I have an idea.

What if.....the lovely homeowner who has defaulted on their loan is contacted by the bank just prior to foreclosure and offers them a sweetheart deal. It would go something like this:

"Hello Mr. & Mrs. Homeowner, next week we are scheduled to go to auction on your property but we have a deal for you. We will put your house up for sale, you stay in the house and keep living there as you are and agree to all the up keep of the property. You agree to provide unabated access to the property to be able to show it to prospective buyers. You pay us nothing in the mean time. Once a buyer is found and the home is sold you will have 45 days from closing to vacate. We will provide you with relocation assistance and a $1500 moving allowance to help you get back on your feet."

Of course there will have to be some criteria like no investment property and the property has to be worth less than the outstanding mortgage amount. We can call it a Short REO.

Aw forget it. This will actually save banks money, help people recover faster thus getting bigger pool of buyers quicker back into the economy and it will halt the price slides and stimulate the economy. Makes too much sense to work.

It's funny how ones past experiences seem to rear their head in other aspects of your life. While a member of a labor group I have learned what good it does as well as the bad. I like that everyone was for the most part equal and no one member got special privileges over another. That same philosophy is also a bad thing becasuse a lazy co-worker gets the same benefits as the loyal hard working individual. Point is there are many benefits non-union labor enjoy today as a result of organized labor. I don't want to start a political firestorm blog about labor but I want to steal their idea to level the playing field in the real estate business. This is my plan:

1. Boycott all BPO work

Brokers performing BPO's are not only hurting values by performing these broad "pencil" appraisals but they are also hurting the appraisal business. Banks are using these BPOs to set values and this is wrong. Only a licensed appraiser should be doing this, plus the measly 50 bucks isn't worth the time or effort if you factor in operating costs. Sure there are agents making a living doing these but imagine if no one did them and forced the banks to pay $350-$500 per appraisal-what would that do to the economy?

2. Stop taking REO listings period.

What am I crazy? No, think about it no REO listings, what would that do to your local MLS inventory? That would help stabilize prices and forced the banks to play ball with the short sales. The REO market is getting almost as bad as the short sales. Banks take offers and sit on them trying to create a bidding war, while crapping on MLS rules that prohibit some of their actions. The banks are in heaven, they have starving agents who will jumped through hoops and walk on fire to get and "service" these listings. Stop the nonsense.

Why my plan will work:

When was the last time this country was really united and firing on all cylinders? History tells us that during the 1950's and 1960's this was a great country to live in and raise a family, still is. You had one income families, jobs that provided benefits and adequate pay that allowed familes to buy homes they could afford and save money. Coincidentally this same period in our history was the hey-day of organized labor. There were huge groups of labor organizing, bargaining and gaining a better standard of living for all. However our country has shifted from a manufacturing based economy to service based. The unions missed their opportunity to organize the service industry on a widespread basis and corporate America took advantage by successfully eroding all those gains. As a country we need to get back to the WE and US mentality if we ALL are to prosper. If not we are in store for the same ole same ole of the capitalistic system, the top 10% making all the loot while the rest of US feed their well oiled money machine. If we can get back to this mentality we will prevail.

Why my plan will not work:

We have been sold on the idea that me is good (myself included). I can own my own business build a future for my family and be successfully. The most successfully business people in history have never done it alone. They have dragged others along with them and helped others prosper. Why are in the housing mess today? GREED and that's it, period. Greed is the highest form of ME mentality and it will eventually destroy this great country. Our founding fathers did not envision an America where we step on our neighbors backs and check our scruples at the door on the way to the top. In business there are times you have to be tough and firm but not ruthless. As long as we have brokers snapping up every REO listing they CAN'T handle and agents willing to do BPOs at an 80% discount versus an appraisal, we as an industry will continue to struggle even in good times. I don't want to create an Agent Union, but if it worked in the middle of the last century maybe we can learn from it and adopt some of those principles.

Your thoughts, ideas and opions are always enjoyed.

Regards,

Noel Padilla

Some of you may or may not know my son Julian has Autism. We will be at a walk-a-thon on Sunday February 22, 2009 in Crandon Park at Key Biscayne. It would be great if you can attend but if you cannot, you can click below to see how else you may be able to help. On Julian's behalf, thank you in advance.

