I found these two great articles on Mortgage Planning and the new Qualified Mortgage rule:
BofA to test new Foreclosure Pilot Program
Bank of America has started a new foreclosure/lease program where they will allow some delinquent home owners transfer title back to BofA (forgiving their mortgage) and in return,BofA will lease the home back to the owner at or below market rents for up to 3 years. In my opinion, this "Mortgage to Lease" pilot program will never work and is merely a way of trying to regain favor in the public eye.
Why do I think it will never work? The same reason why "Deeds in Lieu" are never a successful (and rarely sought after) alternative to foreclosure. The typical person who is behind on their mortgage isn't just delinquent on that debt. There are often second mortgages and liens (HOA, Contractor, etc.) that may be placed against the house as well.
If a bank takes title back without foreclosure, they assume all of the debts and liabilities that may be attached to the home. There not going to do that.
I applaud your effort BofA...but I will be extremely surprised if this becomes a viable solution (or one that has any kind of impact) to the foreclosure situation we are currently in.
2 comments • Nick Miller • March 24 2012 12:10PMRobo Signing Settlement may Release a Backlog of Foreclosed Properties.
The $25 billion robo signing settlement was reached with 5 banks recently, but what effect is this really going to have. For most of us, nothing. But even for those who will receive payment from the settlement it will be very minimal.
However, this will have a hugh impact on the market. These banks are most likely getting ready to release a ton of foreclosures on the market that were previously unreleased because they were tied up in this litigation. Now that they have settled, and they know that they can move forward with the foreclosures, get ready,
If you are a licensed agent and not actively listing or selling foreclosures, now is a good time to start.
If your a buyer waiting for a great buying opportunity...well it has been here but now it is about to get even better.
"We expect to see foreclosure-related sales increase in 2012, particularly pre-foreclosure sales, as lenders start to more aggressively dispose of distressed assets held up by the mortgage servicing gridlock over the past 18 months," said RealtyTrac CEO Brandon Moore in a press release. http://tinyurl.com/7cff2la
6 comments • Nick Miller • March 11 2012 02:14PMDistressed Property Statistics
I just returned from the Coldwell Banker GenBlue Convention in New Orleans. I attended several great courses including the CRS 112: Guiding the Buyer in the Distressed Property Market. This course offered good statistics and facts regarding the distressed property market:
100% of all Real Estate Owned (REO's) will be sold
50% of all owner occupied homes will be sold
Average market price across the U.S. is $200,000.
The Treasury Department predicts that this market will continue for another 10 years.
Currently their are 6 million homes in default or underwater.
30% of sales in 2011 were distressed properties. That is 1 in 3.
Beurau of Census states that 1 in 10 houses are empty.
25% of buyers in the market today are investors.
These statistics can look bleak to some, but to others they represent a great opportunity.
If you are a buyer, foreclosures represent a great buying opportunity.
If you are a real estate agent, listing and selling foreclosures is a great business opportunity.
3 comments • Nick Miller • March 04 2012 09:53AMOWS Disrupting Foreclosure Procedures
I found this article the other day on the Christian Science Monitor where Occupy Wall Street protesters were disrupting foreclosure auctions and foreclosure proceedings.
It is interesting the mentality of this group of people. I think some legitimately want to make a positive change in this country, though they may be misguided, but others I think just want to be disruptive and be involved in a "Revolution". They may have a romantic idea of what that means. This is unfortunate because they could easily be lead to protest or do anything, whether they know what it is or not. Group mentality can be a dangerous thing.
I have worked foreclosures for 8 years now and I have seen the human side of the business. I have had to evict many good people who were in difficult situations and it is heart breaking. There is a human element to everything and it is not always business as usual. But disrupting the process isn't going to solve the problem.
I would like to know this; if a OWS protester loaned someone $100,000, and that person didn't or couldn't repay the loan. I wonder how forgiving they would be of the debt and how much they would appreciate someone disrupting their ability to collect the collateral on the debt.
1 comment • Nick Miller • February 01 2012 10:51AMAdventures of an REO Agent
It was a cold February morning. I was standing on the porch of an old rundown home built around 1920 that had been vacant and abandoned for years. The home was located in downtown Jackson on the appropriately named Hooker St. Right behind me were two guys hired from Labor Finders by the owner of this dump to complete a trash-out of this property.
Now this place was full of trash...up to your knees in feces, old urine stained clothes, porn mags, used condoms, furniture, dead rats, roaches and just about any other disgusting item you could think of. I knew this because I had been in the house a few days before. I didn’t have a key to the place so to gain entry I had to kick the front door in, which I have had to do an many occasions.
Now this door was big and heavy, not like most doors today. This door was made back when thay actually used real wood. It weighed at least 100 pounds. It wasn’t too hard to kick in because it was hanging on by one rusted door hinge. When I left, I just propped it back up on in the frame, which leads me back to where the story began.
