Tag Archives: Bank of America foreclosures

Insider Secrets from a Foreclosure Pro

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With foreclosures slowing down, the competition to purchase these bargains has become even stiffer.  Many people call each week hoping to land these bargain properties and few will win the prize, so we thought it might be helpful to buyers and agents alike to learn the inside secrets on being the successful bidder on these properties.

As a listing agent for many banks, we know what the banks are looking for. We speak to the asset managers.  If you follow these tips your chances will increase as not every buyer knows what the bank considers when looking at multiple offers, which many foreclosures receive.

The first thing buyers must understand is there is a lot of competition for these homes.  Typically bank foreclosures go fast, and for over asking price.  Everybody seems to want them.  So structuring your offer and submitting it correctly will increase your chances.

Foreclosure Tips From a Real Estate Pro
How To Buy a Foreclosure Chart

Keep in mind, listing agents must have all the required information, so if they ask for something upfront, they mean it.  Listing agents don’t have time to track your agent down for this info.  We attach a document to each MLS listing specifying what is required with the offer.  Make sure your agent completes every single field.  We submit offers into an online system, and if information is missing, the offer cannot be submitted.

The bank never sees your offer until one is accepted.  The listing agent must enter information into an online submission, and it must conform to what the bank asks for, and all fields must be filled out.  If a foreclosure has 20 offers, the listing agent doesn’t have time to call 15 agents and beg for information that is required by the banks online system.  Keep in mind, it takes awhile to upload 20 offers, and the listing agent may be dealing with 20 properties.

Listing bank foreclosures is very time intensive, and the listing agent coordinates everything from repairs to working out HOA fees, title issues, code violations, etc.  Providing the required information is the first step.

Secondly, consider that you’re probably competing against other buyers, and that many will be above asking price.  So how do you compete?  Consider a higher escrow money deposit, shorter closing time, and definitely a shorter inspection period.  Bank asset managers are also gauging the strength of each buyer, so you want to put your best foot forward in hopes of getting the property.

Banks are on the lookout for buyers tying up properties then using contingencies to escape later.  Banks want solid deals, so you want to dress up your offer to make you look like the best buyer in the batch.  The price will be close to asking price or above because it’s a deal anyway, so you have to compete in other ways.

In many cases banks will counter multiple offers with highest and best.  Buyers are shocked when the bank doesn’t and just accepts one offer, so it always pays to pony up early on and go for it.  If you do get a highest and best form, assume the other buyer wants it as bad as you do, and act accordingly, because if you don’t, chances are you won’t end up with the home.

Be careful that your offer is written well and clearly states all fees and costs.  It is difficult to impossible to make changes later, and it could cost you the home.  Any change to the contract later on opens up the possibility the home goes back out for rebid and you could lose it, so it pays to write offer correctly the first time.  Same applies with names; make sure everyone who wishes to take title is on contract from beginning. You may not be able to add names until after closing, which could require new title insurance and additional fees.

If you’re purchasing as an LLC, make sure you provide documents upfront that you’re authorized to sign for the LLC.  The bank will ask.

These are some very useful tips by an experienced foreclosure agent. Each bank has their own rules, so be sure to follow directions well.  Make sure you’re working with an agent who understands contract language. Many times we see financing contracts that don’t match up or specify some costs buyer is not allowed to pay under the buyer’s financing program, and the offer cannot be presented to bank until language is cleaned up which could cost the buyer the sale because of delays.  Be sure to work with an agent who has experience writing clear and concise contracts and understands financing in and out.

Following these tips will increase your chances, and ignoring them will most assuredly have you scratching your head wondering why the bank selected another offer.  Good luck and happy house hunting.

 

Stop-Go-Yield!

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Last week we reported that distressed sales accounted for 63.27% of all single family home sales in August, and that a big shake-up was about to ensue as banks declared they were halting foreclosure sales at auction until they had time to investigate whether they’ve followed proper procedures.

Since that time Three major lenders (J.P. Morgan Chase, Allied Financial Inc. (GMAC,) have all stated they were halting foreclosures, but that doesn’t seem to be the case. Last week there were in fact several foreclosure sales to the astonishment of the banks who have instructed their local counsel to halt proceedings of final judgments until they study each case.

SW Florida Real Estate Foreclosure Market
Stop- Go- Caution

We at the Ellis Team handle foreclosure sales for one of the large banks and FNMA. FNMA says they have not been affected because they didn’t employ the robo signers the big banks did. The large bank we work with gave us orders on 10 new properties in the past 2 weeks, and we had a closing this past week.

