FranklyRealty.com Daily Questions

Seller financing? Listen to Donald Trump?

noreply@blogger.com (FRANK LL0SA Va Broker- BLOG.FranklyRealty.com) — Tue, 19 May 2009 20:06:00 +0000

Just got this email today:
Hi Frank,
I was watching Donald Trump on Larry King Live and Donald was promoting the idea of buying utilizing seller financing. I went to google and found dry descriptions of seller financing. Then I went to your blog to look for an insiders perspective on seller financing. Unfortunately, there's nothing there!

Is seller financing worth writing a blog post on? Maybe it's a waste of my time. It does kind of seem like I could hear about it on a late night infomercial. Your thoughts?

Thanks,
Jay

Hey Jay,
Not only do I love the Donald (I applied for the Apprentice, met him and got to the semi-finals in the selection process), I LOVE creative financing. But they rarely work out.

For seller financing to work, the owner has to have enough, or all, equity. With people being underwater now, that isn't too likely. Also rarely do desperate people own their house 100%.

Example for Partial Seller Financing:
$500,000 home.
$200,000 loan on the home.
$300,000 equity in the home.

The buyer gets their own loan.
Option 1) Buyer gets a 50% Loan to value ($250,000 loan) and the buyer puts down (their own money, cash) anywhere from 0% to 45%. In other words the seller can hold a note (loan) for a much as $250,000. They become the second trust, the second lender.

Option 2) Buyer gets a 80% loan. This is a more typical loan. But then they don't have the 20% cash to put down. In this case the seller holds a note for anywhere from 1% to 20% of the home's value. Leaving the buyer putting down anywhere from 0% to 19%.

Hurdles: The lender has to allow for this. They might not allow a buyer to put ZERO MONEY DOWN. They want the buyer to have some skin in the game.

OR
FULL Seller Financing: A buyer finds somebody that owns the house outright. No loan. They can lend you the entire amount. As in 100% down. No lender can tell them what to do. Or they can do a loan for 95% or for 90%. The more the buyer puts down, the more likely the seller will feel comfortable giving the buyer a loan (if you miss a few payments they get the house and keep the down payment).

What rate?
Then you have to ask at what rate. This can be anything. It can be HIGHER or LOWER than market rate. The seller might want the buyer to refinance. One way to do this is to say "Ok, I will give you a rate of 7%, and you get your credit in order and pay it off as quickly as you can."

Or they might give a LOWER rate than the market. Why? Well if their alternative is 2% or 3% in a CD, they might be ok with a 4% loan to the buyer. Also watch out for a prepayment penalty. The seller might not want you to refi (except when you sell).

Also you have to look at the big picture. A seller might give a 0% loan on $50,000 (a part of the purchase price) with a one time balloon payment in 5 years. Why? Well he might do that to keep things simple. For example if the price is $500,000, but you all agree to $505,000 with a 0% loan.... it starts to work itself out (watch out for tax consequences or interest payments vs a balloon payoff).

Why would the seller do seller financing?
If you are in an area that many buyers can't qualify for a loan, this can double the number of buyers. If you are selling a $200,000 home and you would need to drop it to $150,000 to sell it, you might instead keep it up at $200,000 but offer aggressive terms like a 2% loan. So those that only care about their monthly will be attracted to the offer.

Why would the buyer do seller financing?
The buyer might not qualify for a loan any other way. They might have 10% or 20% to put down, but their rate might be 8 or 9% because they can only get a sub-prime.

Conclusion:
So while it sounds like a great idea, there are very rare instances where it can be used with FULL seller financing. But Partial seller financing can be an option. Also look into Options to buy, rent to own and Lease Purchase. There are MANY scams in these categories, but if done correctly, it can be a great alternative to the banks.

You can also search FranklyMLS.com for Seller Financing in the remarks. There are 88 in Virginia under $800k

Hope that helps,

Frank
Broker FranklyRealty.com

Can't Sell, But I Wanna Buy a 2nd Place

noreply@blogger.com (FRANK LL0SA Va Broker- BLOG.FranklyRealty.com) — Thu, 23 Apr 2009 04:42:00 +0000

(sorry for the jumbled post. The copy and paste didn't work well)

Hi Frank

First, I have to tell you, your franklymls.com its great, after trying every free option available, and some paid for, I think this is the best for this area. Now to business. Me and my wife own (and live in) a townhouse that we bought in the worst possible moment, back in 2004,

Frank reply> Only 2005 is worse.

when the prices were close to > burst, it was stupid, but it seemd like a good idea at the time.

Frank reply> Kinda like now (based on yout email below)

We own more to the bank than the current value on the market. > We both work full time. My wife works for a company and makes > XXk/year. I own my own company that I started back in 2008, > less than a year ago. I am the only employee. My total income as per the 2008 taxes is around > XXXk. We filed joined taxes for XXXk last year. This year it should be > better. My last salary for another company was XXXk/year.

> We would like to buy a detached house in the coming months, now that the > market is down, seems like a good moment to buy, we do not want to sell the > townhouse for the same reason, and I am not even sure that we would be able > if we wanted to, we owe (~XX%) more than its worst.

> We called a loan officer that a friend recommended, she seemed really smart.

> She said that because we have no equity on the townhouse and are not selling > it, but buying a new one, and have no equity on it, we need to prove that we > can afford to pay both mortgages, which we think its still possible. But > then she said that because I have my own business, that business would have > to be in business for a year or two before I can use that income to apply > for FHA loan, and that the only option for us was a "sub prime" loan, which > does not sound too exiting. > Is she right?? What would you recommend? > thanks > Eric >

Frank reply> In my opinion, you are crazy. What you are proposing is SUPER risky. Ever been to Vegas? Lose $100 on the roulette table? What is the best way to win it back? DOUBLE DOWN. That is what you are trying to do. One is down, so you want to double down. What if things still go down more? You will be wiped out. Way to risky. If you sell your place and move UP and buy a bigger house, you will be ahead. Yes lose 10% or $30k on your sale, but on your purchase you also save 10%, but on a bigger home, that is $50k below. The total benefit is $20k ahead. If you can't sell, then rent. Rent your place and rent a bigger place. Even after taxes it is cheaper to rent, even in this market. And subprime. Don't even think about it. That is nuts. That extra 3% you get charged... no way. Yeah yeah , you plan to refi, but if the market goes down, you are stuck with a horrible high priced loan. I have a blog on subprime and how subprime people should never buy. But that is just my opinion.

Sure you could make a killing with what you propose, but it is super high risk speculation.

Hope that helps.

Frank

Short Sale Listing Agent needed. Can you help me?

noreply@blogger.com (FRANK LL0SA Va Broker- BLOG.FranklyRealty.com) — Fri, 03 Apr 2009 17:08:00 +0000

Hello Frank,

I found your site through an internet search for seeking short sale real
estate agents in Alexandria.

In summary, I own a house that has an estimated value of about $400k
(maybe even less) but I owe about $450k (a little less actually) on it
through two loans (mortgage + line of credit), putting me $50k in the
red. I am not late on the loans, but I am under a lot of pressure to
sell it.

I was hoping, after seeing all my options, to secure a short sale. But
I'm not sure if the bank will agree to it because I pay so well. The
first bank is Suntrust (owe about $250k, pay $2000 a month), the
second is Countrywide (owe about $100k, pay $1000 a month).

The main reason I want to sell is because living in that house causes
emotional distress.

My dream scenario (that would at the same time be realistic)? Someone
would invest in the house by buying it for fair market value, but paying
off all my debt and then setting up a payment plan for me to repay back
the difference, perhaps at a rate higher than typical house loans.
Played out: Corporation X buys the house for what I owe ($450k) and then
makes out a loan that I have to pay back for the difference between what
was paid and FMV ($50k). My monthly payment goes down, or perhaps stays
the same (around $4000 a month) but then I pay back the loan in 24
months and then I'm done with the house, my credit worthiness intact,
in two years instead of 25 more. Furthermore, my debt is reduced from
$450k to $50k, paving the way for me to buy another property.

Can you help??

Regards,
Samuel

Hey Samuel,
Good brainstorming, but that dream will never happen.

