This blog explains why many short sales will end up in foreclosures: Our government will reward banks for their losses...

I was recently representing a buyer for a condo and submitted an offer to this Re/Max top agent in my area. His website says he has been in business for 21 years... He indicated that he was not willing to do the counters back and forth in writing and that once the parties reached a verbal agreement we would put it to paper.

I trusted this experienced agent and started the negotiations verbally and via email. Halfway through the negotiations he informs me that they have another offer on the table and suggests we make our highest and best offer as the seller is seeking a min of $560,000. This same counter was made to the other party.

I call the listing agent later and ask if the other party has submitted their highest and best. He says yes. I submit my buyer's offer and get an email the next morning from this listing agent informing me that he will get me the signed contract back from sellers later in the day.

Later that afternoon the listing agent calls me and nonchalantly indicates that the competing buyer's agent contacted the sellers directly, bypassing him, the listing agent, and negotiated directly with sellers a higher price than our verbally accepted offer... The listing agent proceeded to say in an emotionless tone that he felt horrible but there was nothing he could do. His lack of reaction to another agent bypassing him to talk to his sellers directly made me very suspicious about this Re/Max agent.

I told him that the other agent acted unethically and he said he agreed but would not do anything about it. I informed him that I would be filing an ethic complaint with the board of Realtors. You see this "experienced" Re/Max listing agent was acting as a transaction broker and owed fairness to both seller and buyers. The fact that he is not willing to file a complaint against the other buyer's agent proves that he either acted in collusion or does not understand his duties as a Transaction Broker.

Even if his story is true, it shows poorly on the ability of this listing agent to stay in control of the transaction.

Lesson to be learned: A bad apple can be in business for 21 years, so no matter who you are dealing with, do not trust anyone who wants to deal verbally or via email... Always ask for all counters to be in writing, if the listing agent refuses, have your buyers contact the sellers directly to communicate that they are uncomfortable dealing with the listing agent and would like to submit their offer directly... It is time to clean our profession from the few slimy agents left...

I have a short sale that has been in negotiations for almost a year. As we get close to the approval with the second lender (line of credit), the attorney negotiating the short sale has the title work pulled and realizes that actually the owner had refinanced the 1st mortgage on the property in 2005.

When the refinancing was done the existing 2nd lender (line of credit) never signed a Subordination Agreement for the benefit of the new first mortgage lender, and as a result, the second (line of credit) was now in first position and was entitled to full payment, not the measly handout from the first lender... Apparently the new mortgage lender never sent the Subordination document to the line of credit... Talk about a major SNAFU.

New twist: now we have to convince the "no longer first" lender to take substantially less or risk being wiped out if the line of credit lender decides to foreclose...

Lesson learned: make sure the first lender is really in first position if you are dealing with a re-fi short sale...

I received a call yesterday from a prospect who wanted to list his condo for sale. After asking all my questions I proceeded to do the research but could not find a trace of his transaction in the MLS.

I called him back to find out how he bought it in 2006. He proceeded to explain that him and his wife enjoyed walking by the beach and "befriended" the seller. Long story short, he bought from the seller direct (no wonder this was never listed) at an outrageous price then proceeded to dump an extra $110,000 in renovations for a total of just over $470,000.

Based on my market analysis, the property was worth at best $350,000. When I gave him my analysis he was upset and would not budge on requiring $400,000 as a minimum sale price.

I could have done what most agents in my market do: take the listing at an inflated price and let the market and/or the seller's personal circumstances beat him down over time. Instead, I chose to do the right thing and honestly explained to him that I did not want him to be upset with me 6 months from now when his unit was still listed without a contract at his price...

Many buyers believe that the For Sale By Owners/FSBOs are just good but cheap folks who are trying to save the real estate commission. The reality is that most are overpriced properties that would not sell through the MLS at these inflated prices for a number of multiple reasons that may include:

- Sellers owe too much (Not your problem as a buyer)

- Sellers must net a certain amount to be happy or to move or pay the bank... (Again not your problem)

- Sellers have spent a lot of money renovating (Not your problem either)

- Sellers want to save the commission (if they are going to save it, then you should save it too). If the same house sold for $500,000 but had a 6% commission on it. Then you should at least save 50% of the commission and only pay $485,000 if you buy direct from the seller as a FSBO...

