at the right price. In fact, the latest estimate by Realtytrac for the first quarter of 2010 is that the average Short Sale goes for 27% less than non-distressed property. Price it for a 30 day quick sale, and they will come.

By they, we primarily mean cash buyers. Short Sale property in areas where a high percentage of sales have been to cash buyers should sell easily and quickly, if priced right, simply by marketing directly to those buyers who have bought with cash in the same area. In many cases these are Investors who are repeat buyers trying to build up an inventory of under market value rental or lease option homes within their “sweet spot” area. Get to know what every one on this list is looking for and call or email those people directly when you have a match with their preferred type, size, price range and property location. Your Buyers’ List should contain details on what each cash buyer in your area is looking for so you can in effect “go shopping” to match their needs.

Online advertising may also attract new Investors to your area. Make sure your website is well optimized so that it ranks on the first page of the search engines for keywords that are searched in your area by those looking for foreclosure property in your city. This may take writing a regular series of articles on buying foreclosures in your area for your blog, or for publication on article directories. There are services that help you to get backlinks to and social buzz from your articles and can help your blog or website to get ranked quickly. This is the type of work that can be easily farmed out to a technical expert or virtual assistant.

The property sale brochure can also be posted on various online social media sites such as Craigslist, EBayClassifieds (Kijiji), Backpage, local real estate investment group sites, and Investor social sites like Bowku, Connected Investors and Realestateinvestor. Posting and updating social media ads is another task to assign a VA. The ad should be reposted every few days on the real estate boards to make sure they stay near the top of the list for the area.

By proactively soliciting for Short Sale sellers to list with you from areas where cash buyers are plentiful you will be setting up your business to succeed by knowing what the buyers are looking for and then finding the houses that meet your Investor-clients’ needs.

More Foreclosure Myths

Mon, 12 Jul 2010 13:16:39 GMT

Recently we covered some of the common myths prospective Buyers have about foreclosure homes. Here are five more:

1. Buying a foreclosure requires all cash.

It is true that for a property being sold at auction all cash is required, and in some areas cash buyers have an advantage in buying Short Sale and bank-owned properties. However, foreclosed property can generally be bought with FHA and conventional financing. The buyer and the property simply have to fit the normal guidelines for qualifying.

2. It is easier to get a bank loan for a foreclosure than for other property.

The bank requirements will be the same whether it is a foreclosure or a standard sale. What will be different is that a bank-owned or Short Sale property will likely cost 5% to 30% less than market value and will be more affordable than similar homes that are not distressed.

3. Many people are just walking away from their homes.

It is true that there are more “strategic” foreclosures than in the past. However, a Financial Literacy Survey by the National Foundation for Credit Counseling indicates that only 23% of consumers feel it is justifiable to let a property go simply because the mortgage is under water, and 15% said they would not default on a mortgage under any circumstance.

The major reasons why people default on their mortgages are because of job loss, escalating mortgage costs, or other hardships such as death of a spouse or high medical bills.

4. Foreclosed property will lose value.

The value of the property will be enhanced once the liens and other signs of distress have been removed from the property. If anything, because the foreclosure is probably being bought at a discount the foreclosure should hold its value in a declining market better than a home that has never been discounted.

5. There are hidden costs in buying a foreclosure.

Some auction companies will build in special fees. Sometimes to close a Short Sale the Buyer will need to pay some of the liens. Generally these things are absorbed by the Lender. In an REO all of the liens will have been removed and the property will go to the new owner with clear title.

Buying pre-foreclosure and bank-owned property is an excellent strategy for first time home buyers, Investors and others who are willing to do a little homework and seek these properties out. There is really very little added risk to them than buying any other property, except possibly for those bought at auction.

Taking the Pulse of the Housing Industry

Tue, 29 Jun 2010 17:19:07 GMT

The Joint Center for Housing Studies at Harvard University recently published a report on “The State of the Nation’s Housing 2010.”

Three positive signs of recovery were in place by the beginning of 2010: many highly affordable areas of the country, low and stable interest rates, and revived sales.

Despite some price stabilization in 2009, 2010 has seen a return of price declines in many markets. A huge drag on the housing market is the continuing high unemployment rate. Another drag on the housing market is the high vacancy rates for rentals and the high number of foreclosed homes held off the market in a shadow inventory. The report suggests that there will need to be continuing improvement in the unemployment picture for the housing market to continue its improvement post-tax credit program.