But you are CLOSE! What may happen is you agree with your banks to pay them back part of all of the difference. So if it sells for $300k, and you sign a
promissory note for $50k difference, then you might have a shot.

I can help you, but what I can't do is do what I did with the last 2
emails like this, which is spend hours on it, and then the person just stops replying. So I need to know that this email wasn't copied and pasted to 5 agents.

I would also recommend a 3rd part short sale negotiation company that
knows EXACTLY how to make you look in front of the banks and they
might be able to cut that $50k note by 25-75%.

It all depends how much you have in savings and how distressed you really are financially.

But no, no investor in their right or wrong mind would agree to the
arrangement you proposed.

Frank

I Wanna Move! What is an Arlington Condo Owner of 2 Years supposed to do?

noreply@blogger.com (FRANK LL0SA Va Broker- BLOG.FranklyRealty.com) — Tue, 31 Mar 2009 03:23:00 +0000

Question in regular font, answers in purple bold. This is just a typical email. I thought I'd share with you my typical reponse.

Hi, Frank, I'm just an average Arlingtonian (XXXfair housing details removedXXX, owner of a 2br/1ba condo near Court House) who reads your blog from time to time and likes to think he is learning a little something about owning/selling/buying a home. (When it's time to list, you're definitely the guy I'm gonna talk to, by the way.)

Thanks, sometimes I wonder if anybody is reading. Kinda like Seinfeld's "Is this thing on"

I'm finding out that I'm not much suited for living in a multifloor building -- what with all the neighbor sounds, smells, sights, etc. And in fact, I'm not much suited for *owning* in a multifloor building -- what with all the condo association drama that can go on.

I can see that being a drawback for some. Some buildings have less than others of course.

So I'm not even keen on continuing to own while renting it out.

Yes, it can be harder to be a landlord then many people think. If the toilet has a problem, guess who they are gonna call? And it ain't ghostbusters.

You see where this is going, right?: I look forward to the day when I can sell this thing and move on to greener pastures -- like, maybe, Fairfax County.

You can get a ton of green grass for the price of a condo.

The sticky thing is that I bought about two years ago

You are F-ed.

-- when things were starting to topple off their peak a little bit, but still pretty high.

At least somebody bought for more than you, so that is a little consolation. Like me, I bought in 2005, aka, at the top!

And I put down a big down payment. So I'm thinking that if I were to try to sell any time soon, I'd be selling at a loss. (Bye-bye, down payment -- or a big chunk of it.)

Yes, a big loss. How much you put down has nothing to do with how much you lose. It has to do with how much you bring to the table.

So I guess my question(s) to you is: What's a guy near the Orange Line to do?

Rent a place with a yard in Fairfax, and rent out your place. If you buy and keep your condo, I call that "doubling down" like in Vegas. Very high risk. If you are up for it, great, but if the market keeps going down, you are double hosed. If it goes up, you are a genius.

Just wait it out?

The other problem with renting it out is you will lose money per month (remove from the equation the big down payment, that is like a TARP bail out and that should not go into your equation. Calculate your mortgage assuming 5-10% down. The difference between rent and your mortgage at 90%, is your true loss per month)

I know some condo owners that waited 12 years to break even!

(And for how long do you suspect that those of us on/near the Orange Line will have to tough it out?

Dunno. Equal numbers of signs going in each direction.

I thought that this corridor was supposed to be somewhat immune (an easier sell) than other places in the DC area -- and in the rest of the country.)

Yes and no. People that tell you a great location will never go down... those are called... Realtors! Times Square... the #1 location in the USA. Probably went down. The higher you go, the more you can fall. So really, that is just brainwashing.

But yes, we did MUCH better than Prince William county which dropped 50-60% overnight.

I'm OK selling at zero profit or at a loss of a couple grand.

You should not only be OK<>But how likely is that scenario in the near term?

Nothing immediate. Still have short sales and bank units hitting. For a moment I think it slows down, and then BANG, four more hit. THe key is stopped those from hitting the MLS.

Are things picking up along the Orange Line?

For the right price, there are 5-10 offers on places. But that price is $50k under resellers.

Is there a silver lining for this neck of the woods?

Yes, and you heard it here first... a buyer said to me the other day "I feel like I need to hurry up, or I might miss the boat and miss the bottom." It was the first sense of panic that I have heard.

Or do I just need to keep owning until my condo's value gets back to near-2007 levels?
(Another three years or more?)

I would be surprised if it rocketed up in under 2 years, but if Obama can freeze foreclosures and let the Short Sellers refi, it actually is very possible. Real Estate is supply and demand. Cut off the bank units and you will have a couple months of NO sales, but then the buyers will say "screw it, I'll just take one of these 'break even' resellers."

And does having a 2br within walking distance to the Metro change the equation?

Absolutely not.

***I realize my question might make good fodder for your blog. If you want to use my question/scenario, please don't use my real name.***

Great Idea. Please add your reply as a comment... "George".

Thanks.

Hopefully I could be of help. Hope you will spread my blog around, and make sure you subscribe to the main blog.

Frank
Broker FranklyRealty.com

Don't Value Properties Based on Actives!

noreply@blogger.com (FRANK LL0SA Va Broker- BLOG.FranklyRealty.com) — Fri, 17 Oct 2008 02:33:00 +0000

Quick story.

I had a listing that I owned personally. I wanted to dump it.

It sat for 90 days and 3 people saw it.

But then the unit 3 floors above listed for $40k more. The exact unit. Dunno what they were thinking, but thank goodness.

Mine looked like a bargain... I got an offer for $50k under list from an eager buyer that called all my agents to find me. I called his bluff, countered full price... he bought it.

Moral: Don't use actives to value a home. Just because you like a place that is $50k under the neighbors place, doesn't mean that both aren't $100k and $50k overpriced.

Thanks,
Frank

Does The Buyer's Agent Work For The Seller?

noreply@blogger.com (FRANK LL0SA Va Broker- BLOG.FranklyRealty.com) — Thu, 31 Jul 2008 20:22:00 +0000

So I love to IM, so here is a question over IM. The Handles have been changed.

[16:15] C-Pow: Hi Frank, this is Larry. Got a sec for a quick question?
[16:15] Frank'sIM-: yes

[16:16] C-Pow: My Mother-in-law just learned from her boss what Seller's Agency is. Needless to say, she's starting to freak out. =)
[16:16] C-Pow: An agent hasn't provided an agency disclosure yet, but we haven't really made any decisions yet either
[16:16] C-Pow: so i figure it's just a bit early
[16:17] C-Pow: Do agents usually work under an EBA?
[16:18] Frank'sIM-: getting off phone now
[16:18] Frank'sIM-: (really pissed at an REO agent that hasnt called, emailed or texted me back in 9 days)
[16:22] C-Pow: Hopefully it's not the same guy that's listing the REO that we are looking at ;)

[16:23] Frank'sIM-: done ranting

[16:24] Frank'sIM-: no need to freak
[16:24] Frank'sIM-: you talking about how state law (disclaimer, I am not a lawyer) technically means that
[16:24] Frank'sIM-: the buyer agent that shows you a home works for the listing agent?
[16:24] C-Pow: bingo!

