One of the important things to note with a Short Sale is that one of the primary objectives is to Avoid Foreclosure.  If you fail, or if your team fails you, then you lose and end up in foreclosure.  The ramifications of a failed Short Sale and Foreclosure can be found throughout our various blog entries over the past couple of months.

 

When you have decided to present a Short Sale Solution to your lenders it is important to have a plan and the right team.  A licensed real estate agent is many times an integral part of your team.  It is very important to choose the right agent and have a mechanism to ensure that the realtor is doing their part to help you with your short sale.

 

Why is this so important and why does the title of this blog include a reference to “The Freight Train to Foreclosure”.  In plain English, if you do not have a realtor that is capable by themselves or as a compliment to a team, your realtor will simply be the conductor on your personal freight train to foreclosure.  This happens all the time and the distressed homeowner suffers immensely while the realtor has virtually no accountability.

 

I am not going to criticize realtors.  I am going to tell you what they must do and what you must require of them to win.  I am then going to give you some examples of problems realtors have created that were very harshly judged by their peers, other realtors.  The fact of the matter is that there are many more bad realtors by a multiple then there are good ones that will get the job done for you with a short sale.  Again, the judgment of the faults, the ignorance, and negligence is going to be voiced in my examples by other realtors.  Realtors have been protected too long by their lobby and their proprietary MLS system.  I am going to make a motion that this also be addressed by the new administration.

 

With The Negotiated Solution we have a strict protocol that all realtors must follow.  At times we are forced to provide them assistance.  At other times we give them a gentle push and in the extreme at certain intervals we sick the client on them like a rabbit dog.  It is a personal choice, but in the end we are here to protect the distressed homeowner and help them Avoid Foreclosure with our program.

 

What should you expect from your realtor with a Short Sale?  You realtor must review the most recent comparable sales that are most representative of the characteristics to your property and in close proximity to your property.  They must also review the most recent comparable listing trends to determine how new properties that are just coming onto the market are being priced. This will enable them to determine the real bid of the market in this environment. After the property has been marketed for a couple weeks if you don’t have a contract you must demand that they do the basic follow up and track down the interested parties for comments on price and condition of your property relative to competing properties. This is very straight forward and common sense oriented, however don’t be fooled, many realtors don’t have a clue.

 

Often realtors do not spend much time pricing a property.  Many realtors will put a property on the market at what they perceive it should sell for and it will sit and sit and guess what…. you will lose.  Choo Choo.. your on the train going right where you don’t want to go.

 

If you are not watching out for your own best interest, or if you do not have a competent team, your efforts with a short sale solution will often fail miserably.  Why do realtors hate short sales as reflected in many national publications?  The reason is that they do not understand what it takes to succeed and many of the frankly are lazy and not willing to invest the time to learn. 

 

I am going to provide a couple recent examples. Before I do I want to tell you that the ignorance and the examples of futility on the part of the realtors with no plan is at epidemic levels.  Things have been good for so long that many realtors just want the commissions.  Their brokers and their governing bodies provide squat for education.  The real estate and residential lender industry is pathetic when it comes to real education and accountability.  For this reason you must protect yourself and keep your eye on the ball if you are to Avoid Foreclosure and succeed with a Short Sale.

 

I could elaborate on literally tens of examples of clients that have come to us that have ridden the bid of the market with their homes down for as much as two years to financial wreckage only to seek refuge with a short sale.  It would be unfair for me to bore you with what could be hearsay from a homeowner before I was directly involved.  The evidence or our success for this group of people lies in the fact that we obtained contracts for their homes in short order after they became clients.  Looking back past 15 months it would be fair to say that the belligerent homeowners shared the blame with their realtors in many of these improper pricing incidents.  I would like to share with you one of my recent picture frame cases of realtor arrogance and incompetence with complete disregard for the distress family facing foreclosure. 

 

Recently one of our clients had a property that was valued at $900K based on two very recent comparable sales on the same street.  Anyone with half a brain and the common decency to respect the position of the distressed homeowner would have priced this home accordingly.  Not this realtor.  This particular realtor was not from our network but was referred to us and sent us the client.  This realtor decided to price the home for $ 1 million dollars because she noted that the two comps that recently sold on the same street were short sales.  In other words, distressed sales, so they shouldn’t be counted in the pricing analysis.  I am waiting for someone to tell Mr. Market that this is a rule that better be followed.

