First off, let’s be clear about this so called recovery every talking head in the media keeps talking about – it’s not your parents or grandparents recovery. It might be your great-grandparents recovery though! No economic downturn has had such a damaging effect on American Home ownership since the 1930’s and that effect is not going to go away anytime soon. This has been different from the 1930’s in that in the 1930’s destruction of housing values was pretty much across the board from Rich to Poor; in the current event the damage was primarily at the bottom and middle with homes over $750,000 – $1,000,000 range actually increasing in price during the period of this downturn. Since the end of World War II housing downturns have been generally short lived, in the eighteen to twenty four month range, and primarily inventory adjustment events in this case which began in the third quarter of 2005, the downturn has been primarily a loss of confidence – a much harder basis to recover from in all cases.
Technology is likely to have a significant impact on the structure of the real estate industry in the coming recovery for a number of reasons. Real estate transactions have basically two related and separate parts: the seller side and the buyer side.
The Buyer Side will not be as greatly impacted by change as the seller side due to some factors which are basic to the process. The impact of technology on the buyer’s side will primarily be on the media not on agents and buyers. Most people who have been involved with the real estate industry over the last ten or fifteen years have known that print advertising has declined in efficacy dramatically. Virtually all buyers begin and continue their home searches on line. Brokers and real estate franchises that have been tracking the source of their business for many years have seen that buyer leads that came primarily from print advertising before the internet have seen the number of viable leads from print advertising drop to a very small number of viable buyer leads. The last and most effective use of print advertising has become open house events or very short term immediate demand sort of inventory like rentals. Buyers still however require the assistance of a licensed real estate agent to help them work their way through a real estate transaction and access and view properties as well as negotiate and consummate a real estate transaction. Fees for trained and competent Buyers Agents are likely to remain in the 2.5% to 3.5% of the transaction price that they have been in for many years due to the high time consumption and relatively high failure rate that Buyer Sides of transactions experience.
The Seller’s Side of real estate is likely to see the greatest changes. For a decade or more before the Great Recession large banks had been trying to repeal laws that barred them from providing real estate services such as listing and selling homes for their customers. Now as a result of the unprecedented number of foreclosures in the hands of banks they have become The Dominant Sellers of real estate in the United States. Fannie Mae and Freddie Mac established 6% as the official normal commission that they would accept on both short sales and foreclosures and required that commissions be spit equally between buyer’s side and seller’s side in a real estate transaction. Every real estate agent in the United States has been trained that establishment of “Normal” or “Set Fees” has an anti Trust violation since the late 1970’s, however the big banks and Fannie Mae and Freddie Mac have been seen as exempt from these laws. This has resulted in a situation where the majority of listings that sell are listed by Bank/Lenders that own them at a nominal rate of 6% with local real estate agents and agencies but using a conduit of third party companies, that collect hefty referral fees on their listings, leave the selling agencies to work with 1.5% to 2% of the actual sales price rather than the 3% to 4% that they have historically have had to work with since the end of World War II. These agents and agencies have been able to do this because of the downward changes in their cost structure do to the changes in technology.
It is unlikely that as non-institutional home sellers are able to re-enter the home selling market as prices stabilize, and even rise in the foreseeable future, that the advantage to both consumers and Realtors of lower fees on the listings side of real estate transactions will be lost, which have been made possible by the reduced operating costs possible for Realtors due to the changes in technology.
By Dick Thackston CRB, ABR, ABRM, Broker NH, MA & VT
banks, commission, economic downturn, economic recovery, Fannie Mae, fees, foreclosure, Freddie Mac, operating costs, real estate, REALTORs, REO, short sale, technology
What is an REO? REO stands for “real estate owned” – it is a class of property owned by a lender. Most consumers don’t realize it but lenders that have REO Properties have very strict guidelines for the agents that work for them as Neighborhood Listing Agents helping dispose of REO inventory. The first tasks that REO Agents are charged with by lenders are to make sure that all transactions are done in compliance with all applicable local, state and Federal laws. The last things anyone wants in the REO industry is to have a property tied up or a sale to fail do to non-compliance with the rules. Legal issues, tenancy status, zoning and code violation, recording of deeds etc often make the initial phase of getting properties on the market slower than many anxious buyers would like, particularly if a buyer has targeted a property for some time. Any title issues need to be resolved no matter how long it may take even though it may be mind numbingly long to the uninitiated buyer. That being said, in the case of all these things, consumers are well served to be patient – as a general rule any problem not resolved prior to closing can come back to haunt an REO homebuyer tenfold after closing, and the REO seller’s work diligently to resolve these issues. After the legal issues, there are three basic areas that all REO sellers’ have made of super importance and abundantly clear to their agents: these are Information Security, Anti-Blight Campaigns and Relocation Assistance Programs.
