Not true.

Not even close to being true.

Most Realtors do not know how.

And let me tell you something even worse – most Realtors DO NOT WANT TO EVEN TRY OR LEARN.

That becomes a problem when your regular sale turns into a short sale.

That becomes a problem when your reasonable buyer turns into a lawyer calling terror.

Short sales have to be negotiated differently.

Short sales have to be handled differently.

Short sales have to be presented, obviously, to the bank in a very different way.

Short selling sellers have to do a lot of things differently.

And short sale buying buyers have to be managed, informed, and hand held to a very different standard.

None of this is easy or fun to do.

But it must be done if the short seller is going to get debt forgiveness.

And if the buyer is going to get the home of their dreams.

Make sure your agent is fully trained (at a minimum a practicing CDPE specialist from the Distressed Property Institute).

It is very hard to pull one off.

These are very stressful, very adversarial deals.

The risks and barriers to success are hard – but the potential payoff is HUGE for both the buyer and seller.

What was the REAL effect of the following:

HAMP/the foreclosure moratorium/the robo signer moratorium/”Making Home Affordable”/and HopeNow?

(these were all roadblocks to market clearing foreclosure activity or government sponsored mortgage crisis programs for homeowners in distress)

The considered net effect?

Some economists are saying it was ZERO.   It just pushed foreclosures ahead to the future.

Like this guy . . .

“It is pretty clear, however, that overall foreclosure moratoria, foreclosure delays, modifications, and other workout activity continued to keep the number of homeowners who “lost” their homes to foreclosure massively lower than one would have expected given the delinquency/in foreclosure numbers.” (Quote from economist Tom Lawler in Calculated Risk blog.)

Here is my take “from the street”.  From Main Street USA.

I just met a guy today.

Foreclosed.

I was helping him move out and securing the asset for my client.

The city/house/street do not matter – because this is happening all over Northwest Ohio.

What did he tell me?

What is the street effect of this crisis?

He has lived in the house for 4 years without making one single mortgage payment.

And with no property taxes paid by him either . . . . that equals a lot of money.

In fact it is “worth” over $50,000.

$50,000 of imputed savings/benefits/gain that he has accrued to him.

While he was being foreclosed.

I am not an economist.

But this is being repeated all over the country.  The effect is real.  The bills are going to come due.   The merry go round will stop.

“3 or 4 times MORE foreclosures”???

Hard to think about that . . .

It’s a strong word.

“It shall be done”.

“Do this”.

Or how about “promise”.

Also a strong word.

In the world of short sales . . . . I don’t think you can either or honestly issue many guarantees or promises or commands – not unless you are the mortgage holder.

They hold the note.

They loaned the money.

They have the gold and they make the rules.

The signs that proclaim “I Buy Houses!” are usually come ons for a bait and switch exercise to list your house or even worse get you to fraudulently convey control of it.

The Federal government has an opinion about this too.

You can read about it here.

I will boil it down for you:  no promises allowed.  No guarantees allowed.  No getting paid up front.

Any Realtor or “real estate investor” who approaches you and wants some money up front to help you with your short sale or foreclosure?  They are breaking FEDERAL LAW.

Any Realtor or “real estate investor” who comes and promises results, or claims some inside track with the lender or the government . . . again, breaking FEDERAL LAW.

The FTC says that paying $$$ up front is totally forbidden -

“The most significant consumer protection under the FTC’s new rule is the advance fee ban. Under this provision, mortgage relief companies may not collect any fees until they have provided consumers with a written offer from their lender or servicer that the consumer decides is acceptable, and a written document from the lender or servicer describing the key changes to the mortgage that would result if the consumer accepts the offer. The companies also must remind consumers of their right to reject the offer without any charge.”

I have not yet seen anyone doing this in Perrysburg.  I have seen this happen in Toledo and Sylvania . . . . with terrible results for those scammed.

Nothing in a short sale is guaranteed – except that it will be hard and difficult, filled with surprises, and the end result holds the potential to get you out of terrible trouble.

Many of the real life stories deal with “strategic defaults”.   This is the cogent decision to pick up your stuff, move away, and never come back to the house.

AFTER you have stopped paying the mortgage for a long time.

I am not sure that banks want to talk about this – it being assumed you have to pay them once you get their money and not just walk away.

Options abound for upside down, underwater homeowners in Perrysburg.

Most of them are just bad.

Strategic Default?  Foreclosure.

HAFA and HAMP?  Funny.  You are joking, right?

Refinancing?  Not if your are late, distressed, or have taken an income hit with your job.

So what is left?

The SHORT SALE.

