Archive for the ‘Uncategorized’ Category

Fannie and Freddie Release Short Sale Guidelines

Thursday, June 3rd, 2010

When the original government sponsored short sale program, known as HAFA, was released there was no such program for Fannie or Freddie.  Considering the volume of loans owned or serviced by these entities, there was a collective groan from the masses wondering when the government’s own agencies would release a program that was being encouraged on private entities.  This week, that day came.  As one of the most knowledgeable people in America on short sales, Tim Burrell has written an excellent piece  describing the good and bad of these programs.  As I have said before, any organized program is better than no program.   Only time will tell if people struggling to make a mortgage payment feel a short sale offered un this manner provided a way out of their personal difficulties.

If you are so inclined, I am also posting the Fannie and Freddie short sale guidelines for your more in-depth review.  If you have a short sale that you would like to discuss, contact me at joel@wilmothgroup.com.

Fannie Mae Owner Occupant Sales Enforcement

Tuesday, May 18th, 2010

With the creation of the First Look program, and the extension of the Home Path incentive, Fannie has decided to really crack down on ensuring owner-occupant, primary users of these homes are getting all of the benefits.  Fannie is now requiring all proposed buyers and their agents to execute this certification attesting to the buyer not owning another property that they actually occupy.  The First Look program and the Home Path incentives do not include second home buyers. 

This certification will cause most buyers or their agents who are trying to scam the system, second thoughts when faced with a $5000 penalty and additional costs including loss of earnest money.  If you are a Realtor be aware if you are working with a buyer.   As a buyer agent you are being asked to also execute this document, you need to make sure your buyer is not scamming you as to their intents or you will also be legally obligated to pay Fannie $5,000.   Like it or not, the burden is being shifted to the buyers agents.  I also am aware of systems being implemented to test these certifications against public records. 

Please be aware of the seriousness of this matter when asked to execute this certificate.

For Immediate Release

Thursday, April 1st, 2010

 In a move that has surprized most people who notice, today the Wilmoth Group announced the move of its headquarters to Key Largo Florida. Our office staff will be given the opportunity to work from our new offices located on a former billionaire’s yacht pictured here. We are anxious to get started in our new location……. Our IT providers are completing our new satellite communication system that will allow us to work miles from land. Fed Ex has agreed to drop ship contracts. Realtors will all have to learn they have to use email to communicate with us rather than just walking into our office!

Defective Drywall Update

Tuesday, March 2nd, 2010

There is some progress to report in the ongoing issue of creating some recognition of the legitimacy of this issue in homes mostly in the Southeast US, in particular Florida.  As I have posted before, I bear witness to the fact that these homes are not liveable with the sulfer gas being emitted.  I have found myself nauseated after just a few minutes of being in one.  Yet, there has been a reluctance for any public agency to actually acknowledge a criterian for defining a home with defective drywall.  I have speculated this has been an effort to control the inevitable flow of class action lawsuits once this issue is clearly defined.

The U.S. Consumer Product Safety Commission (CPSC) is still studying the effects of exposure to the drywall as well as what should be done about it.  In January the CPSC issued an update report that did not really have much in the way of news, but offered reassurance that the issue was still being researched.  The CPSC indicates they have 2,822 incidents of this defective drywall reported across 37 states.  From the numbers I have read in Florida alone, I believe a lot of people are not reporting this issue due to the fear that some insurance companies have reportedly dropped coverage when learning of this issue.

More significantly, HUD and the CPSC announded new guidelines guidelines on how to identify the presence of metal corrosion, as well as other indicators of problem drywall in homes. The guidance takes into account visual signs of metal corrosion, evidence of drywall installation in the relevant time period, and the identification of other corroborating evidence or characteristics. Click here to review the entire press release.

HUD and the CPSC’s two-step guidance requires a visual inspection that must show blackening of copper electrical wiring and/or air conditioning evaporator coils; and the installation of new drywall (for new construction or renovations) between 2001 and 2008. To view the full text of this guidance, click here.

