Sales price of Short Sales vs. REOs
This is an excellent article about the general overview of how short sales are reaching into the mainstream of the real estate industry.
The article, however, leaves a false impression that the REO listings are receiving more money because they close at 99% compared to 91% for short sales. However, there are plausible explanations for the differences in those two closing ratios.
1. Short Sales generally have to start off at market price and require systematic price reductions which must be justified to the lenders for them to agree to the sale. Because buyers want deals but the lenders want to start with market price, price reductions are inevitably built in to the process. Whereas in a REO, the bank and its accountants have pre-determined their bottom-line net price, which is typically below market rate. Because they are dealing with bottom-line net prices, the banks will rarely agree to accept prices that are far off their list price, if at all. By contrast, there is a bit more latitude in negotiating price in a short sale.
2. In addition to having to start off at market price, comparable short sales generally list at a higher price point because owners typically live there and take better care of their homes where their family still resides; compare that to an REO where the owners often destroy many components of the house during the eviction process. Short sales show better so are also more popular because they are closer to move-in condition that REOs.
So despite the impression that short sale properties receive less money, the reality is that short sale properties, sell at higher price points for comparable properties, yet close at a lower ratio relative to list/sold price because of the lenders demands to list at or near market price.
An emotional response to a foreclosure notice
It is quite common to hear about the emotional responses of homeowners facing foreclosure. I have personally seen many bank owned homes (REOs) where all of the cabinets were torn off the walls, every single door knobs was stolen, walls were peppered with holes and carpets were soiled with who knows what…..
I suppose these were often the emotional responses of perfectly rational homeowners having irrational responses upon learning that their lenders would force their family out of their homes and try to sell their homes at auctions. I imagine I would not react in such drastic ways; but who knows how one would react unless one were in the other person’s shoes?
Well, here is a homeowner’s reaction to a foreclosure notice………
Foreclosing on a property the bank did not own.
Now I’ve heard everything. Can you imagine a lender accidentally foreclosing on your home and throwing all of your belongings out on the streets? Imagine how embarrassing and shocking that would be for you if you paid for your home in cash and owed nothing on it. Imagine further that you informed the bank’s agent and said agent repeatedly informed the bank that they had the wrong house. The bank foreclosed on the property it did not own anyway.
Well it sounds unbelieveable, but leave it to Bank of America to foreclose on a house it did not hold a note on.
Strategic Default is not the answer
Walking Away Is NOT The Answer
You may have heard that a “strategic default” can be an appropriate and even beneficial reaction to an upside-down mortgage or impending foreclosure. While this idea is widespread, the truth is that default is never an easy road to choose, and rarely ever strategic.
Unfortunately, the ramifications of a “strategic default” are rarely explained, leaving many homeowners stranded on an island of misinformation. To assist you, I’ve prepared a free report outlining the myths and misrepresentations of strategic defaults.
Fill out your information below for this free report. Don’t hesitate. Get the facts today!
Another Short Sale Approved!
Got another Short Sale approved today with no promissory note or contribution required from sellers. It’s was a good day. Sellers get to walk away from a house that is worth less than what they owe on it and the bank gets to sell for a price higher than the list price and not have to continue to pay for property taxes, HOA dues and other carrying costs and make a clean break.
Feeling good because one less family has to suffer under the burden of foreclosure and its consequences.
What is your plan to stop your foreclosure?
“What is your plan?” When I ask this question, the typical response is something in the order of: “What plan? I didn’t know you needed one.”
I ask this question of my buyers who want to get that “deal” and I also ask that of my sellers who want to sell quickly with no hassle and get top dollars. I use the analogy that a real estate related plan is like having a well platted map before going on a long trip (the analogy still works in this day of the GPS). You may eventually get there, but if you have a well organized plan or a map, you can save tremendous amounts of time, money and heartache and give yourself the opportunity to enjoy the trip rather than wasting time sweating the details on the fly. In Real Estate, you don’t get that deal or you don’t get that multiple offer scenario by accident; there is always lots of work done beforehand.
Most of us would not consider taking our family to Disneyland or Legoland or wherever our destination is, without having some sort of itinerary. Yet, in these difficult times, when it is now so common for homeowners to be struggling to make their mortgage payments and who are facing the very real possibility of foreclosures, homeowners try to “wing it” and approach this very long and arduous trip without any sort of planning or assistance. Almost hoping that foreclosure can be avoided by accident or hoping to talk to someone who will understand and sympathize with their plight and make things stop. Unfortunately, that rarely happens.
