Archive for month November, 2008

Reality Check #1: Stubborn Lenders and Short Sales

Saturday, November 29th, 2008

Some months ago, I had been working on a Short Sale for several months in Lawrenceville, GA.  After investing many hours of work, and finally finding a buyer, the lender who owned the loan told me that their system was so SLOW that there was no way to stop the foreclosure process and make the Short Sale happen.

My client was a senior citizen who did not have work, and could not afford where he was living.  As I mentioned, we had a buyer willing and able to buy.  The offer I received in July was to close “As Soon As Possible” and his loan was processed and ready to close.
Still the lender was going to foreclose.

Let’s look at the reality four months later:

The lender has foreclosed on the property.  It has been on the market for $2,900.00 more than the offer I presented to them, and they still don’t have a buyer.  Isn’t it incredible that a lender would prefer to pay all the costs associated with a foreclosure ($7,000.00 would be a very cheap estimate), to have a house on the market for another six months, without getting the least bit of revenue – and at the end of the day sell it for LESS than what was offered in the Short Sale?  On top of that, now my client will end up owing much more money to this lender, who will be investing yet more money on lawyers trying to collect on that debt from a Senior Citizen with no job and no income – whose children are now caring for him.

This is the beginning of my new series called Reality Checks because I have run across people on each side of a transaction who are not living in reality.  This lender was one.  In the series, we will also explore Buyers, Sellers, and Agents on both sides that need a Reality Check like this lender.

To me, this thinking is amazingly short sighted and stubborn.  Everyone loses except the lawyers.  The lender, for sheer stubbornness, will lose thousands of dollars – just because their system was too slow to stop the foreclosure engine.

Have you experienced examples where someone involved in a Real Estate transaction needed a reality check?  I’d love to hear about it.  Please leave us a comment here.

Foreclosures Dramatically Rise

Saturday, November 15th, 2008

Statistics show a 25% increase this year in foreclosures, from September 2007 to September 2008.  Foreclosures are at an epidemic level we have never seen before.  The bailout was supposed to help, wasn’t it?

Well, yes it was.  But keep in mind, it happened in October and will take some time to have an effect.  In addition, it was never intended to stop foreclosures, but to prop up the credit market overall so that money can continue to flow.  At best, it stops the slide in prices that occurs when buyers cannot get loans to buy.  Its aim was the overall economy, not the individual. 

The original bailout idea was for the government to buy “troubled assets” meaning those mortgages that were in default and near foreclosure.  The thinking was that it would provide funds to the banks to loan again, and provide some cover for those facing foreclosure so they don’t lose their house immediately.  Renegotiation of the loan might be possible, allowing the homeowner to afford to keep paying on their home.

But all that has changed.  The government has decided instead to invest in stocks of the banks.  It provides them with the same cash to operate, but they keep the bad loans.  And many banks, instead of using the money to make loans, are using it to purchase other banks.

So where does the homeowner stand in all this?  On the sidelines.  Essentially, for you, nothing has changed.

The FDIC, however, actually has proposed an idea aimed directly at you.  They want to create a 300 billion dollar program to renegotiate loans.

Also Wednesday, Housing and Urban Development Secretary Steve Preston said the government may let more borrowers qualify for a $300 billion program designed to let troubled homeowners swap risky loans for more affordable ones. The program was launched Oct. 1, but there are concerns that lenders won’t participate because they have to voluntarily reduce the value of a loan and take a loss.

Unfortunately, the treasury secretary is adamantly opposed to this, and the President has already expressed his opposition to it.  So there is no relief in sight right now for the homeowner in trouble.

This means that Short Sales are just as needed, or more so, than they were before.   Call me and let me see how I can help you get out of financial trouble, and preserve your chance at a financial future.  And comment here with your opinions of the bailout, the economic crisis, and the government’s response.  We’d love to hear from you.

Is a Short Sale the Right (or only) Option For You?

