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Category Archive: ‘Short Sales’

Short-Sale Flipping

Here is investigative reporting for you.

Jason Hidalgo from the Reno Gazette-Journal found that dual-agency short sales with a prearranged cash buyer accounted for more than 10 percent of Northern Nevada’s 2,096 single-family home short sales last year.  He looked me up in February to get my thoughts on short-sale flipping, and then in his story he lays out two offenders:

http://pages.rgj.com/specialreports/soldshort/index.html

Here is an excerpt:

Krch Realty, which triple dipped commissions on more than half of its dual-agency short sales with cash buyers last year, did not respond to a request for comment for this article.

ssmarshallMarshall Realty accounted for nearly a third of such short sales in 2013. Broker-owner Marshall Carrasco defended his company’s transactions and referred further questions to his lawyer, who wrote to the Reno Gazette-Journal to “proceed with caution” on any article about Carrasco.

“Mr. Carrasco and Marshall Realty have represented many sellers in short sale transactions,” attorney James M. Walsh wrote. “As noted, full disclosure is made to the short sale sellers of the nature of the transaction. Mr. Carrasco, on occasion, presents these listings to individuals or entities that he knows are interested in purchasing short sale properties.”

Investor Jeremy Page of Harcourts NV1 Realty, a key player in the area’s real estate investment scene, stressed that all his short sale deals were done within the scope of the law. Page says his short sale purchases not only took distressed houses out of the market, they pumped more than $20 million back into the Northern Nevada economy in 2013 in the form of payments to suppliers and contractors who worked on his properties, as well as real estate agent commissions.

Real estate experts say such short sales come at the expense of the average homeowners, who do not fully understand how real estate transactions work, making them easy targets. It’s a problem that’s not limited to Nevada but is seen in other states as well where agents bend the rules for profit, said Jim Klinge, broker for California-based Klinge Realty.

“Typically, the homeowners don’t even know what they signed when these sharks get into their living rooms,” Klinge said. “I have had people call me asking if they have been taken advantage of, and in every case the answer is yes, but they never asked questions.”

The practice is especially a concern in Nevada, which saw the steepest decline in home values at the peak of the U.S. housing crisis. In recent years, the FBI identified the Silver State as a prime target for short sale fraud due to its high percentage of distressed properties.

Klinge called the lax environment surrounding short sales laughable.

“Nothing is done by anybody to stop this outright defrauding of banks, servicers and investors,” Klinge said. “There is no law enforcement or industry watchdogs, so it runs unabated. When other agents see people get away with it and make 5 percent or 6 percent commissions, then the amateurs give themselves permission to do it, too. It is going to take a district attorney vigorously pursuing this until we see perp walks nightly” for it to stop.

http://pages.rgj.com/specialreports/soldshort/index.html

This stuff happened in every major city in America over the last 2-4 years, and thankfully it’s mostly over.  Thank you Jason for a great investigative report!

Jason answers reader questions here:

http://www.rgj.com/story/news/2014/04/21/short-sale-flipping-reporter-answers-reader-questions/7983239/

Their Facebook entry here with 25+ comments and 57 likes:

Posted by on Apr 22, 2014 in Fraud, Scams, Short Sales, Short Selling | 1 comment

Selective Foreclosure

From RealtyTrac:

http://www.realtytrac.com/content/foreclosure-market-report/q1-2014-home-equity-and-underwater-report-8037

“The relatively high percentage of  foreclosures with equity is surprising to many because it would seem  homeowners with equity could easily avoid foreclosure by leveraging that equity by refinancing or with an equity sale of the home,” Blomquist  noted.

No surprise here.

With no pressure from anyone to foreclose on non-payers, mortgage servicers can be picky about who gets foreclosed.  It makes sense to foreclose where you can make a profit, and let the still-underwater folks ride the gravy train for another year or two.

Deadbeats don’t need to panic, it’s still quiet around SD County:

San Diego County Filings

Posted by on Apr 17, 2014 in Foreclosures/REOs, No-Foreclosure as Banking Policy, Short Sales, Short Selling | 3 comments

Short Sale Fraud is Illegal

Hat tip to Booty Juice!  From calcoastnews.com:

timbTimothy William Barnes, 37, pleaded guilty Monday to committing bank fraud. Barnes, a San Francisco resident, owned and operated Apex Properties Real Estate Brokerage in San Luis Obispo. Barnes is accused of orchestrating a property-flipping scheme in San Luis Obispo, Paso Robles, Pismo Beach and other Central Coast cities that netted him more than $500,000 in profits between January 2010 and September 2012.