[16:24] Frank'sIM-: that is hogwash
[16:24] Frank'sIM-: it is an old trick that they
[16:25] Frank'sIM-: teach in the "big companies" as a way to scare people into signing a buyer agency agreement

[16:25] Frank'sIM-: "if you dont sign here, then I work for the seller" it is BS
[16:25] C-Pow: i see
[16:26] Frank'sIM-: did you read my blog post on buyer agency agreements?
[16:26] C-Pow: absolutely
[16:26] Frank'sIM-: I talk about why it is good to sign them, but I think I dispels that myth
[16:26] Frank'sIM-: I wouldn't use THAT tactic
[16:26] Frank'sIM-: the one where "you better sign, or I am gonna screw you and work for the seller"
[16:26] Frank'sIM-: (if it is in there, I gotta take it out)
[16:26] C-Pow: right

[16:33] C-Pow: So your expert advice would be to tell the Mother-in-law to chill?
[16:33] Frank'sIM-: yes
[16:33] Frank'sIM-: or if it makes you feel better start with an email from your buyer agent saying "we work for YOU, not the seller"
[16:33] Frank'sIM-: which is also legal since it is in writing
[16:33] Frank'sIM-: I would lose my license if I went and conspired with the listing agent
[16:33] C-Pow: i see
[16:34] Frank'sIM-: nobody even does that. Absolutely nobody does what is known as "sub agency" (as I have ever seen)
[16:34] Frank'sIM-: where you work for another firm and you are the assistant to the listing agent
[16:34] Frank'sIM-: urban myth
[16:34] C-Pow: nice
[16:35] Frank'sIM-: I can blog about it on my Questions.FranklyRealty.com
[16:35] C-Pow: Have you emailed snopes.com? (kidding)
[16:35] Frank'sIM-: show it to you ma
[16:35] Frank'sIM-: I should
[16:35] C-Pow: cool
[16:36] Frank'sIM-: fyi seller's agent
[16:36] Frank'sIM-: in virginia has 2 legal definitions
[16:36] Frank'sIM-: it means buyer agent on the one hand on some contracts and
[16:36] Frank'sIM-: listing agent on the other
[16:36] Frank'sIM-: so I only use buyer agent and listing agent
[16:36] Frank'sIM-: I never use "seller's agent"

[16:36] C-Pow: that's maddeningly logical of you....
[16:37] Frank'sIM-: I even yell at reporters to get it right.
[16:37] Frank'sIM-: "seller's agent" is very counter intuitive and they use it wrong all the time

Written by Frank Borges LL0SA- Broker FranklyRealty.com

Buying in Lyon Park, Waycroft and Ashton Heights Arlington

noreply@blogger.com (FRANK LL0SA Va Broker- BLOG.FranklyRealty.com) — Thu, 31 Jul 2008 13:41:00 +0000

Question

Good morning Frank,

I am a frequent blog reader and also user of your franklymls site; one of the most helpful tools for buyers, in my opinion. My husband and I are currently looking for 2-3 bedroom single family homes in Lyon Park, Ashton Heights, and Waycroft, preferably in the range of $600-725K. We rent just down the road from 1021 in Courthouse, so we're fairly familiar with the area, but have had some difficulties in identifying
a) for sale by owner homes and
b) new listings of less than a week or two, by which time the ones worth seeing are typically under contract.
Any thoughts? Linda

Reply:

Hello Linda,

Yep, I have thoughts.

Email alerts will be key, and I will set those up to be hourly. Just make sure to confirm the first emails (3 total). The first email will have current homes and subsequently you will get an email every few days with new listings and price drops. I put the max for $900k so you know about everything.

Here are the homes that have sold since Jan 2008, about 1 per month per category. Which one do you like?

Lyon:

http://matrix.mris.com/Matrix/Public/Email.aspx?ID=26265643408

Ashton Heights

http://matrix.mris.com/Matrix/Public/Email.aspx?ID=26265662445

Waycroft:

http://matrix.mris.com/Matrix/Public/Email.aspx?ID=26265961837

(half sold within a week)

And if you do decide to sign with us (see blog post

http://blog.franklyrealty.com/2007/02/exclusive-buyer-agency-contracts-dont.html on Exclusive Buyer Agency agreements) we can be even more aggressive and actually send out a mailing to those areas specifically trying to find people who haven't picked a Realtor yet and are about to sell. I get about a 1% response rate, which isn't bad.

I'm sure you have seen the actives, can you tell me what you like and don't like from these?

Of the actives, what were your thoughts of these 2 in Lyon Park:

http://matrix.mris.com/Matrix/Public/Email.aspx?ID=26266067206

These 6 in Ashton Heights:

http://matrix.mris.com/Matrix/Public/Email.aspx?ID=26266106528

and this short sale: [edited out as per MRIS rules]

2 in Waycroft

http://matrix.mris.com/Matrix/Public/Email.aspx?ID=26266140095

As a rule of thumb, homes that sell in the first 10 days tend to keep 99% of their list price. However on average a home will drop 8% from the top price. So we want to look at homes that are 10-15% higher just in case they are way overpriced and can be knocked down, but then again, we have to get hourly alerts in case something good hits that is properly priced. Did you see the FranklyCRA blog post http://blog.franklyrealty.com/2008/07/frankly-cra.html on how to tell (in part) if something is overpriced?

As for FSBOs your best bet it Craigslist. And FranklyMLS.com will link to craigslist at the bottom of each individual listing. Also I just signed up for RealtyTrac.com which will give me some heads up for possible bank stuff coming down the pipeline.

Would you like to meet at one of the properties above? In part to just look around and in part to meet in person.

Also if you are on AOLIM or GTALK, my handles are below.

And have you spoken to a lender yet? If so which one?

- Written by Frank Borges LL0SA- Broker FranklyRealty.com

Slick Realtor? We Offered, He Fudged the DOM

noreply@blogger.com (FRANK LL0SA Va Broker- BLOG.FranklyRealty.com) — Wed, 30 Jul 2008 15:25:00 +0000

Question:

Hello, love your input & realistic wake-up for some.
Question- we put in an offer on a home that had been sitting close to a year. As soon as our offer was received the agent relisted the house and days on market went to 1 (both DOM-P/M)! It looked like a brand new listing with new remarks - the whole deal! Of course, it generated folks. They waited to respond & got a better offer. Slick Realtor? Shouldn't they be fined for these kind of plays? I would love to report the Realtor - if it were true that they messed with MLS data to get property refreshed.
Possible? If helpful... [address here]
Cheers!
Sally

Answer:
Hey Sally,
Were you using a buyer agent? If not, that was your first problem.
Remember, the Listing agent represents the SELLER, not you.
Actually I looked up the listing. He did what I call "legal & fatfree fudge". The DOMP actually did NOT reset. So they were completely ok with what they did.

Also the agent did a great job sitting on your offer. Agents LOW low offers since you can use them to entice other offers. They don't owe you any obligation, they are allowed to use your offer to inspire other offers. Actually I always have said that it takes 2 buyers to sell a place. Regardless of it being week 1 or year 2.

Best of luck. And yes, for others that want to file a compliance complaint, that can be done easily, just email me.

Written by Frank Borges LL0SA- Broker FranklyRealty.com
(please report typos)

Specific Performance, Can I Sue?

noreply@blogger.com (FRANK LL0SA Va Broker- BLOG.FranklyRealty.com) — Mon, 21 Jul 2008 05:35:00 +0000

Question:
would you please make a blog post on specific performance, i currently have a buyer who is changing their minds about a listing, and i would love to have my lawyer send them a letter if nothing else just pretending that i am going to go after specific performance.... have you ever tried this? Best; Ted, Realtor
Reply:
Hey Ted,
Disclaimer: I am not a lawyer.
I'd love to give you advice, but this really is a legal matter that you would have to engage a lawyer for. My understanding is that you can sue and make the seller sell their place to you at your agreed upon contract. But you better make sure your contract is iron clad. I could give some examples on how to get out of a contract, but I don't want to encourage people doing that. You might also read your contract and see what it says about legal fees in the event of a dispute. Also ask your lawyer if you can go after the brokerage to receive your commission.
Good luck
Frank

Condo Fees For New Construction. Up?

noreply@blogger.com (FRANK LL0SA Va Broker- BLOG.FranklyRealty.com) — Sun, 20 Jul 2008 16:24:00 +0000

I recently answered a question about the risks involved with condo fees going up exponentially with new constructions.

Reply
Snoopy, you are dead right about condo fees with new buildings.

They DOOOO skyrocket in the first year.

Sure it is decided by the condo board, and they hate to do it, but they have to. The builder puts in artificially low fees so that you get attracted to the condo. Then once the board is set, they are like "WTF" we have to cut everything AND skyrocket our fees.

I live in Clarendon 1O21 in Arlington and after the board took over we cut everything down the the free water and coffee maker. And our rates went up 10% the first year. I think another 5% the second year.

One big part of that was the reserve. The builder left NO reserve for the future. So we had to create a 5 year plan to build a $400,000 reserve (or something like that), which meant increasing fees to build this.