Follow This Link to visit my personal web page and help me in my efforts to support Autism Speaks

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Regards,
Noel Padilla for Julian Padilla

The rave that seems to be making the rounds in the Real Estate community is the short sale option contract. It goes something like this: A Realtor gets a call from a prospect to list a property for sale which is worth less than owed (Short Sale Scenario). The agent does not want another short sale listing but reluctantly takes it and turns to an investor for help. The investor makes an extremely low offer with an option to sell. He then takes over the short sale negotiation from the agent who has agreed to let him do so.

The hitch is that the property is then actively marketed for a higher price while under contract. A buyer is found and a contract is written with the investor as the seller. Once it closes it is immediately sold to the buyer. Of course there are other variables and scenarios painted in different lights to try and masquerade what is going on but this is essentially what is happening. Oh by the way the listing agent is promised the second listing as well along with a reduced commission, but who cares the agent is getting two commissions days apart, nice!

The problem with that is the little thing called code of ethics. A Realtor has a fiduciary responsibility to get the highest and best price for the seller. The other wrinkle is this other little thing called fraud. If the agent knew full well he could get a higher sales price, why didn't the bank receive those funds? Especially when he listed it for the investor and sold it a few days later.

If this scheme is properly disclosed to all parties, I doubt the bank will accept the first offer, especially when they do their homework and find out what the property is worth. Most of the time it is not even called an option contract because that phrase raises red flags. You can see why the "investor" wants to control the negotiation process. This way he controls the information to the lender. He probably manipulates the BPO as well to get the sales price accepted. This is why the Realtor has to be in on the scam.

Most option contracts require either one of two elements to make them work ethically. The first is time, and the other more practical one is buying low with all parties aware of what is going on. The property needs to have enough equity and the seller needs to be sophisticated enough to know he is leaving money on the table in exchange for a quick sale.

Common sense should prevail here. Think about it, if the property can be sold at that much of a discount don't you think you can find plenty of buyers? Why use a middle man?

What I see happening is a bunch of Realtors being duped to buy a course that packages this type of transaction in the form of books, cd's and webinars in exchange for putting their license and freedom on the line. Heaven forbid an agent actually gets involved in a short sale option contract. The ones making the money are the endless amounts of gurus, so called investors and overnight experts. If it sounds too good to be true it usually is.

See this article for an actual case. http://www.nationalmortgagenews.com/fraud/stories/?id=289

Recently I received an unsolicited e-mail (spam) from someone named Sally Larabee about a very interesting subject. She claimed that Realtors all over the nation will be getting sued for calling themselves experts in short sales, when in fact they haven’t completed not one. It went on to list how this would take place and the only way to avoid it is to take their course (probably at a hefty price). It also states that if you really want to call yourself an expert you need to take their course and prepare yourself.  I thought to myself now wait one minute you just said if I don’t do a bunch of short sales and gain “experience” that I can’t call myself an expert, now you tell me if I take your course you can call yourself an expert. Which one is it? Expertise is not measured by how many times you perform a task, that’s called experience.

Although the argument is very compelling, it’s fairly easy to protect ones self with the proper disclosures without taking another short sale course. If you are doing short sales and haven’t had an attorney write a disclosure for you, shame on you. Get it done today and have all parties sign it.

Finally what I found interesting is that when I surfed the Real Estate Radio Blog, low and behold I found the exact same article written by Barry Cunningham, I thought the e-mail had Barry’s tone. I also wrote a post to that blog and somehow it was never published. I just wanted to let Barry know that his stuff had been plagiarized-or vice versa.

This is a great country we live in. It is abound with opportunities and hope for those who are willing to work hard and stay persistent. What makes me sick though is the continuing separation of the classes. It seems the same poeple keep getting knocked down no matter how hard they work or how persistent they are. The opportunities keep getting handed to cronies or those who are already successful and well off.

Case in point: REO's. If you check your local MLS, the same listing agent or brokerages keep appearing time and time again. Grant it, every now and then you will see an agent get a bone but for the most part the same "good ole boys (girls)" are getting the breaks.

I have tried doing BPO's to break into this market. I have sent resumes, applications and my first born to hundreds of companies. I only got 3 BPO's of which I was assigned one because I happened to be sitting in front of the computer when the order came through.

The irony is that I specialize in short sales and if anyone knows the foreclosure business, it's a short sale Realtor. I think that's the major flaw in our country, it's not what you know but who. I'll just keep helping folks avoid foreclosure, it's much more gratifying in more ways than one. You get to help someone who truly needs it and you get to stick it to big business who preyed on these poor souls to begin with. I just wish corporate fiscal irresponsibility came with a prison sentence.