Fiduciary responsibility to who? In a short sale!

January 3rd, 2010

In the course of my speaking to and networking with short sale practitioners in numerous markets across the nation I regularly encounter those who have a completely false impression with respect to who owes which duties to whom in the course of a short sale transaction. More specifically, many agents (both on the selling and buying sides of transactions) erroneously think that ALL short sale offers must be presented to lenders – nothing could be further from the truth!

While all real estate law is subject to individual State legislation and interpretation, and while several areas of law come into play in the course of a real estate transaction (e.g.: contract law, agency law, etc.) there are general principals and practices that can be said to apply. Generally speaking, the laws work like this:

* The listing agent for a property owes their fiduciary duties (care, confidentiality, obedience, accountability, loyalty, and disclosure) to the principal/client, who is virtually always the OWNER of the property.
* ALL offers must be presented to the OWNER of the property.
* The OWNER decides which offer(s) to accept, reject, or counter, based solely on the OWNER’S personal criteria, which may, or may not be price (e.g.: A fast sale may be more important to the owner than a top dollar sale. Similarly, a cash, “as-is” offer may be perceived by the owner to be a better bet than a higher priced offer that has to go through financing and inspection approvals).

For some reason, I find that a very large number of practitioners treat Short Sale transactions as if they were already REO transactions. Such confusion leads to wrong decisions with respect to the presentation of offers, and complicates and prolongs an all too often already complicated and time consuming process. Given these general principals, and in order to answer the question of whether all offers must be presented to a short sale lender, let’s explore the differences between Short Sale and REO/Bank Owned transactions

In an REO transaction the lender has already foreclosed on the property, which means that the LENDER is the OWNER of the property. If we apply the three general principals outlined above to an REO transaction we see that:

* The listing agent for the property owes their fiduciary duties to the LENDER.
* ALL offers must be presented to the LENDER.
* The LENDER decides which offer(s) to accept, reject, or counter, based on the LENDER’S own criteria.

In a Short Sale transaction, while the lender may have initiated the foreclosure process, the BORROWER is still the OWNER of the property. If we apply the three general principals outlined above to a Short Sale transaction we see that:

* The listing agent for the property owes their fiduciary duties to the BORROWER (not the lender).
* ALL offers must be presented to the BORROWER (not the lender).
* The BORROWER (not the lender) decides which offer(s) to accept, reject, or counter, based solely on the BORROWER’S personal criteria, which may, or may not be price (e.g.: In the case of a short sale situation, where interest, fees, and legal costs continue to accrue until the property is sold, a fast sale may be more important to the borrower than a top dollar sale. Similarly, a cash, “as-is” offer may be perceived by the borrower to be a better bet than a higher priced offer that has to go through financing and inspection approvals).

Clearly, in the case of a Short Sale, the agent works for the borrower and the borrower makes the decisions as to which offer(s) to accept, reject, or counter. Once a decision to accept an offer is made by the BORROWER, only then is the offer forwarded to the lender. The transaction proceeds as does any other with respect to subsequent offers that may come in – once an offer is accepted, the borrower is “under contract” (subject to third party approval by the lender) and they do not continue to entertain offers. Yes, they may accept an offer as a “back-up,” but a back-up offer only comes into play when/if the initially accepted offer falls apart, and only then would it be forwarded to the lender.

The lender is merely a third party “approver” of the transaction – they are not “a party to” the transaction. This is an important distinction! The lender simply has the right to reject, or accept the offers that the borrower chooses to forward. You must remember that a short sale is a completely voluntary attempt by a borrower to avoid a foreclosure — a borrower does not have to opt for a short sale. That being the case, if a borrower is under no obligation to even attempt a short sale, how in the world could it be said that a lender has a right to be presented an offer?

Now that you understand the borrower’s obligation to present offers vis-à-vis the lender, let’s shift gears and specifically focus on the short sale listing agent by first asking some questions about the general obligations of real estate agents to their clients, and then extrapolating the answers to short sale agents specifically.

Generally speaking, would it ever be tolerated for the agent of a client to act AGAINST the best interests of that client? Would it ever be tolerated for the agent of a client to act on behalf of a party who was acting expressly AGAINST the interests of their client? The answers of course are that, “Such acts would never be tolerated!”

That said, how could it be possible for the agent of a borrower to be compelled to work for the lender? Isn’t the lender working for THEIR OWN best interests, and not those of the borrower?

Clearly, the lender is working for their own best interests, which are directly adverse to the borrower’s interests (after all, the lender is either in the process of, or threatening to foreclose on the borrower’s property, which is about as adverse a situation as there is). Given the nature of an agent’s fiduciary duties to their clients, the agent for a borrower MUST do all that is legally within the scope of their representation to PROTECT the borrower from the lender and to advocate on behalf of the BORROWER’S position, not the position of the lender. There is nothing wrong with this – this is exactly what an agent is hired to do!