 

My team disputed this adamantly but the realtor rose up like an ambivalent dictator and bellowed that she has sold lots of homes and that she has been in the business for 30 years.  Well, we decided to sit back and not make waves until our client was in jeopardy.  We waited six weeks and there was no contract and no offers on the property.  We began to tighten our grip on the realtor with pressure regarding the client’s position and the pricing.  The bellowing and the egotistical comments from the realtor continued.  At the eight week mark we called our client and turned them on the realtor.  The property was grossly over priced.  Between our client and the salvos of attack my team unleashed on this realtor she capitulated and quickly reduced the price to 900K.  The problem was not solved.  As we all know the markets were very volatile in Sept and Oct of 2008.  The value of this home was no longer 900K.  To sum it up the realtor was on the defensive.  She had done a major disservice to the client.  When the realtor continually repriced the property she was merely trailing the real bid of the market down.  Why not do the research and price it properly up front?  This is a question you really have to ask.  Let’s see what her peers had to say about her conduct. 

 

After another two months the clients, after continual consultations with our team, decided to dump the realtor for better representation.  A new realtor we assigned from our network that followed our pricing model and our protocol.  After checking the recent data and the listing history the new agent was appalled at the level of incompetency the previous realtor had demonstrated by the initial pricing of the property at the 1 million level.  The new realtor further commented that this property would have easily sold for 900K based on the comps in August of 2008.  Today the property has been listed by the new realtor based on the real bid of the market at 750K.  Within 3 weeks we have secured a contract for the homeowner and we are moving forward with our solution. 

 

I would also like to note that we do not employ realtors, we only choose them to participate in our network to compliment our program.  There is no financial incentive for us to use one realtor over the other if all are willing and capable to perform. In the above example the distressed homeowner suffered unnecessarily both emotionally and financially.

 

I don’t enjoy giving people the play by play but I thought it was very important in this example because we see this happen all the time.  The realtors are driving “The Freight Train to Foreclosure” and your family could be on board.  Keep in mind that many realtors see the state of their business and often admit openly that it is rife with ignorance and incompetence.  The realtors that actually care about succeeding for the clients don’t like this either.  The question we need to address is what do we do about it other then individual police work as described above.

 

I would like to give you one more example that is a bit more sobering.  Last week a realtor that has 25 years experience called me to discuss a new client.  We had gotten the client situated with our program and she was very pleased of the financial blueprint and strategy that we had put in place.  Before the conversation ended she asked me if I could answer a question for her.  This was a very nice lady and I was happy to oblige. She mentioned that she had a family recent go to foreclosure.  She didn’t note the reason but she asked me what the two big things were on their credit.  Before I could answer she asked if they were from the former lenders.  I told her yes that they were deficiency judgments on a Virginia property and that it was game over as far as having them as renewed clients for a long time.  She quietly but solemnly said, “Oh my”. 

 

Now I really like this realtor.  The fact that she asked a very good question and simply did not know is perfectly fine with me.  This realtor may have unintentionally victimized her clients by not understanding the importance of a qualified team and comprehensive plan with her clients.  This example was a short sale that didn’t make it.  I can assure you from this point forward this realtor will be seeking help because she now knows the cost of ignorance.  She simply did not know but she is going to make it right with future clients facing foreclosure and we all have to respect this.

 

The homeowner must beware and know that a hand shake and hope do not automatically win with short sales.  Short sales or any workout situation with lenders are difficult.  The problem is complex and you didn’t get into it in the past 48 hours so be realistic and don’t expect to get out of it that soon as well.  If you are going this alone with a realtor I have given you what you need to keep your eye on the ball and your foot on your realtor.  If you want to learn more we welcome you to visit our program at www.thenegotiatedsolution.com

 

In summary, our real estate industry is broken.  As the government moves to stabilize the banking sector it should also address the regulation and core competencies that direct and govern the realtors. Personally, it is my view that the MLS system should be nationalized and made available to all the people as a contiguous federal platform of property distribution for our citizens.  Further, when the scholars review the state of the realtors they are going to see a pit full of warriors with tattoos that say, “Every Man and Woman for Themselves”.  It is high time that the residential real estate lobby suffer the same accountability as Wall Street for their part in the housing crisis.  It’s time for real education, accountability and efficiency that will result in reduced commissions.  Yes there are good realtors out there, however, the stakes can be high if you don’t find one of them and end up with a rotten one.

