(This Old House) — A tide of foreclosed properties has been sweeping into the beleaguered housing market, bringing down property values, dislocating families, and sending municipal governments scrambling to manage the crisis. But some buyers see a once-in-a-lifetime opportunity in the gloomy headlines; they are buying up foreclosed properties at ultra-low prices.

Real estate agent John Lynch of Keller Williams Greater Cleveland West says he has interested buyers calling from all over the country, and as far away as Israel. Some are buying in bulk. “One investor I am working with right now wants to buy 200 houses all under 10K.”

Would-be homeowners are not excluded from the bonanza. Despite economic fears and the struggling housing market, Tonya Perkins-Stoudermire of McMullan Realty in Cleveland says this may be an ideal time to think about the dream of first-time home ownership.

She tells the story of a friend who waded into the foreclosure market and came out ahead. “My girlfriend bought a house last summer. It has two baths, a two-car garage, and two fireplaces. She loves it. Her house is $350 a month, with taxes and insurance. She’s in her late 40’s and had been a renter all these years.”

Those are the high notes, but these agents tell other stories, too. There’s the one about a far-away buyer who learned he owned a bunch of vacant lots, instead of houses. “It’s not for the faint of heart,” says Lynch. Lynch has seen the same house at foreclosure auctions more than once. “That hurts us all,” says Lynch.

A check-in with real estate professionals, home inspectors, and federal housing officials offers these words to the wise on buying a foreclosed property.

• Budget carefully. Agent Tonya Perkins-Stoudermire says don’t let a small price tag lure you into a quick deal. Be sure to ask yourself a number of questions: Do you have the money for the extensive repairs these houses often need? “Do you have a crew. If you plan to rehab and then rent, can you afford the house if you don’t find a tenant? If you do your homework, there’s little risk,” says Perkins-Stoudermire.

• See the house for yourself. “You can’t buy them sight unseen,” says Bill Richardson, president of the American Society of Home Inspectors (ASHI). “If you’re an investor from Chicago and you’re buying in Tucson, you’ll need someone to evaluate the house in person.” This Old House: What to expect from a home inspection

• Look at the neighborhood. Your homework should include evaluating the neighborhood. You may not be able to recoup the cost of the repairs if the value of the house is depressed by widespread foreclosures or high crime in the area. Tonya Perkins-Stoudermire says she also encourages buyers to study the neighborhood’s appeal at all hours, including at night. This Old House: How to identify a promising neighborhood

• How long has the house been empty? The longer the vacancy the more damage there is, in most cases. Bill Richardson, of ASHI, says if a house hasn’t been “moth-balled” carefully, a long list of ailments set in. “The plumbing seals dry out, sewer gases back up, and bugs that are in the sewer get a chance to get into the house. That’s true for the sinks, toilets, and washer drains,” says Richardson.

• Was it winterized? Don’t turn on the utilities until you know the condition of the pipes. If the pipes cracked during a cold spell, water will leak into the walls, and mold could take hold when you turn the water back on. This Old House: Dealing with mold

• Look at the landscaping. ASHI’s Bill Richardson warns, “If the house has been neglected, untrimmed trees, vines and bushes contribute to the deterioration of the house.” Vines crawl into the windows, and tree seedlings send roots down into the foundation. “It doesn’t take very big trees to mess up pavers, and dead branches crash into the house,” says Richardson.

• Contract for a private inspection. Banks generally require a home inspection when lending money for a mortgage. But even if you’re paying completely out of pocket for an ultra-cheap find, all the pros say it’s crucial to get an up-to-date inspection.

Richardson says previous inspections “are only a snapshot in time,” and conditions change dramatically. “There’s no caretaker on these properties. I’ve looked at quite a few,” says Richardson. “We’ve seen vandalism. We’ve seen previous owners steal cabinets and fixtures. Copper piping has been stolen.”

In some cases an inspection will prevent further damage. For example, if inspectors determine the pipes are cracked, repairs can be done in advance. Richardson said inspectors charge $300 to $500.

• Consider a HUD house. The Department of Housing and Urban Development is currently holding approximately 39,000 houses whose previous owners held mortgages insured by the federal government. HUD houses go to market about six months after foreclosure. Local governments get the first option to buy. After that, buyers who pledge to live in the house have the first opportunity to offer a bid. If the house is still on the market after a period of about 10 days, the listing is opened to investors. Owner occupants end up with about half of HUD’s properties, according to HUD officials.