To date title companies are still issuing policies and the banks are still closing sales, although we’ve heard reports of some cancelled sales by agents. Banks may be halting summary judgments, but in many cases they are moving forward with new foreclosures to get the process started, but holding off on the final judgment or auction sale until they know they are on solid legal ground with their paperwork. This is not necessarily stopping them from disposing and selling properties they previously foreclosed on.

So one has to wonder if the bank’s announcement was all a farce for publicity. The answer is probably not. These banks are large and decisions take awhile to matriculate down to all the branches. The implications are huge though.

What’s at stake is the bank’s legal authority to foreclose. Typically the bank makes a loan then services the loan after they sell the loan to an investor, often times as a group package in what is called a security. These loans are typically bundled together with many loans, and many investors may join together and invest in the security package. Other times an investor will buy individual packages of loans.

Because these original loans get bought and sold, there must be a paper trail as to who actually owns the security, and the right to foreclose against the borrower. Defense attorneys have long asked for the lender to produce the note, often called “Produce the note defense.”

Usually the lawyers would sign affidavits that they, or the bank does indeed have the note, and the judge would accept that. The reality is, the note and other paperwork may be missing and perhaps never found. Because of all this, some judges may no longer accept those affidavits, and many of these sales may be in question.
Some speculate this could happen in as many as 30-40% of the cases out there, and the answer is nobody really knows, not even the banks or attorneys right now. This is why banks and states have opened investigations. If this is wide-spread, it could have deep financial implications to the banks and investors, and we wouldn’t be surprised to see damage suits against the banks by those foreclosed upon where the paperwork was insufficient.

This very well could stall the process and tie up the courts for awhile, which could affect the real estate market. It would make sense for the banks to emphasize short-sales now that foreclosures could be delayed, but the banks don’t always make sense.

Inventory could dry up, and transaction volume could decline. Some speculate prices would be driven up fast and furious, but we’re not so sure. We’ve had high sales because prices have been at bargain prices. Unemployment is high, and the economy is hurting. Will prices rise just because supply goes down? In a balanced economy, we’d say yes. In this economy, we may just be prolonging the foreclosures further out and delaying our recovery. We hope this situation gets resolved quickly as nothing good results from a foreclosure moratorium. In the end, the property will still be foreclosed or sold, so no sense delaying it and letting neighborhoods decay and the market falter. Let’s hope this gets fixed and we all get back to business soon.

Watch SW Florida Real Estate Update-Foreclosures-October 2010 on video

Big Shakeup in SW Florida Real Estate Market?

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Last month distressed sales in Lee County accounted for 63.27% of all single family home sales.  This trend has been fairly constant for the past few years as Lee County has been hit hard by a sagging economy and a fallout from the real estate industry.

We have reported in past articles how the government’s loan modification plan was ill conceived and would not help struggling homeowners and in fact would prolong the housing crisis, and this has born out.  While there is plenty of blame to go around, there is a new threat on the horizon that may shake-up the SW Florida real estate market and change the landscape of transactions.

SW Florida Real Estate Distressed Sales Chart
Percent of Distressed Sales in Lee County Florida June-August 2010

Because of the volume of foreclosures nationwide, banks have hired outside firms sometimes regarded as foreclosure factories to handle and process the foreclosure.  The problem is that these firms must certify and investigate certain facts before presenting to the court a notarized package that the person investigating has read all the documents and certified the package is true and correct.

Through recent testimony, it has been revealed that a few of the large banks have one person signing thousands of documents, making it unlikely this person has personally reviewed each case.  In another case the vice president of one bank is also the vice president of another large bank, and is the person notarizing the attorney-in-fact’s signature. This is suspect and unlikely true, which gives further credence that this person is rubber stamping notary signings for various banks, which could invalidate all those foreclosures.

Three major lenders (J.P. Morgan Chase, Allied Financial Inc. (GMAC,) and Bank of America have halted foreclosures in 23 states because of this. There is a potential to postpone many foreclosures both here and nationwide, which could stall a real estate recovery.  The talk of the industry is, would this make banks more likely to consider short sales?  The answer is that would make too much sense, but it would speed things up and limit bank’s liability in this foreclosure document crisis.

