Archive for the ‘Buyers Agents’ Category

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Proof of Funds

Monday, February 18th, 2013

real estate contract lockboxHave you ever wanted to make an offer on a home and have the seller or their agent tell you that they need a “proof of funds”?  Probably…and when that happened did you question who it is really for?  Aren’t agents obligated to submit every offer…without additional requirements?   Agents today are relating to their buyers that the demand for a “proof of funds” (actually evidence that current funds exist in cash or loan commitment) is something selling agents are demanding for their own protection.  Well, if your cynical side is running the show on this issue please take a minute to finish reading this post.

It is true that many of the major servicers/owners of defaulted mortgages and foreclosed properties are now utilizing on-line offer systems that allow the seller to have a complete snapshot of all bids for a property.  In most cases these bidding systems do not have an initial method for uploading proof of funds.  So, the conclusion some are reaching is that this requirement is one that the selling agent is creating and enforcing.  This is no closer to the truth than Lance Armstrong’s multiple claims to not be using PED’s.

While the electronic bidding systems are now a large part of the foreclosed property landscape, ultimately there still is a contract package that must be submitted.  With that contract package, there are certain supplementary documents.  Jennifer Wilmoth, my partner and one of the largest volume REO brokers in America, stated  “We must have a proof of funds statement when submitting final contracts for a seller to execute in all cases for the clients we work for.  No exceptions.  So, why would we want to submit a bid for an agent or buyer unless we know that a satisfactory proof exists?  With the time lines these offers must follow, and the competition for many homes, if one does not exist when submitting a bid it likely will not be available when completing the contract package.”ing

Lets look at HUD homes for an example.  A buyers agent can submit a bid electronically for a HUD home and in that process they acknowledge that the buyer has funds to perform on the proposal.  Their bid could be accepted the next morning and then there is only two business days for a HUD contract package (including the Proof of Funds) to be in an office in another part of the country.   The entire contract package needs to be completed when submitting the electronic bid!  Same goes for Fannie Mae bidding at HomePath.com.  Much the same for other servicers also.

Bottom line is that proof of a buyers ability to perform on an offer is still very much a part of the corporate seller’s requirements..even when using an electronic bidding platform.  The listing agents are relaying sellers requirements, it is just that the delivery method has changed.

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Crucial Steps To Buying A Foreclosure

Tuesday, December 4th, 2012

Seems like when the conversation gets around to what I do for a living, just the smallest mention of being involved with foreclosures sparks people’s attention.  Many people are intrigued by the prospects of purchasing a foreclosure as an investment.  Others are trying to find a home to live in a foreclosure leaves them with more questions than answers.  With most Realtor associations reporting default sales making up 25% to 30% of all sales, it is easy to see why so many potential buyers are interested.

I always try and keep these conversations simple because each case has its own unique circumstances.  Nevertheless, the basics that I explain to buyers they need to consider when they are considering a foreclosure consists of the following.

Disposition:  By this I ask the buyer to self-assess.  Foreclosure sales can be tricky and involve more time than many buyers have the ability, or patience, to work through.  The time involved is on both the buyer and seller’s ends.  For a buyer to assess a foreclosure properly, there is some legwork.  Famously, the seller’s are also not known for timeliness.  This causes frustration if one is accustomed to traditional sales methods.

Value : Most buyers have this one figured out..or at least they think they do.  The main reason people want to buy a foreclosure is “to get a good deal”.  But what exactly does that mean?  We are in the business of determining value and most properties come with a range of them!  The reality that most buyers should understand is when a foreclosure is priced within that range, it will frequently get multiple offers.   Seller’s know this to be true.  An offer of 50% of list price is not going to get you far and likely will end up with the buyer watching the home go under contract while they are asking what happened to their offer.  Do the homework of identifying that range.  This is an important function of using a buyers agent.

Inspect:  So many offers are made by buyers who have not thoroughly inspected the property.  Many buyers believe they just get the winning bid, then inspect and determine if they still want the home.  Many will pursue requesting repairs prior to closing.  This might be an option with some sellers…but the majority of the time it is not.  Many foreclosures are sold “as-is” and the seller accepts your offer on that condition.  For a buyer that means getting your earnest money returned may be challenged.  Do your homework upfront by using professionals to help you determine the condition of the home.

Financing: There are some tremendous options available for buyers of foreclosures!  Some programs provide financing for repairs and allow a buyer to make some personal selections for things like carpets and paint.   Owner-occupants and investors both have possible low down payment options.  One of the best seller financing program for a foreclosure is HomePath from Fannie Mae, offering many closing related costs waived, low down payments and many other attractive terms.  The presence of a great financing package can be a huge deal when considering a foreclosure.

