Remarkable Marketing

This property at 5946 Llano Ave. in Dallas was just listed by an Edwin Dolatkhah with Plugin Realty. It's priced at $209,000, which is pretty good for the area. It's also listed as a "short sale." But how about those photos, huh? I mean, nothing says "Welcome Home" more than scary pitch black photos. Amiright?

But seriously, how in the hell can any reasonably intelligent person upload those photos, knowing they will be distributed to all major real estate websites, and not think to themselves, "You know....These photos are a little on the dark side. I wonder if I should retake them?"

And then there is the person who snapped these photos. Did you even think to try a light switch or maybe open the blinds? You didn't? Okay. No. That's fine. No, no, no. Really. You did a great job. :/

Short Sale vs. Foreclosure: What Are Your Options?

Let me give you a very common real estate scenario, one I have encountered more frequently in the past several years.

Mr. Seller paid $350,000 for his home in 2006. He now wants to sell his home because he [got relocated/got married/wife had their 4th child]. As a real estate agent, I now have the awkward responsibility of telling him his home is currently worth $315,000 in today's real estate market. He then tells me he owes $340,000 on his mortgage and that he doesn't have the cash to bring to closing and asks me what his options are.

If the above scenario sounds familiar, you're not alone. So, here are your options:

1. Bring enough money to closing to cover your remaining mortgage, plus closing costs. For example, you owe $340,000 on your mortgage but you can only sell your home for $310,000. You are responsible for the $30,000 difference, plus closing costs.

2. If #1 isn't an option, then you need to consider staying in your home until you are in a position to sell your home without bringing money to closing. Or, if you have to move you can choose to rent out your home until you're in a better financial position.

3. If neither of the above options sound good to you - you don't have much cash but you HAVE to sell your home and don't want to rent it out - then you need to consider a short sale. Meaning, you need to negotiate with your mortgage company and ask them to cover any shortage in paying off your mortgage after your home sells. Basically, this is like option #1, except you're asking the bank to cover the $30,000 shortage, plus your closing costs. This will negatively affect your credit, and most short sales are huge headaches and can take many months to close, but you will be able to move on to the next chapter in your life without taking a huge financial loss.

4. Just walk away. Many homeowners have chosen to simply walk away from their home and let go into foreclosure. This will negatively affect your credit more so than a short sale, but you won't have to deal with the headache of a short sale, or the ensuing months of paying a mortgage on a home you can no longer afford - or no longer want. This option is very attractive to the rich. e.g. 'Why keep paying on a home that is depleting my bank account and has lost over 50% of it's value since I bought it? Let the bank deal with that headache!' Having enough cash to get them through the next 7 years while their credit score recovers is also helpful.

Our real estate market will continue to force many people to choose between the scenarios I have outlined above. And every one's situation is going to be different. You need to decide what works best given your current financial situation. Talking openly and honestly with your real estate agent is the best advice I can give you. I make decisions based on the information my clients give me. If you tell me you're not in a hurry to sell and you're financially comfortable, then my advice will be much different than if you told me you needed to sell in the next 45 days or you will no longer be able to pay your mortgage, car payment, etc. Unfortunately, people tend to tell me the former, when the truth looks more like the latter.

Will A Second Wave Of Foreclosures Hamper Our "Recovering" Real Estate Market?

This is a great article from the Washing Post talking about the possibility there will be a huge onslaught of foreclosures coming down the real estate pipeline in the not so distant future. This second wave of foreclosures will most definitely ruin any chance of a real estate recovery. What is the likelihood of this happening in 2010? According to this article the numbers are pretty telling.

"Lenders are deluged by late-stage delinquencies. The pent-up foreclosure inventory is there," said Massoud Ahmadi, director of research for the Maryland Department of Housing and Community Development.

Also from the article,

In addition to those already in default are 11 million more U.S. borrowers who owe more on their mortgage than their home is worth -- known as being underwater -- and are in danger of becoming delinquent, said Sam Khater, chief economist for First American CoreLogic.

I briefly touched on this topic late last year and it sounds like I wasn't that far off. I feel like the government is trying to help stave off this impending second wave of foreclosures. But until the banks get their act together and help homeowners adjust their current mortgages and assist with shortsales I feel like we'll be dealing with the threat of foreclosures for a very long time. From the article,

"Banks have remained in foreclosure paralysis, allowing that backlog to get larger and larger. You can't do that indefinitely," said Sandeep Bordia, head of U.S. residential credit strategy at Barclays Capital.

I agree, but banks won't change unless someone forces them to change the way they're handling this crisis. Until then I guess we'll all just have to cross our fingers and hope for the best.