Foreclosure is a process driven activity, which means activities are laid out in sequential order. In order to successfully fight a foreclosure, you must understand the process and have a plan to fight the lender and stop the sequence so the final step – foreclosure – is not achieved.
Fighting foreclosure is not something I can write about in a few paragraphs in this blog; as you can imagine, it is much more complex and the situations and hardships differ from homeowner to homeowner. However, I do have a report here which will explain simply and provide information so that the distressed home owner can take action to stop the foreclosure process and learn about the foreclosure prevention options that are available to them. Some sort of action must take place; inaction will not stop, but in most cases will accelerate the foreclosure process.
Q3 2009 Mortgage Delinquency Data
As more and more economic data is released, more and more, we are beginning to realize how severe our current foreclosure situation truly seems to be. The news media seems to want us to believe that the worst is behind is in the foreclosure crisis, but the reality paints a picture which is quite different.
The Mortgage Bankers Association (MBAA) recently released the Q3 2009 statistics about mortgage delinquency which revealed some truly alarming statistics which blew a lot of minds.
14.32% of all mortgages in the nation are in default (at least 30 days behind in payment) and of those, 4.38% are actually in foreclosure process where they have been served a Notice of Default. These numbers are the highest they have ever been since this organization kept track of these types of numbers. I REPEAT: 14.32% OF ALL MORTGAGES IN THE NATION IS IN DEFAULT!
And we all know what is causing these historic default activities: unemployment. Unemployment was at 10.2% while underemployment was at 17.5% for October. Unemployment is up while housing values are dropping, creating the perfect storm for foreclosures. Look at all of the categories listed above, in every single loan category MBAA tracked, 10% or more of said loans are in default. These are astronomical statistics, they had never seen numbers like that before.
The numbers for states like California will be even worse that these because we were at 12.3%. We must address the unemployment issue if we are to get out from underneath this 800 lb. gorilla sitting on our shoulders.
78% of Option ARMs have yet to recast.
Here is one of my favorite bloggers who writes often about a topic very close to my heart: the option ARM fiasco brewing in California. He has access to and extrapolates some amazing data. I wish I had access to such data. In this particular post, he lays out simply why option ARMs will be the next big wave of foreclosure headache coming down the road. And the incredible fact is that according to him, 78% of these time bombs have yet to recast. On top of that, the bulk of these (58%) problem loans originated in California.
Talk about a problem coming down the road…..
Client References – ask for them
I am amazed by how surprised prospects are when I advise them I will provide references from past clients who have used my services, particularly, short sale clients. Yes, in the case of short sale clients, it is understandable that clients do not want to bring up and discuss the unpleasant hardships of the past with complete strangers. But as consumers of services you should have the right to see what you agree to buy.
Unfortunately in our changing business environment, there are too many people out there claiming to be “experts” in certain areas of our profession without providing any proof of their adequacy, let alone expertise. One simply is not an expert because one declares oneself as such.
Under normal circumstances, selling a house is important but does not have long term implications if the house cannot be sold. It simply means the homeowners stay in the house until a better time to sell comes along. However, in a foreclosure situation, if the house cannot be sold or if the terms cannot be negotiated with the lenders to get the approval for the sale, people not only lose houses, but they lose that important sense of “home” and go through an emotional roller coaster ride that comes along with being foreclosed. Houses can be replaced, but the emotional scars can remain for a long time……
Ask for references. When you are talking to a Realtor, you are essentially interviewing him/her for a job. And what job interview does not involve providing references from past employers? If a Realtor does a good job for their clients, it is not difficult to get the latter to share their experiences with potential clients; as a matter of facts some become your evangelists if they had a good experience with you.
Some Realtors belong to an organization that rates the service via independent surveys and post those scores on the web. I belong to the QSC organization because I believe in its philosophy and strive to provide the best service I am able to provide and believe if I were on the opposite side, I would want to know how that person’s past clients rated their service before engaging them. These are difficult times and you should get the best quality service available out there. After all, don’t you deserve it?
Foreclosure: A family saga
Unfortunately, foreclosures are no longer reserved for the sub prime borrowers. Now it has spread to the mainstream. All too often, it takes a few of bad months before the borrower falls so far behind, they are unable to catch up.
Besides job loss, catastrophic medical expenses is another common reason why homeowners are unable to make their mortgage payments. This is a why we should have health care overhaul to make sure people are not forced into foreclosures or bankruptcies because of medical expenses. The saga this family is living is being repeated by many other families here in Silicon Valley.