So here I am on the porch with the two guys from Labor Finders. I have to show them what all needs to be trashed out. Knowing that the door was just leaning against the frame, I push it over. As the door falls (which seemed to be in slow motion) I notice a candle flickering in the corner of the room. The first thought that registered with me was., “that’s odd.” That was about the only thought I had until the door hit the ground. Shortly after that, I heard a bunch of hollering and screaming. I was so fixated on the flickering candle I didn’t even see the homeless man sleeping in the room right behind the door. Well sure enough, to his surprise, my surprise and the two guys behind me, who were so startled they almost ran down the street, this man’s alarm clock that morning was a solid 100 pound wood door falling on top of him.
Of course the first thing I thought was law suite, then I realized that he didn’t know who I was, and I sure as heck wasn’t about to tell him. I demanded that he put his hands up where I could see them, then drug the door off of him. I asked him if he was okay and if anyone else was in the house with him. He said his partner was sleeping in the other room. The man got up, got his partner and ran out the back door.
I showed the guys all the trash they had to clean out and said, “have a nice day.” Later that afternoon, around 4:30, the Labor Finder guys called me up and asked if I could come pick them up so they could buy some gas to put in their car. It was getting late, they were scared and didn’t want to be in the house after dark. Of course I am the last person that would want to be in the area after dark as well, dressed in slacks and a button down. I would stand out like a sore thumb. But I relented, because I felt bad for the guys. I picked them up as the sun was going down and drove to the nearest gas station.
I let them pump gas into a milk jug as I went in to pay for it. The gas station attendant was standing behind 2 inches of bullet proof glass. He started arguing with this druggie who cut in line in front of me to by a Swisher Sweet because he cut in front of me. He forced him to get behind me. I thought, this is very nice, but your behind two inches of glass and I am standing next to the man. I don’t mind if he cuts. But of course you can’t show fear. So I stepped in front, payed the $3 worth of gas and quickly left the building. As the man who had originally cut in front of me left the building, he preceded to turn around and re-leave himself all over the front door of the gas station. At this point I remember thinking to myself, the few hundred dollars that I will make on the sale of this home isn’t worth all this trouble...but this is the life of an REO agent.
Now this place was full of trash...up to your knees in feces, old urine stained clothes, porn mags, used condoms, furniture, dead rats, roaches and just about any other disgusting item you could think of. I knew this because I had been in the house a few days before. I didn’t have a key to the place so to gain entry I had to kick the front door in, which I have had to do an many occasions.
Now this door was big and heavy, not like most doors today. This door was made back when thay actually used real wood. It weighed at least 100 pounds. It wasn’t too hard to kick in because it was hanging on by one rusted door hinge. When I left, I just propped it back up on in the frame, which leads me back to where the story began.
So here I am on the porch with the two guys from Labor Finders. I have to show them what all needs to be trashed out. Knowing that the door was just leaning against the frame, I push it over. As the door falls (which seemed to be in slow motion) I notice a candle flickering in the corner of the room. The first thought that registered with me was., “that’s odd.” That was about the only thought I had until the door hit the ground. Shortly after that, I heard a bunch of hollering and screaming. I was so fixated on the flickering candle I didn’t even see the homeless man sleeping in the room right behind the door. Well sure enough, to his surprise, my surprise and the two guys behind me, who were so startled they almost ran down the street, this man’s alarm clock that morning was a solid 100 pound wood door falling on top of him.
Of course the first thing I thought was law suite, then I realized that he didn’t know who I was, and I sure as heck wasn’t about to tell him. I demanded that he put his hands up where I could see them, then drug the door off of him. I asked him if he was okay and if anyone else was in the house with him. He said his partner was sleeping in the other room. The man got up, got his partner and ran out the back door.
I showed the guys all the trash they had to clean out and said, “have a nice day.” Later that afternoon, around 4:30, the Labor Finder guys called me up and asked if I could come pick them up so they could buy some gas to put in their car. It was getting late, they were scared and didn’t want to be in the house after dark. Of course I am the last person that would want to be in the area after dark as well, dressed in slacks and a button down. I would stand out like a sore thumb. But I relented, because I felt bad for the guys. I picked them up as the sun was going down and drove to the nearest gas station.
I let them pump gas into a milk jug as I went in to pay for it. The gas station attendant was standing behind 2 inches of bullet proof glass. He started arguing with this druggie who cut in line in front of me to by a Swisher Sweet because he cut in front of me. He forced him to get behind me. I thought, this is very nice, but your behind two inches of glass and I am standing next to the man. I don’t mind if he cuts. But of course you can’t show fear. So I stepped in front, payed the $3 worth of gas and quickly left the building. As the man who had originally cut in front of me left the building, he preceded to turn around and re-leave himself all over the front door of the gas station. At this point I remember thinking to myself, the few hundred dollars that I will make on the sale of this home isn’t worth all this trouble...but this is the life of an REO agent.