Barnes understated the value of homes in documents he submitted to banks that he was asking to approve short sales. He then sold the houses at higher prices. Often Barnes concealed higher offers he had already received and simultaneously negotiated the short sale and resale of the houses.

Short sales can occur when the value of a property drops below the amount of money owed on the mortgage. In that instance, a bank can agree to a short sale, in which it accepts less than the total owed on the loan.

The FBI and the Federal Housing Finance Agency’s Office of Inspector General investigated the Barnes’s property-flipping scheme. FBI agents raided his downtown San Luis Obispo office in September 2012.

Barnes is scheduled for sentencing on June 16. He faces a maximum of 30 years in federal prison.

http://calcoastnews.com/2014/03/former-slo-broker-charged-federal-bank-fraud/

Posted by on Mar 5, 2014 in Fraud, Jim's Take on the Market, Scams, Short Sales, Short Selling | 6 comments

NSDCC Distressed Market – 2014

ben's smoking gunAfter seeing Bernanke holding the smoking gun on Monday (where he said that he told banks to not disrupt the economy with their REOs), did you give up hope getting a deal on a distressed sale?

If not, this might push you closer to believing.

Here is the mix of NSDCC detached listings this year:

REOs: 1

Short-sales: 10

Non-distressed: 825

REO listing agents, flippers, and short-sale scammers have to be scrambling.  Keep your head down!

Posted by on Mar 5, 2014 in Foreclosures/REOs, REO Inventory, Shadow Inventory, Short Sales, Short Selling | 0 comments

2014 Short Sales in San Diego

Can we make the case that short sales are the precursor to foreclosures?

shortsales5Those underwater probably won’t sell unless pressure is being applied through the foreclsoure process.  The ‘waterfall’ of banker events starts with a loan-mod attempt, and if that doesn’t work, then a try at short selling before getting foreclosed.

Here are the counts of SD County short-sale listings that have hit the MLS between Jan 1-9 (there will be a few added to this year’s number):

2011: 395

2012: 337

2013: 148

2014: 38

It doesn’t look like the foreclosure machine is back in business yet. Many thought that the dropoff was due to banks having to re-tool due to the newly passed CA Homeowners Bill of Rights causing the 148 last year.

The decline has been steady on the graph below. It’s hard to believe that the defaulters just started making their payments all of a sudden:

San Diego County Trustee-Sale Results

Posted by on Jan 10, 2014 in Short Sales, Short Selling | 0 comments

Short-Sale Deals?

searchingforshortsalesBuyers hoping for a deal will have to look high and low these days – because sellers are typically the most optimistic early in the selling season.

Maybe a bank-owned REO?  Don’t get your hopes up, there have only been seven REOs listed in San Diego’s North County coastal region over the last six months.

How about a short-sale?  There have been 38 listed in the same period, but with the lighter load these days, the servicers have been more diligent about selling for full value.

But I heard this story today which could help – maybe?

NationStar Mortgage requires short-sellers to first submit their home to Auction.com for sale – BEFORE the house gets inputted onto the MLS.

Auction.com gets a few days to sell the house to the highest bidder, based on a sales price that they determine after sending out an ‘inspector’ or two.  Not sure if they are assessing the condition and/or value, but we know how Auction.com operates, and their system has one troubling flaw:

Their opening bids are ridiculously low to attract the maximum eyeballs - and once you put an ultra-low price on a house, it is hard to recover.

Here is an example:

This has been on the MLS since September, listed for $1,300,000 (apparently the agent didn’t get the memo about the new process):

http://www.sdlookup.com/MLS-130051639-4035_Royal_Dr_Carlsbad_CA_92008

But starting today and going until January 5th, you can bid on-line to purchase the property, with the opening bid starting at $500,000.  They also advertise it as being a ‘Bank-approved short-sale’:

http://www.auction.com/California/residential-auction-asset/1469796-7284-4035-ROYAL-DRIVE-CARLSBAD-CA-92008-O426

We’ll check back to see if they are having any luck – I have seen this house and we couldn’t get out of it fast enough. It is a wreck of a floor plan that has divided the house into two units inside.

The success of this program will be up to the lenders. Because Auction.com positions the offering to be a screaming deal, the lenders will have to be generous about their reserve prices.

But if they are going to do that, why not just foreclose and get paid immediately, and have the trustee-sale buyer worry about gettting the former owners out of the house?

The original mortgage on this house was $1.45 million, and it looks like no payments have been made since 2010. The balance owed is over $1,800,000.  Do you think the reserve price will be under a million?

