Yip they sure are.
We the people have bailed out the banks to the tune of 700 Billion dollars and for what… Ahh yes, to help the foreclosures and to prevent homeowners losing homes.
So why are lenders still not facilitating short sales at a more productive and proficient rate?
Well this is how it works. .. In short of course.
Lender gets an offer for a property which is way overleveraged, so the offer is significantly lower than what is owed.
Banks ask for a short sale package to be completed and sent to them. Then comes the Not So Fun part…. The call a BPO (Brokers Price Opinion) or in some cases an appraisal.
At this point you need to be aware that this is where the challenges start.
A lender pays on average $30 - $50 for a BPO and most appraisals are at ½ price you would normally pay.
So the big question is, what incentive has a BPO or an Appraiser to make an accurate evaluation…. My experience None What so Ever.
It is as quick as they can get in and get out. Some BPO’s and Appraisers don’t even go into the house.
There is NO WAY anyone can be efficient enough to walk into 15 homes a day, take a note of all the challenges ( theses are mostly MIND notes as some don’t even bring in a pad to write on) take half a dozen pictures and moves onto his or her next one.
How can anyone possibly remember all the defects and price adjustments that have to be made if nothing is written down.
We have this exact challenge going on right now… 3 appraisals, using the same person and they wonder why the value hasn’t changed.
At the last appraisal our representative was there and the appraiser openly admitted “he didn’t realize how bad this house was since he had….. wait for it….. NEVER BEEN IN IT BEFORE !!!!!
So why has this person gone back to the lender and told them a value of $300k for a house he has never been in? More so why are banks allowing these appraisers to charge 3 times for an appraisal which has Never been carried out correctly.
And needless to say on his last appraisal guess what his value was….. You’ve got it…. $300k.
We approached the lender and told them not to send the same guy out.. he is ever going to make himself look like an idiot and produce a lower value.
Oh by the way… the buyer’s lender carried out and appraisal and the value was $228k … go figure.
We did ask the lender if they are hell bent on getting $300k for this house would THEY lend to the buyer…Their answer was NO, as the buyer’s appraisal was $228k.
So there you have it, banks take our money, don’t help homeowners by facilitating short sales, listening to the very people who helped create this mess with over valuing homes and we all sit and wonder why the housing market it on its knees.
In spite of overwhelming evidence to substantiate the buyers offer including current listing and sold comps, and appraisal, 3 Independent BPO’s, repair estimates for over $65,000 …….this lender (who will remain nameless for now) is still going on one persons opinion of the value…. Unreal !
I think it is about time there was an independent body created to oversee banks and see the exact reason they are not doing short sales to help homeowners… when they have been given $700 BILLION of our money to do so.
More later.
Steve M
Tuesday, September 14, 2010
Wednesday, August 18, 2010
2 mindsets when looking at homes
It happens all the time when taking clients to view homes... She likes this she likes that, she hates this she hates that, he loves what she hates and vice-versa.
Some people have two diverse ideas of what their dream home should be.
one wants a 2-3 bedroom apartment so they have no garden maintenance and the other wants 4 bedroom with their own private pool so they can have family and friends over in the summer.
Before you start to research all the listings out there, the agents should sit down with the clients and see exactly what they are looking for.
If they are so far apart in wants and needs, it would make good sense to allow them to write down their 'wish list' and 'must haves' and then compare notes.
Time is money, and money never sleeps.
Make sure everyone is one the same page you they are ALL looking for the same type,size and location as each other.
This Will save many hours of back and forth.
Happy hunting.
Steve
www.DreamHomesofLA.com
Some people have two diverse ideas of what their dream home should be.
one wants a 2-3 bedroom apartment so they have no garden maintenance and the other wants 4 bedroom with their own private pool so they can have family and friends over in the summer.
Before you start to research all the listings out there, the agents should sit down with the clients and see exactly what they are looking for.
If they are so far apart in wants and needs, it would make good sense to allow them to write down their 'wish list' and 'must haves' and then compare notes.
Time is money, and money never sleeps.
Make sure everyone is one the same page you they are ALL looking for the same type,size and location as each other.
