Foreclosures Fall to Lowest Level in 3 Years

Sounds like good news right? The numbers are down in line with some of the seasonal trends we have seen in the last few years. While some folks may be saying this is the sign we have hit or are nearing bottom; folks are still getting going into default, banks are still foreclosing, there is shadow inventory that needs dealt with so we have still have plenty of snow available to keep that snowball growing or at least maintaining its size.Click here for the CNBC article.

In working with clients sometimes they are trying to decide if they should borrow money, go into debt, etc to hang onto the house. You may be considering the same in light of some of the less negative news in the press.

It isn’t unheard of for my clients to be 40-60% underwater on their properties. It makes sense to consider the big picture. I have found it beneficial to walk through the scneario with my clients to see what makes sense.

Lets say we have the following that is a typical scenario:

Value at peak 4 years ago (loan amount) – $250k

Current Value – $150k

Depreciation over 4 years – $100k

Average appreciation in a healthy market (for our area) @3%

The question is how many years in a healthy market will it take to recover the 40% loss?

A long time.

I am not suggesting that home owners should choose to default on their loan because they are under water. I won’t ever tell a home owner to stop paying their mortgage. But borrowing from credit cards, family, personal loans, etc. at some point seems to be throwing good money after bad.

 

 

Last Minute Short Sale Surprises – Working with the right agent can help you avoid a train wreck…

As I reflect back on a week that we have closed a couple more properties and helped a few more home owners avoid foreclosure I continue thinking about a number of  discussions with another listing agent and a short sale seller that are not working with me but have kept in contact with me for a few months with occasional short sale related questions, etc. The recent conversations included questions along the lines of “What would you do if this happened?” “Have you ever seen this happen?” “How do I fix this?” – in general what do I do about this short sale that has turned into a train wreck?” In discussions it became apparent that either the Seller was not provided the Short Sale Approval Letter prior to closing or they did not read through it until the day of closing. In each situation it nearly blew the short sale up which likely would have landed the properties in foreclosure.

The letters in question included terms allowing the lender to seek a deficiency judgment (which is a pretty big deal). Trying to sort things out to determine where the train jumped the tracks wasn’t something that could be determined but I did emphasize to the agent that should they do another short sale in the future it is probably a good idea to read through the letter to know what it is saying and to also provide the approval letter to the client well in advance of putting all parties in motion to closing and give the Seller the opportunity to review and approve of the terms of the letter.

In working with our Short Sale Sellers we provide to them a copy of the approval letter prior to releasing it to the buyers agent. Our Seller’s have the opportunity to review the letters and seek legal and/or financial advice (neither which we can provide) should that be important to them prior to approving of the short sale approval letter. If all looks good to our Sellers we have them sign the approval letter itself and a few documents as well that instruct us to put all parties in motion to closing – again – before releasing the approval letter to the buyer agent.

As a short sale seller client of ours you can be assured  that you  will have the opportunity to review your short sale approval letter(s) as we receive them so that you are on board with the terms. Our goal is to make the process as transparent as we possibly can while helping your reach the most beneficial outcome. We’re not into train wrecks…

We received a nice note of thank this past week from a client that we helped short sell a house, get the bank to release deficiency rights, and avoid foreclosure in July that I thought I would share with you. My goal is to help every one of my clients have such a positive outcome and avoid a train wreck that short sales can become with the wrong agent at the wheel.

Dear John,

I don’t think I every thanked you for doing such a great job with the Short Sale of my property. The entire process was smooth, painless and most of all transparent. I wish to tell all potential clients that I would most certainly do business again with you if the opportunity presented itself.
Thank  you!!

Dr. Rebecca
San Francisco, California

The Mythical Loan Modification

Below is a video created by and featuring Lee Honish, former Head Loss Mitigatior for IndyMac, now OneWest Bank on the reality of trial loan modifications. This is the scoop on loan modifications. Weekly I work with clients who attempted a loan modification but mysteriously after the trial period ended were denied the loan modification and helped down the road to foreclosure by the very bank that said they were “helping” them.

