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Bank of America’s Equator

Craig Cerreta — Fri, 05 Mar 2010 13:35:00 GMT

Ask any Realtor in town which bank is the slowest on earth at processing short sales. The universal answer is Bank of America (BoA). Most other banks average 60 to 90 days to process and respond to a short sale offer, but Bank of America has been averaging 130 days or longer. Such delays are incredibly frustrating for all parties involved.

BoA recently rolled out a new short sale tracking system named “Equator”. I am not saying the train is on track, but there appears to be a light in the tunnel. Out of my 8 pending short sale contracts with BoA, we have received more communication from BoA in the past 4 weeks than in the previous 3 months.

Equator not only tracks progress, but it imposes standard timeframes that BoA employees are supposed to hit. Now when a file is submitted an internal deadline date is set by the system for response to that step. Once that step is completed the next deadline is set, etc. Prior to Equator there were not even target deadlines for the bank.

Anne Weintraub, real estate attorney and partner at Syprett Meshad PA, says “I actually love Equator because the deadlines are right there on the screen. Now I have some punch when I escalate to a supervisor to complain and push for my clients”. There is no financial penalty if they miss their own deadline, but it gives them targets to hit and that is a significant improvement.

Only time will tell, but right now it looks like BoA may actually speed things up to the point where they can process and answer a short sale offer in under 100 days (I know, that still sounds insane).

This is good for the entire Sarasota and Bradenton area market. The faster we can get distressed properties done and gone the sooner we move to the next phase of market recovery. I never thought I would say this, but go BoA go.

Rentals and Market Health

Craig Cerreta — Mon, 15 Feb 2010 22:17:00 GMT

Most people only pay attention to home sales (new and resale) as the primary indicator of market health, but the unfurnished single family rental market is also a decent indicator of overall market health and direction.

In late-2005 and early-2006 the market was getting flooded with single family homes available for lease. Nobody wanted to rent because buying was too easy. Yet supply of rental homes was growing at an alarming pace because so many people were buying them as investments.

Actual example of a home in University Place: A home that had commanded $2000 a month in 2005 would only bring $1750 by mid-2006. The market continued to deteriorate from over-supply. That same house would only bring about $1550 by late 2008. Things have changed. That house now commands $1750 again and it is likely to be back at $2000 later this year.

In 2006 University Place had 5 to 7 homes available for rent at any given time. Right now there are no unfurnished homes on the market. In fact, there have only been 3 or 4 come on the market over the past few months and they rented quickly. Surrounding neighborhoods have similar low inventory levels: Lakewood Ranch, River Club, etc.

Supply is down: Investors and speculators are gone. They have sold or been foreclosed on, so their rentals are off the market and occupied by new owners who bought at low prices.

Demand is up: More recently dozens of homesteaded owners have had to sell their homes via short sales. Their credit is damaged so they have to lease a home. The short sale market has caused a flood of tenants who have no choice but to rent.

This tells us the overall market is improving.   Fewer homes are being offered for lease, so fewer investors and speculators. More and more people are buying for their own use (second or primary home), so we are still appealing to snowbirds and permanent residents. And the short sale displaced families are moving into rental homes so they can stay in the area.

The rental market tells the story before the resale market (it is almost always well ahead). The rental market is already at a point of under-supply and excess-demand.   Pay attention to this market indicator.

Sarasota Market Improves in 2009

Craig Cerreta — Mon, 18 Jan 2010 11:34:00 GMT

The Greater Sarasota area market is better than it has been in several years. According to the Sarasota Association of Realtors, the market closed 6699 sales in all of 2009 versus 5459 in 2008 (Solds: 22.7 % increase). The overall property inventory has reduced from well over 10,000 in 2008 to almost 6000 today. (For Sale: 40% decrease)

That is the foundation for market improvement, but price points are still being impacted by “short sales” and bank owned foreclosures. (Distressed sales closed: 136% increase in 2009) But new foreclosure listings in many of the East County Neighborhoods that were hit hardest over the past few years is past the foreclosure peak. Yes there are still foreclosures being filed today, but the pace is slowing in my immediate market areas.

