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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First-Time Home Buyer Credit & Short Sales Do Not Mix!

By now, even the most procrastinating of first time home buyers understands that the end is nigh.  The end of the $8000 first-time homebuyer tax credit, that is.  While rumors abound about a possible extension past the current deadline, rumors also persist that man did not actually walk on the moon in 1969 (if you happen to believe the latter, you can moonwalk your way right out of my blog catalog).  When it comes to our esteemed legislative bodies, I am not ready to take the leap of assumptive faith that they will do the logical thing.  As things stand, you have received sufficient warning from every warm and cold blooded Realtor type in the land that you need to get on the stick immediately.  With new appraisal regulations and loans which used to take 30 days now bogged down in underwriting quicksand, it is not a good idea to venture past mid October before pulling the trigger on that home you have been patiently watching for just one more price reduction.  With a fleet of fellow procrastinators waiting until the absolute zero hour (closing prior to 12/1/09), there is also the added risk of running into title company soup.  Think the end of the month is busy at your friendly title company and subsequently hectic in terms of getting your deal closed?  My hunch is that typical happenstance will be a walk along a tranquil beach in comparison to the buyer tsunami that figures to crash upon every escrow office near you between 11/1 and 11/30.

But these are the things you already know.  Just like you already know that the credit is not reserved solely for first time buyers, but also those who have not owned Real Estate within the past three calendar years.  This information is so readily available that I haven’t even bothered to write about it before now.  At great risk of being the guy who runs into the empty room to yell “Fire,” I do believe there is one more wrinkle that needs to be discussed.  With the deadline steadfastly approaching (just because it looms closer, doesn’t mean the pace has suddenly morphed to earn “rapidly approaching” designation, now does it?), lost in the prodding for first-timers to buy now is any discussion as to the kinds of homes you should be considering.  I shall rectify this egregious oversight now.

Earlier in the year, the Real Estate world was your oyster.  REOs, short sales, HUD homes, auctions … bring them on.  As long as you wrapped up your purchase prior to December, you were golden.  Thus, you had the ability to trawl every last oceanic trench to scrape up your sunken treasure.  It probably didn’t take long to realize that the biggest finds, those Titanics of the Real Estate deep, were teeming with sharp-elbowed and deep-pocketed prospectors.  Basically, you with more purchasing power.  Every time you made a play for a new bank property, you and your FHA-fueled dingy were left eating the wake of 50 foot conventional vessels and staring into the live canons of the scourge of the first timer’s sea: cash buyer pirates.

Resigned to the fact that your 3.5% down and government-backed loan vehicle is not a fair fight against the types of buyers that the best values attract, you most likely started looking at resale and short sale properties.  Resales have been tricky because most sellers are not in a position to compete with the banks.  Many that you would be interested in continue to be priced out of your affordability.

Now you may be thinking that short sales are the way to go.  The bank wants to offload a property that is in default without incurring the expense of foreclosure.  The seller just wants out and is not motivated by profit, thus creating a tantalizing asking price.  Sure there are only a couple months left to close on a house to secure your credit, but this listing says they are using a “Certified Negotiating Specialist.”  This other one says they have a 95% success rate!  Another even says that they are near bank approval!

Don’t do it.

I know you have gotten your teeth kicked in on the bidding wars that erupt on the bank properties, and the resale market is still too pricey, but short sales are not the way.  Not now.  If you had submitted an offer on one several months ago, you would have a shot, but I am telling you right now that YOU WILL NOT RECEIVE YOUR $8000 TAX CREDIT IF YOU WRITE ON A NON-APPROVED SHORT SALE LISTING at this point.  It is quite typical for the process to take 3-6 months, and the resolution is far from a sure thing.

Keep looking at the bank properties, but reset your sights a little.  Great values are still out there.  You can lock one up that isn’t priced so stupidly low that every buyer and his pet chimpanzee show up to vie for it, driving the price into the stratosphere.  Some of the best buys made right now are actually the ones with list prices that aren’t necessarily the most attractive.  When banks, just like typical sellers, miss that sweet spot, you have a better shot at negotiating the price lower versus bidding the stupid cheap one up.

