Authored by: Laurie Mindnich

October 23rd, 2007

Foreclosures, pre-foreclosures, short sales are in evidence on the North Fork of Long Island. A quick explanation:

A pre-foreclosure arrives in the form of a lis pendens - the homeowner is notified that the bank will be claiming the property from the mortgagee. It is essentially notification to the homeowner of a pending lawsuit.

As payments are skipped out of necessity (with a market that has properties available for less than the LOAN BALANCE for these unfortunate sellers) the “payoff” increases by the amount in arrears, with additional penalties. An individual desiring a sale is finding that, month after month, the payoff amount is getting increasingly (and alarmingly) out of line with the current value of the home.

If you are in a situation that requires input, a good site to check out is: www.banking.state.ny.us.com. Most of your questions can be answered here, and they indicate that potential assistance is available. Another site is offered by the Community Development Corporation of Long Island. They can be reached at: 888-995-HOPE.

Many homeowners have been stunned with the speed at which mortgage payments have accelerated, and are discovering that the adjusted payments are simply too high. A recent meeting held with one such homeowner was an example of a nightmare: a retiree, this homeowner refinanced two years ago. While the payments remained in the 2000./month range for a time, the increases came fast and furious- her loan is now adjusted every three months. It is hovering in the 4,100. month range.
Working with this type of listing is a true challenge- if at all possible, homeowners need to contact not only their mortgage company, but any federal entities (local) that are paying attention to this issue for additional assistance. The initial attorney fee quoted to this homeowner was $4000. with $2000. up front- there is help available for those unable to afford this cost.

Foreclosure verbiage to be aware of:

Arrears: being overdue in an installment payment

Beneficiary: An individual entitled to receive assets or money from a trust or an estate. A lender is a beneficiary with a deed of trust or note as security for a loan.

Bid: An offer by an interested party requiring payment of a designated price for a property which is about to be sold at auction

Chattel: Personal property, such as household items

Closing costs: Expenses extraneous to the sale of real estate, which includes loan, title, appraisal, closing fees.

Deed in Lieu of Foreclosure: With lender approval, the owner deeds the property to the lender in order to avoid foreclosure. Lenders are inclined to avoid a “deed in lieu of” without clear title, and the owners offer an affidavit that provides that they are acting of their own volition.

Default: Failure of borrower to make payments in full or as stipulated by the lender.

Demand Letter: This is also referred to as a “letter of intent to foreclose”, or a “breach letter”.

Equity Right of Redemption: the right to avoid foreclosure by removing all encumbrances (interest, fees, debts outside of the current loan amount).

HUD1 statement: A form typically provided by the bank that includes the costs of purchasing the home.

Instrument: any written legal document.

Loss Mitigation Department: at banks, the department that assists homeowners in avoiding foreclosure.

Notice of Default: a notice sent by the bank to the borrowers with the purpose of curing the loan/late payment.

Notice of Rescission: a notice sent by the bank to the borrowers when the deficiency is “cured” and current.

Short sale: the sale of a property that is either below, or at market level that is LOWER than the loan balance.

IF YOU ARE FINDING YOURSELF IN THIS SITUATION, CALL US FOR ADDITIONAL RESOURCES:

Options Realty

621-717-2227

Who ARE these people fielding short sale phone calls, anyway?

It must be challenging to go to work knowing that the phone is going to be fraught with fury, frustration, and other "f" words, from soon-to-be non homeowners, their attorneys, their Realtors.

I get that, and it makes me shudder.  HOWEVER, SOMEONE'S GOT TO DO IT, AND THAT PERSON IS YOU.  And you, when the first "you" goes on vacation; and the third higher-up "you" defers happily to voicemail- ALL OF YOUSE are DRIVING US CRAZY.

THE ONLY WAY TO GET AN ANSWER IS TO FUNNEL THROUGH THE YOU'S, HEADING INEXORABLY UP THE LADDER. 

I'm wondering if they aren't each having daily contests, "MY Realtor will call 14 times before they figure out that I was just the receptionist; MY soon-to-not-be homeowner thinks that I'm calling right back; MY attorney, how much you wanna bet, holds until I'm back from lunch...and a pedicure" and SO ON.

I ASK AGAIN:  WHO ARE THESE PEOPLE? 

