... or shall I say, how Freddie Mac (and Bank of America) is sending a house on the road to foreclosure on purpose? 

Yes, I said it.  I have a condo listed since November.  We started high based on previous sales in the complex, and later dropped the price according to the market conditions, trends and recent sales.  It was easy to show and on lockbox.  Its challenge however is that its not been updated since the 1970's, it is pretty "vintage" (aka original), has some repairs needed, borders an "industrial" area and unfortunately has been smoked in.  The plus side though is that I have a very cooperative seller who first tried for loan modification, was turned down for HAFA (as it was a Freddie Mac loan) and consulted with the 3rd party HUD approved work out company Bank of America enlisted to contact the borrower.

Sound familiar?  Yes, the seller that does "everything right."  And like many, wants to "do the right thing."  But boy has Bank of America and Freddie Mac made it impossible.

I'll spare you all the nuances, but the short story is.....

First and only offer since we listed in October came in during February at a price lower than our list price.  BPO agent comes and does his valuation.  Bank of America counters us at higher than we were listed!  As I refreshed the comparables, I realize the price is firmly higher than comps.   In fact, I even contacted the BPO agent (though he was less than appreciative) and asked if he made a mistake and thought the condo was in the neighboring town!?!?! 

For locals, you know there is a difference between Concord, and Pleasant Hill sales, trends and values.  This condo is literally on the border of the two towns.

The Bank of America rep didn't seem to appreciate my reaction, I was shocked at the value.  So I appealed their value.  I provided comparables within 1/2 a mile.  I didn't go miles away, I didn't go to another town, I didn't go for less beds or baths, I stayed within 10% of the square footage.  I found COMPS (meaning they were COMPARABLE), that were legit. 

So Freddie Mac ignored some comps apparantly, and valued it at higher than a price we couldn't sell at for over 71 days? We priced higher initially as this is a "unique" complex and the last sales in here, did sell considerably higher than some surrounding properties, but the fact is now, there hasn't been a sale there in over a year. We have to look at neighboring comps.

It seems pretty clear doesn't it?  Doesn't it appear there is an ulterior motive here?  At this point, B of A has declined the offer, Freddie Mac declined my value appeal, and now, closed the file.  Bank of America says I need to get a more "reliable" buyer.  My opinion is that it will not even appraise for a buyer at what they want.

If it has been declined based on a formula based on their loss, fine.  If they get paid more money on foreclosure, fine. Just be up front so we don't all waste our time.

By the way, no Notice of Default is filed, so it will be months and months before this home forecloses.

I just thought something this obvious needs attention. Not sure we'll find a more "reliable" buyer to pay more than the condo is worth - but we'll put it back on and submit again if we get another offer. In fact, this complex is not FHA approved, so it's even harder to find a buyer. 

Calgon, take me away....

(Oh by the way, yes I did try to call Freddie Mac directly. Freddie Mac will not talk to anyone they say.  They will only talk to their servicers. So no help there. I tried to escalate through Bank of America with absolutely zero response except from the negotiator who ultimately closed the file today.)

We all celebrated the new HAFA short sale months ago when it was introduced, as with many programs, it sounded good at the time.  Of course I'd say we all had reservations knowing how anything the government had their hands in was going to be doomed...

The reality is that I remained optimistic as long as I could, but now, I give this program a big fat "F," for FAIL. 

Bank of America has especially fallen fall short of anything even resembilng acceptable with their HAFA program implementation and for the most part has outsourced all their HAFA deals.  I have two different servicers I'm now working with.  AMS and Promise Solutions are just the two I know of intimately.

AMS has had this one short sale since November.  Now mind you, Bank of America funneled this seller into HAFA *AFTER* we already had an offer on the property (rule #1 with B of A HAFA, do not have an offer in place).  We were assigned to AMS, and surprisingly had the deal "approved" in underwriting in late December.  Approved in underwriting means that the mountain of paperwork was in, reviewed and the seller hardship and paperwork were matched up to the guidelines and we passed.  We're in.  Yay. Right?  Wrong.

It is now March.  The appraisal itself wasn't even done until the first week of February and as of March 4th, the appraisal was still not in the system at AMS.  So they say they will escalate.  Now again, in terms of hiccups to this point, we've had plenty, not to mention I thought AMS had gone out of business for a while there as their phone didn't work, wasn't answered or I was promised calls back within 24 hours on more than 4 separate ocassions. 