A fraction of the total foreclosure market, HUD’s inventory is concentrated in Georgia, Indiana, Michigan, Ohio, and other states where the mortgage crisis has been especially severe. But if one of these houses suits your fancy, HUD spokesman LeMar Wooley says the feds offer a few advantages. “You will know the fair price of the property” because HUD updates its appraisals regularly. It offers a “property condition report” too, though that report is not updated. Wooley is thus among the chorus of experts urging buyers to pay for their own home inspection before closing the deal.

If HUD appreciates the value of a good inspector, inspectors likewise say HUD houses are better protected. “The feds often take the steps to winterize the houses. They put anti-freeze in the traps, and drain the pipes. When HUD’s involved it’s a little bit better,” says ASHI president Bill Richardson.

• Don’t expect to profit from a quick sale. Investors who buy intending to do as little as possible to a house, hoping to resell for a profit when the market turns around, may find little profit and a lot of headache. Some cities are cracking down on neglectful property owners, charging penalties that increase over time, and unmaintained homes lose value quickly.

But real estate pros and housing officials report that, overall, investors are a welcome and all-too-scarce resource, and most are fixing up the houses they buy for rent or resell. What’s more, investors and new owner-occupants might get the satisfaction of helping to turn a hard-hit neighborhood around.

COPYRIGHT © 2009 THIS OLD HOUSE VENTURES, INC.

Written By: Kristin Duff

We’ve all seen today’s adds about the housing market. As listing agents become more desperate for buyers, they have come up with colorful ways to say “it’s really not as bad as it looks!” but the question on all of our minds begging to be asked is “is it really worth my time and effort?” some listing agents have taken it too far and their creative verbiage, meant to strike curiosity in the viewers, has become an outright lie. There is a difference between a home needing a little TLC and a home needing extensive repairs. Some Realtors have even gone so far as posting old pictures of their listings in which the house was in a better condition. THIS IS A LIE! And it is blatantly unacceptable. Let looks at a particularly popular phrase “A diamond in the rough”. A diamond in the rough folks, is a lump of coal. Phrases which truthfully display a mental picture of a property for the buyer while optimistically trying to display the positive aspect of the property can be a very good opportunity for those who naturally can’t see the potential, but when does pointing out the ups outweigh the need to disclose the downs? The right answer? Never. But the honest answer is that it’s happening everyday to more people than can possibly be ethical. The sad truth is that a lot of potential buyers are looking for a deal and they are finding that some of the neglected, abandoned bank owned properties on the market are way beyond the normal person’s ability to fix. The cost of renovations could very easily exceed the price of the “steal of a deal” home they had hoped to purchase. This is not to say that all agents have been using creative verbiage to sell houses that were beyond the capability of the buyer to fix, or that all bank owned properties aren’t worth the trouble of trying to fix, but the predicament that some of these buyers have been put into still exists. Let’s be honest with our buyers. If a bulldozer would be a mercy killing then saying “needs a little TLC” is an understatement.  Let’s call it for what it is …Land value only.

What is a Certified Distressed Property Expert

Written by Noel Padilla

http://activerain.com/np1000

Before we can define what a Certified Distressed Property Expert is, we need to define what a distressed property is. A property can become distressed for a variety of reasons but the most common is a foreclosure. Any situation that has caused a property owner to have difficulty making mortgage payments or even selling the property is said to be in a distressed state. Basically any property which has foreclosure looming.

Now that we have defined a distressed property, what is a Certified Distressed Property Expert (CDPE)? This is not only a designation earned by a licensed Realtor but it is also an acronym that signals to the public that the person displaying it has gone through extensive training to successfully mitigate a foreclosure. This can be done by negotiating mortgage terms, helping to negotiate a refinance or the most likely-help sell the property.

Sometimes these properties have lost significant value either by physical damage, changes in the zoning, lack of curb appeal or host of other factors one of which occurring today is market conditions. If the value of the property drops below what one could sell the property for then the property is said to be short and any sale would be considered a “Short Sale“, which has become very common lately. Negotiating a short sale is where a CDPE really shines.

