Archive for December, 2009

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.

 

 

 

The REO Problem?

Tuesday, December 22nd, 2009

II found this article from David Curry published earlier this year in Realty Times.  Several great points for REO buyers.

There is a growing trend among Realtors calling themselves REO or Foreclosure Specialists.  Seriously..take a look at any Realtor today and see if they do not proclaim to offer this specialty.  If they are not proclaiming their expertise on the foreclosure side, they are short sales experts.  Realtors have gravitated to these claims with little or no knowledge of what is involved in selling these properties solely because it is the color of the day.  The problem for most Realtors though is they are not prepared, and subsequently do not prepare their clients, for the cold, distant world of corporate sales.  It is not what they have been use to when everybody shared the same level of empathy and motivation.

The best REO buyer specialists know that it is not the listing agent who truly does not care.  It is also not the corporate seller.  It is the circumstances that these sales create.  Vacant homes, no history available, a foreclosure process that today, with moratoriums and other delays, extends the period of time a home sits vacant before management of the property can occur, puts all parties at a disadvantage.  Here I must disagree with Mr. Curry..no amount of empathy can change what is being offered in these properties.  They buyer that is looking for a transaction full of disclosures, repair allowances, extended financing contingencies, and warm fuzzies when the buyer gets cold feet, really should be steered away from foreclosures and short sales.

This is my beef.  The agents who want to claim they are foreclosure or short sale specialists, need to accept that as a specialist, they offer an important service leading potential clients away from these types of transactions as they learn about their client.  Many buyers are not well suited for the trials and tribulations of buying a foreclosure or short sale property.  These buyers need to be led to a transaction that does not offer these challenges.  A surgeon does not consult every patient to have an operation.  Call yourself a specilst and remember that part of the service you offer is to identify who is not really a patient.

Citigroup Suspending Foreclosures For 30 Days

Friday, December 18th, 2009

From the AP

Citigroup Inc. will suspend foreclosures and evictions for 30 days in a temporary break for about 4,000 borrowers during the holiday season.

The New York-based bank said Thursday the suspension will run from Friday through Jan. 17. It applies only to borrowers whose loans are owned by Citi. Borrowers who make payments to Citi but whose loans are owned by other investors are out of luck.

“We want our borrowers to have a much less stressful time, to spend their time with their families during the holidays as opposed to worrying about their homes,” Sanjiv Das, head of the company’s mortgage division, said in an interview.

The suspension means Citi will halt foreclosure sales and stop evicting homeowners from properties it has already seized. The company projects it will help 2,000 homeowners with scheduled foreclosure sales and another 2,000 that were due to receive foreclosure notices.

Das also said the company is working on “some long-term fundamental alternatives” to foreclosure, but declined to be specific. “We know that moratoriums are not permanent solutions,” he said.

Most major lenders suspended foreclosures last winter while the Obama administration developed its $75 billion loan modification program. Foreclosures picked up again after those suspensions lifted. In recent months, they have fallen as banks evaluate whether borrowers qualify for the government program.

Citi has enrolled about 100,000 borrowers in the Obama program, but had made only about 270 of those modifications permanent as of the end of last month, according to a Treasury Department report. But Das said the low number resulted from a “reporting error” and said it will rise dramatically by year-end.

I have put a lot of pressure on my team to make sure that there is almost nothing left in the pipeline” he said.

Does The Bank Care About My Offer?

Tuesday, December 15th, 2009

Lately, I am hearing more people concerned that the banks are ignoring their offer.  The reason people are jumping to this conclusion is becasue they have not heard a response for the offer they submitted.  Most buyers, and their agents, are accustomed to 24 hour turnaround on offers made in the conventional home sales world.

The world of buying from a bank is different.  Of course the bank seller cares very much about your offer.  I can only compare the issues surrounding responding to your offer as similar to when you apply for a loan with a bank.  In a way, the issues are similar.  At least when a bank contemplates making a loan, they anticipate getting the money back with interest.  But, there is a risk in making the loan.  Somebody at the bank has to approve the loan which means they have assessed the risk and the probability of loss.

Selling a foreclosed property is similar in that the loss has occurred, and the bank has identified a reserve for the loss.  There has been quite a bit of analysis to determine the anticipated loss, whether it be an appraisal or a broker price opinion.  A list price was determined based on multiple parties opinion of value and the anticipated loss identified.

When I hear from an agent, or a buyer, asking me what is wrong with the bank and why they are not responding back on their offer, I typically ask how much discount to list was the offer?  It really is pretty simple, a low ball offer will take a higer level of authority to determine if a counter offer should be made or how specifically to respond.  Banks do not make loans in 24 hours typically.  They do not acknowledge changes in their anticipated losses by gladly accepting offers that defy all of their information.  Somebody has to review the situation and determine what should happen next.

They are not ignoring you.  They really are glad you made the offer.  If for no other reason but to provide some additional market information.  Just please do not call our staff daily wondering if we have a response or if the bank cares!  They get paid when a house sells so they will track you down as soon as we have a response.  I promise!