 

Blogging from the front line of the housing crisis at blog.thenegotiatedsolution.com

 

GHunter

It is now clear that many people outside of the traditional subprime borrower are facing the loss of their home through foreclosure.  In 2007 the implication was that the subprime borrower was irresponsible and for the most part solely to blame for the epidemic of delinquency.  This has proven to be false.  In society we are always looking for a scapegoat.  That always makes us feel better and separates us from the cause.

 

Today we are facing realty.  Many people, and the majority of our customers, are not in the subprime category and they didn’t buy a home with the intentions of walking away from it.  The majority of people put as much as 25% down from savings or from the sales proceeds from another home that they owned for years.  How did all of these people get pulled into the epidemic?

 

It’s really quite simple. You can sum it up with the word ”Greed”.  Wall Street was greedy and they continued to put out loan programs that allowed people to push the limit of traditional home affordability.  The borrowers wanted it as well.  For every homeowner that is stuck in a mortgage that signed up for an Alt-A Loan Program or any fancy Option Arm or Interest Only Program it began with greed.  Where are we now?

 

Let’s first be clear and honest with ourselves.  Alt-A and Subprime etc loan programs were not created yesterday.  Wall Street is certainly to blame for the evisoration of the lending guidelines accompanied with the abundance of 100% LTV programs.  However, the fancy loan programs have been around for years but the older versions had guidelines, otherwise terms thresholds, governing loan eligibility.  For example:  In 1988 I purchased my second home with a 75% loan-to-value 3 year adjustable rate program with a Stated Income feature.  This meant that I have to put down 25% in the form of a qualified down payment and my income had to correlate to others in my employment field.  It had to be my money, gainful employment was required, etc.  It was all very sensible.  We even had option arms in the late 80’s.  They were great as the loan program of last resort.  My nickname the Option Arm at that time was “The Trashcan”.  It took a lot of time to sell one of these in the 80’s.  Realtors looked down on you if you even mentioned it to their client.  You really had to wait until the client brought it up or the realtor pushed you for whatever was available. It is simply appalling that they became such a hit during the recent frenzy in real estate.  Maybe the realtors pretended not to remember the negatively amortizing loan programs.  Maybe they just looked the other way.  I will let you answer that question.

 

The best way to sum this entire episode up is with “Greed”.  If you are in trouble with a home, whether it is a primary residence or an investment, you are “Guilty” of being greedy.  The lender is not responsible for your well being.  If you lose your job or the economy turns south you still owe them the money.  The realtor is not responsible for you either.  If you were too stupid to question their mantras like, “It’s different this time”, or “You better act now or you will be priced out of the market”, or “you better put a triple whammy auto escalator into your contract or you may not get the property”.  Does anybody remember this or are we all so convinced that we are ritcheous and victims of the economy or someone else’s actions?   It is frightening to read the papers and see all the distressed homeowners with an attitude of entitlement. It’s everybody else’s fault and I should be let off the hook.  

 

Let’s talk a bit more about the word “entitlement”.  I personally don’t like this word.  People that show up for seminars or meetings with their lenders with a presumptuous attitude that the lender is going to roll out the red carpet and fix everything are dead wrong.  Let me tell you what is going to happen.  Your lender is not going to forgive your debt.  They are going to listen to your pleas and if you are lucky they may restructure your mortgage by a small amount to assist you with affordability.  There is a high probability that your expectations during the process of negotiation will not be met.  You will become frustrated and very angry.  In the end you legally owe the money to your lender and they have the absolute right to literally beat the hell out of you in any manner they see fit.  This means that they will harass you by phone at work and at home whenever they please. They will send out nice letters and then nasty ones.  They will sick the foreclosure attorneys on you and you will get letters that you don’t understand.  You will be scared and generally bothered all the time.  You lender is going to exact a toll on you because they can.  How does it feel being a desperate beggar?  I am sure it sucks!