This is also not a bad time to take another hard look at the resale market.  Sellers of properties that will fit the budgets of first time buyers should be receiving advice from their agents right about now that they really need to get competitive if they are to capitalize on the last minute purchasing rush.  Granted, many sellers simply are not in a financial position to lower their prices, I have noticed more and more resale listings working their way into my searches.

Finally, I would be remiss if I didn’t caution that the tax credit should not be the be all and end all for your purchasing decision.  If you simply cannot find the property you want at a price you can afford, don’t get caught up in the frenzy.  The worst decisions are often made in the face of such artificial pressure.

But if you are ready to take the plunge, find yourself a property in which the seller can give you a thumbs up or thumbs down within days instead of weeks.  Walking the short sale plank with less than 90 days to get it closed will net you an $8000 cold shower.


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I Had a Choice … And I Made It.

Picture a bowl of primordial soup.  No, really picture it.  What does it look like?  I see a gelatinous, gray gumbo of sorts.  The contents within completely impervious to the light of the sun underneath an opaque, spoon-devouring outer layer.  I don’t need to make out the individual invertebrates that I sense roiling about the porcelain confines to intuit that a wayward finger would disappear into tiny, prehistoric mandibles within moments of straying into the land of the culinary lost.

Of course, I am talking about bank owned property sales.  If the creepy crawlies in the walls don’t get you, the asset managers will.

About a year and a half ago, I, like many of my Real Estate brethren, was forced to take stock of the focus of my career.  Having long relied on the nearly continuous repeat and referral business that I cultivated through years of diligent service, I was forced to ponder the unponderable when the Great Market Implosion of 2008 (c)  threatened to sabotage my business model.  If you could even call it a business model, that is.  I subscribe to the notion that if you do right by the clients that you have now, you will never want for clients in the future.  Good business practice begets good client retention.

And yet, there I was.  Looking around for the vine upon which my new business had died amidst the economic crop dusting that was rendering entire markets fallow.  My hedgerow bustled only with concern.  So what to do?  With credit markets drying up and loans increasingly difficult to come by, the resale market became a stagnant bog.  The only sign of life would be Nessie popping her head above the surface of the foreclosure loch on occasion to swallow another hapless homeowner.  Against this stark backdrop, many of my respected colleagues turned to the very institutions that led us down this path to housing oblivion for their salvation.  Sensing that resale properties could not compete with the dirt cheap foreclosures, and that finding loans for buyers had become vastly more difficult than finding properties, I was tempted to follow suit.

The lure of pursuing bank-owned property listings was … gulp … quite tantalizing.  I saw REO agents handling more properties at a given time than they ordinarily handled over the course of an entire year while I banged my head against the resale wall.  Heeding the siren’s song, I went so far as to solicit lists of banks with whom I could apply to handle their overflowing inventories.  Hat in hand, it struck me that this was the 21st century version of standing in line for hours on end amidst scores of other able-bodied candidates for a factory job circa 1930.  A funny thing happened en route to the head of the line, however.  An epiphany, if you will.

In the current market, we all work for the banks in one manner or another.  You either list their houses, or you bring them buyers.  Only one side of that equation will bring you repeat business down the line, however.  I realized that I could not take on the workload that REO specialists enjoy tolerate without alienating the loyal client base that had propelled me to heights I had never really thought possible in my career.  Knowing there are only so many hours in the day, I made the conscious decision to forgo the possibility of immediate gratification with the banks to continue to serve real people.  It’s not an entirely altruistic choice either, but a pragmatic one.  The foreclosure market will dry up eventually, leaving the few remaining morsels to the established denizens of the deep who have waded through that knee-deep filth for the last two decades.  Those Johnny Come Latelys whose bank-owned property experience extends back a year or two will be in the unenviable position of having to redefine their expertise yet again.  Their neglected mom and pop clients will have moved on.

I do not want to watch my business wash up on the rocks along with the myriad other souls aimlessly following the tide on a makeshift raft of sticks and desperation when the winds finally change.  I’ll continue to take my chances with my own internal compass and weather-battered crew.

