How to Buy a Foreclosure is a subject I’ve written about many times on this real estate blog, but today I want to focus in on a very important part of the process that very few people know about, including Realtors.  Banks that foreclose on homes hire outside companies to list and market their foreclosed properties.  Those companies hire contractors who clean up and maintain the homes, and they also hire Realtors to list the property.  Just in this little chain of people and companies, you can get the idea that there are many intermediaries.  But it gets better, or should I say it gets worse.

These companies hire asset managers, who coordinates many of the details necessary to manage the home and get it sold via all these other parties.  This makes the asset manager the primary point of contact and decision maker for the banks, and it is the asset manager who the listing Realtor communicates with when an offer is presented by a selling Realtor.  Get ready for the nightmare.

Asset managers typically only need a high school education, and many of the job applications on the Internet for asset managers indicate they only need two years of related real estate experience, which could have been working for a mortgage company during the mortgage fraud and real estate market crash.

No wonder they don’t understand the process of negotiating and documentation.  Without going into great detail, let me tell you that asset managers never put a counteroffer in writing.  Normally, of course, a buyer makes an offer and a seller will often counteroffer, which they do in writing.  Not the foreclosing banks.  Their asset managers do not understand basic contract law and real estate practice, and . . . they definitely do not understand the negotiating process.  Instead, the asset managers give their listing agent some vague notion of what they would like, which often is impossible.  (For example, it is impossible to get a lender’s letter requiring repairs before there is mutual acceptance on all terms and before an appraiser has even been appointed by a bank which hasn’t even been hired to process a loan yet.) There are many examples of ridiculous and foolish responses by asset managers.

Asset managers not only require the selling Realtor to draft the bank’s counteroffer for them when the Realtor represents the buyer, but . . . and I’m not kidding or exaggerating here . . .  the asset managers also want the selling Realtor to literally guess what the banks’ counteroffer should be.  I kid you not, the listing agents are typically unable to articulate their own client’s position.  Their own clients (the asset managers) refuse to put any counteroffer in writing or articulate what they want in writing!

This can put a buyer in a twilight zone of trying to buy a home, having agreed upon a price, but unable to get the bank’s representative to cooperate using standard Washington state real estate documents and processes.

No wonder our foreclosure market is such a disaster!  There’s no adult supervision at these institutions.  If you do want to buy a foreclosure, I understand the process, as frustrating and time consuming as it can be.  I’d be glad to help you walk through this labyrinthian process, if you have a lot of stamina.  If necessary, I’ll bring some adult supervision to the process on your behalf.

Fore more about the foreclosure process, the documents and timelines, and the processes involved in buying a foreclosure, simply do a search on this blog for “foreclosures” (without the quotes).  There are dozens of articles.

See Foreclosures here.

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If you are buying a home in Sequim or Port Angeles involving a short sale, here are three proven steps to making that purchase a huge success.  If you’re not familiar with the term “short sale,” it involves buying a home at a price that is less than the current mortgage balance.  Most people are familiar with the concept of a car  being upside down when the car isn’t worth what is owed on it.  Until the recent real estate recession, we didn’t have homes that were upside down.  Around the country many homes have had to sell as short sales.  Of course, this requires the bank’s agreement to cut their losses and take a payoff on the loan that is less than what is owed.

Short sales are closing every day in cities like Las Vegas and Phoenix, but not in Sequim and Port Angeles.  The procedure and the steps to accomplish a successful short sale here are different than the template for the short sale hot spots around the country.  As a real estate attorney who handled many foreclosures and short sales, and now who represents buyers in short sales as a real estate agent, I’ve articulated three steps to a successful short sale in Sequim or Port Angeles.  If you do complete these three steps, you still have no guarantee, but if you miss one of these steps, you are guaranteed to fail or end up with a nightmare scenario.

3 Steps to Buying a Short Sale Home

1.  Know the process and save yourself from disillusionment.  Know that negotiating a short sale in Sequim or Port Angeles will be a slow and tedious process, and the bank can leave you waiting, literally not responding for months.   The process can drive a normally patient person to say, “Forget it, I’m not going to sit around waiting, not knowing when or if anyone will decide to respond to my offer.”  [Again, this is not the same in Las Vegas where there are currently 700,000 loan modifications in process.]

2.  Find a Professional Short Sale Buyer’s Agent.  Buying a home that must be a short sale is not something you want to do without an experienced professional who has been there, done that many times.  There are many nuances and many traps for the unwary.  I picked up many clients as a real estate attorney who thought they knew all they needed to know, but subsequently found themselves in deep trouble.  When I represent a client as their Short Sale Buyer’s Agent or their Foreclosure Buyer’s Agent, I cost my clients absolutely nothing.  Sounds too good to be true, doesn’t it?  But it is true.  The seller pays all my fees as well as his agent’s fees.  What I give my clients is a lifetime of real estate experience, including many short sale and foreclosure transactions.

