Welcome to Real Estate 2008! For families in jeopardy of losing their homes, the only real alternative from foreclosure is to negotiate a short sale NOW...not later.
If you're behind in payments and your mortgage lender (cannot) help you modify or work out your loan, immediately call a Realtors who *specializes* in short sales. Do it now. Do not wait for a better day, and do not call the greedy, unlicensed bastards masquerading as "foreclosure specialists" throwing their bandit signs up on every street corner and filling your newspapers with ads and your mailbox with touching stories wanting to help you.
Absolutely avoid theses wolves in sheep's clothing.
Today was a really bad day. I failed to help a single mom with three kids avoid foreclosure. It was a painful experience for me. And of course it was painful for them.
As life often does, life threwTess M. of Orlando, Florida, a fully-loaded can of whoop-ass beginning with medical bills, job loss & divorce.
Which wound can you guess was the deepest? Tess and her husband could not ride out this financial storm...they separated and divorced, futher defining this American (family) Tragedy.
Never did Tess believe she'd lose her children's father and her children's home. Throughout, Tess attempted to protect her kids from this darkness, trying to maintain life as usual.
But the kids knew....as is the case, the kids always know when bad times hit home. They know. Tess knew that they knew, and that made all this malaise even more tragic.
Short Sale Succeeds But Fails
Let me stop for a moment. I want you to know upfront that I failed Tess and her children. I did not successfully negotiate a short sale. I failed to help Tess at least walk away with a decent credit rating.
I friggin' failed to help them!
You see, Tess' last payment was June '07. I came on board to short sell in November '07. She (and her soon-to-be ex-husband) owed $348,000 and the foreclosure cost the lender around ~$50,000 (9 months of no payments, holding costs, attorney/court fees, utilities, taxes, insurance, clean-up fees, etc) ......... $400,000.
I set the list price at $258,750 (I could justify it as well). Auction date was set for January 18, 2008...much quicker than I had thought. We had gotten over 50 showings. Not surprising...great area & "bargain" priced or so the bargain hunters thought.
To justify my list price, I spent hours compiling a market analysis for Nationstar Mortgage, the mega mortgage lender ouf of Texas. However, reaching a decision maker in Loss Mitigation proved extremely challenging.
...until I figured out the email nomenclature they use, e.g. John_Doe@mylender.k12.fl.us. I then researched the executive branch and began emailing them, telling them I had a full price offer on one of their pre-foreclosure (now an REO or real estate owned or bank-owned) properties.
I kept emailing.
The price was right for the house, the neighborhood & the local market. Finally, a VP of Loss Mitigation emailed me, apologizing and letting me know he personally was reviewing the offer and would get back with me. From around or above the mountain of files, he found his computer to email me.
I was impressed. I had to have been one of thousands calling and emailing, as more and more "bad" properties rolled in to Nationstar.
Suddenly, a flurry of activity...lots of different people from Nationstar swooned down on me with questions. I struggled to keep their names or titles straight, but they all were extremely helpful and wanting to get this done.
Note: As Realtors, we get insanelyvupset when it takes weeks and months to hear back from the Lender re: an offer on a pre- or foreclosed house. Our buyers get upset. Our sellers trying to save some shred of credit get upset. Everybody gets upset. However, from the mortgage lender's position, they are flat-out overwhelmed and clearly under-staffed. How could they not be under-staffed. Who anticipated this 100-year economic meltdown?
Appraiser Destroys Single Mom's Hope
During the review process, progress ground to a halt. Suddenly, my first report requires a second report regarding the house, the neighborhood & the local market. The initial appraisal was grossly overvalued. I fought that appraiser's poor judgment with well-researched and accurate.
Was this mortgage lender, Nationstar, in denial about poor market conditions? I don't know.
What I do know is that in my second report to Nationstar, I simply wanted to write, "Take my first report and think WORSE...now you have the state of the house, the neighborhood & the local market from my first report."
Two months go by and Nationstar continues to sit on a full-price offer from a strong buyer who's putting down 60% cash.
BPO Rescues Sale For Buyer
The house, now bank-owned, gets a second appraisal, this time from a broker who performs what is called a BPO (broker price opinion) in late January '08.
I kept emailing, always inserting factual information, never wanting to waste their time.
In the meantime, Tess and the children remain in the house...two full months after the auction. In fact, they just moved out last week to allow inspections to take place.
As a courtesy for leaving the house in "broom-clean" condition, Nationstar wisely provided the (previous) owner $500.00. What a SMART business decision!
The Fear Beyond Fear
You see, a lender's fear today (and rightfully so) is that a house in foreclosure will be destroyed and stripped. Yes, it's really happening...and it's happening more often with each day.
I previewed a home last week for a lender and could not believe what I witnessed.....smashed windows....gutted kitchen (not one cabinet...not one appliance...not one countertop...not one light fixture...nothing!)...gutted bathrooms...thousands of holes in the drywall...holes in all ceilings...no carpet...busted tile!
Worse, the stench was unbearable...even from outside the house...the worst "sewer" odor you can imagine. Was it because all bathroom fixtures were gone? Was it the feces spread throughout the house....onto the walls as well?
I could not leave fast enough, and certainly photos did not do this "crime" scene justice.
Oh, by the way, this is a house in a $700,000 neighborhood...a so-called "exclusive" neighborhood. Was this vandalism? Or was this an angry owner who lost a house?
That's not my investigation or problem. However, here's a fact. Similar situations are happening...other Realtors report similar horror stories and not just in Florida.
Alleged angry home(owners) are destroying and stripping their homes before surrendering them, often forced by the Sheriff to leave. Vandals and vagrants are destroying and squatting.
And mortgage lenders must decide to fix the damage or sell "AS-Damaged" (not even the typical AS-IS).
What happens to a neighborhood shellacked by a couple foreclosures, sending values plummeting by 25-50%? Trailer homes to palatial estate homes, this epidemic is paralyzing Florida (perhaps the country?).
The Worst Is Yet To Come.
Mortgage lenders cannot hire enough loss mitigation staff. Out of necessity, mortgage lenders are telling homeowners in pre-foreclosures to list for 90 days (or longer) before even considering a short sale. Forget "deed-in-lieu-of-foreclosure" -- most lenders are not accepting properties "deed-in-lieu...."
What's the solution? Well, here's one, and I'm certain this proposal will stir the pot and get dismissed automatically as unfair, flippant and even impossible. Impossible? Impossible is what we're witnessing on Main Street and Wall Street. Flippant is believing this market with right itself. That's flippant and irresponsible.
Here's my common-sense approach, clearly lacking any formal finance or economics education:
Adjust mortgage payments and mortgage amounts to today's prices. Do it NOW! Instead of continued writedowns and economic meltdown, keep people in their homes. Give them a certificate for the difference between their mortgage amount and today's value (ex: they owe $348,000; today's value $268,000; certificate $80,000).
Insist they cannot sell for one year unless absolutely necessary. Hence, they receive a credit (certificate) of $80,000. If they sell four years from now and their home's value has recovered to $338,000, they receive $10,000 credit.
Is this fair? Of course it's not fair. Neither is the recession we're in that this country's "LEADERS" refuse to admit (not enough quarters of negative growth).
Ask any child not from some privileged family, and you'll get the truth. That child will tell you, hopefully not using the "F" word, these are tough times and about to get tougher.
