So, I went to the courthouse steps in Arlington Virginia to see today’s scheduled auctions. First of all, all 3 homes set to be auctioned off were canceled. This happens frequently. The notice makes it to the newspaper, but the owner figures out a workout or a way to delay the process (sometimes multiple times).

I then asked the auctioneer whether consumers are buying them directly from the courthouse. While he said “they can,” he also said they don’t because the banks are buying them back at their loan amount, which is usually OVER the market price. He estimated that 95-99% of the homes sold are being sold back to the lender.

My theory is the banks don’t have the resources to fully figure out what a property is worth. So they just buy it back from themselves at full price, and then they try and figure out later what it is worth. They do this by hiring a BPO (Broker Price Opinion, a non-official, cheap appraisal). (Sidenote: Lawyer question how this will effect the Deficiency Judgments, see the comments in the older post).

But this might change, so I will go back every year or so to make sure (I went there 2 years ago, and it was the same thing).

If you are reading this from your email subscription, make sure you watch the video on VA Courthouse Steps Foreclosures.

Click here to view the embedded video.

Written by Frank Borges LL0SA
Broker FranklyRealty.com
Owner FranklyMLS.com

Broker FranklyRealty.com
Owner FranklyMLS.com

Sorry, but that was so 2000-2007.

With Banks, REOS and Short Sales, money is playing second or third fiddle to TERMS, TERMS, TERMS. Banks are taking 2-4% LOWER offers (when there are multiple offers) that are stacked with great terms including:

• ALL CASH
• No Home Inspections
• No Finance contingency
• No Appraisal contingency
• No VA or FHA loans*
• FAST closings
  * Many will debate this and say that these loans have evolved and are as good as regular loans. Guess what? Banks don’t care!

For example, I was talking to an agent the other day. Her client offered $100,000 over list with 50% down on a Virginia Bank Owned property. Another offer was for full list, ie $100,000 LOWER but with ALL CASH. The all cash won. But then the buyer persnickety (great word) started meddling with the bank addendum (see older post) . The bank said forget you. Went back to the 50% cash offer, which lowered the offer to $50,000 under full list.

Banks want LOW HASSLE DEALS!

For Virginia Short Sales, the seller doesn’t care about the price (slight exaggeration). They aren’t eating the loss. They want somebody that will standby and be patient. I even had one listing agent say “I don’t care about the price, the bank will determine that with a counter, I care about staying power.”

I am in no way saying that you should only buy with all cash (if you can great) and remove all contingencies. I’m just saying that it is very important to meticulously review all the terms in your contract and to make them as strong as you feel comfortable with. Maybe do a home inspection, but make it a “take it or leave it” inspection (not a “information purposes only,” I hate those. They are sheep in wolves clothing.) instead of the default which essentially says “we will inspect it and then demand petty changes.”

And believe it or not, I can’t talk about all the things we do, but there are many other ways to win a contract for LESS than the highest offer. But yes, it takes some thinking (wow, an agent that thinks, imagine that?).

And generally I don’t like escalation contracts.

Why? If you have great terms, you will be outbidding a sucky terms contract. How dumb would you feel if you escalated $10,000 higher because there was a high offer with a home sale contingency? Or if you waive the appraisal and the offer you beat doesn’t. Why beat another offer the seller wouldn’t have taken? You can adjust the addendum to try to protect from this. Make sure you are beating not only the price, but the terms.

Please subscribe to this blog and leave a comment, and feel free to leave your experience, even if you disagree.

Written by Frank Borges LL0SA
Broker FranklyRealty.com
Owner FranklyMLS.com

Also I started a new blog that showcases each of my WheelEstateCam.com videos!

Funny how buyers think they are the only ones buying. As I pulled up, I was rerouted to the next street down to take the “shuttle!” About 20 Mercedes Benz, Lexus, and BMWs lining the road.

At the right price there are always buyers looking for “bargains.” In this post I want to unravel the new techniques in trying to move (sell) mansions and estates in Great Falls Virginia. It also relates to other areas as well.

