Short Sales - The Good, The Bad, The Ugly!
July 3rd, 2009 categories: Real Estate News, Relocating
The term “Short Sale” has become common place in housing markets over the past few years. Yet, for many, what a short sale is, and how it becomes a reality, is still a mystery. A short sale is a sale of real estate in which the proceeds from the sale are less than, or “short of”, what’s owed on the balance of the loan securing the property being sold.
The Good
At first glimpse, one might wonder why a lender would ever entertain such an arrangment, accepting less than what’s owed on a loan. In most cases, the owner(s) are “upside down” with their mortgage. In other words, they owe more than their property is currently worth. While there are various reasons why owners are in their current distressed state, the good news is that banks have begun to embarace the short sale process. Foreclosing on properties isn’t in anyone’s interest - especially banks. According to the legal counsel for the Virginia Association of Realtors (VAR), the average foreclosure costs the bank approximately $65,000. That’s not what they lose on the loan payoff. That is simply what it costs the bank to handle or manage the foreclosed property. For banks, avoiding foreclosure simply makes monetary sense.
Additionally, the Administration and Congress have moved to stem the foreclosure rate and make short sales a more standardized and acceptable choice for lenders. A push from lawmakers to improve and simplify short sales has encouraged banks to embrace this option for homeowners, avoiding further emotional and financial pain that would ensue if foreclosured on.
The Bad
From a Realtors point of view, handling a short sale transaction is never easy. On the selling side, there are two other major participants in the process, the homeowner (Seller) and the bank (Lender). Each of these bring with them potential problems. The good thing is, the homeowner is usually approaching the transaction as a motivated party. Unfortunately, that rarely seems to be the bank’s case.
Complicating matters further is the lack of national standardized short sale procedures, and no mandated cummunication timelines between banks and realtors (who represent their clients). If there’s anything more frustrating for the real estate community than their fruitless attempts to reach the proper point of contact at the bank when dealing with a short sale, I’m unaware of it. If the short sale cummunication and coordination process was designed any poorer, it would be DOA. But, fortunately, despite the piecemeal structure, many of the transactions do close….eventually. But, “muddling through” is no way to conduct business.
The difficulty in successfully executing a short sale is due to more than poor coordination and communication. Aside from these stumbling blacks, two other hurdles must be overcome. The first involves the banks, the other, the real estate community.
The Ugly
While we’re almost four years into the Mortgage Meltdown, banks have yet to hire enough personnel to handle their short sale and foreclosure workload. We’re routinely informed that negotiators and asset managers are beset with caseloads of 300 or more. With numbers like those, how can we expect success? Within the Realtor community, it isn’t the numbers that are the problem, it’s the lack of know how.
Many Realtors handling short sales or foreclosures lack the training needed to properly do the job. The Commonwealth of Virginia has no training requirement for handling these types of transactions. Many agents, if trained at all, do so after “muddling through” their first few such transactions. Wouldn’t it be smarter to have the training prior to accomplishing the task? How can a professional do the job without knowing what has to be done? And, who is paying for the mistakes made along the way?
Both Short Sales and Foreclosures have excellent certification programs available. For the former, the Certified Short Sale Professional (CSP), and the latter, the Certified Foreclosure Specialist (CFS). But, unfortunately, many who should be taking these courses aren’t.
Today, in many regions of the country, shorts sales and foreclosures account for more than fifty percent of real estate transactions. Luckily, there is an abundance of information on the subject available from lenders, the real estate community, and best of all, online. Time and experience has resulted in greater success in navigating each of these unconventional property sales approaches. But the players involved, and the processes, have miles to go before can begin to claim the process works well.
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Four Steps to Getting the Foreclosure You Want
June 29th, 2009 categories: Real Estate News, Relocating
For many of us, the current housing market feels alot like, as Yogi Berra might say, “deja-vu all over again.” Five years ago, in the midst of the runaway market, many homes were on the market for less a day before we witnessed multiple offers presented to the seller. In hindsight, one might conclude that the market was “out of control.”
Today’s market landscape looks very similar. As they say, the players have changed, but the “song remains the same.” Much like then, the multitude of today’s bargains comes in the form of foreclosures.