Information Security is a huge concern to all of us in today’s hyper technological world of money and transfers; we’ve all heard horror stories about identity theft. REO Seller’s, who use the internet extensively to manage their assets, don’t want consumer data lost or used inappropriately. Most non-REO trained real estate agents are part-time and do not have extensive computer skills – many “do business the way we always have” and actually can be dangerously ambivalent to the level of private information. REO Sellers know that part-time and “old time” real estate agents are on the top of the target list for professional identity thieves and want to know that the REO Agent’s they hire are doing all they can to protect consumer’s personal information. REO Agent’s typically are required by the bank’s that list REO properties with them to follow these basic policies: 1. Maintain lockable file cabinets. 2. Have a clean desk policy – meaning files are left out of unsecured storage when they are not in use. 3. Confidential documents should be shredded not just thrown in the garbage. 4. Use encrypted e-mails when sending personal information. 5. Never send copies of checks, checking account numbers, Social Security numbers or credit information over the internet. 6. Avoid clicking on unknown links. 7. Maintain written Security Policies and make sure they are understood and enforced within the organization.
Anti-Blight Campaigns have become significant factors in the REO business over the last few years. Banks with REO Properties and Foreclosed homes do not want consumers to be go down the street and be able to pick out the REO’s do to lack of yard care and basic maintenance. Fannie Mae and Freddie Mac as well as many large regional banks know that the money they spend on maintenance will be paid back to them many times through quicker, easier sales requiring less discounting of price. Code Violations, unsecured properties, health and safety issues are all issues that the Full Time Professional REO agent is supposed to handle for the REO Seller. The REO agent is the number one point of contact and serves as the eyes and ears of the REO seller in neighborhoods. REO sellers are increasingly following up with random property checks and requirements for weekly dated photos to be sent to assist in verifying that the lenders REO’s are properly cared for and marketed.
Cash for Keys and Relocation Assistance Programs once unknown are now common place in the REO Industry. These programs are designed to help the occupants of homes that have gone to foreclosure move on. Many times REO properties are occupied by the former owners who have become what is legally know as “Tenants at Sufferance”. Many times they occupied by the friends, relatives or tenants of the Former Owners, any and all of whom need to have their occupancy resolved before the property can be sold as an REO. It is not unusual for an owner to have moved out of a property after it has gone to Foreclosure and rented it after the Foreclosure – this is not actually a valid lease – but the occupants needs still have to be addressed in some form. Most REO institutions have strict policies for agents who negotiate with occupants of Foreclosed Properties: 1. The owner’s of REO are making a Relocation Assistance Program/Cash For Keys offer to encourage occupants to leave as soon as possible – less time than an eviction would take. 2. REO Institutions have a range of offers that a REO Agent can make general determined by the property type location and condition. REO agents are not allowed to offer less than these amounts. 3. REO agents are expected to deal with occupants honestly ethically and fairly but remember they do work for the REO Investor and must keep the REO Investors interests first.
By Dick Thackston CRB, ABR, ABRM
Broker NH, MA & VT
cash for keys, financing, forclosed, foreclosure, former owners, lease, Occupants, Owners, real estate, realtor, relocation assistance, REO, REO Agent, Tenants
I see America changing every day when I talk to home buyers. American’s expectations about housing are switching rapidly from the “American Dream” of Mom, Dad, kids and a house in the suburbs, not as much because of the financial decay of the last three years, but rather because the current generation of Home Buyers, the so called “GenY”, has moved away from the highly conformist expectations of their grandparents – the “Baby Boomers” – to a highly diverse, multicultural, multidimensional society.
The Baby Boomers experience, viewed as a cultural event or milestone, has had more impact on American society, real estate and home ownership than any other event in American society since the Civil War. Boomers were raised with these expectations and typically only owned three or four homes in their lives – this is the generation that had mortgage burning parties when they paid off their homes and built a pool.
