Ken Crotts

I've only been doing short sales for a couple of years but have noticed a disturbing trend as of late. When I started doing shorts the 2nd lien holders were typically getting 10% of their balance approved by the first. Later on that went down to 5%, and more recently with direction from Fannie Mae and the HAMP program they have gone to $3,000.

Greentree seems to be bucking the system. I have two right now where the first has all but approved the deal but Greentree is demanding 5% of the PURCHASE PRICE! Now we are used to outragous claims but after weeks of negotiating they are not coming off the price and seem more than willing to let the borrower and the first burn rather than accept 3% of the purchase price. At 3% they are getting far more than most in these deals.

Since they are signed on the HAFA are there any pressure points we can leverage to get some movment from them? If anyone here has been able to over come a similar situation I would appreciate your input.

I've only been doing short sales for a couple of years but have noticed a disturbing trend as of late. When I started doing shorts the 2nd lien holders were typically getting 10% of their balance approved by the first. Later on that went down to 5%, and more recently with direction from Fannie Mae and the HAMP program they have gone to $3,000.

Greentree seems to be bucking the system. I have two right now where the first has all but approved the deal but Greentree is demanding 5% of the PURCHASE PRICE! Now we are used to outragous claims but after weeks of negotiating they are not coming off the price and seem more than willing to let the borrower and the first burn rather than accept 3% of the purchase price. At 3% they are getting far more than most in these deals.

Since they are signed on the HAFA are there any pressure points we can leverage to get some movment from them? If anyone here has been able to over come a similar situation I would appreciate your input.

Automated home valuation web sites offer the promise of a free market value for your home without the hassle of having an agent spend hours of your time during a free CMA presentation. I think they are great, and more than a little addictive once your start logging into the site and popping in the addresses of any home you are curious about.

Best of all they portend to give you the monthly fluctuations in graph form and will even email you letting you know how much your home has gone up or down in the last 30 days. Pretty miraculous wouldn't you say? The last email I recall from Zillow said my house went up $26,ooo over the previous 30 days. Cool! I felt like celebrating. When it actually comes to determining what the actual market value of your home is are you willing to leave it to a web site to make the determination? If so, which site? Zillow.com, Cyberhomes.com, and EAppraisal.com all give you automated valuations on their sites.

I recently had a customer who was obsessed with Zillow. With every fluctuation I heard about Zillow this and Zillow that. Just for kicks I put the address into the 3 sites to see what values came up. Zillow came in at $588,500. Cyberhomes came in at $546,062. EAppraisal came in at $487,226, and last but not least the county's 2010 assessment is $394,000. Of the valuation web sites there is a $101,276 spread which is much more than a statistical insignificance. I tried this for a few other addresses and got similar results.

For home buyers and homeowners these are fun and interesting sites to visit. Check out your neighbors, and friends or whomever. When you really need to get down to a real valuation there's no substitute for the opinion of an experienced Realtor who knows your neighborhood.

Many of the loan modifications in process are running into challenges when the second mortgage holder is asked to cooperate. Homeowners trying to stop foreclosure in Maple Valley are having success with their first lien holders just to find out that the second mortgage holder is refusing to cooperate. House Financial Services Committee Chairman Barney Frank (D- Massachusetts) has sent out a petition to some of the nation's largest junior lien holders demanding that they take "immediate steps to write down second mortgages" to create a clear path for sustainable loan restructurings.

Reducing a homeowner's overall debt to 31% of their monthly income so that modified payments are within their budgets requires cooperation from both the first and second lien holders.

In a letter to the CEOs of Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo, Frank wrote, "Many homeowners are eager to save their homes despite being ‘underwater,' but find that lenders and servicers are unable or unwilling to make necessary modifications. These homeowners are increasingly forced to short sale their homes or walk away and let the first lien holder foreclose due to the lack of cooperation. In many cases where the homeowner and the first lien holder are in alignment with both benefiting from a modification, the junior lien holder holds veto power over the agreement and is often exercising their right to cast the deciding vote for no deal. Frank wrote. "According to investors, administration officials, and other experts I have consulted...the problem of second-lien mortgages standing in the way of successful principal reduction modifications has reached a critical stage and requires immediate attention from your institutions."

Frank argues that most of these second liens have "no real economic value," since the first liens are well underwater, and the prospect for any real return on the seconds is "negligible."

But he notes, "Because accounting rules allow holders of these seconds to carry the loans at artificially high values, many refuse to acknowledge the losses and write down the loans, which would allow willing first lien holders to reduce principal and keep borrowers in their homes." So in the end the homeowner loses their home over an accounting strategy that allows the second lienholder to keep their book values artificially high.

Frank is demanding a quick response from the four banks in his line of sight. "I will be calling you within the week to discuss what your institutions plan to do to remove the second liens you own or control as impediments to principal reduction modifications," he said in the letter.

"To save homes on a large scale, we must move past temporary modifications in interest rates or terms and focus on permanent principal reductions that result in truly sustainable mortgages," Frank wrote. "There is no more important priority for me in our efforts to restore stability to our mortgage market."

