by Jim the Realtor | Jun 4, 2013 | Fraud, Short Sales, Short Selling
The number of completed short sales has dropped this year, and the agents who specialized in them are scrambling around trying to figure out how to be regular realtors.
Hopefully the short-sale business will conclude when the debt-tax exemption expires again on December 31st.
But in the meantime, the rampant fraud has continued in 2013. This year the REOs are selling for a higher average price-per-sf than short sales:
SD County Sales, All Props Jan 1 – June 3
| Year |
#REOs |
$$/sf |
#SS |
$/sf |
#Non |
$/sf |
| 2012 |
2,502 |
$178 |
3,401 |
$190 |
8,725 |
$253 |
| 2013 |
994 |
$200 |
2,335 |
$198 |
11,871 |
$285 |
Thankfully, the Non-distressed sales are dominating the landscape, and eventually we might forget about this seedy chapter in realtor history.
by Jim the Realtor | May 17, 2013 | Fraud, Scams, Short Sales, Short Selling |
These are the short-sale scams mentioned in yesterday’s comments that deserve their own post as a resource for people to use to protect themselves. If you have seen other tricks, include them in the comments so we stay aware!
The most common packages:
1. The listing agent spoons his lowball short-sale listing to an investor to start the lender-approval process. Agent then finds the retail buyer, and once the investor closes at the lowball price, they sell it to retail buyer and pocket the difference.
Once a SS investor chimed in here that this is legit because he discloses to the lender that he is buying for the purpose of immediate re-sale for profit. I’m not sure why a bank would agree to that, but we do know that some banks’ short-sale departments are so busy that they will approve sales just to move product, and may not care as much about getting top dollar.
2. The listing agent can’t close the lowball deal so he tacks on a five-figure processing fee or lien-release charge instead. The short-sale processor is complicit though usually paid by buyer so fiduciary conflict there too, though they will claim to be a neutral 3rd party.
3. The investor approcahes the listing agent and agrees to have the LA represent them on the purchase so agent makes 6%. But the investor gets to negotiate the deal with the bank, and they go in ultra-low with or without the agent’s knowledge. If the investor gets it approved, hooray, they put in the standard $15,000 flipper package and make $100,000+ by selling it to the retail buyer they find later. If not, the seller has to start over on a short-sale process before he gets foreclosed.
4. Listing agent appears to expose property to the open market, and fields several offers. Short-sale closes months later for far-under your offer price, and an insider represented the eventual buyer – usually an agent in the same office.
Tell-tale evidence, usually left all over the MLS:
A. The five-second listing, where once the listing is inputted, it is immediately marked pending or contingent.
B. List-price reductions after marked pending/contingent, usually several smaller reductions over months of time.
C. Listing office represents both buyer and seller (listing agent gets a buddy in the office to help diffuse the obvious).
D. None or one photo, or a few terrible photos meant to throw people off the trail.
E. We saw in the news the idea of ‘negative staging’ where they beat up the house prior to appraisal.
F. Widespread abuse of fiduciary duty being inflicted by new and experienced agents, many of whom work at big-name legitimate firms whose managers look the other way.
by Jim the Realtor | May 16, 2013 | Short Sales, Short Selling |
Here is a glimpse behind the curtain of short-sales, and a very typical example of what is happening in the field.
Comment on what you think occured here:
http://piggington.com/short_sale_advice_needed
by Jim the Realtor | May 13, 2013 | Frenzy, Short Sales, Thinking of Buying?, Thinking of Selling? |
What makes me think the frenzy is slowing down?
1. List prices have gone from ‘exuberant’ to “hit-the-lotto” range, generally speaking. Have you seen it too? It’s not enough to just get more than the last guy, some sellers list so high that they must be thinking of funding the retirements of them and the kids!
2. The days-on-market statistic is dropping, but we are into dizzying warp-speed now – it can’t get much faster.
Here are the DOM for NSDCC detached-home pendings/solds for each month (DOM stops when marked pending, so the DOM is the same whether the listing is marked pending or sold):
Avg Days-On-Market NSDCC Under-$1,000,000
Jan: 48
Feb: 34
Mar: 34
Apr: 30
May: 21
This has to be the peak DOM, doesn’t it?