System #1: Auction
Auctions are sexy. Make sure to get a bunch of people in a room and get each other excited. Even the Open House was only 1 hour, so it looks 4x more packed then a normal 4 hour Open House. But it was packed and my buyers were amazed.

This auction was requiring bidders to bring a $150,000 cashier’s check before you could bid. The “starting bid” was $1.5M. But that means nothing. That is 100% marketing. Why? Because there is an unpublished “reserve.” So even if only 1 person bids at $1.5M, they still won’t sell it to you (most likely). So why not start at $178.72? Because $1.5M lets you think for a second that you might get it for that! And they use you to bid up the next guy.

And on TOP of that… this auction has a “10% Buyer’s Premium.” Oh and did I mention is it also a Short Sale to boot? Bid up all you want, the bank will likely still make a counter.

I have to give it to this Auction company though. They WERE able to sell one home this way. And that says a lot. If this company had never sold one, I would likely 100% write it off. For the one that DID sell, it sold for $500k under tax assessment. It probably also started at $1.5M, but sold for $2.5M. No 1/2 price firesale here.

System #2: BANKRUPTCY.
The seller is in “bankruptcy” so all offers are encouraged (see below). It is not clear to me who actually is selling the property. Does the builder have the right to agree to a price, or does the bank have a say? Does the bank have the only say? Or is it a court?

People ask me “what will it sell for?” Heck I have no idea. This is all unchartered waters. All I can do is look up past data to see if I can predict the future. So I did a Realtor MLS historic search for 10 years for the word “Bankruptcy” from $1m to $4m.

Only 1 had sold in Northern Virginia.
Listed for $1.05m, sold for 1.1m (over list)

And two others “withdrew.”
One of those was listed at $1M and came back onto the MLS a year later as a bank owned and sold for $750,000.

System #3: Bank REO
These are regular bank owned properties for sale. They have already undergone the other tricks and marketing techniques and they are serious about selling. Since 2007, in all of Fairfax I found 13 over $1m . Link to Fairfax Bank Owned and Sold via the MLS
Most of them sold AT list and a few within 10%. How can that be? Well if they are priced right, below “market,” they will sell fast.

These are the best options. I recommend signing up for email alerts via FranklyMLS for the phrase: Cityname Bank like this: Great Falls Bank (note that this site searches the remarks, so if it says “near Suntrust Bank” it will come up in the results).

System #4: “Bring All Offers”
What does that really mean? Does that mean a $4M place will take a $1M offer? Not likely. Or at least I wouldn’t tell you about it, since I’d call my mafia friends and find a way to buy it myself (joke). So again, I look at data. What homes that have used the phrase “Bring All Offers” have sold in Great Falls or Fairfax over $1 million in the last few years…? In all of Fairfax since 2007, only 8 have sold.

Lowest List Closed Price
$1,080,000 $1,058,000
$1,098,000 $1,000,000
$1,149,000 $1,120,000
$1,201,500 $1,185,000
$1,209,900 $1,000,000
$1,299,998 $1,175,000
$1,395,000 $1,230,000
$1,890,000 $1,750,000

I don’t see any huge firesales. I do see two that were 20% off though. So you know an offer 20% below shouldn’t be laughed at. See all 8 “Bring All Offers” Homes Sold

More interesting facts:
How many homes have sold in Fairfax since 2008+ for over $2M? 109 homes sold.
Only 24 were in Great Falls, most were in McLean.

Only 7 have sold in all of Fairfax (including Great Falls and McLean) from Jan 1 2009 to March 1st 2009. Oh yeah one said “Motivated seller” in all caps. Listed at $2.2M sold for $1.9M.

If you are looking in this price range let me know, I can pull some more specific data for you. Whatever you do, don’t just call the listing agent. Having a buyer agent can help you save a ton in the end, if they are good with data analysis.

Soon I want to blog next about creative financing for these higher price estates. Why? Who wants to sell off their stock at a 50% loss to buy a home for a “deal?” (see Luxury Homes blog post) Including full seller financing, or a mix of a bank loan and partial seller financing, also called Seller held trust (either with interest or a balloon payment in 5 years).