Ready:  All foreclosure sellers require proof of funds prior to considering an offer.  If you want to make an offer on a foreclosure, traditional financing contingencies do not apply.  You need to have a bank approval letter dated in the last thirty days or proof of cash.  If you do not have one of these, then you are not ready to be looking at foreclosures.

One final thought.  Buyers are often confused about short sales and foreclosures.  They are NOT the same thing.  Short sales are still owned by a seller who has not acquired the property through a default..ie foreclosure.  They are people just like you and me.  They do not have the ability to sell their home without their mortgage company blessing the sale because it will not provide enough cash to pay off the mortgage and provide a release.  It is a complicated process and a topic for another day.

 

 

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Low Ball Bids

Friday, November 2nd, 2012

Nobody wants to pay more than they have to for anything.  If we are talking about groceries, where a combination of the lowest prices with the best quality and shopping experience are important factors,  price will usually  trump.  Buying real estate though involves a bidding or offer process.  Bank owned real estate is even a little more different.  Many of the institutions and government entities with properties for sale have converted to electronic bidding systems.   In many instances, these systems have eliminated the concept of a counter offer.  The bidder has one shot.  The sellers are dismissing the low ball offers while seeking to work only with the competitive bidders.

From the seller’s perspective, they have valuations from appraisers and brokers to  consider.  They are also not like a typical seller who might just be desperate.   The banks are NOT desperate to move or give away their real estate owned!  They want to contribute to a housing recovery by selling their properties at near market prices.  Market prices mean similar to the range of prices the immediate area yields.  The buyers with the low ball offers that are being sprinkled all over town, looking for a bite, will not get far with the institutional sellers.

I also run into buyers who want to make their low ball offer with a letter of explanation.  This letter includes comparative sales they have used to determine value and a list of repairs needed to the property.  I fully understand why somebody wants to present their case…we just have no way to facilitate this.  The bank seller has their own comps and their own list of repairs.  We have no way to submit a letter like this and, even if we did, I seriously doubt it would be read.

My suggestions to potential bidders for bank owned homes:

Make your best offer the first time.  Don’t expect a counter offer.  If you do, and you made your best offer, stick to it.  See what happens.

If the property is one you want, for a home or investment, don’t wait.  Bank owned properties sell quickly.  The reason- they are priced appropriately for the market and their condition.

If you are looking for an investment-review the aged inventory.  This is the best place to find a property where there will be consideration of any offer presented.

Offer expiration dates mean zilch to bank sellers.  Sometimes offers are held until the bank has enough to review several.  I have seen banks come back three weeks after an offer is presented and ask if the buyer was still interested.   The bank would now like to bring their offer under contract.

Finally, whatever else you might do, DO NOT fail to provide a current proof of funds with all the details to make it very clear that the buyer has the resources, or an adequate loan approval, in place to perform on their offer.

 

 

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Multiple Offers

Friday, October 5th, 2012

One of the major improvements in selling bank owned homes over the last five years is the systematization of the multiple offer scenarios.  So many agents in the past insisted that they be told how many offers a seller had received…like it was a right that existed for the buyer.  There also was a belief that the first offer submitted was the only one a seller could respond to before moving to another offer.  Both of these beliefs were wrong..but I still run into them today.  Usually, it is a misinformed buyer who is confused by the process because it was not adequately explained by their agent.

The Multiple Offer dialogue begins and ends with an understanding that disclosure of any other offers is only to be done by a listing agent when given that permission as part of their listing or other written agreement.  It is not a violation of the Code of Ethics to decline such requests from other agents.  In fact,  Article 1, Standard of Practice 1-15 of the Code of Ethics of the National Association of REALTORS®, requires that listing agent disclose the existence of multiple offers ONLY with the seller’s approval.   An addition to the Code of Ethics in the last few years added the following requirement: Where disclosure is authorized by the seller, REALTORS® shall, if asked,  also disclose whether the offers were obtained by the listing broker, another licensee in the listing firm, or by a cooperating broker.  For a buyer or agent to expect this information is not correct.  A seller must authorize it.  Most of the bank sellers now authorize, with a certain set of procedures for how disclosure of multiple offers are to take place.  Please remember these are not laws but pledges anybody who is a Realtor is expected to conform to as part of a Realtor Code of Ethics.  You may be working with a licensee who is not a Realtor.  In that case, these same ethical duties may be ignored.

Educating your buyer is the best thing to do about this process.  It is a very common part of the bank owned home purchase process.   It should not cause buyers or agents to shy away from making an offer on a property.  A good understanding of the process, with expectations set accordingly, will result in the best experience for all.  The most important thing for a buyer to understand?  A low offer may never have a second chance.  Sellers often select the most competitive offers and allow them a “highest and best” period to submit one more offer.  There is no requirement that every submitted offer will receive this opportunity.

The National Association of Realtors has published an excellent guide for Realtors to use when advising sellers and buyers in multiple offer situations.  Click here to download “Presenting and Negotiating Multiple Offers.”