While there’s been much in the press about the the ugly side of foreclosures (owners destroying the property, evictions, mold, etc), many foreclosures on the market are in excellent condition. Very much like the condition they were in when purchased at the height of the market in 2004-2005. Yet, many of these properties are purchased for 35-50 percent lower than what the current owner paid for them. And, in a few cases, even cheaper. But, how do you find these properties before the competition? How do you level the playing field with the investors that have been in the business for years?
While there is no full proof method for success, there are three important steps that dramatically improve your opportunity to successfully purchase foreclosed properties.
The Steps to Success
1. Identify the property the first day it’s listed for sale on the Multiple Listing Service (MLS).
Better yet, locate the property before its actually foreclosed on. many of these properties have been on the market prior to foreclosure, as a resale of short sale. If this doesn’t result in a sale, they’ll be ripe for the pickin’ at the lower foreclosed price point. But, once they’re on the market as a foreclosure, it is, as they say, “the early bird that gets the worm.”
Seeing it on day one of its listing on the MLS probably depends on getting that information from your Realtor. So, hopefully, your Realtor has set you up with a direct feed of Foreclosures. Most MLS programs now offer the Foreclosure option. If that’s the case, have your Realtor provide you an automated feed of new Foreclosures on a daily basis. While this step a must do if you expect to catch the listing on day one, the second step to successfully getting the foreclosure you want is equally important.
2. Strike quickly.
Submitting a contract as soon as possible is vital to getting your contract accepted. As I discuss with my buying clients, during the contract process, we take things one step at a time. Our goal is to “get to the next step.” By that, I mean that we take things one step at a time. In the case of a foreclosure, we want to have the first contract submitted. The sooner we submit a contract, the less opportunity we give competitors to do the same. Multiple contracts are NEVER in the interest of the buyer. The preparation or due diligence necessary to protect my buyer should have been done ahead of time. Things like looking at comparable properties, neighborhood issues, history of the property, unpaid liens, should be done prior to the offer. But, many of these can be examined prior to the submission of the contract. Another key to securing the property is the terms the buyer is asking for.
3. Make it Easy For the Seller
If your goal is to buy a foreclosure, many pruchasers are looking for as little work as possible. For REO, or bank owned properties that are on the market as foreclosures, the banks are looking for the same thing; as little pain as possible. Since the onset of the current mortgage meltdown, lenders have been inundated with defaults. They aren’t in the property management business, and want to rid themselves of their properties as quickly as they can.
Avoid contract contingencies. Routinely, foreclosed properties are sold “As Is“, which means the buyer will take the property just as it is, at the time of the offer. Should you include a Home Inspection contingency in your offer? That is certainly an option, but not one I’d recommend. Remember, your goal is to get to the next step and provide the bank with few, if any, reasons to say no. However, asking for a home inspection for informational purposes can serve the same purpose, if, at some point, after ratification you decide to withdraw from the contract. Additionally, often, in bank owned (REO) foreclosures, the necessary bank Addendums to the contract will often allow you to alter terms before the contract is “fully” ratified by both parties. While the interaction with various banks are routine and standardized, there are some often differences from bank to bank, with specific procedures. Many banks negotiate one contract at a time. And, you want your contract to be the one they’re considering. So, banks are keying in on the “net” cost to them, make sure your terms aren’t providing the bank a reason to say no to your offer.
4. Go with Experience.
Real estate transactions can be easy, or they can be…not so easy. Make sure you’ve enlisted the services of a professional real estate agent. What does that mean?
It begins with experience and competence. While those traits don’t necessarily go hand in hand, they’re often found in pairs. First, it helps to have someone on your side with foreclosure experience. While the transaction process is fairly straight forward, having an agent that knows how the process works, and knows how best to “work the process” is invaluable. They’re familiar with the necessary timing, procedures, and strategies to accomplish the objective. Further, as the process unfolds, they’ve worked foreclosures with banks previously, and understand what it takes to get you to closing. They have the experience and the competence to close the deal.
Good deals abound in today’s housing market for home buyers. Many of those deals come in the form of foreclosed homes. Capitalizing on the foreclosure opportunities involves a few simple steps. By taking the time to become aware of what’s available, and acting decisively with the aid of an experienced professional, you can maximize your chances for success. Of course, you first have to find something you want to buy. So, how hard is that?