3. The last big pricing upsurge was in 2003, and even though they were giving mortgages to anyone who could fog a mirror, the intense frenzy only lasted about a year – the pricing leveled off to minor increases starting in 2004. There should be a natural limit on increasing prices – how much can buyers endure?
4. The gap between fraud and flip is getting larger, which should throw logical buyers back to the sidelines. You see it every day – and well, here are two new listings today of similar houses in the same neighborhood with nearly 20% price difference:
Five-second listing – 2,876sf asking $562,600:
http://www.sdlookup.com/MLS-130024262-3453_Ravine_Dr_Carlsbad_CA_92010
Flip – 2,476sf asking $669,900:
http://www.sdlookup.com/MLS-130024357-3429_Moon_Field_Dr_Carlsbad_CA_92010
At some point, don’t buyers start to hesitate when they see these shenanigans? They should, because it isn’t right – and unfortunately for the legit flipper, it is he who could be harmed.
Just like when the boom started out of nowhere last year (right before the election too!), it is likely that the frenzy will slow….or stop…without notice.
(I’ll add more later)
by Jim the Realtor | May 13, 2013 | Fraud, Scams, Short Sales, Short Selling, Thinking of Buying? |
Most mortgage fraud takes place in the short sales and REO space, according to Rob Hagberg, associate director of fraud investigations at Freddie Mac. “This area is ripe with fraud,” he said during a webinar hosted by CoreLogic.
While servicers and others in the industry have adapted to some fraud schemes and put measures in place to detect and prevent fraud, schemes continue to evolve as fraudsters find new ways to manipulate sales.
For example, many fraudulent REO and short sale transactions involved the use of a straw buyer who temporarily purchased a home at an undervalued price and then sold it to a third party at a higher price.
These transactions would be immediately suspicious to anyone reviewing property records, which would show a home was sold for one price one day and then almost immediately resold at a higher price. Savvy perpetrators are now eliminating the second buyer. Property records will not reveal a middle buyer, but they will reflect a higher price than the servicer agreed to.
Another growing trend in short sale fraud is what Hagberg calls the “short sale and stay.” This occurs when an underwater homeowner wishes to keep his or her home but wants to lower his or her loan amount.
The homeowner will recruit someone—often a friend or family member—to purchase the home through a short sale, and the original owner will remain in the home.
Sometimes, a wife will use her maiden name to purchase the home from her husband, and the couple will stay in their home.
Both short sale and REO fraud often require fraudsters to convince servicers a home is worth less than it actually is.
To accomplish this, fraudsters have attempted to bribe REO brokers, manipulate MLS data to lower the prices of comparable properties, and have engaged in reverse staging to make a property appear in worse condition than it is.
In cases of reverse staging, Hagberg has seen cabinet doors removed from kitchen cabinets, garbage left lying around the home, and sometimes old fish hidden behind refrigerators to create pungent scents.
Sometimes BPOs include false property stigmas such as high crime rates, and in a few instances Hagberg has seen properties undervalued by as much as $40,000 under inaccurate statements that the home had been a meth lab and would need to be entirely gutted.
http://www.dsnews.com/articles/reo-short-sale-fraud-continue-to-evolve-2013-05-10
by Jim the Realtor | Apr 2, 2013 | Foreclosures/REOs, Short Sales, Short Selling
A bill that would extend for one year state income tax relief provided to homeowners who receive mortgage relief from their lenders was temporarily put on hold in the Legislature on Monday.
If enacted, it would align state law with federal law, which has been extended to provide another year of tax relief.
Through “short sales,” lenders agree to let borrowers sell their homes at a price lower than the amount owed on their mortgage. They then forgive the difference between the sales price and the amount owed. Historically, such loan forgiveness has been treated as income for tax purposes.
The federal Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure or short sale of a primary residence up to $2 million, qualifies for the relief.
The state law providing more limited relief than the federal act. It excluded from taxable income up to $500,000 in debt forgiveness.
AB 42 by Assemblyman Henry Perea, D-Fresno, would extend the state law for a year. The Franchise Tax Board estimates its enactment would reduce state tax revenue by $50 million this year.