These transactions are extensively time consuming and tedious. They require diligent follow-up, tons of paperwork and detailed analysis. Not to mention all the work that goes into drafting market reports and gathering all the information to convince the bank to accept a sales amount that will net them less. Not an easy task. Some of these sales can take anywhere from 3 to 12 months to close, depending on the complexity of the transaction.

All this is done in addition to the normal marketing efforts required to sell the property. You can see why less than 1% of Realtors nationwide have the training and knowledge to successfully negotiate a short sale. I am one of those in the less than 1% that has dedicated my time, effort and finances to educate myself in this sector of the market.

In March of 2008 50% of all homes sold were in some sort of distressed state…….Half! If you have a distressed property you can’t chance your home sale on someone who doesn’t have the tools to get things done. This market is going to be here for sometime. Experts predict 2 to 3 years, I predict closer to 10 years which began in 2006 so we are 2 years in to the 10 year cycle.

Buyers are not immune to the phenomenon. They are getting great deals on these distressed properties but guess what, if they are dealing with someone who doesn’t know the mechanics of a short sale, the deal will fall apart after waiting months. It is equally important to buyers and sellers of distressed property to use a person who can get these transactions to the closing table.

Thank you Noel Padilla for allowing me to post this on my webpage.

July 28, 2009

WASHINGTON – As part of an ongoing effort to expand relief to struggling homeowners, Treasury released today the Supplemental Directive for its Home Price Decline Protection (HPDP) program, a component of the Home Affordable Modification Program (HAMP).  HPDP provides additional incentive payments for modifications on properties located in areas where home prices have recently declined.  The purpose of the program is to encourage additional lender participation and HAMP modifications in areas with recent price declines by helping to offset any incremental collateral loss on modifications that do not succeed.  HPDP will help ensure that borrowers in areas with recent home price declines have the opportunity to stay in their homes, thereby minimizing foreclosures, which further depress home values.

“This is an important next step in our multi-faceted efforts to bring relief to struggling homeowners and stabilize the housing market,” said Assistant Secretary for Financial Institutions Michael Barr. “Home price decline protection can help homeowners who may not have been reached otherwise.”

All HAMP loan modifications begun after September 1st, 2009 are eligible for HPDP payments. 

HAMP offers incentives to investors/lenders, servicers, and homeowners for successful mortgage modifications.  The “pay-for-success” structure of HAMP provides incentives to create sustainable mortgage modifications in a manner most cost effective for taxpayers. 

Treasury has allocated a total of up to $10 billion for the HPDP program, but the actual amount spent will depend on the home price trends.  The funds available to individual servicers to pay HPDP and all other incentives on HAMP modifications will be capped according to the Program Participation Cap included in their Servicer Participation Agreement.  Treasury will establish each servicer’s initial cap by estimating the number of modifications that servicer is expected to perform during the term of HAMP. 

The Home Affordable Modification Program (HAMP) commits $75 billion dollars, including $50 billion of funds from the Troubled Asset Relief Program, to encourage loan modifications that will provide sustainably affordable mortgage payments for borrowers.

HAMP is one component of Making Home Affordable, the Administration’s comprehensive plan to stabilize the US housing market and offer assistance to millions of homeowners by reducing mortgage payments and preventing avoidable foreclosures.  Making Home affordable includes: (1) the $75 billion HAMP program, (2) the Home Affordable Refinancing Program providing increased refinancing opportunities for borrowers with high loan-to-value ratios and (3) a $200 billion commitment to increase confidence in the GSEs and support increased refinancing generally.

The original press release can be found here: http://www.makinghomeaffordable.gov/pr_07312009.html

Service Performance Report through July 2009 for the Making Home Affordable Program

Making Home Affordable Program on Pace to Offer Help to Millions of Homeowners

Public Release of Data Provides Transparency on Servicer Performance

WASHINGTON – Today, the Obama Administration released its first monthly Servicer Performance Report detailing the progress to date of the Making Home Affordable (MHA) loan modification program.  The purpose of the report is to document the number of struggling homeowners already helped under the program, provide information on servicer performance and expand transparency around the initiative.

On February 18, the Obama Administration announced its comprehensive plan to stabilize the U.S. housing market.  Two weeks later on March 4, the Administration published detailed program guidelines and authorized servicers to begin modifications immediately.  MHA provides $75 billion for sustainable mortgage modifications through the Home Affordable Modification Program (HAMP). 

