Losing your home to foreclosure

I was asked by my representative at the Idaho Statehouse to tell stories of hardship.  The stories are real and the names have been changed:

John

I listed the home in February 2008. It is probably what drove me to my run for Congress. It made me mad enough to run. It was a short sale with Wells Fargo. John is a school teacher.  He and his wife took out a second mortgage on his home. The home appraised for $30K more then the home was ever worth.  Five months later, his wife left him.  He didn’t know he was upside down until he tried to refinance according to the divorce decree. He tried to pay the mortgage but released that he was selling everything he owned make the payments.  Without his wife’s income he could not make the payment.

I listed the home and dropped the price to $185K.  In April I had a good offer at asking price.  The bank would not let me call in and talk to a negotiator.  In the end they rejected the offer even though it appraised for 98% of the offer.  That is very good for a short sale.  They didn’t tell me they canceled the file for over a month.  Everyone I talked to gave me a different story.  One person said it was that the second wouldn’t settle.  My client would have settled a bit  of money to make the deal go fast (we were within the 3 month window of nonpayment of the mortgage).  We upped the price and never got another offer.  My seller was so upset that he moved before the foreclosure.   The home foreclosed in February of 2009 and the bank sold the home in May of 2009 at $165K.  During the summer a company called him asking for a $70,000 deficiency judgment.  At this point I became involved again.  The company was willing to settle for $7000 but John didn’t have the money.  We went and saw a bankruptcy lawyer.  We offered the bank $3000 at the end of summer school.  They said they needed the money right then.  I explained that he wouldn’t have the money until he got his summer pay.

In the end John, who only had the mortgage against him, had to declare bankruptcy.

Not all bank owned properties are created equal….

During 2010 and 2011  most of my work was as a buyers agent for REO’s or bank owned properties…..  One would think they are all the same but they are not…..I know HUD does not like to be considered REO or bank owned by for the purposes of this comparison I will include them in the description.   Bank owned property is property that the bank foreclosed on or took in leiu of foreclosure.   The bank  owns the property and wants it off the books… They often sell at a discount.  More importantly not all bank owned properties are created equal…..

So what types of properties are there?  The are HUD, Fannie Mae, Freddie Mac, OCWEN, Wells Fargo, Bank of America, IFHA,  Chase…… You get the picture….. Every different bank or entity has a different procedure…Perhaps different areas are different.  I work in the Treasure Valley of Idaho and I serve Ada, Canyon and Boise counties….

It used to be that bank owned properties were typically trashed.  No one would bother to go clean them up.  There would be trash, dog pee, weeds, etc.  This is rarer (except for HUD listings).  Many bank are willing to put money into the listing to sell them quickly and at a higher price.  This is nice for us because we have better homes to show are clients….

First we will start with the government and quasi- government foreclosures…. These include HUD, Fannie Mae, Freddie Mac and some OCWEN (VA)…. It probably also included rural development but I haven’t worked with those so I wont discuss them.  The really cool thing about HUD, Fannie Mae and Freddie Mac is they have a owner occupied period for bids.  That means that if you are looking for someone planning to live in the home they have the opportunity to bid and be considered before anyone else.   This is very important because investors often have cash and look better on paper.  It allows people to own the American dream for less… In my area most of these homes that are nice sell before the owner occupied period is up.  Not all bank owned properties are created equal

HUD is part of the federal government…. They make the rules for everyone else but they do not play by those rules… What you see is what you get.  HUD homes are never fixed (at least in my area)…. They wont even fix the property enough to test the systems… Not only that you are not allowed to fix anything either.   This can be very inconvenient.  The homes are listed on the multiple listing service and www.hudhomestore.com.  Your HUD qualified  agent (ME) enters bid.  You have no idea what the others have bid are.  There is no contract (until your bid is accepted).  That is the easy part.  If you are successful with your bid the fun starts.  Your agent writes the contract and has to get their broker and the lender to sign it.   Then the agent has to express mail it and beat the time deadlines.  Any mistakes and HUD threatens and sometimes do cancel the deal.   Most of these homes can have FHA loans because the government did the inspection and appraisal.  If you bid for more then the appraisal you have to pay the difference in cash.  It is usually possible to get 203K loans on these too. They are often a good value but do not  show very well since the government is not willing to make them nice.  It doesn’t matter what the lender requires.  The inspection is either a go or no go….You the buyer have to turn on all the utilities at your expense and then re-winterize the home… Not very fair..We real estate agent used to get an extra 2 % in the Treasure Valley but no more….  It sort of made it worth the hassle.  These homes sales are ulcer producing…. That said I have closed every HUD home that I put under contract.  If anything ever makes me into a Republican it will be dealing with HUD foreclosures… I have gone to my Republican Congressman twice on HUD problems….  This is the same Congressman I ran against in 2008. By the way I am not allowed to use the words distressed, bank owned, REO, foreclosed when describing a HUD property…. HUD thinks these words have a negative connotation.  Not all bank owned properties are created equal

