From the category archives:

Foreclosure

Million Dollar Homes Sold As-Is in the Twin Cities

Selling Unfinished Luxury Mansions I was reading today about a Luxury Mansion in Florida being listed for sale at a staggering price of $75 Million. Problem is, the house is not entirely finished. In fact, it doesn’t go much past the studded walls. The unfinished 90,000 square foot home includes a roller rink in the basement, home theater, bolling alley…oh, the list goes on. Needless to say, but selling an “as-is” home is pretty difficult. Buyers have a hard time envisioning the final product, and many will discount the home even more.

The article got me wondering if there were any new construction homes listed in the Twin Cities MLS database that were priced above a million dollars and being sold “as-is”. I was able to find one on Long Lake with 5200 square feet of unfinished space that is for sale for $1.1 Million. It originally started out at $2.2 Million, but with the market crash, and the simple fact that it is not finished, I am not surprised it hasn’t sold yet. Once a potential buyer also looks at the $18,000 yearly property taxes, they might think twice about buying the home. Oh, and did I forget to mention that the home is now lender owned?

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HUD Changes Some Rules to Help the Sale of Homes

HUD TAKES ACTION TO SPEED RESALE OF FORECLOSED PROPERTIES TO NEW OWNERS
Measure to help bring stability to home values and accelerate sale of vacant properties

WASHINGTON – In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan today announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties. The announcement is part of the Obama administration commitment to addressing foreclosure. Just yesterday, Secretary Donovan announced $2 billion in Neighborhood Stabilization Program grants to local communities and nonprofit housing developers to combat the effects of vacant and abandoned homes.

“As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers,” said Donovan. “FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization.”

With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.

“This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed,” Donovan said.

In today’s market, FHA research finds that acquiring, rehabilitating and the reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.

The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

“FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties,” said FHA Commissioner David H. Stevens. “This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity.”

The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of “flipping” where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:

• All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
• In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions.
• The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD’s website.

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Banks Could be in Hot Water over Short Sale Fraud

I knew this article was coming out and was contacted by one of the parties mentioned in the story, but at the time had not had it happen to me in any of my short sale dealings. Shortly after the fact, I did have JP Morgan Chase ask me to keep something off the HUD involving a second lien holder in a short sale negotiation. Even after I notified them that what they were asking was a RESPA violation, they refused to yield. In the end, the home owner was able to pay off the second lien holder before anything further proceeded, but I wasnt’ too happy with Chase’s attitude that what they were requesting was OK.

Big Banks Accused of Short Sale Fraud

“Just as regulators, lawmakers and all forms of financial oversight boards are talking about new regulations to guard against mortgage fraud and another mortgage meltdown, there appears to be yet a new mortgage fraud out there today, allegedly perpetuated by agents of, yes, the big banks….” (read more)

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Luxury Home Short Sales

Working with Luxury Short Sales in the Twin Cities

While high end homes don’t go into distress too often, the current market is causing some home owners to pursue the short sale route when selling their home. With home prices dropping in expensive neighborhoods, and seeing as many were artificially inflated due to the real estate market a few years ago, luxury homes are now seeing a much needed market correction.

Unfortunately, there are not as many buyers out there who can afford an expensive home (not to mention the high property taxes that come with million dollar homes). Currently the most concentrated area in the Twin Cities Metro area for short sales is in and around Lake Minnetonka, including areas like Chanhassen and Medina. But you can find a luxury short sale here and there throughout the Metro area.

Having worked with high-end short sales, I can say that they are quite different than the normal sale. The ones I have worked have almost always involved a higher up…not the average remedial negotiator who could give a rats butt, but someone who understands the potential huge financial loss that a million dollar home would create on their books. A $1.5 million dollar foreclosure is so much worse than writing off a few hundred grand in a short sale.

Case in point, a luxury short sale listing I successfully sold this spring became a success because I got the ear of the Vice President of the bank. He agreed that a $400,000 loss was much better than a $1.4 Million loss. Granted I am sure they would have gotten some money back if sold as a foreclosure, but it would have been much less than that of a short sale, not to mention the court and lawyer fees that would have been tacked on to the net. Working like a team to reach a common goal, the bank and I were able to negotiate very well together, creating a deal that helped the home owner out of a jam, and got the buyer a super deal in an expensive neighborhood.

If I had to give one piece of advice for a home owner looking to sell their expensive real estate as a short sale, than I would recommend finding an agent that not only specializes in luxury homes, but also has experience in short sales. (There are very few of us that do.) For the short sale million dollar homes currently for sale, most of them have an agent that has little to no experience in either. Sadly, this really only hurts the home owner as they don’t get what they really need – the successful sale of their home and avoiding foreclosure.

If you have any questions regarding the short sale of your home, please feel free to contact me anytime!

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Minnesota Foreclosure Process – Foreclosure by Advertisement

Many people facing foreclore have no idea what will really happen, or how events play out. Above is a quick snapshot of the basic process leading up to the sheriff’s sale as furnished by the Minnesota Home Ownership Center.

