Are there hidden problems with my short sale?

Yes, there could be hidden problems with your short sale. I’m not trying to scare anyone, although the title is somewhat alarming, but I do feel that sellers need to know what could go wrong with their short sale. I am working on a short sale right now in which the seller has done everything right and we still cannot get an approval. Let me share his story.

My client, hereafter known as “C” for client, contacted his bank, hereafter known as “Citi” for Citimortgage. He called them as soon as he got into financial trouble. His reasons for falling behind are legitimate and due in a large part to the recession as he is in a construction related trade. Everything was done according the Citi’s guidelines. He filled out the workable solutions packet, submitted tax returns, hardship letters and every other document they requested. Then C waited, and while he waited he made payments according to an arrangement with Citi. 60 days after he made his last payment he received a letter in the mail saying that the investor on the loan would not modify the terms of the contract. His response was “Who?”

That’s right, many loans are not owned by the company who performs the service. For example, my loan is serviced by Citi but the investor is Fannie Mae. I guess I’m one of the lucky ones as they are reputed to work with clients in trouble. My clients investor, Hudson City Savings, is a bank that apparently does not care to help the people who have been paying them. So my client, who had never missed a payment and tried to keep his home by working with the bank, was told to shove it by an investor who had no contact with him except copies of his documents. That’s where I came in.

I was called to help sell the home via short sale. For those who don’t know where the term originates, they are called short sales because the home is being sold “short” of what is owed. I looked at everything, did some research both online and with other REALTORS who do short sales and felt good about taking the listing. Citi actually has a good reputation in the short sale world and typically resolves things quickly. I had him sign everything, including authorization, new hardship letter, the works, and waited for a contract. Since I priced it right we had a contract within 2 weeks and I submitted everything to Citi. To their credit, they had everything digitized within 3 days and were speaking to me as soon as they had the authorization letter uploaded. We had the legwork done within 2 weeks and were assigned to a negotiator. That’s when things bogged down.

Our negotiator was not the most responsive. I can’t really say he was the least responsive, as I’ve had worse, but this guy was obviously over his head. In the next 2 months I received a grand total of 1 email response from him, which said “I reviewed your email. I have been sending request to the investor to get a status in writing.” So not only am I in the dark, so is the negotiator. You can imagine how the buyers agent took this news. Needless to say, I am very lucky to have a very professional and experienced REALTOR on the other side of this deal.

During this time, my client also received an offer for a loan modification. Odd that the investor would not consider modifying the loan before, but when it comes to losing money they decided to give it a shot. However, the loan modification actually increased the owner’s monthly payment instead of decreasing it! My client felt more than just ignored. He was insulted. I don’t blame him. What brain trust is sending out modifications that make things worse for the consumer instead of better? The answer: Hudson City Savings, the investor on the loan. Naturally my client turned down the offer to pay a higher mortgage payment.

So I keep sending emails, making phone calls and getting nowhere when I get a very confused and frantic message from my client. The investor had put the account in foreclosure! After sending several emails and calling every number I had for Citi, I finally got the negotiator on the phone. Unfortunately he still had no answers. He told me that this behavior was typical for this investor and that he was elevating the case to his manager. Luckily for us he was able to get a 30 day hold on the account to get it out of foreclosure.

Another two weeks went by and nothing happened. I finally reached someone in the short sale department and found out the reason. Nobody had done anything! Our negotiator had not elevated the file, his manager had no notes on the case and there was no contact with the investor. I raised all kinds of hell and then called my client. He had told me he was considering bankruptcy, and I advised him to consult an attorney on the matter. I know that bankruptcy would at least keep a roof over their heads and prevent foreclosure while we worked on getting the short sale approved. He did file bankruptcy, and now we are in limbo.

So what do you do in this situation? I am writing a letter to one of my senators, Mark Warner, who is on the Committee on Banking, Housing & Urban Affairs. I figure he can take the ball and run with it. This is the type of situation where I see a need for banking reform, and it needs to start at the top. We are still under contract, and the buyers and their agent are in the loop, which helps. I also advise clients to ask who their investor is when they begin the loan modification process, and research them to get an idea of whether or not they are cooperative. Finally, I suggest getting your legislators involved. Even if they can’t resolve it we can at least communicate the challenges of doing business with an industry that is not responsive to their clientele.