Realtors should breathe a little easier too about Auction.com’s attempts to get into residential resales.  I doubt many regular home sellers will agree to an opening bid that less than half of their perceived value.

Posted by on Jan 2, 2014 in Auctions, Jim's Take on the Market, Short Sales, Short Selling | 7 comments

Defaulters Get Another Chance

Housing foreclosure authorities LoanSafe.org and YouWalkAway.com have created a new website to help people re-enter the housing market after having been through a previous foreclosure. The website is called AfterForeclosure.com and helps those most affected by the housing crisis take charge of their financial future and own their own home again.

Read More

Posted by on Dec 29, 2013 in Mortgage Qualifying, Short Sales, Short Selling, Strategic Defaults | 2 comments

Bought And Paid For

realtorstuffingflyerboxThe California Association of Realtors’ political action committee  gave $500,000 to the state Democratic Party the day before the Democrat-dominated Franchise Tax Board effectively resolved a months-long legislative fight over the state’s tax treatment of short sales.

Tuesday’s donation, reported Wednesday evening, matches the $500,000 the Realtors gave state Democrats in May. The group also gave the party $168,000 earlier in the year and more than $1 million in 2012.

The 2013 contributions, by far the largest to the party in the current election cycle, will help Democratic attempts to keep their two-thirds legislative supermajorities in 2014.

Realtors spokeswoman Lotus Lou denied any connection between the two events. Wednesday’s legal opinion from the Franchise Tax Board stemmed from a September clarification on the issue by the IRS, she said.

“The two did not have any relation to each other,” Lou said.

In her legal opinion, Franchise Tax Board chief counsel Jozel Brunett cited the clarification by the IRS that forgiven debt after a home is sold for less than the amount owed on it should not be treated as taxable income.

“This is welcome news for Californians who have had to short sell their homes this year,” Board of Equalization member George Runner said in a statement. “We learned last month they wouldn’t face a federal tax penalty. We now know they won’t face a state tax hit either.”

Read More

Posted by on Dec 6, 2013 in Local Government, Short Sales, Short Selling | 10 comments

Debt-Tax Relief Forever

Dec. 4 – The CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) announced today it received a letter from the California Franchise Tax Board (FTB), obtained by Board of Equalization (BOE) member George Runner, clarifying that California families who have lost their home in a short sale are not subject to state income tax liability on debt forgiveness “phantom income” they never received in a short sale.

bboxer1Last month, in a letter to California Sen. Barbara Boxer, the Internal Revenue Service (IRS) recognized that the debt written off in a short sale does not constitute recourse debt under California law, and thus does not create so-called “cancellation of debt” income to the underwater home seller for federal income tax purposes.

Following the IRS’s clarification, C.A.R. sought a similar ruling by the California FTB.  Now with the FTB’s clarification, underwater home sellers also are assured that they are not subject to state income tax liability, rescuing tens of thousands of distressed home sellers from California tax liability for debt written off by lenders in short sales.

“We are pleased with the recent clarifications issued by the IRS and the California Franchise Tax Board, which protect distressed homeowners from debt relief income tax associated with a short sale in California,” said C.A.R. President Kevin Brown.  “We would like to thank Sen. Boxer and BOE member Runner for their leadership in obtaining this guidance from the IRS and FTB.”

“Distressed California homeowners can now avoid foreclosure or bankruptcy and can opt for a short sale instead, without incurring federal and state tax liability, even after the Mortgage Forgiveness Debt Relief Act of 2007 expires at the end of this year.”

Posted by on Dec 5, 2013 in Short Sales, Short Selling | 5 comments

Short Sales Less Favorable

From NMD:

RealtyTrac reports that the nature of distressed property sales is evolving.  In its most recent report on market and distressed sales, the company noted that changing economics are increasing the reliance on more traditional third party purchases at foreclosure auctions rather than the lender/borrower negotiated sale at less than the outstanding loan balance.

“After a surge in short sales in late 2011 and early 2012, the favored disposition method for distressed properties is shifting back toward the more traditional foreclosure auction sales and bank-owned sales,” said Daren Blomquist, vice president at RealtyTrac.

“The combination of rapidly rising home prices – along with strong demand from institutional investors and other cash buyers able to buy at the public foreclosure auction or an as-is REO home – means short sales are becoming less favorable for lenders.”

reos and shortsales

Read entire article here:

http://www.mortgagenewsdaily.com/11252013_realtytrac_home_sales.asp

Posted by on Nov 29, 2013 in Shadow Inventory, Short Sales, Short Selling | 3 comments