Supply is down. Demand is up. Distressed homes for sale are thinning.

Short Sale Rule #3: Buyer Beware

Craig Cerreta — Fri, 06 Nov 2009 01:24:00 GMT

Expect to be asked to pay fees and charges that are not traditionally paid by the buyer. You wanted a steal. You are getting the house below market value. Cough up the cash if it means saving the deal.

Case in point: 5518 Whitehead St in The Harborage. Original owner paid $366,000 in 2005. My buyer closed on a steal via Short Sale this week for $190,000. At the last minute Bank of America changed the terms. The seller had to pick up additional closing costs. The buyer had to pick up the Seller’s $2500 in unpaid HOA dues and fines from earlier in the year.

The buyer would normally balk at the thought of paying someone else’s HOA fees and fines, but the pursuit of the deal outweighs the way things should be. The buyer paid the fees and took the steal.

Sarasota attorney Anne Weintraub, partner at Syprett Meshad, says the buyer is asked to pay non-traditional fees in about 35% of Short Sale deals, and that number is growing as banks look for ways to reduce their losses. Expect the unexpected and accept it even if you don’t think it is right. The deal is more important than paying just what you are normally expected to pay.

The Fed changes Short Sales

Craig Cerreta — Thu, 22 Oct 2009 00:16:00 GMT

Short sales have dominated the local real estate market for the past couple years. They have driven down prices and been the force behind our reduction in inventory. Everyone knows someone who has sold their home as a short sale (where the bank takes less than is owed on the loan). There have literally been hundreds of homes sold this way in Lakewood Ranch, Sarasota and Bradenton.

But the world of Short Sales is shifting under our feet. The Making Homes Affordable (MHA) program from the federal government is creating new rules and processes that will alter the way we do Short Sales.

CHANGES: Prior to being allowed to do a short sale, nearly every short sale candidate will be expected to apply for a refinance or loan modification under one of the new federal programs. The Fed wants to ensure consumers have a shot at keeping their home before they lose it. Sellers will have to attempt alternatives before being granted short sale status if all else fails. If approved to do a short sale, the bank will set the listing price based on what makes financial sense for them. Thus the bank will have to do a lot of work prior to the listing (as opposed to after the offer like it is today).

GOOD: The Fed is trying to create consistency and reduce the number of homes lost. In the past every deal and every bank was completely different. Some deals that should qualify for a short sale were denied while others that should not qualify have been successful. Some are approved in 30 days while others take 6 months. If this works, homes that are listed as a short sale should be approved much much faster and should be nearly assured of being approved at the asking price.

BAD: No matter what the Fed says, this will slow things down even more. This change will shift the delay to before a home is listed versus after an offer comes in. Homeowners who want to try and sell short will get frustrated over having to wait several months while they apply for loan modifications and the bank does up front work. It could ultimately take several months just to get to the point of listing the house for sale. A sellers credit will damaged even worse due to the long delay before they can sell.

REALITY: Nothing the Fed puts out gets implemented as intended. Things are going to change and banks are going to create workarounds and exceptions. Sellers will be more frustrated by all the rules and upfront delays, but buyers will appreciate the quicker approval time on the backend. We will probably see an overall slowdown in the number of homes coming to market as a short sale in the next few months. That might help stabilize the market further, but on the other side several of those sellers who wanted to sell short will end up being foreclosed on because they did not fit the Federal guidelines. We will see how it plays out over the next 6 months.

Short Sale Rule #2: Brown Nose

Craig Cerreta — Fri, 02 Oct 2009 00:12:00 GMT

So you are selling your house via a Short Sale. You qualify for a hardship: loss of income, poor health, death in the family, etc. You can no longer pay your mortgage. You provide everything the bank requests of you: tax records, bank statements, pay stubs, a hardship letter and more. You bend over backwards to provide it in a neat organized format like your Realtor or Attorney advised.

