Courthouse Step Foreclosures. Deal Or No Deal?

Today I continued my research on the hunt for details on a possible upcoming influx of bank properties (due to a lift of the bank foreclosure moratorium) and to see if consumers are buying properties directly from the banks at the courthouse.

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 (more…)

  • 28
  • April
  • 2009
Posted in Buying Advice, Virginia Foreclosures | 20 Comments »

Bank Foreclosure Moratorium Lifted. Frank Calls CNBC & Jim Cramer.

A couple of weeks ago Fannie Mae and Freddic Mac (backing most home loans) lifted a Bank Foreclosure Moratorium. I was concerned that the recent 80% drop in bank foreclosure inventory might be a temporary blip with an oncoming tsunami of bank foreclosures.

After hours of dead end research. I decided to call my buddy… Jim Cramer from CNBC’s Mad Money (more…)
  • 21
  • April
  • 2009
Posted in Buying Advice, Press, Virginia Foreclosures | 13 Comments »

Terms, the New Money for REO and Short Sales

Ever heard somebody say “Cash vs loan? Money is money, the seller doesn’t care, as long as we show up to close.”

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% (more…)

  • 17
  • April
  • 2009
Posted in Buying Advice, Short Sales, Virginia Foreclosures | 12 Comments »

Auctions & Bankruptcy & Bring All Offers in Great Falls Virginia

I went to an Open House today for a $3Million+ “Auction” in Great Falls Virginia today. What a spectacle.

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 (more…)

  • 1
  • March
  • 2009
Posted in auctions, Luxury Homes, Virginia Foreclosures | 8 Comments »

My 07 Prediction & Where I’ve Been… Youtube & Wedding & Law School

First my thoughts on the $700,000,000,000 bail out… I told you so!

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 (more…)

  • 22
  • September
  • 2008
Posted in Virginia Foreclosures, Youtube | 10 Comments »

Buying Bank? Hurry! & Wait…

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 (more…)

  • 30
  • July
  • 2008
Posted in Buying Advice, Virginia Foreclosures | 11 Comments »

Top 10 Questions Before Showing Virginia Short Sales

(Update 6-16-08: This post was featured in the Washington Post)

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 (more…)

  • 12
  • May
  • 2008
Posted in Buying Advice, Short Sales, Virginia Foreclosures | 32 Comments »

Short Sales Are "Fake Listings." Only 5% Close!

Update 3-19-09: This post is OLD. See new Post from 2-09 Short sales are closing, if done correctly. They can be the best “deal” (I hate saying “deal”). The post below is still great background info.

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).

Short Sale Statistics:

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.”

-Written by Frank Borges LL0SA- Broker

Please report typos.

p.s. See Washington Post Article on Short Sales

  • 20
  • February
  • 2008
Posted in Buying Risks., Short Sales, Virginia Foreclosures | 119 Comments »

Buying A Foreclosed Virginia Home? Beware of Bank Addendums & $3,000 Hidden Fees

So you are buying a Virginia bank owned property, and REO or a Short Sale? You need to understand the various bank addendums that accompany them, or you might miss a $3,000 hidden fee.

But first, a quick background. Agents that are members of NVAR, and are REALTORS, use a 15 page contract that was painstakingly (more…)

  • 12
  • February
  • 2008
Posted in Buying Advice, Virginia Foreclosures | 22 Comments »

Freeze Interest Rates? Bankruptcy to Profit?

On the heels of our discussion about legislation to remove the Phantom Tax associated with short sales, (see my quote in the Washington post on Short Sale) there is also legislation out there to freeze Adjustable Rate Mortgages for (more…)

  • 10
  • December
  • 2007
Posted in Virginia Foreclosures | 19 Comments »

My Quote in Washington Post Elaborated: Pitfalls of Mortgage Cancellation Tax Relief Act, H.R.3648

Below is my quote in today’s Dec 7th 07 The Washington Post story, “Those Who Avoided Risk Call Plan a Raw Deal

  • [Lead up to quote; red emphasis added]… The aggravation has been building for a while and stretches beyond the agreement announced yesterday. For instance, under one congressional proposal, there would also be a break for short sales — that is, when owners sell a home for less than is owed on the mortgage and the lender forgives the (more…)
  • 7
  • December
  • 2007
Posted in Press, Short Sales, Virginia Foreclosures | 20 Comments »

Buyers! Don’t Skip Photoless Listings. Save $15,000

Punchline: Buy homes with No Additional photos= Save $15,000 on a $400,000 house.