Now that it’s been explained to you, doesn’t it make sense?

Do you see how you have been mistaken if you thought that all short sale offers had to be presented to the lender? If you are a listing agent, do you see how presenting all short sale offers to the lenders could constitute a breech of your fiduciary duties to your clients? If you are a buyer’s agent, do you see that you have absolutely no right whatsoever to DEMAND that your buyers’ short sale offers be presented to lenders?

The bottom line is this: A borrower has no obligation to present all short sale offers to a lender, which means that a borrower’s agent has no obligation to present all short sale offers to a lender, which means that a buyer’s agent has no right to demand their short sale offer be presented to the lender. To transact under any other premise is to misunderstand the process completely.

Have a Luxury home behind on payments? We can help
Luxury home short sales in all of Florida 321-610-4773

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The new government incentive for short sales

January 1st, 2010

HAFA – The new government incentive for short sales

Have you heard? The government is trying to motivate lenders to avoid foreclosure.

According to statistics the sister program HAMP has been able to help about 9% of homeowners in trouble. Yes I said 9%, I think the average Realtor has been able to short sale about 20% without the extra help.
We have been able to close about 95% of our short sales because we understand the process. And in my case 95% was never a number I thought was even possible. It took hard work and perseverance but I made it.

I believe short sales have been an issue for two main reasons.

1. The staffing departments in loss mitigation departments exploded and this caused a huge learning curve and lack of adequate systems.

2. The mentality of these departments was that of a collections agent. Not actually mitigating loss but gambling to see how much they could get. I traded stocks for many years and some people said I was gambling, but my level of trading risk was nothing compared to these departments. They hang there risk on another agents appraisal-which many are unqualified to give, they lack any knowledge in real estate. Those talented and qualified loss mitigation agents are buried by thousand of request.

These departments have been filled with loan officers that went broke when the housing bubble bust. They had not been in business long enough to learn the fundamentals of selling homes and negotiating selling terms. They went from making an insane amount of money to broke. Now they are just looking for a steady paycheck.

I lost count of how many times lenders have foreclosed on a home which they would have made more on a short sale. Either because of price, commission, closing cost, basically the normal cost to sell a home, AND THEN sell it one to two months later for 20 to 30% less.

It’s not surprising that some Realtors refuse to touch short sales. Not to mention buyers who don’t want to wait for what seems like forever.

So do I think this HAFA program will work? I sure hope so but I am not going to hold my breath.

To me this will just serve to confuse more people and waste tax payer money. But if it works then great, because both Realtors and Homeowners need the help.

So is it all bad? THE ANSWER IS NO

There are many variables involved. All properties cannot be short sold but we need to go back to basics. Homes are held as collateral for money that is owed. With that you can begin to change the way you think about short sales.

It is all about education and negotiation, the Realtor is key to this part of the process. You need to work with an agent that can educate lenders as to the process, make it easy for them.

Yes make it easy, they have thousands of files, the agent needs to keep it simple. Then they need to negotiate intelligently, don’t sumbit offers with huge discounts, while this might work once in a blue moon. You will just cause the file to get tossed.

And you the seller is the second key. When looking to short sale your home you need to ask yourself a few things.

1- Can I repair my credit after a short sale?
2 – Is my loan a recourse or non-recourse loan?
3 – Do I have a Realtor that understands the short sale negotiation process?
4 – Do I have a valid hardship?
5 – Am I commited to settling these debts?

When you prepare this questions ahead of time, you can ensure a smoother short sale process.

Why waste your time trying to get a loan mod or a short sale that is never going to happen.

Why start with a process you are not committed to.

There is life at the end of this and yes your credit and your stability will return to normal.

We have helped many people reduce there housing expense by over 2/3. Our services are free to you as we are compensated by the lenders and or buyers. And because time is of the essence we encourage you get informed asap!

We look forward to helping the governments efforts to help people in foreclosure. While we are unsure of HAFA’s success, we are still committed to the process.

If you or someone you know is in danger of foreclosure call our short sale experts right away.
At 321-369-9600

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MERS is the banking systems version of “Button”: A Mafia ‘soldier’

December 17th, 2009

ARTICLE: LANDMARK DECISION: MASSIVE RELIEF FOR HOMEOWNERS
AND TROUBLE FOR THE BANKS by Ellen Brown

A landmark ruling in a recent Kansas Supreme Court case may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right or standing to bring an action for foreclosure. MERS is an acronym for Mortgage Electronic Registration Systems, a private company that registers mortgages electronically and tracks changes in ownership.

