2010 has been an interesting year, so far.
We've seen new legislation, regarding the sale of short sale properties - across the country.
We've also seen more cooperation, relating to the servicers/lenders in approving short sales.
We've witnessed numerous "reliable" sources, many of whom are affiliates of each other, simultaneously state that home sales are up AND home sales are down.
Nationwide, unemployment sits at 16%, overall.
We continue to see property values in decline at the same time we see HUGE shadow inventories of REOs.
Simultaneously, as property values decline, we talk to too many sellers/homeowners, facing foreclosure, that are applying for loan mods that do NOT understand what a loan mod will accomplish for them - relating to the fact that the mod WILL NOT be based upon the current market value of their property, that the past due payments and late fees (arrears) will be added in, as well as what the lender's process is for approval.
In fact, a majority of the homeowners we talk to, who had applied for a loan mod many weeks, or even months before, are still scheduled to be foreclosed upon - which is, in my opinion, deceiving to the homeowner - because the homeowner, in good faith, is lead to believe that their loan mod/file is being reviewed - so the homeowner believes that their foreclosure has been postponed until the loan mod review has concluded.
We also see many sellers/homeowners, who are NOT faced with foreclosure, but want to, or need to, sell their properties, struggling with a solution to their dilemma.
Many of these "non-distressed" homeowners owe more, on their property, than they could sell it for - so what should they do ?
What would YOU do ?
What if you were offered a better job, or business opportunity in another city, or state - that is hundreds of miles away from your current residence ?
Would you be able to sell your property for the amount of debt owed on it ?
Maybe you could cash in some of your stocks or take some $$ out of your 401K or retirement fund - to make up the difference ?
When will you get that money back ?
Bottom Line: While our government has been too busy trying to "save" the economy, they've succeeded in creating our largest deficit (In other words, we owe a TON of money to coutries like China), which creates an entirely new set of critical issues.
In other words, this aint over yet.
SOME PEOPLE JUST SUCK.
We had this contract, on this property, where the neighbors had decided that they "own" a certain section of our contracted property.
In short, our contracted property, that happened to be a wholesale deal, was embedded in a property line dispute that was NOT, truly, a property line dispute.
The "true" owner contacted me through my website and we agreed upon a purchase price.
At the point of signing off on my contract, one of my addendums required the seller to disclose the integrity of the property, ensuring that there were no boundary disputes and that there was clear/insurable title.
Pretty standard stuff, really.
Turns out there was an ongoing boundary dispute, where the neighbor had, what turned out to be, an invalid claim.
In short , this seller had, previosuly, had his property listed on the MLS and the listing agent was not able to guide this seller into resolving the property line boundary "dispute".
As a result, the seller was not able to sell their property, because they were not able to pass a clear, insurable, title.
Obviously, this issue had everything to do with this seller, ultimately, contacting us.
So, we looked into the "dispute" and found that the neighbor was trying to file quiet title based on ADVERSE POSSESSION.
What was absent from that neighbor's claim was the actual requirements for such a claim.
Basically, the neighbors had no structures, fencing or anything, actually, to substantiate their claim, though they had an attorney that had had some success in bullying the seller AND their trusted listing real estate agent, into believing that their claim was valid.
So, the listing agent had to disclose the dispute and, as a result, the seller's property just sat on the MLS - with no offers.
MORE importantly, the listing agent never confirmed the validity of the neighbors false claim.
So, after the seller contacted us AND we performed our due diligence, we quickly discovered that the neighbors claim was bogus - we contracted to purchase the seller's property, had our attorney address the absence of the neighbor's claim, thereby removing the "dispute" and we proceded to close 3 weeks later.
Point of this blog is to emphasize the importance of performing YOUR OWN due diligence.
Today, I lost a deal that I shouldn't have.
Now the lender will, most likely, end up foreclosing and they'll add that property to an ever growing list of REOs that are already flooding nationwide marketplaces.
This particular deal has been in negotiations for 11 months and 3 BPOs have been done, on this property, during that time.
All 3 BPOs came in at different values, but the lender opted to stay with the higher value.
How do I know ? Because 2 of those BPOs were mine - I had them done AND there was a difference of 36K, in value, between my 2 BPOs !
According to the servicer, their BPO was higher than my 2, simply based upon the purchase price they were insisting that I pay.
They wanted to capture 92% of their BPO/value - which was more than 90K over the true/current market value of the property.
We tried to compel the servicer to review the most current comps, which we provided AND we also linked them to resources where they, as well, could confirm those comps.
We provided interior/exterior video of the property - so they could see, first hand - the required repairs that would have to be completed.
And, of course - we provided our 2 BPOs, to show the difference of "opinions" in value -
I'm no stranger to losing, or walking away from, deals - because, like the banks and/or any other business - I'm in it to make $$, right ?
However, losing this deal isn't about my lost opportunity, it's about a disturbing fact that these lenders are declining huge volumes of short sales that they should be approving - because the losses, even at less than 92% of their "opinion" of value, aren't as great as the losses that are being realized when these lenders foreclose and the property reverts back to the lender/investor.