Short Sale Hell: Another Reason Why Banks Are Killing Our Economy

I'm currently negotiating a short sale with Bank of America. It's a joke. I also need to point out I've been involved in 10 successful short sales, so I know how these things work. Unfortunately, how each bank handles short sales is exactly why people are choosing to walk away from their homes and accept foreclosure - because it's less of a headache than talking to some $8.00/hour bank employee who could care less about your financial hardships.

This is good article explaining how banks are killing real estate values by not being able to work out short sales in lieu of foreclosing on the home. Here are some key points of the article.

[Short sales are] also a better option for banks: According to one analysis, short sales resulted in loan losses of only 19 percent, compared with an average loss of 40 percent on homes sold after foreclosure.

According to research firm Campbell Communications, only 23 percent of short sale transactions are actually completed. "Three out of four potential short sale transactions fail, principally because the mortgage servicer takes too long to respond to the offer," said Tom Popik, author of a February survey of real estate agents. "When these same properties are later sold it further depresses real estate prices."

Having spoken with these banks on behalf of my clients over the years I can tell you they are in no hurry to help anyone out of a tough spot. If your home is about to go into foreclosure and there is an offer on the table, they will not move faster to make the short sale happen.

Example, instead of the bank accepting $300,000 for a short sale, they take too long negotiating the offer and the home goes into foreclosure. The home sits vacant without utilities (or appliances) for months and deteriorates quickly. The home goes on the market as a foreclosure 3 to 6 months later and sells for $250,000 or less, which doesn't include the tens of thousands of dollars in attorney and processing fees paid by the bank. Smart financial decision on the bank's part, right?

And these "smart" bank folks are who we, US taxpayers, bailed out? *Scratches head*

This Marriage Ain't Long for this World

I've talked about Irvine Housing Blog before, a blog devoted to encourage people to rent instead of buy due to Irvine, CA's terrible real estate market. Or as the blog author puts it, "Chronicling ‘the seventh circle of real estate hell’ since September 2006". Today he posted a poll where you could vote on how long you could stand being "upside down" on your mortgage. (You owe more on your mortgage than your home is worth). Most people have said they wouldn't stand for it for even a minute. Just walk away and throw your keys to the lender, baby! Nice attitude. Or you could just stay in your damn home until things turn around. But I digress, this comment from a reader is what really caught my attention,

"I got aways to go yet. We bought our “McMansion” in 2001 and the price skyrocketed to almost double. I tried to talk my wife into selling and moving to a local rented apartment or townhouse (daughter in public HS) about a year/year and a half ago (when things were still hot to sell) but she wouldn’t hear of it. We could have walked away with $300K in profit (after fees) and, while the prices have not dropped here in MD like they have in CA, I fully expect that, when my daughter has finally graduated in mid-2009 and I finally talk my wife into selling (prolly 2010), we will only be able to sell for a modest increase over our cost of purchase, if that.

My wife is a Pollyanna. She still thinks things won’t get that bad here. So far the local comps are about 10% off their highs of 12 months ago and sales have slowed. My only consolation is I will have an “I told you so” to hang over her head."

Um. Wow. Can you imagine what this guy's wife would say if she knew he felt this way? Ouch.

Short Sale Showdown: HOA vs. Condo Owners

This story is definitely a must read if you own a condo (and especially if you are falling behind on paying your HOA dues). Homeowners Associations for condos are cracking the whip on those residents who are in short sale situations - sales in which mortgage holders agree to take less than they are owed to avoid foreclosing on the property. This article gives us an example of the condo owner who thinks they've sold their condo and negotiated a short sale with their lender but is stopped dead in their tracks and the sale falls through because the HOA is demanding their full share or they will file a lien on the property. What buyer is going to buy a condo with a lein already on it? Zero. So we have a seller who obviously can't pay the dues and the lender certainly isn't going to since they are already taking a loss. So who pays the dues? Good question but let's look at who really has the most to lose.

The article makes a good point in saying if the dues are not collected they usually end up collecting the money from the other residents which increases their HOA dues. It's not fair but the money has to come from somewhere, right? But also keep in mind the HOA isn't just after the unpaid dues. Attorneys fees are now involved so the number just keeps growing. What a mess!

I think HOA's in general are a huge pain in the ass to deal with and I have plenty of stories to back that up. But I have to comment on this quote from an attorney who represents many HOA's.

"Realtors were making a ton of money," Meisner said. "Mortgage companies were making a ton of money. All of a sudden, because the cookie is crumbling, they expect the condo association to take a bath on it. I don't see any reason why they should."

What?!?!?! What does the Realtor have to do with a seller who isn't paying their HOA dues? The bank is the one who gave the seller the money so they might be partially to blame but they are also losing money on the deal so they're being punished. So why bring up the Realtor saying they expect the condo association to take a bath on it? The condo association assumes the risk of not being paid when it's formed! But I digress.