So YES, you have to watch out for that. But that is only 1 of about 10 tricks that new builders will do, so be VERY cautious, and whatever you do, don't go in without an agent, many do.

Frank Borges LL0SA
Broker FranklyRealty.com

I Inherited a Home. Can You Value It?

noreply@blogger.com (FRANK LL0SA Va Broker- BLOG.FranklyRealty.com) — Sat, 19 Jul 2008 16:53:00 +0000

Question
Frank,

I was wondering if you would be available on the 23rd to come and take a look at a house I just inherited in Arlington.
It is a split-level home located at XXX. My father passed away in March and my brother and I inherited the house together. Right now, I need to find out what it is worth so I can buy my brother out. I am not sure if I will rent it (it is a rental now) or sell it this spring.

I found your website when I was searching for a realtor who was familiar with Alexandria (my brother is looking to purchase a condo there.)

My tenant said she would also be home on the 22nd if you would be available then.

Thanks,

Jane

Reply:
Hey Jane,
I don't think I am the right person for you. However I can make a suggestion.

I suggest you hire an appraiser (email me and I can ask my lender for one). That way you get an unbiased number that your brother would be less likely to question.

While some Realtors have no problem spitting out data in 10 minutes and giving you a price, I don't do that. I only give pricing AFTER I'm hired and I take about 6-8 hours to help YOU come up with a number. So while many websites will try to lure in a seller with a "free home evaluation" report, I don't do that.

Also many Realtors will give you a higher price in hopes to try to win your future business. The highest price Realtor wins... That is called Buying a Listing.

Also once you find a price, you have to try to decide what is "fair." Do you buy him out at 50% of the appraised price, or do you adjust it for Realtor fees? Well if you are going to sell it in 6 months, that might not be fair since you are going to have fees then as well. But if you don't sell it, why should he get the full price, assuming no fees.

Best of luck.

Written by Frank

How much to Lowball in Virginia?

noreply@blogger.com (FRANK LL0SA Va Broker- BLOG.FranklyRealty.com) — Wed, 16 Jul 2008 06:08:00 +0000

Somebody recently asked what % below list to offer if you wanted to lowball a place?

My answer:
Lowballs don't really work.

They sound all sexy and everyone around the water cooler might say "low ball the heck out of that house, this is a buyer's market!" Yeah sounds all great, but look at the stats. Have your agent pull some real MLS data for you.

Look at the last 100 homes in that area that have sold. I bet you only 1 or 2 have dropped 15% from the current asking price.

So mathematically you would have to offer on 50 properties before you landed a "lowball." They just don't work. So Redfin is smart to say "No Thanks" to those types of buyers that just don't "get it" yet. Perhaps with the notion that "once they 'get it'... they will be back."

And don't get fooled by the agents that WILL let you put in low balls. They are full of it. They know you won't win the contract. They are just hoping that you will get worn down and still use them (or get you locked into an exclusive contract).

I even know one agent that blogs about lowballing... but in reality he tells me it doesn't work, but it gets people to his site and he gets deals from it. (I hate that kinda stuff)

Now there is some debate as to what a lowball is. I actually don't consider offering 15% less on a property that is overpriced by 20% a lowball. In the building where I live there was a unit that was 20% overpriced. A FSBO. $100,000 overpriced. So would your offer that comes in 15% lower be a "low ball?"

I say no. I say you are overpaying by 5%. Highballing it! (that sounds like a drug reference)

It is rare (way overpricing), but it happens. Some agents, or sellers just completely miss the mark. There is a place like that right now in Alexandria. It is about $100,000 overpriced.

Guess what, I did a Frankly CRA, Comparative Realtor Analysis and saw the last 2 listings the agent closed $100k and $140k below list price. Coincidence? I think not.

So back to the example above, the 2 people that bought for 15% less. I bet you one of those was actually 15% overpriced, so they just got current market rates.

Bottom line is don't focus on % below list or you will miss the best values out there. Know your area's value and focus on VALUE!

Sometimes offering ABOVE list can get you a better "deal." Especially bank owned properties. I had to bid on 6 recently to get one. Ask me to offer 15% below on properties that sell for above list... yeah right.

Best of luck! ;-)

Frank Borges LL0SA

"I Can't Afford to Rent, So I Gotta Buy" WTF?

noreply@blogger.com (FRANK LL0SA Va Broker- BLOG.FranklyRealty.com) — Tue, 15 Jul 2008 19:43:00 +0000

Yep, that was the essence of a recent email exchange! See below.

Initial email:
Frank, My husband and I are interested in this house. We are currently living with my parents until we can get on our feet. We just moved from Prince William county to Fairfax county/Loudoun county line. I saw this house and was very interested in it. Now I will tell you we (my husband and
I) do not have great credit and do not have very much to put down, like I said we are just getting back on our feet. My husband had a heart attack last year. I was wondering what kind of first time home buyer option we might have, considering our credit isn't very good? please e-mail me at [removed] Thanks Linda

MY REPLY:
Hey Linda, What about renting till you can save more? Buying with no money down
is possible but the fees are outrageous (yes sometimes they get rolled into the loan, but they are real fees).

Watch my video on the myths of buying. It is much much cheaper to rent. And no it isn't throwing money out the window.
It was my first video on youtube.franklyrealty.com
Frank

Linda's Reply:
Thank you for your time. We are not going to rent, because we will not be saving money that way, rent around us is way to high. Thats why we moved in with my parents because our rent increased over 1000.00 for a 2 bed room apartment. I have 2 small child who are looking forward to have their own house and their own yard. Thank you for your time and thoughts. We will find someone else who can help us.

Final Frank Reply:
Buying in this area is almost never cheaper, when comparing 2 identical places, sorry.
Even after tax breaks renting is 20 to 30 percent cheaper.

The thought that somebody is buying because they can't afford to rent blows my mind. You will find out sooner or later.
And anybody that tells you otherwise is trying to trick you put of money. Best of luck.
Frank

Final Analysis
Wow, isn't that amazing. Bad credit, no money... so the solution... buy a house! It is the level of entitlement that some people feel in regards to home ownership. It is a a shame. And sure enough, some shady agent will help them find a 'dream home"and they will be foreclosed on in 9 months.
Written by Frank

Investing with Family

noreply@blogger.com (FRANK LL0SA Va Broker- BLOG.FranklyRealty.com) — Fri, 11 Jul 2008 18:28:00 +0000

Question:

Hi Frank
My Name is Erica and I am wondering if you would mind sharing a bit of your wisdom. I stumbled upon an article on msnbc.com that referenced your blog so I thought I would check it out. I appreciate all the information you have posted there already its quite helpful. First let me give you some information about me and my “disclaimer” and if you are not able to offer any advice I fully understand.

I am an American living in Canada – married to a Canadian
My Husband and I are interested in purchasing a property in the US with the intent to rent it for most of the year
My Husbands Sister and brother in law are interested in making this purchase with us (all three of them are Canadian)
We are currently looking at homes/town houses/condos in Southern California (I know this is NOT your area J )

None of us have ever purchased property in the US and I understand the process is a bit different there than it is here in Canada. I want to make sure we are well informed before we jump in head first as most of the process for us will be done long distance. My sister in law and I are planning a trip to southern California at the end of the month to meet with a real-estate agent she has been communicating with and to view some homes in areas we have been researching.

So after all of that my questions are these do we need to be preapproved for a certain amount before we make an offer on a property there? Do laws very by state regarding the purchase and sale of a home? We have a wonderful relationship with my husbands family and we want to keep it that way so are there specific clauses that can be placed in the purchase agreement that hold every one equally liable regardless? Keeping in mind that my husband and I might be the “little fish” in this bigger deal we want them to know that if something goes wrong as this is all very new to all of us that they will not be left holding the bag.

Again I do understand that you work on the east coast and not in California, though I wish you did because I LOVE your MLS site and the information you provide there. I appreciate any bits of wisdom you might be able to offer.

Kindest Regards
Erica

Reply:

Hey Erica,

Every area is different, but I'll tell you about my area, but you will have to ask your agent about your area. (and California is another beast altogether)

1) So we need to be preapproved for a certain amount before we make an offer on a property there?