Are you facing foreclosure? Lets talk soon…

What a Short Sale “Expert” told me today…

Some buyers touched base with my wife and me over the weekend to take a look at a $600k short sale property. We lined up a time to take a look but before heading out to show the house I dropped the listing agent a line.

The short sale was being marketed as an “Approved Short Sale” so I wanted to make sure what the listing agent meant as the answers you get to that question really vary. Just a pet peeve it should have been listed as a “Previously Approved Short Sale” but I digress. I asked the obligatory questions of who’s the bank, what do you mean by approved, is the file still open and active with the negotiator at the bank, etc. I “foolishly” asked if any buyer closing costs had been approved…the listing agent went into a big rant about Bank of America not EVER agreeing to pay any buyer closing costs. I tried to tactfully convey that they do but quickly realized I was dealing with an “Expert” who wouldn’t accept any questioning of her authority on the short sale process, BofA short sales, and on who came first – the chicken or the egg. I tried to chalk it up as someone having a bad day, on an ego trip, etc. but then confirmed my suspicion that this expert hadn’t closed too many short sales and surely not too many with BofA.  9 … 9 short sales total closed and she was the authority on BofA short sales?

I bit my tongue and headed out to show the house.

I arrive at the house and who is at the house – none other than the “Expert” listing agent (this is not customary in ID for the listing agent to be at the house during a showing). Turns out she was waiting for the water company to turn on service to the house. It was a 6,000+ sqft house on a fair size lot so we spent an hour or so checking out the property with Ms. “Expert” Agent hovering, trying to interject in conversations, and watching us through the windows as we walked the grounds. As we were wrapping up the showing Agent “Expert” was hanging around the door and quickly stated that the house was approved for “x” and that to write an offer for anything less than that would be a waste of time. Wonder if her Seller would like to hear of that? She then went on bad mouthing her seller clients and also another agent that had presented an offer lower than the previously approved offer. Classy. Then as the buyers went back through the house to check out a couple more things I stood there talking with the “Expert”. She told me short sales were all she did and insinuated she had a sizable number of short sales currently listed (4 times the actual number she has listed). She then told me all about her expertise and reiterated that short sales are all she does and that oh by the way she teaches short sale classes. yeeesh…..

After she finally left the property my clients chuckled at how big a head the agent had and I gave them the low down on her actual numbers and explained the reasons that she may have said some of the things she had, etc. Needless to say my buyers were not impressed with this agent, we both knew she was full of it and herself.

As I drove away I wondered how someone gets paired up with an agent that discourages offers, bags on her clients, etc. I felt sorry for her clients and then later in my drive I felt sorry for for Ms. “Expert” as it seems a rough existence to be so full or yourself and/or delusional to twist closing 9 of 42 short sales into a performance that qualifies her as an “expert” all the while helping clients down the road to foreclosure.

Don’t be fooled when looking for an agent to help you short sell. Coming through 22% of the time won’t keep you swinging a bat in the big leagues even if you look and sound the part. If foreclosure is what you are trying to avoid you want an agent that bats far better than .220 – give me a ring.

Looking back at the FTC’s MARS ruling – What should I look for in an agent to list my short sale?

As of Feb 2011 FTC’s rules regarding the MARS disclosures went into effect. We scrambled to adjust contracts, agreements, and disclosures to meet these disclosure guidelines as our local association had not created anything to address MARS.  As of the beginning of July our association came out with forms to address this ruling and as of 7/15 the enforcement of the guidelines were adjusted as to how they would relate to real estate agents in good standing. There were some parts of MARS that were poorly applied to the process of agents helping home owners but a fair amount of the regulations in my opinion were nice to see for the protection of  homeowners.

The original MARS ruling outlined the following:

Advance Fee Bans (follow the links above for details)

Disclosures (follow the links above for details)

Prohibited claims

The MARS Rule prohibits mortgage relief companies from making any false or misleading claims about their services, including claims about:

• the likelihood of consumers getting the results they seek;
• the company’s affiliation with government or private entities;
• the consumer’s payment and other mortgage obligations;
• the company’s refund and cancellation policies;
• whether the company has performed the services it promised;
• whether the company will provide legal representation to consumers;
• the availability or cost of any alternative to for-profit mortgage assistance relief services;
• the amount of money a consumer will save by using their services; or
• the cost of the services.