Rep said he'll escalate.  Great.  But he warned... "remember, even once we get the appraisal in, we're still 6-8 weeks before the approval letter will even be generated." 

Fabulous.

Bank of America outsources so much of it's work now. It's either a) because their inept, b) they're overloaded, or c) they want a scapegoat and to absolve themselves of the complaints of delays.

Maybe all of the above.

For me, I've closed my Bank of America accounts, and have gone to a local credit union.  I can no longer support a company like this.  For me, this is just one of DOZENS of horror stories and the sad part is that for most of you, this is not new news, this is what you've heard before, and for many you've experienced the same or worse.

Bank of America and HAFA, there is nothing resembling reasonable or responsible and they are failing their customers. 

In California, we have SB931 protecting sellers against deficiency on their firsts.  Find a second that will accept the HAFA pay out and waive any further deficiency rights, good luck.  What remains as the incentive is the $3,000 incentive.  But really?  Does a seller really need to endure all of this for $3,000 - well I guess in a way, it's the best of both worlds - stay for FREE for 6, 7, 10 months to a year, and get a good bye gift of 3,000.  Sounds like a good deal to me, but was this the intent?

This has been a topic on my mind for a while.  I have been 'specializing' in short sales in the last couple of years, out of necessity.  But it's not what you think.  It's not because of all the "get rich," "profit from short sales," and the "new commission stream" emails I get from all the companies pitching their programs, certifications and products related to short sales - I got into this segment because the CLIENTS truly deserve someone who not only cares and is educated, but who is doing it for purely the right reasons. 

I can't advise clients in legal or tax matters, but surely I should know enough to know when a client may not be seeing the whole picture,  or heading down the wrong road, shouldn't I?  As in any profession, shouldn't we know more than our clients if we are saying we are "specializing" in something?  Worse, if you're an "EXPERT."  If you're calling yourself an "expert," and you've never done a short sale, where does that leave the client?  Be sure your agent has A LOT of experience, or partners with someone who does.

I take my fiduciary duty to my clients seriously.  When I take on a short sale listing, it is typically after several meetings, exchanges and discussions of options, loan mods, HUD counseling and every conceivable way they could save their home FIRST, before proceeding into the short sale track.  Then,

Clients are STRONGLY urged to seek the counsel of an attorney and CPA before deciding on the course of short sale.  It is rare that clients will walk away completely "scot free," and they need to understand this.  And, I tell them WHY they must talk to a tax and legal expert, those reasons include:

In California as it stands now, anyone who has done a short sale in 2009 through now, may be looking at a state income tax hit - and according to some news reports - many are shocked.  Shocked?  How could that be?  How could a client be shocked if they were adequately advised to seek the counsel of a CPA or attorney for tax matters?  (this may change if the lawmakers bring a satisfactory bill for consideration, but last week the bill was vetoed by the Governor for too much other "junk" that was contained within it)

How about those second loans and HELOCS?  I hear clients are shocked and calling their agents wondering "how" after a short sale, these banks are still coming after them, or have referred them to collection agencies.  Again, a discussion with an attorney about recourse debt vs. non recourse debt could've helped avoid any surprises.  Refer to the not walking away scot free above...  Most don't.  If you refinanced and got a second, used your HELOC for things other than your home, or simply used your home's equity as an ATM machine - you very well may not have been totally forgiven for the deficiency on that debt. 

Oh, and the HOA dues.  I've heard some sellers have decided to foreclose because the HOA dues could not be negotiated away or down.  The banks wouldn't pay them all, and the buyer said no way.  Some sellers thought/think if they walk away, and let a loan foreclose it makes all the HOA's go away too.  It may not be true.  I often advise clients that if you can keep your HOA dues current, DO IT.  If you can't, then you need to let me know so we can keep in touch with that HOA and keep it from becoming a lien.  We can often work with an HOA prior to that point and work out a pay-off arrangment.  Remember, the banks have very little incentive to pay off thousands and thousands of HOA dues. In a foreclosure they may get wiped out, but they WILL go after you.  Be careful.