3.  Do Your Due Diligence.  You’ve got a lot of due diligence to do when buying a home in a new area, and a short sale or a foreclosure will require some additional due diligence because of unique problems associated with distress sales.  Also in this process, the bank will submit certain documents to you, in addition to the standard real estate forms used in Washington, and these forms will require legal interpretations as you will be asked to sign them.  Some entities representing banks in this process have put together forms that were not drafted by an attorney and give them complete access to all of your personal financial accounts and identity.  That is not only inappropriate, but dangerous, and yet many who don’t know or aren’t getting good advise are signing such documents. [I know this because I have reviewed these documents and advised my clients.]

Your ideal home may be in the MLS and listed with an agent, and it may or may not necessitate a short sale, but if it does, know how to go through the entire process and come out a winner.

I hope this information is helpful.  If you do find a home that is for sale, and it is either a foreclosure, or was, or it must be a short sale, you can hire me as your Short Sale Buyer’s Agent or Foreclosure Buyer’s Agent.  Contact me by email, chuckmarunde@gmail.com, or call me at 360-775-5424.  I would love to represent you.

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Buyers are using the Internet to search for their next home, and this technology is the greatest advancement for home buyers in decades, at least since the invention of the MLS itself.  Online MLS search tools have made finding a home or land so much easier and more efficient, it’s really amazing.  While buyers can browse hundreds of homes for sale with very specific parameters, there is still something the Internet won’t do for you.

The Internet won’t give you the 3D real life experience with the ability to see everything in person, experience the visual reality (as opposed to virtual reality), experience the smells and all that your senses tell you about a neighborhood and a house.   Looking at a data sheet and some photos and maybe even a virtual tour is all good.  It’s all incredible, and so much more than buyers had even a few years ago, but until you put boots on the ground, you won’t be able to get the full experience of any home or lot.

This becomes glaringly evident when you look at homes for sale in different cities and states.  The real estate markets are different around the country.  For example, if you live in an area like Phoenix or Mesa or Las Vegas, you can find some absolutely gorgeous foreclosure homes in the MLS, and some great prices that may be as much as 30% or more below their normal FMVs.  In fact, you can find not just a few homes like this, but hundreds.  There are foreclosures that are beautiful and listed at incredible prices, the kind of homes that buyers want and could say, “I could make this my home forever.”

But in an area such as Sequim, Washington (and many cities and towns around the country), you cannot find such nice homes readily available in the MLS at great prices.  In fact, in some of these areas, it is almost impossible to find a foreclosure that is nice enough to live in, doesn’t need major work, and is priced very low.

Some of these differences can be interpreted by an online Internet search, but unless and until you actually put boots on the ground, you won’t really know precisely what these homes look like.  Use the Internet to filter through available homes, and then plan your trip to view the best prospects.  But don’t be surprised if everything looks different on the ground.  It always does.

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Loan modifications under a federal plan announced by President Obama had hope for homeowners who were  struggling to make their mortgage payments, and for those who were already in default and facing a foreclosure. Over 3,137,548 homeowners made requests for information, but only 31,382 actually got permanent loan modifications.  Mortgage representatives around the country geared up to help homeowners save their homes and many implemented special educational programs to get the word out.

Unfortunately, it now appears that the program has been a dismal failure with only a one percent (1.0%) success rate.  While one could be critical of the Obama program for the failure, the real victims are homeowners across America.  The pace of foreclosures in several large metropolitan areas has not slowed down.  For the government’s report, see Loan Modifications Report.

“So out of over 3 million requests sent to borrowers, only 31,382 modifications have been made permanent. That’s a failure of epic proportions. Imagine if you got a 1% score on a test when you were in school. How embarrassing. No wonder the link to this report is “accidentally” broken on the financial stability website. (I found it by guessing what they’d correctly name the file and typing it into the browser.)”  Quoted from the Atlantic, 1% Success Rate.

There have been some successful loan modifications in Sequim and Port Angeles, although not necessarily under the federal program.  Clallam County has seen its share of foreclosures gradually increasing.  Trustee’s Sales at the Courthouse have stepped up, and projections are that there are many coming down the pipeline.  We shall see, but if you are in need of a loan modification, pursue that diligently with a reputable loan rep.  Many have gone down the path of modification with a rep that dragged them along for months with nothing in the end, and all that after paying a hefty fee.

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If you’re thinking about buying a foreclosure house, think again.   I’ve written elsewhere that the foreclosure market is in chaos.   It really is.   The loss mitigation departments of the national banks and the short sale divisions of the national banks are at a loss for leadership and management that understands fundamentally how to handle their work load.

Buying a home that is a foreclosure or a short sale, at least from a national bank, can end up being a nightmare or a dead end in terms of trying to get a reasonable transaction put together with a real closing date in the not-too-distant future.

I had a short sale offer on one of my listings that the Bank of America should have accepted in a heartbeat, but they could not get their bureaucratic act together.   The kind lady working at their short sale division told me she could not even get the offer considered, although she knew it was an offer that should be accepted immediately. Another bank killed an offer by a client of mine over $5,000.   It was a reasonable offer, too.   Can you imagine any seller killing a sale over $5,000?   That bank still has that house sitting on the market months later.