YES. While you don't HAVE to have a preapproval letter first, any/most listing agents will require one. Kinda a "we will consider your price of XYZ, IF we know you can pay for it."

Also it just isn't good to be offering on places until you have a decent level of certainty about your ability to but it. ESPECIALLY if you are buying it as a partnership, which can make MUCH stricter rules (ie more money down, higher rate etc)

2) Do laws very by state regarding the purchase and sale of a home?

Yes.

3) We have a wonderful relationship with my husbands family and we want to keep it that way so are there specific clauses that can be placed in the purchase agreement that hold every one equally liable regardless?

Yes, a clause that says "Sorry family members, we love you too much to go into business with you." It really is a recipe for disaster. Everyone has good intentions, and one thinks that they can write out all of these "what if" scenarios, but you can't even scratch the surface with the unknown. What if one wants to sell and another doesn't? What if the market drops in half and one wants to sell? What if it doubles and one wants to sell? You will buy them out at the "fair price?"

Keeping in mind that my husband and I might be the “little fish” in this bigger deal we want them to know that if something goes wrong as this is all very new to all of us that they will not be left holding the bag.

> It might be easier to make it a straight loan and not a revenue sharing deal. That way they wouldn't have any say in when to sell. As long as you make your payments, they can't say anything. But remember, it will be MUCH harder to get a loan for this.

Written by Frank

Mortgage Late fees. Is 5 days Legal?

noreply@blogger.com (FRANK LL0SA Va Broker- BLOG.FranklyRealty.com) — Fri, 11 Jul 2008 18:14:00 +0000

Question:
Frank, Several months ago I refinanced by office building, which is actually just a single family home converted into a Insurance agency.
The company that we refied with was a Bayview Loan Servicing, which if I would have known how difficult they were to deal with I would have never used them.
My question to you is whether or not it is legal for them to only allow me a 5 day grace period before they attach an exorbitant late fee. My home, old office mortgage & even an investment property I own, give me the customary 15 days, this 5 day stuff is extremely difficult especially when our commission monies do not come even come in until the 5-10th of the month.
I have tried to deal with them but they are extremely nasty & truly could care less. Actually it looks to me as if they are trying to make people late so that they can charge the extra monies.
Any help would be greatly appreciated.
Thanks, Mark

Reply:
Hey Mark,
Sorry, but I don't know. But maybe somebody will find this post and share their info. So post a "hi" and subscribe to the comment feed (I think this blog lets you do that).

I do know that the lending world is highly regulated, so I would be surprised if they were able to get away with shorter grace periods, if it wasn't legal. As it is due the 1st, I don't know if the law can say "give people more time."

People love going to BankRate.com or LendingTree.com and getting the absolute cutthroat lowest price, without caring about the fineprint. So yeah, they probably made $500 less on you up front, with the hope that X% of their clients will pay $200 in late fees every year.

I wish I could point you in the right direction, but unless a lawyer knows off the top of their head, it is going to cost you a few hundred to find out.

I will also direct a few lenders to chime in.

And lastly, if you DO find that they aren't legally allowed to do 5 days, you might be able to get your money back for past penalties.

- Written by Frank Borges LL0SA

My Short Sale Offer & Moving Trucks

noreply@blogger.com (FRANK LL0SA Va Broker- BLOG.FranklyRealty.com) — Fri, 11 Jul 2008 03:34:00 +0000

Question:
Hi, Frank.

I have a problem and wondered if you've addressed it on your blog. My husband and I made an offer on a home. According to the remarks in the listing, it's an approved short sale. The listing agent (the guy really needs to learn understandable English or my agent should let me talk to him since I speak his language!) said that the bank would accept an offer for the approved price and offer 3% in closing costs. Our full-price offer went in the morning of July 2.

My on-the-ball realtor couldn't reach him until Tuesday of this week to confirm receipt. (The guy doesn't return phone calls.) He had forwarded the offer to the asset manager, who responded that he would have an answer by Thursday (today). Today, the asset manager said the bank needs another two weeks. Is this standard?! I had hoped to have movers come in three weeks in anticipation of closing in four to five weeks. (This is a cross-country move.) From my perspective, I think they're hoping for a better offer over asking price. I've looked at the comps and the asking price is right on target.

When my agent originally called the LA after the showing last week to find out specifics for submitting an offer, the LA told her that he already had an offer on it for $25K less than what we planned to offer. She thought it odd that he shared that info with her (he wasn't the only agent to "disclose" other offers.) I don't trust the LA not to share the amount we offered in hopes of a higher offer in this two-week interim. To his credit, both he and the homeowner are calling the bank every day trying to get this offer pushed through (or so he says).

Is there some kind of law that prohibits this type of bank stalling tactic? It does not seem fair. A homeowner can't do this. What allows a bank to do it? And, is there anything a buyer can do aside from submit a ridiculously high offer? Any insights you have would be greatly appreciated. I'm just looking for a second perspective (especially considering my agent is out of town for the next two days and I'm driving myself crazy with worry--we NEED a house before school starts!).
Thanks so much. Evelyn

Frank's Answer:
Evelyn, Sorry, but you are nuts! Moving across the country to a short sale? The only thing worse would be if you used the Listing Agent as your agent (dual agency). I got a nearly identical email last week about how she is now homeless (sold her place already).

To answer your question, Hell no! There is no law (I am not a lawyer) that requires somebody to ratify a contract quickly. My guess is you didn't ask the 10 questions to ask every short sale http://blog.franklyrealty.com/2008/05/top-10-q.html and did your agent look at the agent's track record to see if they have ever closed one. If they haven't, I would give it a 1 in 12 chance of closing (was 1 in 20 in Feb).

You have to start looking elsewhere. As for the listing agent saying it was "bank approved," I really wonder. If that is true, that the bank approved list price and a seller subsidy, there should NOT be any stalling. Banks don't care enough. If their chain of command approved X, and you offer X, who gets a bonus if they get X plus 1? Nobody. I don't think the listing agent is trying to get a bigger commission, so it is probably NOT bank approved.

Again, these "steals of a deal" are bogus.

And what people constantly misunderstand is they initially say "oh I can be patient in order to save $20,000." But it isn't a matter of patience. If only 1 in 10-20 close, and it can take 3-4 months, do the math... that means 3-4 years to get a home.

I would ONLY let my clients consider a short sale if there is a competent Listing Agent that has done them before.

Written by Frank Borges LL0Sa

Discount Agent Horror Story & Question

noreply@blogger.com (FRANK LL0SA Va Broker- BLOG.FranklyRealty.com) — Thu, 03 Jul 2008 15:30:00 +0000

QUESTION:
Hi, I came across your website in search (googling) of information on how to get out of a sticky situation. Any advice you can provide would be greatly appreciated.

Two days ago (7/1) we closed on a REO home. We did not get the HOA resale packet at closing. It turns out it wasn’t even ordered…. (we used a discount agent…. He’s not very helpful,,, won’t even return my calls…Now we know….)

Yesterday I called the HOA mgmt company and found out that there’s ~ $1400 in fees/fines levied against the previous owner. If I understand it correctly, we inherited that obligation.

Questions I have are:

1) can we legally cancel the contract within 3 days (by tomorrow)? … there’s language in the VA Property Owners Act that states that within 3 days of receipt of HOA Resale Package buyer may cancel… but since we didn’t get one, can we?

2) If we can’t, can the owner’s title policy protect us?
Thank you.
Jacob

MY ANSWER

Hey Jacob,
Sorry to hear that you have a bad experience with a discount agent. They aren't all bad, but I do frequently get emails like this.

First off, I am not a lawyer, but I might be able to give you food for thought to ask your lawyer.

1) HOA packet at closing? Normally this is done within the first week of being under contract.
My understanding in Virginia is that you do have a right to cancel a contract for not getting the HOA docs... up until closing. I believe that closing ends that right. In other words, you could have stopped and NOT closed due to the lack of HOA docs, but since you DID close, that was your decision.

