Going with a full listing with an agent over doing it yourself as a FSBO-For Sale By Owner.

Let’s go over some of the services that go with a full listing and service of a real estate agent, these are just some of the services included:

-Agent puts listing on Realtor® MLS- Agents have access to the MLS-Multiple Listing service, so they can take photos, add photos and details about your property onto the MLS so that other agents can search and that data is searched by thousands. This is where agents and buyers all search for properties. This gives you more exposure where other agents can help bring buyers to your property.

-Agent gives ideas on home staging- You can learn a lot of steps about how not to clutter a house, how to put your furniture in the house, and maybe even rent furniture from another company to make your property look it’s best.

-Agent gives tips on how to get in show condition-They will show you how to make your house look best against other properties, such as making it in show condition. You may need to clean it every time you get a showing request.

-Agent will discuss today’s market value (CMA)-Get a market analysis report with recent sold comps of properties that have sold recently just like yours to find out what your property is worth. This can be done before you list your property. This is a great indicator of what your house will sell for.

-Agent will help with the purchase agreement-The purchase agreement and many forms can easily equal 15-35 pages in today’s market with all of the possible contigencies buyer ask for, inspections, financing addendums, addendums, etc etc. Let an agent go over the purchase agreement and explain all of this to you.

-Agent will help with the negotiations-Real estate agents are use to negotiating, so it’s recommended you let them do the negotiating and explain to you what your counter offer really means to you.

-Agent will help with ?’s from buyer’s agents- The buyer’s agent may have some questions, and it’s important that your listing agent answer these questions. First the agent will know some of the answers, second, the agent will tell them what should be disclosed about the property and what shouldn’t be disclosed about your situation.

-Agent will help to get a sign in the front yard- Getting a sign in your front yard is important to let others in the neighborhood know your house is for sale, and it helps for extra marketing and exposure. Agents have signs already made.

-Agent will help to post street signs- These may include directional or open house signs on the corner.

-Agent will help to put out ads for marketing- Your agent often will put out marketing in magazines, newspapers, or fliers for extra marketing of your property

-Agent will help with in-house marketing and flyers- The agent may design a flyer to be delivered or just for the house for those that look at the house on showings.

-Agent will help with seller disclosures and paperwork-There are a lot of disclosures and laws these days, paperwork, and fine print, let your agent help with this

-Agent will help with understanding buyer’s inspections-There are buyer’s that order inspections, learn from an agent what this means to you, and the timelines

-Agent will help with understanding buyer’s appraisals-Let an agent explain to you the appraisal process and the good and the bad from the outcomes

-Agent will help with updates from the loan officer-Your agent will constantly be in contact with the loan officer to explain to you where the buyer is in the loan process.

-Agent will help with the closing process-The agent will have to make sure things are moving along with the title company, buyer’s agent, loan officer and more.

-Agent will help on the closing day, reviewing closing paperwork- Let the agent explain the HUD-1 settlement statement to you and the charges and fees on there

-Agent will help get photos taken and on the MLS-Let the agent do the work of taking the photos and getting this on the MLS for you

-Agent will help with measurements, data, add to MLS- Let the agent do all of the measurements and add a lot of the info to the MLS

-Agent will help get a lockbox on my door-This lockbox will be important for that next agent to get in the property

-Agent will help with communication by email and phone- You will want to be in constant contact by phone and email with your real estate agent on any questions you have a long the way, let the listing agent earn their commission with the hard work they will show you along the way.

If you have a house you want to sell, or are thinking about it and need a home value, please email me ron@minnesotainvestors.com and I’ll put you in touch with one of my associates to help you.

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A More updated version of short sales is now available here What are Short Sales the Process in Minnesota

Bank Owned Listings: REO-Real Estate Owned Foreclosures

REO is Real Estate Owned, also known as a bank owned property. There are REO agents that specialize in selling REO properties. Let me tell you many of the best REO agents have been around 10-25 years in the business. I will tell you right now that I don’t know a lot about bank owned REO properties compared to some other topics, but I do have some friends who have been buying them or working them for years, so I learn from them.

REO is when the bank gets the house back after the foreclosure process and timeline which you may have seen in our other blog post. Here is what I will tell you. At the time of this writing I have heard of listing agents with 80-100 listings with banks of just REO properties. Keep in mind most good agents work on 3-5 listings at a time. That’s how busy they are. With REO, the bank owns the property free and clear. The previous owner has no ownership anymore, it’s now on the banks books as a non performing asset. Up until the 2007, I saw banks overcharge for bank owned properties and prices, and watched the properties listed on the market for many months until someone paid too much for the house, I couldn’t believe it, but people didn’t know better. Well I’ll be the first to tell you that I think as of this writing April 2008, I think the best deals out there are REO properties. That doesn’t mean all REO properties are a good deal.