The significance of the holding is that if MERS has no standing to foreclose, then nobody has standing to foreclose – on 60 million mortgages. That is the number of American mortgages currently reported to be held by MERS. Over half of all new U.S. residential mortgage loans are registered with MERS and recorded in its name. Holdings of the Kansas Supreme Court are not binding on the rest of the country, but they are dicta of which other courts take note; and the reasoning behind the decision is sound.

Eliminating the “Straw Man” Shielding Lenders and Investors from Liability

The development of “electronic” mortgages managed by MERS went hand in hand with the “securitization” of mortgage loans – chopping them into pieces and selling them off to investors. In the heyday of mortgage securitizations, before investors got wise to their risks, lenders would slice up loans, bundle them into “financial products” called “collateralized debt obligations” (CDOs), ostensibly insure them against default by wrapping them in derivatives called “credit default swaps,” and sell them to pension funds, municipal funds, foreign investment funds, and so forth.

There were many secured parties, and the pieces kept changing hands; but MERS supposedly kept track of all these changes electronically. MERS would register and record mortgage loans in its name, and it would bring foreclosure actions in its name. MERS not only facilitated the rapid turnover of mortgages and mortgage-backed securities, but it has served as a sort of “corporate shield” that protects investors from claims by borrowers concerning predatory lending practices. California attorney Timothy Mc Candless describes the problem like this:
“[MERS] has reduced transparency in the mortgage market in two ways.

First, consumers and their counsel can no longer turn to the public recording systems to learn the identity of the holder of their note. Today, county recording systems are increasingly full of one meaningless name, MERS, repeated over and over again. But more importantly, all across the country, MERS now brings foreclosure proceedings in its own name – even though it is not the financial party in interest. This is problematic because MERS is not prepared for or equipped to provide responses to consumers’ discovery requests with respect to predatory lending claims and defenses.

In effect, the securitization conduit attempts to use a faceless and seemingly innocent proxy with no knowledge of predatory origination or servicing behavior to do the dirty work of seizing the consumer’s home. . . . So imposing is this opaque corporate wall, that in a “vast” number of foreclosures, MERS actually succeeds in foreclosing without producing the original note – the legal sine qua non of foreclosure – much less documentation that could support predatory lending defenses.”

The real parties in interest concealed behind MERS have been made so faceless, however, that there is now no party with standing to foreclose. The Kansas Supreme Court stated that MERS’ relationship “is more akin to that of a straw man than to a party possessing all the rights given a buyer.” The court opined:

“By statute, assignment of the mortgage carries with it the assignment of the debt. . . . Indeed, in the event that a mortgage loan somehow separates interests of the note and the deed of trust, with the deed of trust lying with some independent entity, the mortgage may become unenforceable. The practical effect of splitting the deed of trust from the promissory note is to make it impossible for the holder of the note to foreclose, unless the holder of the deed of trust is the agent of the holder of the note. Without the agency relationship, the person holding only the note lacks the power to foreclose in the event of default. The person holding only the deed of trust will never experience default because only the holder of the note is entitled to payment of the underlying obligation. The mortgage loan becomes ineffectual when the note holder did not also hold the deed of trust.” [Citations omitted; emphasis added.]

MERS as straw man lacks standing to foreclose, but so does original lender, although it was a signatory to the deal. The lender lacks standing because title had to pass to the secured parties for the arrangement to legally qualify as a “security.” The lender has been paid in full and has no further legal interest in the claim. Only the securities holders have skin in the game; but they have no standing to foreclose, because they were not signatories to the original agreement. They cannot satisfy the basic requirement of contract law that a plaintiff suing on a written contract must produce a signed contract proving he is entitled to relief.

The Potential Impact of 60 Million Fatally Flawed Mortgages

The banks arranging these mortgage-backed securities have typically served as trustees for the investors. When the trustees could not present timely written proof of ownership entitling them to foreclose, they would in the past file “lost-note affidavits” with the court; and judges usually let these foreclosures proceed without objection. But in October 2007, an intrepid federal judge in Cleveland put a halt to the practice. U.S. District Court Judge Christopher Boyko ruled that Deutsche Bank had not filed the proper paperwork to establish its right to foreclose on fourteen homes it was suing to repossess as trustee. Judges in many other states then came out with similar rulings.

Following the Boyko decision, in December 2007 attorney Sean Olender suggested in an article in The San Francisco Chronicle that the real reason for the bailout schemes being proposed by then-Treasury Secretary Henry Paulson was not to keep strapped borrowers in their homes so much as to stave off a spate of lawsuits against the banks.