This Will save many hours of back and forth.
Happy hunting.
Steve
www.DreamHomesofLA.com
Wednesday, August 11, 2010
Over Priced Homes
Overpriced Homes-Sell Slower and For Less If there’s anything we can take away from the plethora of Bank Owned Foreclosures is they certainly know how to price a home to move!
I maintain that you almost always shoot yourself in the foot by overpricing your home. Your home will almost always sale at or above market value by pricing at or below market value.
So why is that? Well think back at when YOU were buying a home. Remember when a “great deal” came on the market and everybody and their agents were “swarming” to the open house?
You placed your offer only to find out their were 10 other offers and they were going above the asking price?
This “bargain price” created an auction affect and got people excited. THAT is how banks are pricing their homes and if you want your home to move quickly and for the most amount of money, this is a winning strategy.
So why don’t sellers do it? I think it’s because there’s a little voice inside of our head (and pocketbook) that says “what if”.
“What if”- I can get $50K over market value. (even if someone were excited enough about your home to pay $50K over appraised value, their lender won’t loan the money if the value isn’t there. No loan, no buyer)
“What if”- I don’t get multiple offers and I only get one offer (May be still overpriced!)
Often fear (and sometimes greed) hold us back from making smart choices!
Don’t feel bad though, even some Real Estate Agents are guilty of senselessly overpricing their homes. Somehow when it’s their turn to sell, all of their “market knowledge” becomes goo and leaks out of their ears! It’s like the hairdresser with bad hair!
The bottom line is, almost always, an Over Priced House will sit on the market longer and sell for less than it should have had it been priced strategically from the beginning.
So my question to you is: Do you want to list your house for it to sit there OR do you want to list so that it sells?
Peter Hernandez
www.DreamHomesofLA.com
I maintain that you almost always shoot yourself in the foot by overpricing your home. Your home will almost always sale at or above market value by pricing at or below market value.
So why is that? Well think back at when YOU were buying a home. Remember when a “great deal” came on the market and everybody and their agents were “swarming” to the open house?
You placed your offer only to find out their were 10 other offers and they were going above the asking price?
This “bargain price” created an auction affect and got people excited. THAT is how banks are pricing their homes and if you want your home to move quickly and for the most amount of money, this is a winning strategy.
So why don’t sellers do it? I think it’s because there’s a little voice inside of our head (and pocketbook) that says “what if”.
“What if”- I can get $50K over market value. (even if someone were excited enough about your home to pay $50K over appraised value, their lender won’t loan the money if the value isn’t there. No loan, no buyer)
“What if”- I don’t get multiple offers and I only get one offer (May be still overpriced!)
Often fear (and sometimes greed) hold us back from making smart choices!
Don’t feel bad though, even some Real Estate Agents are guilty of senselessly overpricing their homes. Somehow when it’s their turn to sell, all of their “market knowledge” becomes goo and leaks out of their ears! It’s like the hairdresser with bad hair!
The bottom line is, almost always, an Over Priced House will sit on the market longer and sell for less than it should have had it been priced strategically from the beginning.
So my question to you is: Do you want to list your house for it to sit there OR do you want to list so that it sells?
Peter Hernandez
www.DreamHomesofLA.com
Wednesday, August 4, 2010
Open House Suggestions
On open house day it is always best if the you, the homeowner, isn’t home.
You might ask why?
Well quite simple really, brokers like to talk about the positives and negatives of a property and how their clients may perceive it to be, and this can sometime offend the homeowner because homeowners always think their house is the best.
So to make sure your home is best presented the way you want here are some tips:
1) Clutter is a big turn off for potential buyers; make sure all not necessary stuff is gone, clean work surfaces, kid’s toys, books, magazines shoes at the door etc.
2) Have cats? Make sure litter boxes are clean and have fresh litter, Dogs? Make sure there is no “land mines” in the back yard, this is an especially big turn off for buyers as they may envision their children playing in the back yard however with dog’s doing their business on the grass could give a resounding NO.
3) Again with pets, food bowl, either have them cleaned out or removed completely.