The reason I think REO properties are a great deal right now is that banks need to raise money fast, and they are taking back far too many properties, way above normal, it’s putting some in a cash crunch. Also keep in mind that all 2nd mortgages, 3rd mortgages, helocs, mechanics liens, all of that which is typically still a lien on the house when a seller is selling on a short sale, those liens no longer exist when a bank owns the property, the bank can sell extremely low, and just write it off as a loss on their taxes. Especially on $300,000 to $700,000 houses banks are giving great deals right now. You can even get a great deal on new construction houses through the banks. I will tell you right now that REO agents are very particular about using their purchase agreement and having everyone abide by their rules. Also REO agents like to just receive faxed offers, they don’t like to talk a lot on the phone, they are busy people in general. I wouldn’t have the patience to work with banks and be an REO agent, I have a decent temperament and I just couldn’t do it.

One thing I will tell you is if you are a buyer, you better be extremely persistent with your offers. Also you can send in low ball offers and get denied, and do it month after month and eventually one day the bank may take it, timing is everything with these banks. Another thing I”ll tell you is that banks want zero liability with these properties so they will want to play by their own rules on the disclosures, so you may want to hire your own inspector for these properties, after all the banks never lived in them. Banks can sell properties for 50 to 70% of tax value, it exists, I hear about it, I see it. I own bankownedforeclosure.com I may try to list something on that site sometime in the future. Also many bank owned properties need a ton of work, many people underestimate this and can buy something they can’t handle, sometimes it’s structural.

If I could sum up bank owned properties in a few sentences, I would say this: Prior to 2005 let’s say, bank owned properties were in very rough shape on average, banks REO’s were over priced, and they were willing to take months to sell the properties, and the agents were just very hard to reach. Banks were very non negotiable, and the houses were huge projects.

Now if we are talking the current market, I would sum it up saying, REO agents are busier then ever, banks have too much inventory, deals can be had, even new houses, and even houses that don’t need much work or have hardly been lived in. Much of this has to do with mortgage fraud where people didn’t even live in the houses. Banks are willing to negotiate, please work with a buyer’s agent that wants to work with REO’s.

I wouldn’t be that agent to work with the bank’s but I would have 1 or 2 agent friends that know what they are doing and how to negotiate, so please email me at ron@minnesotainvestors.com and I will put you in touch with an experienced agent that knows what he is doing.

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Minnesota Short Sale Homes

A More updated version of short sale homes is now available here What is the mn Short Sale Process

This post is going to just be a brief overview of of the short sale process, and at a later time I may post a more detailed short sale posting.

Short sales in general are a more complex transaction, and usually takes an experienced agent to do the job right. In the current market some sellers who are no payments behind and can’t afford the house payment or adjustment in payment may be eligible for a short sale. In recent years you would be 60-90 days behind before a lender would even negotiate a short sale, but in the current market you can be just a little bit behind with a bleak future on the horizon. The bank sees what’s inevitable and is willing to work with you. Here is what happens most of the time. A seller wants to do it themselves, so they call their bank and it’s usually some customer service rep, and they ask them if they do short sales. The customer service rep may not even know what they are talking about. Many times seller’s beat themselves up getting no answers. What seller’s don’t know is there is a department called “loss mitigation” where the loss mitigators are hired by the banks to specifically negotiate short sales and approve them.

Now if a seller gets to this point, they are welcome to do it themselves, as a general rule seller’s are not in the right state of mind to want to do this. If you let a 3rd party negotiate with the loss mitigator for you they will do the work and the bank will pay them their commissions, to the agent that is. The banks generally pay 5% or less to agents. Banks also don’t like any junior liens (2nd’s , 3rd’s, mechanics liens, etc) to make any real money. Count on $1000 or less, that’s if the bank is going to take less than what’s owing. Banks typically lose $40,000 -$60,000 on a full foreclosure, so it’s in their best interest to just make it go away.

