If you get offended easily, can only see one side of a picture, DON'T READ THIS. I Don't Want Hate Mail. Professional discussion welcomed.
I am seeing more and more of this $500 non refundable earnest money for the first 90 days on Short Sale listings. As if selling a home that is a short sale isn't hard enough, listing agents are adding this verbiage along with a 3 page novel hidden under the document tab of how to write "their" offer.
Why don't my buyers get to write the offer "they" want and the sellers (really the listing agent) counter with everything they want. Writing an offer based on someone elses terms and conditions is becoming nonsense in my opinion.
In all fairness, to those that do not understand this, let me "Break It Down Barney Style" as my good friend likes to say (always makes me laugh).
This whole non refundable earnest deposit clause came about as listing agents became increasingly frustrated of working night and day to get an offer through the banks short sale system only to have the deal fall apart as the buyer loses interest and finds another home. This process (more so in the past) has taken anywhere from 3 to 6 months (some longer). During that time it was very common for the buyer to keep searching the internet for homes. Inevitably they would find a foreclosure they like just as much, submit an offer, and win the bid. No waiting, no unknowns, just a simple approval, easy peezy, close in 30-45 days. So the same buyer would back out of the short sale (as allowed per addendums). This would leave the listing agent to have to find another buyer and start the process over again. (let me finish, I already know what you are thinking).
Stay with me, I am only explaining the logic (not reality) behind this. So the $500 is to attract only "serious" buyers who will commit to hanging around long enough for the bank to respond.
Reality. Most ridiculous thing I have seen yet (yep, my blog, my opinion is allowed). Short sales that have this stipulation stay on the market longer before getting an offer, typically retain offers for less than asking price. Not only that but since when does a bank respond by 90 days anyway? Yes, far and few between.
Smart short sale listing agents will take several back up offers so if the first buyer backs out, they can slip one of the back ups in its place so the process doesn't have to start over with the bank.
I can tell you from representing many buyers, that the $500 has not stopped my buyers from continuing to look. If another home moved them enough to that "warm and fuzzy" feeling they would walk from that $500 in a heart beat. In which case how did that $500 help the listing agent with her offer and the bank. Does she offer the bank the $500 by saying, "Oh, by the way, the buyer backed out, here is $500 for your troubles." I do not think so. That listing agent has to go back to the drawing board irregardless to find another buyer.
Also, how does a listing agent know for sure if the buyer hasn't already bought another home and is just waiting out the 90 days to get their $500 back? Even if the bank were to respond within 90 days, they all counter with something. So all the buyer would have to do is reject the counter and get their $500 back. As a listing agent, if the buyer found another home, I would rather know sooner than later so I could secure another buyer instead of having the buyer secretly appease me for 90 days just to get their $500 back. Furthermore I would continue with that buyers offer with the bank until I could get an approved price so my listing was in a better position for the next buyer. Looks fantastic in a listing too! "Approved Short Sale"
In my opinion, the first buyer is doing me a favor just by allowing me to get the ball rolling with the bank. If the buyers sticks around, Great! If not, I have a plan B that is ready for its play. I could so open another can of worms about agents who submit bogus first offers but I won't.
I honestly and logically do not understand this $500 non refundable earnest deposit. I suppose for some buyers it is a mental thing but if anyone really thought this through, you could see how very flawed this is not to mention how detrimental it is to an already tough short sale listing. I have buyers who avoid these listings for this mere fact and it is not because they do not want to commit for 90 days, they know what they are getting into, they just do not like being told to wait 90 days for an answer AND hand over $500 to wait for that answer.
Ok, I said it.
Showing posts with label Short sale. Show all posts
Showing posts with label Short sale. Show all posts
Thursday, January 20, 2011
Tuesday, March 9, 2010
Thought for the Night about the Mortgage Interest Deduction
At dinner tonight, conversation turned some friends of the family who just lost their home. Not because they do not make enough money, just the opposite, but because they got involved in a really bad business venture that has been tied up in the court system for a long time and drained their savings over the last 4+ years. Like everyone else they took out the equity of their home and their retirement to start this business which ultimately failed.