Olender wrote:
“The sole goal of the [bailout schemes] is to prevent owners of mortgage-backed securities, many of them foreigners, from suing U.S. banks and forcing them to buy back worthless mortgage securities at face value – right now almost 10 times their market worth. The ticking time bomb in the U.S. banking system is not resetting subprime mortgage rates. The real problem is the contractual ability of investors in mortgage bonds to require banks to buy back the loans at face value if there was fraud in the origination process.

“. . . The catastrophic consequences of bond investors forcing originators to buy back loans at face value are beyond the current media discussion. The loans at issue dwarf the capital available at the largest U.S. banks combined, and investor lawsuits would raise stunning liability sufficient to cause even the largest U.S. banks to fail, resulting in massive taxpayer-funded bailouts of Fannie and Freddie, and even FDIC . . . .

“What would be prudent and logical is for the banks that sold this toxic waste to buy it back and for a lot of people to go to prison. If they knew about the fraud, they should have to buy the bonds back.”

Needless to say, however, the banks did not buy back their toxic waste, and no bank officials went to jail. As Olender predicted, in the fall of 2008, massive taxpayer-funded bailouts of Fannie and Freddie were pushed through by Henry Paulson, whose former firm Goldman Sachs was an active player in creating CDOs when he was at its helm as CEO. Paulson also hastily engineered the $85 billion bailout of insurer American International Group (AIG), a major counterparty to Goldmans’ massive holdings of CDOs. The insolvency of AIG was a huge crisis for Goldman, a principal beneficiary of the AIG bailout.

In a December 2007 New York Times article titled “The Long and Short of It at Goldman Sachs,” Ben Stein wrote:

“For decades now, . . . I have been receiving letters [warning] me about the dangers of a secret government running the world . . . . [T]he closest I have recently seen to such a world-running body would have to be a certain large investment bank, whose alums are routinely Treasury secretaries, high advisers to presidents, and occasionally a governor or United States senator.”
The pirates seem to have captured the ship, and until now there has been no one to stop them. But 60 million mortgages with fatal defects in title could give aggrieved homeowners and securities holders the crowbar they need to exert some serious leverage on Congress – serious enough perhaps even to pry the legislature loose from the powerful banking lobbies that now hold it in thrall [i.e., in bondage].

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The Florida Foreclosure Process

November 26th, 2009

Florida Foreclosures

Foreclosures happen in Florida when an individual or group is severely delinquent in payments or can no longer make
payments on their mortgage. Any number of situations can contribute to the foreclosure process beginning: an injury
preventing work, the loss of a job, a divorce or other financial strains. Foreclosure is the process of the bank or
lending institution getting the property back and reselling it to recoup their money.

Florida is a judicial state. This means that all foreclosures must use the court system for processing. Since banks
differ and the courts are involved, the foreclosure process timeline varies slightly between individual cases.
The average time frame is five to six months from the beginning steps until the finalization of a foreclosure.

Steps Taken to Foreclosure

The first steps fall under the pre-foreclosure period. The mortgage holder is late with payment, but remain in the
property while the foreclosure proceedings progress.

Notice of Default

The Notice of Default is the first indication of late payment. It is a written notice sent to the mortgage holder
by the mortgage lender. It will state how much money is owed and how late the payment is. A Notice of Default will
state what you need to do in order to become current on your payments and prevent foreclosure from happening.

Lis Pendes

Lis Pendes is paperwork filed by the mortgage lender in the county courthouse. It states their intention to sue
the property owners if they do not receive the mortgage monies. The court then creates the paperwork that notifies
all parties involved about the upcoming lawsuit and the terms.

Action

Notice of Action is the next step in the foreclosure process. When a mortgage holder cannot pay the terms stated
in the Notice of Default and goes further in delinquency, a Notice of Action is posted in the local newspaper. It
states the mortgage lender’s written demands to be paid on their loan and their intent to take back the property
if the payment is not made.

Once the Notice of Action is posted, the formal foreclosure process takes place.

Foreclosure Action

A foreclosure action, which is a lawsuit filed under the county where the property is located, is made. This states
the intent of the mortgage company to evict the residents and take over ownership of the property. They will post the
date and time of the auction where the property will be sold, anywhere from three to six weeks in the future.

Redemption

At any time before the auction of the property, the mortgage holder can take back the property if they can pay off
the mortgage in full. If they can pay for the mortgage in full, the proceedings are halted and the mortgage holders
can move in and reassume ownership of the property.

Sheriff’s Sale

The last step of the foreclosure process is the Sheriff’s sale. This is where the property is auctioned off to the
highest bidder at the county courthouse. The price is low to begin, but can escalate if it is in a hot location.
Once another bidder has won the auction and the property, the former mortgage holder has terminated all of their
rights to the property. Within ten days of the successful sale, the title is transferred to the winning bidder.