MHA has made rapid progress in a few short months.  Servicers covering more than 85 percent of loans in the country are already modifying loans under the program. More than 400,000 modification offers have been extended and more than 230,000 trial modifications have begun.  This pace of modifications puts the program on track to offer assistance to up to 3 to 4 million homeowners over the next three years, our target on February 18.  

Today’s report discloses performance on a servicer-by-servicer basis in order to increase transparency for participating institutions.  The data show that servicer performance has been uneven.  The Administration has asked servicers to ramp up implementation to a cumulative 500,000 trial modifications started by November 1, 2009. This would more than double in three months the number of trial modifications started in the first five months of the program.    

The Administration is taking additional steps to improve performance.  On July 9, Treasury Secretary Tim Geithner and Housing and Urban Development Secretary Shaun Donovan wrote the CEOs of participating servicers calling upon them to redouble their efforts to increase staffing, improve borrower response times and streamline the application process.  Senior Administration officials discussed the importance of these steps in a face-to-face meeting with servicer executives on July 28.  The Administration will develop more exacting metrics to measure the quality of borrower experience, such as average borrower wait time for inbound inquiries, completeness and accuracy of information provided applicants, and response time for completed applications.  As an additional protection for borrowers, the Administration has asked the program compliance agent, Freddie Mac, to develop a “second look” process to audit MHA modification applications that have been declined on an ongoing basis.

1.      Program On Pace to Help up to 3-4 Million Homeowners Over the Next Three Years

• More Than 230,000 Trial Modifications Started

No program has previously attempted to modify so many mortgages at such affordable terms for borrowers.  The Administration is seeing real results – modifications that provide long-term solutions for borrowers.

o    In 2008, 42 percent of modifications by the largest servicers lowered monthly payments.  Under the MHA modification program, 100 percent of borrowers starting trial modifications have had their payments reduced.

• More Than 85 Percent of Mortgage Market Covered by Participating Servicers

o Thirty-eight servicers have signed Servicer Participation Agreements (SPAs) to participate in the program.  These 38 servicers service many types of loans, including Fannie Mae and Freddie Mac loans, private label loans and loans in portfolio.

o Approximately 2300 servicers that service Fannie Mae and Freddie Mac loans are automatically participating in HAMP. 

2.      Performance Metrics Aimed at Improving Consistency of Servicer Performance

• Description of Metrics Used to Measure Servicer Performance

The Administration has established a servicer-by-servicer performance metric to enhance overall program performance.

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  •  
    • The report includes the absolute number of trial modifications begun by each servicer. 
    • The report also includes a simple performance metric which measures each servicer’s performance relative to an estimate of the servicer’s HAMP eligible loans.
      • The performance metric used in the report is trial modification starts as a share of estimated HAMP eligible loans. 
      • Many loans are eligible for HAMP that are not included in the estimated HAMP eligible loans in the public report, including current borrowers in imminent default.
      • This measure of estimated HAMP eligible loans was developed solely to provide a common denominator across which to compare performance of servicers. 

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  • Servicer Performance Metrics Show Uneven Progress in Implementation

The metric measuring comparative servicer performance shows uneven ramp-up, and substantial variation in the pace of modifications.  To improve performance, the Administration has asked servicers to commit to starting 500,000 trial modifications by November 1, 2009 and to establishing exacting metrics to monitor servicer specific program performance.

3.      Public Report Increases HAMP Program Transparency

Today’s report will provide transparency into program results on a servicer specific basis. 

•  
  • Reports Will Be Issued on a Monthly Basis

The Administration expects to issue reports detailing the progress of modifications under the HAMP program each month. This report will be updated to include additional metrics and results as the program progresses and more data becomes available.

The Servicer Performance Report is available here: http://www.treas.gov/press/releases/docs/MHA_public_report.pdf

The Original Press Release can be found here: http://www.treas.gov/press/releases/tg252.htm

Written By: Kristin Duff

A Certified Distressed Property Expert® (CDPE) is a real estate professional with specific understanding of the complex issues confronting the real estate industry. Through comprehensive training and experience, CDPEs are able to provide solutions for homeowners facing hardships in today’s market.