The bill was presented to the Assembly Committee on Revenue and Taxation on Monday. As it routinely does with measures that would significantly affect state revenue, the panel delayed taking action until the details of next year’s budget projections become clearer.
Read more: http://www.vcstar.com/news/2013/apr/01/bill-seeks-to-extend-state-tax-relief-for-debt/#ixzz2PGp6Rkhv – vcstar.com
by Jim the Realtor | Mar 26, 2013 | Sellers Waiting For Comeback, Shadow Inventory, Short Sales
Equity sales, that is sales of non-distressed properties, now constitute two-thirds of all home sales in California, compared to less than one-half only one year ago. A report from the California Association of Realtors® (C.A.R.) puts the share of equity sales in the state in February at 67.1 percent, compared to 64.4 percent in January and 46.7 percent in February 2012.
This is the highest share of equity sales since April 2008.
Short sales made up 19.9 percent of sales in California in February compared to 21.5 percent in January and 24.8 percent a year earlier. Sales of lender-owned real estate (REO) represented 12.6 percent of the home market in February, down from 13.7 percent the previous month and 28 percent in February 2012.
C.A.R.’s Pending Home Sales Index (PHSI) rose 8.7 percent from a revised 101.4 in January to 110.2 in February but was down 8.2 percent from the index in February 2012 of 120. The index is based on signed contracts and is a forward-looking indicator of future home sales.
The annual decline of pending sales might be attributed to the tight inventory of available homes. The Unsold Inventory Index for REOs was unchanged from January to February at 2.0 months while the Index for short sales was 3.3 month and for equity sales it was 3.8 months.
http://www.mortgagenewsdaily.com/03252013_california_home_sales.asp
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Closed sales of detached homes in North SD County Coastal, last 30 days:
REO: 5 (2%)
SS: 15 (6%)
Regular: 239 (92%)
It’s hard to believe that there are so few distressed sellers. People have suggested that the banks are adjusting to the California Homeowners Bill of Rights, which was announced in July, 2012.
It’s been nine months now, maybe they are getting back on track?
by Jim the Realtor | Feb 28, 2013 | Fraud, Market Conditions, REO Counts, REO Inventory, Short Sales |
Wouldn’t it make sense for banks to be unloading REOs when all we see are bidding wars everywhere?
Initially we thought that the drop-off in foreclosures was because banks were pushing people to short sale instead. With this being the last year of debt-tax exemptions, wouldn’t we be seeing a surge of new short-sale listings?
Nope, instead it appears that they have shut down the foreclosure machine:
San Diego County New Listings between Jan 1 and Feb 28:
| Year |
SS Listings |
REO Listings |
| 2010 |
3,106 |
1,427 |
| 2011 |
2,766 |
1,297 |
| 2012 |
2,402 |
919 |
| 2013 |
1,187 |
393 |
Defaulting homeowners are going to squat as long as possible because they really don’t want to move – besides, rents are high and their credit is shot.
For short sales to occur, banks have to threaten to foreclose in order to keep the pressure on, otherwise defaulters will just keeping living for free.
But both short-sales and REO listings have plummeted.
Pollyanna thinks that people are making their payments again, or that the foreclosure settlement caused enough loan-mods that the problems are solved. No way. Filings are down, and cancellations are up because that has become policy now.
by Jim the Realtor | Feb 20, 2013 | Market Conditions, Mortgage News, Seminars, Short Sales |
Yesterday I attended the Bank of America REO/Short-Sale seminar for agents on their preferred list.
They haven’t sent me a new REO listing in about a year, so I thought I better attend, just in case it improves my chances.
They mentioned that they’ve cut 1,200 agents from the list already, and expect to trim it down another 1,000 and end up with fewer than 4,000 preferred realtors nationwide. Uh-oh.
Bank of America’s REO and Short-Sale Seminar highlights
1. Just 18 months ago, Bank of America was acquiring 16,000 properties per month through foreclosure. Today their count is 3,000 to 4,500 per month. There were a variety of reasons given for the dropoff:
- The mortgage settlements caused it.
- Loan modifications.
- They are selling off servicing rights when mortgages go 60 days late.
He admitted that there are probably a lot of people who are living for free.