The Gen X’ers, the children and grandchildren of the Baby Boomers, never fully adopted the lifestyle of their elders. This is the generation that came of age in the boom years of the 80’s and 90’s. This generation used credit cards, car loans and mortgages like no generation before. This is the generation the treated their homes as Piggy Banks and expecting to buy low and sell high on every home they would ever own and they expected to own a lot of them too! Gen X’ers as a group expected to stay in multiple homes for short periods – three to four years max – disposable lifestyles. Their generation is much smaller then the “Baby Boomers” as a group but has had a disproportionate impact on the housing market. While these Gen X’ers have had an immediate short term negative effect on housing and the American Economy as a whole, the effect on real estate will be short term because this is a small generation. The dramatically different “Generation Y”, aka “The Microwave Generation”, influence is already being felt on the real estate market and the economy as a whole.
“Generation Y” is much larger than the Gen X’ers and has a completely different agenda. Financially, socially and educationally, Gen Y is dramatically different than either of the two prior generations of Americans. Gen Y is much more likely to have an IRA or a 401K than either of the earlier generations and at a much earlier stage in life: Baby Boomers expected a pension, Social Security and the equity in their home to carry them through retirement; the Gen X’ers expected to flip houses to infinity and beyond with minimal reserves and limited funding of retirement accounts.
“Generation Y’s” effect on housing will be as dramatic as that of the post World War II baby Boomers or greater. The Y’s are happy to not own a home any time soon if at all. It’s more important to the Y’s to have flexibility and cash. This is a generation that has student loans like no other before but that’s because as a group they view education not as just as important but imperative to their lives. Lifestyle choices such as access to services, an elegant downtown – clubs and shopping – is more important than owning a home. Y’s as a group are looking for housing that meets those criterion rather than a quarter acre lot and a three bedroom house.
Sure, Generation Y’s expect to own homes, but it is not an urgent first order of business as it was for their parent and grandparents. Generation Y’s perspective on real estate ownership is colored by their willingness to rent. (Sixty plus per cent of renters want to own their own home someday according to a recent survey by PulteCorp.) The Y’s interest in savings is reflected in the much higher contribution rates to IRA’s and 401K’s than either of the prior generations combined with their much higher student loans and need for “a lifestyle” that is more cosmopolitan and focused on convenience than the Generations of “Boomers” and “X’s” that came before them.
By Dick Thackston CRB, ABR, ABRM
Broker NH, MA & VT
401K, american dream, American Economy, american society, baby boomer, buying, Civil war, disposable lifestyle, economic crisis, Economics, flipping, foreclosure, generation x, generation y, home buyer, home ownership, Housing, housing market, lifestyle, microwave generation, Mortgage, renovations, Retirement, savings, selling, social security, suburbs, world war II
According to several industry sources the average value of bank owned, REO Properties, has actually increased in the last years while the value of non-bank owned real estate has dropped on average! There are several reasons in the realm of conventional wisdom as to why this is happening; the most common reason given is that REO properties are being bought up by investment groups and turned into rentals thus driving up the price of REO’s on average. While this certainly is a factor there are other factors that are probably more important to the change in real estate values that I see happening as a “boots on the ground REALTOR”.
Here’s how I see it. The initial wave of foreclosures was for the most part badly maintained and marginal properties: no real surprise that the most marginal home owners were the least able to maintain and upgrade their homes and least able to hang on through tough, tougher and tougher economic times. These homes languished off the market as so called “shadow inventory” for months and in many cases years due to a hostile regulatory and legal environment in which mortgage holders found themselves, thus slowing up the process of foreclosure, resale and return of these residential assets to productive use. No news there really. What the facts recently made public noted about rising REO prices and declining price on non-bank owned real estate indicates is not that we are “moving toward the middle” but in-fact indicate that we are continuing to crater the housing market in slow motion.
This pattern of rising REO value reflects exactly what many experienced REO REALTORS have noted over the last six to nine months: we are getting better quality inventory. The better quality inventory is the result of the economic damage moving up the food chain from the economic bottom into the middle and above. The middle class buyer that bought his house at a fair market price in 2009 is likely to find that when he goes to sell his home today it’s worth the same or a little less and that any improvements he made have added little or no value. So, if they can’t hang on and they can’t sell they let it go. Thus leading to a better class REO property and putting further and continuing pressure on the middle of the market.