This is an excerpt from a book I am writing called: "Buyers Guide to Foreclosures"
1 comment • Nick Miller • January 24 2012 11:18PMCombating Loss Aversion
This was originally posted on by business blog at www.nicksbusinessjournal.com, but I thought the underlying principle could be useful and applied to our real estate business...though you may not want to ask your sell to do a money back guarantee or 30 day free trial. But you may want to give it some thought and see how this could be applied to either your sellers, or to your business as you recruit clients.
Loss Aversion Definition - Peoples tendency to strongly prefer avoiding losses to acquiring gains.
Concept: Psychologist quantify the pain of loss to be twice as strong as the joy of gain.
For instance: Lets say your stock portfolio is up this quarter netting $10,000 in gains: You are pretty happy.
Next quarter your stock portfolio is down, losing $5000 in value. You are devastated (and probably ready to find a new investment adviser).
How does this affect your business? Loss aversion applies to all of us; you as well as your customer. Your customer has a finite amount of money, which can either be saved, spent on your product or service, or spent on something else. You are competing for that dollar against all other options they have.
They hate to lose. They don’t want to walk away feeling like the made the wrong decision by spending their dollar on your offer and not the other options. If they fell they make the wrong decision it will far outweigh the feeling of joy or satisfaction they will get from your product of service.
This could keep them from making a purchase in the first place.
How to Counter Act Loss Aversion: Make them feel like a winner.
Offer a guarantee of free trial (two potential options).
A money back guarantee will help alleviate their fear of loss because they know that they could simply return it if the do not like it.
A free trial will allow them to test the product before buying. If they like it they will buy it knowing that they are getting good value for their money.
New Year. New You. www.livefitandhappy.com.
0 comments • Nick Miller • January 19 2012 06:41PMForeclosure isn't always a 4 letter word
This is an excerpt from a book I am writing called: "Buyers Guide to Foreclosures." I would love to hear from the AR community regarding feedback, comments or suggestions on the below statements.
Now, I want to challenge your assumptions for a moment by making a statement that may seem counter intuitive or heretical: foreclosures aren’t necessarily a bad thing, and banks aren’t necessarily bad for foreclosing on a home (a view you may argue with if you have been foreclosed on). Because of the banks legal ability to foreclose on a home, you and I are able to obtain a mortgage. Think about the difficult, or necessary requirements, to get a loan if a bank could not use the property you were borrowing against as collateral. The home is what gives us the leverage, and the bank assurance, to make the loan.
Please keep in mind that I am not an advocate for the banks or foreclosures. I just want you to have a healthy and balanced perspective. The media and others can demonize banks because of the current housing crisis and increasing number of foreclosures, but they don’t always paint the whole picture.
Not all foreclosures are due to corruption and fraud, though that certainly did take place (for more insight into that I recommend Michael Lewis’s book “The Big Short”, which is mentioned later in this book). Sin has been in this world since the fall of Adam and Eve, and there are some who prey on the misfortune of others. But most foreclosures are legitimate, legal and necessary in order for banks to maintain the ability to offer loans (be it for homes, cars, business, etc.) to all of us. As the saying goes, we can’t have our cake and eat it too (which is a misinterpretation of the original saying; we can’t eat our cake and have it too).
However, I would rejoice in the day when foreclosures are no longer necessary because everyone has the means to afford and pay for their homes (and not because the government regulates housing). In that event, I may be out of a job, but I could only imagine that, in that scenario, there would be plenty of work and money to go around and I would happily find something else to do.
Please keep in mind that I am not an advocate for the banks or foreclosures. I just want you to have a healthy and balanced perspective. The media and others can demonize banks because of the current housing crisis and increasing number of foreclosures, but they don’t always paint the whole picture.
Not all foreclosures are due to corruption and fraud, though that certainly did take place (for more insight into that I recommend Michael Lewis’s book “The Big Short”, which is mentioned later in this book). Sin has been in this world since the fall of Adam and Eve, and there are some who prey on the misfortune of others. But most foreclosures are legitimate, legal and necessary in order for banks to maintain the ability to offer loans (be it for homes, cars, business, etc.) to all of us. As the saying goes, we can’t have our cake and eat it too (which is a misinterpretation of the original saying; we can’t eat our cake and have it too).
However, I would rejoice in the day when foreclosures are no longer necessary because everyone has the means to afford and pay for their homes (and not because the government regulates housing). In that event, I may be out of a job, but I could only imagine that, in that scenario, there would be plenty of work and money to go around and I would happily find something else to do.
1 comment • Nick Miller • January 11 2012 10:32PMUsing a FHA 203k Loan to Purchase a Foreclosure
This is an excerpt from a book I am writing called "Buyers Guide to Foreclosures" (generic title but to the point).