Homeowners who believe they may have problem drywall should immediately report to the CPSC by calling 800-638-2772 or logging on to www.cpsc.gov/cgibin/drywall.aspx. For further information on defective drywall please visit the CPSC’s Drywall Information Center.

This is progress.  Standards had to be established.  Upon review, these seem fair and appropriate.  We are closer to admitting there is a problem.  How to solve it?  A year and half ago I felt ultimately some type of class action suit would produce a fund that would be controlled by government and funded by private industry.  I still think this approach is likely but the potential biggest culprit is a company from China.  I do not think they will participate.  Why should they other than a concern for what is right.  I do not anticipate that to be relevant in their decision making…do you?

Right Idea Just Not Implemented Correctly

Tuesday, February 2nd, 2010

In the last couple of weeks great sounds of celebration have been heard in the real estate investing world based on a change in rules from the FHA.  New rules have opened up FHA borrowers to the properties for sale by investors who have acquired a foreclosed property, and then made repairs to make it habitable and to FHA standards.  In the past, there was a 90 day rule that added costs for investors and made it less likely one of these properties would be available for an FHA buyer.  This rule change can be such a big deal becasue today FHA is the home lender of choice, with approximately 60% of all owner occupied homes being financed with loan and a FHA guaranty.

The issue I have with this improvement in the rules is that there is a 20% cap on the difference between the investor’s acquisition cost of the foreclosure and the price paid by the new buyer.  I know what those friendly to capitalists folks running our government were thinking.  “Wow..I sure would like to make 20% return for such a short term investment.”   Obviously, they still have not visited a foreclosed home.

Lets just start with the basic idea here that an investor, who buys an as-is foreclosed home is taking some pretty serious risk and should get some return for the risk.  It is not unreasonable to consider 10% is the low end of the risk-return ratio that makes this investment make sense.  So, this leaves 10% of the acquisition price for rehab to make the home eligible for an FHA buyer.

Most of you already see where I am going at this point.  Very few foreclosed, REO homes, only have 10% of cost in their budget for repairs needed to qualify.  It will be a rare property where this formula will work.  The folks at HUD have the right idea, but all I can figure is they really do not believe an investor should be allowed a 10% return for this risk.

Take a look through our website www.WilmothGroup.com and look at the properties for sale.  We only put on the decent pictures, leaving many of the really ugly defects to be inspected with the eye.  With the right investment, most of these houses can be a home again.  It will likely take investments much greater than 20% and an investor would be crazy to not demand some return for their risk.

This idea shows progresss toward removing the roadblocks to capitalism that can solve a lot of our nations problems.  Unfortunately, a zebra does not change its stripes and the concern that somebody might profit seems to have interfered with implementing the rule so it truly can have a positive impact on FHA borrowers and neighborhoods languishing in foreclosed, vacant properties.

New Fannie Mae HomePath Sales Incentive

Monday, February 1st, 2010

Purchasing a Fannie foreclosure just got more enticing for your owner occupants!

Fannie Mae Offers New Closing Cost Assistance and Appliance Incentive for Homebuyers

 

Fannie Mae is offering a 3.5% incentive for buyers who purchase and close on a Fannie Mae-owned home between January 28 and April 30, 2010. Buyers purchasing properties listed on HomePath.com that are closed within this period may receive up to 3.5% of the final sales price for:

 

·         Closing costs;

·         The purchase of new Whirlpool® appliances by Fannie Mae; or

·         A mix of closing costs and appliances, at the buyer’s discretion, up to the maximum 3.5%.

To be eligible for this incentive:

·         Offers must be accepted on or after January 28, 2010;

·         Property sales must close before May 1, 2010, and;

·         Buyers must be owner-occupants (investors are excluded).

 

The incentive reinforces the organization’s commitment to stabilizing communities and assisting buyers. For more information about this incentive, visit www.HomePath.com, read the press release on fanniemae.com, or contact a Fannie Mae listing broker.

