A new video has been posted to our YouTube channel with more information to help you get your arms around the process of selling a HUD Home.
Posts Tagged ‘buyers agents’
Role of FSM’s In Selling HUD Homes
Thursday, January 19th, 2012HUD Announces Changes To Selling Agent Bonus as of 12/1/11
Thursday, December 8th, 2011Home Buying Mistakes And How To Avoid Them (Pt 2)
Wednesday, September 14th, 2011
Yesterday we covered a few of the more significant mistakes I have seen buyers and their agents making that end up costing time and money. There are some additional items that can cause problems that may not be as obvious. Today I will share with you this list and some ways to make sure you avoid them.
John bought a foreclosed property based on the representations of the bank, listing agency, and his title policy. Except nobody really reviewed the legal description on the title work closely enough to question why the lot width was only 60 feet when the structure he was buying was 80 feet. John actually waived his option to obtain a survey with the bank. John ended up with a house that the master bedroom (an addition) was on another lot owned by the foreclosed owner. Except nobody had yet foreclosed on the second parcel because even the lender did not know to make the loan on both parcels when refinancing a few years back! A survey would have revealed this issue very early in the process. Don’t skip a survey! This is an extreme example but I can tell you it is not unusual to find fences and driveways someplace where they are not suppose to be!
I have written several posts about the importance of a home inspection. That is still the case. It is your most important step to ensure you can negotiate a solution to a problem that may not otherwise be discovered.
What happens to a buyer who goes to closing and does not stop and inspect the property before the closing? There are plenty of horror stories when it comes to buying vacant homes. How about the couple who rushed in from out of town to the closing of their investment property, signed all the papers and handed over their check, then went to their new investment. Shocked is the best word to describe their reaction to the fact all the drywall was destroyed because thieves had pulled every stitch of copper plumbing from the home the week before closing. That investment became a huge loss. In fact, the couple ruined their credit because they could not afford the repairs and never made a single payment on the loan they had obtained! Don’t go to closing without a final walk through inspection.
Make sure that the buyer knows what their out of pocket costs will be before negotiating an offer. Confirm that the purchase agreement has the seller paying all taxes, association charges, and assessments through the date of the closing. If you are buying a bank owned home, do not assume anything is “standard” that the bank will pay. I still receive phone calls the day before closing of a HUD home sale where the buyers agent is screaming that the settlement statement is incorrect as the buyer is being made to pay for an owner’s title policy. Agents assume that the seller will pay this and it is a very costly assumption. HUD does not, but you have to review their policy to know that. Usually when this costly mistake occurs the agent ends up paying for it and at a cost that is most of the average HUD home buyer agent fee!
Finally, as much as possible before closing get a copy of the settlement sheet, known as a HUD-1. Review it and make sure all the charges make sense and are as agreed. Settlement entities are left to interpret the purchase documents on many issues and they do make the occasional mistake. It is better to get them corrected before closing than to try and fix them at the table.
Now that you know my list, in your experience, what other buying mistakes exist?
“Hard To Sell” HUD Properties and What The Selling Agent Needs To Know
Thursday, September 8th, 2011
Recently, HUD made a change in the selling and listing agent compensation structure. This change affects homes on the lower end of the price spectrum..specifically homes with accepted bids under $42,000. Originally, when the new HUD contract (known as Marketing and Management 3) was introduced, there was a base minimum payment to selling and listing agents of $1250 per side, or $2500 total. So the formula that a selling agent could use to request their selling agent fee was up to 3% or $1250 minimum.
In August that all changed. Here is the announcement:
HUD has eliminated the minimum commission of $2500, split between the selling and listing agents, and it is no longer available on the HUD Homestore. Going forward, all listings will reflect a maximum 6% total commission, split between the selling and listing agents. As of now, HUD has no plans to increase the commission percentage beyond 6%, but only may do so on a case by case basis.
Please note this change affects the Local Listing Brokers, like Wilmoth Group, just as much as the selling agents.