Don’t forget to sign up spam-free for this blog in the upper right corner of Blog.FranklyRealty.com

Thanks for reading! Make sure you add your comments and questions. Nobody likes a dead blog.

Written by Frank Borges LL0SA
Broker FranklyRealty.com
Owner FranklyMLS.com

Read my blog post from 12-2007 entitled: SIV= Imagine Enron, Bank Wide. (I posted it on my more frequent, but less polished blog on ActiveRain)

The #1 problem is OFF-BOOKS accounting! All of these sub-prime loans are hidden. Nobody knows how much exposure all the banks have.

Secondly, people have been emailing me asking what I’ve been up to and why I haven’t posted more frequently. Well, as some of you might know I’m in night school at Washington College of Law at American University. (I should be reading right now actually)

Oh and I also got married!

Anyhow, don’t fear. I’m still sharing my thoughts, but more so over at my WheelEstateCam on Youtube. I attached the camera to my steering wheel and I take you for a spin as I head over to class. The “Video Blog” was featured in Friday’s Washington Times. Make sure you subscribe to Youtube.FranklyRealty.com

Here is a round up of my recent Video blogs:

• Lending Tree blows. How to Pick a Lender & today Close call closing.
• 4 Bank Tales: 22 Offers, Destoyed HVAC, Verbal counters, Bank Required lenders

 

• FranklyMLS.com 101 New E-mail Alerts. NO Passwords! How-To Video. This video is particularly cool. I have been constantly upgrading FranklyMLS.com. No MLS search site site comes close in terms of speed and massive amounts of data at your fingertips. Even other buyer agents use it!

 

• “Wheel” Estate Cam- Bank Foreclosure Bidding Wars (the first one!)

• Redfin- Debating their “Real Estate Science”
• Need to Sell before you can Buy? Some Options.
• And a little shout out to NVAR (Northern Virginia Association of Realtors) for their new Youtube channel to promote Realtor classes. Watch (the class is on Nov 12 2008)

So if you don’t have a Youtube account, you can sign up for free and subscribe to my Youtube Channel and get emailed when I post something new.

Oh, and yes, I’m still doing real estate! (plug: in case you need a Realtor)

Written by: Frank Borges LL0SA Broker FranklyRealty.com

ps. Please send me any typos

I just got a bank owned / REO property under contract. Was previously $800k, and it was now listed for $400k.

We had to bid on 6 properties before finally “winning” one (ask how we “won” without having the highest offer too!). Wow was that a pain. And people say it is a “buyers market” with tons of inventory? If a home is priced right, it will sell FAST. The key is to get daily MLS email alerts! (or ask for hourly)

So, I haven’t figured out to what degree the hassle was with the listing agent or with the bank itself.

First we have the overloaded listing agent problem.

The banks don’t like changing who their “partner” Realtors are. Once they like one, they dump on them dozens and sometimes hundreds of listings. So the agent is overwhelmed. The listings get thrown onto the MLS with the 1 free “driveby photo” that the MLS provides (thank God for FranklyMLS.com where buyer agents share 30+ photos of these photoless properties).

And if they have 20-40 properties, they get swamped. Their voicemail fills up and emails get ignored. Recently I put in a lowball for a bank property (see why Lowball offers don’t work) and 8 days later, after 3 ignored emails and a couple phone calls, the listing agent had no recollection of her “got your contract” email that she (or an assistant) sent, and then was like “oh sorry they rejected that last week, we shoulda told you.” Of course this makes the buyer agent look horrible to their buyer, since it is inconceivable that the listing agent would be so non-responsive.

But the problem is this is becoming the NORM.

Then we have the overwhelmed banks losing $100,000 per deal.

Sometimes listing agents don’t even have a phone contact at the bank. They just enter in the price and terms (don’t forget that terms DO matter!) into a website and they wait, and wait.

The listing agent can’t bug the bank and say “hurry up” since they will get fired. So they wait.