The administration has incorporated a second lien component into its Home Affordable Modification Program (HAMP), which is slated to begin within the next few weeks. It includes a payment schedule for extinguishing second mortgages and the automatic modification of a second lien when a first lien is modified. Bank of America signed on to the program in January, but none of the other major servicers have agreed to participate.

Second liens can also prove to be an obstacle for short sales, the focal point of the administration's Home Affordable Foreclosure Alternatives program set to take effect April 5. Although the first lien holder may agree to the sale of a home for less than the outstanding mortgage balance in order to circumvent a foreclosure, if there is also a second lien on the property, the sale can fall through if the junior lien holder will not relinquish their claim.

Booking an airline flight is an exercise in the trade offs in value. For those who are value conscious they can fly stand by and get the least certainty of achieving their goal of arriving at their destination on time. In the middle of the value spectrum is coach where your seat is (relatively) assured, but service is minimum, and your experience in flight is not a high priority. At the top pf the cost spectrum is first class where you get top priority in seating, comfort, and in flight experience. The customer booking the flight makes their choice and gets the experience they pay for.

Now imagine all the seats are the same price. What class would you fly? This is the world of real estate. If you are looking to hire a full service agent are you going to be flying stand by or first class? There's allot on the line too. Your house is a big part of your financial and personal life so messing up here can have significant consequences. Full service agents all charge commission rates that fall within a narrow negotiated range. So the questions is "why do so many people fly coach when first class is the same price?".

It appears that many homeowners give less consideration to whom they choose to represent them in the largest financial transaction of their lives than they do which isle their seat is in for their next vacation flight. It is common to hear a homeowner refer to a neighbor who has a license, or a friends kid who just got into the business and their desire to help them out. In the current market where real estate agents are really struggling to just survive the stakes are even higher. The old saying is "desperate times call for desperate measures". Why would a normally thoughtful, intelligent homeowner higher an agent who's carear has one foot in the grave? With mounting personal and financial pressures on the agent their objectivity may become compromised, so why take the chance?

Here's why. They are compassionate and caring souls who want to help someone they know and they are unaware of the real challenges and jeopardy that a mishandled real estate transaction can bring. After years of increasing prices and easy transactions the reality of this market has yet to sink in. Sellers cannot afford to lose a buyer, or their equity, to simple but costly mistakes that inexperience can cause. As our economy moves into recovery and the real estate market gets back onto firmer footing in the coming years we may get back to the point where selling a home is as simple as booking an airline flight like in years past. For the next few years homeowners will need to be a bit more discerning in their selection of agents in order to protect themselves and their homes equity in order to have the favorable experiences that they desire.

The debate over banking reform rages as President Obama's efforts to reign in the "too big to fail" institutions are endlessly debated. Capitalism vs. over reaching government is the debate of the day.

A comment on the topic by a friend brings some focus to me as to why I became a Short Sale Specialist and launched StopForeclosureinMapleValley.com.
The question posed was "Why do people hate the rich? Would you give up 1/2 your income in order for all to be equal?". My response is I would not give up 1/2 my income to make every one equal. The possibility of becoming wealthy keeps me striving to become more than I am. In that endeavor I serve more people and society benefits as a whole. It's the essence of Capitalism.

I'll confess that my primary objective is to provide for my family. My intention is to do very well. However, I could not engage in the daily battle that is involved in short sale transactions without the deeper more altruistic commitment to bettering the community I live in. I am absolutely committed to stopping foreclosure in Maple Valley. Why? The why is in the eyes and souls of the people I meet with every day. Foreclosure and financial hardships are a terrible thing. It tears apart families and marriages, creates despair, anxiety, stress and generally makes life miserable for those involved. It's Painful. Bringing relief to those good people when they are most in need is deeply satisfying.

Everything I have created from the video series on financial hardship, to the reports on how to talk to your lender, the homeowner loan modification kit, and the creation of our team is all to diminish and minimize the pain the our clients are feeling. All if the loan modification reports, homeowner kits, the loan modification calculator, or any of the videos are free for the general public to use and I highly encourage them to be used. Why was so much time and energy put into creating them? I get a great deal out of them if you use them to better your life. Service to the community is a rich reward and that is why I want to hear from you who have used these tools and found them helpful.

Short sales provide the same benefit. Hire me, and my team takes over. We take the calls from the bank, no more trying to figure out what to do, you have a lot less stress from day one because we are on the job, and now you can kick back and let us work. For short sales our service is completely free to our clients. From day one their lives are better, less stressful, and more certain than before. For that I am grateful. Maybe that's why our customers are so happy with our service. Excellent service is never appreciated more than when you are most vulnerable and need it urgently. To be sure there is still some stress because of the gravity of the situation but the stress of not knowing what to dois gone since you are doing the most you can by engaging experienced professionals.

I have a great team, we provide a great service and if you are reading this and have questions, please, call or email. Our commitment to bettering your life will quickly become evident as we take the first steps towards financial stability together.

Ken Crotts
Broker
Windermere Real Estate
Certified Short Sale Specialist