Twitter fail and social media refocus

I’m taking a few minutes to update my real estate blog about my social media reevaluation.  I decided a few weeks ago that I needed to refocus my efforts online and pare down what I was doing.  Additionally, I needed to recommit to what I wanted to do.  I decided I needed to simplify.  To that end, I’ve been shedding twitter followers and brainstorming blog topics.

When I first signed up for twitter, I thought it was a numbers game.  I was thinking in a conventional advertising sense without understanding how social capital accumulates, or what it means.  The sad thing is that I really understand that in the face to face world.  I really work to maintain my reputation and build real and lasting relationships.  I get referrals from clients I sold years ago, and I send them thank you cards and make it a point to thank them in person.  I understand the value of those bonds and spend a great deal of time keeping my people happy.

Still, in spite of what I knew, I did what the first blogs I read told me was a good idea. Specifically, I followed everyone who would follow me back.  I tried to stay somewhat on topic, for example I followed a bunch of other REALTORS, some property managers, staging companies, and the like. Still, I didn’t get a real stream of business out of it. Naturally I got a little tired of maintaining a network that yielded me 3 leads in 2 years.  The value wasn’t there.

I have a different issue with my blog. Since I haven’t really built a following I’m not sure what people want to read. Now I’m doing better research to find that out. That’s part of my refocusing. A knowledge based approach will help me find my voice and help everyone else understand what I’m about.

Bear with me through the growing pains. I know most folks don’t blog about their failures, but I feel like the few folks who take the time to read this deserve to know what is happening. If I have stopped following you on twitter and it hurt your feelings, I’m sorry. However, I only unfollowed folks with whom I didn’t have a personal connection. If you want me to follow you again, then just talk to me we can build the type of relationship that benefits us both.

I look forward to hearing some feedback on my future posts.

Another reason to build a new home in Spotsylvania VA

Great news!  Spotsylvania County is offering a 25% discount on most new construction fees.  For example, the fee for building a new home was $0.33 per square foot, but has been dropped to $0.25 per square foot.  That translates into a $160 savings in a 2000 square foot home.  Even additions and alterations are discounted $0.03 per square foot.

You are probably asking “How does this help me as a consumer?”  Well, first off it allows builders to slightly cut costs when building in Spotsylvania.  Also, if you already own a home the cost for adding on or making major alterations will be slightly less expensive.

Why is the county doing this?  My guess is to spur the building and contracting industry.  Building and contracting were a huge part of our local economy prior to the recession, and it generated a lot of tax revenue.  Additionally this gives the homeowner some savings when they use these segments of the economy, so its good all the way around.

If you want more info, check out the fee list on the commercial/development area of the Spotsylvania County web site.  Happy building!

The first time homebuyer tax credit, or when is the new deadline?

I know everyone in congress is busy patting themselves on the back and preparing new campaign marketing materials because they passed the tax credit extension, but let’s take a look at what we really have.  I rarely like to take the government at its word, but this bill seems like it actually does what it says.

First off, the tax credit is extended to April 30, 2010 with a caveat.  If you have a binding contract signed by April 30th you have until June 30th to close.  This is likely a response to the nightmare that was October and November, where the deadline created a flood of mortgage approval requests and attempted closings that have been steadily pushed farther back.  USDA RD loans in particular have been experiencing extreme delays in the Fredericksburg area, mainly due to the fact that they still do 100% financing.

There are some limitations.  For closings after November 6, 2009, you can’t make more than $125,000 if single or $225,000 if married filing jointly. That is based on modified adjusted gross income. If you don’t know what that is, I suggest talking to an accountant or tax preparer.  People over that amount still qualify for a tax credit, but it decreases.

The home price must be at or under $800,000, and the amount of the credit is not necessarily $8000.  It is actually valued at 10% of the homes purchase price to a maximum of $8000, so if you buy a home for less than $80,000 you will get less of a benefit.  However, buying a home for less than $80,000 is a pretty big benefit in my market!

Congress also added a tax credit for repeat buyers.  Again, there are some caveats, but most guidelines and deadlines are the same.  The credit is $6500 instead of $8000.  I think this really helps encourage sellers to upgrade, which will help stimulate the economy. Sellers right now are scared, and a tangible benefit like this will help them get over their fear.

