CA renter and I saw this new listing hit the market at about the same time yesterday, and had the same reaction – you gotta be kidding!
http://www.sdlookup.com/MLS-090037885-3302_Azahar_Carlsbad_CA_92009
It’s a 34-year old house with no upgrades on an 11,000sf lot in Old La Costa. In January, 2004 the homeowners paid $580,000 using a 3% down payment, and then did a cash-out refi in 2005, bumping the loans to $657,000.
They’ve made about $70,000 profit on the deal.
Now they are in foreclosure.
Yesterday the new listing pops up, and is marked ‘contingent’ immediately, awaiting lender approval of short sale. It appears that the listing agent must have had their own buyer, and put the short-sale deal together prior to MLS input.
CA renter posted it on Piggington as fraud, because of the ultra-low price of $450,000.
A number of issues arise:
1. Do the sellers and/or realtor have any legal or fiduciary duty to the lender, Wells Fargo, who is facing a haircut of approximately $230,000?
2. What’s the real value of the house if it’s not exposed to the open market?
3. Do taxpayers take a hit on these? Or just Wells Fargo shareholders – or MBS holders?
4. As a realtor representing a buyer, am I compelled to search out these deals?
The first three questions have the same answer – it’s up to the bank to protect themselves and their shareholders or MBS owners. Just getting an appraisal done probably isn’t enough protection.
The fact that the agent inputted the listing onto the MLS must mean he represents the sellers too, which gets touchy if you ask me, especially regarding the potential liability of short sales. Will the banks chase around old borrowers of recourse loans some day in the future? They might, nobody knows for sure.
If the agent formally represents the sellers, then he should do what’s best for them – obtain the highest-and-best offer. That way they’ll have the best chance of getting bank approval, and minimize the loss that the bank could try to collect in the future.
I think we’ll agree that it’s not likely that any agent puts much thought into these, they are just looking at picking up a 5-6% commission in the next few months. There hasn’t been any guidance issued by any government entity, and, of course, nothing from NAR, CAR, Sandicor, or local boards on what is acceptable, or how to properly handle these cases.
Let’s drop down to point #4 – aren’t buyer’s agents compelled to search out these deals? The house in question is offered at 2000-2001 pricing, doesn’t every buyer want that? CA renter said she’d pay $450,000 for it, and that’ll tell you something right there!
The buyer-agents have a fiduciary duty to their buyer to get them the best deal possible. These are some of the best deals, if you can get them closed.
There are hundreds of these happening now – I know of one agent alone who has 32 of these in process currently. He inputted all of them as pending listings, not contingent, and he also marked that he is representing the buyer too. Since November he has only closed four and had at least three get foreclosed, so getting them done must be a challenge when you have 32 on your desk.
This type of guerrilla salesmanship is where the realtor profession appears to be heading – to find these deals for their buyers, secure them at favorable pricing, and get them closed. The REO sales are just as challenging – wait until the frenzy breaks out over seeing bank-owned SFRs in Carmel Valley listing for $300/sf!
This type of guerrilla salesmanship is where the realtor profession appears to be heading – to find these deals for their buyers, secure them at favorable pricing, and get them closed.
Yes, yes! Find me one of these deals, please! 😉
So what I don’t quite follow on these deals, it is dual agency, right? ( I guess tri-agency if you want to make the probably wrong argument that the agent represents the bank too).
If the agent is closing the short sale while leaving open the possibility that the seller gets hit with a bigger recourse claim from the lender, or bigger cancellation of debt income from the IRS if they did the cash out refi thing, agent is going to get dragged into the problem when the lender sues or taxing authority assesses by any attorney with half a brain.
And I don’t think the boilerplate CAR language about the Seller getting its own attorney and tax advice is going to cut it when the facts show that the agent was pushing it through to get the buyer the best deal. Not to mention compliance with the foreclosure consultant rules when the closing takes place after an NOD is recorded.
Danger Will Robinson
Yes the foreclosure-consultant compliance is sticky too. Think any of these agents are considering the risks?
Californians will get enhanced protection from foreclosure rescue scammers under a new plan from state Attorney General Jerry Brown, which will require foreclosure consultation companies to register with the AG’s office and post a $100,000 bond by July 1st if they want to stay in business.
The plan will create a registry of foreclosure consultants operating in the state, which will allow consumers to research companies before they seek their services, and will also open up a paper trail for recourse if the company violates the law. All foreclosure consultants operating in the state must post a $100,000 bond with Brown’s office by July 1, and provide company information — including copies of contracts that will be offered to consumers, and examples of advertising.
Foreclosure “rescuers” who try to stay in business without fulfilling the new registration requirements will face criminal penalties, including up to a year in jail, and fines from $1,000 to $25,000 for each violation.