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Tell Me About Yourself

Friday, July 13th, 2012

Just met with a fairly new agent who was frustrated.  Since so many of our homes are vacant, we require our agents to do some serious pre-qualifying prior to agreeing to show a home.  Some potential buyers/tenants take offense to this.   I hate to disclose this but some of our clients think we should just, at any request,  show up to a property and show it to whoever asks.  I am getting tired of the ignorance that comes with this expectation.  Our agent had just been spoken to in a rough fashion by a prospective buyer who expected to be shown a home without being willing to share any information about themselves.  Well, we don’t do that.  We want to know who you are, why you are looking, contact information, and some other things such as if you are pre-qualified or willing to go through a tenant screening.

Why are we this way?  Well lets start with why would anybody expect us to do business any other way?  First, the obvious.  The time invested in situations that clearly will not work out.  When you only get paid by a client when you accomplish a goal, we should all agree wasting time on things that will not produce the desired result is a waste for both parties.  It is also actually a waste for the third party involved- the prospect.  Unless they have a viable chance to accomplish a transaction.  When you think about it, a lot of prospects don’t know if they qualify and we provide a service just getting them on the right path to accomplishing their goals.  Anybody who is a prospect who is offended by our trying to actually help them also causes me some alarm.

The reasons for alarm involve the dirty secret of this industry.  Agent safety.  Much more important than making clients or prospects happy is our agents own safety.  Being expected to meet strangers in vacant houses is not something many people would consider a great career opportunity.  Real estate agents love their careers and the opportunity to help people achieve their goals.  Sometimes, they love it too much.  Even the best screening methods don’t always identify every nut case that thinks calling agents to look for a way to hurt somebody is a great way to channel their anger or whatever sets them off.  It does not take long to complete a quick search to find news about the dangers our agents face.

Bottom line..we take every measure possible to not put ourselves in a situation that is uncomfortable.  If the prospect does not like it…fine..play along.  Understand why.  Just don’t expect us to be able to help you if you refuse.

 

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The Difference Between Success and Failure In Selling HUD Homes

Thursday, April 26th, 2012

The HUD home sales process is different but once you understand it you will realize it is logical and easy!  You will want to work with buyers who are interested in buying HUD homes.  If you don’t invest the time in learning how to successfully sell homes…well you might end up like the agent in this video.

 

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What You Should Know About HomePath

Tuesday, April 10th, 2012

I get calls all the time from potential buyers who will ask if a bank will finance a home they hold in title due to foreclosure.  It seems to be one of the great urban legends that give people the impression that a bank will turnaround and provide more than generous terms on their foreclosures in order to get a new buyer for the home.

In one case I am able to suggest that such generous terms are not legend but reality.  The terms available on FannieMae foreclosures include:

3% downpayment for owner occupants, 10% for investors

No private mortgage insurance (PMI) keeping total payments lower

No appraisal

15 day preference for owner occupant bidders

Investor deed restriction that they will not resell for more than 120% of the purchase price within first 90 days of ownership (discourages flipping).

Some properties offer renovation financing.

In 2009 Fannie Mae launched a new branding program for their foreclosure (REO) properties.  Known as HomePath, the program initially identified the financing program that Fannie supports through multiples of lenders.  As the years have passed, the brand “HomePath” has come to identify all Fannie Mae REO properties, their marketing, where to find complete lists on the web, and the favorable finacing program.  Now, when you see one of our homes “for sale” sign, you will also see a HomePath rider that tells you this is a Fannie Mae owned home.  Most importantly, it tells buyers that this home is available with the best financing program available in the USA for foreclosure properties.

Why should you care about Fannie Mae?  They have one of the largest inventories of REO properties in the country.  Not inferring this is a good thing..but the sheer nature of who they are places them in this unenviable position.  Fannie Mae is a government-sponsored entity, chartered by Congress and overseen by the Department of Treasury.   Simply, Fannie has been the largest investor in mortgages for many years.  Their mission has been to provide liquidity to the market so that banks and mortgage entities could continue to make mortgage loans.   This means that a significant portion of the mortgages in the country end up Fannie Mae’s responsibility and as we know, in the last decade this has created problems due to the volume of owners who could not make payments on their mortgages.  It is estimated that Fannie Mae has an interest in one-third of all mortgages currently outstanding in the country.

The unfortunate end result is that Fannie holds a very large foreclosure inventory.  This fact is why any buyer or agent better be familiar with HomePath and be ready to utilize the program if the opportunity presents itself.   Start with a lender who is approved for HomePath and express your interest in using the program.   Make sure they respond enthusiastically.  Unfortunately, reports do come in to us that some lenders on the list provided at the HomePath site, often are not great advocates of the program.  This is their mistake and for you a sign to move on.