What about the language in those short sale letters?  What if they say things like .... oh.... "we reserve the right to pursue you for the deficiency."  Does that not sound scary?  What if that is your first loan, and your deficiency is in the 100's of thousands of dollars?  Don't you think a trip to an attorney would be a good idea?  Has your agent said "non recourse is non recourse, they can't go after you."  Well that sounds like legal advice to me, and you better hear that from an attorney if you are going to rely on it.

Oh, and have you heard the one that a "short sale is ALWAYS better than a foreclosure?"  Good grief.  No, this may not be true for some people, and every single circumstance is different.

What about those clients that have tens of thousands, or even , hundreds of thousands of consumer debt, credit cards, on top of recourse loans, HELOCs, other homes, boats , cars and more?  Do you think it might be in the best interests of that client to see an attorney? Yes, I think so.  Did you know that sometimes, yes sometimes, a bankruptcy may be in that person's best interests?  Again, it might cost you a listing, but what happens when that house short sales?  Often leaving that second open to collections and STILL leaving them saddled with all that other consumer debt with no relief.  We have to help our clients consider all options by getting them to the appropriate EXPERTS outside of the real estate field.  LEGAL, TAX and CREDIT implications can be huge and all angles should be considered.  It may keep that client IN THEIR HOME, and it will help you keep a client for life, for doing the right thing for them. Remember, that fiduciary?

Is this an investment home for the client?  If so, do you know what their Fed tax implication will look like? They should, as it could be huge.  People get wrapped up in the Federal Mortgage Debt Forgiveness Act like it is there to help all homeowners.  It's not true. It is there for primary owner occupants - if you read the text.  It is not meant to protect investors.  So be careful that the client knows what the ramifications of foreclosure or short sale is.

And, believe it or not, these are things just on the top of my mind and surely does not encompass every complication.  Clients contemplating a foreclosure or short sale must seek the counsel of a CPA and/or attorney in conjunction with the real estate advice of their realtor.  Most people are surprised at how complicated the "after" process is.  Getting through a short sale is the easy part. Making sure a homeowner knows the in's and out's is vital.

Our California Governor is threatening to veto the tax bill (SBX8 32)passed by California lawmakers last week.    As part of an LA Times blog article:

"Gov. Arnold Schwarzenegger announced today that he would not sign a bill lawmakers passed to bring new tax relief to homeowners and green energy companies, in large part because it would ramp up the penalties against those who abuse such tax credits."

I say, follow the money.  Look a the next paragraph:

"The governor's move came at the urging of a coalition that includes the California Chamber of Commerce, the Western States Petroleum Assn. and the California Manufacturers and Technology Assn. It lobbied against the bill, SBX8 32, arguing that it would make businesses reluctant to claim tax breaks for fear of making an error."

Hmmm, really?  The Western States Petroleum Association?  The California Manufacturers and Technology Association?  Oh, and the California Chamber of Commerce, supporting businesses? Shall we say, follow the money?

The HOMEOWNERS of this state need help, and somehow this bill got all tied into another and we may very well see a veto.  Now at this time it is being urged that lawmakers urgently draft a new version, but we'll see what "urgently" means to our trusted (please read a lot of sarcasm there) lawmakers in Sacramento. It never ceases to amaze me what kind of junk could be thrown into a homeowner help plan that causes it to be vetoed and perhaps forever rejected. 

Said in the article:

"Administration officials urged lawmakers to immediately get back to work crafting a new proposal and to pass it in time for Californians to be able to claim the credits on their 2009 returns, due April 15. But Democrats said it is unlikely a new bill would get enough votes, leaving taxpayers out of luck."

So, where does that leave us?  I guess back to square 1.   But, we can hope.

You can track the bill as it is now through the process at SBX8 32 and read the details within it.  Have you read it though?  Good grief, why can't anything be simple?

UPDATE: Bill was vetoed. Governor asks lawmakers to bring a new bill by April 15th written only to address the issue of helping homeowners.

Catherine Myers
Windermere Bay Area Properties
DRE 01337828

www.CCShortSales.com
Providing resources to homeowners in Contra Costa, Walnut Creek, Concord, Clayton, Pleasant Hill, Martinez and surrounding communities.

Short Sales, REO, home buying, search for homes at Contra Costa Homes for Sale.