4) Bedrooms: cloths lying around again comes under the “anti-clutter rule”
5) Bathrooms: make sure make up, shaving and hair brushes etc are all away. Nice clear surfaces always.
6) Kitchen: amazing how many people leave dishes in the sink… also the night before the open house, clean down the range and stick on the oven cleaner.. People love clean ovens it’s also great to run a cycle on your dish washer and then remove the washed dishes making it clean and fresh.
Try to imagine you were coming to buy the house, what would you hate to see?
Implement these simple strategies to ease the pressure of open houses.
You might ask why?
Well quite simple really, brokers like to talk about the positives and negatives of a property and how their clients may perceive it to be, and this can sometime offend the homeowner because homeowners always think their house is the best.
So to make sure your home is best presented the way you want here are some tips:
1) Clutter is a big turn off for potential buyers; make sure all not necessary stuff is gone, clean work surfaces, kid’s toys, books, magazines shoes at the door etc.
2) Have cats? Make sure litter boxes are clean and have fresh litter, Dogs? Make sure there is no “land mines” in the back yard, this is an especially big turn off for buyers as they may envision their children playing in the back yard however with dog’s doing their business on the grass could give a resounding NO.
3) Again with pets, food bowl, either have them cleaned out or removed completely.
4) Bedrooms: cloths lying around again comes under the “anti-clutter rule”
5) Bathrooms: make sure make up, shaving and hair brushes etc are all away. Nice clear surfaces always.
6) Kitchen: amazing how many people leave dishes in the sink… also the night before the open house, clean down the range and stick on the oven cleaner.. People love clean ovens it’s also great to run a cycle on your dish washer and then remove the washed dishes making it clean and fresh.
Try to imagine you were coming to buy the house, what would you hate to see?
Implement these simple strategies to ease the pressure of open houses.
Wednesday, July 28, 2010
Truth about short sales for the Homeowner
So we recently covered the area of shorts sales from of lenders angle today we are going to look at it from a homeowners angle and how it effects them.
Firstly Mr. and Mrs. Homeowner please be careful there are many scams going on and I will try to point out a couple of them to keep you on your guard.
Lets take a scenario which a lot of people can concur with these days.
You bought a house in 2006, for $550,000 and you managed to get 100% financing doing a stated income loan, low or no docs.
your payment was $4,425 with a 2 year arm.
Present day: your interest arm has reset and your payment has shot up; your new payment is $5,900. WOW !
You don't earn enough to pay that extra amount so you default on your mortgage.
Month one leads into month two because you think 'I will do some over time plus Joe Blow owes me some money... I'll catch up' ... then month two goes into month three, then for most it's too late.
But now there is another challenge........in days gone by your house may be worth $590,000 - $620,000 but the housing bubble has burst and your pride and joy home is now worth $310,000.
You can't refinance as there is no value in the property anymore, no lender in their right mind is going to finance that, plus now that the rules have changed you won't qualify financially anyway.
You are already 4-5 months behind so your credit reflects that too, so no lender is going to lend to you.
You can't sell the house as you would need to take $250k to the closing and if you had that kind of money you would not be behind on your payments... right ?
So what do you do?
If you had only one mortgage you could do a deed in leu, meaning you give the house back to the lender via a deed and you are released of your obligations.
But more than likely you will need to go down the route of a short sale in order to reduce the debt and get the house sold. Now there are pros and cons with doing a short sale and we will try cover most of them hear.
In my previous article you read why the banks will take a short sale but it has got to make sense as well as fall within their matrix criteria.
There are reputable companies that will do a great job doing your short sale but also there are people who will do a terrible job.
Being a home owner please bare in mind there is no guarantee that a lender will do a short sale on your property. Note: If anyone promises you that they can do the short sale. walk away, no one can guarantee you an approval as no one can control the banks, and most don't know the lenders criteria anyway.
Here is the thing every house will sell if it is at the right price, the trick is getting the lender to take that price.
If the short sale is completed successfully then the ripple effect can be extraordinary. So many people can be benefit. Lets look at the ripple when the house is sold.