I'll stop bitching and get to the possible solutions. The HOA is holding out for 100% of what they are owed plus their attorney's fees which is a great way to end up with - you guessed it - nada, zip, zilch, NOTHING! The bank is willing to negotiate a loss but the HOA is not willing to forgive the unpaid dues so the bank ends up with a condo they don't want and the HOA gets no money for dues or their attorney's fees. You would think it would behoove the HOA to get involved with the negotiations and see if they can't get a little cash out of the deal whether from the buyer or the bank. But the sad truth is that they are willing to let the condo go into foreclosure and turn around and get the money - and the attorney's fees - from the other residents. You.

So beware if you're a resident in an association that's killing short sales because of uncollected HOA dues. You might be proud of your HOA for standing strong and demanding to be paid what they're owed. The truth is that there is no one to get the money from and if they allow the home to be foreclosed on, you, the responsible home owner, get screwed twice. You now have a foreclosure sale on the books which is most likely a lot less than what you paid for your condo and your HOA dues increase to make up for the loss. I live in a townhome community and you better believe I'll be all up in the HOA's business trying to see what we can do to avoid a foreclosure sale in my neighborhood. You should too. Otherwise you end up with a lose-lose.

Dallas Thinks; Therefore It Is

I admittedly don’t keep track of mortgage rates regularly. (I let my client’s lenders handle that part of the transaction) But while having lunch with a lender friend yesterday he said he is closing deals at interest rates under 6%! Yet people still want to perpetuate what a terrible real estate market we are in? It is getting more and more frustrating to repeat the same information to my clients here in Dallas trying to educate them about the real estate market. I guess I’ll continue to sound like a broken record by repeating the 2 main reasons why it’s a good time to buy.

1. Rates are amazingly low.
2. Inventory is great meaning buyers have a lot of homes to choose from. If you don’t want to get into a multiple offer situation then you don’t have to. There’s plenty of fish in the sea.

So I ask my buyers, “What exactly are you waiting for?” and here’s what some of them are saying followed by my official response.

“Rates might go down!” – Uh, like to what? 4.5%? I doubt it. Some people might be able to get a 5.5% interest rate but if it goes any lower than that I will very surprised. But think about the opposite. If you wait too long you might be looking at a 7% interest rate. If you want to play the wait and see game then you might get burned.

“Inventory is high and I keep hearing how bad the real estate market is so sellers should be negotiating down off their asking price!” – Do you know the sellers financial situation? In all price ranges sellers move for different reasons. If you happen to get lucky and make an offer on a home where the owners are getting a divorce and want to ditch the home for next to nothing then congrats. But just because there is an abundance of inventory don’t expect EVERY seller to give away their home to you because YOU think the real estate market is bad. And what’s the alternative? Wait until there is a small amount inventory on the market? That means multiple offers and paying top dollar. So let me know how that works out for you.

“I keep hearing about all of the foreclosures and pending foreclosures. Find me one of those!” – This is my pet peeve and I could spend an hour answering this but the quick answer is that there are literally THOUSANDS of investors combing the Dallas real estate market for foreclosure deals. So when a true foreclosure deal comes on the market there are multiple offers on the property for over list price and the investors are paying in cash which means they can close quickly. But your typical buyer doesn’t want to pay list price (they want to negotiate) and are financing their loan thus needing at least 20 days to close the loan. Which offer do you think the banks are going to accept? My advice is get over the foreclosures and look for a home you want to live in, not the deal of the century.

People don’t realize real estate is local and not dependant on other states. North Texas has been and is doing just fine. But the national media attention has crept into our minds and we can’t shake it. While pondering the phenomenon we are experiencing with everyone and their dog believing the real estate market is bad, I thought of a real estate analogy. There is a house in your neighborhood. Just your average home and the owners keep to themselves. Not many neighbors have seen the inside of the home but it looks to be in average condition. So one day the neighborhood gossip sees the For Sale sign in the yard and the owners packing outside. She skips over to offer her goodbyes and they politely invite her into their home. Meanwhile she sees a couple stress cracks over a few door and window jambs. “The home obviously has serious foundation problems and I think I smelled mold too!” she says to anyone who will listen. Then they tell someone who tells someone else – you get the point. Even when people are looking at the home neighbors feel the need to tell them about the problems the home has and therefore the home lingers on the market and sells for pennies. But guess what? They actually just brought down their own property values by spreading these untruths.

Dallas has bought into the woes of California, Las Vegas and Florida and is actually hurting itself by perpetuating the bad real estate market story. Our city does NOT have foundation or mold problems yet the terrible rumors persist and only time will tell how our own foolish beliefs will affect our real estate market. In the end we only have ourselves to blame.