All FannieMae HomePath properties are available for review, and bidding by a real estate agent only, at www.HomePath.com.

 

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Posted in Buyers Agents, Financing, HomePath, HomePath Sales Procedures | 2 Comments »

Good Neighbor Next Door

Thursday, March 22nd, 2012

We get lots of questions from buyers and agents about the Good Neighbor Next Door program (GNND).  People hear bits and pieces of the program and hope that it applies to them.  If you do qualify, it most certainly is a program that you should consider participating in.

The purpose of the GNND Sales Program is to improve the quality of life in distressed urban communities by encouraging law enforcement officers, teachers and fire-fighters/emergency medical technicians, whose daily responsibilities represent a nexus to the needs of the community, to purchase and live in homes in these communities.

What you need to know:

Available to Teachers,  Police Officer, Fire Fighters and Emergency Medical Responders.

Buyer can get a 50% discount off the HUD appraised value.

Homes are available in HUD designated revitalization areas.

Buyer must live in the home for a full 36 months as the buyer’s sole residence.

Must not have owned another residential property for the last 12 months.

Eligible Participants (Details)

Teachers

·         Full-Time

·         Pre-K – 12

·         Employed at State-Accredited Public and Private Schools

·         Serving Students From the Area Where the Home is Located

Police Officers

·         Full-Time

·         Employed by a Law Enforcement Agency of the Federal Government, a State, A Unit of General Local Government or an Indian Tribal Government

·         Must be Sworn to Uphold and Make Arrests for Violations of Federal, State, Tribal County, Township or Municipal Law

Fire-fighters/ Emergency Responders

·         Full-Time

·         Employed by a Fire Department or Emergency Medical Services Responder Unit of the Federal Government, a State, A Unit of General Local Government or an Indian Tribal Government

·         Serving the Area Where the Home Is Located

General Rules

·         Earnest Money Is Required of  1% of the List Price (No less than $500 and No More than $2,000)

·         Must “Bid” 100% of the List Price

·         Offers Selected by Lottery Number – Not Net to HUD

·         If Buyer Uses FHA Financing-  May Get Their Loan for $100 Down Payment and may finance the cost of reasonable and customary closing costs

·         Buyer Must Qualify for the list price (not just the discounted amount)

·         Silent Second Mortgage will be Recorded

·         Silent Second Mortgage Will be Reduced by 1/36th on the Last Day of Each Month of Occupancy

·         HUD WILL NOT PAY COMMISSION OR CLOSING COSTS- Buyer must build those into financing or pay with cash.

There is also a helpful FAQ at HUD.gov to answer all of your questions on this program.

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Is A HUD Home Available for My Buyer?

Wednesday, March 14th, 2012

Most HUD homes have an exclusive period for owner occupants that lasts 30 days.  The exception are the properties with uninsured status.  These have a five day exclusive period.  The way to know if your buyer qualifies is to look at the listing at HUDHomestore.com and see the Eligible Bidders category for the listing.  This will identify whether the property is in the exclusive period or if it has been opened to all bidders.  Then look at the Period Deadline date to see when the last day of the exclusive period will be.

Here is a screen shot from HUDHomestore.   Please use this easy method to determine if a HUD home will work for your buyer type.  You can click on the image in order to see a full size view.

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How To Avoid A HUD Contract Rejection

Wednesday, March 7th, 2012

A fairly significant percentage of the HUD 9548 purchase contracts submitted after a bid is accepted are rejected and the selling agent must make corrections in a short two business day window.  One of the HUD asset managers, recently provided us with a list of the most common reasons for rejection of these contracts.  To follow along, here is a link to the HUD 9548 purchase contract.

1.      Buyer does not initial line 12 where Purchaser acknowledges the Seller can keep their earnest money deposit if the terms of the contract are not met.

2.       Buyer name on the contract does not match the name on the bid.

3.       Financing type on the contract should be based on the way the property was  bid at HUDHomestore.com.

4.       Lead Based Paint Addendum contains check marks instead of the Broker’s initials where required.

5.       Often the Lender Letter does not indicate all the required items: loan type, loan amount, sales price, credit verified and a signature for the loan officer or name, title and contact information of loan officer.

6.       Money orders or other certified funds for earnest money must be made payable to HUD.

7.       Dollar amounts on line 5, 6a, 6b, & 7 do not match the bid amounts originally submitted at HUDHomestore.com.

8.       The Buyer and/or the Broker signs in HUD’s space.

9.       Authorization letter not included for agent to sign on behalf of the Broker.  Check with the Listing agent as to what is required as this varies by Asset Manager.

10.   Not following all the instructions on the correction email.  Errors on the revised contract submission are subject to the contract being rejected and the property placed back for bid at HUDHomestore.com.

We are here to help you get your contract submitted correctly.  If you are interested in understanding this process better, I strongly suggest you consider signing up for one of our monthly classes.

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