I was surprised when on one of my google alerts I saw one of my own listings - no , not surprised at seeing the listing as we (brokerages) share information all the time.  I was surprised at the notation on the listing:

Short Sale

This home is flagged as a short sale. We're sorry, we don't tour or write offers on short sales because of the slim chance that you'll get the home.

I know that everyone has differing views, and different experiences in short sales. But in my opinion, if you're a buyer in some areas, it really is a shame if you're working an agent or brokerage who refuses to show you short sales.  I suppose if their business model does not support the possible long waits for a short sale, that is one thing, but it simply is not true in my experience that it is a "slim chance" you'll get it.  Almost all of my short sales close.  Most experienced short sale agents have high success rates.  It takes education though.  Buyers need to have proper expectations of timing and requirements of the contract and terms of the lender approval.  Buyers also need to be cognizent of the nuances of a short sale (as-is) and the emotional toll a short sale can sometimes take on a seller.  It is true it is anything but typical.  Though it's not hopeless. An experienced listing agent with short sales can certainly educated both a buyer's agent and the buyer to the process. 

Also, when I work with a buyer, I take my fiduciary duty to a buyer seriously and part of that would be to show you ALL homes you want to see.  If you instructed me not to show you any short sales , that is one thing, but if not, I want to show you everything that fits your requirements.   Many short sales sell for 90-95% of their list price, so there can be good deals to be had.  Many banks WILL allow closing cost credits.  So what's not to love (other than the long wait and some of the terms  of course )

My next blog post will be more about what buyer's should look for and know when considering a short sale, but don't dismiss all short sales.  The chances are very good you'll get the house , if ... you have the right mix of patience and persistence.  It's true.

Catherine Myers
Windermere Bay Area Properties

925-683-2125
Walnut Creek, CA
Clayton, CA 94517
Concord, CA
Pleasant Hill, CA

Serving Contra Costa and Alameda Counties
www.DiabloValley.net

Buy, Sell, Short Sale, REO - Contra Costa Homes for Sale

Clayton, CA a fabulous small city nestled beneath our gorgeous Mt. Diablo State Park .  So much to offer in Clayton. I know, because it is where I call home myself! 

Just in the last month or so in Clayton we've seen our own Oktoberfest, Labor Day soapbox derby, a weekly Farmer's Market and our bi-weekly Music in the Grove.  Our walking trails are consistently voted TOPS, and Clayton itself is on the list of America's BEST CITIES to live in! Oh, and you'll often horses and riders walking thru town (or tied up behind the local saloon), coyotes roaming around and wild turkeys galore - seemingly unaware Thanksgiving is, oh, but a month away!  For dining, playing, relaxing and living, you couldn't find a better place than Clayton, CA. 

Check out www.CNNMoney.com for more on the Best Places to Live 2009 featuring CLAYTON!

So, now that I've talked about how great Clayton is to live... what about the homes for sale in Clayton? 

There are some really good housing opportunities now.  Prices have come down from the highs a few years ago and you can get a lot of house for your money here in Clayton as compared to neighboring Walnut Creek.   Schools are TOP NOTCH and both the elementary school and middle school in Clayton are California Distinguished Schoools, the best in the area.  The widely respected API score at Mt. Diablo Elementary School is 911.  Huge gains.  Diablo View Middle School is also distinguished with an API score of WELL over 800 and is the newest of middle schools in the entire district.  Beautiful joint use gym, and a campus less than 15 years old offers air conditioning and all the latest technologies.  Parental involvement at our local schools assure the success of our schools.

So, now let's talk housing stats, and market trends.  Take a look, and contact me for more information, the full report on Clayton or other nearby cities, and what it all means:

Search homes for Sale in the Clayton, CA and Concord, Pleasant Hill, Walnut Creek areas:

Contra Costa County, Clayton Homes for sale, Real Estate Expertise

Fellow REALTORS and industry leaders, please help!

We need SHORT SALE REFORM NOW!  Our banks and servicers are being strangled by their investor guidelines.   We need to jump into action together!  We need to write to our law makers - locally, statewide and nationally - to let them know they must aid in the reform of the Short Sale process.