Sunday, November 9th, 2008

As a Short Sale Specialist in the Atlanta area, I run across all kinds of people in a variety of hardship circumstances.  The first thing I need to do is figure out if a Short Sale is right for them.  It is not for everyone, and I only take on the Short Sale if it is right for the client.

After hearing what has caused the current hardship, I try to help the client understand their options.  Each situation is different, and there are no clear lines to which option is best.  Generally, though, there are seven different options.

  1. Refinancing.  Can you qualify for another mortgage, one that you can afford?  That’s always the best option.
  2. Selling the house as a normal transaction, even if it means bringing cash to the table – if you can.
  3. Working out a plan with the Lender.  Amicable settlement is better for everyone.
  4. A Short Sale.  The lender must agree to accept less than the principle and not hold the seller responsible for the difference.
  5. A deed in lieu of Foreclosure.  Give the house to the lender to terminate the mortgage.  The homeowner might be responsible for the difference between what the lender sells the house for and the principle.
  6. A Foreclosure.  The homeowner loses the house and their credit rating is damaged.
  7. Walking away.  This is the absolute last resort.  The homeowner’s credit rating is heavily damaged.

Let me help you figure out what option is best for you.  Give me a call, or leave a question or comment here.  I’d love to hear from you.

Creativity is what will overcome this market…

Wednesday, November 5th, 2008

Today, someone asked me what kind of creative ideas have I used in my business to become so successful in Short Sales.  This is a very interesting question, and one which made me think about what had been these creative ideas.

Being a Short Sale Specialist for more than two years, very early in my career I understood that my practice must not focus exclusively and only in doing a Short Sale on every property that came to my attention.  One of the things that makes me feel very proud is complementing my services with help to the Homeowners – not only with their Short Sale on their property.  For many Homeowners, the solution is not a Short Sale, maybe it is a payment plan to recover the overdue payments, or a loan modification.

I have helped many clients with these processes as well.  Sometimes I get the feeling of being in a satire when I being the process of modification with a lender, and their response is to raise the monthly payment or make a second loan for the homeowner for the past debt that they owe.  I ask: Do these people think it is going to make it any better to add an extra payment for the homeowner who has already shown that they cannot pay for and because of that are behind.

Well, even so, I have had many good experiences, with many homeowners able to stay in their houses, no longer facing foreclosures.  And these are clients for a lifetime – clients who generate the referrals that comprise 78% of my business.  There have been people who only needed a few months of help in order to look for better work, renegotiate their medical bills, or maybe restructure their finances in a short time of crisis.

If you would like to work with an agent who takes creativity seriously every day in overcoming the difficulties in dealings with the lenders, contact me and ask me what I can do for you.

Government Plan B: Refinancing for All Those Facing Foreclosure

Saturday, November 1st, 2008

A few days ago, talking with a loan officer about the government’s plan to give a stimulus for the lenders to refinance the loans that are in default, and the government would commit to buying them.  This loan officer told me that “the government does not obligate the lender to do this, it is only a suggestion that they make to the lenders, but they are not obligated to do so.”

Now, let’s look at the reality: in order to refinance any property, the first thing that must happen is an appraisal.  It is no secret that in several states, people owe more than their houses are worth. 

Some questions would be:

  • Who is going to pay the difference between the refinanced amount when the property does not appraise for the loan value?
  • If the property does not have any equity, who will be responsible for paying for the months the borrower is behind, and refinance it for the same value as when the person first purchased it years go?
  • Will the lender pay the closing costs, including the appraisal?

At the end of the day, the lenders will be able to use this money for other types of transactions, and the benefit will go only and exclusively to the lenders.

Personally, I hope that they use some of that money to create a Loss Mitigation department that is more efficient and quick, and the Short Sales can move more rapidly with a timeframe more acceptable for the serious buyers.

Take a look at what the short sale process is like, and give me a call to see how I can help you.  And leave a comment here telling us what you think of how the bailout is being managed and what the government should do now.