The 2000 to 2010 decade was a “lost decade” in terms of real median household income and total household wealth. Both figures ended the decade at, or below, the figures for the beginning of the decade.

The report notes that fewer new homes were started in 2009 than any year since World War II. By 2010 permit applications were still so low that it can be anticipated 2010 will be another weak year for new homes. Last year 57 of the nations top 100 markets reached new lows in housing starts.

The report credits the tax rebate program and the Federal Reserves purchase of mortgage-backed securities as the two keys to jumpstarting the housing market in 2009 and early 2010.

There are risks in the current market. The shadow inventory of vacant property stands at an estimated 745,000 units above normal levels. Vacancy rates on rentals continue to slide due in part to the numbers of unsold vacant homes that are entering the rental market. Low net immigration and doubling up among renters are the biggest factors for the continuing high vacancy rates.

During most recessions housing construction has led the country in to and out of the recession. It dragged down the economy for 14 straight quarters. As a share of GDP the housing market bottomed in the second quarter of 2009 at 2.4% and averaged for the year 2.5% of GDP, the lowest level since World War II. Falling home prices also dampened economic growth.

The study anticipates that strong gains in employment, more spending for manufacturing, and a stronger housing market will be necessary for economic growth. Even without strong influx of immigration there should be enough population growth pressure to boost demand for new housing and remodeling activity during the next decade.

Dealing with Buyer’s Remorse in a Short Sale

Fri, 25 Jun 2010 23:10:08 GMT

Short Sales often fall through because buyers back out while waiting for bank approval. The Buyer gets impatient as the process drags on for months, finds another property they like better or is immediately available, and they get out of the deal.

The most effective way of combating Short Sale Buyer’s Remorse is to avoid putting an end Buyer in place until the Short Sale has been approved. If a transactional Investor/Buyer provides the initial contract to get the ball rolling on the Short Sale there is little incentive for that “B” Buyer to walk out unless the bank approval falls through. Prospective Homeowners and some buy and hold Investors who receive contracts prior to bank approval are more typically candidates for Buyer’s Remorse and will cancel their offers quite frequently as the time drags on for bank approval.

Typically, the transactional Buyer will have a number of deals in the pipeline at one time. Since they are not going to hold the property long term and will not need to qualify for financing, they do not need to drop an offer in order to put in an offer on another, better property. If the end Buyer is lined up only after there is a bank approved price, everyone has a higher certainty of a closing on the horizon and the deal is more likely to close.

Here are some additional things the Agent can do to knock out Buyer’s Remorse:

Do your due diligence on the financial viability of the end Buyer before the offer is accepted. If qualifying appears doubtful, then look for another Buyer.

An offer from a cash buyer is more likely to close than one from a first time buyer who needs FHA financing. This is one of those times when accepting a lower all cash offer is better than accepting a higher financed offer—more likely the deal will close and less likely to end in Buyer’s Remorse.

Require a high down payment for the end Buyer so that only the most serious contenders will make an offer. Tighten the addenda in the contract to give the Buyer fewer “outs” without sacrificing the down payment.

Buyer’s Remorse can never be eliminated entirely, but it can be greatly reduced by careful screening and managing the timing for finding the end Buyer.

Key to Short Sale Success: The BPO

Tue, 22 Jun 2010 17:52:50 GMT

Arguably the most important step in completing a successful Short Sale is in assuring that the BPO Agent has all the relevant data to make an accurate valuation.

The law requires that Lenders remain at arms’ length from the BPO Agents. For that reason they are usually from outside the immediate area and may be unfamiliar with the specific neighborhood. Without some monitoring by the Agent or the Investor/Buyer, it is highly likely that the BPO will be a cursory affair that does not adequately reflect the true value and condition of the property.

Agents may not illegally influence BPO Agents. That does not mean that the Agent cannot have any contact. In fact, the best strategy is to make sure the BPO Agent must contact the Agent for the Short Sale specifically to gain access to the house, and then meet them there.

Have a packet of data available for them including your comps and the information about the house condition and the neighborhood that justify your offer. Identify the different comps for similar distressed properties. Provide repair estimates from licensed contractors. Consider having your own BPO done and share those results. Share the crime statistics, document if there are registered sex offenders in the neighborhood, and point out near by areas of blight. Provide the general economic trends that affect the housing market in the area. If the BPO Agent is new or from out of the area, they may not already have this detail, or they may not take time to collect it for them.

Agents who have kept on top of the BPO Agent have some times stopped irregularities that could doom the BPO such as the Agent sending an unlicensed assistant to conduct the on-site work, or the BPO Agent doing a drive-by cursory inspection only.