2. Foreclosure volume is predicted to be FLAT over the next year or two.
3. Once foreclosed, their goal is to dispose of the property within 180 days. Last year the average was 210 days.
4. The bank’s public website that displays properties for sale will have a “coming soon” section where readers can preview new listings. (This site has never been updated frequently so don’t get your hopes up).
5. They are open to selling tenant-occupied properties to investors. Because they see so many cash offers, rather than wasting time and money on evictions, they will consider investor offers in advance that keep the occupants in the home.
6. Out of the other side of their mouth, it was stated clearly that asset managers will not respond to offers until the property has been on the MLS for five days.
7. Bank of America expects to sell or transfer 2,000,000 properties this year.
8. They solicited 15,000 defaulting homeowners last year with the pre-approved short-sale program, offering up to $30,000 in incentives. Only one of eight homeowners took them up on it.
9. They solicited 2,000 defaulting homeowners to accept a deed-for-lease program, and only eleven homeowners agreed (where the homeowner signs over ownership and leases back).
10. Their average short-sale-approval time is 43 days.
11. Fraud is found in 23% of short sales.
12. They have a pilot program underway to sell short-sales through Auction.com. The seller still gets an incentive to participate, and realtors are involved. The properties are offered with a pre-determined reserve price, but at least the auctions will take the buyer-selection process out of the listing agent’s hands.
There were no promises or even hints of increased production – but they say that they want to hurry up the process. The phrase, “think outside the box” was said at least a dozen times, but many of us were skeptical that any major chances were coming.
by Jim the Realtor | Feb 19, 2013 | Short Sales, Strategic Defaults |
Andreea Stucker thought she made a good investment when she bought a Huntington Beach condo with her boyfriend in December 2005.
But then she and her boyfriend split up. He moved out just as the housing market crashed, leaving Stucker broken-hearted, and broke.
With her own income down at least 60 percent, the real estate agent was unable to make the $4,400-a-month mortgage payments on her own, even after taking in room-mates.
“I begged the bank for over seven months to grant me a loan modification to reduce my payments, because I was rapidly going through my savings,” Stucker, 34, recalled. “I ended up completing a short sale on my home, and my credit took a huge hit.”
Three years later, Stucker has mended both her heart and her credit score. She has a new husband and, “miraculously,” a new house.
Stucker is among the emerging ranks of boomerang buyers — people who bounce back from foreclosures or short sales to become homeowners again.
Generally, buyers must wait at least three years after a foreclosure or short sale to qualify for a government-backed Federal Housing Administration mortgage. It can take seven years to get a conventional loan backed by Fannie Mae or Freddie Mac.
It’s been 4 1/2 years since the foreclosure crisis peaked, and real estate industry observers say they have seen boomerang buyers gradually returning to the Orange County market for at least a year.
After 3 ½ years, Stucker still cries at the memory of losing her Huntington Beach condo. She and her ex-boyfriend paid $613,000 with no money down for a two-level condo with cathedral ceilings and skylights, two bedrooms, two bathrooms and a spacious loft less than two miles from the beach.
They spent $40,000 more installing granite countertops, hardwood and travertine floors, new bathroom vanities recessed lighting and other upgrades.
But it turns out that the real estate game isn’t just about location, location, location. It’s also about timing.
By December 2005, Orange County home sales had just headed into a three-year nose dive. Home prices soon would follow.
Stucker’s income as a real estate agent dropped. Her boyfriend moved out after five months. Eventually, she depleted $29,000 in savings, then quit making house payments.
Unable to get a loan modification she could live with, Stucker sold the condo in May 2009 for $425,000 — $188,000 less than what she owed on two mortgages.
Her credit score went from 798 in December 2005 to the low 500s by May 2009.
“It was probably nine months that I fought for that home,” Stucker said. “I loved my house, and I wanted to stay.”
In hindsight, she says she should have cut her losses before dipping into her savings. But she kept thinking the market would turn around, and she’d be able to afford the home again.
“It’s like getting kicked when you’re down,” Stucker recalled. “You’re going through this awful breakup with this person you thought you had a future with, (and) your income is crap even though you’re working full time. … It was tough.”
Read more here:
http://www.ocregister.com/articles/years-496154-stucker-loan.html
