Matt Peters (New Mexico Broker)'s Blog

Buying in Central New Mexico

Matt Peters (New Mexico Broker) (RE/MAX Premiere) — Fri, 09 Oct 2009 23:53:51 -0700

I've long been a firm believer that "who the seller is" is much less important than the property and the listing price. But, things have changed. With an increase in short sales, a supply of REOs, plenty of non-motivated Sellers, and "the clueless", foraging for a home or a bargain has gotten much more ccomplicated.

Of course, the property has to be right. But what kind of Seller, and possibly some underlying details, needs to be determined and well considered to determine approach.

The Conventional Owner may or may not have the motivation needed to sell, but hopefully, has the ability to sell. Negotiations are influenced more by perception and motivation of the Owner and circumstances which, more often than not, are unknown or difficult to determine. But, response to an offer should be fairly quick.

The Short Seller lacks equity and needs one or more lenders to agree to settle for less than due. In this case the Seller is willing to accept ANY offer that is considered "reasonable". The ultimate decision maker is the Loan Servicer or Investor. In a perfect world, the Bank would be quick to accept any offer that would provide a better net that an ultimate sale after foreclosure. Aside from the difficulties to determinewhat that might entail, there will probably be "secret rules" under which they must operate. The complexities, the work load of the Servicer and the possible need for review by a higher authority all contribute to the biggest probable issues with this type of sale, -- time and uncertainty.

The Bank Seller (REO) needs to liquidate, pure and simple. They may have misinformation on the value of the property or the market, but they will be selling. Over time, they will become more motivated and both reduce list price and their attitude on offers. Generally they will respond to offers within a reasonable time. Exceptions to quick response may occur at busy times, at the beginning of the listing period and/or if offers are low or ccomplicated.

When a bank is involved, either Short Sale or REO, "national conventions" will generally apply to the sale. That is, there will be limited costs that they will be willing to pay, regardless of local custom. Proper and carefulpreparation of an offer to purchase by a knowledgeable agent can greatly increase success. Concessions that the Bank either can not or will not make will only delay the process and can loose the deal. Often detailed instructions from the Bank or the Listing Agent are completely ignored by inexperienced Buyers Agents to the peril of the transaction.

The biggest advantages of dealing with the Conventional Seller are flexibility in terms and quick response to offers. There may be low motivation and reluctance to make concessions, but every case is different.

With aShort Sale the advantage is the possibility of a below market deal. Limitations on how terms can be structured and the waiting and indefinite status of the transaction for extended periods are definitely disadvantages. The ability and attention of the listing agent is a very important factor in the potential success of a Short Sale. It is only after a Borrower approved offer is submitted to the Loan Servicer that an evaluation of the property and the market is started. There is often a backlog of cases adding to the delay in processing.

REOs have limitations similar to the Short Sale on the structure of terms, but the response time on offers is only a little longer than expected from the Conventional Seller. Part of the reason for a faster pace than the Short Sale is preparation. With an REO, the Bank is an owner, motivated to sell, who has already determined market conditions and values.

Once you find the right property, develop an approach in negotiation that fits the type of sale.

Matt Peters, Albuquerque-Rio Rancho, NM Matt@REALTOR.com
(505) 269-4791 . . . . Your Direct Line to RESULTS
www.IdealNM.com www.Relocation2Albuquerque.com

Negotiating Tenant Purchase of Short Sale Property

Matt Peters (New Mexico Broker) (RE/MAX Premiere) — Thu, 06 Aug 2009 10:31:18 -0700

I have a client who is a tenant of a "troubled property". He would like to purchase the property from the owner, but the payoff on the owner's VA mortgage higher than the ask price of a home with the same plan about a block away.

Owner was prepaid rent and a deposit, and is in no position to refund. Owner plans on filing bankruptcy soon, and property is not listed. There was an unsuccessful listing of the property a year ago. At this point Owner claims to be only 1 month behind on mortgage. Mortgage is serviced by Wells Fargo.

Would listing the property and getting farther behind on the mortgage be essential or only helpful in orchestrating a successful short sale? What would be the best way to handle rent payments that would protect the tenant and not sour his option to purchase?

I can deal with the nuts-and-bolts of a short sale, but have never approached the process from the perspective of a tenant purchase of an unlisted property. The bankruptcy also adds complexities.

Matt Peters, Albuquerque-Rio Rancho, NM Matt@REALTOR.com
(505) 269-4791 . . . . Your Direct Line to RESULTS
www.IdealNM.com www.Relocation2Albuquerque.com

So You Want REO Listings?

