I am out of town today but this post from a year ago still holds true...
originally posted on 9/9/2013
Many banks are starting to use online auctions for the sales of REO (Real Estate Owned) This is the term commonly used to describe real estate that is owned by a bank, obtained in foreclosure. HUD has been doing auctions for years on its FHA inventory but their auctions are not run live. HUD auctions use sealed bids. REO managers have a different idea. They want to market the house in a classic Ebay style environment. They want to drive the price up as high as possible with a bidding frenzy. This can be a great way for REO sellers to sell, but can have pitfalls for buyers which I will discuss a bit later.
One of the real areas of concern I have is short sales. I see this movement towards online auctions with short sales. Many banks are having their debtors sign an auction agreement along with the other short sale documents. The house is then placed up for auction terms and often the auctioneer does not even notify the listing agent. It seems that banks are going to continue to push ethical boundaries on short sales and in some cases take advantage of the American people while cashing in on federal programs like HAFA (Home Affordable Foreclosure Alternatives).
I have had some positive experiences with one loan short sales under auction terms. It seems the first lien holder often pre-negotiates the deal with the auction house and the short sale can move ahead with efficiency. The problem is that there is sometimes a second lien and the auction house either fails to disclose to the buyer or discloses in a fashion that is difficult to find. This can cause allot of grief for the buyer and the home owner.
People that are bidding on these auction homes should have a real estate professional aid them in the process. Typically the homes are listed on the local MLS and your real estate agent will get paid by the listing broker under the terms of the listing agreement. By all means a buyer should always have representation in a transaction involving large amounts of money.
In general the auction houses appear to be decent business operators. The problem is that another party to the transaction is now involved. The more parties in a real estate transaction the more likely it is to fail. Buyers and sellers can be taken for a long and uncomfortable ride when there is two banks and auction house involved in the deal.
If a buyer decides to bid on an online real estate auction, they should consult their trusted local real estate professional. That agent can do some quick research to help the buyer decide whether or not the home is viable. The agent can also help determine a good bidding range. It is paramount to remember that auction terms are designed to get an emotional response by the bidders. The emotion that screams, "I want to win" so as to drive up the price. Some auctions even have disclosures that suggest overbidding will result in mandated payment even if the property does not appraise. This could be a problem for a buyer using a loan to purchase.
In my experience dealing with the short sale departments at most banks is akin to getting a root canal without Novocaine. So adding the auction element on these sales is surfing in dangerous seas. Caution is heavily advised.
Finally, there are some banks now taking their REO inventory directly to auction without listing on the local MLS. They hire a local licensed agent to make the sale legal under state law, but offer no representation for the buyer. I believe that American banks are already about as ethical as your average mugger, now they are trying to engage the direct home buying public in a "dark alley deal" that will almost certainly take advantage of the buyer. If the auction house is listing a property that is not listed on the local MLS, I would tell most buyers to run away. Seasoned investors may feel compelled to bid, but inexperienced buyers really should not take the risk of engaging in a transaction without a buyers agent involved.
Musings on the state of the market with tips, information and a little fun.
Showing posts with label REO. Show all posts
Showing posts with label REO. Show all posts
Friday, October 3, 2014
Friday, November 15, 2013
Banks can be a little rotten at times
I generally like to keep my posts as positive as possible. Sometimes however it is difficult to avoid a subject that has some negative tendencies. This is one of those time and needs to be addressed. Many of America's banks are handling real estate transactions in an appalling way. Buyers should be aware and cautious when entering into a transaction with a bank.
As many of you may know, the banks managed to tap into a large chunk of federal dollars in the form of what we commonly call "the bailout". These banks through various government programs are able to offset losses in foreclosures and short sales. The government wanted to be certain that our financial system did not collapse under the weight of the market crash in late 2008. Regardless of how we feel about the so called, "bailout", it happened and it's all water under the proverbial bridge now.
The problem is that many banks are working the system and taking advantage of the taxpayers and buyers. Banks often stall and dig in their heels on short sale transactions until they finally foreclose. Often it is the case that the bank fails to close on a short sale transaction that would have netted them say $200,000 only to foreclose and get a net of $150,000. Then they slither over to the feds and get more "bailout" money from one of those federal programs. I have seen this transpire many times over the last five years.
The latest trend among banks involve all this REO (Real State Owned) they now hold. Much of this inventory they are holding could have been off loaded in the short sale process that they seemingly sabotaged themselves. Milking the feds is apparently not enough. Now these institutions are preying on innocent home buyers. Banks are posting REO assets on auction sites with a real estate firm that will work for a tiny fee to "list" the property on a local MLS with no cooperating broker arrangement. Then they try to get buyers to engage in the transaction without the traditional representation of a real estate agent.