Here’s the civil code on foreclosure consultants:
http://www.leginfo.ca.gov/cgi-bin/displaycode?section=civ&group=02001-03000&file=2945-2945.11
First thing a bank should do when receiving a short sale package instead of ordering a BPO is ordering the MLS hit sheets and ask for the property history. If they see the listing inputted and then going contingent within a couple minutes they should kill the deal right there and demand open exposure to the market.
Lenders should also have resources available where you can email these things.
Agree 100% with that, ED.
More shady business practices, does not surprise me a bit.
I would think that with the available technology these including Google maps, Streetview, MLS maps census data, HUD data. A reasonable person can sniff these out in a second. I think a problem is that the departments were understaffed for this climate that they filled positions with any old body. Most people here could tell something wasn’t right immediately because we spend way to much time on this. I wonder how much technology the banks have built in into their software.
Here’s another weird listing that appeared recently:
NOT A SHORT SALE! Terrific views! Home has been recently upgraded, with slate tile floors, newer kitchen cabinates and corrian counter tops, large yard for your grownin family, large family room with wet bar, great for entertaining, ALL BUYERS MUST BE PRE-QUALLED WITH CHAMPION MORTGAGE PH 888-390-2432
What’s up with *requiring* a specific mortgage company — one you’ve never heard of — in order to be the buyer? As an interesting exercise, try googling “epinions champion mortgage” for some people’s experiences with Champion Mortgage.
Jim,
Thanks for going against the flow and telling it like it is. I hope that your business thrives. We tax payers will suffer in the end. The banks have staffed themselves with people who are barely scraping by so; hence they don’t care whether the deal stinks or not and just rubber stamp it.
-Big Fan
From the LA Times: “Complaints Erupt About Lowball Home Evaluations”
“Reporting from Washington — It’s by far the hottest controversy in real estate this summer, and it could directly affect the value of your house — probably negatively — by tens of thousands of dollars.
The issue concerns lowball valuations and the new rules guiding appraisers in both price-depressed and rebounding markets. Consider these snapshots of what’s going on:
* In San Diego, Steve Doyle, division president for Brookfield Homes, is trying to close out the final 20 houses of a 120-unit single-family subdivision. Prices range from $340,000 to $350,000. But recently there’s been a major hitch: Appraisers assigned by banks are coming in with valuations $60,000 or more below Doyle’s selling prices. The appraisers, who Doyle says are unfamiliar with local market trends, inexperienced or both, are using distressed sales — foreclosures and short sales for less than the amount owed on the mortgage — as their “comparables.” Some of the distressed properties are in poor condition, and all of them offer fewer amenities, Doyle said.”
Full article:
http://www.latimes.com/classified/realestate/news/la-fi-harney5-2009jul05,0,5375301.story
There’s always the chance that the buyer and seller are both “acquaintances”. The seller gets out on a short sale, the buyer gets a steal of a deal, and the agent gets the full 6%. Oh, and perhaps the buyer kicks back a few bucks under the table to the seller.
Smells to high heaven.
Jerry Brown for Governator………oh…..he already was….and how! I actually bought my first house at a Caltrans auction of homes Orange County in Fountain Valley in 1976. Some of the homes that were bought up by Caltrans in preparation for a new planned freeway going from the 405 to the beach to relieve the growing traffic on the major streets to the beaches. But Brown put a stop this and many other freeways. He decided that he will make people use mass transit instead and slow the growth of people moving to Ca. What an air head. So they auctioned all the houses that they had purchased and killed all new freeway plans. Now of course, the freeways are still so badly needed, but now the cost has skyrocketed out of sight and on top of that, the state is broke. And this clown wants to be governator again? Sick. I would rather have Ahmadinejad for Governator.
Been trying to snag one of these REO/short sales for 6 months now. Time and again we have witnessed these scumbag-realtor shenanigans……. The listing goes *pending* as soon as it hits the MLS.
It is a rampant problem that is known to EVERYONE in the real estate industry (San Diego anyway).
Why the Fu!%@ hasn’t the NAR stopped this criminal crap?
Murf2222
Another reason why the future of the job, “Used Home Salesperson” is going away in the main. Sure, there will be some specialists and some niche operators but for the most part, buying or selling a home in a Redfin environment is no less “safe” than doing so with the vas majority of Realtors (TM) out there.
No slap against Jim but you’re the exception, not the rule.
It’s like the old saw about attorneys. “The only person who wins in court every time are the lawyers.” Same thing for realtors and I think people are going to realize that they’re better pocketing the difference and casting their fates to the wind (and/or using an attorney).
And in the end, it’s CAR and NAR who bear most of the responsibility. They tacitly support this activity and been disingenuous marketing their business for years.
I agree Ice, the CAR and NAR could have taken the lead to help create a future for realtors, but instead they perpetuate cheerleading.
When the banks evaluate the short sale offer, don’t you think they are going to look at things like days on market (
When the banks evaluate the short sale offer, don’t you think they are going to look at things like days on market (1 day) and then at least pull a computer appraisal to see if the price is even in the ballpark??
You mean the banks will perform due diligence?