Matt Peters (New Mexico Broker) (RE/MAX Premiere) — Sun, 01 Feb 2009 19:56:16 -0800

REO listings have great appeal.
Who wouldn't want listings from a motivated seller with the ability to do whatever it takes to sell?
In many markets REOs are a significant portion of what is actually selling.
It's no surprise that more and more agents are looking to get REO listings.

Getting a start with REO listings is not easy.
Without REO experience it may be difficult to get that first listing.
Most asset managers don't want to take a chance with an agent without REO experience.
Breaking into listing REOs has a little of a "Catch 22" element.
Before chasing his business specialty, you might want to do some soul searching to decide if REO listings are for you.

REOs are certainly not for everyone.
Consider some of the issues:

Management You will need to gain access to vacant properties, get locks changed and windows boarded, have trash hauled off, get the property cleaned, have utilities turned on, get plumbing winterized, etc. etc. And you will need to pay for these services out of your own pocket (and wait for reimbursement), and will not be compensated for your time.

Spending Your Money You will need to pay for property services, and wait for reimbursement. Sometimes the amount of out-of-pocket expenses can be significant, and your wait for reimbursement could be long. You will need to keep good records to document expenses and make sure you actually get reimbursed.

Record Keeping and Reporting Monthly reports are common, some as detailed as an updated BPO. Some weekly reports may be needed. Documentation of expenditures and progress on contracts to closing may also be required.

Reduced Commissions Terms vary, but you will need to accept what is offered, possibly as little as 1/2 of what you normally get on the listing side. The selling side could also be lower than normal.

Personal Confrontations You will need to contact property occupants to determine their intentions, negotiate "cash for keys" agreements, be present at evictions by the County Sherriff, and sometimes make arrangements to dispose of the borrower's personal property. If you have too soft a heart, some of the situations could be difficult.

Frustrating Management The professional seller can be difficult at times. There will be occasions where responses to offers or other actions will be difficult to understand, and following instructions will create awkward moments.

Looking Bad Delays in response on offers, instructions to negotiate with more than buyer at a time, and other legal-but-unconventional practices can make you look like a less-than-ethical to other agents.

If you still want to persue this specialty business....
You might have a chance at a start with a small local mortgage company or credit union.
Ocwen Loan Servicing, one of the large players is another possibility, definately register with them.
Also register with as many REO and BPO organizations as possible. Do BPOs for two reasons; 1) to develop relationships that could lead to listings, and 2) to broaden your experience in completing BPOs so you don't blow a listing assignment, when and if you get it. BPO mills are probably worth working with until you get competent with their system.
Most of the asset managers or offices that award listings will have someone they already work with in your market area. Even if they are not totally happy with their current broker in your area, they may prefer familiarity to the risk of working with an unknown. So the odds are against you, but you may be lucky and beat them. There will always be Asset Managers who need someone new, and if you are prepared and out in front of them, it could be you.

Matt Peters, Albuquerque-Rio Rancho, NM Matt@REALTOR.com
(505) 269-4791 . . . . Your Direct Line to RESULTS
IdealNM.com My Relocation Site

Media Advisory: Downpayment Clarification

Matt Peters (New Mexico Broker) (RE/MAX Premiere) — Fri, 16 Jan 2009 00:25:22 -0800

Have you seen the new press release from NAR?

There is concern about misinformation out there saying, "Buyers need 20% down in order to buy." NAR's answer is a "media advisory" pointing out conventional loan options with 5% or 10% down, and FHA mortgages which require 3.5% down.

See the whole NAR article at Media Advisory

Perhaps the advisory was a good idea, although I haven't seen any of the misinformation. It is mostly acccurate, and it needed to have specifics, but there are a couple of points that could have been improved.

It might have been good to have a general intro with something like, "There are a variety of mortgage products available which do not require 20% down payment, although conventional mortgagees with less than 20% down do require mortgage insurance...."

And, the article does not mention either of the two government sponsored Zero Down Mortgage Programs! Of course, there is the VA guarantee program. But there are also USDA Rural Housing Development mortgages. Granted, these programs are not available to everyone, but the point is there are a variety of mortgage options out there.

Matt Peters, Albuquerque-Rio Rancho, NM
Matt@REALTOR.com
(505) 269-4791 . . . . Your Direct Line to RESULTS
IdealNM.com My Relocation Site

Buying Bank Owned Properties, REOs

Matt Peters (New Mexico Broker) (RE/MAX Premiere) — Sun, 11 Jan 2009 14:48:15 -0800

Various forms of Stress can create opportunities to purchase real estate at bargain prices. A promotion or new job requiring relocation for the Seller is a rare positive event. Most opportunity causing events, however, would be considered negative from the Seller's point of view. Job loss, health issues, medical bills, divorce and even death can all create stress which will eventually force a sale.