Now we will take a detour and talk about the bidding process on most of the rest of the bank owned properties.  The real estate agent writes the offer on the normal real estate form… I find I can almost always get 3% closing costs but I cant always get price reductions on REO property.   You must have either proof of funds or pre-approval.  The earnest money often has to be a cashiers check (usually for at least $1000).  I often bid with a personal check that will get converted into a cashiers check when I know the title company.  The seller always chooses the title company and often the earnest money is held by the title company or the listing broker.  That is not typical in the Treasure Valley.  If there are multiple offers you asked to submit your highest and best… Your buyer also has to sign a form acknowledging that they are in a multiple offer situation.   If your bid is accepted the bank will send a huge addendum which basically negates the original purchase and sale agreement.  It is a form written in favor of the bank but if you don’t sign it you don’t get the home.  The bank will tell you they wont fix things but they will often do so if the lender requires the fix.   I have even gotten the banks to concede on price for cash deals if the inspection is bad.  You must have an agent that is very confident when dealing with the banks.  These deals require around 2 extra weeks because the the time it takes to get the seller signatures and a the time at the end for the REO bank to approve the HUD-1.  The other thing about these deals is that the buyer signs everything before the seller signs anything.  This means that you can’t have the home inspection until you have seller signatures on the addendum and the sales contract.  If there is a hang up and there are lender required repairs that will also slow down the sale since it has to go to a higher level of management for approval.  Mostly these sales will progress like a normal non-distressed sale.  Not all bank owned properties are created equal

Fannie Mae and Freddie Mac are quasi-government agencies.  They are backed by the federal government.  Lately Fannie and Freddie are willing to fix a house up in order to sell them.  They sometimes paint, carpet and fix things so the buyer will bid.  There is usually a 15 day first look program for the owner occupied buyers.  They are usually well priced and show better then their HUD counterparts.  Because of the owner occupied first look program they are ideal candidates for owner occupied buyers…. Fannie Mae has a Homepath financing avenue.  This is a 3% owner occupied and 10% investor down rate.  There are fees that are high but there is no private mortgage insurance.  There is also no need for appraisal… Make sure your agent does a market analysis and listen carefully to your inspector.   Freddie Mac’s gimmick is that they give a free 2 year home warranty for owner occupied dwellings.  These will proceed like a normal sale once it is started. My favorite REO’s might be Fannie and Freddie’s.   Not all bank owned properties are created equal.

Wells Fargo and Bank of America both have the annoying feature that you must prequalify with their bank to submit a bid unless you are a cash buyer.  It adds a day to the process and they will offer some incentives for going with their bank but be forewarned these are big banks and they tend to delay closings….  The asset managers do not seem to talk to the mortgage department so being with the same bank doesn’t get the loan closed any quicker.  I also wonder about a conflict of interest.  I had a case where closing was delayed by more than a week because B of A mortgage department wouldn’t put out the closing docs with less then 3 days before closing and the assest manager didn’t want to extend the contract…. My buyer almost pulled out.  These banks are good to take your investor too.  There is no owner occupied period.   Not all bank owned properties are created equal

The other banks will have different quirks.  Small banks work faster at getting the deal done.  IFHA in Idaho is particularly good to work with.  These homes sell and they sell fairly easily.  The buyer usually gets a good price for their new property.

So I hope this helps with understanding some of the differences with different bank owned properties.   If you happen to be in the Treasure Valley of Idaho and want to buy a bank owned property contact Debbie Holmes.  I will get you the best possible deal and I have a lot of experience dealing with different banks.  Because you now know just like me …. Not all bank owned properties are created equal!

Working from the hospital….