The house will be sold to a third party ( happy new home owner), your lender gets paid, the new buyers lender has a new loan, survey, title, insurance, electric, cable, gas, water, trash, lawn guys,all the way down to your driving license address being changed which will cost around $20.
The short sale approval and close is bigger than most people think and stimulates the economy.
The homeowner also has a few benefits, the house is sold, gone are the pressures of foreclosure that are effecting so many families right now. The homeowner does not have a foreclosure on their credit which means in a few years when the housing market stabilizes again and the homeowner gets into a better financial status they could again become homeowners.
Ok, so I hear everyone shouting what about the deficiency, it will hound the home owner for years, they still have debt. May be true but there are a few different scenarios.
A good negotiator when talking to the lenders, will ask for zero deficiency towards the homeowner, if they have proved their case well most get approved without a deficiency.
You my still get a IRS 1099 for the difference between what you owed and what the house was sold for. This is a taxable event for the homeowner and will be reported as income.
A lender cannot give you a deficiency and a 1099, as the lender can't get paid via a deficiency and give you a 1099 for income if they are being made whole by the deficiency.
I would also tell you to get your CPA to find out about the 982 IRS form which is a forgiveness of indebtedness to the IRS and see if you qualify.
I would also check out the senate bill H.R 3648 dated Jan 4th 2007 which talks about the deficiency in regards to the IRS.
Do not listen to people who say you can stay in the house and pay rent , they will short sale it and pay off the debt.........9/10 it wont happen, they are pocketing the money and doing nothing.
Plus it is illegal to accept rent when a property is in default without those payments going towards the mortgage company. it is called equity skimming and comes with a side of 5-10 years in a local penitentiary.
Now if you had a HELOC (home equity line of credit) where you pulled money out of the house when things were good, you have another challenge. HELOC loans are qualified as a good loan as it was cash out. The lender is entitled to get that money back and can attach it to you personally, or another property that you own or even garnish wages.
Now what you can do is, if the debts is negotiated and they still want ....lets say $20k from you (as you borrowed $80k) then ask that it is reported positively on your credit report.
please bare in mind you did sign a promissory note for $80k and they gave it to you, now you are only being asked to pay back 20k of it. is not a bad deal really.
Most of the time it will be interest free for the duration.
If your mitigation company is successful in the negotiation of the mortgage debt and the house is sold, there is another challenge.
Most lenders FHA, Freddie MAc and Fannie Mae will not give the homeowner a new mortgage for between 2-4 years. Really its not a big deal in todays economy, personally I would want to wait for a few years anyway to let the housing market come back and rebuild my credit. before I move forward with another house purchase.
Until Next time.
Steve M
Please to not take this as legal advice. I am not an attorney or a CPA, please check with your own council before engaging with any of the information supplied. this is solely for reading purposes and the information is solely my opinion.
Firstly Mr. and Mrs. Homeowner please be careful there are many scams going on and I will try to point out a couple of them to keep you on your guard.
Lets take a scenario which a lot of people can concur with these days.
You bought a house in 2006, for $550,000 and you managed to get 100% financing doing a stated income loan, low or no docs.
your payment was $4,425 with a 2 year arm.
Present day: your interest arm has reset and your payment has shot up; your new payment is $5,900. WOW !
You don't earn enough to pay that extra amount so you default on your mortgage.
Month one leads into month two because you think 'I will do some over time plus Joe Blow owes me some money... I'll catch up' ... then month two goes into month three, then for most it's too late.
But now there is another challenge........in days gone by your house may be worth $590,000 - $620,000 but the housing bubble has burst and your pride and joy home is now worth $310,000.
You can't refinance as there is no value in the property anymore, no lender in their right mind is going to finance that, plus now that the rules have changed you won't qualify financially anyway.
You are already 4-5 months behind so your credit reflects that too, so no lender is going to lend to you.
You can't sell the house as you would need to take $250k to the closing and if you had that kind of money you would not be behind on your payments... right ?
So what do you do?
If you had only one mortgage you could do a deed in leu, meaning you give the house back to the lender via a deed and you are released of your obligations.