What does it all mean? It means that there is no foreseeable improvement coming for non-REO properties and that REO properties will continue to dominate the residential real estate market. Warren Buffet is right: single family homes are likely to continue to be an excellent investment for those who can“buy and hold” but only for those who can buy and hold either as owner occupants or as investors looking at increasingly higher and higher rents over the foreseeable future.
By Dick Thackston CRB, ABR, ABRM
Broker NH, MA & VT
bank owned, economic, economy., foreclosure, home owner, home value, home values, housing market, investment, investor, middle class, News, real estate, real estate value, realtor, rental, REO, resale, residential property, short sale, single family
CORONA, Calif., March 12, 2012 /PRNewswire via COMTEX/ — PartnerFirst is pleased to announce the renewal of its contract with ServiceLink as its nationwide short sale agent network. Through this alliance, now entering its third year, thousands of distressed homeowners can use PartnerFirst agents to resolve their mortgage problems.
PartnerFirst powers the ServiceLink Short Sale Agent Network which connects distressed homeowners with qualified real estate professionals. Through its education platform, including the Pre-foreclosure Specialist Certification (PSC), PartnerFirst educates agents to help distressed homeowners.
Regarding the ongoing alliance with PartnerFirst, Leo Esposito, ServiceLink’s Senior Vice President of Loss Mitigation and Asset Disposition, said, “ServiceLink is pleased with the agent education services and the quality of agents provided by PartnerFirst to power the ServiceLink Short Sale Agent Network. This marks the third year that the two firms will be working together to achieve solutions for the nation’s housing crisis.”
ServiceLink, the national lender platform of Fidelity National Financial, has managed over $10 billion in short sale transactions, working with five of the nation’s top ten lenders. With its experience in working with lenders, investors, mortgage insurers, and junior lien holders, ServiceLink has the flexibility to provide efficient solutions and expeditious closings.
The short sale alternative preserves neighborhood values, minimizes loan loss severities for investors, and provides a dignified resolution for distressed borrowers.
For more information, or to sign up as a ServiceLink short sale agent, visit: http://www.servicelinkfnf.com/downloads/ShortSaleAgentPackage.pdf .
SOURCE PartnerFirst
asset disposition, distressed home owners, Financial, foreclosure, home sales, housing market, Lost Mitigation, Market, Mortgage, PartnerFirst, preforeclosure, real estate, realtor, REALTORs, recession, REO, ServiceLink, short sale
Ronald Regan made the now famous statement about thirty years ago that the phrase “I’m from the government and I’m here to help”, was a phrase that Americans everywhere have learned to fear. The current mortgage/housing/financial crisis has only reinforced that view for many of us that have had to deal with the destruction of the American dream since this economic debacle began in 2005.
It is clear to me from my day to day dealings with home owners and former homeowners that the government most assuredly is not “here to help”. A big part of my business has become handling cash for keys for banks. Cash for Keys or Relocation Assistance Programs run by lenders to help the occupants of foreclosed properties find a new home and move. The programs are for the most part well run and helpful to the occupants. I do about two or three of these a week. Here’s the way the government “help” becomes tragic: almost everyone of the people I talk to has applied for assistance under the HAMP or HAFA programs offered by the government; almost no one has benefited from these programs; almost all the people I’ve spoken with in the course of doing Relocation Assistance for lenders would have been better off had they never heard of these programs and several have been the victims of outright fraud.
Example: I spoke with a local family last week that has lived in their home for about nine years. They never refinanced, they never took out a home equity line of credit. They have three small children two under the age of five. Over the last nine years they have worked on their home fixed it up as they went along. Early last year the husband lost his job in construction, so he took a job that didn’t pay as well at a fast food place and the wife went to work part time and they burned up some savings but kept their house payments current – they need a place to live, right? They struggled along and they called their mortgage company; their mortgage company told them to apply for the HAMP program. They didn’t understand what it was so they went on the internet and found an attorney that advertised he would help them negotiate the process. They sent their full mortgage payments to him; he was to get the loan modified; after the fourth mortgage payment was taken out of their account sent them an e-mail and said there’s nothing else he can do; house went to foreclosure. Fundamental problem is the creation of false hope by the HAMP program which a reasonable person will see is non-workable so they hire someone who must be “smarter” than them to set it up, unfortunately he was just a crook.