Lesson to be learned for the buyers out there who are thinking about saving themselves a commission that is typically paid by the seller: you are only helping the seller and doing a disservice to yourself by not having an agent represent you... At a minimum and if you must buy direct from your "friend", order an appraisal and make sure you tell the appraiser that the purchase is direct from the seller without real estate commission being paid (Appraisers are supposed to adjust for commission if it is not paid on a sale)...

I hear a lot of agents complain about getting their deals blown up by low appraisals oftentimes performed by non-local appraisers assigned by the"independent" companies that were setup as a buffer by the Federal Gov.

Banks/lenders/mortgage brokers are no longer allowed to order appraisals directly and must use the services of an independent company that will assign appraisers. Therefore it is not uncommon to get a non-local appraiser who is unfamiliar with the market. Hence the high risk for a low appraisal...

Some creative agents have proposed to put language in the listing and contract requiring a local appraiser be used. In all practicality that will not fix the problem because the intermediaries do not have to abide by that clause since the bank cannot tell them what to do; and there are some bad local appraisers in any market anyway. It is like saying that only a local agent can properly market and sell real estate. A good agent can sell anywhere because he/she has the proper skills to quickly study and understand any market.

So what is the solution ?

From my personal experience, the best approach is for you to pull the 4-5 best recent comparable sales and listings. Meet the appraiser, spend the time tactfully educating him/her about the market and the comps (Give him/her as much as you can). It is how you present it: "Mr Appraiser, as you probably know the house down the street suffered from... hence the low price. I noted this on the data printout for you...

Instead of fighting and complaining, I find it is better to be part of the solution by preventing the issues through collaboration with the appraiser. As long as you are providing factual market evidence, the appraiser must take that into account, and you are not unduly influencing their value opinion...

With a recession in full swing and lenders stingy with the cash, cash buyers understand they have the upper hand and are patiently waiting on the fences for the rare good deals.

So who is selling today ? Definitely not the sellers stuck in 2005 pricing. A recession means receding prices due to reduced availability of cash and buyers' tendency to postpone purchasing. Uncertainty and fear about what is going on in the country and the world have put a damper on activity.

Many sellers have also decided to sit tight and wait for better times to list. The sellers currently listing and selling are motivated sellers. They have to sell.

Some colleagues say it is the time to list, implying that listing your property is an impulsive herd-like type of behavior. What they are not disclosing is that only the motivated sellers are selling, at current market value, and not at some rosy inflated 2005 prices...

This is a painful market for honest listing agents like myself who are facing a huge dilemma: humor and mislead an unrealistic seller and take the listing at a high price knowing eventually the market will beat the seller down; or, pass on listing overpriced properties and play this disgusting game.

The bottom line is this: list if you must sell and if you are ready for pricing at current market prices. This market is not a "let's try it at this price first". You are wasting your time and money.

Oh, one last thing: before you sign the listing agreement test your listing agent and ask if you can cancel the one year typical luxury listing agreement if you do not sell within 6 months and within 10% of your listing price. 

If you are thinking about selling, contact me for an honest consultation.

Either we are getting older and more sensitive to heat and cold or this winter is really one of the worse.

Either way we have experienced and expect some more cold fronts to blast us with unusually chilly weather.

At least we have no snow storms to worry about and mostly sunny skies to enjoy.

This cold but sunny weather has not stopped our seasonal residents from coming down to escape the bitter winter ahead for the northern States.

So, welcome back snowbirds...

This locally owned and operated store is a blessing for people who demand high quality nutritious organic foods.

This store is located downtown Boca at the corner of Federal Highway (US1) and SE 3rd Street (Just South of Palmetto Park Road).

The store carries fresh organic fruits and vegetables and organic groceries with an emphasis on local produce. Prices are very competitive when compared to Whole Foods.

The store also carries a good selection of organic wines from many countries at very reasonable prices.

The prepared food section carries a large variety of organic desserts and prepared foods ranging from fish/meats to vegetarian/vegan dishes. You may also order freshly made sandwiches and wraps from their menu. Many items are gluten free...

In addition, the store features a fresh juice bar with delicious fresh juices and smoothies including Wheat Grass.