FNMA has not been affected, and this document crisis will not halt all foreclosures, but it will shake things up for awhile.  What’s going to be interesting is how the failure of the banks to properly certify their properties for foreclosure will affect title.  A few title companies have already suspended issuing title policies on foreclosures of certain banks until they can determine the foreclosure was in fact legal.  The interesting question would be what happens to previously sold properties that could come into question?

This all sounds like a legal mess, and it probably is.  It is uncertain what all this means, but we do know it could have a profound impact on available inventory, and possible further effects on past sold bank foreclosure properties.  The implications are far reaching and beyond the scope of anyone’s expertise I know of to accurately predict how this will play out.  Our guess is it will just delay foreclosures in our area, which will prolong the market recovery.  Sales transaction could decline further unless banks step up and approve more short sales.

This is one of those wild card events that can affect the market.  Past wild cards were terrorism, oil prices, and the previous financial liquidity crisis.  Stay tuned.

Watch October Bank foreclosure video update-SWFL

Short Sale Update

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A few weeks ago we wrote about attending a recent bank foreclosure and short sale conference.  We told you that banks and the US Treasury department have learned that home retention and loan modifications are not working, and that 2010 will be a year of “The Transaction” either by short sale or foreclosure.  More banks are actually pursuing both simultaneously. 

We’ve been illustrating graphs showing the percent of distressed sale activity in Fort Myers, Cape Coral, and Lehigh Acres for months now, and this week we decided to update Short Sale activity.  While analyzing MLS data this week we noticed foreclosure sales have dropped in January and February to about 579 per month, down from approximately 700 or so the previous 5 months.  This can be attributed to a backlog of foreclosures in process and a moratorium in place early in 2009. 

Closed Short Sales in SW Florida

We also noticed a stabilization and recent up tick in short sales, reversing a decline in December 2009.  Will these trends continue?  Let’s start with the foreclosures.  We believe foreclosure sales will increase in 2010 as the backlog comes to the market. In fact, we’ve received a large volume of foreclosure listings we’re working to bring to market.  It typically takes time to secure the property, assess the condition, the value, workup a Broker Price Opinion, compare that against the bank’s new appraisal, and meet with the investor to develop a marketing strategy on each property.  All of this is done through the use of a bank asset manager, either an employee of the bank or 3rd part asset manager.  Either way, asset managers specialize in disposing of REO (Real Estate Owned) bank foreclosures. 

Once the value and strategy is determined, the property goes from a pre-listing to an actual listing complete with instructions.  The agent then lists the property in MLS and solicits offers.  Many times the property elicits multiple offers, and the agent presents all offers that match the bank’s criteria.  For instance, we are not allowed to present any offers where we have not personally verified cash funds to close on all cash deals, nor are we allowed to present any subject to financing offers without pre-qualification from that bank’s in-house loan officers.  Banks do not want to take properties off the market simply because a buyer presents a pre-qualification letter from an unknown or out of town bank or mortgage broker.  Speaking from experience, banks and agents have had bad experience with pre-qualification letters.  They are easy to get, and are rarely worth the paper they’re written on, so it is quite natural the bank wants their own people to look at the qualifications of the buyer if they are getting a mortgage.  The borrower doesn’t have to use that bank, but the bank will not look at the offer unless they are offered their pre-qualification letter with the offer. 

So we know 2010 will offer more foreclosure properties that have been initiated in 2009.  What about short sales?  Banks are not offering loan modifications as much as they have proven that they do not work long term.  Politicians still promote the idea as it sounds politically correct, but it further exacerbates the problem.  We are seeing large banks making a push to go online.  Bank of America for example now negotiates their short sales online through a system called Equator.  We have been using Equator to handle Bank of America foreclosures for years.  We hear that banks such as Wells Fargo and perhaps others are in the process of adding their short sales to Equator.

This online venue will allow greater efficiency and allow more people to touch the file, reducing the time it takes to approve a short sale.  The short sale is still a complex transaction and homeowners should not attempt it alone.  In fact, your bank will refer you to use an agent who is familiar with the process.  Short sales are not for every agent and should only be tackled by agents who are committed to learning and operating in a very rigid and complex process.  Buyer agents regularly interview listing agents to make sure the listing agent knows what they’re doing, because if they don’t, the process will fail. 

Look for 2010 to see rising foreclosure sales throughout the year, and perhaps rising short sale numbers as well.  The banks are committing resources to it. We’ll keep reporting the numbers we track, so check back often.

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