There are other issues as not taking back “non performing” assets and notes. Info which is also not readily available is that a bank can lose it’s “charter” status if it takes over a certain % of non performing loans. Also most experts agree that a bank will have to hold up to 8:1 ratio of reserves for every non performing asset the bank takes back. That means for every $200,000 house (non performing loan) the bank takes back 200,00 x 8= $1.6million has to be held in reserves. There may be banks that are able to hold less than this, I have heard some say 7 x, other say 10 x. More people than not have said 8x. These are some ideas of why the bank doesn’t want your foreclosed home.

Some banks will not negotiate a short sale after the sheriff sale. If you need to have someone do a short sale on your property, I’d recommend 30-60+ days to get it negotiated after you hand in your paperwork, and then allow 3-6 months at least for marketing with current market conditions. Time is of the essence. The kind of paperwork you will need will be similar to what you need to get a loan. w-2’s, bank statements, etc. The bank wants to just see you don’t have thousands of dollars hidden away. After all, the bank is taking a big loss, so they don’t want to see the seller make a penny. As far as the deficiency judgment questions, that can be negotiated away during the short sale. As a general rule in Minnesota, the foreclosing lien position (in most cases the 1st mortage) has waived their right to a deficiency by initiating foreclosure. Please consult your attorney and CPA to verify this. Their could also be a tax hit.

Some have heard about the new legislation that would waive taxes for those doing a short sale, please let me warn you, that’s for owner occupied only and many many people that doesn’t apply to. I’d like to have you look directly at IRS website and other legislation and talk to your CPA to get the real story. Please verify an update of info on this at www.OverFinanced.com

Eventually the lender will need to verify a HUD-1 settlement statement to see what every other lender and agent is making to approve the HUD from the seller’s side. The agent will list the house on the MLS mostly likely and get an offer from another buyer’s agent or buyer and write up a purchase agreement, and get it approved by the lender. Then they will try to close the loan and get financing like usual, the only difference is instead of seller approval, it’s subject to lender approval.

Let me just tell you that short sales take a lot of effort, and I don’t recommend it for the beginner. Most seller’s just want peace of mind and want to just be done with the property. Let a short sale expert and/or agent help you out.

If you have a house you owe too much on, are behind in payments, or in foreclosure, please email me at ron@minnesotainvestors.com and I will put you in touch with an agent and short sale negotiator to help you with your house. Remember they get paid by the bank, the idea is for this to be easy for you.

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FSBO-For Sale By Owner pronounced (fizz-bo)

In this post I am going to try to give my opinion and overview on FSBO from the buyer’s side and seller’s side, and maybe even an agent’s side, since I am a real estate agent/broker.

Personally as a buyer, I think you are not getting any better of a deal buying FSBO homes. I know the reasoning is that you are buying a house without a real estate agent fee on top, but from what I saw years ago researching it, is typically a FSBO wants full maximum dollar, that’s why they won’t pay fees, and they’ll wait until they get it, often I’d argue it’s over market value much of the time, that’s just what I’ve seen. I know their are cases where you’ll get a better deal FSBO. I would buy a house from a friend FSBO, or an investor not listed, that makes sense. Probate, foreclosure deals, you could get a better deal as just a FSBO. One argument I will make that FSBO could be a better deal is that they don’t have a listing agent representing them to really look out for the seller, so the seller is often bad at negotiating or may say the wrong thing or become too emotional.

As an agent prospective, their has been a lot of articles written that seller’s get less money for their home selling it themselves then if an agent had just sold it for them on the market. These articles could be written by agents, and could be bias, but here is what I’ll say to that. There is no question that an experienced agent has experience negotiating, and his/her full time job is to show prospects and to put out a lot of marketing, this is an advantage that the real estate agent has. I like to think of myself as a pretty experienced salesperson, maybe 10+ years experience, but if I had a $10,000 car for sale right now that was used or new. I’ll be honest here and say that I’d be better off trading it in, or better yet putting it on consignment at a large car lot, the car lots just get far more exposure. They can do a better job than me. There are agents out there that just list houses and don’t sell, that’s not what I am talking about. The other thing I’ll say is, doing an agents job takes so much time. There are you in other states that say houses sell in 1 day with a FSBO sign, that’s fine, in those days maybe you didn’t need an agent, but where I am you have to hustle hard and still wait 4-12 months on the market to get showings, and even after you get an offer it’s still a lot of work. Some of us can change our own oil, or do our own taxes and read up on it, their is a point at which you just pay a professional.