In the last post my step-mom was in the ICU.  She is getting better and will finally have the surgery on her arm tomorrow… It has been a very difficult week and my step-sister in law and I took the car home this weekend.  I do not have pictures from the hospital but I will include one from a break at the beach on Thursday… I do love the ocean. I actually went in fully clothed because I left Boise in a hurry and had no time to get a swim suit.

Now as an active real estate agent I still had work to do.  I did not work on new clients but I had 2 things that I had to keep going.  I have a pending that we ran the inspection on.  I picked this bank owned house for the buyers (sort of scary) and they came up Sunday July 31 to see the home.  They liked it (phew….) and we proceeded to the inspection scheduled Wed.  I arranged for the inspector to be let in.  We got the report on Thursday and my buyer wanted to walk.  It was just a little more repairs then he wanted to deal with.  I prepared the return of earnest money form and sent it to the buyers.  I informed the loan officer.  The loan officer called the buyer and talked him into waiting.  He thought that the underwriter might call many of the items that worried the buyers.  He often works with this listing agent and I was relieved but a bit nervous.  My buyer sent the inspection report for the underwriter.  I waited and waited…. I wanted to see what the underwriter was going to pick.  Meanwhile my step mom developed a liver problem to add to all her other problems.  It was a tense day.   I was worried because Friday was the last day for the earnest money to be returned because of the inspection.  I waited some more getting more worried.   I talked to the listing agent who assured me I could get my buyer out of the contract or hope for the underwriter to pick the scary stuff up….  I had not worked with the loan officer and felt this was leaving my buyer very vulnerable.  What if the underwriter didn’t care about the same things that concerned my buyer?

I called my broker to discuss the problem and came up with a solution (poor broker I started talking told him I figured it out and went to work).  My solution was a very careful reading of the contract.  I could stop the clock by putting in the repair request.  I knew, my buyer knew and the listing agent knew that the seller would not agree to anything that didn’t prevent the underwriter from approving the loan.  But it also stopped the clock until Monday.  Today the seller agreed to wait until the appraisal was in so my buyers doesn’t have to worry about losing his earnest money.

I still don’t know if the sale will go through but my buyers will get their earnest money back if they don’t proceed with the sale.  I know the house is a good value.  I have protected the buyers!  If I had $25,000 cash I would be glad to buy it as an investment.

I did all this work from the hospital…..People (including the listing agent) were helpful when they heard about my situation.

‘The other project I worked on is a job site I hope to list in a couple of weeks.  I have been working as a sort of contractor arranging the workers at the site.  I left my handyman partner in charge of meeting the sprinkler guy (that is really the name of the company) and the heating contractor.  I got the report and talked to the owner.  Again it is amazing what you can done with a cell phone and a good internet connection….

This was a very tough week and I am very tired.  I am up $7 from gambling in Tonopah on the way home (the Ramada is very nice)…..I did my caregiving and my real estate work from the hospital room….Pray tomorrow goes well for my step mom tomorrow….

Volunteerism… Frusteration with a customer…

Some people volunteer at the soup kitchen…. Others at the homeless shelter, etc.  I help individuals save their homes or at least ease them out gently.  I am very good at this and most people appreaciate my help.  I gained my knowledge through  my early entry into the short sale market (2007)  I have learned how to reach the correct people at banks.   I have taken my knowledge and I try to put the client and the lender together to work a loan modification out for my customer.  I never take money and I choose my cases.  I always sort of figured as long as I am selling a home a month I can afford this work which is also important.  Once in a while I am just helping them lose their home with dignity (not a shortsale).

 

In early June a woman called on a rental.  I was on vacation but she had recieved foreclosure notices on her home.  She is on SSI disability and she swears she paid them.  I talked to her for about 20 minutes and suggested she stay in her home until the foreclosure.  I also volunteered to work with her and try to prevent the foreclosure.  I asked her to call me on Monday when I would be home from vacation and we would set up a time.  Time passed and she didn’t call.

Fast forward to Tuesday (7/19) and she called me and wanted help.  She lives in Caldwell, a town 30 minutes away from where I live.  I ask her if she can come to Boise and she says she can’t because she doesn’t drive.  I ask her if she has email and she doesn’t.  I ask if any of her friends have email and they don’t.  I take a deep breath and volunteer to go to her and bring my printer/copier.  I ask her to find reciepts and we agree to meet at her home on Thursday 7/21/2011.   I pull all the deeds, foreclosure notices, etc…. Anything Title- One can give me and drive to Caldwell.  I am five minutes late because the exact entrance to her street is hard to get to.