Example: I spoke with a couple in their early sixties; they’ve lived in their home for 31 years; they raised their kids and ran their business from their home all that time. They got behind on their mortgage when their small business started to fail in mid 2007. They struggled to keep things afloat and did. They contacted their mortgage company to see if anything could be done after meeting with local REALTORS about selling their home; they were surprised at first to find that they owed more than their home was now worth and that there was “no way” they could sell their home without having a substantial deficiency due to the bank. They became aware of the HAMP program and decided they would try the program. They were told that they no longer “qualified” for the amount of the mortgage they had and in order to complete the program would have to bring money to pay down the loan amount. Seriously?
By Dick Thackston CRB, ABR, ABRM
Broker NH, MA & VT
american dream, cash for keys, crisis, Financial, foreclosed, foreclosure, fraud, government, HAFA, HAMP, home equity, homeowners, Housing, lenders, Mortgage, refinanced, relocation assistance, ronald regan
By Dick Thackston
2012 is likely to be defined, in the real estate world, by three “E’s”: Expectations, Employment and Europe/Economy. No matter what your political belief system is, no matter how much or how little money you have, these three factors will permeate American life and the economy more than any others in the next eleven and a half months.
Expectations: In the world of sales there is an old truism, “To live with the classes sell to the masses!” those will be the watch words for real estate this year. 2012’s real estate will almost certainly only be about first time buyers and large volumes of REO properties being sold to investors. Both first time buyers and investors have some striking similarities: both groups feel they are buying at the bottom of the market and both groups have an expectation of housing prices increasing over the next three to five years and both groups have an expectation of rents remaining and going higher. (Personally, I agree with both groups.) First time buyers not only have the family formation/nesting instinct driving them into purchasing, but they have the ever increasing cost of renting versus home ownership. Most first time home buyers are renters now and are looking at homes that will have monthly mortgage payments 15-20% below their current rent. Landlords/Investors are looking at the exact same equation from the other side and seeing that almost anything they buy now will have positive cash flow of at least 10% and often up to 20%. The group that is melting away at this time is the investors looking to buy, fix and flip, the risks are too great of carrying a vacant property or over improving and taking a hit in what is in fact a flat market, and of course move-up buyer’s remain effectively locked out of the market for the foreseeable future. Until move up buyers can sell and move there is likely to be no updraft in the real estate market, but when it does begin it will be huge.
Employment: In New Hampshirefor sure, the Northeast in general and for the nation probably, employment getting better.New Hampshire has experienced job creation. Not dramatic but some. GivenNew Hampshire’s favorable tax and business environment it’s not really surprising that it would be one of the first parts of the country to recover. New England more generally seems to be getting better although not at the same rate as New Hampshireand the nation, well let’s face it would be hard to screw things up much more – which is a perverse kind of improvement actually. So as workers become more secure in their outlook on employment, they become more confident that they can cope with a mortgage payment and the other cost associated with home ownership, and are feeling much better about leaving their apartments and Mom’s basement. This is having a very noticeable effect on stabilizing the market at the bottom.
Economy: The macro-economic environment remains dicey. I almost headed this section “Europe” as my third “E” but really it’s bigger than all that. The United Sates is no longer insulated from the rest of the world economically. I doubt that this was ever really true, but we felt it was true and we certainly acted as if it was true. The United States remains the world’s largest economy however it remains subject to outside shocks: Tsunami & nuclear disaster in Japan, economic slowdown in China and most dramatically European debit crisis – country by country bad news out of Europe send shocks through our financial system and impacts our banking sector. The largest of these in public perception is Europe which is unlikely to be resolved anytime soon and will continue to drag on the world economy. China seems to have better managed its financial affairs – easier in a totalitarian state – and seems likely to have a softer economic landing than Europe.
What’s the take away from all this? Housing is stabilizing now; sales volume is likely to increase significantly; good deals from a buyer’s perspective are likely to remain the norm for the next eight to twelve months; no real appreciation in real estate as an asset class is likely and value added efforts for renovations will remain high risk till after the end of 2012.