Finally, you can double check everything I say at a few different sites.  I find that the NAHB site is the most user friendly.  I hope this helps you make the decision to buy.

VOTE!

I couldn’t say it in text, so watch the video!

FIRE! What happens if your friend’s home burns down?

I hope nobody reading this has to use this information, but I was reminded of how devastating fire can be to a family when I read an article in today’s Free Lance Star.  The story was about a family of 3 who were displaced by a fire.  When I was an insurance agent I dealt with several families who had home fires.  It never got any easier.

Still, if you have friends who have a fire and they call you for help, here is what you can do to assist them.  First, make sure they have a place to stay.  Their insurance company or the Red Cross should handle that, but if they are having trouble you should be acquainted with some local churches and shelters.  Second, if you can offer any financial assistance they would certainly appreciate it.  I’m not talking thousands of dollars, but some spending money or cash for diapers or toiletries is very helpful.  If you are not comfortable giving cash, then consider donating some toiletries, diapers, snacks or the like.  Clothing is a big need, since not wearing it can get a little uncomfortable.

It is also a nice gesture to have them over for a meal, offer to watch the kids or even offer to help them look through the remains for personal effects.  Really, showing support in any way and being there for them is what is important.  If you are really motivated, you may want to try helping out with a fundraiser for them.  You can also find them some stuff on freecycle. I hope this helps, and I honestly hope you never have to watch your friends go through something like this.

Will they call it a D.W.T.?

Is it really harder to text wearing handcuffs?

Driving While Texting? That’s right, as of July 1st we Virginians are no longer allowed to drive and text, email, or even read texts or emails. You can still use your phone to make calls while driving, which is more than the folks in D.C. are allowed, but it still may frustrate some folks. However, even though I am a “chronic texter” I am still glad this legislation passed.
Why? Why would I want another law that can possibly bite me in the hindquarters to be signed? Well, it helps force me to do something I already know is a bad idea. Personally I think cellphones in general are a terrible idea. Sure, they remove the leash and allow me to work out of my office, but they add another leash where anyone can reach me any time.
Let’s face facts: Driving is a difficult thing to do well. It is not particularly difficult to drive, but to drive without hitting anything and obey the laws is difficult. It both requires and deserves our full attention. When I was an insurance agent I had dozens of commercial clients who were in accidents as a result of cell phone conversations. Imagine how bad those accidents would have been if they had both hands off the wheel trying to type out a text!

The bill name is HB 1786 and I encourage anyone who uses their phone on the go to read it.  It is somewhat refreshing to see some common sense legislation.  Although I am not a huge fan of the “nanny state”, this one makes sense to me because I have witnessed the damage inattention while driving can do first hand.  Do yourself a favor: Don’t text and drive.

Fredericksburg Restaurant Review: Basil’s Italian Market & Pizzeria

Street view of The Galleria, where Basil's is located

Okay folks, if you’re looking for good but fast italian/american food, this is the place to go. I have eaten here several times and enjoyed the food every time. Today I visited with the wife and had the italian sub, which is capicola ham and a few other meats, lettuce, tomato, provolone, onions and a dollop of their homemade balsamic vinaigrette. I had the vinaigrette on my side salad as well, and it is good. Nice and spicy, a little peppery so if you are sensitive to that sort of thing you might give it a pass. I loved mine, and would order it again in a heartbeat.
The wife had 2 slices of cheese pizza and a side salad with bleu cheese. She loved the salad, and the bleu cheese appears to be homemade also, as it had big chunks of bleu cheese in it. She found the pizza to be a little too saucy, and thought the sauce was a little too sweet. I ate her second piece, and she ate the second half of my sub. She agreed with my sub conclusion, but I disagreed with her. I found the sauce to be prominent, but felt that the natural tomato flavor came through. Of course, tomatoes are super sweet, but I didn’t get the feeling that they had added any sugar to the mix.
At any rate, 2 lunches and drinks came to about $18, and with tip we paid a total of $23. Not bad for a good solid meal with ample flavor.
If you’re looking for it, here is the google maps link.  For lifetime locals, they are located in the old Colonial Theatre building.  Seriously though, if you are looking for a good meal, Basil’s is a good choice!

Tax Auctions are Fun!