It started the rotation of logic in my mind that I know of a few people in their situation. They make good money but made bad decisions. All these people who make good money will be doing their taxes this year and next to a very rude awakening. What happened to their mortgage interest write off?!?!?!?!? So we are going to have literally millions of people paying in an enormous amount of money in taxes to the government. Am I wrong in this thinking? Not only that but what about all the taxes having to be paid on the 1099 unearned income statements from the short sales and foreclosures. Sure some people are covered under the "Debt Relief Act" assuming they were primary residences but many more were not.
So when I hear about all the tax cut programs because of lost revenue from property taxes, I have to think about all the revenue they are getting from people not having the greatest tax shelter which was their home. Maybe in the big picture of things this amount is insignificant, but it was a thought none the less.
It started the rotation of logic in my mind that I know of a few people in their situation. They make good money but made bad decisions. All these people who make good money will be doing their taxes this year and next to a very rude awakening. What happened to their mortgage interest write off?!?!?!?!? So we are going to have literally millions of people paying in an enormous amount of money in taxes to the government. Am I wrong in this thinking? Not only that but what about all the taxes having to be paid on the 1099 unearned income statements from the short sales and foreclosures. Sure some people are covered under the "Debt Relief Act" assuming they were primary residences but many more were not.
So when I hear about all the tax cut programs because of lost revenue from property taxes, I have to think about all the revenue they are getting from people not having the greatest tax shelter which was their home. Maybe in the big picture of things this amount is insignificant, but it was a thought none the less.
Thursday, January 21, 2010
Loan Modifications and Principal Reduction
Check out http://www.naca.com/
They have been 80% successful due to their connections and political weight
They have been 80% successful due to their connections and political weight
Thursday, December 31, 2009
Short Sales and Loan Modifications
If individuals are having issues with modifying their loans or getting a response from their lender(s) during a short sale, they need to be asking their lenders if they are carrying private mortgage insurance. Many homeowners are completely unaware that just because they put 20% down or did some type of hybrid loan (80/10/10 or 80/20) to avoid having to pay the extra mortgage insurance (otherwise known as PMI or MIP depending on type of loan) that the lenders can still take out an insurance policy after the fact to cover themselves. If your lender(s) are not cooperating, there is a good chance your loan is insured by one of the private mortgage insurers. The lenders are all about making money. There is nothing ethical or moral about their decisions except for the bottom line. If they foreclose on your home, they file a claim for their loss and get your bad loan off the books. Why should they modify it? There is no incentive for them to do so. Your home is considered a toxic asset (oxymoron) and frankly the banks want you to foreclosure so they can get it out of their portfolio.
Most modifications consists of interest rates adjustments only. Very rarely does it involve principal reduction. So in a sense, you will still be "renting" your home until the value goes back up. Factor in the average 5-6% appreciation when the economy improves and you could be "renting" your home for a very long time. The principal balance owed will be upside for sometime continuing to drag down the lenders portfolio values. You must keep records of every conversation especially all phone operators id numbers. Keep in mind that the private mortgage insurance can be taken out at any time by your lender. If your loan is not Fannie or Freddie, that means a private investor(s) are holding the note and there is a strong possibility your loan will have this hidden insurance without your knowledge.
First step: Find out if your loan has private mortgage insurance paid for by the lender themselves. Call your lender 3 separate times to make sure you get the same answer at least twice. Most lenders have call centers of people who get yelled at all day. Call early in the morning for best answer before they have been abused. Many lenders are on East Coast Time.
Second step:
If Yes, take your issue to a higher source. I will indicate resources to file a complaint in a subsequent post. Get the name of the private mortgage insurer and make them aware that your lender is not co operating with you. Many of these mortgage insurers are now coming after the lenders for their losses when they find out the lenders had an opportunity to prevent the foreclosure and did nothing about it.