The good news is the “case by case” exceptions are occurring and the selling agents need to know what to look for. HUD is using the term “hard to sell” to identify properties where the former $1250 minimum applies. These will be properties listed for less than $42,000. How to find out if the property you are considering is included? Go to www.HUDHomestore.com and look for the icon at the beginning of this post. It is the “hard to sell” icon and it signifies your ability, as a selling agent, to request a selling agent fee up to $1250!
As I look at this list today in Indiana and Florida, there are quite a few properties with this designation. It does not seem to be rarely used. That is good news for all affected. Of course, we should not be making decisions on selling any property based on the compensation offered. At least now you can adjust your expectations if a buyer is looking at under $42,000 HUD homes.
The 10 Pitch Strike Out!
Monday, August 29th, 2011
Anybody who f0llows baseball understands how a great at-bat can wear on the pitcher and even the defense. A typical at-bat might consist of 4 to 7 pitches. An at-bat where the batter starts fouling off balls, can extend the at-bat until the batter gets a base on balls or hit by a pitch, strikes out, or puts the ball in play. The more pitches, the more the batter eats into the pitchers total pitch count. Eventually the pitcher’s day is over, even when having a great game, when the pitch count gets around 100. So, an extended at bat can wear on a pitcher, as the batter keeps in the game, but is not actually moving the game forward other than wearing out the pitcher.
Unfortunately, today’s home buyers and Realtors are finding that trying to buy a home for their family is a little like a 10 pitch strike out. In record numbers, contracted home purchases are not closing due to issues related to financing. Whether it is the buyer’s credit, or objections of the lender to the condition of the home, what we call “pended” transactions are not making it to the closing table. According to the National Association of Realtors (NAR) is reporting in July that one in six Realtors had contracts cancelled, in contrast to the previous 16 month average of 8 to 10%. Essentially doubling the failure rate over the average!
When interviewed, the agents are saying the biggest factor causing these cancellations are not the well documented struggles with financing approval but actual concern about the economy and fear that now is not a good time to make a commitment as significant as housing. This fear has caused many of these recent cancellations to be based on minor problems that could have easily been resolved, but also were used to cancel the contracts. This usually occurs in the inspection phase where almost any home will have some issues, but due to inspection contingencies, buyers can utilize one of these problems to demand a repair from an unwilling seller, or simply state that they do not wish to proceed. To a lesser extent, the difficulty in closing short sales-something I have written about several times-also is causing problems with buyers who eventually give up. This problem has been a part of the housing market though for the last three years. I am not sure buyers are any less patient with short sales today. Appraisal values also present challenges as appraisers find less and less comparable sales other than distressed sales to provide values. The argument remains if those values are the new norm or just an aberration. I think one has to be aware in their market tract, what percentage of sales are distressed or bank owned, and understand that may seriously impact value.
Realtors representing buyers though really have to become a part of the solution instead of just blaming the buyers. It is very unfortunate for sellers to pull their property off the market to any other buyer, and then incur the 10 pitch strike-out! With each new pitch, the seller finds a way to foul it off and stay in the game. The buyer slowly wearing down their total pitch count. I hear far to many agents blame the buyers when transactions cancel, but often later find that the buyer was not properly prepared to be making offers on homes. Here are some simple steps agents and buyers can take to make sure they are ready and not experience a strike out!
- Pre-qualification for a mortgage is not enough! Get a pre-approval and have it in hand with each offer. Make sure it is no more than 30 days old.
- Complete a fair opinion of value to assist the buyer when considering a home. Make offers on homes that seem to be valued realistically.
- Approach home inspections with an understanding of who the seller is. Bank owned or distressed properties are rarely going to be able or willing to make repairs. The inspection is a tool for the buyer to make sure there is nothing major that the eye could not discover, and to prepare their checklist for after they close.
- Finally, interview your buyers enough to understand their level of motivation. Is this a need or a game? The buyers agents really should not have time for a 10 pitch strike out either!
Short Sale or Foreclosure..It Depends!