2) My understanding was that the HOA loses their rights to fees after a home is foreclosed on. Unlike taxes, the HOA dues do not attach to the house once it is foreclosed on. Now if the foreclosure was on Jan 1 2008, and the bank hasn't paid since then, then yes you might be responsible from taht day forward. But, I don't think, you would be responsible for years or months of HOA payments that were not made before the foreclosure. (this is NOT gospel, but my understanding, you need to verify it with a lawyer)

Correction: I asked a closing specialist. Here is my question and her reply:

Frank> HOA fines and fees do not survive after a foreclosure (bank steps) right? The tally starts over when the bank takes the property over.

Closing company> Unless they were a lien, HOA fees do survive. Bank should pay.

As for the title insurance, I don't know if that would cover it. My guess is that it would not.

Let me also guess... you used THEIR closing company? This is another reason NOT to use the bank's closing company. If you had your own company, this information should have been found BEFORE closing.

So ask the closing company:
1) Did you do a search for any liens on the property? Including the HOA. Why didn't this come up.
2) Does my Title Insurance cover this?
3) Then ask them if Virginia law allows the HOA liens to survive through/past a foreclosure.

Hope that helps,
Frank- Broker FranklyRealty.com

Comparing 2 VA Townhomes with different HOA Dues.

noreply@blogger.com (FRANK LL0SA Va Broker- BLOG.FranklyRealty.com) — Tue, 17 Jun 2008 04:18:00 +0000

Recently I got this deep within an email:
"We don't want to consider homes with an HOA fee over $100."

To that, my reply is:
Instead of completely deleting them from the running, try making some adjustments to compensate for the HOA fees (or Condo fees), so that you are better comparing Apples or Apples.

For example, if two Alexandria Townhouses are $300k. And one has an HOA of $100 and another has an HOA or $200, then ask your lender what $100 a month in buying power gets you at your current rate.

Let's say it is 6%, the extra $100 per month, is $1,200 per year or about $20,000 in buying power ($20,000 at 6% is $1200 a year or $100 a month).

So that the townhouse with the $100 more expensive HOA, should be $20,000 less (assuming all else is equal, which is never the case). Also note that HOA fees are far more likely to increase then a 30 year fixed loan, so if you wanted to dock it another $5,000, that would make sense too.

So if you find a $275k place with $200/mo HOA and a nearly identical $300k place with $100/mo HOA, you should consider them equally in terms of monthly payments.

Written by Frank Borges LL0sa Broker FranklyRealty.com

Designated Agency, Can They Share My Info?

noreply@blogger.com (FRANK LL0SA Va Broker- BLOG.FranklyRealty.com) — Fri, 06 Jun 2008 05:40:00 +0000

This is a longer question , so I thought I would answer it along the way in purple font. I have added bold emphasis to her question for easier reading.

Frank,
I was recently the victim of some very bad business practices and was hoping for some of your expertise on it. Don't worry, not looking for legal advice or filing a suit against anyone but I haven't been able to find the information I am seeking, just tidbits here and there.
[BACKGROUND STORY]
I was trying to buy a home through the company that listed it,

> You might not have known better, but I frequently rant and rave about NOT doing this. Here is a mini post on why you should NOT CALL THE LISTING AGENT (soon this will be a longer blog post). Now I can also link to your example as evidence.

The company designated and signed with me a representative separate from the sellers agent [listing agent]. They of course worked together in the same office along with the broker owner, but don't the confidentiality rules still apply?

I corrected above. A little pet peeve of mine. In Virginia a "Seller's agent" is actually the buyer's agent. The terminology is confusing so I exclusively use :"Listing agent" and "buyer's agent."

One problem with above hand off is the "referral fee" system in real estate. The listing agent most likely received anywhere from 25%-$50% referral fee from the agent that they "assigned/gave " the deal to. Can you say, "wink wink, make sure this deal goes through so a) I get the listing side plus 1/3rd the buy side commission and b) make this happen and I will give you more future deals." It is just one step up (better) vs Dual Agency.

Yes confidentiality applies. But this is called Designated Agency in Virginia (different in each state). Which means both agents work under 1 supervising broker. This isn't ideal, but sometimes is inevitable. This is MUCH better than the "Dual Agency" system (illegal in some states) where 1 agent does both sides of the deal. Regardless of either. Yes your info should be confidential while you are a client (the rules get tricky AFTER you no longer are a client). If the supervising broker knows some insider scoop, they are not supposed to share it with the other side. Also the agents shouldn't share it with each other. IE: "I think they will pay $10,000 more."

What is the difference between a buyers agent and a buyers representative?

I don't know that there is a difference. I could be wrong. (I won't BS you if I'm not sure)
Either way, they are supposed to be representing you and doing what is in YOUR best interest.

That being said, there is the law and there is reality. (I am not a lawyer) Whether your agent says side comments like "Sure she is qualified" vs "She is very qualified" vs the most appropriate: "Read the lender letter, beyond that I can not add additional information," gets down to the nitty gritty nuances of what is confidential.

In Virginia there is a paragraph where you have to check off whether the Buyer Agent is allowed to reveal financial information on the buyer. My clients check NO, but many check yes (which can be fine too) and yes means "I want to buy the house, feel free to give information to the seller, so that the will be more comfortable and more willing to sell to me." Heck in DC it is customary to fill out a full financial report and even faxing copies of your bank statements or a screen shot of your bank's assets online.

What were the broker/owners legal duties/responsibilities in this situation?

Make sure we don't confuse broker and agent. In Virginia think of an agent as a brown belt and a broker as a black belt, or the "boss." The broker, unless otherwise authorized, should be available to help both agents (one on each side) but they are not supposed to reveal any confidential information. Instead trying to only answer procedural questions.

Wouldn't they still have to uphold the Realtor oath to treat all
parties fairly, honesty?

Yes of course.

I ask this because during the time we were under contract with our accepted offer our requests for water and septic inspections were ignored.

Yes and no. It depends if your initial contract called for those inspections up front. If it did not, and your agent messed up and left it off, then technically after being under contract you might have lost your rights to ask for these other inspections (or contingencies). (some state laws might kick in and require you to have certain inspections regardless of what the contract says).

If you had in the contract that you were supposed to be given these inspections, and you weren't, that is very bad. If something went bad with those systems, and you have in writing that you asked for them to be tested, you might be able to make the agent/broker pay for the problems.

No inspections were shown on the day of closing (other than lead based paint) they were requested again on the day of closing and we were told that they did not have to provide them.

Now if they did the inspection, but weren't required to, and they found information that was bad, AND if the initial contract did NOT call for them, the listing agent and seller do not have to request that an inspection be done (unless state law says so, like the lead based paint disclosure in VA)., then that opens another can of worms that only a lawyer can address.

The home had a spring fed water system and private septic tank. To the best of my knowledge in the state of Virginia (and most other states) the seller is obligated to provide those inspections if the home is not connected to city water/sewer.

Oh, I didn't realize you were in Va. Ok, I hear you. I barely ever do septic. If that is true, then you might be allowed to walk all the way up to the closing date (or until they produced the inspection). Also some lenders would require this as well.

I ask about the confidentiality because during the process of trying to acquire a mortgage for the property

Don't tell me you used their "in house" lender?

(which we were unable to do because of the water system) our credit, which was good enough at the time, was hit so many times that it ended up showing too many inquiry's.

Usually when buying a place, your credit shouldn't be effected that much (or at all) if all the hits were from one source type (home loans). I can have somebody chime in about this later.

After telling our designated representative about the credit issue and our desire to wait a few months before trying again for a mortgage on that particular property, we received a phone call
from the sellers themselves offering us credit counseling advice.
Shouldn't our rep have kept the part about our credit to herself since we did not authorize the release of that information?

You might have authorized this in the contract without knowing it. Otherwise, you are right. That shouldn't have happened. But it would be a common mistake for the agent to say in passing "yeah, they have a credit issue and are tied up" but technically they shouldn't say anything. I don't think this has much to do with them being in the same brokerage.

I also ask about the fair and honest treatment of all parties because I came home to a message on my machine from the company that resulted in their firing. In the message the broker (who was returning my call) didn't not realize she had not hung up the phone but put it on speaker
instead.

Wow, this is getting good!

I have her, her husband (who is not even employed there) the sellers agent and our rep (who was still under contract with us) talking about my family and I, laughing at us calling us names and saying that if they had to come over to the house they would break our knees and throw us in the waterfall.