If No, good luck, although this is highly not advisable but a known fact in the industry, "Why fix what aint broke?" As long as you are making payments they have no incentive to work with you. No one will ever tell you to stop making payments, but why do the lenders only pay attention to the files that are at least 3 months behind in payments?
One organization that has an 80% success ratio in getting loans modified is http://www.naca.com/. Went to one of their presentations to educate myself after a newscast about them. (I dont always believe or trust what I hear on the news). Very legite and the people truly have a passion for stoping foreclosures. They are bullying the banks to modify and they have the connections to do so.
Step 3: Wait. Loan modifications can take from 60 days (smaller banks) to over a year with larger banks (such as Aurora Loan Services).
It is truly horrible what has come of our corporate industry ethics. It is not even human anymore. A cancer has infected the whole industry starting with Wall Street and spreading like wildfire throughout corporate america. There is much more happening behind what the morning news is told to report to the faceless unknowning minds that observe. All of the Obama plans have been made optional for the lenders to participate in and since his administration has apparently been unaware of this private mortgage scheme going on, all of his attempts to help have been bust. I think the last statistic I heard was that less than 10% of eligible loans had actually benefited from his plans. Why is that? (Hint, BECAUSE THE BANKS ARE GETTING PAID TO FORECLOSE ON YOUR HOME)
But who am I? Just a little unknown Realtor in Buckeye Arizona trying to keep my neighborhood and yours from declining more in property value by these infected tumors.
peace.
Most modifications consists of interest rates adjustments only. Very rarely does it involve principal reduction. So in a sense, you will still be "renting" your home until the value goes back up. Factor in the average 5-6% appreciation when the economy improves and you could be "renting" your home for a very long time. The principal balance owed will be upside for sometime continuing to drag down the lenders portfolio values. You must keep records of every conversation especially all phone operators id numbers. Keep in mind that the private mortgage insurance can be taken out at any time by your lender. If your loan is not Fannie or Freddie, that means a private investor(s) are holding the note and there is a strong possibility your loan will have this hidden insurance without your knowledge.
First step: Find out if your loan has private mortgage insurance paid for by the lender themselves. Call your lender 3 separate times to make sure you get the same answer at least twice. Most lenders have call centers of people who get yelled at all day. Call early in the morning for best answer before they have been abused. Many lenders are on East Coast Time.
Second step:
If Yes, take your issue to a higher source. I will indicate resources to file a complaint in a subsequent post. Get the name of the private mortgage insurer and make them aware that your lender is not co operating with you. Many of these mortgage insurers are now coming after the lenders for their losses when they find out the lenders had an opportunity to prevent the foreclosure and did nothing about it.
If No, good luck, although this is highly not advisable but a known fact in the industry, "Why fix what aint broke?" As long as you are making payments they have no incentive to work with you. No one will ever tell you to stop making payments, but why do the lenders only pay attention to the files that are at least 3 months behind in payments?
One organization that has an 80% success ratio in getting loans modified is http://www.naca.com/. Went to one of their presentations to educate myself after a newscast about them. (I dont always believe or trust what I hear on the news). Very legite and the people truly have a passion for stoping foreclosures. They are bullying the banks to modify and they have the connections to do so.
Step 3: Wait. Loan modifications can take from 60 days (smaller banks) to over a year with larger banks (such as Aurora Loan Services).
It is truly horrible what has come of our corporate industry ethics. It is not even human anymore. A cancer has infected the whole industry starting with Wall Street and spreading like wildfire throughout corporate america. There is much more happening behind what the morning news is told to report to the faceless unknowning minds that observe. All of the Obama plans have been made optional for the lenders to participate in and since his administration has apparently been unaware of this private mortgage scheme going on, all of his attempts to help have been bust. I think the last statistic I heard was that less than 10% of eligible loans had actually benefited from his plans. Why is that? (Hint, BECAUSE THE BANKS ARE GETTING PAID TO FORECLOSE ON YOUR HOME)
But who am I? Just a little unknown Realtor in Buckeye Arizona trying to keep my neighborhood and yours from declining more in property value by these infected tumors.
peace.
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