Phone Calls and Emails on Bank Owned Homes

Monday, December 14th, 2009

I feel like a snob but there is a need to write this.  First, we are not snobs..we really would love to communicate with everybody in an immediate fashion.  There are just so many calls and emails everyday…most with answers available in other formats.  Sure, I know you are not near your computer, or your internet connection is down, or the cat ate your glasses (yes..I have heard all of these excuses) but I (or our office staff) just can’t answer every question in the manner expected.  We have to select the ones that are unique or demand urgency.  The questions that are based on the standards that we have spelled out in other ways, may be delayed as to a response.

 

The truth be told, it is just not me.  REO listing brokers do not have the ability to immediately answer every inquiry.  We create systems to make it easy to do business with us. I have spent many hours compiling a FAQ on our website..one for agents..one for buyers.  The problem is that most people are use to buying real estate in what I call the traditional way.  This includes the ability to chat it up for half an hour, then say they need to talk to their wife (or client) and disappear never to be heard from again.  Most Realtors play this game and therefore their average income is just above poverty (not making this up).  They do not use their time well and end up broke.

 

What are the common calls and emails that fall to the bottom of the priority for returns?  Here are a few examples with the answer you will likely receive…

 

  • Is this bank-owned home still for sale?

If our website says it is Active, then it is still for sale.  If the MLS says it is Active, with no contingencies, it is still for sale.  I do not remember phone calls like this being made when I was in traditional real estate to every Realtor or seller asking if their home is still for sale.  I get that some agents may not keep this information up to date.  We do.  In fact our website is in real time for status, plus you can subscribe to a Twitter feed or an email notification when a property status changes.

 

  • How much will the bank accept?

I fall asleep every night around 11:30pm so I am not watching TV at 1am when the guy driving the Bentley and the girls in bikinis serving him drinks tells people that they should ask this question before wasting anybody’s time with an offer.  First, the banks would be foolish if they told their listing agents this as it would compromise their ability to get the best market offer.  Second, most of our contacts can’t accept offers that are too far off the list.  Any offers outside of their narrow range has to be approved by a higher authority.  So, even our clients often do not know what they will accept.

 

  • How can I write the highest and best offer?

I suggest you pull comps, look at the repairs needed, and make an offer that you or your client will not wake up and say..boy I would of paid one dollar more for that property.  Oh..you have not actually seen the property yet?  I think you deserve whatever you get.

 

  • How long has this bank-owned home been on the market?

OK..for buyers without representation, I will give them that this is a fair question.  Perfect for their buyers agent or representative to research.  If you are not represented, I will get one of our skilled buyers agents to contact you to provide this information and help you write an offer.  I work for the seller and this is an awkward bit of information for me to share.

You are a Realtor?  And you are asking this question?  Do you live out of state or not have access to an MLS?  This is the kind of information that they train Realtors how to research in the MLS. 

 

  • How much will it cost to fix up the home?

Again, see my reference to late night TV.  First, we are not contractors, Second, we provide visual inspections for the bank.  Usually we have limited information on the bones of the property or the satisfactory performance of the mechanicals.  Never mind that this is the kind of thing you should hire a contractor to discover…even if you have a buyers agent.  If you are a buyers agent, then I think you need to work with a contractor who can help your buyers sort out these expenses.  Finally, the listing agent can’t do a very good job representing the seller if we know this and just share it with anybody..unless the seller authorizes us to disclose.

 

  • What types of repairs will the bank make?

The ones that are negotiated into your accepted purchase agreement.   If you are buyers that need a lot of repairs, I will share with you that I strongly believe you should manage your own repairs after closing.  If your financing will not allow this then you are probably using the wrong financing or looking at the wrong home.

 

Now, the kind of calls/emails that get our attention:

 

  • Did you receive my offer? 

Actually, we send an acknowledgement within 24 hours so these calls/emails alarm us.

 

  • There is no key in the lockbox

We hate that to happen to anybody and we get it fixed immediately. 

 

  • My buyer has a problem with his lender and is not going to be able to close on time.

I really do not want to address what happens with these calls…but it is often not fun for anybody.

 

 

Fannie Mae’s First Look-What It Means For Investors

Friday, December 4th, 2009

I probably can’t say it any better than Ken Harney does in this morning’s Realty Times story on this new program that makes investors take a back seat for the first 15 days a new Fannie foreclosure property hits the market.

Condominiums For First Time Buyers Are Harder To Finance

Wednesday, December 2nd, 2009

Why?  The main sources of financing for first time buyers are Fannie, Freddie, and the FHA.  New rules instituted last month make it almost impossible for these buyers to qualify.  Read the details here.

So many incentives for first time buyers with the home buying credit.  It has been said over and over..need to have financing for the credit to work.  No doubt home sales are being propped up with the credit..it just appears those home sales will not be entry level condominiums.

Guess what type of property is foreclosed on often in Florida?  Another reason for the shadow inventory we hear about?