Contact Grand Star Realty for more information on how short sales and you home buying and selling in Melbourne Florida and
Satellite Beach Florida

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Office Address web sites and phone numbers

November 22nd, 2009

Satellite Beach Grand Star Realty & Auctions LLC
599 Sherwood Ave
suite # 107
Satellite Beach FL 32937
United States
(321) 369-9600
http://www.grandstarrealtyandauctions.com
http://maps.google.com/maps/place?hl=en&georestrict=input_srcid%3Acf85c2f2910aa908

Melbourne Florida Real Estate Agents Grand Star Realty
1530 Waverly Place
suite #B
Melbourne FL 32901
United States
(321) 369-9600
http://www.grandstarrealtyandauctions.com/melbourne.html
http://maps.google.com/maps/place?hl=en&georestrict=input_srcid%3A2f771ba74829f92b

Merritt Island Real Estate Agents Grand Star Realty
2401 NEWFOUND HARBOR DR
Unit a1
Merritt Island FL 32953
United States
(321) 369-9600
http://www.grandstarrealtyandauctions.com/Merritt-Island.html
http://maps.google.com/maps/place?hl=en&georestrict=input_srcid%3Af8f91be96ce75e14

Satellite Beach FL Real Estate Agents Grand Star
1290 Highway A1A
Suite B
Satellite Beach FL 32937
United States
321) 610-4773
http://www.grandstarrealty.com/satellite-beach-florida
http://maps.google.com/maps/place?hl=en&georestrict=input_srcid%3A85fdb3d9a0116323

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Tips to Avoid Pitfalls in Owning Investment Rental Property in Melbourne Florda

November 12th, 2009

Tips to Avoid Pitfalls in Owning Investment Rental Property in Melbourne Florida

Owning and operating investment rental property in Melbourne Florida can provide a number of important advantages. There are potential disadvantages to owning rental property in Melbourne Florida; however, you can help to minimize possible pitfalls by following certain guidelines to protect your investment.

First, always make sure that your expectations regarding investing in rental property in Melbourne Florida are reasonable and realistic. You should always approach the investment of rental property in Melbourne Floridawith the goal of achieving a positive cash flow; however, do not expect that you will be able to buy a new vacation home within a year.

In addition, it is important to make sure that you take the time to do your research and ensure that you understand the rules and regulations regarding the ownership and operation of rental property in Melbourne Florida. As the owner of rental property in Melbourne Florida, you must abide by certain federal and state laws which provide specific information regarding your liabilities and responsibilities.

Along those same lines, it is important to be certain that any lease or rental agreements you handle are absolutely legal. If you handle a lease or rental agreement which is not legal, you may experience a number of problems if your tenant happens to violate terms of the lease. To be safe, it is best to have an attorney draft your lease and rental agreements.

Before purchasing any rental property in Melbourne Florida, be sure to have the property in Melbourne Florida inspected or else you may discover you are facing a set of expenses you did not anticipate. Having the property in Melbourne Florida inspected by a professional before you sign on the dotted line will involve an expense; however, compared to the expenses you could face by purchasing a property in Melbourne Floridawithout an inspection, it is certainly well worth it.

When you begin the process of renting out your property in Melbourne Florida, take the time to run credit checks and call references. These are both steps which many novice landlords often overlook in their rush to fill their rental properties and begin turning a profit; however, it can be detrimental. Remember that having an empty unit is always better than rushing and having an irresponsible tenant who may destroy your property in Melbourne Florida, get behind on their rent and ultimately prove difficult to evict.

Joining the Landlords’ Association in your local area can also prove to be helpful by putting you in connection with experienced investors and landlords. You can also gain access to reliable contractors, inspectors and other professionals who can make the process of operating rental property in Melbourne Florida much easier.

It is also imperative that you make sure you have adequate property in Melbourne Florida insurance as well as liability insurance. Property in Melbourne Florida insurance will help to protect your investment while liability insurance will protect you in the event anything should happen to someone while on your property in Melbourne Florida.

Finally, make sure you take the time to establish an emergency fund in order to cover expenses which may crop up unexpectedly. Remember that you are operating a business and as such you must be prepared for those times when expenses arise. The exact amount that you wish to contribute to your emergency fund is ultimately up to you; however, it should be sufficient to cover typical expenses that may arise. The general rule of thumb is to put aside 20% of the value of your property in Melbourne Florida. To make the process of establishing an emergency fund easier, consider setting aside a certain amount of your rental receipts each month into a special account.

Real estate agents Melbourne Florida

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Be the “Buyer” in Today’s Buyer’s Market In Melbourne Florida!