The modern system of the MLS cooperating brokerage arrangement transformed real estate for buyers from a shady proposition to a safe and properly represented transaction over 40 years ago. Now these banks are trying to circumvent all of the positive progress we have made in consumer protection. They want to lure buyers to an auction website without representation. It seems that some local MLS systems are a willing accomplice to this rather dastardly deed. They do not seem to object to listings being posted with no cooperating brokerage arrangement. Thus we see this reversion to the slimy 1960s used car style of home sales by greedy banks that just want to squeeze a little more profit out of the house the feds already bailed them out on.
Buyers should be aware that the listing agent has an obligation to the seller to negotiate the best possible terms for the SELLER. Banks are exempt from state mandated legal disclosures and often use their own in-house addendum forms that may have serious negative consequences to buyers. Most real estate agents work for a brokerage that won't be too pleased at taking on the state regulated responsibility of agency with out a cooperating brokerage arrangement. This puts the buyer in a position of either being unrepresented or having to hire an attorney or real estate agent for an additional fee.The more likely scenario is that the buyer will enter into a binding contract with the bank without representation. Who do you think will get shafted in that arrangement?
Buyers should be very cautious before entering into these agreements. Buyers that use an agent to purchase the majority of homes listed on the local MLS will enjoy the security of being legally represented under the state regulated agency laws without having to pay that agent a fee. The cooperating broker arrangement on the MLS assures that the listing fee paid by the seller is shared among brokers. This gives buyers the confidence that they will be well cared for and properly represented in the transaction. Some of our seedy banks are working hard to destroy that arrangement just to line their pockets with a little more gold.
There are sharks in the pond so be careful my friends, be very careful.
As many of you may know, the banks managed to tap into a large chunk of federal dollars in the form of what we commonly call "the bailout". These banks through various government programs are able to offset losses in foreclosures and short sales. The government wanted to be certain that our financial system did not collapse under the weight of the market crash in late 2008. Regardless of how we feel about the so called, "bailout", it happened and it's all water under the proverbial bridge now.
The problem is that many banks are working the system and taking advantage of the taxpayers and buyers. Banks often stall and dig in their heels on short sale transactions until they finally foreclose. Often it is the case that the bank fails to close on a short sale transaction that would have netted them say $200,000 only to foreclose and get a net of $150,000. Then they slither over to the feds and get more "bailout" money from one of those federal programs. I have seen this transpire many times over the last five years.
The latest trend among banks involve all this REO (Real State Owned) they now hold. Much of this inventory they are holding could have been off loaded in the short sale process that they seemingly sabotaged themselves. Milking the feds is apparently not enough. Now these institutions are preying on innocent home buyers. Banks are posting REO assets on auction sites with a real estate firm that will work for a tiny fee to "list" the property on a local MLS with no cooperating broker arrangement. Then they try to get buyers to engage in the transaction without the traditional representation of a real estate agent.
The modern system of the MLS cooperating brokerage arrangement transformed real estate for buyers from a shady proposition to a safe and properly represented transaction over 40 years ago. Now these banks are trying to circumvent all of the positive progress we have made in consumer protection. They want to lure buyers to an auction website without representation. It seems that some local MLS systems are a willing accomplice to this rather dastardly deed. They do not seem to object to listings being posted with no cooperating brokerage arrangement. Thus we see this reversion to the slimy 1960s used car style of home sales by greedy banks that just want to squeeze a little more profit out of the house the feds already bailed them out on.
Buyers should be aware that the listing agent has an obligation to the seller to negotiate the best possible terms for the SELLER. Banks are exempt from state mandated legal disclosures and often use their own in-house addendum forms that may have serious negative consequences to buyers. Most real estate agents work for a brokerage that won't be too pleased at taking on the state regulated responsibility of agency with out a cooperating brokerage arrangement. This puts the buyer in a position of either being unrepresented or having to hire an attorney or real estate agent for an additional fee.The more likely scenario is that the buyer will enter into a binding contract with the bank without representation. Who do you think will get shafted in that arrangement?
Buyers should be very cautious before entering into these agreements. Buyers that use an agent to purchase the majority of homes listed on the local MLS will enjoy the security of being legally represented under the state regulated agency laws without having to pay that agent a fee. The cooperating broker arrangement on the MLS assures that the listing fee paid by the seller is shared among brokers. This gives buyers the confidence that they will be well cared for and properly represented in the transaction. Some of our seedy banks are working hard to destroy that arrangement just to line their pockets with a little more gold.
There are sharks in the pond so be careful my friends, be very careful.
Monday, September 9, 2013
Online Auction Sites becoming the Rage with Banks
Many banks are starting to use online auctions for the sales of REO (Real Estate Owned) This is the term commonly used to describe real estate that is owned by a bank, obtained in foreclosure. HUD has been doing auctions for years on its FHA inventory but their auctions are not run live. HUD auctions use sealed bids. REO managers have a different idea. They want to market the house in a classic Ebay style environment. They want to drive the price up as high as possible with a bidding frenzy. This can be a great way for REO sellers to sell, but can have pitfalls for buyers which I will discuss a bit later.