Your Realtor brought you a reasonable offer after 60 days on the market. Everything was sent to the bank as requested. You wait 3 months to get a response from the bank. What happens? The “negotiator” at the bank starts jerking your chain. He clearly has attitude. He seems to be enjoying listening to you sweat. He drags his feet for another 4 weeks with meaningless requests and delays.

He finally says he will approve the short sale, then says it has to go to his boss for signature. He assures you it will be emailed out the next day. 24 hours later you inquire where it is. He neglected to tell you that his boss is out of the office for a few days, so it will have to wait until next week.

He calls the next week to tell you they are denying your short sale request. No real reason. He just doesn’t think you fit their guidelines (Yet 3 weeks earlier he was fine with it). WHAT IS GOING ON???? It is called a power tip and you are the victim of an $8 per hour bank employee who is thriving on his new found position of power.

Exaggeration? No. This is a real scenario that one of my clients experienced with one of the biggest two banks in this country. Short sales can result in great deals / steals, but many are a royal pain in the butt. Remember the #1 rule in short sales: patience, patience, patience. And don’t forget the #2 rule: brown nose the negotiator. He or she controls your future. Piss him off even a little and you are done.

Steal, Deal or a Home

Craig Cerreta — Wed, 30 Sep 2009 00:25:00 GMT

Most buyers today start out in search of a “steal”. They have been primed by the media, friends, family and co-workers to believe that they should be able to buy the house of their dreams at 50 cents on the dollar. Can they get a steal? Absolutely. Will it be the house of their dreams? Not necessarily.

There is a fine line between “steal” and “deal”. Buyers have to ask themselves what is most important to them: price or house. I have seen buyers who lost sight of the house in search of the deal.

A healthy goal might be looking for a great deal on a house you want to call home. Good deals can be had. The market has adjusted across the board, but a lot of the super steals are leftovers that carry baggage: bad lot, damage, etc.

Remember that you have to live there after the thrill of the deal is gone. Keep your priorities in order: location, neighborhood, house, deal.

Lakewood Ranch Country Club Sales

Craig Cerreta — Thu, 24 Sep 2009 00:43:00 GMT

The tide is changing. Not only are sales up, but I am seeing more normal sales versus distressed sales (short sales). My last two sales in Lakewood Ranch Country Club have NOT been distressed properties.

My listing at 7532 Rigby Ct, Lakewood Ranch FL 34202 sold in July for $725,000. That is a far cry from the seven figures it could have pulled during the boom, but it sold at a fair market value. I originally listed that home at $1,249,000 in November 2007 (almost 2 years ago). It was overpriced from the start, but they seller wanted to maximize their take, so we agreed to give it a go. That was a mistake. You can’t be on the high-end of your price range in a downward market. In hindsight I think that house would have sold for right about a million or just under had we priced it at $1.1 Mil. The seller stayed on the high end of the price range as we came down over the past two years. It sold quickly once they agreed to sell at true market value. But it sold and it was not a short sale.

Another listing at 13926 Siena Loop, Lakewood Ranch FL 34202, sold in just 60 days. We only did one minor price reduction. It was priced right from the start and in excellent condition. That is what buyers want. We had over 50 showings in 2 months. Now that shows some demand. The only reason it did not sell quicker was that it backs up to a berm and a road. It is a nice lot with a lake view, but some buyers were uncomfortable with the road. But it sold and it was not a short sale.

Having 50 showings in 2 months says it all. This is the slowest time of the year, and there are more buyers looking now than at any time in the past 3 years. Lakewood Ranch Country Club is coming back.