November 10th, 2009

Be the “Buyer” in Today’s Buyer’s Market!

Whether you are a first-timer buyer, an empty-nester, or an investor looking for a new project, today’s real estate market is the PERFECT time to find just what property in Melbourne Florida you want – at prices you can afford! Have you been waiting to buy? NOW is the time! But just how do you get your own “piece of the American Dream? Read on and we’ll give you some good pointers to get you well on your way!

1. First and foremost, know what your true FINANCIAL SITUATION is. Now is not the time to try to fool yourself! While it is indeed fun to shop expensive properties, it reaps little return in the long run. Know in advance what you can truly afford and what you can qualify for mortgage-wise. Of course, you’ve almost always got a bit of leeway, but realism will hold you in good stead and save you a lot of wasted time.

2. Second, USE THE INTERNET! Today’s market is like no other in that just about any property can be found on the internet, if you have the desire and the know-how to find it. Properly used, the internet can save you countless hours by narrowing down your search according to area and price, map-questing individual properties so that you can drive by them at your convenience, showing you the number of days on the property In Melbourne Florida has been on the market (invaluable if you are considering making an offer), even finding comparable properties to help you determine a fair market value. To put it simply, with the internet you can do a whole house-full of research that can save you a ton of time and trouble! If researching on the internet just simply isn’t your “cup of tea”, please do find yourself a good real estate firm. A good, licensed agent will quickly get a good grasp of what you are seeking. As you continue to work together, further discussions will narrow down the possibilities, then you go on from there.

Either way, you’re ready to visit some properties!

Remember, you are the buyer, not the seller. Realtors in Melbourne Florida love to talk about curb appeal, but if a property is lacking in this aspect, you can probably rectify it fairly inexpensively. Pay more attention to the surrounding homes as you will not be able to change how they take care of their properties! Listen to the sounds of the neighborhood. Kids playing? Traffic noise? Dogs barking? Picture yourself in your new home, windows open on a cool Fall day; do you like what you hear? Then we go on into the structure itself. How does it look to the bare eye? How does it smell? What updates have been done and when? What updates need to be done? How does the floor plan work – does it flow and will it work for your purposes? Only you can answer these questions to your satisfaction.

So, now it’s time to place an “Offer to Purchase”. You are ready to get out your checkbook to make a deposit on the property. You’ve talked with your mortgage broker/banker and things are just fine in that respect. The closing dates work well for both you and the seller, and the title insurance will be provided in a timely fashion. Is there anything you’ve forgotten? Any t’s to be crossed or i’s to be dotted? Glad you asked!

3. Third, GET A GOOD HOME INSPECTOR! For a small amount of money, considering the overall price of your purchase, a good home inspection will let you know if there are any structural concerns that could cost you big bucks in the near future. Termites, septic, plumbing, electric, roof, appliances, these are just a few of the real problems that could be found. A buyer can, in most instances, insist that the property pass a home inspection (at the buyer’s cost, of course) or the sales contract is voided. If defects are found, can you deal with them and use them as a bargaining chip against the price of the property? Or are you looking for a “turn-key” home? It is something to think about.

All in all, buying a home in this market is a GREAT idea! Prices are very low with tons of properties from which to select. Sellers are motivated and there are some terrific deals out there. So, if you are thinking about buying real estate – GOOD FOR YOU!!! Hope our pointers will help you find your own “American Dream”!!

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Foreclosure mediation programs are ineffective:

September 26th, 2009

Foreclosure mediation programs are ineffective:

report The National Consumer Law Center (NCLC), a nonprofit, says there is no data to suggest that foreclosure mediation programs have facilitated any substantial number of affordable modifications. NCLC, after reviewing 25 foreclosure mediation programs in 14 states, said the programs fail to impose any obligations on mortgage servicers. “Without the imposition of these obligations, it is unlikely that mediations will lead to fewer foreclosures,” the report said. “The programs we considered often lack mandatory rules and fail to impose sanctions for non compliance with what minimal rules exist.” NCLC has also pointed out a number of procedural flaws – such as not mandating analyses of loan modification alternatives and setting unreasonable procedural barriers – in mediation programs. The report, “State and Local Foreclosure Media Programs: Can They Save Homes?” reviewed foreclosure mediation programs in states including California and Florida. The report’s author, NCLC staff attorney Geoffrey Walsh, warned that mediation programs may never be effective if corrective measures are not taken. “If the programs continue to demand little or no accountability from servicers, they will likely go the way of federal efforts to control foreclosures that have failed as a result of relying on voluntary compliance by the lending industry,” said Walsh. Housing industry to work with Cuomo to amend HVCC The Home Valuation Code of Conduct (HVCC), which was introduced in May with the idea of preventing inflated home valuations, requires lenders to hire appraisers only through an independent appraisal-management company. Industry participants have been saying that the HVCC has hurt the industry instead of helping it, so far. The National Association of Realtors recently reported that 20% of its members claimed to have lost at least one deal due to low valuations on account of following the HVCC. Representatives of the housing industry met with New York Attorney General (AG) Andrew Cuomo this week to discuss amending the rules. Cuomo was instrumental in formulating the HVCC. Housing industry wants greater clarity on rules. Real estate professionals are scared they may violate the HVCC on account of misinterpreting the rules.”The HVCC does not prohibit interaction between housing professionals and appraisers,” said Bill Garber, spokesman for the Appraisal Institute, a trade group. “But it could state more clearly what it’s legal to do.” The industry has expressed optimism on the outcome of the talks. “The good news is they were very concerned,” said Jerry Howard, the CEO of the National Association of Home Builders, “and they offered to be part of the solution.” Howard said the lead attorneys from the AG’s office agreed to join with a “summit” of industry representatives next month, in which the details of the HVCC will be refined. Analysts say job growth is critical to housing recovery The unexpected drop in existing home sale in August shows just how uncertain housing recovery is. “The market’s incredibly fragile,” says Mark Zandi, chief economist at Moody’s. “As long as job losses are rising, the housing market is at risk of continuing along a decline. Any recent stability would be in danger.” The Commerce Department reported yesterday that new jobless claims dropped in the week ended September 21. While that is a good sign, analysts say that jobless rate has to decline significantly for housing to recover in a sustained manner. “The market’s been somewhat stable here but job losses would put the breaks on a recovery very fast,” said Cindy McClellan, a real estate broker. Currently, interest rates are favorable to homeowners; but analysts say low interest rates alone are insufficient. “They’re not enough,” said McClellan. “If you don’t have a job, lower rates won’t help you get a home or sell yours.” Foreclosures, because of job losses, will push prices down and hurt sales. “What are the drivers of housing? One is jobs and income,” said Frank Nitschke, director at CW Capital. “You need a rebound in jobs and income to have sustainable rebound in housing.” Orders for durable goods unexpectedly drop in August According to data from the Commerce Department, orders for durable goods excluding transportation equipment, dropped 2.4% in August, the second decline in 3 months, after increasing 4.8% in July. Economists expected a 0.5% increase, according to a survey by Thomson Reuters. Orders excluding transportation equipment were flat. Demand for aircraft, which is known to be volatile, dropped 42% in August after rising 98% the prior month. Automobile orders increased 0.4% after a 1.6% gain in July. Companies cut inventories of durable goods by 1.3% and total shipments dropped 1.4%, the most since May. Curbs in consumer spending and excess manufacturing capacity mean companies will probably not increase investment in new plants or equipment in coming months. “We expect capital spending during this economic recovery to underperform,” said Jan Hatzius, chief U.S. economist at Goldman Sachs. “Few businesses will step up capital spending sharply unless they see a meaningful improvement in end demand.” Small businesses express optimism about the economy A survey conducted by Chase Card Services, the credit card division of JPMorgan Chase, says small businesses are optimistic about economic growth over the next 3 to 6 months. About 80% of the survey participants said they are pursuing moderate or aggressive growth strategy. Only 5% said they are not looking to grow business aggressively. About 49% of the small businesses said they were adding job positions, and 29% said they were not adding jobs but were hiring to upgrade talent. Fifteen percent of the companies said they had a hiring freeze, and 5% said they were cutting staff. The survey included 168 chief and senior executives from the annual Inc. 500/5000 list of fastest-growing small companies. Companies participating in the survey must have had revenues of at least $200,000 in 2005 and at least $2 million in 2008. “There’s certainly a bit of light on the horizon,” said Richard Quigley, president of Ink from Chase, a new suite of cards designed for small businesses. “We’re not home yet but it’s certainly going in the right direction.”

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Economy improving…or not

September 21st, 2009

Economy improving…or not

The Commerce Department said Thursday housing starts rose 1.5 percent from July to a seasonally adjusted annual rate of 598,000 units.  In another report, the Labor Department said the number of workers filing new claims for jobless benefits fell by 12,000 last week to 545,000, the lowest level since early July.  A survey yesterday showed that confidence among U.S. home builders reached its highest level in 16 months in September, which bodes well for future home construction.  All this sounds just peachy, and fuels speculation that the economy is improving, but we’ve heard that before…a lot.  The flip side is that The Labor Department report showed the number of people still on jobless aid after an initial week of benefits increased by 129,000 to 6.230 million in the week ending Sept 5, the latest for which data is available.  It was the largest one week gain since late June.  Meanwhile, the inventory of total houses under construction fell to a record low 595,000 units
in August, the Commerce Department said, while the total number of permits authorized but not yet started also hit an all-time low of 99,000 units.