WTF! No way. Do you still have the audio? Email it to me. Or we can set up a call and I can record it and post it here for all to hear (removing names). Or give it to the press. As you can assume, this is very bad and could be grounds for serious removal of a license.

Would that constitute as a breach of contract?

That is a legal question, whether they breached your contract, but they seem to have no longer stuck to their Fiduciary Duty as your representative (google that).

From all the information I have been able to find this was a conversation they shouldn't have even partaken in, especially with outside parties who have no contractual dealings with us.
Wouldn't it prove that our Rep was not protecting nor promoting the best interests of their client?

Yes, it appears that way.

And being only our Rep wouldn't that still make us that agents client?

Yes. (but technically depends how your contract with your rep reads)

I very much thank you in advance for any of your knowledge on this matter, Samantha

No problem, hope I was somewhat helpful. Please post your reply in the comments section.

The parts in purple were :
Written by Frank Borges LL0sa - Broker FranklyRealty.com

Clarendon 1021 Great Deal. 2BDR for $450k? NOT

noreply@blogger.com (FRANK LL0SA Va Broker- BLOG.FranklyRealty.com) — Tue, 03 Jun 2008 16:44:00 +0000

Question:

Frank, I saw a listing for a 2 bedroom/2 bath condo in 1021 (unit #XYZ). Do you have any more details about this condo? If yes, I'd like to see anything you have. Thank you, Tammy

Answer:

Hey Tammy

Sorry but that is a fake listing or a short sale. I wrote a detailed blog on Short Sales that was featured in Business Week

http://blog.franklyrealty.com/2008/02/va-short-sales.html

I do love the building, so if you have any questions, don't hesitate to ask. There is a unit XYZ (directly below me) that is a real listing, but it is $100k more. We can probably get the down some, but they are already taking a loss.

The average seller is now taking a $25k loss in order to sell.

Did you see my blog and video blog on Clarendon 1021? There is a link to it on www.1021Clarendon.com

Also when searching try www.Franklymls.com for 4x larger photos and keyword searching.

Thanks, Frank

Written by Frank Borges LL0SA- Broker FranklyRealty.com
(please report typos)

My Agent Can't Sell My Arlington Condo. Can you?

noreply@blogger.com (FRANK LL0SA Va Broker- BLOG.FranklyRealty.com) — Tue, 03 Jun 2008 16:33:00 +0000

Question:
(via Chat) Sorry, I'm not an experienced chat user. My name is Doug and I'm the owner of unit 9XX in (Arlington Condo). We are looking for a replacement Realtor who is willing to aggressively sell our property. Interested?

Answer:
Hello Doug,

I was on the phone and I missed your Blog chat.
I see your home is still active on the MLS. Realtors aren't allowed to engage in conversations with people that are currently represented. (if you find an agent that does, they shouldn't be!)

What I can tell you is that XYZ is a very well respected agent.
Thanks,
Frank

Reply:

Thanks for responding, Frank.

... We're just not seeing, in our opinion, the desire on her part to get this sold. We need some movement here.

Doug

Reply Reply

No problem.

The Arlington condo market is really tough now. You have some VERY stiff competition from builders that are unloading units left and right (and bank owned properties). I also looked at unit #XYZ for sale in your building and from first glance, it looks more upgraded and larger, for less.

What I suggest is that you ask for a report "what has sold in this zip code in the last 60 days from $400k to $465k" and that way you can see exactly what IS selling and what you need to do to sell your place.

Are you getting showings? If not, it might be overpriced.
If you are getting showings, ask for feedback, if they say it is overpriced, they aren't negotiating, they are just telling you it is overpriced (and yes feedback DOES come in that says "priced well").

In my building, Clarendon 1021, I get approached all the time to sell listings. But my first questions is "are you prepared to take a serious loss from your purchase price in 2005?" If they say no, I can't help them.

And I just looked up unit XYZ that sold for $475k. Each floor is about $3k, so that makes it $15k higher, and it has two spots... what $15k-$20k more? That alone, without looking into detail tells me you are at least $30k overpriced (possibly much more). But again, I didn't look closely and pricing can take me a few hours.

My guess is you aren't listening to your Realtor. And what really stinks is many new or inexperienced (or bad) agents might take on the deal and then just try and beat you down in price after signing you up, ala "we tried." So the first agent spends a ton of time, the client doesn't listen, and they finally listen to the 2nd agent.

(don't go with an agent that will tell you they can get you $515k. Read my Buying a Listing post)

So if she is telling you to drop the price, she is probably not pulling your leg.

- Written by Frank Borges LL0SA- Broker FranklyRealty.com (please report typos)
(some details have been altered to keep the email details private)

Multi-Unit Property in North Arlington

noreply@blogger.com (FRANK LL0SA Va Broker- BLOG.FranklyRealty.com) — Mon, 02 Jun 2008 18:14:00 +0000

Question:
Hi Frank,
I've followed your blog on and off for several months and like your approach. I'm interested in buying a multi-unit property in N. Arlington where I can be an owner occupant. Do you or one of your associates have experience in this type of investment purchase? I have met with my lender and know my financial parameters and would like to find someone creative in helping me find a property where the numbers will work (rental income numbers are critical). I'm open to unofficial duplexes where extra units may not be listed under multi-family listings.
Thanks for your time and look forward to speaking with you.
Paul

My Answer:
Hey Paul,

Thanks for emailing me.

I have to tell you that my first instinct is that if I helped you, I'd likely end up talking you out of it.... And talking me out of a commission. But oh well, you have friends right?

As for multi family, I own a part of a 400 unit multifamily apartment complex in Richmond, so I know more than a thing or two. As for smaller duplexes, I haven't don't that, but the math should still apply.

The problem is that a ton of people, I mean even a guy at the pool today, wants to dabble in real estate investing. Dabbling doesn't work in my opinion.

Also the financials probably aren't there, and may never be. For the most part in Northern Arlington, any place you buy won't cover the mortgage. So with a monthly loss, you then are just speculating on the market rebounding .

Many, maybe not you, have a plan to live for free and let a tenant pay all, part or most of their mortgage. But it isn't that easy.

Sure you might do ok in 7 years, but it isn't a no brainer investment.

Do you have a particular place in mind? Did you try searching for Arlington duplex on franklymls.com ?

- Frank Borges LL0SA Broker Owner FranklyRealty.com

Investors Trying to Avoid Foreclosure w/ Short Sales? Unlikely

noreply@blogger.com (FRANK LL0SA Va Broker- BLOG.FranklyRealty.com) — Wed, 28 May 2008 07:34:00 +0000

Question:

Frank- Good afternoon. My name is Eric. I just came across your blog on the web and wanted to see if there's anyway possible you can help me.

In September of 2006, a friend of mine and myself signed a contract on an NV home to be built in Leesburg, yes...I'm here in Northern Virginia! We closed on the house 6 months later and have been in possession of it ever since. We bought it for $750,000 and as of a couple week ago there was a short sale right next us on the market for $510,000- almost identical house.

We put 10% down and currently have 2 loans on the property- both through Wells Fargo

The property is rented, but between my partner and I, we still have a shortage of around $700 that we have to pay out each month.

One of our biggest concerns at this point even if a short sale was an option, is the implications after we close on the forgiven debt. Since it's an investment, there is no forgiveness on paying taxes on forgiven debt. Since there are 2 mortgages, I don't think deed in lieu is an option. And since both my partner and I have our own houses, we're afraid that the bank will come after us for the difference if we let it foreclose.

I've been in touch with a company called HomeAssure, that for $2500 claims that can get a short sales approved, but I'm just too skeptical of them at this point.

Bottom line is I have no where to turn and no idea what to do....it seems there's no way out and the walls are closing in quickly.

Uggghhh....

Any insight or help would be appreciated.....or, if you think there's something you could do to help I'd be more than happy to discuss options with you.

Thank you Sir

Eric
My Answer
Sorry Eric. I don't see it happening.

First of all, a Short Sale is irrelevant if it never sells, so don't compare your value to a possible Fake Listing.

