Welcome Back, REO Agents!

Greetings REO Agent,

As the foreclosure crisis here in Scottsdale is beginning to show signs of easing, if not exactly abating, your fellow Real Estate professionals are eager to welcome you back to the ranks of humanity.

You’ve been missed!

You’ve done what you needed to do to stay afloat during the difficult times of the past few years, but now that your bank business is slowly petering out, we have a few tips to help ease the transition back to regular old resale transactions. By following the advice herein, you should have little trouble re-assimilating with the general population.

  1. Invest in some Supra lockboxes. We don’t fault you for not wanting to spend $70 a pop for an electronic box when you were carrying 50 listings at a time (okay, we do, but we aren’t ones to carry a grudge), but it’s a small sacrifice for the security of your mom and pop clients and ease of access for your fellow agents now that you are down to two overpriced townhouses.
  2. You have to return phone calls again. As a busy professional, we understand that you can’t always field a call. Just bear in mind before letting everything roll to voicemail purgatory that you will need the sales force now that you can’t rely on grossly underpriced homes to do the job for you.
  3. Burn your addenda. Then piss on it. Every last piece of superfluous documentation that your employing banks made we hard-working stiffs submit in advance of a purchase acceptance.
  4. Regarding feedback on your new resale listings … um, yeah, not going to happen until you update us on the status of every unanswered offer we have collectively submitted on your REO listings over the past five years.
  5. Camera phone listing photos … time to rethink this one. We recommend mixing in a shot or two of the interior while you’re at it. Human sellers appreciate marketing.
  6. Be advised that our sellers will respond to all offers you draft in 3-5 business days. Or thereabouts. Your business is important to us, and we thank you in advance for your patience.
  7. We do NOT advise touting your recent success of underselling the neighborhood, or looking equity sellers directly in the eye on your first forays back into the wild. They will charge.
  8. Planning on working with buyers again? They are those vaguely homo sapienish looking creatures you have been studiously ignoring since 2006. We’d be happy to make introductions. They don’t think you really exist.
  9. Time frames matter again.
  10. Send the legion of fresh-faced assistants back for their diplomas. They still have a chance to make something of their young lives.

And most importantly, remember to have fun. Because we’re going to have a bunch of it at your expense in the coming months.

Sincerely,

The Real Estate Community

PS – We may have taken a few of your former clients while you were gone. Our bad. If you can pick any of yours out of a lineup, we will gladly return them. If not … tough titty for you, fishface.

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Note: This bit of light-hearted fare is purely satire and not intended to impugn the integrity and/or professionalism of my fellow REALTORS.

Much. 

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The Day the Deal Stood Still

The Day the Deal Stood Still

The closing table is no place for incompetence.  The crescendo to a Real Estate transaction, the signing of loan documents and the final settlement statement is representative of a successful navigation of the escrow obstacle course.  If it were a cinematic experience, an empowering musical score would soar over the montage of conquered struggles that it took to get to this point.  While a few credits have to roll before the buyer can officially call the property home, namely lender funding of the loan and recordation of the deed, smiles and handshakes accompany the last executed signature in the two inch stack of paperwork, nonetheless.  In years past, agents and consumers alike have been spoiled by the well-oiled machine that was the title and escrow field.  Catastrophes arose, catastrophes abated and we lost our minds if a closing was delayed twenty four hours by unavoidable eventualities.

These days, I consider myself lucky if a closing isn’t delayed two weeks and my clients draw anyone other than Sparky, the one brain-celled signing agent.

With new disclosure regulations, a completely different settlement statement and a host of new concerns with the transfer of clear title due to the pervasiveness of foreclosure and short sale properties in our midst, an accomplished escrow officer has never been more vital to the process of a home sale.  Unfortunately, many of the good ones were forced out of the industry when the market hit the skids in 2007.  When sales finally began to rebound, the major title/escrow companies restocked their ghost offices.  As the predominance of these properties were distressed, however, it was the REO (bank foreclosures) and short sale divisions that welcomed new staff.  The resale divisions remain largely undermanned.