Buyers LOVE seeing tons of photos for each listing online. I think said that listings with multiple photos get seen 6 times more than listings with 1 photo. The tendency for buyers is to see a photoless house and think it is garbage and skip to the next listing (more…)

  • 21
  • November
  • 2007
Posted in Buying Advice, Don't Miss Best Of, Virginia Foreclosures | 28 Comments »

Arlington Foreclosure (REO), Realtor Buys Her Bank Owned Home

Buy like a Realtor!

This post is a link to a 6 minute video showing the process involved in buying a Bank Owned Property in Arlington Virginia, by a Realtor. Megan Buckley, a Realtor with, recently bought her REO home in South Arlington. It was bank owned.

Foreclosures aren’t as frequent as people think in Arlington, and I still suggest looking at everything, but it is possible to get one for a deeply reduced price versus the previous owner’s purchase price.


Virginia foreclosures

Highlights from the video (more…)
  • 21
  • November
  • 2007
Posted in Buying Advice, Virginia Foreclosures | 17 Comments »

Virginia Foreclosures! The new FEVER!

The FEVER was lost for two years, but it’s BACK!

My Virginia Real Estate blog showcases the trends before you ever knew they existed. This is a new trend, and it is on fuego. Problem is, is it real?

The message is slightly different, but the bottom line is still there: Buy Foreclosures, Flip (more…)

  • 11
  • November
  • 2007
Posted in New construction tricks, Virginia Foreclosures | 13 Comments »

"SOL" Homes: Virginia MLS Foreclosures, REO, Short Sales Defined + Email Alerts

Newspapers are filled with talk of the flood of foreclosures, but none that I have seen have taken a step back and defined all the different industry words for my new industry word: “SOL” (S* Out of Luck) Homes ™, and how to buy them. 2-3% of MLS listed homes are SOL in Northern Virginia. Can your agent find them?

It might seem odd that I’m writing about how to buy foreclosures listed on the MLS since some might have just finished reading my article Attn. Market Timers! The EXACT Best Day to Buy!

Well SOL homes can get you a 5-15% discount* if you

  1. Know how to search for them, AND
  2. You have patience
  3. You aren’t picky!
  4. Fully understand the risks of buying “as is”

* Side shout: BusinessWeek did a great job in their article This Old Foreclosure Buying directly from a bank avoids some risks, but don’t expect a steal They both dispelled the 30-50% pennies on the dollar mentality people equate with foreclosures and how foreclosures of a year ago are different today, they no longer occur mainly on courthouse steps. They use the MLS)

So, let’s go over the SOL terms:

  • Pre-Foreclosure: term used by agents or sellers that are in the process of being taken to the courthouse steps since they have defaulted on their mortgage (didn’t pay it). They want to sell the property before it gets foreclosed on, and oftentimes before it is taken over by the bank. Banks sell them on the MLS through Realtors (learn how to find these later in the article). Here are some examples of Fairfax Pre-foreclosures on the MLS.

  • Foreclosure: Technically a foreclosure is a house that is being auctioned off at the courthouse steps. Many people use this word incorrectly to represent a house that is in Pre-foreclosure, or has already been foreclosed on and taken over by the bank (see REO).
    Traditional foreclosures aren’t occurring on the courthouse steps as much (see BusinessWeek Art) since the amount owed (the starting price for the auction) is TOO HIGH. So when the minimum price is too high on the courthouse steps, the banks take them over and sell them on the MLS through Realtors. (learn how to find these later in the article) Here are some examples of Arlington Foreclosures on the MLS and don’t forget Realtors that can’t spell and leave off the E in “forEclosure”: Virginia Forclosures

  • Short-Sale: Usually an MLS listed house that is heading toward foreclosure. The deal requires 3rd Party Approval (the bank) because the seller is trying to sell for BELOW the loan amount and is hoping that the bank will approve the deal, and eat the loss. Only about 5-15% actually get to closing since banks oftentimes say, “no” (blog post coming soon, so sign up). For example, a $500k home was bought with 100% financing. If the market price is now $450k, a seller can a) bring a $50k check b) try a short-sale c) let the bank foreclose. With a short-sale, the bank eats the $50k. Note that the seller still gets a taxable 1099 for the difference (at least for now). This process is seen as being better for the seller’s credit vs bankruptcy and foreclosure. The benefit sometimes to the bank is lower foreclosure costs and re-marketing hassles.