buyer, buying, China, debt crisis, economy., Employment, Europe, Expectations, Financial, financing, First Home Buyers, first time buyer, first time buyers, first time home buyers, foreclosure, housing market, housing market recovery, housing recovery, investors, Japan, Keene, landlord, Landlords, Massachusetts, monadnock region, move up buyer, New Hampshire, northeast, Peterborough, political belief system, positive cash flow, real estate, realtor, REALTORs, recovery, REO, Sales volume, seller, selling, short sale, time home buyers, totalitarian, Tsunami, Unemployment, Vermont
By Dick Thackston
I continue to read about mortgage credit terms such as Credit Scores, Down Payment Requirements, and so forth being eased on home purchases. Federal Reserve Senior Loan Officer Survey still reports historically tight standards. Part of the problem from what I’ve seen, is values coming in low on appraisals after the buyer and seller have come to terms, which in my opinion, reflects tightened appraisal standards. (Appraisers don’t want to be held responsible for over valuing properties – as they have been in the past – even though local market conditions support values.) It’s odd because in my experience appraisers who “know local areas” almost always have a clear sense of what is going on in a market; the biggest problem is large un-named government backed lenders that bring appraisers in from 200 miles away that often do not have a sense of the nuances for local markets that even underwriters can pick up from a desk 2000 miles away. Ultimately, sloppy work is sloppy work and it creates a drag on the entire process.
If home prices are stabilizing, as many people feel they are, this will actually be a bigger problem because house prices will no longer “always be lower than last month” and buyers will be bidding up prices which won’t be adequately reflected in comparable sales from a few months earlier. Low appraisals serve to drive prices down and create a self fulfilling cycle of ever lower prices. If appraisers are better able to justify the sellers price this may in fact be a key to breaking the cycle of pain in real estate we have seen.
Lenders have clearly been working to slow the pace of REO properties coming on the market; to be sure there are plenty of lender owned homes available and they still represent the majority of sales in all market despite everyone’s desire to deny the fact; this decline in the speed at which REO properties are coming on the market is likely to be a big part of stabilization. Once there is any perception of stabilization in the market it seems likely to me that many buyers will “pile into the market” and then be confronted with the challenges of getting a new loan – back to the appraisal and underwriting issues. The entire process is likely to be painful but rewarding for those with the constitution to push through: sellers and buyers both.
Re-financing has gone nuts by all reports from our friends in the lending business with home mortgage rates at historical, probably lifetime lows, loan officers actually have trouble keeping up with the volume of business they are processing. The good news here too is that a much lower percentage of these home mortgage re-finances are taking cash out unlike the past re-financing booms, this time the home mortgage re-finances seem to be more focused on actually reducing cash flow burdens on households, where as in the last fifteen years the home mortgage re-finance booms have been more focused on stripping homes of their equity to finance current consumption.
Mortgage lending in 2012 is probably less consumer friendly than in most of the last twenty years in the sense of underwriting standards and appraisal issues, however loans are being made and the process is sufficiently painful so that borrowers seem to really be paying attention to their reasons for going through the process and is getting done in a way that will lead to a healthier housing market in the foreseeable future.
appraisal, appraisal standards, appraiser, asset management, asset manager, borrower, buyer, consumption, credit score, down payment, equity, federal reserve, financing, foreclosure, government backed loans, interest rates, lender owned homes, lenders, local market conditions, Market, Mortgage, mortgage credit, mortgage lending, mortgage rates, real estate, real estate market, realtor, refinance, refinances, REO, reo properties, seller, short sale, sloppy work, stabilization, Thackston, underwriter, underwriting
WHAT’S REAL ESTATE GONNA BE LIKE IN 2012? By Dick Thackston CRB, ABR, ABRM, Broker NH, MA & VT
2012 is looking like it’s shaping up to be the year of the buyer. The winter months so far here in the Northeast have been unusually busy with buyers poking around virtually ever listing – mind you it has not been hundreds or even dozens of buyers coming out to Open House like in the mid 2000’s but there’s been plenty of action. Over the holiday week virtually every REO listing I have has had one or more showings.
Conventional wisdom says that the buyers are going to remain primarily investors and first time buyers.