The bank rep has no incentive to do anything quickly. No bonuses, no commissions. And the longer they wait, the more likely another offer will come in (ie good for banks). Buyers LOVE putting offers in once another person puts in an offer. It knocks them off the fence, and into the market.

Put a deadline? Yeah, like that will work. They don’t care.

Put an escalation clause? Nope, they just cross off everything and put your max price as a counter.

So REOS are still 10x better than Short Sales, but expect to wait. It can take a week just to get a reply to your offer. How is that for sleepless nights.

How to write a strong bank offer.

1. Don’t forget TERMS! While banks care about price, they care about TERMS too. They too frequently see deposit checks bounce, or people back out after the inspection. So if you make your contract as lean on contingencies as possible, it can help you get a LOWER price. Yes, if they think you have a 95% chance of closing, but you are $5,000 lower than another buyer that they think has a 60% chance of closing, they will take less money (obviously not always, but you get my drift). I still would NOT recommend buying without a home inspection.

 

2. Run a FranklyCRA to see if you can find some trends with that bank or the listing agent.

 

3. Multiple offers at once? This is tricky. For the most part, legally (I’m not a lawyer yet) you can not do this without fully disclosing the fact to all parties. Saying “I’ll use the condo docs to get out” if both ratify at the same time, that doesn’t work (since you broke your obligation to the contract BEFORE your rights to review the condo docs kicked in). But I did get legal counsel on how one CAN legally obtain the same end result (ie multiple offers out at once). I’d love to write about it, but then I would be giving legal advice, and somebody in North Dakota would sue me after taking my advice and something went wrong.

 

4. DO NOT REMOVE THE HOME INSPECTION. It might be tempting to remove the home inspection, but that is a little too aggressive for me. Actually many bank addendums will put BACK IN the inspection (that was a really important point, but you probably skimmed and missed that) for liability purposes. Some people have run inspections BEFORE putting in the offer, and others can have the inspection with a “take it or leave it” language in the contract. Don’t do the “informational purposes only” garbage. (sidenote: if I get that when I am the listing agent, I say, “feel free to inspect it after closing, since it is only for informational purposes.” I got burned too many times with that one!)

 

5. Don’t make your closing too soon. If you put in 30 days, and it takes them 2 weeks to sign it, you have 2 weeks to close. Consider “Within 40 days from ratification date as chosen by buyer.”

 

6. READ the bank addendum (see post)

 

(Sidenote/update on Short Sales. More are closing. Before I called them “Fake Listings” since only 1 in 20 was closing, then I made a Top 10 Short Sale Questions to ask before considering short sales. Previously 3 had closed in all of Arlington in the last 6 months. Now I would guess it is more like 1 in 8 short sales close. And in my building at Clarendon 1021, 3 or 4 have closed in the last few months. If the listing agent has short sale experience, the close rate can jump to more like 60%-70% (after 2-3 grueling months).)

Want more?

Make sure to subscribe via RSS or email (spam free).

-Written by Frank Borges LL0SA- Broker FranklyRealty.com

Also read Tony Arko’s: Are Foreclosures Listing Agents Leaving Thousands on the Table?
Report typos please. Photo Credit: 50% off by Robert Brook , Sheep and Wolf by manitou2121 Wideload by The Web President Squirrel on Fence is by Gilles Gonthier,

I wrote about my distaste for Short Sales (aka Fake Listings), and how only 5% close in Northern Virginia (as of 2-08, but that might be changing). I guess now my distaste has shifted away from Short Sales, and more toward clueless agents listings Short Sales incorrectly.

On the buying side, instead of just banning them completely from my showing route, I have implemented a new:

Top 10 Questions to ask the listing agent BEFORE showing A Northern Virginia Short Sale.

Here is the exact e-mail I send to the listing agent of a short sale. Feel free to copy and paste this.

*********************
Hello,
I have a possible buyer considering your short sale listing.

Our company policy is to ask for more information from the listing agent before showing any Short Sales.