Buy A Foreclosed Home With $15,000 for Rehab From The Government

Monday, January 18th, 2010

Its funny that this Market Stabilization program offered through the Indiana Housing and Community Development Authority has been around for almost nine months, yet I see it not being used often by buyers of foreclosed homes. It could be the limits of the geopgraphic areas (rather large actually) or the requirement you stay in the home for 10 years to receive forgiveness of the $15k.  The $15k can be used for a downpayment, closing costs or rehab, but with a low downpayment loan to purchase the home of 5% or less, the $15k makes sense to use for rehab.  One other requirement-the home needs to be a foreclosure.

The money is granted via a second mortgage on the home that is forgiveable, after 10 years.  A refinance of the first mortgage is going to cause problems for this second so you want to lock in today’s low rates with this program. 

The process of learning if a home is eligible is simple.  Go to this page and enter the address of the home you are considering.  The other significant qualification issue is income eligibility.    The limits seem generous enough..in Marion County a five member family with income under $84,360 will qualify  You also have to work with a participating lender and the Indiana Housing and State of Indiana website indicate you have to check with Indiana Housing to find one. 

A worthwhile program to consider for you or your buyers interested in foreclosed homes..

Multiple Offer Procedures Changed

Tuesday, January 12th, 2010

Due to the number of properties that are now receiving multiple offers, it has become impossible for us to keep the MLS Realtor Comments timely with regard to the status when a property moves into a multiple offer status.  Subsequently, we are no longer publishing this information in the MLS. 

I understand the buyers and their agents like to know how many, if any, additional offers there are on a property.  First, our sellers do not authorize this type of disclosure until the time they give permission.  Each bank has different procedures for handling and now we are going to handle all offers in a uniform process.

We are not going to try and figure out for anybody considering making an offer if we already have offers.  It is just not practical.  I can tell you we have no offers, and by the time you tell your buyer, we could have three.  Then, I have had the experience of the agent coming back and saying “you told me there were no offers”.  I’d like to respond..”did you think time was going to stand still while you and your buyer tried to figure out your offer?”  No, I am too polite for that.

Did I mention the part about the seller not authorizing us to disclose the existence or status of other offers?

So, when your email is ignored, or you receive a simple reference to our FAQ when you ask, be warned.  Apparently this status of other offers is expected by all parties now before proceeding with one of their own.  You will need to communicate to your buyer that they will find out when they actually submit an offer.  What a great way to get them to sign the Purchase Agreement!

See also:

Are there any offers?

Multiple Offers

Multiple Offer Forms

 

 

 

Clues As To Why Your Offer Was Rejected on a Bank-Owned REO

Tuesday, January 5th, 2010

contract.jpgLets take a second to explore one of the more common questions I am receiving today…why was my offer not accepted?  I hear this from cooperative agents, and even worse, their clients who contact me.  I hate when that happens as you will see the answer often lies in what their agent did not do for them.  I do not want to go there with somebody else’s client so I have to avoid the question or send them back to their agents.

Here are a few of the more common reasons offers are not accepted:

Not Completing a Purchase Agreement Correctly-Or At All!  Not sure what happens but some agents think because these are bank owned homes, and there will be an addendum that muct be executed, that little details like financing contingencies, dates to close, and inspection requests are not important to detail in the purchase agreement.  Even worse, lets just leave every blank blank!  Tip-if it does not apply enter NA (Not Applicable) so there is no doubt what you are trying to propose.

Offer is Not Submitted Per The Instructions- Between the Realtor remarks in the mls and the info posted at www.BuyWilmothREO.com, we lay out the correct way to submit any offer.  If a proof of funds is required, and what exactly that means is available in writing for your review, but you still submit one that is from a bank account one year ago…I am sorry but you are telling us alot about the way you will execute a REO sale.  Banks don’t want to mess with people who can’t follow instructions.  They just as soon keep the home  on the market looking for somebody who can.