When a property's mortgage is moving towards default, there are possibilities to negotiate a deal, but many of those transactions can get quite complicated. Making a deal with an owner under pressure can be tough. If the mortgage holder needs to accept less than the full amount owed, a Short Sale would be needed. Final review and approval by the lender can add to complexity and take a lot of time. Prior to completion of foreclosure, considerable skill, effort. patience and persistence are required to have a chance of completing a transaction.

Once the foreclosure process is completed, the Lender is the new owner. The property is Real Estate Owned (REO). REOs, sometimes called Bank Owned Properties, are listed for sale like any of the other properties, but there are some differences to keep in mind when attempting to buy an REO.

Although there are some differences in terms acceptable to different Bank Owners, there are common elements in nearly all situations. Properties are offered in AS IS condition and are usually "less than perfect". Buyers need to demonstrate their ability to perform by submitting Proof of Funds (POF) or a pre-approval letter a lender. And, the Seller will usually pay limited closing costs, and only at closing. Any inspections, including appraisal and survey, and most loan costs are often the Buyer's responsibility.

REOs can be a terrific opportunity. Make sure you work with a Broker who is experienced with REOs. Writing an offer with multiple requests for items the owner cannot accept delays seller response, complicates the negotiation process, and can result in a lost deal. You don't want that!

Deciding on an offer price can also be challenging. Current asking price, price history, length of time on the market and opinion of actual value all should be considered. Knowing the rules of the game can improve the odds of making the deal.

Matt Peters, Albuquerque-Rio Rancho, NM Matt@REALTOR.com
(505) 269-4791 . . . . Your Direct Line to RESULTS
http://www.IdealNM.com http://www.Relocation2Albuquerque.com

Improving the $7500 Tax Credit for First Time Buyers - Take Action NOW!

Matt Peters (New Mexico Broker) (RE/MAX Premiere) — Sat, 10 Jan 2009 10:58:42 -0800

The $7500 Tax Credit included in the Housing and Economic Recovery Act of 2008 could be a great "bottom up" stimulus to the housing market. Combined with low interest rates, and excellent prices in most markets it should be a strong incentive to buy and help push the market in a positive direction. For details on the credit check out Tax Credit

There are several factors that seriously limit its appeal and impact:

1. It needs to be paid back. The Credit functions like a interest free loan from the IRS.
2. The rules are confusing and details on the pay-back provision complicated.
3. The Credit or Rebate is delayed. Especially, as of the new year, the credit will be realized only after 2009 taxes are filed, a delay of about a full year. 4. The Credit only applies to First Time Buyers. Stimulating potential Buyers to actually BUY could go a long way toward improving markets, reducing excess inventories, stabilizing prices, reducing defaults, etc. There are good arguments that the program should be extended and expanded.

A full scale acceleration of the program would:

1. Eliminate the pay-back provision.
2. Simplify the rules.
3. Accelerate the timetable for realizing the Credit. Possibly allowing or promoting a "Withholding Holiday" that would immediately increase the Buyer's take home income.
4. Allow the Credit to all Home Buyers (with some income limits).

The National Association of REALTORS is promoting some improvements to the Credit. I think their proposals are a good start. I encourage EVERYONE to Take Action by contacting the appropiate members of Congress, asking for support. The process is extermely simple and only takes a minute, just click on This link and fill in your name and address!

Matt Peters, Albuquerque-Rio Rancho, NM

Can a Can First Time Buyer get the $7500 Tax Credit with FHA non-resident co-borrower?

Matt Peters (New Mexico Broker) (RE/MAX Premiere) — Fri, 09 Jan 2009 19:04:00 -0800

There are a lot of reasons to buy real estate right now -- especially if you don't already own your home.

Interest rates are really low, prices have come down in nearly all markets, FHA offers buyers with credit scores down to 580 a variety of products, the USDA has a great zero-down program for rural areas, and there is a great tax credit/rebate that works like a zero-interest loan (or better) with payments of only $500 per year or maybe even less.

There is a lot of information on the Tax Rebate for first-time buyers directly from the IRS at http://www.irs.gov/newsroom/article/0,,id=187935,00.html and it is well worth review by both porential Buyers, Real Estate Professionals, and even Sellers looking to "marketing ideas" that may help get their property SOLD.

I have a couple of questions, that need answers!

If a frist-time buyer uses the FHA "kiddie condo" program to secure financing, does the tax credit apply? If it does apply, how do the figures work? If it does not apply, is there a way to make it apply?