It is a property surrounded by busy streets and very near the railroad tracks.  The yard has trash and furnature strewn all over it.  I knock on the door and she is NOT HOME.   I call her and she doesn’t answer her cell.  About 10 minutes later she calls me back and rudly asks who this is.  She says she couldn’t find the papers I wanted so she went out.  I suggested that we meet anyway because I could get started without the receipts.  The phone rang and I needed to take it so I asked if I could call her back in a few minutes.  She said yes.  I called her back and she didn’t answer.  I left a message saying I would stay in Caldwell for 30 minutes please call me back.  I went to the gas station then a cafe for a meal.  I read over the deads and realized that whether or not she had paid the bills I could help her.  It was a small second mortage and at most she owed $800.  She was upside down in the first.  This would actually be easy (even without the money order receipts).  I make busy work in Caldwell by visiting an apartment complex I manage for my step mother.  I visit with 3 of the tenants then at 12:30 PM I get into my car and drive towards Boise.  Just as I am leaving town she calls.  I tell her I have read her documents and know I can help her can we meet while we I am still in town. I remind her I don’t charge for this.  I also tell her if we set up another meeting  (after I leave Caldwell) she will have to come to Boise.  She tells me she is at her mothers home.  I suggest I go to her mothers home.  She tells me she is too busy baking pies…. At this point I inform her that I have done  several hours of work on her behalf and drove to Caldwell to meet her.  I will only meet her on my terms in Boise.  She says she might give me a call.

 

I think I just had to vent…..  If pie baking is more important then saving her home perhaps she doesn’t deserve to be a homeowner….Also she knew I was driving in to meet her and she should have been there.  I just don’t get it.  Hopefully, my next pro-bono case will want my services.  I also had put off paying clients a half day to handle her case.

 

Why I sell HUD HOMES…MORE OF AN ESSAY..

Over the years I have been the buyers agent for several homes in the Treasure Valley.  The first thing you want to do is make sure your broker has signed the agency up to sell HUD homes.  The first time I sold a HUD home I had to refer my client out and lose a significant portion of my commission check.   It also makes the deal stranger since you know all the in and outs of the deal and the other agent doesn’t.  Talk to your broker or the office manager and ask for the HUD number and check to make sure it is active.  It needs to be renewed every year.  Being the government your brokerage will not get any notice when it needs to be done….

HUD  homes are government owned homes that have been foreclosed on but the government has insured them when to original loan was taken out..  OH no !  Unfortunately I just broke some rules about selling or talking about HUD homes.  We are not allowed to use the words repossessed, REO, distressed, foreclosed when describing these homes because HUD feels that these words have negative connotations  .  We now have to use the words HUD owned.  This also means that the Intermountain multiple listing service had to add a separate category called HUD homes.  This is very annoying because it one more parameter you have to search for.

Now those of you who no me know that I am a rare breed.  I am a Democrat in Idaho who has run for Congress.  If anything ever turns me into a person who thinks the government is malevolent it will be selling HUD homes.  HUD makes the rules for everyone else but does not seem to feel the need to follow them.  Someday I will blog about this….. They will not fix things (even things to inspect the property).  They set their own timelines that are difficult for the loan officers.   They make you rush for brokers signatures and make you send docs in expensive Fedex packages.  When you make a mistake they threaten to cancel the contract.  The mistake can be forgetting to get an initial.  I must admit to being paranoid by now.  To my credit the contract that I have pending was perfect the first time.  You have to be on top of things and be your buyers advocate.

So obviously I do not like HUD or selling HUD homes….  Why do I do it?  Because it gives my buyers a chance to get into the housing market with FHA loans.  Also HUD, Fannie Mae and Freddie Mac all have a home owner first look programs.  That means that my buyers are only competing against fellow owner occupants and not investors.  This is a huge advantage to first time home buyers. HUD homes are also often competitively priced with FHA financing (for insurable property). HUD bidding is easy and everything else will seem harder then it needs.  I work for my buyers and not my comfort.  It is important to me that my buyers get a home that  works for them and I am willing to work hard and make my loan officers to work hard to make this happen.

I truly believe that part of the American Dream is to own your own home.  It makes us as individuals, the community and our country stronger.   Part of helping my clients achieve this dream is to offer them as many homes available in my community.