The prospect of foreclosure can be financially and emotionally devastating, and often homeowners proceed without guidance of any kind. The developers of the CDPE Designation believe that in almost all cases, the best course of action for a homeowner in distress is to speak with a well-informed, licensed real estate professional. They have the tools needed to help homeowners find the best solution for their situation.

While enduring financial difficulties is challenging for any family, the process of finding a qualified real estate professional should not be. Selecting an agent with the CDPE Designation ensures you are dealing with a professional trained to address your specific needs. For more information, contact a CDPE in your area.

CDPEs don’t merely assist in selling properties, they serve and help save their clients in need.                     

http://www.cdpe.com/what-is-a-cdpe.html

The Fine Line between Good Negotiating and Bluffing

Written By: Kristin Duff

In the past, claiming to have multiple offers on a property was a realistic claim in the real estate market, but after the market crashed, this was a sad dream of what used to be. As the market starts picking back up, however, it is becoming more prevalent again. Now, the problem with this is that some realtors are using this fact to their bargaining advantage, bluffing to try to get more from the buyer. Unfortunately, this tactic sometimes drives prospective buyers away leaving the house vacant longer with the seller accruing more debt, or it prevents the seller from moving on to their new home. Another “game” currently being played in the real estate market is the game of submitting offers that don’t go through. This damages both the buyer and the seller. First of all, submitting offers that the buyer isn’t committed to takes the house off the active market for others to buy. Now, having multiple offers on a property is probable if the house is priced well and in good condition, but once an offer is accepted, all other offers go into standby mode and the house is basically taken off the market until the offer fails. Some agents are known for telling their buyers it’s ok to write up an offer if you aren’t really sure you want the house.the problem in this is that most other realtors don’t like to work with them because they have “earned” their bad reputation.  The only way to prevent this is to research well before you commit yourself to a realtor. If your realtor has been in the “game” for a substantial period of time, then he/she should have plenty of knowledge as far as how each other “player” plays the game. Not to mention the fact that most experienced realtors have numerous contacts and one of them has most likely worked with any prospective realtor in the area. Weather your realtor is accepting offers on your behalf as a seller or negotiating your offer as a buyer, you are placing your trust 100% in your realtor to do what’s best for you.  If you do not have a good standing relationship with your realtor with a good open dialogue can you really be sure that they aren’t “gambling away” your money?

Article written by Kristin Duff

Financially challenged property owners have become a huge target for scam artists and loan modifications can be especially risky. If your Realtor doesn’t have the proper training to assist you, you may find that, in some cases, the advice given isn’t up to par. It is legal for a Realtor to give you advice about loan modification, Short Sales, and Foreclosure, but as the number of people seeking this advice grows, the active number of real estate agents able and willing to give this advice becomes sparring. Loan Modification Assistance is a very risky business for any licensed real estate agent or broker, simply because it has not been a part of the realtors job description until now, and even now it only applies to those certified to take on the responsibility. Most agents and brokers are not trained or skilled in loan modification and giving advice on the topic may violate the scope of their license. The structure of a loan and the servicing required to complete a loan modification is very detailed and has to be very precise. Before the Real Estate Market crashed due to the economic crisis in our country, in order to seek advice about loan modification, one would have to speak directly to a loan officer. With so many people losing their homes, most realtors have had to pick up at least a few hardship cases. The opportunities for these people to keep their homes or at least reduce their home debts have multiplied. Given that fact, some agents have become comfortable giving loan modification advice. Without the proper training on this avenue, this can be a very dangerous situation for the homeowner. A vast majority of agents have to send a prospective home buyer to a loan officer for a simple price range pre-qualification. The scary thing is that some of those same agents have become omfortable with giving homeowners in mortgage distress loan modification advice. In the Realtors Code of Ethics it specifically states that “REALTORS^® shall not undertake to provide specialized professional services concerning a type of property or service that is outside their field of competence.” Given this factor, make sure that the person you seek advice from on loan modification is certified to give this advice. A Certified Distressed Property Expert is guaranteed to know more about the subject than an average real estate agent.

If you have any questions or concerns regarding your ability to keep your house during this economic crisis, please feel free to contact Pearl Ahlquist at (916) 708-3851. She is a Certified Distressed Property Expert.

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