Okay, tax auctions should not be fun.  I mean, think about it.  The only reason there is an auction in the first place is because someone either could not or would not pay their real estate taxes.  It also means that the county is so bent up about it they took said person to court in order to get permission to sell their property, so it is not a happy series of events.

Still, a good auctioneer can make any auction fun, and the auctioneer I saw today was a blast.  There were a total of 11 properties up for auction here in Stafford county.  However, one of them was “redeemed,” meaning the owner paid the taxes so it was no longer for sale.  The interesting thing about a tax auction is that all sales are final unless…

The court does not approve the sale.  So, if for some reason the court does not approve the sale then it does not go through.  For example, if the bid is lower than the taxes owed then the court may order the property to auctioned again.  The owner can also redeem the taxes up until the court date, so there is a slight possibility you may lose the property for that reason.  Unlikely though, as the property owner has had plenty of notice and opportunity to pay the taxes.

So what do you gain by circling around a tax auction like a real estate vulture?  Low prices, of course! Lot prices at this auction were generally about 20%-30% assessed values.  However, the assessed values are probably off by 30% or so, so you’re really only saving about 40%.  Stil, 40% of $100k is worth my time!

The auction started on time, and the selling attorney went over the auction contract.  It is only one page, and it says if your bid is accepted then you are on the hook.  This is a no inspection, no repair, as is sale.  You have to do your due diligence up front on these, or you will end up on the hook for something you did not expect.  Also, the time to do your due diligence is not at the auction!  You would be surprised how many people were asking the auctioneer facts about the property. The auctioneer’s reply was “I don’t know.  I’ve never set foot on it.”  It pays to do your homework up front.

I spent 2 days researching this and one day in the field with my client.  We pre-established his maximum bid and I attended the auction for him.  This is good insurance for a buyer.  As his agent, I was limited, and as a buyer he was protected from the buying frenzy that often occurs at an auction.  We were outbid on all three of the properties he was interested in, but I didn’t mind because the auctioneer kept me entertained with his call, wit and repartee.

So, if you want to save some money on land, consider a tax auction.  Prices at this one ranged from $7000 for a small lot to $61,000 for a lot with a home on it.  You probably won’t steal property, as the court will not approve a sale that low.  Still, you can save some money, and everyone needs that in this economy!

Get a CLUE part 3: CLUEd in.

Okay,  let’s talk a little bit about insurance in general and why CLUE reports are so important.  Insurance got started back in ancient China by rice farmers.  Every week, rice farmers would load all their rice on a boat and take it downriver to sell.  However, sometimes sudden storms sank their ships (say that fast 3 times) or they were robbed.  When that happened, a rice farmer faced disaster.

Facing disaster is a great way to come up with a new way of doing things.  The farmers quickly learned if they divided up their rice and put a little on several ships, they reduced the possibility of ruin.  Thus the concept of risk pooling was born.  Insurance works the same way.  We all put a little money in the pool, and we can take it out when we need it.  After all, most of us can afford to fix small things around the house but very few can afford to build a new house if ours burns down.

So we have pooled our money together for our own protection.  How do we stop people from taking money out when they haven’t had a loss?  How do we make sure that people are paying the right amount to cover their property?  Or, even worse, how do we stop people who deliberately lie about the condition or value of what they have insured?  This, to quote Frank Zappa, is the crux of the biscuit.

What we are talking about is Adverse Selection. That is the term for taking on risks that the insurance company cannot accurately rate.  For example, if I were a newly diagnosed cancer patient with 6 months to live, no insurance company would sell me a life insurance policy.  However, if there were no records that the insurance company could reference, they would never know I had cancer and be forced to pay out whatever amount of insurance I took out on myself.

That brings us back around to the CLUE report.  This report gives the insurance company a history on the home AND the people who own the home.  Thus, they can see if the home has an inherent defect or if the homeowners are poor risks.  This actually protects the majority of people, as it lowers fraud and makes sure that you pay what your property is worth.

The CLUE is not the only report that insurance companies use.  They also pull credit reports, alias reports, and several other sources of information to guard against fraud.  The goal is that you are accurately insured and pay the lowest premium amount for your property insurance.

So what happens when the reports show that they can’t insure me?  I will cover that in wednesday’s blog post. See you then!