I can tell you that, when you plead and plead for a REAL VOICE, the one that you get (not being privy to the case) is very pleasant.  That'll pacify all for another twenty minutes.

Really.  It is such a blatant game of stall-stall-stall in the face of close-close-close- you FINALLY HAVE A BUYER...I'm not sure whether the room is eating popcorn, watching Dr. Phil while we're on hold, and laughing at US...or their employer, for instituting the biggest procrastination scheme that I've ever experienced.

My recently married daughter called to let me know that there will be, in June, a new family member.

Because I am in New York, being able to unobtrusively visit my new little member in Colorado requires the purchase of MY OWN HOME in Colorado, long distance from New York.

Not a problem- having sold a house in Colorado without having to return, I'm fine with buying one.  EXCEPT, the baby isn't due until June, so...IN A DECLINING MARKET, WHAT'S THE RUSH?

As a buyer, I seek the following:  a two bedroom CONDO in the Centennial/80016 (which could include SE Aurora).  Perfect condition.  GUESS WHAT?  I saw lots of them on Realtor.com.  I am in NO RUSH.  However, the reality is that a baby is coming, my first grandchild, and I'm buying a place that has amenities and is in a good school district.  Or, one that I feel is good.

How, as a Realtor, do you capture my interest now?  YOU DON'T, AND YOU WON'T.  I'm a FENCE SITTER.

The "new market" requires, and demands, patience toward buyers.  While I am a "dud" prospect at the moment, come June of 2008, I'm the easiest sale that a Realtor will ever have.  Whatever is available at that moment in time is what I'll buy- and as a buyer, I think that it'll be less in June.

Here's the bottom line:  if it isn't, I WON'T CARE.  Buyers today are no different from buyers yesterday, or yesteryear- finding out the motivation will always be the most important part of the relationship between buyer and Realtor.  And guess what?  If a Realtor in Colorado is smart enough to figure out which area is best for me, and offers updates on the area...I'm likely sold before June, because I don't want to worry about the future of my first grandchild, if the "right place" presents itself.

WE'RE IN A HELL OF A BUSINESS IN A BUYERS MARKET. 

The recent report issued by the FTC and DOJ concerning consumer issues is one that should be required reading for new New York State real estate licensees (and even some old timers).

Specifically, the scope of interpretation of "legal advice" when performing specific real estate related tasks- it would appear that changes could be forthcoming, eliminating a barrier that has been in place in NY and a few other states- "fill in the blanks" contracts, while not used regularly in my area (if at all) may soon become OLD NEWS.  There is a suggestion in the report that states will need to reevaluate antiquated practices barring Realtors from fully completing all paperwork, addendums, etc. without the imposed presence of attorneys.  As I'm interpreting this measure, it would appear that with the additional contingent of the legal eagles, the consumer is paying MORE for a closing than may be neccessary (as evidenced in other states) and the FTC and DOJ are consumer advocates for fair costs associated with closings.*

Additionally, a reiteration of the financial (fines) implications with any  of suggestion that "discount" methods are to be discouraged (from agent to consumer) is present- good to know before blogging.  Even the unintended comment with respect to discounters that implies a "set rate" amongst other brokers is a slippery slope.  With a big, fat fine.http://www.usdoj.gov/atr/public/real_estate/index.htm

As a measure to insure that we are within the realm of what could well be consumer expectation (and a blessing from the DOJ and FTC) getting VERY familiar with NY contracts, and any required addendums, is our objective.  With a new person coming on board, we will be sitting down with an attorney for a "contract writing" lesson- while I've had plenty of experience in this realm both inside and outside of NY, new agents need this information, and should be practicing FILL IN THE BLANKS contracts on every transaction:  transaction.http://www.usdoj.gov/atr/public/real_estate/closing_details.htm

The new website is impressive, like it or not.  WE LIKE IT.  Contrary to viewing it as a detriment, it's an opportunity for our consumers, if they choose us, to understand all available options with respect to selling their investment.  An educated consumer is better for everyone, Realtors included.

Consumer unfriendly practices (dual agency, anyone) that benefit broker/owners, but put salespeople in a very uncomfortable fiduciary position (IMPOSSIBLE position), will likely be targeted- all it takes is one consumer to send an email that they feel taken advantage of, and the can is opened for the broker.  Good luck with this one. 