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When You Know You’ve Made the “Big Time”
June 24th, 2009 categories: Entertainment, Relocating
Life is full of events that flag certain milestones in life. These milestones come in different forms, be they job related, academic, social, emotional, or another. Significant achievements often designate what we might call a ”rite of passage“. A sort of coming into our own. Well, many who found themselves in Fredericksburg this past weekend, may have witnessed just such an event in the life of our City. What was the big event? The opening of Fredericksburg’s very own Wegmans supermarket. But, as anyone whose been inside a Wegmans can tell you, it is anything but your father’s neighborhood grocery store.
While Wegmans has some seventy stores, they’re exclusively in the Northeastern U.S. Many shoppers outside of this area have never heard of Wegmans, much less stepped inside their doors. From its birthplace of Rochester, N.Y., it’s stores have spread to neighboring states New Jersey, Pennsylvania, Virginia, and Maryland. Store features include:
1. Cheese Shop
2. Bakery
3. Coffee bar
4. Patisserie
5. Sushi Station
6. Seafood Bar (with wine & beer by the glass)
7. Burrito and Panini bar
8. Crab Cake Counter
9. Thai & Indian Buffet
10. Kosher Deli
And much more, to include the two levels of seating for diners, who would rather sit down to enjoy their food. This includes the upstairs balcony, where those who enjoy the touch of fresh air feel right at home.
For those of us who avoided the 20,000 or so shoppers who were brave enough to wade into Wegman’s on opening day, there’s plenty left to be had. I happened to stop in earlier today, and the shelves have been fully re-stocked, while the aisles are still quite busy. Its something new, and not your ordinary “shopping” experience. As a matter of fact, the kids I witnessed in the store, seemed to be enjoying themselves as much as their parents.
Many have chosen to call Fredericksburg home because of its location, or history, or family in the area, or for its culture, or lifestyle reasons, among others. And, availability of shopping is an important consideration for many. With Wegmans moving into the neighborhood, we’re beginning to look a bit more like the “Big Time.” Now, if we can just convince Trader Joe’s that Fredericksburg is big enough for them too, we might be on to something!
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Are You Looking for the Four E’s?
June 23rd, 2009 categories: Real Estate News, Relocating
Have you ever wondered what it takes to be successful? Of course, “successful” means different things to different people. But, for the sake of our argument, let’s use Webster’s definition, ” a favorable or desired outcome.”
Most of us would probably agree with that characterization. But, what does it take to get there, to achieve that end?
In the real estate business, many of us define personal success in terms of goal achievement, and numbers or monetary sales goals met. For others, it may be as simple as satisfied clients. But, whatever measure is used, what strategy do we use to acheive those goals? What about clients, home buyers or sellers? What methods do they use to maximize their chances of success?
For years, Fortune 500 companies have looked for certain qualities in their future employees. For many, they are looking specifically for the ”braniacs”. But at least one of those companies, has, for years, used a different approach.
Jack Welch, General Electric’s Chairman and CEO from 1981 - 2001, used a another approach. He looked, not necessarily for brains, but for what he called the Four E’s.
According to Jack Welch, it’s as easy as Four E’s.
This is the criteria he used to assess employees at GE.
1. Do they have the energy - postive energy? Do they start the day with enthusiasm, and end it that way too?
2. Do they energize others? According to Welch, “it doesn’t do you much good to be a whirling dervish if you don’t end up exciting other people.”
3. Do they have edge? Do they have the ability to say ‘yes’ or ‘no,’ and not ‘maybe’? Do they make the tough calls?
4. The fourth E is execute. Do they get the job done? In other words, do they deliver?
Said Welch, “Integrity is assumed. These four E’s—when you look at people and want to evaluate them, and when you look at yourself and evaluate yourself this way—give you a pretty good read on where you stand.”
According to Welch, this recipe for success will work in any environment.
If that’s the case, should we be looking for the Four E’s when we hire employees? Are those considerations we’ve used in selecting peers for leadership positions? If not, why not?
Are buyers and sellers looking for these qualites in the agents they hire to represent them? It would certainly make perfect sense. If they’re not, and, at the end of the day, leave the settlement table dissatisfied with their agent’s performance, they’ll have nobody to blame but themsleves. It’s called, “Due Diligence.”
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Can You Say Convenience?