Now from the seller’s side point of view. First off I am a real estate broker, been an agent/broker for 5+ years, and I don’t even list my own houses to save money. Why is that? Because it takes time, and I make more money per hour focusing on other parts of the business I am good at. I personally think people should just pay agents to list a house for them. It takes a long time to do the FSBO by yourself. Also the MLS -Multiple Listing Service, although it may not be as effective as it once was, has a lot of market exposure to provide to your house. For you that don’t know what it is, it’s something that just about every agent in the state or at least metro area logs into for access to view properties for sale, that way you have a chance to get other agents out there seeing your listing. You need that exposure, especially if you are vacant. I will write a post on why you should go with a full listing over not going with a full listing on another post, it’s well worth it, I see the value myself, like I said to even pay someone else to do it.

Why do we all pay when we eat out? Well, because once you go grocery shopping, carrying in the groceries, wasting some food, cooking, cleaning up, doing dishes and finally sitting down to relax, it’s easier to just pay. Well it’s the same with a real estate agent, it just takes a lot of time, so hire one and let them do their job.

I know agents who have sold and listed hundreds and hundreds of transactions, even per year, so if you want your house listed, and probably eventually sold, just email me at ron@minnesotainvestors.com and I’ll try to get you in contact with someone that can help you.

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Minnesota Short Sale Homes

A More updated version of short sale homes is now available here What is the MN Short Sales Process

Foreclosures in MN: Minnesota Foreclosure Timeline

This time line should be pretty accurate for the state of Minnesota and for foreclosures by Advertisement. There are two types of foreclosures in Minnesota, one is judicial, and one is non judicial. Everyone tells me 99% of all foreclosures are non judicial by advertisement, meaning they don’t go through court proceedings, and lawsuits, etc.

In the beginning a seller gets behind 30 days, and that may get reported to the credit bureaus. The lender will usually charge late fees, and will send a lender to remind them that they are 30 days late, they may even send a letter if you are 10 days late, even though most people have a 15 day grace period. To be more specific, lenders are more likely to call you a few times before you are a full 30 days late. Some may even hand it over to their collection department, after it’s late. I’ve seen lenders call after the 2nd or 3rd day of the month if they don’t receive the check. Also lenders will typically take your monies and apply it to late charges, interest, penalties, negative escrow, etc before they’ll apply it to any principle on the loan. After someone gets to be about 60 days late, a lender will start sending them more serious notices, and maybe will send a NOD -Notice of Default by the 60-90 day late mark.

This is them going through their routine of going through their motions of sending out the fair amount of letters to notify you. Now depending on the lender, they will probably send you that NOD and say that you must pay all amounts in the arrears just to reinstate the loan. What does that mean to you? Well no more of this partial payment stuff, they want the full amount you are behind, plus late fees, plus any accrued attorney fees. Before we get ahead of ourselves though before this point where you have to pay that full amount just to reinstate the loan and stop the ‘time clock’ for the sheriff sale date, I don’t want to get ahead of you here.

At this point, we have a few different options. In today’s market in 2008 there is recasting the loan, which typically means to put the late payments on the back of the loan, I don’t hear of too many doing this option. There is what’s called a forebearance and/or payment plan with the lender. This is becoming very popular these days, I’ll get to that in a minute. What’s becoming very popular in 2008 is what’s called a mortgage modification, I personally have never done one, but it’s all the rage right now with the market conditions. Basically the lender is allowing for a rewrite of your mortgage terms. This may include going from an ARM, to a fixed rate. This may be a way for you to lock in a far lower interest rate for a period of time. Everyone these days knows a lender doesn’t want a foreclosure back, it can cost them $40,000-$60,000 to take back a house in foreclosure by the time it’s all done. Many people say I don’t understand why the lender won’t work with me, I hear of others getting it done. Well you need to understand a lot of the time the lender funded your loan with an investors money from another company or maybe someone on wallstreet. Now there is usually someone “servicing the loan” sometimes it’s the lender sometimes it’s a large 3rd party. That servicer will talk to you about modifying it or doing anything else you plan on doing, but it’s going to take permission from the investors behind the scenes, that’s why it sometimes isn’t that easy to do.

Ok let’s get back to forebearance. You will hear differing opinions about this, but many say that the payment plan the lenders set up a seller on is doomed to fail, I have heard 85% of the time it can, I don’t know if that’s accurate. The reason is that they usually want 1 1/2 payments per month or more than you were paying before to catch you up. The idea here is if the seller couldn’t make the payments to begin with, why would a higher payment work. Others say it’s the lenders last attempt to get an extra $20000 out of you before they take it back in foreclosure anyways, which they are planning.

