Perrysburg Blog

It’s secret.

It’s above top secret.

But if you are doing a short sale you need to change where your checking and savings accounts are.  Banks are now using language in their checking and savings policies that you have agreed to when you opened your account to PULL MONEY OUT of accounts that are not linked to your mortgage.

Now, in polite society, this is called STEALING.

Or THEFT.

In bank terms it is called the “Right of Offset”.  You can go here and do a search for that term if you want to get real mad.

But the average consumer does not have a copy of what they signed, can’t remember, and probably can’t hire a lawyer to look at all their agreements.

So – the simple solution that I am telling ALL my short selling clients is this:  MOVE YOUR MONEY TO A TOTALLY DIFFERENT BANK.

Simple.

Sweet.

Ends the drama.

I won’t name any banks – I am assuming some are not doing this.  But some are.  And the solution to protect you is as simple as the pain of the unauthorized monetary removal is great if it happens to you!

One of my favorite real estate writers posed a similar query in the Wall Street Journal’s excellent real estate blog – Developments.

James Hagerty posed the question: “Will the bank take my iPhone?”

Which is sobering – I have an iPhone.  You can’t have it.  You can’t take it.  It’s addictive and it’s mine . . . and I have a hard time imagining it being surrendered to a creditor.

Which made me do some thinking.

And then some investigation.

Since I deal with many homeowners today who owe the bank MORE than the market value – what can happen to their iPhones?

And their cars?

And their retirement savings?

And their other assets and possessions?

5 or so years ago this was a pointless, absurd question.

It just did not happen in Perrysburg.

Today – it’s a vital, important, timely question.

According to the Fed (specifically the Federal Reserve Bank of Richmond VA) in their monolithic report “Recourse and Residential Mortgage Default:  Theory and Evidence form U.S. States) Ohio is considered a “recourse” state.

That means that lenders may have MORE remedies against a defaulting homeowner than just taking the house back in a foreclosure.

(N.B. – for this entire post, please remember that I am not an attorney and you should and are highly recommended to hire your own attorney to answer your questions!  You need a good, honest attorney . . . call me, and I will recommend one to you)

If I am a defaulting homeowner, I do not like “recourse”.

What is interesting about the lenders right of recourse in our state is that only in Ohio and Iowa does the lender have a very short period to seek recourse – and in Ohio, and thus Perrysburg, it is only for 2 years after the foreclosure.

Y0u can download their 50+ page paper yourself and read the gory details.  The financial equations on page 10 caused me to have a regression attack and revisit my finance classes at Duke University.   I was so shook up by this I had to go out and sell 5 houses today – but that’s another story . . .

2 years.

That is the time frame for recourse that your bank has to get more coins from you.

Lose your house to the bank . . . and they get an automatic deficiency judgment against you.

But they only have 2 years to collect it.

And many banks are taking 12 months to return phone calls right now – so what are the odds they will get your iPhone?

This recourse is usually obviated when a short sale is negotiated – which reinforces my belief that 2010 and 2011 will be the year of the Short Sale in and around Perrysburg.

Because then you will get to keep your iPhone.

Somethings to think about if you are planning on buying in Perrysburg:

1. Buy now, not later.

The 2009 extended tax credit for buyers is going to end this Spring.  If you are definitely going to buy in 2010 you are rather foolish to NOT take the governments free $8000 or so.  (I admit that it is borrowed from China, will have to be paid back with interest by our children, and will help to further bankrupt America – but YOUR not taking it won’t help.)

2. Don’t Buy JUST Because of the Tax Credit.

Sorry – many people are buying now who should NOT be buying.   There is a TOTAL COST of owning in Perrysburg that many buyer’s gloss over with stars in their eyes as they swoon for a great listing.  Taxes.  Insurance.  Upkeep.  Please consider carefully ALL of these costs.

3.  Lock In Today’s Great Rates!

The $ multi-billion dollar mortgage buyback program that the Fed has been running will be winding down soon. When it does most experts are forecasting a .5 to 1.5% increase in nominal interest rates for all fixed rate loans.