So, another opportunity to LEARN.  New York is real estate challenged, not because salespeople are incapable of performing minimum paperwork standards.  My guess is that it is broker owners that are tying hands.  In order to remain "current", it would seem incumbent upon broker owners to push two concepts:  KNOW YOUR PAPERWORK, AND UNDERSTAND FIDUCIARY.  It will be a sorry day when a buyer requests that an offer be written by their fiduciary, and the real estate community just looks...blank.  As broker owners, real estate salespeople in New York deserve preparedness.  If the broker owners don't encourage this, it could be the consumers that feel short changed.  Just an opinion.

I'm reading much about the frustration that builders are creating for ALL of us (except their fortunate buyers) in this time of DEEP DISCOUNTS.  As luck would have it, I read a terrific article in Business Week, entitled, "Housing, That Sinking Feeling."

It reminded me of a time in the 1980's in Denver when builders were being eaten alive by a dead market.  Rates were hovering in the 13% range.  3-2-1 negative amortization loans were the order of the day.  The BIGGEST problem occurred when builders started to go under.  Out of business.  See ya.  Leaving the foreclosure activity at an all time high in resale, coupled with empty builder houses, not completed (or, completed with 100k worth of contractor liens on them to be dealt with)-  weeded, empty lots sitting next to foreclosing resales- it was one ugly picture.

WE DON'T WANT ANYONE GOING OUT OF BUSINESS RIGHT NOW.  ANYONE.

This would include at the top of the list, builders.   In my opinion, which is bolstered by the reminder triggered in the above article,  we want builders SOLD OUT.  Lien free.  Give the farm away- just make sure that you can afford the promised landscaping.  GET OUT.  The sooner they're less heavily inventoried, the sooner things can balance out in resale.  Face it, if you're in a new area: appraisals will be directly impacted by builder sales- your short term loss is going to take time to recover.  There's no magic pill.

The ugliness of builders going under is devastating to the resale market.  The discounts offered now are nothing in relation to builder foreclosures.  The dynamic in those times involved foreclosures competing with builders competing with resales.  When it shifted to foreclosures competing with resales (from both the builder and resale contingent) it only tanked further.

And, in its cyclical way, time solved the problem.  It just took a long time.  So, my thoughts are simply that while builders are problematic, we want them to succeed in selling product.  JUST BE QUICK ABOUT IT.

To  New York Realtors, I have a question:

If you are representing the buyer as a buyer broker, who writes the contract?

Buyer agency switches the FIDUCIARY incumbent upon the salesperson (Realtor or broker) from the seller to the buyer.  It becomes the responsibility of the buyers agent to make certain that the transaction occurs with the best interest of the buyer in mind.  From my standpoint, this would absolutely require that: a.  the Realtor writes the contract (yes, you CAN do it with attorney review) or b. the BUYERS attorney performs the contract. 

With a belief (please, correct me if I'm missing something- I'm all ears) that buyer agency will require a change in standard practices, how is it being handled out there in the trenches, to those of you that represent buyers?

For those outside of NY, know that the process in NY (at least in my area, and in Long Island) is as follows:  the buyer views the property.  The buyers agent writes what is called a "binder".  The binder, with terms that the buyer is in agreement with, is submitted to the listing agent.  If accepted by the seller, the binder then goes to the seller's attorney to be written up.  This is done AFTER the inspection- if the inspection doesn't work out, the buyer is simply out the money and...the house is available to other lookers throughout the process of inspections.  This is not a responsible move if fiduciary on the part of the buyers agent is understood- at least, not for my buyers.

A reminder about fiduciary:http://en.wikipedia.org/wiki/Fiduciary_duty.  The buyers interests are your responsibility.

This current process for buyers is uncomfortable, to say the least.  Shouldn't the buyers attorney (in the spirit of representing their best interest, along with our own responsibility) be the instigator of that which the buyer understands to be the offer submitted?  Having the sellers attorney write up the offer is rather like having the same divorce attorney- noooooot good.

Just curious about what position may be present in light of the representation.  I've met many great Realtors out here that just don't quite have a grip on the process that works best for the buyer.  Then again, it could be that I'm operating from a position that is equally confounded. Until clarity is provided, this renegade will simply follow what the majority of the nation offers to both buyer and seller every day- an understanding of fiduciary.