In addition, the rule bars mortgage relief companies from telling consumers to stop communicating with their lenders or servicers. Companies also must have reliable evidence to back up any claims they make about the benefits, performance, or effectiveness of the services they provide.

The above sentence “Companies also must have reliable evidence to back up any claims they make about the benefits, performance, or effectiveness of the services they provide.” is one of the items that is very important in my opinion based on my communication with prospective Sellers when they are looking for a qualified agent to help them and/or their agent when I am bringing one of my buyer clients to a short sale.

I cannot tell you how many times I have a prospective short sale seller call me to discuss the process, interview me, etc. and they mention to me that another agent is telling them they have closed X amount of short sales and their close ratio is X% of the short sales they take. According to our MLS’s data I have closed more short sales than anyone in our MLS excluding one agent (with a far lower closing ratio than me); being in the thick of our short sale scene it is relatively easy for me to know off-hand that the home owner in distress has been lied to by an agent. A quick 30 second search of the MLS will confirm this.

My purpose here is not to bag on anyone, rather I am tired of hearing of agents overestimating their knowledge and success rates at the expense of a homeowner. If you are looking at doing a short sale on your house you can ask the agent to provide to you a list of all their closed short sale transactions to back their claims. It is also a wise idea to ask the agent if they are the one that is working with the bank (Many agents outsource their short sale listing bank work to “experts” that in my experience are a 50/50 scenario). Maybe it’s just me but closing 50% of the time doesn’t strike me as a ratio that would suggest any expertise.  As a Seller I would want to know if the agent telling me they had closed a certain number of short sales at a given close ratio was being straight with me or just looking for another listing.

Apart from the items discussed above the are a number of other things you might ask an agent that may help you in making the best decision for the best possible outcome.

 

On Property Managment Companies/Lease Considerations – For Investment Property Owners and Sellers….

Lately most of the folks that are selling are upside down in their properties and need to do a short sale. Many of these sellers purchased rental properties and have landed themselves with a property worth 50% of  its value during the boom. Times are tough and whatever the hardship maybe they need to cut loose of these rental properties that are dragging them down and avoid a foreclosure.

As we work with owners of rental property we also involve their property management company in gaining access and cooperation of the tenants to get the house sold and avoid foreclosure. The way that a lease agreement and management agreement are structured initially are very important items for a seller to consider looking to the future when they intend to sell the property.

Recently we are finding that a few property management companies have created leases that do not allow a property to be shown as is generally customary with 24-48 hours notice given to the tenants. Most recently one of the management companies that drew up a lease like this had no real explanation for why the lease was drawn up this way but they were adamant that even though the property owner is just a few months away from a foreclosure auction there is nothing that could be done to change the inability to have the house shown. The central flavor of the conversation being bitter because the management company was losing a property that they manage (monthly income).

As this whole conversation is taking place I am thinking in the back of my mind how much differently the person on the other end of the line at the management company would be feeling if they were in their clients shoes – staring down the barrel of a foreclosure.

In light of running into this situation a bit more as of late if you are talking to a management company to handle your investment properties and draw up the leases for you one important question to ask of the management company might be “Explain to me the process when I am ready to sell the house whether a tenant is in the house at the time or not.”

Make sure you are not painting yourself into a corner.

Hopefully when you sell you are in a positive equity situation on the property and not staring down a foreclosure with a management/lease agreement that has your hands tied keeping you from being able to actively market and sell your property.

HAFA Short Sale Program – Fabulous or Flop?

The HAFA short sale program has been going “strong” for nearly a year now and there is still quite a bit of fuss about it. Guidelines have been modified a bit effective February 2011. But no real changes have occurred. So what exactly is all this fuss about?

Seller’s are excited about the possibility of receiving up to $3,000 back for completing a HAFA short sale, the bank has to agree to release the borrower from any further liability, and the bank cannot ask the borrower to contribute any cash at closing or require the signing of a promissory note. These are all really great for a borrower – no doubt – if they happen.