Wednesday, June 29th, 2011A new article at bankrate.com tackles the question from a buyers perspective. Both short sales and foreclosures make up over 40% of the market sales so if you are trying to buy a home for occupation or investment, you are likely going to run into one of these types of sellers.
Foreclosures offer faster closings, and more negotiation opportunities. They also have been vacant for a period of time that might exceed a year or more. The effects of being vacant this long are often combined with a poor condition left by the last owner, making the foreclosure a project with possible hidden surprises.
Short sales are often still occupied and the occupant is still trying to maintain the property. If a buyer is not wanting a potential project, short sales are the better alternative. Yet, short sales have many more hurdles to the sale process. Making an offer, and receiving a response can offer a different level of frustration and delay. Negotiations may be very limited. Approvals and closings can drag on.
Every day I see agents showing foreclosures to buyers who probably have no business purchasing a foreclosure. Similarly, I witness the buyer who needs a home in 30 days being shown short sales by their agents. Short sales and foreclosures are so much a part of the real estate world today that buyers believe they need to get in on the opportunity in order to save the most money. It is really important agents help buyers understand the challenges and benefits of both types of properties. This article is a good piece to hand out to buyers before starting the process of showing homes.
KISS Your Bank Offers
Wednesday, June 22nd, 2011
The best offers for bank owned homes will follow the KISS principle.
Another morning of quickly reviewing what has been emailed overnight. As I click on a message that seems to make our Outlook exchange server work much harder than it wants, I come to realize an agent has submitted a 10mb pdf file. How does this happen I ask myself? Many networks would just reject this but we have ours set up to accept even ridiculously large attachments. I am pretty sure I know what is coming. Besides the fairly obvious need to set the scanners resolution settings way down, the attachment is an offer for a bank owned property we are handling with a whole lot more attached than just an offer.
Ah, the whole lot more. The secret sauce to convince the bank’s asset manager that this offer at 40% under list price is correct because of the attached 20 pages of problems, fully illustrated with pictures. In addition, the offer contains a narrative to tell all about the buyer, their ability to make these repairs, their personal needs for a home like this, and exactly why their pre-approved mortgage will not allow them to invest anymore of their cash than the amount estimated by the buyer to be needed for the pages of repairs.
Maybe in traditional real estate sales, with Mr. and Mrs. Jones as the seller, this approach has some merit. I am not sure I can make a logical argument for it even there. When you think about it, this case building almost assumes lack of knowledge by a seller for their property. Granted, this is a bank owned property but long before it was listed, there was a brokers price opinion completed with lots of pictures, an appraisal with more of the same and even more detailed valuation information, and in some cases a report completed by a field services company. I have never seen a package like this submitted by an agent with a major new disclosure. In other words, we already know about the problems, and the home was priced to reflect these issues. The buyers issues…well how do we say this kindly? They are the buyer’s issues.
There is another factor that also renders such an approach a waste of time. Almost all bank sellers now use simplified systems where we enter the terms of the offer into a web platform. If the proposed terms are accepted, contracts are prepared for the sellers execution. When we receive these additional narratives, it is almost impossible for us to figure out who to forward them to. Most asset managers do not want them or likely will not read them. Not to mention most banks systems will reject the file size.
The best approach for a selling agent? The KISS principle. Whichever way you interpret that acronym, the point and value remains the same. The bank is not emotionally invested in the sale of this property and is unlikely to be affected by the offerer’s personal needs to buy this property as proposed. The bank representatives already assume their pricing models take into account repairs and conditions, so the asset manager is not likely going to care about your buyer’s calculations for these repairs. Finally, the systems used do not allow for complex negotiations. The bank seller is looking for an acceptable net from the sale. That is pretty much the bottom line.
So, if you are a selling agent, tell your buyers that KISS is the way to go. Short, sweet, and to the point. Buyers, listen to your agents on this. There is a big difference in making these offers to banks than non-bank sellers. Get your simple, reasonable, offers submitted in a format easy for everyone to understand and most importantly..accept! If it requires 20 pages of explanation, then maybe this property is not the right one for the buyer.
Do You NAID?