There are even more choices here, there is deed in lieu of foreclosure, there is a short sale, there is giving the house back to the bank and staying in the house. First off, from what I have been told by many, the short sale will show as a settlement and affect you the least, the deed in lieu of foreclosure is like a surrender to the lender, where you give them the keys and deed back and just let them take it without going through the long process, some feel this will be looked upon better than a full foreclosure. Then their is the full foreclosure, which will affect you taxwise, and has a chance to cost you on a deficiency. Taxes and deficiencies are a whole other topic. Short sales I could do a few posts on just by themselves.

So let’s say you reinstate the loan and pay everything you are behind, maybe $5000 or $9000 or whatever. You pay that all and reinstate the loan and keep going on like you were before. Let’s say you just can’t make up that money that fast, we have already discussed the other options. If you don’t do anything let me explain what will happen with the timeline. You will eventually become 90 days up to (honestly I have heard of 12-15 months) before the sheriff sale. Most lenders will send that NOD after 90 days, and then they will have to advertise your foreclosure notice in the newspaper at least 6 weeks prior to the sheriff sale, they have to do that. Then at the courthouse steps, the lender will pledge the mortgage or another investor will have to put up the cash for the sheriff certificate. After the sheriff sale you are talking about a 6 month redemption period.

Now again before we get ahead of ourselves, there are circumstances where it’s not 6 months, but it’s rare, but I’ll breifly cover them. Some lenders can get that down from 6 months to 5 weeks, if they can prove “abandonment”, they have to file stuff and that definition has to be followed to a ‘T’. There are also situations where it can take 12 months for the redemption period. I’ll gloss over those. This would include someone who has paid 1/3 of the principle down on their house. not 1/3 of the value(33% equity), 1/3 of the principle balance, that takes years. Also a property with 10+ acres used for agriculture use. Please look into these exceptions they are rare and I don’t know them that well. Let’s say there are 6 months left in redemption after the sheriff sale. Some investor or lender will have the sheriff’s certificate which they’ll hold and eventually receive interest on at the note rate over that period of redemption.

During that redemption that seller may redeem his/her own home, but will need new financing, that’s nearly impossible while you are behind in payments, what lender wants to give you a loan? The seller has a 2nd choice of assigning their redemption rights in the property. I don’t think many people out there know about this.

Meanwhile during the redemption, you are going to have lenders that want to change locks, REO agents that want to kick out renters, or get the place cleaned up, that want to get the place ready later. Stranger things have happened, the seller gets the right in redemption, it’s their property.

This time line is pretty specific to Minnesota, other states, have 30 days redemptions, other states 12 months. Some states have recourse loans, some states have non recourse loans(meaning they can’t come after you for the deficiency).

You will want to talk to an attorney, to get an opinion, and not necessarily the banks’ attorney that’s working the file. Back in the 2000’s, sellers had a lot of equity and tried everything they could to save their home. Since about 2006 to present most people owe too much on their house, and with the market downturn, just need to do a short sale.

Since I didn’t mention what a short sale is above, I will quickly tell you that’s when a lender sells for “less” than what’s owing. Any lien or lender in 2nd or 3rd position on the property, position means(when it was recorded, which order in the time line at the county) those 2nd and 3rd positions will lose their interest at the end of the foreclosure process. The only way to “secure” their position is to purchase with cash, and purchase all positions in front of them. So for example if there was a $50,000 1st mortgage, $20,000 2nd mortgage, and $100,000 3rd mortgage, you can see how a 3rd mortgage company wouldn’t want to lose everything so they would pay for the $50,000 + 20,000 to get control of the property.

At the end of redemption, each lien position has 1 week to redeem the property after the 6 months in order of the liens. Eventually if the other lien positions don’t do anything they will get nothing. The 1st mortgage company isn’t too worried because they have a very safe position for resale and don’t owe anything on the positioned liens behind them. Another thing to keep in mind is this is exactly why short sales work, and especially with 2nd and 3rd mortgages, they are use to ending up with almost nothing during the foreclosure short sale process.

There is so much to know about foreclosures, it’s a risky business. I wouldn’t recommend new buyers buying them. Many need major work, and many have major title issues. If you are a seller you should seek a professional with experience.

For those of you that need help and owe too much on your house currently, and can’t afford the house and are zero payments behind or even 5-6 payments behind, email me at ron@minnesotainvestors.com and I’ll have a short sale specialist help negotiate your loan and sell your house. The mn short sale people I know have done hundreds of transactions.

I also like this foreclosure timeline link

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