The investors were out in force in the month of December probing banks and making low offers hoping that banks would take massive price hits to get properties off their books and closed by 12.31.11. I don’t know of any of these offers that went anywhere, clearly these investors do not understand the obligations or objectives of asset manager’s or company’s working out REO inventory on behalf of investors. The truth is that it costs very little to hold a property and with rare exception the REO assets are priced to the market and there is NO incentive for REO assets to be dumped just because it’s the end of the year. As a practical matter most lenders run on fiscal years that don’t end on 12.31 so it’s just another day – many do not even use natural quarters of the year for the end of their businesses. That being said many excellent transactions were originated in the month that were great opportunities in the medium and long time frames. I had one experienced investor come into my office and talk for about forty-five minutes today about how he has changed his strategy to conform to the current climate. Now mind you this man has been buying, selling and building houses in this region for over thirty years. Traditionally he has picked up land and renovation projects in the down turns and built new homes or renovated and flipped, but he has changed his tack for now. He can’t build profitably and doesn’t want to “build for practice” so he’s banking land assets and buying moderately poor condition homes and stabilizing them with the plan of renting them out. I asked him how many did he plan on doing and he said he’s done nine clean-up and rent outs in the last six months of 2011. His business model is to acquire single family homes and renovate for a total of $75,000 or less which gives him about a 20% gross return based upon is average rent of $1,200. Not bad when you look at your other investment alternatives.
First time buyers are also out in force. They are of course first time buyers and have lots of information, most of which is bad, and lots of input from family, most of whom know less than the first time buyers. These folks are getting transactions together and they are closing, but it is very painful for them because regardless of the input from REALTORS who are actually trained as a buyer’s representative, (like me I am both an Accredited Buyer’s Representative and an Accredited Buyer’s Representative Manager through the National Association of REALTORS), they tend to listen to friends and family who bought homes at sometime in the past, and this is definitely not your Uncle Louie’s real estate market. Big changes for buyers are that no REO Manager will consider an offer that doesn’t have a high quality pre-qualification letter along with it – these REO managers don’t do wishful thinking, they want to know that the buyer can perform or they won’t consider tying up inventory. Other big changes are that when the REO contracts are accepted and they call for closing by a specific date there are penalties to the buyers for not closing on time or not completing inspections on time. The REO managers aren’t kidding when they say as is where is and close on time – this is very different from what most buyers came to expect in the last few years of the real estate boom. Most sellers and their agents became really flexible on dates and repairs because they knew intuitively no mater what the buyer wanted they were still making a killing on their property: that would not be the REO market – no matter what the REO’s are loosing money for the investors behind them and they are tremendous opportunities for the buyers who will live in them for a period of years and pay down there loans and sell later in a better time.
assets, financing, first time buyer, foreclosure, homebuyer, investment, real estate, real estate market, realtor, REO
By Dick Thackston CRB, ABRM, ABR
The Office of the Comptroller of the Currency has begun sending out letters to borrowers who have faced foreclosure since 2009. It is estimated that approximately four million borrowers foreclosures may have been mishandled between January 1, 2009 and December 31, 2010. Federal regulators and most of the nation’s largest home mortgage servicers announced earlier this week.
Cases will be reviewed by Federal Regulators as a result of an agreement established in April of this year in which the nation’s fourteen top mortgage servicers agreed with regulators to hire independent consultants to evaluate foreclosure processes and determine if borrowers had experienced financial injury as a result of errors or abuses by servicers. It will be up to the independent consultants to evaluate cases and determine compensation if any due to borrowers.
The Comptroller of the Currency as well as the Federal Reserve will be sending mails between now and the end of the year to notify potential victims of their rights. A mass media campaign is planned as well to direct borrowers to the website www.IndependentForeclosureReview.com or the toll free number 888.952.9105. All requests for review must be submitted by April 30, 2012.
The mortgage servicers and the government agreed that the servicers would pay all the expenses associated of setting up the program. Under government supervision they have hired eight independent consultants that have designed the program to be at no cost to the borrowers. The consultants have set up the website and call center noted above. The program is designed to encourage borrowers from all lenders to use one portal and there is uniform branding and product design to be clearer in the public mind than a number of different sites would be to the public.
There are several basic patterns that the consultants will be looking at to determine wrongdoing and these include miscalculation of fees, a foreclosure that happened while a borrower was under bankruptcy court protection and the most common one in my experience a foreclosure that was done while a borrower was waiting for a response on a loan modification.
This program is a direct result of last year’s robo signing scandal and the investigations that followed. About a year ago it came to public light that many mortgage servicers were cutting corners on due process when foreclosing on properties and either not properly executing documents or simply faking documents to expedite the large number of foreclosures they had on their hands.
This program is a good solution to an unfortunate situation. Objectively, most of these borrowers were in fact behind and many if not most were ready and willingly left their properties to begin over, however that does justify short cutting the legal protection of property rights built into our system of property ownership over the last thousand years from Common Law to Current Law.
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