Tips for Short Sale Buyers – Pre-qualification

Craig Cerreta — Mon, 31 Aug 2009 00:20:00 GMT

Before you make an offer on any short sale or bank owned foreclosure, you must have proof of cash funds and a pre-qualification letter for any loan you might need to obtain. Don’t be offended. Banks are requiring this information of everyone now. They don’t want to waste their time. They won’t even entertain an offer without this evidence. So be ready. Do it in advance. You may even have to get a pre-qual letter from the bank that owns the loan even if you have no intention of using them. They just want to be sure you qualify. Just do it. It is worth it to get a great deal.

Listed and SOLD in the same day

Craig Cerreta — Wed, 19 Aug 2009 14:32:00 GMT

How often do you see that? We used to see it frequently in the boom years of 2004 and 2005, but 2007 forward was more like 220 plus days on the market. But here I am turning in the listing paperwork along with a signed contract at the same time. Was it luck? Just perfect timing? No way baby. It was persistence, skill of the agents on both sides and a changing market.

The buyers wanted to be in this neighborhood and they wanted a steal. They made lowball offers on several homes. Two of their offers were on other listings of mine. The negotiations had been tough, even ugly. The buyer was offering foreclosure level prices, but my owners were not distressed sellers. The buyer’s initial offers on the other listings were in the 80% of list price range. My sellers were offended and did not want to waste their time negotiating with such aggressive buyers. The buyers felt empowered by the “buyers market” they had read about.

So why did they get turned down over and over in this neighborhood? Because the micro market in this particular neighborhood had already passed bottom and is on the way back up. This neighborhood of 400 homes had 29 homes for sale on March 9, 2009. Over 60% of those listings were either short sales or bank owned foreclosures. By August 1, 2009 nearly all the distressed properties had sold. There are now 14 homes for sale and only 2 are short sales and there have not been new shorts sales or foreclosures coming to market in the past month.

This micro market has changed. That is why my sellers felt bolder in turning down offers or countering firmer than they would have just a few months ago.

What about this deal? I coached my seller to price it just below the other non-distressed properties, but well above short sales and foreclosures. I got him to price it right. We had no intention of taking a lowball offer, just a fair market value offer. I spoke with the buyer’s agent as I was listing it. We agreed it was perfect for these buyers. His buyers had lost 4 homes they wanted because they were too aggressive. They finally understood that this neighborhood was past the bottom so they had to make a fair offer to get this house. Their agent got them to offer a little more than they wanted to and I got my seller to take a little less than he wanted. The result is a win-win for everybody.

We will see more neighborhoods turning the corner over the coming months. You can’t make a blanket statement that the market is back. Some neighborhoods and price points still have a little further to fall, but many neighborhoods have turned the corner. The deals are still there, but the days of unbelievable steals are quickly fading away.

Tips for Short Sale Buyers – Point of contact.

Craig Cerreta — Wed, 19 Aug 2009 14:12:00 GMT

Know who is negotiating with the bank on the Seller’s behalf. It could be the Seller, their agent or an attorney hired by the Seller to handle it. The short sale success rate varies dramatically depending on which is handling it. Some Sellers want to do it themselves to save money – bad decision. Few Sellers have the knowledge of time to do it. Some Realtors agree to do it, but have no idea how much time and effort goes into it, so they don’t do a good job. The same can hold true for some lawyers. Make sure that the point of contact is experienced. Otherwise you may want to offer on a different house. Also make sure the person communicating with the bank has your contact info and has committed to update you at least once per week. Ask before you offer.