4. Buy A Short Sale.  If You Can.

I believe that in 2011 we will look back and say that 2010 was the beginning of the short sale bloom.

Short sales are right now:  the best deals, the greatest value, the best kept property, and surprisingly hassle free if you have patience.   You can call me and I will “evaluate” you for short sale tolerance.

5. Save Your Cash.

Start saving $$$$.  You are going to need at least 10% down for an FHA loan if your credit is not spotless.   And, by the way, you ought to have at least that much down or you should not even be buying a house in this volatile market, IMHO.

6.  At Least Consider an REO Listing.

These poor lenders are trying so hard to move this inventory . . . and many of the bank owned listings I have in Perrysburg are GREAT buys.   You can usually get a great deal.  We can often find a good loan program that meets your needs.  There is no shame in buying one!  You can find ALL the active Perrysburg REO’s at my REO site - www.ToledoBankOwned.com

7.  Forget About Flipping For Fun and Profit.

Not unless you are a seasoned investor professional with experience, cash, and contacts.  You are also probably on a first name basis with me so that I can feed you the one or two deals that are “flippable”.   Otherwise do not try this – way too dangerous.  And you are competing with the banks, HUD, and the myriad of REO’s in the “shadow inventory”.

8. Get a High Deductible Insurance Policy.

I have learned a few things from my insurance selling brother www.ModeneInsurance.com.  And one is that you are not really going to use your home owners policy anyway – not for anything small.  (If you do – they are watching and will JACK YOUR RATES UP!)  You are going to use your property insurance for a really big claim.  So get a high deductible policy and save some serious money.  Those insurance guys – they make enough money anyway and will gladly sell you a cheaper, high deductible policy.  (If you talk to my brother Dave . . . ask him what lovely desk accessory I bought for him).

Foreclosed vs. Short Sale?

Sadly becoming an important question.

A vital question.

A confusing question.

As a CDPE (Certified Distressed Property Expert – trained and credentialed by The Distressed Property Institute -  of whom I am now on their Board of Directors) I have seen first hand how this question is impacting the decisions that many homeowners have to make this year.    Tough, gut-wrenching decisions.

As always, seek legal counsel.  But – sadly, I have attorney’s who ask ME for help and information!  So be careful what attorney you ask!

Here is a chart of the effects on your credit of doing a short sale vs. being foreclosed:

I am doing more and more short sales these days.

Why?

Because our local economy is slowing down.

Which puts job pressure on workers and business owners.

Which puts income pressure on homeowners.

Which puts houses behind in mortgage and second mortgage payments.

Which leads to . . . . short sales.

Or at least attempted short sales.

Because often there are 2 different lenders on the same piece of real estate.

And there are complications.   Like bankruptcy, income collapse, damaged homes, etc.

All of which conspire to make the short sale harder and harder to accomplish.  And you do know, of course, what a short sale is.  Right?  It is when the bank or lender takes less than what they are owed (they are shorted) and they still release the mortgage so that the seller can still sell.

What is the problem?

Most lenders are buried with paperwork and applications for mortgage renegotiations and short sales and foreclosures right now.  Absolutely buried.

In my experience less than 1 out of 3 short sale attempts get closed.   We can increase the odds if the seller does all of the right things and has a good reason for attempting the short sale and if the buyer involved is very, very patient.   Then the odds go up to 60 or 70%.   But it takes a lot of work and a lot of time.

Right now the lenders are the main problem.   When they forgo the shorts sale they then end up having to foreclose on the house.  Which usually, by the time they get into the property, is full of mold/water/broken pipes/stolen copper/and any other bad thing you can imagine.   When they finally get clear title, pay off there acquisition costs, and finally get it sold in a declining market, they always will have been better off to take the short sale dollars.  Every time they would have netted more money with a short sale vs. a foreclosed sale.

Perrysburg short sales are difficult – and worth the effort for the seller.   If the lenders catch a clue, they will win in a difficult situation as well.