Can you please answer the following questions:

1. Have you closed a Short Sale before?

 

2. Have you requested and received the short sale package from the bank, including the hardship letter?

 

3. Have you sent the package AND have you confirmed receipt?
   

 

4. What communications, if any, have you had with the bank?
   

 

5. Has the bank approved the list price?

 

6. Have you received any other offers that you are waiting to hear back from the bank on?

 

7. Does the loan have PMI on it? (Private mortgage insurance)

 

8. Is there one or two trusts? Any other liens?
   

 

9. What are the names of the banks? Are these FHA or VA loans?
   

 

10. How long do you estimate that the lender will take to provide an answer to an offer?
11. (new) Has your seller completely stopped making payments on their loan.
12. 
    Update 1-22-09: Is the seller willing to hold a note with the bank for the difference? (much better for their credit score)

 

*********
Am I missing anything? Please add more in the comments.

I recently sent this to 10 listing agents. Only three replied. Only one really knew what they were doing. The winner was Realtor John Ryan in Woodbridge.

His reply:

Started talking with the bank? Yes Has the bank approved the amount? Yes

Have you received any other offers? Yes, however we are only a few days into the process with the new offer. All other previous offers dropped off.

Have you closed a short sale before? Yes, several. I also have a dedicated team of five people that work the banks to get these through. I can give you feedback along the way so that you can keep your buyers informed.

****

Joy to the world…

So I hereby lift my ban on Short Sales on the buying side.

As for the listing side, after an eight hour NVAR CE class, from a group that gets a 90 percent close ratio, I have no problem taking them on (if the seller qualifies). Don’t want a short sale? Send it my way.

Also at the most recent Finance Committee meeting at NVAR, we passed a resolution to consider enacting some sort of Short Sale ____ (certificate, pledge, designation) for those that know what they are doing with Short Sales, so they can put it in the MLS Remarks and buyers can have more comfort.

Update 1-22-09: Still reading this #1 blog post on short sales for a background on the process? Well it was written over a year ago. Short Sales are now closing MUCH more frequently in SOME areas (an 0 in areas like McLean). Subscribe to this blog for I plan to run some numbers on the % that are closing. My guess is the range is 1 in 3 (vs 1 in 20) before. However closing rates can be as high as 80% if your buyer agent asks the listing agent these questions: Top 10 Short Sale Questions.

(Update 6-16-08: This post was written on 2/08, this marketplace is changing ever month. Make sure to subscribe to the blog to get updated on the marketplace, like an upcoming post on more Short Sales starting to close.)

As of 2-08, most Short Sales in Northern Virginia are what I call “FAKE Listings.” (note that this is Virginia, every area is drastically different)

Only 1 in 20 sells.
In Arlington only 3 have sold out of 65 attempts.

I briefly went over Short Sales when I defined all SOL Homes including REOs, Bank Owned Etc. But Short Sales need more attention, as they are very tricky and misleading.

A Short Sale is a listing for sale that requires “Third Party Approval.” That means that 1, or 2!!, banks are owed MORE than the list price.

For Example:

1. Home is bought for $500,000 with 5%, or $25k down.
2. Home has a $475,000 mortgage.
3. Value dropped below $475,000
4. If the seller is facing foreclosure, they slash their price for a quick sale
5. A Short Sale is attempted at $450,000
6. If the bank accepts it, the BANK eats $25,000 (see Phantom tax for Seller)

The Theory Behind Short Sales: Banks would be better off to accept a loss now, versus going through the legal expense of a foreclosure, just to end up selling it for less later. Win win, right? Wrong. Read on.

Bank Trick 1: “Sure, we will consider a Short Sale, IF YOU KEEP PAYING US.”
Yep, a bank sees a desperate seller, and a potential $50,000 loss. They then mislead them into thinking that they might consider taking a bath on the deal IF the owner keeps paying their mortgage. The bank then ignores offers for 2-4 months in order to squeeze out another $2,000 x 4 or $8,000 profit. Brilliant. The bank then takes it over after foreclosure and sells it for $10,000 OVER the Short Sale List price. $18,000 better off, NOT doing a Short Sale.