But more than likely you will need to go down the route of a short sale in order to reduce the debt and get the house sold. Now there are pros and cons with doing a short sale and we will try cover most of them hear.
In my previous article you read why the banks will take a short sale but it has got to make sense as well as fall within their matrix criteria.
There are reputable companies that will do a great job doing your short sale but also there are people who will do a terrible job.
Being a home owner please bare in mind there is no guarantee that a lender will do a short sale on your property. Note: If anyone promises you that they can do the short sale. walk away, no one can guarantee you an approval as no one can control the banks, and most don't know the lenders criteria anyway.
Here is the thing every house will sell if it is at the right price, the trick is getting the lender to take that price.
If the short sale is completed successfully then the ripple effect can be extraordinary. So many people can be benefit. Lets look at the ripple when the house is sold.
The house will be sold to a third party ( happy new home owner), your lender gets paid, the new buyers lender has a new loan, survey, title, insurance, electric, cable, gas, water, trash, lawn guys,all the way down to your driving license address being changed which will cost around $20.
The short sale approval and close is bigger than most people think and stimulates the economy.
The homeowner also has a few benefits, the house is sold, gone are the pressures of foreclosure that are effecting so many families right now. The homeowner does not have a foreclosure on their credit which means in a few years when the housing market stabilizes again and the homeowner gets into a better financial status they could again become homeowners.
Ok, so I hear everyone shouting what about the deficiency, it will hound the home owner for years, they still have debt. May be true but there are a few different scenarios.
A good negotiator when talking to the lenders, will ask for zero deficiency towards the homeowner, if they have proved their case well most get approved without a deficiency.
You my still get a IRS 1099 for the difference between what you owed and what the house was sold for. This is a taxable event for the homeowner and will be reported as income.
A lender cannot give you a deficiency and a 1099, as the lender can't get paid via a deficiency and give you a 1099 for income if they are being made whole by the deficiency.
I would also tell you to get your CPA to find out about the 982 IRS form which is a forgiveness of indebtedness to the IRS and see if you qualify.
I would also check out the senate bill H.R 3648 dated Jan 4th 2007 which talks about the deficiency in regards to the IRS.
Do not listen to people who say you can stay in the house and pay rent , they will short sale it and pay off the debt.........9/10 it wont happen, they are pocketing the money and doing nothing.
Plus it is illegal to accept rent when a property is in default without those payments going towards the mortgage company. it is called equity skimming and comes with a side of 5-10 years in a local penitentiary.
Now if you had a HELOC (home equity line of credit) where you pulled money out of the house when things were good, you have another challenge. HELOC loans are qualified as a good loan as it was cash out. The lender is entitled to get that money back and can attach it to you personally, or another property that you own or even garnish wages.
Now what you can do is, if the debts is negotiated and they still want ....lets say $20k from you (as you borrowed $80k) then ask that it is reported positively on your credit report.
please bare in mind you did sign a promissory note for $80k and they gave it to you, now you are only being asked to pay back 20k of it. is not a bad deal really.
Most of the time it will be interest free for the duration.
If your mitigation company is successful in the negotiation of the mortgage debt and the house is sold, there is another challenge.
Most lenders FHA, Freddie MAc and Fannie Mae will not give the homeowner a new mortgage for between 2-4 years. Really its not a big deal in todays economy, personally I would want to wait for a few years anyway to let the housing market come back and rebuild my credit. before I move forward with another house purchase.
Until Next time.
Steve M
Please to not take this as legal advice. I am not an attorney or a CPA, please check with your own council before engaging with any of the information supplied. this is solely for reading purposes and the information is solely my opinion.
Thursday, July 22, 2010
Firstly I would like to recommend to everyone to stop listening to people who talk about short sales but have never actually carried out one or if they have it may have been one or two.
I have carried out over 450 short sales and I will now give you a synopsis of the truths behind short sales.
Unfortunately, most people listen to realtors or attorneys when it comes to short sales and most of them do not understand the underlying details and the technicalities of a short sale. I hope by the end of this column that you will be enlightened in the world of short sales by the information in which I am about to give.
It has been said that the Short Sale is the new kid on the block, the new buzz word in real estate but the fact is real estate investors have been conducting short sales for many years.