Another key to BPO success is to remove the listing from the MLS once the Purchase and Sale Agreement is signed until the Lender BPO has been completed. The BPO Agent will not be obligated to include the MLS listing price in the calculation for the market value of the home if it is not currently in the MLS. If it is in the MLS the BPO Agent will have to include the price, even if it is too high to realistically sell at that price.

By providing a complete and accurate justification for the offer price to the BPO Agent you will be making it much more likely that the approved price will be in the right ball park for completing the Short Sale.

Separating Myth from Reality about Foreclosure Property

Tue, 22 Jun 2010 17:45:13 GMT

The average buyer has an inaccurate picture of what to expect when buying a foreclosure property. Many will not look at distressed property because of some of the popular myths out there about these properties. Since in many markets 30-50% of all sales are distressed properties, dispelling the myths about foreclosure may be the first job for the Agent before selecting properties to show a buyer.

Here are some of the common misunderstandings:

1. Foreclosures are always wrecks.

It is true that all Short Sale and bank-owned properties are considered “distressed,” but that does not necessarily imply that all these properties are damaged. Most require paint, new carpeting and landscaping, precisely the things most homeowners change when they purchase a property.

Perhaps half of all bank-owned properties have other more serious problems to rectify before the property is habitable. Often properties have been abandoned for months on end. Extreme cold or heat in properties where the electricity and water have been off for an extended period of time can cause pipe bursts and black mold. These problems must be corrected before new owners can move in.

The images of homes with concrete in the toilets and torn out cabinets scare most potential buyers. Fortunately, these are problems in a minority of distressed homes.

By bringing a home inspector or contractor to the property before putting in an offer buyers can get a good picture of the costs involved in bringing the foreclosure property up to snuff and avoid properties that will require too much rehab or have hidden structural flaws.

2. Distressed properties cannot be inspected before putting in an offer.

Only properties purchased at auction are off-limits for pre-offer inspection. It is always a good idea either to inspect before putting in an offer, or within the inspection period built into most Purchase and Sale Agreements.

3. Short Sales and REOs always come at a huge discount.

While many distressed homes sell at 50% or more below the amount of the mortgage, the discount is much less from current market value. In most cases the discount will be 15 to 25% below market value. In markets with few foreclosures the discount may be only 5 to 10% below current market value. The discount is justified because of the time, work and risk involved in curing liens and restoring the property to productivity.

Dispelling the myths that surround foreclosure properties may help in increasing the interest among buyers for them.

Can HAFA Be Successful in Increasing Short Sales?

Tue, 15 Jun 2010 18:13:00 GMT

Clayton Holdings, a loan servicer, analyzes the probability of success for the new government Short Sale program which began April 5. (See article in its monthly publication In Front (May 2010).)

While there are some benefits for all parties involved in the Short Sale, there is enough detraction to the HAFA program that Clayton researchers doubt that this program will replace servicers’ own proprietary programs.

A big draw-back is that HAFA requires that a property be for sale for at least 120 days before being considered for the HAFA program. This lengthy time may increase the loss severity and lower the degree of flexibility that the servicer will have in negotiating a good price. The homeowner also must qualify for the basic requirements of the HAMP program, in which case the homeowner is more likely to want to negotiate a loan modification rather than a Short Sale.

HAFA does not require in inside and out BPO of the property, against industry standard. This may lead to greater discrepancies between offer amounts and decrease the flexibility the Lender has to negotiate a settlement with the Buyer. The program is not available for Investor properties.

Some disadvantages not mentioned in the Clayton report that we’ve noticed: The Homeowner may be required to pay up to 31% of their income toward the mortgage while waiting for the Short Sale to take place. Many Homeowners’ budgets are stretched by unemployment and soaring debt and will be unable or unwilling to make the extra payments.

There are some benefits to the HAFA program. All parties get some compensation from the government for participating in the program. Homeowners participating in a HAFA Short Sale are assured that Lenders will accept the Short Sale payment as payment in full with no deficiency. This is probably the biggest attraction to the program for Homeowners.

The incentives may not be enough, however, to entice especially 2^nd lien holders from insisting on a deficiency judgment or a promissory note in lieu of a judgment for repayment of a larger portion of the debt.

Clayton concludes that the program is well-intentioned, but may actually increase the length of time it takes to get a non-performing asset off the books and will probably not play a major role in solving the foreclosure crisis.