 

How many more Loan Modifications and government programs that fail is it going to take for you to become realistic and help yourself?  Maybe the new administration will stroke a couple trillion dollars out to get everybody out of their personal real estate hell.  If you think this will happen please stop reading this blog and never return to this site again.  If you are in this category you are a “loser”.

 

The solution is for you to understand that this is your problem.  You can both be part of the solution and get over the expectation of “entitlement” or you can continue to waffle and dissipate all your assets and end up in foreclosure.  Ignorance and the attitude or expectation of entitlement sort of bother me if you haven’t gotten my drift. However, to be fair, I want to give you the context of entitlement with a recent example so you can be the judge.

 

A lady bought a house two years ago in Virginia.  She paid 500K for the house.  It supposedly was her dream home.  She and her husband make 160K per year and they can afford the payments just fine.  Recently a young man that just finished college bought a home two doors down for her.  He only paid 253K for his home.  This made the lady mad.  During our conversation she referred to the young man as a “Punk” just out of college.  To me that sounds a bit harsh.  The “Punk”, just got a better deal then you, was my thought.  The lady was disgusted that her shack was only worth 250K.  She wanted to hire our firm to get the lender to forgive the 250K she was underwater and let her keep her house.  This is “entitlement”.  I told her pompousness that it doesn’t work quite that way.  The only way this individual can essentially have her cake and eat it to is with a Real Estate Short Sale.  Oh my she said, “I would have to leave my home”.  She just wanted the lenders to forgive the residual mortgage debt.  When I had had just about enough of the conversation I abruptly created an exit with a guarantee.  I told her I will guarantee her two things.  First the government will save the free markets and she is on her own.  Secondly, I said, “you owe the mortgage debt to your lender until you don’t”.  She didn’t like the sound of either of my statements.  This is entitlement.  Doesn’t it make you proud to be an American?

 

Where is the solution for the decent human beings that are truly proud Americans?  The solution is in the only comprehensive “Free Market” option…The Real Estate Short Sale.  With a Short Sale you can effectively have your cake and eat it too.  It is also the most responsible action you can take by providing your lender a solution in this terrible housing crisis.  The downside of winning is that you will have to move from your present home.  The rewards are high so you can rent for a year or two and you will be just fine.  In this market that is probably the best for you anyway.

 

At the end of the day the responsible people will win and effectively mitigate and minimize the adverse affects of the housing crisis on their families. The soul searchers of entitlement will get crushed.  Get on board with a Real Estate Short Sale by reading our blog entries and taking a peak at The Negotiated Solution available at www.thenegotiatedsolution.com   Blogging from the front line of the housing crisis.

 

GHunter

The day before Christmas I caught a short blurb on Fox Business News regarding the state of the mortgage market.  An industry representative was adamantly demanding that people do something about their mortgage problems.  She said, and I quote, “Don’t let you lender mess with your grocery money”.  It was a short blip on the screen and it clearly caught my attention.  Was this fear mongering on the part of a mortgage industry guest on Fox or was this lady whole heartedly trying to communicate solid advice to the viewers?  I think this is an excellent topic to elaborate on.

 

If anyone without mortgage industry knowledge or familiarity with judgments and garnishments were to hear this on television they might immediately think that it is just another scare tactic on the part of some random guest of the mainstream media.  However, this lady had a very good point to make and I wish she had been more than a short blip on the newswire.  The primary topic related to all the delinquent or soon to be delinquent homeowners facing imminent foreclosure.

 

Here is what she was trying to explain but clearly did not have enough time on Fox to elaborate on her point.  If you are a distressed homeowner in jeopardy of losing your home to foreclosure you need to attempt to do something about it so you can avoid a deficiency judgment that will follow from you lender.  A deficiency judgment is allowed in many states and is no different from any other judgment.  When your home is foreclosed upon by the lender, the lender will follow state law and present before the judge or magistrate the deficiency.  When the amount is approved the court will grant the lender the right to a judgment that will be placed on your credit report. 

 

The problem with any judgment that is deemed worth collecting is that the lender can garnish your wages and really make your life a living hell in the process. This is what the lady was referring to when she said “don’t let the lender come between you and your grocery money”.  Once a judgment has been issued the lender can now take action to obtain a garnishment. A garnishment of wages is mandated by the state and your employer automatically must comply and divert your after tax money out of your pay check.  This is an involuntary action and it could be your grocery money.