Financing can be a major hurdle for some buyers wanting to purchase a foreclosure because of the condition of the home, which may keep it from qualifying for conventional or traditional FHA loans. The 203k is a great option. I encourage all agents to familiarize themselves with this loan program.
There are two types of FHA 203k loans. There is the Streamline and the Standard.
The Streamlined is used for homes that need minor repairs such as replacing a roof or flooring, interior and exterior painting and HVAC system replacement or upgrades (doesn’t really sound like minor repairs). This loan has a maximum rehab limit of $35000 with no minimum. Therefore, you can make repairs that cost as much as $35000 or $5 - but you really wouldn’t need the loan if you only plan to make $5 worth of repairs. The rehab funds are placed in an escrow account with half dispersed to the contractor up front and the remaining funds released after the repairs are completed and inspected.
The Standard 203k is for homes that need major repairs such as structural and/or foundation repairs, adding a room to the home and major landscaping improvements. With this loan, the total rehab cost must be greater than $35000. There is a $5000 minimum of eligible repairs or improvements required, such as structural repairs, termite damage, etc. After the initial $5000 is met, the remainder can be used for cosmetic repairs and upgrades. Again, rehab funds are placed in escrow and are released as repairs are completed and inspected. The Standard also allows up to six months of your mortgage payments to be included in the rehab costs if the Housing and Urban Development (HUD) consultant determines that you must be displaced during the repairs.
The 203k loans can be used to purchase a 1 to 4 unit residence. To qualify the borrower must occupy the home as their primary residence. Maximum loan limits are based on property type and location. Also, luxury items such as installation of a swimming pool, hot tub or barbecue pit are not eligible.
The Streamlined is used for homes that need minor repairs such as replacing a roof or flooring, interior and exterior painting and HVAC system replacement or upgrades (doesn’t really sound like minor repairs). This loan has a maximum rehab limit of $35000 with no minimum. Therefore, you can make repairs that cost as much as $35000 or $5 - but you really wouldn’t need the loan if you only plan to make $5 worth of repairs. The rehab funds are placed in an escrow account with half dispersed to the contractor up front and the remaining funds released after the repairs are completed and inspected.
The Standard 203k is for homes that need major repairs such as structural and/or foundation repairs, adding a room to the home and major landscaping improvements. With this loan, the total rehab cost must be greater than $35000. There is a $5000 minimum of eligible repairs or improvements required, such as structural repairs, termite damage, etc. After the initial $5000 is met, the remainder can be used for cosmetic repairs and upgrades. Again, rehab funds are placed in escrow and are released as repairs are completed and inspected. The Standard also allows up to six months of your mortgage payments to be included in the rehab costs if the Housing and Urban Development (HUD) consultant determines that you must be displaced during the repairs.
The 203k loans can be used to purchase a 1 to 4 unit residence. To qualify the borrower must occupy the home as their primary residence. Maximum loan limits are based on property type and location. Also, luxury items such as installation of a swimming pool, hot tub or barbecue pit are not eligible.
7 comments • Nick Miller • January 08 2012 10:52PMA Lesson for Sellers
I am still reading through "The Personal MBA" by Josh Kaufman and came to the chapter on finance. In this chapter, he has a subsection on Value Capture.
In that he states: "Value Capture is the process of retaining some percentage of the value provided in every Transaction."
There are 2 approaches to Value Capture.
1. Maximization approach - attempt to capture as much value in each transaction as possible.
2. Minimization approach - capture as little valure as possible, as long as the business remains Sufficient.
I think most people default to approach number 1. But there is a danger in that.
Kaufman explains: "When something is a "good deal" customers tend to continue to patronize the business and spread the word to other potential customers. When a business tries to maximize revenue by "nickel-and-diming" their customers or trying to capture too much value, customers flee.
As long as you're brining in enough to keep doing what you're doing, there's no need to fight for every last penny. Create as much value as you possibly can, then capture enough of that value to make it worthwhile to keep operating."
Is there a lesson here for sellers? I think so. While a seller is not building a business, they are still selling a product (their home). And in order for any sale to take place their must be a customer willing to purchase their product.
Now obviously sellers are not worried about re-peat customers. Most of them just have 1 home to sell. But they do need to worry about the 1 customer, who still makes their purchasing decision based on whether the home they are buying has more value to them then their money. And customers do buy based on whether they perceive that they are getting a good deal or not. Trying to capture all of the value from a sale takes away value from the purchase, which in today's market, will cause a buyer to speed walk away from a deal, especially if they have a good buyer agent representing them.
I have heard it said that we judge ourselves based on our intentions and others based on their actions. Beware of a seller that will nickle and dime a buyer to death on the sell of their home, then expect a good deal on the next home they purchase.
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