One hiccup and 30 days is not enough

Craig Cerreta — Mon, 27 Jul 2009 00:00:00 GMT

We indicated in previous blogs that the mortgage industry is now requesting no less than 30 days to process a loan (versus 7 to 10 days during the boom), and I am experiencing this first hand on a deal in University Place. We set the closing for 45 days from the effective (contract) date. A couple weeks into it the title search uncovered an innocent problem with the title. A neighbor that lives two houses down was getting a loan for his business. Suntrust erroneously listed our seller’s house lot number on the neighbor’s loan. It was a simple error. His house is on lot 6, this house is on lot 8. It can be cleared up with a few signatures and a corrected filing at the county. But you lose a couple weeks while Suntrust corrects their error. In the mean time our deal would have been at risk had we contracted with a 20 or 30 days closing period. There are a ton of potential problems: either party can back out once you miss the contractual closing date for any reason, the bank can decide to change the interest rate, the financing approval may run out, etc. The 45 day closing period allowed us to keep this deal intact. Don’t rush things. The world of finance is continuing to slow down and make sure everything is right.

Housing Fraud Dominates Local Newspaper

Craig Cerreta — Wed, 22 Jul 2009 17:13:00 GMT

The Sarasota Herald Tribune has released a series of investigative reports focused on local housing fraud over the past several years. These disturbing stories have revealed the names of several local residents allegedly involved in mortgage fraud or property flipping scams. Although some of the allegations have not been proven in court, this negative
press has already put our area under an underwriting microscope. Loan applicants are required to provide proof of nearly every item on their application. Appraisals are being audited with field reviews. The end result is that the negative press will result in even longer loan processing times. Many loan officers are now recommending a 45 days closing cycle to ensure all the necessary due diligence can be completed. The HT has worked on this for over a year. It is an impressive series. Too bad it will hurt us further. The stories can be seen at www.heraldtribune.com/flipping.

Best Buys - Lakewood Ranch C-Club 500 to 1 Mil

Craig Cerreta — Sat, 18 Jul 2009 18:31:00 GMT

We may be seeing some stablizing in the Lakewood Ranch Country Club sweet spot of $500K to $1Mil. Inventory is down significantly, but a key factor is how few short sales and bank owned properties there are in this price point. Out the 58 homes for sale at this price range only 7 are listed as short sales or bank owned. That is a nearly 50% reduction in distressed properties over a few months ago. There are multiple reasons. First and foremost homes are selling. There are 14 pending and there have been 23 close in the past 90 days. An impressive pace. Another factor is price reductions. There is an increase in the number of homes for sale below $500K and in the number of those under $500K that are shorts / bank owned. 14 of the 33 for sale under $500K are distressed. So the problem bubble has moved down the food chain. I think that is great. Lower priced distressed properties will sell to want-a-be country club buyers while the mid to higher price range benefits from a shrinking inventory that is based primarily on normal sales. That is healthy for the Country Club in the long run. Check out my personal Best By favorites in the $500K to $1Mil range: LWR C-Club 500 to $1Mil.

Tips for Short Sale Buyers – Teasers

Craig Cerreta — Sat, 18 Jul 2009 17:58:00 GMT

Watch out for listings with artificially low listing prices. Real Estate agents don’t have a clue what the bank will take in a short sale deal. The banks won’t give agents guidance until there is an actual offer on the table. As a result, many agents list the house at a ridiculously low asking price to generate interest and offers. It makes the house sound great, but once you make an offer it will take the bank a couple months to respond with a counter-offer. During that time you are locked up waiting for the response. Then the bank comes back with a counter that is substantially higher than what you offered. You are frustrated and feel you wasted a couple months. You did. Nobody knows what the bank will take until they have an offer, but an educated agent can make a decent estimate based on the estimated market value as well as the combined debt: loans, liens, HOAs fees, taxes, etc. If the asking price is another 20% or more below that the estimated market value it is probably a teaser price. The moral of the story is that short sales can be fabulous deals, but if it sounds too good to be true it probably is.

Best Buys - Greenbrook in Lakewood Ranch

Craig Cerreta — Sat, 18 Jul 2009 17:44:00 GMT

Inventory is down significantly in Greenbrook. with 48 homes for sale versus over 70 just three months ago. But 23 of those 48 are listed as either bank owned or short sales requiring third party approval. That is a staggering 48% of the available inventory. Clearly the blood letting is not over in Greenbrook. The average list price per square foot for short sales / bank owned is $117 versus $148 / sq ft for the other 25 normal sales (not bank related). But price is not everything. Don't forget lot, view, condition, etc. Here are my personal "Best Buy" picks right now: Greenbrook Best Buys.

