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Archive for the ‘Foreclosures’ Category

Generally, not up. There may be pockets of improvement, as all markets are local, but we aren’t on solid ground. We haven’t grown out of the recession yet, and there are questions as to whether the gigantic spending the administration is doing will sabotage or foster prosperity. Les Christie of CNN/Money rightly observes that rising rates, foreclosures and the eventual end of the tax credit will continue to suppress prices. I agree.

There are no arguments to the contrary. Money markets are still a shambles, the public is either unemployed or freaked out, and inventory is being pelted daily with cheap REOs. While New York is not as bad as Las Vegas or South Florida, we aren’t immune either- I see more short sales and distress now than 18 months ago. It has to cycle out before we’ll see sustainable, general improvement.

Buyers are in the driver’s seat.

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According to the NY Times, foreclosure filings in New York State for 2009 are up 17 percent from 2008, with just over 48,000 cases. Not all filings automatically become bank repossessions- many  will become short sales, loan modifications or get pulled back by the homeowners through other means (like paying the arrearage if at all possible). Even with those options, the sheer raw volume of filings will end up with more REO properties hitting the market.

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I should first disclose that I am not, nor have I been in the past, an REO Broker. I have purchased them myself and I have represented buyers in the transactions many times over the years. It is as different an area of real estate from typical transactions as Podiatry is from Opthamology in medicine.These are things consumers must know before they purchase a bank-owned REO property here in my home state of New York. Most of the principles apply universally.

  1. You should absolutely use an attorney who is FAMILIAR and EXPERIENCED with the purchase of bank-owned properties if you buy an REO (Real Estate Owned-by the lender) in the state of New York. Even if your employer or union is providing you with subsidized or free legal representation, use of the wrong attorney can negate whatever perceived savings you are getting in the purchase, add to your stress level, and still have you poorly represented. This is, of course, to say nothing of the needless time and energy the other attorney and agents will have to expend bringing your attorney up to speed.
  2. You are not being rushed-you are being given deadlines for efficiency. This is why you need an experienced attorney who won’t gasp or get the vapors about having to take shorter than a week to do anything. Lawyers typically operate at a casual pace in property transactions, but REO transactions have to go at a far faster pace, not because anyone is trying to bamboozle you, but because this is a NON PERFORMING ASSET and TIME IS OF THE ESSENCE. Not only that, there may be competing offers that they can go to if you or your attorney are going to dilly dally. So, a document that says “please sign and return tomorrow” really does need to be signed and faxed tomorrow.
  3. You are buying the house “AS IS.” Nobody will dissuade you from getting an inspection, but unless there is an environmental issue, it is for your volition only. The bank will not make repairs. The bank will not put GFCI outlets near the sinks. The bank will not put new batteries in the smoke detectors. Do your inspection BEFORE you make the offer, because once you make the offer the clock is ticking with deadlines (see #1 and #2). You are already being compensated for the physical issues of the property with a lower sales price, often far more of a discount than market value less repairs.
  4. You cannot speak with the bank. If you run into frustration or red tape, no, you cannot speak with the bank. I know it would be great to just have your lawyer and the bank iron the issue out, but “the bank” is not “the bank” as you know it. “The bank” is an overworked, underpaid asset manager in another state who will hang up on you so fast you won’t even know she answered. Why? For the same reason you’d be escorted out of surgery, a radio studio, an underwriter’s office, or court. People in those places are doing their jobs and do them better without your interference. Those are not settings for the public and your interference hurts the other people who, like you, are waiting.
  5. You have to pay the transfer tax the seller usually pays. This raises your closing costs a bit, but the lender is losing a ton of money on this deal and needs to economize where possible. Every lender does it. It is an established practice. It is part of the cost of doing business and worth the overall discount you are getting in your sales price for this property.
  6. Exceptions cannot be made. If you are buying an REO in 2009 you are participating in the largest liquidation of property in the history of the planet. It is a huge undertaking that will completely break down if systems, efficiency and deadlines are subordinated to individual exceptions and personal requests. All large organizations have to operate this way or they will cease to be large organizations. Think of it this way: You have a certain cell phone plan. You can’t change it on a temporary basis or get the phone company to make an exception unless you pay for another plan.

