Inventory is increasing slightly. Prices remain stable. Short sales continue to dominate the market. We expect inventory to continue to grow as demand has decreased somewhat.
A Loan Modification Fable
January 24th, 2010 by Shelley BrownA fable according to Webster’s Dictionary is “a fictitious story meant to teach a moral lesson”. Aesop is the best known fable writer and most of us are familiar with his stories such as “The Tortoise and The Hare”. A lesser known fable is “The Wolf and The Crane”. For the purpose of my fable, the leading roles will be played by The Homeowner (the Crane) and The Big Bad Bank (the Wolf).
The homeowner purchased her home at the height of the Las Vegas boom. She scraped together her down payment and stretched her budget to the max. Times were good and it seemed like the right way to go before the prices got higher and homes were out of her reach. She was able to afford a $250,000 home. Her mortgage was adjustable and the payment barely affordable, but with both her and her husband’s salaries, they could make it. Of course, her credit was spotless. The American dream was realized.
After they settled into their home, they worked hard on finishing it with backyard landscaping, a covered patio, and all the things they felt they needed to make it a home. Things were going great. Then, WHAM! Las Vegas was changing- times were tough, business was off, and consequently, her husband was laid off. She was lucky – she had a great boss who cut everything else but kept her at her current salary. In addition to her husband’s layoff, her loan rate adjusted and her payment went up. Her neighbors also hit on hard times and abandoned their homes. The average $250,000 price in her neighborhood dropped to $95,000.
She was in a quandary. Should she join the group of neighbors and go into foreclosure or try to do the “right thing”? She had heard about this new thing called a “loan modification”. She contacted The Big Bad Bank and the process began. She filled out all the paperwork and had the right qualifications. It looked like a sure thing.
After several months, lo and behold, her loan modification was approved! Her payment was reduced $500!! Now, remember her loan period was extended another ten years, but it still seemed like the right thing to do. She began to pay the lower payment as they instructed. Being a vigilant person with regard to her credit, she decided to check her credit report after three months. The Big Bad Bank had reported her late to the credit bureau THREE TIMES!
When she called, she was told that her loan modification was a “trial” or “temporary” modification. She said, “But I paid what you asked!” The Big Bad Bank said, “But you paid less than your original agreement. We accepted it but it was not what you agreed to when you bought the house.” The homeowner is disputing the late payments with the credit bureau and is hoping for the best.
This homeowner was trying to do the right thing. The moral of the fable “The Wolf and The Crane” is “In serving the wicked, expect no reward, and be thankful if you escape injury for your pains”. The moral of my story is “When you try to do the right thing, the wolf still may eat you”.
By the way, This story is NOT fiction…
Why Short Sales Take Sooooo Long
January 11th, 2010 by Shelley BrownMy mother was a teacher. She always made sure her children did their homework every night- NO EXCUSES! However, I do remember kids who never had their homework done and always had some sort of an excuse such as “I couldn’t find a pencil”, “No one at home would help me”, etc. It was never believed or tolerated by any savvy teacher. The teacher was in control, not the students.
We are in an era of a new kind of real estate where we ask for the cooperation of a mortgage holder to allow us to sell a house (that has dropped so much in value) for less than the homeowner owes on the property. The homeowner is put through a grueling process and must provide detailed financial information as well as a hardship letter about why he needs to sell. At best, the process is difficult for all parties involved. The real estate agent spends hours on the phone (many of them “on hold”), the seller never knows when he has to move, and the buyer doesn’t know if he is even getting the house!!! Patience, patience, patience is required.
The banks have taken a difficult process (like homework) and made it a ridiculous farce. I have decided to write what I believe to be are the Top Ten Reasons Why A Short Sale Takes So Long. I am using some of the exact quotes we have been given by negotiators, customer service representatives, and any idiot at the mortgage company who happens to answer the phone.
#10. “We are missing the authorization to speak to you and we have to start over again”. (Even though we have faxed it 10 times and have the confirmations to prove it)
#9. “The computer crashed and we lost the file. We have to start over again”.
#8. “You have been assigned a new negotiator and we have to start over again.”
#7 “Our phone system is having problems and you are talking to someone in Texas when you need to speak to someone in California. Call next week and start over again.”
#6. “We converted the files to a new computer system and we have to start over again.”
#5. “We closed our company and transferred the file to another mortgage company and we have to start over again.”
#4 “We changed the loan number and we have to start over again.”
#3 “We merged with another company and formed a third servicing company and we have to start over again.”
#2 “We never got access to get in to do the appraisal and we need to start over again.” (Access to vacant land? Where is the front door?)
And the NUMBER ONE REASON short sales take so long…
#1 “The dog ate the short sale package and we have to start over again!”
Seriously, we really have heard most of the reasons above. We cannot understand why the banks are making the process so difficult and often buyers and sellers take their frustrations out on their agents. We all have to be patient and graciously “start over again” when the banks ask us. The banks are in control, not the agents. Remember the race with the tortoise and the hare? We all need to act like the tortoise and just keep moving to the finish line of the race and have a successful closing for both the buyer and the seller. In essence, short sales are never really “short”!
Appraisals in our downward market
April 23rd, 2009 by Harvey BlankfeldI really have a genuine empathy for appraisers. I know that there job is difficult and tedious. I also know that they are currently faced with great challenges.
The currently downward market presents a challenge that seems to be insurmountable. When given the task of appraising a home that is currently occupied and in good or great condition, appraisers have a difficult time giving value to that home’s improvements and it’s condition. They must pull comparables and the vast majority of comparables are REOs. Those homes are in dis-repair and vacant and have lost significant value. Appraisers must also pull available properties in the market. Those homes also are mostly REOs and are also vacant and often in disrepair.
If a seller needs to sell in this market, they are faced with the fact that they must not only compete with foreclosures, but they must endure the indignity of dealing with an appraisal that won’t give them enough credit for maintaining or improving their home. Appraisers are forced to perpetuate this downward market by not allowing sellers to have reasonable value given to their upgrades. I’m not talking about retail value for those improvements, I’m talking about a home with a pool, patio cover, new carpet, freshly painted, new air conditioner, new hot water heater, new stone counters, well maintained, and pridefully lived in only getting appraised at $12,000 more than a model match that was gutted and had none of those improvements. It had no appliances, no pool, no landscaping, etc.
The appraiser explained that his hands were tied. He had to use comparables that were deficient and couldn’t give sufficient value to the improvements. The seller, that understands the market is down strongly, has no choice but to accept this appraisal, because the seller needs to move. The appraisal really can’t be challenged, because of the strict new guidelines limiting access to them.
I believe that appraisers need to be kept independant of Realtor and lender influence, but I also believe that they need to be given the ability to think logically and utilize the skills they have learned over the years. If appraisers can’t give appropriate value to condition or improvements, our market will be perpetually forced downward. That must end.