MBA Study Shows Increased Production Profits

According to the Mortgage Bankers Association’s (MBA) Quarterly Mortgage Bankers Performance Report, mortgage bankers made an average profit of over $1,088 on each loan they originated in the first quarter of 2009 – a marked improvement over the 4th quarter 2008 results in which average profits were $148 per loan.  85 percent of the firms in the study posted pre-tax net financial profits in the first quarter 2009.  In the fourth quarter 2008, only 53 percent of the companies posted profits.  The average number of retail loans originated per retail sales employee rose to 10.4 loans per month in the first quarter 2009, from 5.3 loans per month in the fourth quarter 2008.  The “net cost to originate” fell to $1,725 per loan in the first quarter 2009, compared to $2,324 per loan in the fourth quarter 2008.  The “net cost to originate” includes all production operating expenses and commissions minus all fee income, but excludes secondary marketing gains, capitalized servicing,
servicing released premiums and warehouse interest spread.

Net warehousing income, which represents the net interest spread between the mortgage rate on a loan and the interest paid on a warehouse line of credit, continued to pose a challenge for the mortgage bankers in this study.  Interest spread dropped to 6.60 basis points in the first quarter 2009, compared to 9.28 basis points in the fourth quarter 2008.

Bill Promoting Warehouse Lending Passes House

A resolution directing Administration officials to provide support and facilitate increased warehouse credit capacity for qualified warehouse lenders passed in the House.  The bill notes that while warehouse lenders account for as much as 40% of all residential mortgage loans in the US and nearly 55% of FHA loans, warehouse lending capacity has declined by nearly 90% to the current level of approximately $20bn to $25bn.  The resolution, H.R. 3146, would expand Federal Housing Administration (FHA) personnel and training and requires the Department of Housing and Urban Development (HUD) continue to review FHA-insured loans that become 60 days delinquent in the first 90 days of origination to allow earlier intervention and sanctions against potentially underperforming lenders.  It also directs HUD to carry out “demonstration programs” to analyze loss mitigation strategies for FHA-insured loans.  The House resolution will now go to the Senate for consideration.

The blame game begins

A 10-member bipartisan Financial Crisis Inquiry Commission, charged with getting at the roots of the debacle that late last year brought world banks and capital markets to the brink of collapse, will hold its first meeting today.  Critics say the causes of the crisis are already understood, ranging from deceptive mortgage lending and reckless debt securitization, to irresponsible banker bonuses and unregulated over-the-counter derivatives markets, and that dredging through all that again will only be a waste of time and a distraction from more urgent tasks.  Its proponents say that it has the potential to profoundly influence policy, and point at the impact of the so-called Pecora Commission in the 1930s, on which today’s panel was loosely modeled.  The Pecora Commission, initiated by the Senate Banking Committee, exposed rampant misconduct among some of the richest and most powerful men in America and led to reform…which brings us to the real reason for the commission:  it
may be the Obama administration’s best hope of reinvigorating a push for tougher financial regulation…and to take a whack at capitalism in the process?

Now on to our real estate education section…

Capital Gains or Cash Flow?

Not so very long ago the rage of the day was investing for capital gains and future appreciation with very little consideration given to cash flow. In fact, many so-called real estate “investors” were more than willing to buy high with the hope of selling even higher while carrying a negative cash flow all the way. Debt was viewed as only a temporary situation likely to be rapidly resolved as soon as the property sold…and properties were selling in record numbers at record prices.
Unfortunately, the tide changed (as it is prone to do) and by 2009, the vast majority of “investors” that purchased exclusively with capital gains in mind are now crying the blues. It’s not limited to real estate investors; the stock market dropped by over 50 percent at the low while home prices plummeted by a third.

On the other hand, those investors that invested for cash flow are in a much better position since rents have not experienced such a dramatic decline. They are able to sit out the financial storm while collecting a steady stream of earnings each and every month or even purchasing additional properties via short sales at bargain basement prices. Remember, rentals are not the only way to invest for cash flow; flips, lease and even owner finance all present the potential for cash flow but the basic idea is always the same….make sure you buy low enough to generate cash flow and keep a little “buffer” just for emergencies.

So, is there a time to invest exclusively for capital gains without regard to cash? Perhaps. Like any investment, if you have additional money to burn and can afford to support the property during any downturns it is possible to generate major returns. However, always be aware of the inherent risk of a property unable to “pay for itself” while still generating a profit.

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Hello world!

September 20th, 2009

Welcome to WordPress. This is your first post. Edit or delete it, then start blogging!

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