Real Estate agents and other mitigation companies are advertising the heck out of the program – generally this presents itself with some marketing material that tells homeowners in default that they can get paid up to $3,000 to complete a HAFA short sale – nice marketing hook.

Real Estate related “trainers”, real estate related associations, companies that sell designations agents can tag behind their names, market area short sale “experts”, etc. are marketing seminars, conference calls, manuals, training programs, three and four letter designations, etc. – nice opportunity to talk like an expert, look like an expert, and sell the image of being an expert.

So is HAFA fabulous or a flop? Word on the street is in a grand total of 661 HAFA short sales total were closed in 2010. For all the racket it seems to be a flop.

Alternatives to Foreclosure

Alternatives to Foreclosure

You may be facing foreclosure… so what are your options?!?  Try to look at the situation more from a financial standpoint rather than an emotional standpoint.  This way you can more successfully analyze which option might best suit your needs and desires to move you towards resolving your financial difficulty.  One very important thing to remember: Time is of the essence. Take time to think through your situation and make a decision.  Then, take action right away so you have enough time to complete the solution you choose.

 

Nine options when facing Foreclosure

1. Do Nothing – If a homeowner does nothing, they most likely will lose their home at foreclosure auction.  Loan applications generally ask if the applicant has ever been foreclosed upon.  Credit reports also disclose this damaging information. Not the best option.

2. Payoff/Refinance – Completely paying off the entire loan amount plus any default amount and fees.  Usually this is accomplished through a refinance of the debt.  New debt is at a normally higher interest rate and there may be a prepayment penalty because of the recent default.  With this option, there should be equity in the home.

3. Reinstatement – Paying the entire default amount plus interest, attorney fees, late fees, taxes, missed payments and fees.

4. Loan Modification – Utilizing the existing mortgage company to refinance the debt or extend the terms of the loan.  This may allow the homeowner to catch up at a more affordable level.  To qualify, you must prove to the lender you have fixed the problem that caused the late payment.

5. Forbearance – Lender may be able to arrange a repayment plan based on the homeowner’s financial situation.  The lender may even be able to provide a temporary payment reduction or suspension of payments.  Information will be required from the lender to show that you are able to meet the new payment plan requirements.

6. Partial Claim – A loan from the lender for a 2^nd loan to include back payments, costs and fees.

7. Deed in Lieu of Foreclosure – Give the property back to the bank instead of the bank foreclosing.  Banks generally require the home be well maintained, all mortgage payment and taxes must be current.  Most loan applications ask if this has ever happened.

8. Bankruptcy – This option can liquidate debt and/or allow more time.  I can refer you to a qualified bankruptcy attorney.

–Chapter 7 (Liquidation) To completely settle personal debt.

–Chapter 13 (Wage Earner Plan) Payments are made toward a plan to pay off debts in 3-5 years.

–Chapter 11 (Business Reorganization) A business debt solution.

9. Sale – If the property has equity (money left over after all loans and monetary encumbrances are paid). The homeowner may sell the home without lender approval through a conventional home sale.  In this case, the homeowner will get cash from the sale.  On the other hand, a Short Sale, also known as a pre-foreclosure sale, can be negotiated with your lender by your Real Estate Professional if what is owed is MORE than the property’s value

“What is a short sale?”

That’s a question we have many folks including other real estate agents calling us to ask.

Lots of folks are talking about them but what is a short sale. A short sale is exactly what it sounds like – a sale that is short of the full amount owed on a property. The lender will need to approve the sale and accept less than the full payoff amount of the loan(s). The bank may decide that it is in their best interest to allow the short sale and accept a loss sometimes even if the loss is hundreds of thousands of dollars; of course every situation is unique.

-Are you facing financial hardship that is affecting your ability to pay your mortgage?
-Are you missing monthly payments already and don’t know that you’ll be able to catch up on the payments?
-Did you buy at or near the peak of the market and your home is worth less now than when you bought it and you need to sell?