Bank Trick 2: Sometimes the bank has mortgage insurance and it is CHEAPER for them to let it foreclose versus allowing a Short Sale, which is NOT insured.

For example, I was at an NVAR short sale class and a Realtor asked the speaker, “Why after 60 days, calling 2 times a day (120 calls) with a full price Short Sale offer, did the bank not call us back?” The speaker claimed it was due to an overworked staff.

I asked:

1. Did they tell you they would consider a Short Sale IF you kept paying $3,000 a month? The answer was Yes.
2. Was the home bought with Mortgage insurance? The answer was Yes.
3. Bingo! Why eat $50,000, by accepting the low offer, if the bank a) gets $3,000 a month and b) is insured against a foreclosure and NOT a Short Sale.

She was pissed. She realized that she had been “had.” But this goes on ALL THE TIME. It can take MONTHS to hear back.

Another example:

1. A seller in Clarendon 1021 tries to sell his property and profit $30,000 at $600k. (Yeah right!)
2. Then he drops it to $570,000. No bites, but the foreclosure is pending!
3. They SLASH it to $530,000
   (sidenote, I get flooded with calls from friend that want to pick it up for a steal at $470,000! I said that it was impossible… since I’d buy if that price was a possibility.)
4. It sits for another month, then the listing disappears after 100 days!
5. A month later it is “bank owned” and listed for $560,000
6. It sells for $540,000 in 26 days.
   

The moral here is banks are not dumb and the market isn’t so horrible that they will take all these lowball offers. They sold it for $10,000 OVER the previous list price (which probably had lower offers).

Reston homes from $300k to $400k.
- 20 Active “Short Sales” in Reston (watch out for “Not a Short Sale” listings)
- 73 were Withdrawn, or Expired.
- 3 Under Contract (1 under contract since Nov 2007! Many UC do not close.) />Only 3 sold in the last 24 months. 3 closed sales in 100 attempts!

1. Dropped From $480k to $400k, sold at $400k (Full list)
2. Dropped from $430k to $400k sold for $380k (5% under list)
3. Dropped from $380k to $350k sold for $345k (2% under list)

Arlington Short sales.
- 25 Actives
- 37 Withdrawn
Only 3 have sold in ALL price ranges in all of Arlington in the last 2 years.

1. Listed at $335k, sold for $335
2. Listed at 700k dropped to $620, sold for $600k
3. Listed at 480k dropped to $420k sold for $420.

In Alexandria, only 8 have closed in 2 years out of 80 attempts.

(most were at list, or 2% under list, some were $20k over list)

I show this, so you don’t think “Wow, they are desperate, we can now lowball. These 3 were the ONLY successful ones. Probably because they gave the bank a real offer.

Ok, so enough already with the War N Peace, what should I do?

Advice for Regular Sellers

1. Do NOT blindly compete with a Short Sale. If you get an inexperienced agent, and they see 3 Short Sales in your neighborhood, and they have you compete against these “fake” listings, you can lose $25,000. Hope you “saved a ton” on that agent. (see Realtor Rebates)

Advice for Sellers Facing Foreclosure

1. Watch out for the bank tricks to “keep paying.” Talk to a lawyer that specializes in bankruptcy to help guide you. They MIGHT recommend stopping payments immediately and saving it up for a rental.
2. Use an agent that has completed (as in CLOSED, not listed) at least 1 Short Sale.
3. If you have mortgage insurance, be extra careful, the bank might prefer that you foreclose.
4. Get bank approval for your list price before listing it. Put in the listing remarks “List Price approved.” Otherwise you will get lumped into all the other Fake Listings and ignored by smart buyer agents.