 

This is a fact and not fiction.  This is also a scary thought so I am going to help you out with a little context to put you at ease.  It can happen and it does happen but only if you let it.  That is the beauty of the situation.  Lenders are overwhelmed and you have the opportunity to negotiate a short sale or loan modification.  The only people that are going to have to deal with a potential garnishment or other legal seizures of assets are those with assets to lose and those that just dumped their problem on their lender and never attempted a solution.  Also, the garnishments don’t happen immediately in this type of environment.  The lenders will obtain the judgments from the courts and try to collect them much later when the markets settle down much like they did in the years after the savings and loan crisis of the early 90’s. 

 

What does this mean for you?  Investigate if a real estate short sale is for you.  Does the benefit merit the time and effort you need to invest to succeed?  These are very important questions.  I am promoting my own book when I say check it out at www.thenegotiatedsolution.com , but I don’t want you to think I am participating in the fear mongering.  You are only at risk if your lender wants to pursue you.  Many of you in an upside down housing situation have money to lose.  How do I know?  We have hundreds of clients and 85% of them have no skin in the game and want a way out but they have money.  You would think the majority of people would be financially strapped and somewhat desperate.  This is simply not the case.  There are many people that participated in the real estate game that have good jobs and a lot to lose.  You know who you are.  Whether you have money now or expect to recover in the future I think it is best to settle with your lender or lenders and avoid the potential of any kind of judgment haunting you in the future.  Protect your bounty while the getting is good is another way to put it. 

 

Now, did I ever go after judgments when I was a lender?  The answer is no. I am referring to my team and my bank.  We chose to write the loss off against income and move on.  However, we were a small operation compared to the goliaths that may hold your mortgage.  We didn’t feel like dealing with the headaches and we were profitable.  Today’s environment is different.  Very few lenders are profitable and they want their money back.  The best advice I can give you is to take the risk off the table.  Don’t let anyone mess with your grocery money.  Avoid the foreclosure mess and walk away from an abundance of residual unpaid mortgage debt with a Real Estate Short Sale.  Blogging from the front line of the housing crisis!

 

GHunter 

 

 

 

The recent announcement by Citi and JP Morgan Chase to Stop Foreclosures for a period of time across their distressed loan portfolios was highly publicized. The perception that was derived from the news reports offered hope that the lenders were going to come together and provide affordable solutions for distressed homeowners. We can all agree it sounded like good news and a very constructive measure toward a resolution of our housing crisis.

The real question you have to ask yourself is did the bankers do it for their own self interest or simply because they really want to help the homeowners.

Let’s go over some simple facts so we don’t get caught up in the false hope of lower loan payments for all. This is not a permanent moratorium on foreclosures. A foreclosure proceeding is the lenders legal right to regain control over a property once it has become delinquent. The lenders want their money back at some point. If they cannot work out a solution they will eventually have to revert back to foreclosure. The current announcements are directed at stopping foreclosures so it can be determined what borrowers should be helped with modified terms to keep them in their homes. Keep in mind, there is no guarantee that the lenders will come up with long term solutions to keep the distressed homeowners in their homes. Also keep in mind that many of you are not going to be eligible because you don’t meet the real definition of a distressed homeowner.

Here is my view. There are so many properties in real estate owned (REO) portfolios on the banks’ balance sheets that it would only be prudent to temporarily stop foreclosures. After all, a basic supply and demand analysis dictates that by adding more properties by foreclosure to the current portfolios will only further depress existing property values and make matters worse for the lenders themselves. The bankers and lenders alike need to slow the foreclosure process down to allow for the current REO inventory to be sold at reasonable prices. Otherwise allowing the rate of foreclosures to accelerate will only add to the severity of the problem. Also, it is not the intention of lenders to take down complete communities with foreclosures. They need natural attrition and balance or they will inflict additional unnecessary losses to their portfolios.

The fact is the majority of loan modifications and government programs, with all the rhetoric, have had low adoption rates and not worked for the people as forecasted. It is hard to wave a wand and change the past given the sheer size of the housing crisis. Stopping foreclosures a solid year plus into the full brunt of the housing crisis clearly is not the prime spot for the lenders to all of the sudden become kind to the distressed homeowners. The bankers and lenders are taking this action to save their own hides. Plain and simple, this is how it works. According to the lenders, there is a financial incentive to put on the breaks regarding foreclosures so let’s make it a positive PR campaign while we are at it. It makes perfect sense.