Friday, May 27th, 2011
Ah, the famous NAID. Not the “Native American Indian Dog”, or the “North American International Demoparty” or even the “Non-Anemic Iron Deficiency.” No the NAID I refer to is nothing more than HUD’s “Name Address Identifier.” Most importantly, you have no business showing HUD homes unless your broker has one!
Yep, that is what I said. I run into this on average twice a day. Agents showing HUD homes with no access to an NAID number. So, the buyer decides they really like the house and the agent says, “Great! Well now I just have to find somebody who will submit an offer for you.” Really professional and adds to the shining reputation of the real estate industry.
Yes, I have heard all the arguments. “”Why does HUD require you to register with them?” “Why is it so hard to get one?” ” Why does it take so long to get one?” Look I do not make the rules…but why do we have to complete a lot of paperwork to get a real estate license or join a Board? Licensees do those things with very little complaint. But, get registered to sell HUD homes? Oh, and did I mention it is FREE!
The facts are this. HUD homes are only available for bid at HUDHomestore.com. Brokers, followed by their agents, must be registered at HUDHomestore.com. To be registered the Broker must have a NAID. To get a new NAID it can take 6-8 weeks. The steps to the process along with a way to check the status of a NAID are here. NAID’s have to be renewed annually.
Every agent who discovers that they made a mistake and showed a HUD home to a buyer who now wants to make an offer, with no access to a NAID, contacts our company and requests we submit the offer for them. Simply, when we do that we become your buyer’s agent..with all attached responsibilities and liabilities. We will pay you a referral fee for assisting us in the transaction. That is the best offer I have for you.
One other tip…use to be brokers would get a renewal letter, from the local HUD contractor who administered the NAID program, that their NAID needed to be renewed. This is a annual process. It is now handled through HUD. I am not aware of anybody receiving letters. Your broker’s existing NAID will expire and you will not be able to make offers on HUD homes. It takes about two weeks to get a renewal. Tell your broker (or if you are the broker make a note) that the existing NAID package needs to be reviewed and determined when last approved. Then mark on a calendar somewhere at least 30 days prior to that annual renewal date to complete an updated package for submittal as per these instructions.
HUD homes make up a significant portion of the housing inventory today. If you claim to be a full service agent, then don’t spend another day showing HUD homes without a NAID.
The Best Time Ever For Owner Occupant Buyers
Thursday, December 9th, 2010
For lots of reasons, foreclosure properties have gotten a bum rap with owner-occupant buyers and their agents. Much of the problem stems from the non-traditional sales process. Some of the issue is related to property condition. It is also fair to state that buyers agents have contributed to the problem by refusing to work in the parameters of the industry while cursing the process and the properties to their clients.
The times are changing and rather significantly. Agents who trash working with a bank owned property may be doing their owner-occupant client a disservice. Granted, the robo-signing fiasco added more fuel to the fire of these agents and buyers while setting back the confidence of potential purchasers. I think all of that aside, 2011 is going to be the best year ever for owner-occupant buyers who chose to buy a foreclosure.
Here are some of the reasons why:
Preferences. The three major servicers of foreclosed properties are HUD, Fannie Mae and Freddie Mac. All three are government owned and all three have placed sales to owner-occupants front and center. HUD provides a 30 day bidding preference for owner-occupants under their new program for foreclosure sales. Additionally, there is much needed transparency available to agents and buyers at the new site HUDHomeStore.com to assess a property’s condition before deciding to physically inspect it . Fannie Mae’s HomePath program offers the best financing in the industry through participating lenders. This very aggressive program offers 3% down payments, no mortgage insurance, no appraisal requirement, and frequent incentives for buyers and agents. Freddie Mac through its HomeStepsprogram is offering a SmartBuy Purchase Program that offers 2-year home warranty protection and other incentives for owner-occupant purchasers.