June 10th, 2009 categories: Real Estate News, Relocating
As an old friend used to remind us, “We all going to make a little bit money, but none of us is going to get any more time.” Wasting time is something none of us can afford to do (well, at least I can’t). But, it seems that no matter how hard we try, it’s “built into the system”. In other words, it’s just part of life. Many of the processes we’re involved in are controlled by others. We don’t control all the moving parts, the timing, the content, or, the logistics of getting to the finished product. But, what if we could find a way to make things “better, faster, cheaper”, would we?
Callaborative platforms or software allows us to do just that. Collaborative management tools like videoconferencing, online chats, instant messaging, application sharing, Wikis, and many others, allow us to leverage technology to, in essence, make it easier to accomplish a task. Among other things, it provides users with access to the same material or event at the same time. In other words, simultaneous task accomplishment.
In yesterday’s real estate Google Alerts I ran across the article, New Business Eliminates Real Estate Paperwork, highlighting an effort by a couple of agents in Cincinnati, Ohio, to develop software that provides those involved in reale estate transactions the capability to track negotiations and complete transactions online, and yes, that includes using electronic signatures. The software is called MLS Contracts and is currently being Beta tested by their brokerage firm.
This looks like another tool to improve our business process. It’ll make the process more convenient and productive for agents and their clients. Let’s hope the Beta test is without too many hiccups, and before we know it, we’ll all be using MLS Contracts, or something similar.
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Cracking the Code
June 3rd, 2009 categories: Real Estate News, Relocating
“It is not only what we do, but also what we do not do, for which we are accountable.“
Moliere
Have you ever tried to improve something? Put something together? Assemble an item? Did you remember to follow the directions? Frequently, the directions are more of an afterthought instead of the “how to” they’re meant to be.
Unfortunately, failure is an important part of the road to success. But, if you’re like me, one of your first lessons in failure occurred while attempting to assemble that store bought item you or someone in the family had to have. Probably, in the rush to put together the item, directions were NOT followed. (Who needs them - right?)
Real estate practice carries with it a professional responsibility. Our responsibilities are outlined in the Code of Ethics which serves as the “golden thread” binding us together as a profession. They are our “directions.” In Betty Jasmund’s estimation, they’re more than that, they are a gift.
As the National Association of Realtors publication, Professionalism in Real Estate Practice specifies, the Code outlines our ethical obligations, based upon moral integrity and competent service to clients and customers, and dedication to the public interest and welfare. While the Code of Ethics provides an excellent set of rules or guidelines, what are they worth if they aren’t followed, or Code violations not reported? Or, in some cases, for various reasons, not punished?
Ms. Jasmund, the Fredericksburg Area Assocation of Realtors, Professional Standards Co-Chairman (and one of the wisest Realtors I know), recently authored an article, Why Filing a Complaint Against an Agent is Good for Everyone’s Business, on the value of the Code, in the Association’s latest quarterly publication, FAAR Side. While the entire commentary was instructive, perhaps Ms. Jasmund’s most significant words were:
“….in 1978 by William North, EVP and General Counsel of NAR, he stated that “the integrity of the Code and the value of its vision of the real estate industry depends utimately upon its use.” So if we don’t use it we diminish our ability to monitor our industry. By using the Code of Ethics we present a vision of our profession as it could be and should be.”
The Code of Ethics has had a few changes since its origination in 1913, but its purpose has been the same; to provide clear and conspicuous guidance to Realtors about how their profession should be conducted. Its 17 Articles leave no doubt as to the Do’s and Don’ts of how the profession should be practiced. But, if you were to ask a Realtor you met on the street to cite any one of the Articles, they probably couldn’t. They might be able to tell you the intent of the Code (well, at least, I hope they could), which to them would probably mean “to act in the best interest of the client, and to act with integrity”. But, other than that, who knows what they’d say.
That begs the question, “Should agents have better than a faint idea of what their operating guidelines are?” And, if so, how well should they know the Code? Well enough to know a Code violation if they witnessed one?
More importantly, as it relates to Ms. Jasmund’s point, how can we use the Code more effectively to police our profession? In our efforts to improve real estate practice by improving pre-licensing requirements and establishing a mentoring program, shouldn’t we begin by using the one valuable resource we already have, our Code of Ethics? It is our blanket of accountability. In Stephen Covey’s words, “Accountability breeds response-ability.” And that is exactly what we’re looking for.
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