If you have any doubt, then ask yourself why the lenders have not fully adopted all the government programs to benefit the homeowners. Also, why do loan modifications represent an approximate 90% failure rate? The lenders are owned the money and without a financial incentive to force their hand, frankly, you lose.

Where is the positive for you? The lenders are giving you more time to provide them a solution. A real estate short sale is ideal in this environment. Provide your lender a comprehensive solution. Get your property sold and provide your lender a solution that they cannot pass up. Don’t expect your lender to grant you an affordable solution to your current predicament. Their attitude is that you borrowed the money and you owe it back to them. Remember the old saying “beggars can’t be choosey”. They are absolutely 100% correct and at their discretion they can legally pursue you for their money by means of the mortgage note.

A solution is a hand. Stop and avoid foreclosure all together with Real Estate Short Sales. Even if you just made a bad decision or just got caught and don’t have a real affordability problem, the macro environment in housing is giving you a pass. As an ex-lender, I am urging you to educate yourself and take advantage of your best options. Our site has it all at www.thenegotiatedsolution.com . The sooner you focus on a solution the sooner you will benefit. I am blogging from the front line of the housing crisis.

GHunter

A foreclosure is the legal means by which your lender regains control over your property. The process is governed by the various state laws. Each state has disclosure guidelines, time lines, and restrictions as to how the foreclosure proceedings must be conducted. The lenders must follow the laws in each state when foreclosing on a property.

At a certain point of loan delinquency, a lender will exercise their right to foreclose on the property. When a lender determines that they are going to begin foreclosure proceedings on your property you will begin to receive notices from attorneys with demands for full payment. When these demands are not met in the time frames outlined, the lender has the legal right to accelerate the mortgage. This means that the loan you thought you had with 28 years remaining will soon be due all at once. The letters surrounding demand, acceleration and the actual establishment of a foreclosure date are intimidating to the homeowner.

Why is it important to stop foreclosure and make the effort to avoid foreclosure altogether with either a Loan Modification, Hybrid Refinance, or a Short Sale with your lender?

When you originally took out your mortgage, and went to settlement with all the happy realtors, lenders, and settlement attorneys that were dreaming dollar signs and just wanted you to quickly sign the 150 pages of documents so they could get rid of you and get paid, there was a very important document in the pile. It was called a Mortgage Note. You signed a Deed of Trust and a Mortgage Note. The Deed of Trust attached to the house or otherwise termed the collateral. Conversely the Mortgage Note attached to you and made you personally liable.

I had a client on Friday that decided after several months that he didn’t want to finish his short sale because it was taking too much time. This guy is actually in the business and did not understand the ramifications of the Mortgage Note. I explained it to him like this. If you are not personally liable for the mortgage thereby giving the lender the legal right to come after you, then why do lenders require Mortgage Notes and not just a Deed of Trust. I mean come on, why don’t we just consider all loans non recourse. Right about that time he woke up and said, “ah….” . Yeah, and your in the business!

This is precisely why it is important not to dump your problem in your lenders lap. You need to be responsible and provide your lender a solution. The Short Sale is an excellent means of avoiding foreclosure and helping yourself out of a bad situation. Don’t be fooled by what you hear. You owe the lenders the money and even if you can’t pay it don’t give them an incentive or legal means of getting any type of judgment against you. You will recover from this real estate mess. When you do, you will not want to deal with the headaches of the past.

Oh and lastly, get out of denial. You have a problem and you are not helping yourself emptying the retirement accounts and running up the credit cards with no solution.

On a positive note, has your check from the government arrived in your mailbox yet? You better go check the mailbox. You know the one from all the bailout program that you are expecting. What about your happy lender that just adores you? Has your one sided Loan Modification been approved yet? I am thinking that you either have a big check on the kitchen table or your lender values you as a customer so much that they just called you and said, “Spin the wheel and name your new lower payment”.

Tomorrow is another day, keep checking the mailbox or get a solution. Your lender literally does not give a “rat’s ass” about you. I am blogging from the front line of the housing crisis. Check out thenegotiatedsolution.com for answers.

Ghunter