The store is called 4th Generation for Ashley and Brian, owners who are the 4th generation of the family produce distribution business.

Visit their website for more info at: http://www.4thgenerationmarket.com

The map is below. Hours are from 9am to 7pm Monday through Saturday, and 9am to 6pm on Sunday.

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As the inventory of REOs (aka Bank Owned or Foreclosures) increases, so do the perceived opportunities for new and seasoned investors. Experienced investors know the risks and cover their bases by doing their homework prior to placing a bid. If you are new to this game, play carefully or you may get burned. Here are some pitfalls of REOs:

- Inspect and assume the worse. The banks are selling as-is. They never occupied, never even visited, and have no disclosures to make to you. So make sure you thoroughly inspect the property and assume the worse when it comes to repair and replacement costs. Many of these properties developed roof/window leaks or suffered from vandalism that may include water damage by a previous disgruntled owner/occupant. Beware of costly mold remediation.

- Do not make your highest offer upfront. In most cases, the bank will come back and request a second round of bids (highest and Best) or may counter individually. Please note that we see a trend where banks are pricing properties below market to generate multiple bids. Low bidders are typically wasting their time, unless the property is undesirable.

- Banks are interested in three things: Price, Terms, and Contingencies. They will take a cash offer with no contingencies and quick close, over a higher financed offers subject to financing/appraisal. Beware that some properties may not qualify for financing because of their condition.

- Understand that buying bank owned properties is a legal gamble. You and your Agent may present a contract with all sorts of standard and additional clauses and addendum for your protection, the reality is that once you have an agreement on price and terms, the bank will invariably come back with a Bank Addendum which may not be modified. This bank Addendum will strip and replace any buyer's protection clauses/provisions in the original contract and addendum with clauses in favor of the bank. This is very upsetting for a lot of buyers and agents who do not understand how the game is played. As a buyer, the bank Addendum is basically giving you two choices: walk away from what may be a great deal because most of your protections are gone, or accept the higher risk and sign the bank Addendum and give up the legal protections you had in the original contract your agent submitted.

- If you hired an attorney and your attorney attempts to re-write or modify the bank Addendum to give you more protections (or you ask your agent to do that), in most cases the bank will reject any changes and move on to the next offer. You have to understand that banks want to sell with the least headaches and liability. In rare occasions, they may make certain exceptions to the Addendum such as when you are the only offer on the table for a property that has been lingering on the market.

- Major pitfalls of the Bank Addendum include:

1/ Short inspection periods: typically 7 business days or less. If the deal does not close for any reason, you have lost your inspection fee. The 7 days may sometime start before you even get the Addendum signed by the Bank (see 8/)

2/ The right of the Bank to cancel the contract at any time prior to closing without any prejudice. This may be in the form of a committee and/or investor and/or seller's mortgage insurance company approval clause, or "subject to acquisition of the property by Seller" clause. Or if they cannot deliver clear title.

3/ On cash offers, in most cases your initial earnest/good faith deposit is non refundable if closing cannot take place because of your fault. In this case there may be daily penalties for both buyers and their agent.

4/ Title issues: this is a big one. Beware of the language used to describe the type of title and manner it will be transferred to you. There is a huge difference between a Quit Claim Deed and a Special Warranty Deed. Will the bank clear all liens including the ones that are unrecorded when they have constructive evidence of their existence ? Will they pay delinquent utility bills ? Will they pay all City/Municipal fines, assessments and levies ? Will they pay Code enforcement fines ? I just dealt with a bank owned property that had several hundred thousands of dollars in fines for Occupational License violations computed at $250/day. As a buyer you are responsible to do your homework or hire a Title Agent/Attorney to research the property. Your Real Estate Agent is not trained and licensed to research and advise on title issues. So please don't rely on or ask your agent.

5/  Many addendum state something along the following line: "Buyer shall take title subject to all existing municipal code and/or ordinance violations, and any lawsuits pending for enforcement thereof." As a buyer it is your responsibility to research extent and cost to cure any code violations. Fines and per Diem penalties may be negotiated down with the city but may require a lengthy and costly process in front of a city magistrate. Does the contract allow for that and is the bank going to do this ?

6/ Most addendums indicate that no survey will be provided by the bank. Ordering a survey is imperative to ascertain boundaries, easements, and encroachements. Order a survey.