Tip #1 for Short Sale Buyers – Patience

Craig Cerreta — Sun, 19 Apr 2009 21:08:00 GMT

Buying a short sale requires patience. It can be a very frustrating experience for the Buyer and Real Estate Agents. Some agents are skilled at working them, but many are not. Make sure you are working with someone who has done several short sales so they can help you avoid the pitfalls. All short sales take time to get an answer from the bank (usually 6 to 10 weeks), so be ready to wait. But an experienced short sale agent knows the questions to ask to ensure the short sale you are trying to buy is properly represented and positioned to give you a decent shot at success in a reasonable timeframe. For example, has there been an offer processed prior to our offer? If so, did the bank perform the full process including a counteroffer? When did the seller stop making payments? Has he submitted a short sale package to his bank? These and other similar questions can help ensure you don't waste time on a short sale that is ill-prepared. But no matter how you look at it, all short sales take more time to process than buyers would like. Be patient.

Bank Owned Deal - University Place

Craig Cerreta — Sat, 14 Mar 2009 23:54:00 GMT

This one is sweet: 7705 Charleston St in University Place was originally contracted to build in January 2004 for $452,000. It was listed for sale in June 2006 for $639,900, but did not sell. It was foreclosed on in January 2009 and was listed as a bank owned property on February 20, 2009 for $339,900. Wow, 47% less than it was listed for three years earlier.

My buyer offered $305,000 on March 2, but after several rounds with the bank we stepped away. My buyer wanted to use an FHA loan, so he was limited in how high he could go even though he wanted the property. FHA loan limits were raised from $282,500 to $442,500 on March 6. We increased our offer but stayed well below asking. We came to agreement on March 10. The house will close April 17 or before (at which time I can reveal the exact price). Suffice it to say that we got it at more than $125,000 less than original cost in 2004.

This house is a steal. It is a Lee Wetherington Standford plan with lots of upgrades, a beautiful pool and a preserve lot. Comparables are selling for $30,000 to $50,000 more. I truly believe my buyer is ahead of the curve and has equity from day one.

The house was vacant and needs a good cleaning, but it does not have significant mold (we had it tested). My buyer is replacing carpets, acid cleaning the pool, buying a new refrigerator, and having it cleaned top to bottom. Total after purchase investment is estimated at under $6000.

Escrow Holdback: $5000 for Repairs

Craig Cerreta — Sat, 14 Mar 2009 23:49:00 GMT

Great news for nearly anyone buying a home under $459,500: FHA offers loan products that can provide up to $5000 towards repairing a newly purchased home after the sale is completed. This loan is available for normal sales as well as distressed sales: bank owned, short sales, etc.

The buyer negotiates the purchase price, does a standard contract and applies for an FHA loan. The FHA Appraiser defines any health and safety items that require repair. FHA adds the cost of repairs up to $5000 as long as the combined total does not exceed the regional FHA loan limit of $442,500.

The additional $5000 is held in escrow to pay for the repairs within 21 days of the closing. This means less money out of your pocket giving you more choices in today's home market.

The Big Score: Getting it and Keeping it

Craig Cerreta — Thu, 12 Mar 2009 18:58:00 GMT

Credit scores are critical for everything in life, not just buying houses. The economic downturn coupled with the housing crash has led too many people to give up on their credit scores. It is easy to damage your credit, but the damage lasts a long time and may not be worth the risk. The book "The Big Score" by Linda Ferrari, is written by a true credit repair expert instead of some financial journalist who never worked in the industry. It clarifies mis-perceptions about credit scores and gives real life remedies. Good credit will be paramount coming out of this economic turmoil. Buy "The Big Score" at lindaferrari.com.