Homeowners are left in agony when short sales are seemingly arbitrarily denied.  Or a small $$ difference closes the file.  Or a cash contribution requested is impossible.  Worst is the MONTHS it takes to get an answer from most major lenders, only to be told they will now turn your deficiency balance to a collectable debt!  Their systems are broken. Contact with anyone above a clerk level is almost impossible and they are overwhelmed, in part, due to their own ineptness (I mean how many times can you lose the same document?) ENOUGH IS ENOUGH!  Bank of America and Countrywide are two of the WORST offenders! 

Banks make decisions in these short sales that make NO business sense!  These banks ask for impossible terms from their borrowers when in a foreclosure, these same borrowers would walk scot free!  These sellers are very often not even treated with respect from the same banks who gave them the loan in the first place!  These people in many cases are losing everything - and they are up against the impossible to do the "right thing."  If banks would rather just foreclose, please just let us all know so we stop even trying!

I saw just today a blog featured on the Active Rain main page saying to stay away from Short Sales!  The moratorium is going to be lifted on foreclosures soon, and soon these short sales will be competing against even MORE REO's. 

I can track several of my files from the failure of a short sale to the foreclosure and ultimate sale which led to losses of 50k or 100k or MORE for these banks. IT MAKES NO SENSE!

ESPECIALLY for these banks who have benefitted from our tax payer dollars... they are not helping their borrowers and worse, they are contributing to bigger losses for themselves, and in some cases, larger liabilities for deficiency and taxes for their borrowers.  There are class action lawsuits forming.  There will be lawsuits looming.

Banks should be held to a strict , across the board standard of approving short sales.

One major bank, Wachovia, has taken all their portfolio loans and streamlined the process. They're keeping it local, they're approving within a week and we can close in 30 days.  THEY KNOW the losses to their bank will be much greater with a foreclosure - especially in this time of unprecedented decline of values month over month.  Use them as a model! 

PLEASE! Write to your legislators NOW.  Ask your clients to do it.  Tell them they must STREAMLINE the short sale approval process.  Give these banks and servicers permission to ignore investor guidelines in some cases as long as certain basic criteria are met!  Offer the same tax advantages offered as a foreclosure to the write off of bad debt of a short sale.

HELP HOMEOWNERS NOW.  They want to do the right thing!  They want to avoid foreclosure!  They want to buy a house sooner than would be allowed in a foreclosure!  They want to maintain their credit score as much as possible!  They want to help the bank minimize their losses!

BANKS!  Treat short sales like an REO.  Get us a value with a BPO.  Tell us what is acceptable and we'll sell them!!   Let's turn over this short sale inventory as quickly as the REO inventory is selling and we'll be able to turn our housing market around.  There are buyers who want these short sales, but they are not willing to wait the MONTHS it takes for these banks to make decisions.  Sellers need to be rewarded for keeping the liablity on themselves, keeping the maintenance up, doing all the disclosures and aiding the bank in minimizing their losses.  Plus it keeps our neighborhoods cleaner, more stable and in the longer term values up!  Sell now in a short sale vs. months from now in a messy foreclosure!

DO IT PEOPLE!  Please:

http://www.congress.org

You can look up your local, statewide and national lawmakers on the site above.  You can even write a letter to them right on the site, and print and mail, or for a small fee send thru the site and write on the soapbox to get other people involved too!

We can turn this market around if only we could sell the inventory!  Have you had enough?? I have!

This, I noticed today , on a new REO listing that just came up in my town. We all know the problems these days with keys that "walk away," or, doors that get left unlocked, but here is one agent's warning.  Maybe its been a bad day, but I found this hilarious:

"DO NOT LEAVE ANY DOOR UNLOCKED-Do not steal the key from lockbox; Do not forget to replace

lockbox face-- Back door is tricky,so if you are not good at problem solving, don't open it!

Yup, they did.  19,000 denial letters in error.

I thought it was strange when one client got a denial letter a MONTH AFTER we closed escrow!  Of course I got worried they used some fine print and denied it after close, refused funds and refused to reconvey.  But then, another client got the letter dated the same date, and then another...  so what's up?

Countrywide admits over 19,000 denial letters were sent out in error. 

How does such a thing happen?  Is there a single "button" one pushes to deny over 19,000 customers the help they are desperate to receive.  Heck, now they've got some emotional distress.  Think of all those customers frantically calling realtors this week, and frantically calling Countrywide this week. 

And they say "ooops."  Well I guess that's par for the course huh?