    Examples of “Short Sales” in Alexandria on the MLS. Note that some listings say “not a short sale,” they will come up in an MLS keyword search.

  • REO- Stands for “Real Estate Owned”, but it really means Bank Owned. I guess buying a B.O. house wasn’t too appealing. These are homes that were already “foreclosed” on. Nobody bought them on the courthouse steps and the bank took it over and is attempting to sell them, usually (but not always) for a discounted price.

    Examples of REO Bank Owned in Virginia on the MLS

  • Bank Owned (same as REO)
  • Third Party Approval- If you see this in a listing, it is probably a Short-Sale and it is warning the agent that some extra paperwork and time will be required.
  • Auctions, “Buyer’s Premium”: Some auctions require a 2-10% “premium” be paid on top of the winning bid. So if you bid $500k, you have to pay $550,000. In my opinion, it is a marketing trick that auction houses use to trick sellers by saying “you pay nothing, the buyer pays our commission.” Just make sure you do the math, your NET is what matters.

    Examples of listings with the word auctions in them: Virginia Auctions on the MLS

  • Auctions, “Reserve price.” Sometimes this is also a marketing trick. I have seen $700k listed houses have a $690k reserve. They get people at the auction all excited to get a deal. The auction ends and they say, “sorry you didn’t meet the ‘reserve price’, here, how about a counter?” Sounds like a trick to find out who might be remotely interested in the property.
  • Auctions, “No Reserve.” If you are an Ebayer, you know what this means. The product will be sold, no matter HOW low it goes. If you see “No reserve,” it MIGHT be what I call a REAL AUCTION (send it to me, I’d love to see it)

Auction disclaimer: I am not an expert when it comes to Auctions. I still have yet to see ONE “real auction” in Northern Virginia. I think they don’t exist, but I can be proved wrong if you’d like (have at me in the comments section).

Dealing with SOL property are a PAIN. Expect counters to sometimes take several days, and sometimes months!

And an SOL home is NOT necessarily a better deal. Somebody might have paid $500k for it with 100% financing and the list price might be $480k as they feel the waters. I saw one short sale in my building that started at $600k (they paid $590k). It was overpriced, so it sat. Then the seller/bank got serious. They did a drastic drop to $530k. It sold for full
(while I had 4 people come to me wanting to offer $480k, and they missed out). This was 1 of 2 best priced units in the building over the last 2 years. Another short-sale came on and was sold in 4 days, so if you want these, be ready to act FAST.

So how many of these are there EXACTLY on the MLS?!

Homes that are SOL can be found by having your agent search the Realtor Remarks for keywords, or try it yourself on the new keyword based REO, foreclosure, bank, pre-foreclosure, foreclosed, forclosure*, short sale, auction, third party, 3rd party. *9% of the time this word is misspelled!

In Arlington:

Update to article: I thought I’d run some data from Woodbridge. To my amazement 35% were SOL! This blows my mind!

In Woodbridge

  • Today there are 273 MLS homes from $300k-$325k. 97 (35%) are SOL!

MORE DATA ON 6 NOVA AREAS: 48% of MLS homes are SOL (Foreclosure etc) in Herndon ($300k-400k)

This is shocking!

If you do plan to buy, you need a good agent to know when to spot a “better deal” (remember I don’t believe in “good deals” until you sell your place. See “Buyer’s Market?” No Such Thing As a “Good Deal”)


Have your agent sign you up for alerts based on your price range, area AND these SOL keywords in the Realtor Remarks (different than the Public Remarks). If your agent can’t do it, have them email me, I’ll show them how. If you don’t have an agent… (sorry I tried to hold off as long as possible) welcome to . I’ll set it up for you.

For future articles Subscribe with an RSS reader or via email:
(By Feedblitz)

-Written by Frank Borges LL0SA Virginia Broker

Ps. Please send typos and corrections. Disclaimer: Data gathered from MRIS’s MLS database. Distressed homes

  • 11
  • September
  • 2007
Posted in Buying Advice, Virginia Foreclosures | 26 Comments »