But here’s what I want to share with you today, and this is an exclusive.   I recently wrote an offer for a buyer on a foreclosure, and we did reach an agreement on the price and all the terms.   But then the REO, the entity that represents the bank that foreclosed, presented my clients with a mandatory Addendum that literally made my clients walk away from an otherwise great transaction.

What kind of Addendum would scare buyers away?   An eight page Addendum that added numerous ridiculous terms that were totally uncalled for, absolutely offensive, but more than that some of these terms changed their basic agreement and would have made financing mathematically impossible.   They demanded the loan have final approval within 21 days of mutual acceptance.   That’s impossible.   Thirty days is standard.

But here’s the clause that might just get your blood perking.   Imagine the seller of a home demanding full access to your personal checking and savings accounts and all your personal credit information.   I’m talking about the seller, not your lender.   Your lender is entitled to that information–confidentially.   But can you imagine the seller demanding unlimited access to your personal financial world?   This REO, representing the selling bank, demanded just that.   There is no reason on earth for the REO to need that information.   None whatsoever.   Here’s the clause from that ridiculous and poorly drafted Addendum:

Would you ever agree to give a seller that information?   This is an REO who can give this information to their staff, wherever and whoever they may be, to their other contractors (and there are several), and to the bank they represent.   In other words, your personal financial information could get broadcasted to many unknown people and organizations out there.   Unbelievable.   In this day of identity theft, who in the world would agree to such outlandish demands?

By the way, this Addendum is only provided after you have made an offer, gone back and forth with counteroffers and gotten the REO to agree.   Then they thrust this Addendum on you without any previous warning of the outlandish terms.   Also, as part of their game, they refuse to sign or initial a Washington State Purchase and Sale Agreement in their counters.   Instead, they make their “counteroffers” in an informal email with their listing agent.   They refuse to make any commitments at all until they spring their Addendum on you, and by then you’ve spent many days or a couple of weeks going back and forth on what you thought were counteroffers so you could actually arrive at mutual acceptance.

Imagine having spent many days, or more than likely a couple of weeks looking at homes, narrowing down the many homes you have looked at, meeting with a loan officer to get pre-qualified, and then making an offer and working through all the conversations and issues on the counteroffers back and forth, only to have the rug pulled out from under you at the 11th hour when you thought you had a deal?   You feel you are back to square one, and your emotional reserves may be drained at that point.   You may even be so discouraged, you don’t feel like starting all over again to find another house.   Welcome to the foreclosure market!

This is just the tip of the iceberg and only a little example of how chaotic the foreclosure market is.   Want to see the whole Addendum from an REO, all eight pages?   Much of this agreement is boilerplate, which is totally unnecessary since it is in the Washington contract we all use already, but if you read through this in detail, you’ll see many clauses that were clearly not written by an attorney and which are totally unacceptable and unreasonable to any intelligent buyer.

Foreclosure REO Addendum

(The names of the parties have been deleted to protect myself from frivolous lawsuits.)

Why did I scan this agreement and make it available to you?   Because I believe consumers deserve the truth and what banks and REO’s are doing to consumers behind the scenes is full of legal and ethical problems that could cause serious harm to home buyers.   My mission as a buyer’s agent is to work hard for my buyers and to protect them from this kind of nonsense.

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Finding your next Sequim home is full of adventure, but not always the kind of adventure buyers think.   It’s hard work, there’s plenty of driving and discussions, and major transitions are always accompanied by a certain amount of stress.   All of this may be obvious to the mature, but what isn’t so obvious to many is that once you find your home and make an offer, the negotiating process is not typically a cake walk.   In fact, sometimes after several counters back and forth, buyers find themselves emotionally stretched and often a bit tense at the 11th hour of the negotiations.   Many buyers will express a feeling of frustration and anger directed toward the seller just before getting mutual acceptance on the last volley of counteroffers.   This is true not only for individual sellers, but for banks handling foreclosures and short sales.

Just before mutual acceptance on a price, many buyers often feel like their dream home is just out of their reach, but this is when victory is so close.   Sellers often play hard ball up to the last moment, but buyers who are discerning, have good judgment, are getting sage advise from a knowledgeable and professional Realtor, can reach their goals if they are patient and persevere.

This is not a game for beginners, and it certainly is not a game for a novice Realtor.   Negotiating is a serious game, and a lot of money is at stake–your money.   Be sure your Realtor as your adviser can   walk you through the mine field of legal and financial negotiating, as well as the emotional and psychological challenges you will face.   It’s important to have a professional you can talk to during this process.   Believe me, there are a lot of issues to discuss, and they are not the same for every buyer.

Your money, your future home, and your mental health are reasons you must gain the upper hand in negotiating.   Buying your next home in Sequim must be a victory for you.   It can be.   Email me with your questions anytime.   I’d love to help you gain the victory and your new home.

chuckmarunde@gmail.com

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