One of the real areas of concern I have is short sales. I see this movement towards online auctions with short sales. Many banks are having their debtors sign an auction agreement along with the other short sale documents. The house is then placed up for auction terms and often the auctioneer does not even notify the listing agent. It seems that banks are going to continue to push ethical boundaries on short sales and in some cases take advantage of the American people while cashing in on federal programs like HAFA (Home Affordable Foreclosure Alternatives).
I have had some positive experiences with one loan short sales under auction terms. It seems the first lien holder often pre-negotiates the deal with the auction house and the short sale can move ahead with efficiency. The problem is that there is sometimes a second lien and the auction house either fails to disclose to the buyer or discloses in a fashion that is difficult to find. This can cause allot of grief for the buyer and the home owner.
People that are bidding on these auction homes should have a real estate professional aid them in the process. Typically the homes are listed on the local MLS and your real estate agent will get paid by the listing broker under the terms of the listing agreement. By all means a buyer should always have representation in a transaction involving large amounts of money.
In general the auction houses appear to be decent business operators. The problem is that another party to the transaction is now involved. The more parties in a real estate transaction the more likely it is to fail. Buyers and sellers can be taken for a long and uncomfortable ride when there is two banks and auction house involved in the deal.
If a buyer decides to bid on an online real estate auction, they should consult their trusted local real estate professional. That agent can do some quick research to help the buyer decide whether or not the home is viable. The agent can also help determine a good bidding range. It is paramount to remember that auction terms are designed to get an emotional response by the bidders. The emotion that screams, "I want to win" so as to drive up the price. Some auctions even have disclosures that suggest overbidding will result in mandated payment even if the property does not appraise. This could be a problem for a buyer using a loan to purchase.
In my experience dealing with the short sale departments at most banks is akin to getting a root canal without Novocaine. So adding the auction element on these sales is surfing in dangerous seas. Caution is heavily advised.
Finally, there are some banks now taking their REO inventory directly to auction without listing on the local MLS. They hire a local licensed agent to make the sale legal under state law, but offer no representation for the buyer. I believe that American banks are already about as ethical as your average mugger, now they are trying to engage the direct home buying public in a "dark alley deal" that will almost certainly take advantage of the buyer. If the auction house is listing a property that is not listed on the local MLS, I would tell most buyers to run away. Seasoned investors may feel compelled to bid, but inexperienced buyers really should not take the risk of engaging in a transaction without a buyers agent involved.
One of the real areas of concern I have is short sales. I see this movement towards online auctions with short sales. Many banks are having their debtors sign an auction agreement along with the other short sale documents. The house is then placed up for auction terms and often the auctioneer does not even notify the listing agent. It seems that banks are going to continue to push ethical boundaries on short sales and in some cases take advantage of the American people while cashing in on federal programs like HAFA (Home Affordable Foreclosure Alternatives).
I have had some positive experiences with one loan short sales under auction terms. It seems the first lien holder often pre-negotiates the deal with the auction house and the short sale can move ahead with efficiency. The problem is that there is sometimes a second lien and the auction house either fails to disclose to the buyer or discloses in a fashion that is difficult to find. This can cause allot of grief for the buyer and the home owner.
People that are bidding on these auction homes should have a real estate professional aid them in the process. Typically the homes are listed on the local MLS and your real estate agent will get paid by the listing broker under the terms of the listing agreement. By all means a buyer should always have representation in a transaction involving large amounts of money.
In general the auction houses appear to be decent business operators. The problem is that another party to the transaction is now involved. The more parties in a real estate transaction the more likely it is to fail. Buyers and sellers can be taken for a long and uncomfortable ride when there is two banks and auction house involved in the deal.
If a buyer decides to bid on an online real estate auction, they should consult their trusted local real estate professional. That agent can do some quick research to help the buyer decide whether or not the home is viable. The agent can also help determine a good bidding range. It is paramount to remember that auction terms are designed to get an emotional response by the bidders. The emotion that screams, "I want to win" so as to drive up the price. Some auctions even have disclosures that suggest overbidding will result in mandated payment even if the property does not appraise. This could be a problem for a buyer using a loan to purchase.
In my experience dealing with the short sale departments at most banks is akin to getting a root canal without Novocaine. So adding the auction element on these sales is surfing in dangerous seas. Caution is heavily advised.
Finally, there are some banks now taking their REO inventory directly to auction without listing on the local MLS. They hire a local licensed agent to make the sale legal under state law, but offer no representation for the buyer. I believe that American banks are already about as ethical as your average mugger, now they are trying to engage the direct home buying public in a "dark alley deal" that will almost certainly take advantage of the buyer. If the auction house is listing a property that is not listed on the local MLS, I would tell most buyers to run away. Seasoned investors may feel compelled to bid, but inexperienced buyers really should not take the risk of engaging in a transaction without a buyers agent involved.
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