Many in the public are rightly intrigued by the prospect of buying an inexpensive, bank-owned property at a discount from the norm. That is the Rose. The Thorn is that the process is far less touchy feely and far more cold and automated. However, forewarned is forearmed, and knowing these things going in will enable you to be ahead of the process and not at the mercy of new, unwelcome discoveries. You should still enjoy that purchase, but you have to understand the rules going in.

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I have started a blog on short sales, focusing past success stories from the files we have closed. The link will be added to the sidebar.

http://newyorkshortsaleblog.wordpress.com

I have also created a website for my company devoted completely to our expertise in short sales and heping our clients avoid foreclosure. That link will also be added to the sidebar.

http://www.NYShortSaleTeam.com

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When I agree with the NY Times Editorial, it is noteworthy. But for the senate to go on vacation with no comprehensive policy on addressing the mortgage and foreclosure crisis is reprehensible.

By the time the Senate returns next Monday from its July 4 recess, some 55,000 more homes will have entered foreclosure. And that’s hardly the full picture of the growing calamity. More than three million homeowners are currently at risk of default and millions more are expected to join them in the coming year as home prices drop, the economy falters and delinquencies rise. Yet the Senate went ahead with its vacation last Friday without passing a foreclosure prevention measure.

Many of these people are the same hypocrites who decried Bush for not cutting his own vacation short when New Orleans was under water. Since the odds are that whatever they would do might not help anyway this may not be as tragic as the Times says. But for them to not even try, even for appearances sake to act like they give enough of a crap to work a little overtime, tells me what they are truly about.

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The Times has a fairly balanced article on how people are adapting to the down market in NY City’s least-populated and most suburban borough. The upshot of the story is that not everyone can seek relief through a short sale.

John and Dorothy Miele are an example. Two years ago, they wanted to refinance their home, which they inherited in the mid-1990s from Mrs. Miele’s mother. Mrs. Miele is a homemaker and Mr. Miele earns about $70,000 a year as an auto mechanic for the New York City Police Department. But their credit disqualified them from the sort of loan they wanted.

When thousands of people own a small piece of a home loan, it’s unclear who has the authority to make decisions about the mortgage when it comes to things like working out payments.

They refinanced anyway with an adjustable-rate mortgage, they say, because a mortgage broker told them that it was a step toward improving their credit and that in another six months he would give them a loan with better terms. After the papers were signed, the broker stopped returning their calls and the loan never materialized. Mr. and Mrs. Miele are now in a much tighter spot than they were before they refinanced. Nine people, including their children and grandchildren, depend on that house as a place to live.

The bank that gave them their loan, First Franklin, has since sold it — a standard practice in recent years. Now, it is part of a mortgage-backed security sold by Deutsche Bankto investors. The Mieles, who are about a year behind on their payments, are fighting foreclosure in court. Their next court date is in July.

Deutsche Bank, which acts as trustee, said in a statement: “The trustee is not responsible for foreclosures or selling foreclosed property. Such decisions are made exclusively by the servicing companies.” The servicer attached to the Mieles’ loan, Specialized Loan Servicing, would not comment.

Nine people can’t all fit into a 2 bedroom apartment. There is no easy solution here.  The article is unclear as to why they would refinance a home they inherited; some personal responsibility should be acknowledged there. Still, the broker who gave them a song and dance about refinancing in 6 months should be caned in the public square.

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That’s not me talking, although it would be my advice. It is one of the top three tips for buying a bank-owned foreclosure on CNN Money:

2. Use a broker

Work with brokers; banks use them to sell most homes. Once you’ve identified which properties are REO, you’ll know those are the ones for which a low-ball offer is more likely to be accepted.

Forget buying directly from the bank (lenders typically deal only with pros) or at auction (you may wind up bidding more than you should).

There are other reasons, of course, but the notion that a not having your own broker will somehow save you money is complete folly. The only time I have seen it work is when the buyer has been…a broker themself.

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