We all should know about the FHA allowance of non-resident co-borrower(s). As long as there is a close relationship, a more established individual or individuals, can use their credit and income to help a more "dependant" individual purchase their primary residence. the primary borrower cannot have bad credit, but can have little or no credit and their income or lack of income is not an issue. One of the most common uses has a parent or parents as co-borrower(s) and co-owner(s) helping out their child in getting started -- hence the nickname "kiddie condo program". It is a great means toward college housing, in fact my daughter loves her townhome and I would rather make payments on it than her pay rent while she attends the University of New Mexico.

I consider myself pretty knowledgable on general tax matters, and a relatively good researcher. But I have not been able to find a definitive answer to these questions. Is there anyone out there with some answers?

Matt Peters, Albuquerque-Rio Rancho, New Mexico http://IdealNM.com

Buying Bank Owned Properties, REOs

Matt Peters (New Mexico Broker) (RE/MAX Premiere) — Thu, 01 Jan 2009 01:06:10 -0800

When a property's mortgage is moving towards default, there are possibilities to negotiate a deal, but those transactions can get quite complicated. Making a deal with an owner under pressure can be tough. If the mortgage holder needs to accept less than the full amount owed, a Short Sale would be needed. Final review and approval by the lender can add complexity and take a lot of time. Prior to completion of foreclosure, considerable skill, effort. patience and persistence are required to have a chance of completing a transaction.

Although there are some differences in terms acceptable to different Bank Owners, there are common elements in nearly all situations. Properties are offered in AS IS condition and are usually "less than perfect". Buyers need to demonstrate their ability to perform by submitting Proof of Funds or a pre-approval letter a lender. And, the Seller will usually pay limited closing costs, and only at closing. Any inspections, including appraisal and survey, and most loan costs are often the Buyer's responsibility.

REOs can be a tterrific opportunity. Make sure you work with a Broker who is experienced with REOs. Writing an offer with multiple requests for items the owner cannot accept delays seller response, complicates the negotiation process, and can result in a lost deal. You don't want that!

Expanding Your REO Business

Matt Peters (New Mexico Broker) (RE/MAX Premiere) — Sun, 28 Dec 2008 12:25:22 -0800

Seems like there are a lot of Agents looking to get into listing REOs. No wonder, as REOs make up a significant percentage of the active listings in many markets, AND usually an even higher percentage of the sales. REO listings always sell. In a slow market they set the market, and in a dead market they are the market.

In my early days in New Mexico Real Estate, I sold a lot of HUD listings and envied some of the more experienced brokers in my office who had an inventory of listings from the Resolution Trust. So when the opportunity presented itself, I jumped at the chance to list REOs through a California based Asset Manager. Although I sold a few listings through them, I found the process frustrating. The asset manager seemed stupid, the bank owner was unreasonable and they kept changing the terms of my compensation. I took it personally, had a big argument and ended up getting fired.

Another opportunity presented itself, and my REO experience helped me get the account and keep my perspective when facing frustrations. At the time, many of my associates thought I was crazy to take on listings with reduced commissions and extra work. I have always been a nuts and bolts guy, and I liked "the management" part of the job.

I considered the discounted commission a trade off. I did not have to spend time and money to get face-to-face with people who might list. I did not have to pay someone a referral fee. I simply answered the phone and accepted the assignment (listing). Developing contacts and short cuts to getting locks changed, trash hauled, winterizations completed, etc. was pretty easy for me, with my construction background.

Marketing REO listings was a blast. While most REOs were lucky to get a single photo in MLS, I put the maximum allowed. I also advertised them on my page in the local "photo ad magazine", monitored showings with an electronic lock-box, and was able to use them to generate Buyer Prospects, to even a greater respect than my non-REO listings. REO listings draw attention. I have had reasonable success promoting them through both my primary website and relocation website, and my REO experience had been very helpful in gaining the skills needed to successfully negotiate REO purchases for my Buyer clients.

I currently have three REO accounts. Two are fairly active, and one has been very slow. My current business is about 1/3 of my peak production (2006), and about 1/2 of what I would like it to be. Even with over 15 years of successful REO listing experience, a great resume' and good track record and references, it has been difficult to identify and develop new REO accounts.

I have been developing more sources of BPO assignments, and registering or getting on "waiting lists" with as many Asset Managers as I can find. I know the process can be slow and a bit of a "black box", not knowing if I am accomplishing anything.

What sort of experiences have you had in the REO arena? Do you have any ideas on other ways to grow this kind of business? Are there companies you think should be approached or avoided?