Be Specific in Your Offer- It is really simple..the bank is looking at a net sheet to determine the best offer.  Neither the listing agent or the bank knows what the concession is worth that just says “Seller to pay Buyer’s closing costs” or “Seller to provide an XYZ Home Warranty”.  So what?  Tell us how much is the concession in dollars, not even percentages.

Your Offer Is Presented In Such A Way That The Impression Is You Have Never Done This Before.  Lets start with emailing an offer..with each page its own jpg file of 1mb and a total email sent with 20 files at this size.  Is there anything that screams louder than this is an agent who is not ready to work with bank owned properties?  Do you think we just have somebody in our office waiting to open one attachment at a time and print and then collate?  No, we will send that offer back and guess what?  Your Hotmail account will bounce it because it will not accept a 20mb email and then you wonder why your offer was not accepted?  This is just one example. 

Here is a clue..even if this is your first bank owned property…do everything you can to make it look like you do this everyday.  It is by far the best thing you can do to give your buyer the best opportunity to purchase the home.

Cold Facts About Winterization of REO Homes

Tuesday, December 29th, 2009

WinterImage1.gifIn the Indiana part of our market, we have this weather pattern called winter that can cause as much damage to a vacant home as about any problem on a large scale.  To see a home with burst pipes from the expansion of water when it freezes, and the resulting escape into the home when the pipes thaw, is a sad site indeed. It is even more memorable to then see the items in the home freeze over as if they are being kept in a freezer for all eternity, 

Banks, wisely,  wish to prevent this damage to their properties so beginning in mid September, every new property we bring in is taken through a process called winterization.  This process continues being administered until on or about April 1.  The idea is to protect the home from any freezing. 

Despite the heat being on in a home, or the likelihood of a freeze being nil, the banks will order a winterization in order to avoid any chance that a system fails (furnace and no heat) or the storm of the century arrives in April. 

Interestingly, the problem is not just based in the fact it is cold.  The bigger issue is that the home is vacant and the water in the systems is not getting moved around..so if you go back to third grade science, you understand how when mixed with cold, this water freezes.

And then expands..bigger than the pipes circumference.

The process of winterizing a home looks like this.  By the way, for many reason this is best left to a company with the expertise (and the insurance) to protect your property.

    • winterization.jpgThe water is shut off at the house and at the street.

    • All faucets are fully opened to drain the water out.
    • All toilets flushed
    • The water heater is drained and the gas is shut off at the water heater
    • Air is blown into the pipes forcing all water out of the pipes.
    • Anti-Freeze is poured into all drains, toilets etc. Please note, this is NOT the anti-freeze used in your family car. This is the non-toxic anti-freeze used for winterizing RV’s and Marine vessels.
    • Tag all areas where the anti-freeze has been poured with a big sign informing anybody who looks at the fixture that winterization has been performed.  Toilets get some type of covering, usually tape or saran wrap,covering the bowl. 

De-Winterization and Re-Winterization

After an offer is accepted on a home that has been winterized, the buyers normally wish to perform an inspection.  We have several concerns with this process and document our procedures in our FAQ section of our website.  As a buyers agent, it is important that your buyer understands this process before making an offer so that they are prepared for the possible additional expense.  The other issue that happens frequently is the home inspector is not informed of the fact the home is winterized and shows up to do the inspection.  This also costs the buyer in a wasted trip charge.  Worse are the inspectors who offer to handle the dewinterization on the spot.  This will not be approved as we have to utilize our vendors in this process.  If an unapproved person handles a dewinterization, we will hold all parties liable for any resulting costs or damages (yes that includes the buyers agent who may have not been there when the buyer told the inspector to proceed).

This is a very important area for Buyers Agents to get involved and follow the procedures correctly.  It is obvious when showing the property that this problem exists so start researching what to do before proceeding with your buyers offer.  Make sure the buyer understands the process also. 

Please review the link above to our procedure for handling dewinterization.   Be prepared to explain this issue to your buyer.  For a significant part of the year it is an issue for bank owned properties in cold weather climates.