Condition: You have to have a history working with foreclosed homes to realize how far the industry has come in regard to what shape these homes are shown in. It was only a few years ago when we had clients that actually tried to sell homes without a trash out having occurred. Overgrown lawns, broken windows, the list of community eyesores was lengthy. There is no doubt that the entire industry seemed focused on keeping losses at a minimum with total disregard to how properties would likely only appeal to the investor buyer. In hindsight we can now see how all of that spun out of control and actually caused more foreclosures. Today, homes are cleaned out and secure. Regular property inspections by the brokers and field service companies are mandated. There is also a healthy discussion within the industry as to how much rehabilitation and staging should be invested by the servicer/owner to make the home more appealing.
Offer Process: This process scared many agents away. It was very time consuming and little status information could be obtained. Selling agents would look to the listing agents and we had no news and no way to really provide a timeline when a response might occur. A couple of things are happening to change this and make it more friendly to the selling agents. First, more and more the selling agents are going to be able to enter their offers on-line and have them directly submitted to the lender. The HUD system is what I would consider the template for others. An agent registers at HUDHomeStore.com, enters an offer while affirming an actual Purchase Offer signed by the buyer exists. Then an email is sent if their offer is accepted or they can log into their account and see that an offer was rejected. Fannie Mae is also testing an on-line offer system in select markets. I project in 2011 these systems will become much more common as they eliminate one of the ongoing concerns expressed by agents…”did my offer really get presented?”
So, as you consider purchasing a home, or representing an owner-occupant buyer, consider giving the foreclosed property market a new try. It is evolving and the changes, while brought on due to necessity, will allow us to leave the questions caused by the fall’s “robo-signing” fiasco in the long ago forgotten memory.
How To Show A Bank Owned Home
Monday, August 16th, 2010I am motivated to write these few suggestions after having an agent spend time with a buyer recently, completing a non-authorized pre-offer inspection, and then asking if it was alright to make their offer contingent on the sale of the buyer’s home. I wanted to say “You have read nothing the Wilmoth Group offers about selling a bank owned home…have you?” Instead I politely explained that a bank is not going to consider an offer with such a contingency. In the back of my mind I thought about how much time had been wasted by all parties!
If you have decided to show a bank owned home, lets start with the hundreds of requests we still receive daily for the filter known as “do you have any offers“? Do you ask traditional sellers for this information? I still wonder..why does it matter unless the Agent really does not want to do their job and provide advise to a buyer on a home because they want to have no competition! Last time I looked, almost 80% of our listings receive more than one offer. Many of those offers will never make it past first base. Yet, agents want to NOT show a home if there is another offer. If there are multiple offers, the bank almost always lets the good competitive offers know. Stop making this a criteria for showing a home. Worry about old fashion ideas like what is the home worth in today’s market and does your buyer want to make an offer based on this value? A fair offer will stand a great chance!
While most banks are no longer making it a mandatory item, I would not show a bank owned home to a buyer without a pre-approval letter or proof of funds. How you confirm the buyer has the ability to provide this is up to you. Submit an offer for a buyer without one and you have dropped to the very dungeon of offers…where to even have a chance the bank is going to come back and ask you to provide one for your buyer.
I see Agents spend more time worrying about if there are any offers and little to know time verifying the buyer’s ability to actually support an offer with some type of proof of funds. Put your energy in the item that really counts first.
Don’t show a bank owned home and walk through it telling the buyer that the seller will HAVE or NEED to fix or repair anything. ”Sold as-is means sold as-is!”. Buyers need to make offers assuming there will be no repairs. If a buyer has a inspection, and something not visible in a normal showing comes up..it is OK to ask the bank to repair. How the bank will respond is any body’s guess.
Don’t let your Buyer believe they can come in and make repairs or renovations prior to closing. I see this one a lot. Hey its a vacant house..so who cares? The bank cares so much I have seen them have the local Sheriff come chase buyers under contract off the property as Trespassers and then cancel the contract. The answer to this question is NO due to LIABILITY.
These are just a few basics. Did I mention, don’t waste buyers time if they have a home to sell? The market might be tough enough that traditional sellers are now pulling their homes off the market to allow these buyers the time to sell their homes, but there has never been a bank in 20 years that I have seen even consider such a proposal.