The amazing, wonderful, surgical real estate tool that lets the borrower/homeowner off of the hook.   Let’s the bank get maximum value for it’s distressed asset.  And lets the a new owner move into a newly stabilized neighborhood with happy people for neighbors.

What could go wrong?

Plenty.

In fact, since it makes great sense, it also mainly goes wrong in today’s upside down real estate market.

So . . . starting tomorrow an ongoing series of short sale myths in Perrysburg – in case you were interested or in need of a short sale yourself.

Or for a “friend”.

And it’s a dangerous question.

The mountain looks peaceful.  It is large and contained.   It is immense but has always been that way.  What could go wrong?

The denizens surrounding Krakatoa thought that way too at one time.

Until their lives were forever changed in 1883.

Same with our mortgage system today in 2010/2011.

If no one pays . . . then there is going to be economic and financial chaos.   Just about every bank will go bust.  Credit will be a distant memory.  Your 401k might be vaporized.

So, if you are following the news and watching what is happening in different Perrysburg subdivisions – it is a valid question.

Many people are choosing to NOT pay when they can.

And many people are unable to pay when they really want to.

Nationwide it is now taking over 490 days, on average, for the bank to get control of the “asset” after the borrower stops paying.

You can do the math just as well as I can – that’s a lot of “free” rent.  A lot of money to be saved.  A lot of perverse incentive.

490+ days.

Some people who are upside down in their homes are figuring this out – the ability to simply not pay any payment and live free for a year or two.

I can’t get into the morality or rightness or wrongness of each individual case and or foreclosure or short sale.  They are all – trust me – very unique.

But it seems to me that banks need to remove the incentive to live free that many are now using as a tactical financial tool.

If it spreads the results will be “unexpected” as they say.

“I can’t find them right now” he told me.

They are hidden.

In the shadows.

Today’s news from Core Logic confirms it:

The “shadow inventory” of unlisted bank-owned homes and potential foreclosures increased to 2.1 million units in August, up 10% from one year earlier, according to new estimates from CoreLogic, a real-estate research firm.

That’s around eight months of supply, compared to a five-months’ supply one year ago.

Banks and asset managers are holding them.   Like trump cards they don’t want to play right now.

The reasons are varied, good, and at the same time unimportant.

They are “their” cards.  And if they don’t want to play them right now it’s their call.

8 months of future sales . . . sitting there like a deep and dark shadow.

It’s getting larger.

(I have argued in the past that the Detroit Metro and Toledo Metro markets have been in sync for several years as to inventory and price trends . . . Core Logic estimates that the Detroit market has a 21 month supply of shadow inventory!!!  That is an amazing number – but we could be worse off if we live in Miami which has a 33.5 month supply.)

And it’s going to cause market disrupting and market cascading effects when it unwinds.

Caveat Emptor!

Short sales are complicated transactions.  They are not for the feint of heart.

Who Actually Makes the Decision to Approve a Short Sale.

2 people.

You, the seller.

And your lender or lenders.  You both have to cooperate or nothing but a foreclosure train wreck will result.  You will not be allowed to take any money away from the closing so you really don’t have an economic reason to care about the price your home sells for.   But . . . the bank cares.  It’s now their money at stake.  And while they care there is neither rhyme nor reason as to why one deal is accepted, approved, and closed and another one is not.

Why Would I Short Sale My Home?

There are advantages – if done properly.   You can stop the bleeding.   You can be “forgiven” from owing any more.   You can avoid collection acts and lawsuits that lead to a deficiency judgment.  Bottom line – you can get the bank to take the money that the house sells for and you can walk away.  You will not be able to finance another home with an FHA mortgage for 3 years . . . but that beats the 7+ year ding that a foreclosure action generates on your credit.

What Is the Best Way to Go About a Short Sale on my Perrysburg Home?

“Just call Jon” as I am want to say.   I have closed quite a few in Perrysburg and have special training to increase the odds of success.   A real estate agent with actual field and negotiating experience in short sales is, in my opinion, absolutely required if you want to succeed.  You will have to prove to the bank/investor/mortgage holder that you really did try to get top dollar for it.   You will need help proving your suitability for a short sale, and assembling the paperwork packet that will increase your odds of success.

That’s what I and my team do.

Why Do Most Short Sales Fail?

Time.  And communication issues.  And mistakes in contract process, buyer process, appraisal process, and with second lien holders.  These are tough, complicated transactions and if your Realtor is also working at multilevel marketing too or selling holiday hams at the mall it’s not an indicator of future success.  Hire the best for the toughest jobs.

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!

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.

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).