Advice for Buyers looking for a “steal” (see “deals” post)

1. Avoid Short Sales, or expect to wait 2-3 months and expect to put in 5-10 offers on Short Sales before one is accepted. A Short Sale in my building now has 4 offers. He says he is expecting a reply any day now… sorry, but yeah right!
2. Look for Approved Short Sales. Ask if the bank has been contacted and if a price has been approved. Multiply time estimates by 4. Ie. 3 days= 12 days.
3. Consider offering near, full or OVER list. What! Over list! Are you nuts! CNN says this is a BUYER’s Market! I know it sounds crazy, but if you and your agent see the price is well under your other options… I’ve said time and time again, I’d rather you pay $10,000 OVER list on a house that is $50,000 under the competition versus “saving” $50,000 on a home that is overpriced by $100,000. Ignore list price, focus on VALUE.
4. Focus on Bank Owned. These units get replies in a day or two. (See video of Realtor buying a Bank Owned property)

Advice for Buyer agents & Listing agents

If you get one to close, change the remarks to SHORT SALE, NOT TO BE USED AS A COMP in hopes that the appraiser will take that into consideration and not trash the neighborhood (buyer agents, demand it of the listing agent to try to help your client’s “deal” not turn into destroying his own investment).

Sidenote: A home should NOT go under contract until the BANK signs it, but many agents will make this mistake. The seller signing it means nothing, and it should stay on the market as Active.

• Updated Correction 2-29-08 I’d like to thank DAAR CEO Jeanette Newton for this correction. I’m excited that she is participating in blogging!
• My above sidenote about when to go Under Contract is 100% wrong. So let me explain… IF a seller signs the offer, as written, it is to be listed by default on the MLS as Under Contract with No Kick Out. The problem for the seller is that most MLS websites will remove the listing, so the chance of a better offer (and a higher chance for the bank to accept) is slim to none.

  Here are a sellers’ options (please comment if you know of more options) :

• 1) A seller can counter the contract and add in a “Kick Out” so further offers can be reviewed. The listing then can be set to Under Contract with Kick Out (this was suggested by Loudoun Realtor Tony Arko). But only a buyer agent looking on the back end MLS can find UC/KO. (A Kick Out means “there is still a major contingency here, feel free to submit another offer, it still can be considered and the first contract might be kicked out.”)
• 2) Another way to keep it active (like the unit in my building with 4 offers) is for the seller to send the “offers” unsigned to the bank. Why not try and keep your home as “Active” for as long as possible? Some banks will require the seller to sign, so try #3.
• 3) Or lastly, the seller might add “acceptance of the contract is contingent on lender approval.” or “contingent upon review and approval of the lender.” That one line can keep it “Active.” I am not a lawyer, so please verify any additions you make to a contract with a lawyer.

• As a buyer agent I would prefer it to be “Under Contract” if I was the listing agent, I would want it to be Active. So it depends whose side I am on, it is part of the negotiations. You can even counter with “Increase your price $2,000 and we will place it UC/KO.”

New Trick: Now that Short Sales are getting a bad wrap, some listing agents are NOT disclosing that it is a Short Sale.

Conclusion as of 2-2008: Short Sales in Northern Virginia suck.

Question: Realtors, should you have a “No Show” policy for Short Sales that aren’t approved by the bank? Are they really “for sale” if the owner (the bank) doesn’t even know about it? Feel free to just tell your clients “read this blog.”

n style="font-weight:bold;">-Written by Frank Borges LL0SA- Broker FranklyRealty.com

Please report typos.

p.s. See Washington Post Article on Short Sales

• Top 10 Questions Before Showing Virginia Short Sales

• FranklyMLS.com, 1st to Scrub for Short Sales & Post Article

• Feb 2009 Short sales are closing!

But first, a quick background. Agents that are members of NVAR, and are REALTORS, use a 15 page contract that was painstakingly created by lawyers and a contracts committee. They try to design it as evenly as possible with several “fill in the blanks.” Local Realtors receive hours of training on these standard contracts. While a client might want to also have the contract reviewed by a lawyer, there is some comfort knowing that it everyone uses the same contract and was written by lawyers with a neutral bias.

But when you buy a bank owned property, you start with a standard contract, but then the bank sends their oftentimes non-negotiable “bank addendum.” I can’t blame them. Sometimes the decision maker is in another state and dealing with hundreds of offers. Any small change in contract terms might require bringing in lawyers etc. They would rather take a lower price, but leave their terms untouched.