So how do I propose the lenders/servicers solve this problem ?
I have a few suggestions that might help:
* They can start by having 3 BPOs, done by 3 independent brokerages, done on each short sale - ensuring that the BPOs are being done by LOCAL brokerages.
Then, they can average the 3 out to calculate an ESTIMATED MARKET VALUE.
* After more than 3 solid years of declining property values, in most markets, they can easily create a formula, based on available data, that calculates the AVERAGE LOSS of value - for a given market, over the previous 12 months (or 6 months) and apply that as a discount off of the current ESTIMATED MARKET VALUE.
* They can stop trying to control the buyers of these short sale properties, relating to whether, or not, these buyers intend on flipping for profit, or keeping the property. What I'm saying is IF THE SHORT SALE OFFER IS ACCEPTABLE, THEN TAKE THE DAMN PAYOFF AND BE DONE WITH IT !
*FINALLY - If a short sale offer is acceptable - then the lenders/lienholders should NOT maintain ANY rights to pursue the sellers for deficiencies.
WHY ?? I'll summarize:
When the buyer originally purchased the property, or even had it refinanced, BOTH the buyer(s) and the lender(s) agreed that the value of the property supported the purchase price, RIGHT ?
So, a partnership is formed between the buyer(s) and the lender(s).
Now the market changed AND the property has lost that value -
So, the buyer(s) are going to lose and the lender(s) are going to lose.
Buyer(s) lost the property -lender either sells the property in a short sale, or gets it back - which should conclude any further contractual obligation from the buyer(s).
Legislation will need to be enacted to prevent, or reduce, the inevitible wave of deficiency judgements/litigation that's sure to come.
As an aside, it might be a better idea for foreclosing lender(s) to train reps to contact buyers in foreclosure - that are suffering TRUE HARDSHIPS, but want to remain in their distressed home.
Taking the LOAN MOD (Don't EVEN get me started on LOAN MODS !!) to a new level, the foreclosing lender(s) should arrive at that ESTIMATED MARKET VALUE, as referred to above, and rewrite a new "market value" loan, thereby keeping the current owner(s) in place.
HOW MUCH $$ WOULD THAT SAVE ??
If I'm dreaming, I don't want anyone waking me.
Before I move along, I want to thank my Buyers, because they're responsible for this blog.
So, THANK YOU !!
My business is simple - to get out there, find and contract to buy solid real estate deals, locking them up for deep discounts -
A majority of the deals I secure are from sellers that, for one reason, or another, need to sell/want to sell their real estate and they want it sold NOW !
Cash is a motivating factor, as we all know - and you, my Buyers, have helped me to create enough satisfied sellers that I'm now having potential sellers contacting me by way of referral !!
Seriously, REFERRALS from previous sellers, that sold their houses to us for pennies on the dollar, is the last thing I ever expected to happen.
However, when I think about it, it makes complete sense.
Why ? Because we were there for them when they needed us, when they needed to sell and didn't want to chance losing the sale to a buyer who needed financing, but couldn't qualify, in the end.
We were there with cash and we did EVERYTHING we said we would do, right down to closing on the promised date !
So, while this was a segment of my business that I never, previously, thought possible - it's now a segment that I'm going to work at growing.
....and if I am, in fact, dreaming - DON'T PINCH ME, because this is way too cool !!
According to numerous "reliable" sources, there's a 2% + month-over-month increase in the nation's home loan delinquency rate, up to over 9% in May 2010.
Delinquencies are expected to increase as seasonal purchases taper off.
That buyer's tax credit also helped to inflate what many believe would have been an, overall, "flat" Spring Buying season.
Sources state that the percentage of mortgage loans in default, 90 + days, increased, while both delinquency and foreclosure rates continue to remain relatively "stable", at historically high levels.
As of June, 2010 - there are more than 7 million loans in some stage of delinquency.
Sources state that the average number of days for a loan to go from 30 days delinquent to foreclosure is on the rise.
Keep in mind that there's a HUGE inventory of REOs that cannot be released onto the standard marketing engines, like the MLS - for fear of declining already challenged real estate values.
Sources went on to state that, after a two-month decline, deterioration ratios increased, with an average of more than a 2 to 1 ratio of loans rolling to a worse status, meaning for every one loan that is "saved", 2 move closer to foreclosure.
The number of delinquent loans that "cured" to a current status declined for every stage of delinquency, except in the "greater than six months delinquent" category.
This improvement was likely the result of trial modifications made through the Home Affordable Modification Program (HAMP) that transitioned into permanent status. LPS manages the nation's leading repository of loan-level residential mortgage data and performance information from nearly 40 million loans across the spectrum of credit products. Diana Olick of CNBC says, "Oh good, so the HAMP program is helping "cure" those 6 month+ delinquencies. No, they're just delaying them yet again, since we know that the re-default rate on HAMP is only rising. Forget cure and think remission."
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