The REO division of a title company is an entirely different universe.  Like that of a REALTOR who specializes in listing bank property, transactional volume is ludicrously high.  Too many files on too few desks.  You can imagine how this translates to the urgency with which your file gets treated.  Another component that is not necessarily to the buyer’s benefit is the relationship between the bank and the title company they have procured.  Supposedly a neutral third party whose purpose is to convey the property from the current owner to the buyer, the myth of its transactional Switzerland is a tale taller than the Alps.  If the sheer dollars involved in a title company’s relationship with a bank (or the bank’s asset management affiliate) does not dictate outright obedience to the demands/whims of one party over the other, it sure does influence behavior.  I have been nonplussed during the course of bank property transactions (the buyer MUST use the bank-selected title company if his/her offer is to be accepted) in which the title company is the one contacting me with seller demands, essentially performing the role of the listing agent by proxy.

It is expected that one will have to tolerate a third party that is subservient to its master in a bank property sale (and not overly concerned with getting the file closed in a timely fashion to boot), but problems are now creeping into “normal” resale transactions between living, breathing human buyers and sellers.  For starters, with many resale divisions depleted of adequate staff, it is not an unlikely scenario to get stuck with an escrow officer who primarily handles REO accounts.  Flip a coin between whether said officer is overworked or under-experienced, but too often lately a less than exemplary job is being done.  Documents are not being requested/delivered on time, assistants are left to answer questions they are not ready to field, communication between the officer and the buyer’s lender is nonexistent … I’ve even encountered “signing agents” at closing who are neither the selected escrow officer, nor capable of explaining the documents upon which they want your signatures.  One clown literally tossed the paperwork in my lap and told me to explain it all to my clients.  Had I not been rendered utterly speechless, I would have ordered the hall monitor to escort the fresh lad to detention.

Mind you, these are not mom & pop style title companies, but reputable names that do a very high volume (perhaps too high?) of business.

The moral of the story?  Unless you are purchasing a bank property, and thereby resigned to the amusement of escrow fate, you have a choice in the matter.  As the buyer, you get first crack at naming the title company in your initial offer.  Sellers (upon direction from their chosen representatives most often) may list their own preferred company amongst the terms that are countered, but don’t cave.  Unless your agent can point to specific, positive dealings with said officer/company in the past, I urge you to stick to your guns.  Going back four or five years, a title company was largely a disposable part of the negotiation.  As long as you got your price, you let the other party get the perceived “win” of naming the company.  The recent changes to the escrow landscape make such a laissez faire approach to the title work fraught with peril.  Make this term non-negotiable.  More often than not, the other party will buckle rather than lose a sale over what many still consider a minor point.

When selecting a company, your chosen agent is the best source of advice.  We have favorites for a reason, and it is not monetary.  Through trial and error, we find excellence in all of our affiliates.  When we find a diligent service provider, we are loyal.  In this day and age, though, a little prevent defense is still warranted.  Ask your agent who underwrites the title policies of his recommended escrow company (title and escrow are not necessarily synonymous) before satisfying yourself as to its viability.

I happen to use Jenny Werner with First Arizona Title.  Her policies are underwritten by the big boys at First American.  She chaperones her files quite adeptly to prevent avoidable delays and miscues, and is very responsive to consumer questions/concerns.  Whether you employ me to assist you in the purchase of a home or not, I highly recommend you write Jenny’s services into the agreement.  Your movers and peace of mind will thank you for it.  Eventually, the other party will as well.

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Jenny Werner, First Arizona Title

11333 N. Scottsdale Road
Suite 160
Scottsdale, AZ 85254
Phone: (480) 385-6500
Fax: (480) 385-6800

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Short Sales, Foreclosures, Resales … Huh?

Times were you looked at a few houses, found one you liked and made an offer to the current owner.  After a bit of haggling, you settled on a price that both parties could live with and away you went.  Easy as pie.

In the current landscape, however, buying a home is not always that simple.  Due to the prevalence of foreclosure properties and upside down sellers in today’s market, a buyer is often in the dark as to the nuances that may vary from one property to the next.  To that end, there are certain rules of thumb that a buyer should keep in mind as he or she navigates the 2009 Scottsdale Real Estate market.

1.  The Short Sale Property

Upside Down Seller

"Upside down, boy you turn me, inside out ..."

You’ve read about them in the paper, heard about them on the news and know somebody who attempted one, but still may not know exactly what a short sale is.  First off, I would be remiss if I didn’t make the requisite quip that short sales are anything but short.  By and large, they are loooooooooooooooooooooong.