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Luxury Lake Minnetonka Home Back on the Market at a Steal

A Lake Minnetonka home is now back on the market today – as a bank owned property. If you are looking for a great deal that is most likely being offered at a 50-75% discount, then check out 1535 Bohns Point, in Orono. Now listed at $4.7 Million with Remax Action West, this home was listed a few years ago for $14.7 Million. A year ago it was reduced to $9.5 Million. Now, it is the banks.

The home has an interesting story about the homeowner, words like ponzi scheme and tax evasion are some of the key highlights of the report from the Star Tribune.

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Society Needs to Stick to its Commitments

Every now and then I answer questions submitted by buyers and sellers on Trulia, an online real estate search site, which allows people to connect with knowledgeable local real estate agents. Lately I have seen an alarming trend with a few sellers out there who think they can take advantage of the current mortgage and economic mess. That trend is called bailing on your mortgage when you can readily pay.

A few weeks ago, one home seller admitted he was able to keep current with the mortgage he has on a rental property. The rent covers the mortgage, but the house is worth less that what he owes. So he wanted to know if it would be OK for him to stop paying on his rental and just let it slip into foreclosure….all because it is worth less. Now, his home is not even for sale, so there is no need to talk about a short sale. He just wants to jump into the “poor me” foreclosure pool and use the foreclosure mess as an excuse. Heaven forbid a home be worth less.

Just today, another gentleman wants to refinance his first mortgage so it is less, but bail on the second mortgage and stop paying, because he feels they won’t try and foreclose on him. It seems he just wants to take advantage of the system and save a few bucks.

See, this is what is wrong in America today, lack of personal responsibility. People want to have it all, but when the time comes to pay the piper, they whine and cry and try to make everyone feel sorry for them. Look folks, if you take out a mortgage and you agree to pay it back, then do everything in your power to live up to that agreement. Not only did you sign the “promissory note” (meaning you promise to pay it back), but you have a moral obligation to live up to your word.

I recall a scene in “Jerry McGuire”, when the football stars dad promises Jerry with a handshake, that they will sign with him for representation. He says something to the effect, “my word is stronger than oak”. Not surprisingly, later we find his word is worthless, as he signs his son up with another agent.

It used to be that no one signed documents to make a deal…a handshake was all you needed and the word of honor. But today, we have pages and pages of legal papers that must be signed when any deal involves money.

It used to be, that ones signature, and the word of honor, was all one needed to rest assured he would be paid back. But today, a signature means nothing. Personal responsibility is a thought of the past. Society no longer applies moral code to itself. It is an “everyone for himself” world now.

When are we, as a society, going to say enough is enough? When are we going to stop this madness of looking to the government for bailouts? When are we, as Americans, going to bring back a moral code that stresses personal responsibility? Until we turn the tide and do this, expect more questions from home owners on Trulia, asking if it is all right to bail on a commitment they know they can fulfill.

We need to cut off the life line of taking the easy way out.

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Banks Stink at Selling Real Estate

For the past few months, I have been working with two different buyers on finding a home. One is a first time home buyer looking to purchase a foreclosure, and the other is an investor looking to pick up a fixer-upper so they can hold long term and make some money in the future on their investment (the real way real estate should be bought).

This past month, both buyers found the home they wanted to buy in Minneapolis, and yes, both were banked owned. We take the time to write up offers on these homes, fill out the endless amount of extra paper work required by banks, sign multiple disclosures on how the bank is not responsible for this and that…and we sit and wait.

Amazingly both banks respond quickly with-in a week. One bank counteroffers and my client waits a few weeks to counter back, as we have to figure a way to follow “the banks rules” on how much they can contribute to the buyers closing costs. When we do get back to the bank with a great compromise, we discover that the bank is not excepting any offers as they have a title issue.

The second bank lets us know they have accepted another offer. After a month of waiting to see if the deal goes through, I get on MLS one day to see the house taken off the market. After a call to the agent, I discover that the bank has a title issue – apparently there is still a mechanics lien on the house and is now in the redemption stage, as the bank messed up the foreclosure process.

You would think that the bank would actually do some title research before they put a foreclosed home on the market. I mean, dotting your I’s and T’s in the beginning, keeps you from having problems in the end. But alas, banks get a free pass on this issue. They suck at selling real estate. Any other business would have stream lined the process and made it easier for both buyer and seller. For now, neighborhoods have to continue to be blighted with homes that banks can’t sell…not because there aren’t any buyers, but because the bank has become its own worst enemy.

I guess my main issue with these title issues is the fact that bank makes the buyer wait. But if the role had been reversed, and the buyer needed a few more days to close, the bank would punish the buyer and charge a per-diem or worse. So for now, my buyers must start the search process all over again. Let’s just pray we encounter a smarter bank along the way…..I won’t hold my breath.

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