The addendums are heavily 1-sided FOR the banks and since every bank has a separate bank addendum, there is currently no training for REALTORS, (I proposed an NVAR class to fix this) so that they can better understand them.

Here are just a FEW of the things you should know about bank addendum contracts:

1. Addendum means “Everything in the main contract is nullified” if the addendum covers anything already in the main contract. So if your main contract says you get a walk through, but the addendum says “As-is,” the addendum wins.
2. Some bank addendums are written nationwide and ignore local laws. Local laws DO supersede these contracts, so therefore sometimes there are terms in them that are not enforceable.
3. Watch out for hidden new fees. One of the agents that I work with had their main contract agreed to, but the addendum needed to be signed. The addendum sneakily (is that a word?) shifted a $3,000 tax to the buyer. Hello! That is real money, don’t just sign it.
4. Most addendums are more “AS-IS” than the regular contract. The bank would rather take less and be done with nickel and diming. This is fine, as long as you realize and are ok with this risk
5. Most addendums allow the bank to cancel the contract all the way up to the close date. Yep, they can walk, sometimes for a $1,000 fee or sometimes with no penalty. If they get a higher offer, or whatever, they can break the contract. Again, this might never happen, but you need to know what COULD happen.
6. Bonuses to use their title company. In Virginia the buyer is legally allowed to pick the closing company. But oftentimes the bank wants their company to do the closing (in part because they share in the revenue) so they offer a $1,000 incentive. On something like a bank sale, with the former owner losing their home, I would want MY title company to tell me everything is all clear.
7. Termite provisions are stuck. Normally the seller pays if there is termite damage. The addendum shifts the risk back to the buyer. I’m not talking about the $35 inspection, I’m talking about repairs.

Does anybody else know of details that are hidden into these addendums? Again, there are dozens of variations, so make sure you review it carefully and have a lawyer review it.

Make sure you work with an agent that has done some of these deals and can guide you through the higher risks, but which oftentimes comes with lower priced bank homes.

Written by Frank Borges LL0SA- Broker FranklyRealty.com

Don’t miss the comments and discussion by other agents with other bank experiences. And please report typos! Keywords: Arlington, Fairfax, Alexandria, Manassas.

I have the following questions, maybe you know the answers:

1) Will it only help those facing foreclosure, or will everyone that locked into a 2% teaser rate get the benefit of a 4-8% reduced rate. On a $300k house, this comes to up to $24,000 in savings per year! The plan calls to help 1.2 Million distressed homeowners.

2) Who pays for this? The banks already have calculated expected earnings based on the rate jumps. Do we expect the banks to just eat it? Or does the government write the banks a check?

3) If a $300,000 house increases in value to $400,000 in 4 years, after the government gave some a $96,000 bailout, will they be allowed to take that $100,000 profit?

What I MIGHT be able to understand is a Minimum Payment Option, but the unpaid balance be paid at the end, when the house is sold (like a minimum payment on an Option Arm).

My understanding of the proposed solution:

1. 2005 purchaser pays $300,000 for a home. 100% loan. 4% rate, that adjusts to 7% in 2007.
2. 2007, the government (or the bank) covers for the 3% difference ($9,000 a year)
3. 2010, if the seller can sell for $330,000, after 3 years of government subsidies totaling $27,000, they PROFIT $30,000

My proposal:

1. 2005 purchaser pays $300,000 for a home. 100% loan. 4% rate, that adjusts to 7% in 2007.
2. 2007, the government (or the bank) covers for the 3% difference ($9,000 a year)
3. 2010, if the seller can sell for $330,000, after 3 years of government subsidies totaling $27,000, the payback the subsidy for a PROFIT of only $3,000

BOTTOM LINE: While a measure like this might help distressed homeowners, I can see many situations where this might result in a near bankrupt homeowner suddenly PROFITING $30,000 from taking out a risky loan. That doesn’t seem right.

- Written by Frank Borges LL0SA- Broker FranklyRealty.com

(please report typos)