7/ Most addendum will state something along the line: "Seller is not obligated to complete the sale if sales proceeds to seller are less than $1". What this means is that if in order to deliver title to the property the seller has to pay closing costs and satisfy liens in excess of the purchase price, the bank will not come out of pocket. So if you are making an offer on a property where the liens are higher than price, you may be wasting your time if the bank cannot negotiate them down or transfer the liability to you, the buyer. Beware...

8/ The Bank Addendum will be signed last by the Bank and the Bank reserves the right to accept any other offer until the Bank signs their Addendum. This is also frustrating for many buyers and their agents because you still don't know whether you have a deal until the Bank returns their addendum signed after you sign it. The banks do this to leave their option open to accept a higher offer and also to make sure that the Addendum they sign was not modified by the buyers or their agents. 

- Understand that REO agents representing the banks are typically behaving like employees of the banks. They do not care about you or your agent. Their goal is to make their client happy because they have to do volume to make money. REO agents are typically concerned with one thing: close the deal. They are graded by the banks based on their performance. So they will typically continue showing and submitting offers until the last minute, they will typically be inflexible, and they will sometimes appear as behaving unethically... Just remember, they are not your friends, they work for the banks and are a reminder why we need to keep the Banks out of the real estate business. Banks have shown they can't handle their own business: money, how can you expect them to handle real estate?

- If you are a buyer and want to deal directly with the REO Listing agent without using your own buyer's agent: understand you will not save any money and the listing agent still wants to make their main client, the bank, happy. Make sure you hire an attorney for your protection.

- Beware that most REOs have combination lock-boxes on them with identical combinations chosen by the bank's agents or asset management companies. Once the combination is given out, there is no way to know who has access to the property. It is imperative that you keep an eye on the property once you have it under contract and make a final walk-through shortly prior to closing. Taking pictures at the time of your inspection is imperative to document the exact condition the property was in at contract time.

REO properties may be high risk but many buyers have profited. Remember the saying: High Returns are typically tied to High Risks. So play your cards right.

Copyright 2009-2010 - All Rights Reserved - Ben Giordano MBA, CDPE, REOS, MILHM, Realtor

www.EliteWaterfront.com

Selling the best waterfront homes and condos along the South Florida Coastline from Palm Beach to South Beach. Minimum price of $400,000. Visit our website for waterfront listings, sales statistics and useful information.

As a Realtor I feel my mission is to best serve the public with their real estate needs, whether it be selling or buying.

A major flaw in our Realtor code of ethics is the provision that prevents us from soliciting or contacting the owners of an actively listed property subject to an exclusive listing agreement with another Realtor. Here are the top major issues with this provision for Sellers:

- Listing agent is not showing up or making showings almost impossible. The sellers has no way of knowing that their agent is missing showings and hurting them financially. Every missed showing could be that potential buyer... In this challenging market some agents are trying to double-side the commission and therefore make it harder for other agents to show especially in high demand neighborhoods or buildings...

- Listing agent has no pictures of the property or real bad ones, has incomplete or inaccurate information, or sometimes no information on the property. Most MLS have no requirements as far as info and pictures, and the MLS systems that do have slow and ineffective enforcement. The sellers may be wondering why the property is sitting with little activity when in fact their agent is not providing the info in the MLS that would entice another agent or buyer to see the property.

- Listing agent has the property listed at a grossly inflated price. Some agents take listings at any price and hope/know eventually the sellers will reduce their price... Some agents don't even know how to price properties and err on the high side to get the listing. In the meantime other properties are selling and the sellers are sitting like ducks.

- Listing agent is unresponsive (no voice mail or voice mail is full, not answering calls or emails, travels often...) Many issues here: difficulties in setting up showings, tough getting questions answered, and offers are not being presented in a timely manner...

Competition is the only reason we have progress and reasonable prices for any service or product. As a Realtor I feel that I should be allowed to compete with other Realtors and solicit business. This is the only way bad Realtors will be forced to shape up or do something else.

The code of ethics is preventing competition and the free flow of information in the marketplace. The only remedy is to file a complaint against the other agent, but that is costly, ineffective, and time consuming...

Competition is good and necessary for the protection of the public.