Secondly, you kinda skipped something in your email. You are asking about the 1099 Phantom tax, which you will have to ask a tax advisor about, but I don't see why you would be exempt, but your bigger problem is you left off the huge requirement for short sales: You have to be near bankrupt and prove your financial ruins.

And lenders are FAR less likely to give leniency to investors, in part since they are more likely to hide funds. And if you have another house, they will expect you to refinance your current house to pay your debt obligations. They will suck you dry before giving you any write off.

Too many people think that Short Sales are an easy way to have the bank eat their losses.

And others think that just letting it go into foreclosure is a better option (I got an email regarding that last week from somebody that might be broke in 10 months, he just let them foreclose and is now crossing his fingers that they don't come after him for a deficiency judgment)

As for HomeAssure, I don't know them, but I doubt it. I have called these types of places before and many were scams. Maybe if you got some immediate local references. And if they accept the $2,500 to be placed in escrow and payable upon getting Short Sale approval, MAYBE, but be careful. But my guess is they only take money up front without a guarantee.

You should talk to a lawyer that specializes in this stuff. I am NOT a lawyer.

Hope I was able to shed some light and maybe give you some questions to ask if nothing else.

- Written by Frank Borges LL0SA- Broker FranklyRealty.com

Realty Trac. Is it a scam? Foreclosure buying vs MLS.

noreply@blogger.com (FRANK LL0SA Va Broker- BLOG.FranklyRealty.com) — Sun, 04 May 2008 21:07:00 +0000

Question:
Hi Frank, just finished reading your blogs and tried to "chat" but I couldn't figure out how to "send". My husband and I are moving to Va in the next 4 mos. and we are working with a buyer agent from (insert top 3 company) Realty and have signed a contract. We aren't crazy about her and she is not listed as a REO agent. She is also not crazy about doing foreclosure work and is totally unorganized. We feel sorry for her because she keeps saying "you'll probably want to fire me" and she's in her XX's with many years in real estate. Have you any suggestions for us? We are doing most of the research and have paid to use Realty Trac.

By the way, love your blogs. Thank you. Matty
(emphasis added)

My Answer:
Hey Matty, I was online, I tried to chat back, dunno what happened.

"not listed as an REO agent" that doesn't really matter. There is no such thing (that I know of) as an "REO buyer agent." If somebody says that, that is just marketing. (or Realty Trac is making money letting Realtors advertise as such on their site)

She might not be crazy about Short Sales, my blog post on Short sales is a MUST READ. These are Fake listings that never close (in my area) and they mislead buyers and really mess them up. Make sure you read that.

As for "foreclosures" they don't exist up here. What does sometimes exist is "bank owned." A "foreclosure" is a word frequently incorrectly used. It actually means a courthouse auction of a property. But today the banks buy them back for what they are owed. So the courthouse steps are empty!

I don’t believe in Realty Trac, but maybe I am ignorant (would love to be corrected, and we can both learn). I'd be curious to hear your take on it.

I don't know one person that has bought from it. I think it is a scam, but I could be wrong. Also I don’t think they offer a buyer agent commission, so that could also explain her not looking into them. (but really, show me 2 or 3 on that site and I'll dig up info)

I suggest sticking with your agent a bit longer. You can use her and search via my site (no obligation):

www.FranklyMLS.com it will let you search for keywords like arlington REO (which means bank owned) or Arlington Bank Owned and it will find listings with the word "bank" in the remarks (otherwise they are very hard to find).

Just stay away from short sales unless they say "already approved by bank."

Foreclosures sound sexy, but if you are looking in Arlington or Alexandria, in my opinion, they don't exist. Watch the youtube.franklyrealty.com video with my agent that just bought a bank owned property. If "foreclosures" really existed, she would have bought one that way.

Sounds strange doesn't it? No foreclosures?

Here is the process as I know it.

1) Seller tries to break even at $400k
2) Seller gets foreclosure notice
3) Seller drops price to $300k, a short sale
4) Seller gets 5 offers.
5) Bank says "no way" or doesn't reply
6) Foreclosure on courthouse steps. Bank is owed $380k, they buy it at OVER what it is worth, and they take over the house at $380k (ie no point in you outbidding them)
7) They put it back on the MLS at $350k as a REO or bank sale
8) It sells in 1 week (sometimes for over list, so you better know your pricing and be ready).

Except for far out places like Manassas. Instead of #7, they have these huge 500 person auction houses (HudsonandMarshall.com) that will unload 100 homes. No inspections, nuttin. But they have 3 or 4 people bidding them up. I still plan to do an analysis on homes that sold in that auction to see if they are really better than a regularly listed home. I don't think so, but I could be wrong.

But up here in Nova, they rarely (don't) exist.

So your agent might not be conveying the message to you, or she might have said the same thing, but you might have needed to hear it from a 2nd person that wouldn't make money off of the advice.

Also don't disregard regular properties. They have to compete with the bank ones too. I have MANY clients that start off wanting this blue light liquidation, just to end up getting real and buying a home from somebody that bought it in 2001 for $180,000 and is willing to drop their price to sell it.

Right? A buyer buys for $500k in 2005. 2 years later, the bank takes it over for $400k, sells it for $350k. Meanwhile another seller bought for $200k in 1999. Guess what... they might also be able to sell near $350k.

Hope that helps!

- Written by Frank Borges LL0SA

Can't Sell for Loan Amount, Countrywide Lender; Short sale?

noreply@blogger.com (FRANK LL0SA Va Broker- BLOG.FranklyRealty.com) — Wed, 05 Dec 2007 19:39:00 +0000

Question:
Frank,I hope that your day is well. I have a mortage with with Countrywide and I am trying to sell my home in Warrenton, Va.

Countrywide stated that if I find a buyer who is able to take over my loan then things could be done for them to take it over, or they would have to pay the full payoff value which is more than the assest value of the home.

Is there a way to get any lender to agree to see the home at the assest value of the home?

I did have the home on the market back in the summer but the buyer wanted me to pay the closing cost which I did not have. I am trying to find a way to sell the house without me having to come up with closing cost. Any information regarding this will be helpful. Thanks Alex

Alex

Answer to Alex,

First of all, we need to clear up some technicalities in your question. The problem wasn't the buyer asking for closing costs that you didn't have, the problem was the NET (sales price minus closing costs and Realtor fees) was too low. In other words, if the offer was $30,000 higher, I'm sure you would have been able to pay the closing costs.

So the closing costs isn't the issue. The issue is not being able to get an offer that has no closing costs, the issue is getting a NET offer above your loan amount. Otherwise you have bring money to the table to sell your house (literally a check).

Many people in this market want to break even. I even suggested at one point that we have a Break-Even Party! I so frequently hear, "Well, I'd be fine if I just broke even." Geez, you'll settle for not making a profit? How kind of you! Tons of people are losing $10,000 to $50,000 and you'd be happy breaking even?

So the question is actually, "How do I get the bank to allow me to break even?"

It is called a SHORT SALE.

A Short Sale is when the bank allows you to sell a property for less than your loan amount. They take the loss. But keep in mind you have to pay taxes on that loss via a 1099, unless congress passes the Mortgage Cancellation Tax Relief Act, H.R. 3648

But the problem with Short Sales is they aren't getting to closing. Only about 1 in 20 short sale listings close. Sign up for my main blog at blog.FrankyRealty.com as I have an upcoming post on Short Sales being fake. The bank sees the offer and say "Nah, we'd rather see if you will really foreclose." They bank that a certain percent of the owners will find a way to pay and not foreclose. The others that do foreclose, sometimes it is BETTER for the banks vs a Short Sale.

But to do a short sale, you have to prove to the bank that you are broke and facing foreclosure. Sometimes the bank will say, "Maybe, only if you keep making your payments." Then they ignore your calls for 2 months. Why? To get another $3,000 out of you!

So there is no magic bullet to pass your burden onto the bank. You can obviously foreclose. If you are going to do that, you might consider STOPPING payments immediately, save that money and go get a rental before the bankruptcy shows up on your credit report. Please consult a lawyer, as I don't know if there is any legality around doing that.

Best of luck,

Frank Borges LL0SA Broker FranklyRealty.com

(please report typos)