So the question is why a bank would take less than what is owed and why are banks taking so long to make a decision on a short sale because we know that they don't really want the house back?
One of the main reasons a lenders do short sales is so they can recoup as much of the loss as possible but that's not all.
Loans are funded to lenders from 'pools' of money from Wall St and lenders are penalized for every foreclosure they have.
For every 100k that a lender forecloses on the lender is forbidden to lend 600k which must be held back.
I.e a loan for $400k goes to foreclosure the lender will lose $2.4 million dollars in lending power, which encompassed by the lost interest payments and foreclosure costs and now they have a house they don't want and cant sell.
When their loss of lending power hits a critical mass then Wall St, calls and tells them to get their portfolio ready and call the loans due. Hence the fall of many banks.
They are much better taking a loss now, no foreclosure, no house to worry about and they still have their lending power.
So now you know why they do short sales, now I will tell you why they don't do it.
Every loan is backed either by a private investor or Government body and every loan has an underwriting criteria.
FHA will accept 82% of the now appraised value as long as it does not exceed 63% of the total indebtedness which includes delinquent interest payments.
Freddie Mac and Fannie Mae will except 90-92% of the appraised value but have a loss severity cut off of 52%.
VA will accept 88% of the now value with a loss severity cut off of 64%.
Private investors can be more flexible but the above have strict rules. Prospecting buyers trying to go in for the kill and putting in ridiculous offers on properties and with real estate agents, not aware of the criteria, they are putting in offers and wondering why they don't get a reply. This is why most of the short sales are being held up.
Real estate agents and attorneys are not taught the criteria's within banks and lenders and that is why many of them fail.
I have personally had offers coming to me for $180k for a house that is worth $450k in today's market. I don't even waste my time presenting them.
I hope this gives you some insight to the short sale from a lenders point of view.
I have carried out over 450 short sales and I will now give you a synopsis of the truths behind short sales.
Unfortunately, most people listen to realtors or attorneys when it comes to short sales and most of them do not understand the underlying details and the technicalities of a short sale. I hope by the end of this column that you will be enlightened in the world of short sales by the information in which I am about to give.
It has been said that the Short Sale is the new kid on the block, the new buzz word in real estate but the fact is real estate investors have been conducting short sales for many years.
So the question is why a bank would take less than what is owed and why are banks taking so long to make a decision on a short sale because we know that they don't really want the house back?
One of the main reasons a lenders do short sales is so they can recoup as much of the loss as possible but that's not all.
Loans are funded to lenders from 'pools' of money from Wall St and lenders are penalized for every foreclosure they have.
For every 100k that a lender forecloses on the lender is forbidden to lend 600k which must be held back.
I.e a loan for $400k goes to foreclosure the lender will lose $2.4 million dollars in lending power, which encompassed by the lost interest payments and foreclosure costs and now they have a house they don't want and cant sell.
When their loss of lending power hits a critical mass then Wall St, calls and tells them to get their portfolio ready and call the loans due. Hence the fall of many banks.
They are much better taking a loss now, no foreclosure, no house to worry about and they still have their lending power.
So now you know why they do short sales, now I will tell you why they don't do it.
Every loan is backed either by a private investor or Government body and every loan has an underwriting criteria.
FHA will accept 82% of the now appraised value as long as it does not exceed 63% of the total indebtedness which includes delinquent interest payments.
Freddie Mac and Fannie Mae will except 90-92% of the appraised value but have a loss severity cut off of 52%.
VA will accept 88% of the now value with a loss severity cut off of 64%.
Private investors can be more flexible but the above have strict rules. Prospecting buyers trying to go in for the kill and putting in ridiculous offers on properties and with real estate agents, not aware of the criteria, they are putting in offers and wondering why they don't get a reply. This is why most of the short sales are being held up.
Real estate agents and attorneys are not taught the criteria's within banks and lenders and that is why many of them fail.
I have personally had offers coming to me for $180k for a house that is worth $450k in today's market. I don't even waste my time presenting them.
I hope this gives you some insight to the short sale from a lenders point of view.
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