The term “short sale” is derived from the seller’s lack of equity in the property.  In fact, the seller is upside down to the point that the market value of the home is less than what is owed on the mortgage(s).  With a short sale, the seller must convince the bank to take a loss by agreeing to the sale.  There are numerous pitfalls, including waiting for weeks or months for the lienholder’s response and low success rates (less than 10% of short sales are successful).  One particular difficulty lies in ascertaining whether a seller even qualifies for a short sale at any price.  Each institution has its own unique standards, but sellers must adequately demonstrate hardship (job loss, etc), provide up to date financial statements and pay stubs, document where all funds for a line of credit have gone (the lender in 2nd position will disallow a short sale if the funds went anywhere except back into the house (kitchen remodel, pool, etc).  The biggest saboteur of a short sale, other than an incompetent listing agent, is the presence of a second loan.  Multiply the difficulty exponentially if the loans are held by different institutions.

If it sounds like a lengthy, treacherous process, that is because it often is.  Short sales, in this agent’s humble opinion, only make sense for the buyer with no real time table.  Investors, specifically, are primed to take a stab at one if the purported price (the price listed in the MLS is really just a moving target when you don’t know what the bank will ultimately deem acceptable) is attractive enough.  If you don’t plan to live in it, and won’t be devastated if it doesn’t pan out, have at it.

2. The Foreclosure Property

I'll take a single-family home and $20 cash back, please

I'll take a single-family home and $20 cash back, please

If 2009 could be summed up by initials, they would be “REO.”  Real Estate Owned properties, or foreclosures, are all the rage this season, and for good reason.  Banks are awash in foreclosed homes at present and have effectively set the market.  Eager to rid themselves of bloated inventories, the various institutions have well-earned reputations for bargain basement pricing.  By the time a bank takes a property back from an owner in default via a Trustee’s Sale, I find they are often ready to deal.  If the short sale process can feel like a rudderless vessel as your offer drifts from file to file in the bank’s loss mitigation department, there is actually a captain at the helm by the time the bank ultimately rejects the offer(s) and opts to foreclose instead.  Now an asset manager is responsible for offloading the acquired property.  Just the titles alone speak volumes as to the motivational forces at play:

loss mitigation VS asset management

More often than not, a property that is taken back by the bank will reemerge as an REO property at an even lower price than the listed price of the failed short sale attempt.  Does it make sense?  Not really, but that’s what often happens.  And the price is no longer a moving target.  With the bank now the principal, they set the list price and will negotiate more like a typical seller (albeit at a slightly slower and more aloof pace).  Expect to wait up to a week for a response and the possibility of fighting off multiple offers due to the low pricing, but it sure beats waiting months for an all too often unreasonable response.

The negatives of dealing in bank-owned property are primarily rooted in lack of disclosure about the home and the penchant for selling property “as is.”  You can be sure that something will be missing from the home.  Either vandals have cannibalized the A/C for copper or the former owner yanked all of the appliances and the hall bath towel rack out of the home on the way out, but rest assured, some component of the house is FUBAR.  Complete with heavy handed addenda that favors the seller, the trade off for the great price on a bank property is an often uncared for home with no disclosed history of damage/repair and no one to repair the defects you find during the course of your due diligence period.

Yes, you do get the opportunity to inspect even though the bank will require an “as is” addendum.  If you ever see language in a contract or addendum disallowing your right to inspect the property … run!

3.  The Resale Home

Quick, Marge, get the camera ... real people!

Quick, Marge, get the camera ... real people!

Ah, a home actually owned and sold by a real, unencumbered person.  I must confess, finding such a specimen in the modern Real Estate jungle has been a rarity.  At least finding one that can compete with the pricing of bank-owned homes, that is.  As more and more sellers become realistic about the erosion that has taken place in Valley home values, though, I am starting to see the gap close ever so slightly.  Obviously, anyone who bought a home in 2005 or later is not in a position to competitively price it for today’s market without attempting a short sale due to the subsequent swan dive in prices, but those who have been in their homes for a decade or longer are finally getting the memo and positioning themselves to compete with the banks.  With prices still trending downwards, the smart seller is getting out in front of the curve and pricing his/her home to sell before any further price degradation can occur.  When you find such a home with a seller still capable of maintaining, disclosing and repairing the property’s condition, and priced in line with the foreclosure market … buy it!

So there is a (not so) brief synopsis.  Don’t limit yourselves unnecessarily when shopping for a home.  Allow your agent to explore all available avenues, just be aware of what you might be signing up for with the entanglements that come with each option.

Most importantly, remember this:   A low price in the absence of value is meaningless.

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