Short Sale Fraud--Trash for Cash

In the world of real estate, there's always something new under the sun. There also seem to be new types of fraud and scams developed with each change in the market. Now the scam artists have discovered short sales and foreclosures.
If you’re thinking about working with a financially distressed seller and the house he wants to sell is trashed, make sure he didn’t trash it himself. One of the types of short sale fraud that Fannie Mae is seeing these days is “reverse staged” houses. In these cases, owners trash their house to knock down the property value. There are photographs on broker price opinions that actually show cupboard doors missing, appliances pulled out, and graffiti or trash on the counter tops. Because there are actually websites where you can get repair bids, they can submit false repair bids for the work that needs to be done. A buyer with whom the owner is colluding then comes in with a low-ball offer, buys it and fixes it back up, then flips it for its real market value. That seems like a brazen scheme, but mortgage fraud by its nature is a brazen activity.
Kim Ellison is a Fannie Mae senior industry relations manager for the mortgage fraud program. She also sees a lot of illegal flipping and non-arm’s-length transactions. The non-arm’s-length space is a smaller percentage, roughly 9 percent. Usually the delinquent home owner is selling the property to a family member or a business partner without disclosing the relationship. It’s really an effort for the owner to stay in the home. Instead of making payments to the mortgage company they’re making payments to the family member, as rent. They’re hoping to clean up their credit and reapply for a mortgage down the road.
Selling to a related party isn’t illegal. It’s just the lack of disclosure. The loan servicer may waive the non-arm’s-length requirement, but there have to be compensating factors, and story has to make sense.
These are just a couple of the fraudulent schemes out there. No wonder Fannie Mae is in trouble.

Finding those Files

My friend Lynn Gross-Cerf, who is a great organizer, just sent an email reminding me that Sept 19-23 is "National Love Your Files Week". (There seems to be a week or day for anything and everything.) This event was created to demonstrate that a good filing system is a powerful asset.
It was apt timing because I had just been out to my garage searching for an escrow file. My associate, Judy, is the listing agent for a property that I sold in 2004. In that earlier sale, I represented the sellers, who have since left the area. Her clients wanted to know what termite work the sellers had completed....The recent inspection found old pellets, and needed to know if these were "souvenirs" from the previous sale. Naturally, the buyers had not kept these records, and neither had the termite company.
I moved the freezer that sits in front of the filing cabinet in the garage where I keep the really old records, and then I hit a snag. There was a box neatly labeled 2004, and another labeled 2004-2005, but neither would budge. I plugged the freezer back in, and called Judy. If they really want that file, they will have to come and retrieve it...and no, Lynn, I do not love my files.

New Agents

Last week, I was contacted by a young woman who lives in Old Orchard, an area that I contact regularly with mailings about the market. She had recently passed her real estate license test and wanted advice on how to get started. I remember from many years ago that schools such as Chamberlain and Anthony's prepare a future Realtor to take the State exam, but provide no direction beyond that. The basis college classes are not much better preparation for the actual world of real estate sales.
She came into my office and we talked for some time about time management, juggling a home, young children, and this business.(Been there, done that) Then she spoke to Nina, my manager about training and costs.
Coincidentally, My grandson is in his last year of a business degree, and is also seriously considering a sales career. I plan to mentor him as he begins.
With an aging Realtor community (see my post:Real Estate Agents are Aging:Saturday, November 13, 2010), it is a pleasure to have young people choosing what can be a challenging but potentially lucrative business.

Balancing Work, Play and Volunteering

August should be a month for vacations, but having been away for more than a week in late June, I am playing "catch up" at the office, and fitting in a few added demands on my time.
Thousands of local Realtors are taking part in a lock box and key exchange this week, along with the juggling involved in making this happen smoothly. As expected, there are glitches in the system, even though both boxes and keys were Beta tested. This morning, I lugged seven extremely heavy lock boxes to a well-coordinated exchange at DeAnza College, and carried out a set of even heavier replacements. I also picked up a new key that will need to be used while the stragglers replace their old boxes, hopefully within a month. The exciting part of all this is that eventually, when all the bugs are worked out, my Android phone will...at long last...serve to open the boxes when I show property.
Next week begins the volunteering segment. Our office is holding a breakfast and auction to benefit Habitat for Humanity, and I'll help out as sous-chef, runner and dishwasher. This is just the first of several events we have planned.
So when do I manage to play?...Whenever I can.

Summer Real Estate Market

The Bay Area housing market usually picks up in March, April and May and then slows down over the summer for vacations, graduations, weddings and other activities. But this year it seems like that’s being reversed.
After a rather slow spring, the local housing market has been heating up this summer with strong sales in June and even into July in many areas. Sales activity has been especially busy in the higher end of our markets, which is over $1 million in much of the Bay Area...but even the mid-level market was surprisingly active
There is an interesting trend in last month’s sales figures: In most of the Bay Area, we had the highest level of million-dollar home sales since the summer of 2008, just before our economy went into a tailspin.
Certainly, the Bay Area’s relatively strong economy...especially in the tech sector... ­is playing a key role in our housing market. Inman News wrote in a Friday article, “Tech is back -- and tiptoeing along behind it, at least by some measures, is the San Francisco-area real estate market.”
This doesn't mean that the housing market is completely out of the woods, because real estate is very much a local business. While many of our markets are on the mend, others are still softer than they were a few years ago, and there are still distressed properties coming on the market as bank owned REO sales in the months ahead.
With the national and state economies still fragile, we are fortunate to live and work where we do. Limited housing stock, a diverse job base and great weather are all factors that help home buyers focus on these terrific home values and low mortgage rates.
The best homes are getting lots of offers, and in our Cupertino office, the majority of sales are with multiple offers. Seems like we are having a delayed spring.

A Tale of Two Transfers

When I returned from Michigan, I was contacted by two families transferring from out of state to Silicon Valley. The first referral was through a company I had worked with before. Their new CFO, his wife and son, were moving from the Midwest and needed a house rental. In a normal market, a 2500 square foot house in a good school district would be easy to find, especially for stable family willing to pay up to $5000 a month. After talking to a few reliable rental agents I know, I discovered that not only is the local rental market tight, a good rental house of that size is nearly nonexistent. With new jobs come new problems, and the search continues.
The second challenge is a small family from Colorado. The husband is already here, and has begun a high paying job. He is renting a condo in Santa Clara for $2500 a month, and their quandary is: Do they give up the large house they love...only 12 years old, in an excellent school district, with a large yard and valued at $400,000...and buy something here for more than double that price and with fewer amenities? Or does that family remain divided, and perhaps invest in a condo so that the husband can move out of the rental? I have my in-house lender working with them on qualification, but neither solution sounds perfect.

Back from Michigan

What a contrast from the real estate market in California! I expected to see depressed areas in Detroit, and although the bus tour drove through the best sections of the city, the tour guide admitted that a large percentage of the city's residents had left the city along with the jobs. Even in these tree-lined streets of beautiful homes, values had dropped by nearly half, and we passed occasional houses with boarded up windows and for sale signs in their front lawns.
We were there at the beginning of the River Walk celebration at the Renaissance Center, and the families enjoying the water views, lunching on ribs, and listening to music had a positive attitude that a down economy couldn't erase. We were there for a convention, and people saw from my badge that I was from California. More than one person stopped me and said to tell folks back home that they haven't given up and still love their city.