If any of these scenarios are hitting home and you think that a short sale might be the best route for you to go, please continue reading…

It’s a shocking statistic that nationwide an average of 90% of all homes that try to “short sale” end up in foreclosure. You need the right agent working for you… Agents may be “trying to help” but without the proper training they go about the negotiation incorrectly or even go so far as to submit the package to the bank and then sit back and wait for the banks response. They are misinformed on how to help you and should your house be part of the 90% failure statistic they will not have helped you at all.

Short sales are not easy and you need the help of an expert. We have been trained how to handle the ins and outs of short sales by a former Chief Loss Mitigator with 20 years of experience (the guy at the bank that accepts or declines the short sale). It just makes sense to be educated by the folks that we are negotiating with right?

What Past Clients and Co-operating Agents have to say…

“John Boles was very professional and proficient with the short sale of my home. He had a list of forms I needed to fill out and he took care of the rest, so I could focus on what I needed to do to get back on track with my life. John has several banking contacts and knows exactly what to say to expedite the short sale process. If you’re looking for someone who can handle your short sale from start to finish and take the stress and worry out of the process, John Boles is your man.” - JT in Meridian, ID

“Thank You  for all of the work you did for us.  We were really pleased with the service you provide as a realtor.  It could not have been a better experience especially given the situation and being out of state.  Thanks again for all the hardwork and professionalism with our home.  We were very happy.” – NF in Utah

“I was in a situation where I needed to sell my rental property.  I was not able to get it rented and the money was running out.  I decided to try and sell the house before it would fall into foreclosure.  I found Jon Gosche Real Estate online at www.BoiseRealtyStore.com and relied on John Boles and Jon Gosche to help me accomplish the impossible, selling a 600k house in a buyers market.  We decided to go for the short sale option, which I hadn’t heard of before. But that didn’t matter; John held my hand through the whole ordeal.  One thing I would like to mention is I am in Virginia and John is in Idaho.  I had never met him face to face but I truly felt I could trust him.  All communications and transactions were done via email and phone calls.  I must say it was a very stressful experience, but because of the competence and diligence of John Boles and everyone at the BoiseRealtyStore, www.BoiseRealtyStore.com ; I was able to sell the house; Thanks so much John Boles and Jon Gosche.” -CG in Virginia

“Thanks for all your hard work on this, John…it was the best short sale I’ve been involved with!” – KH, Boise Real Estate Agent from a different brokerage (buyer’s agent on a recent short sale)

“…of all the agents I have been working with lately on them (short sales), you seem to have a better handle on it.” – Boise Real Estate Agent from a different brokerage (buyer’s agent on a recent short sale)

“John you are awesome – you did such an excellent job -thanks for all your help -We don’t know how to express our gratitude for all your help and guidance.”- TC, in California

At a recent Lance Churchill – FrontLine Short Sale Seminar held in the Treasure Valley, a few local agents were used as examples of folks who know how to sell and close a short sale in the Valley…Thats right Lance noted us as agents that know what they are doing. And Agents – a local Agent who we happened to be working with at that time on a sale who was taking the seminar chimed in to let all the other agents and investors know this in fact was true (her buyer client is happily settled into a home she got at a great price and our seller client got his house sold after trying to with other agents for more than a year before he called us). What does this mean to you as a Seller? Buyer Agents want to work with agents that know how to close short sale properties and so do their buyers. (fyi – we don’t have any affiliation with Lance Churchill or FrontLine Seminars)
Not all agents can do a short sale and not all homeowners qualify for a short sale. If you meet the following criteria please give us a ring or send us an email and we would be glad to further discuss how we may be able to help.

-You have a legitimate hardship situation
-You have little or no equity in your home
-You are unable to pay your mortgage or soon will not be able to make the payments

The clock is ticking if you wait too long we may not be able to help.

****If you are a Real Estate Agent and have a client faced with foreclosure and are not experienced in or have not had success selling past attempted short sales for your Sellers call one of us. Due to our success rate and working knowledge on short sales many agents locally and around the state have been calling us for advice. We would be glad to discuss your situation to see if a co-op approach or a direct referral of your client would be more appropriate.****
John Boles, GRI, Associate Broker, 208-830-6185
Kasey Boles, GRI, Associate Broker, 208-830-6186