So, here you sit.  Spoon in hand, ready to dive into that noxious looking soup.  It may not be the most appetizing dish you have ever seen, but it’s the house special and the price is right.  The maitre d’ has already slipped back into the kitchen, hurriedly gathering the same ladled gruel for the next table.

No fear, your royal tester is still here.  Pass that gnarly bowl on over and I’ll help you determine its edibility.

I was sitting on your side of the table when we were eating steak and lobster, and I’m not looking for the check now that my dinner guests can only afford spam.  It may bring a little indigestion on this particular evening, but there are plenty of four star evenings ahead.

If you are buying or selling a home in Scottsdale, Arizona, and you are not an amorphous, soul crushing financial institution, it would be my great privilege to represent you in your pursuits.

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Falling Equities … Are Realtors to Blame?

Real Estate agents are largely responsible for the massive housing inventories of the past two years.

That bears repeating.

Real Estate agents are largely responsible for the massive housing inventories of the past two years.

This is a conclusion that does not please me to reach, but my conclusion nonetheless after continuing to see overpriced home after overpriced home hit the market.  You can blame banks or non-paying homeowners for the glut of foreclosure inventory, but guess what?  Bank owned homes sell.  By and large, they are priced appropriately and adjusted regularly until they sell.  Compare this to the unrealistic seller/listing agent tandem with the home down the street that enters the marketplace grossly overpriced, and just sits there while the days on the market pile up without mercy.

You can blame the banks again for the short sale listings that take forever to work their way off the market because of all the bureaucracy and idiocy involved.  In many instances, I would agree with you, but I find ample fault with the listing agents who do not take the time to learn the process and requirements involved for the institution(s) that hold the lien(s) against the property.  Even though many banks seemingly select the files they will actually review via a no holds barred game of inebriated backgammon on the first of every month, too many agents simply throw a short sale listing on the market at a completely unrealistic price (compared to what the bank will be willing to accept) and hope that they can make it stick.  Buyers get frustrated with the process after several months of inaction and often exit the transaction before getting a response from the bank.  Even if the home eventually sells prior to the looming trustee’s sale, it has contributed to the bloated inventory level for months instead of weeks.  Some banks will not negotiate with a seller at all until an offer is in hand, but that doesn’t mean that the agent can’t have all of the documentation lined up in advance.  Many short sale listing agents that I have encountered have been a bit lacking in the communication department as well.  Buyers are more likely to hang around and wait for a response if they are receiving regular feedback and updates from the seller’s side of the table as to the progress with the bank.  A phone call or an email update every week or two would go a long way to keeping some of these deals together and clearing out these negative equity weeds that are choking out the resale lawn.

Inventory levels have dropped considerably in the last couple of months, but we have a long way to go before we reach a nice healthy balance of buyers and sellers.  While everyone is currently focused on stimulating demand, we professionals bear a large portion of the responsibility for the supply.  Every time an agent in our ranks takes a listing for 100k over the property’s current value, or even 10k for that matter, he/she is contributing to the stasis that has plagued our Valley since the equity and credit bubbles burst in 2007.

We all want your business, and are generally eager to please.  As such, it can be a temptation to tell a prospective client what they want to hear when it comes to the value of their house.  Less charitably, it can also be a temptation to “buy the listing” by quoting an unrealistic price to sway a seller to list the home with us versus the agent quoting a considerably lower asking price.  A good agent will ensure you command a top of market price for your home, but not a one of us has a secret stash of magic beans that will grow the value of your digs above and beyond what a buyer will be willing to pay. We can advise you as to how to make your home more market ready, and how to improve its value, but we can’t fit a $750,000 peg into a $500,000 hole.

Ray and I vow to give it to you straight.  It does neither party, nor the market, any favors to cram yet another overpriced listing into the protesting pair of lycra pants that is the MLS.  Nope, no more glazed doughnuts on our watch.  It’s time for an industry-wide low glycemic carb / high saleability diet.

As I tell my clients when we sit down to review the data, I would rather tick you off with my evaluation up front than 6 months down the line when your home hasn’t sold.  Better to lose business truthfully than be complicit in the further swelling of our hemorrhaging housing market.

A home should be priced accurately, or it should not be priced at all.

We don’t list homes to practice.  We list them to sell.

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