Just when you think you’ve heard it all, something happens that makes you realize you should never close your mind to how far out of left field the ball might fly (a little baseball analogy for those sports fans to appreciate). It seems that is definitely the case with banks, and wait until you hear what the latest hurdle is…unfortunately I know from personal experience that this in fact is happening.

Last week my investor client, who was getting a loan to purchase a property, was told we were ready to draw docs on a Bank of America funded loan. We had been given the thumbs up from the lender, the appointment was set for the buyers to sign at the escrow office that afternoon, and we were just awaiting docs to arrive at escrow. Then my clients’ mortgage professional received the phone call from the lender: there are no funds currently available to fund this loan. He was told they would be available in approximately 5 business days.

Now, had this transaction been a traditional sale this may not have made any difference. But being a short sale, with a deadline established by the short sale lender by which we needed to close (or risk the home going to foreclosure), we didn’t have 5 business days. My buyers had to close with cash at the last minute. Luckily, they were able to do so, but my buyers were not happy about this.

Is this crazy or what? Those of you who know me know that I have been singing Bank of America’s praises for the past few months – I have blogged about how they really seem to be helping close short sales faster. But this – this is a big step backwards for the lender. Last minute bombs like this could decimate the ability and desire to buy property.

The inside scoop. Here is how it happened. B of A decided to shut down lending channels to mortgage servicers who sold their products, deciding that only B of A would be able to sell B of A loans. How many loans were effected is unknown to me, but I bet there have been some serious situations lately that could lead to lawsuits.

Realistically, this could lead to a slew of litigation. It could put buyers in breach of their real estate contracts if they are not able to close on time. They risk losing their initial deposits, and the monies they paid for home inspections, appraisals and other expenses. In the case of short sales, as mentioned above, if the short sale lender did not extend the deadline last minute due to such an issue, the home would go to foreclosure. Bad for sellers, bad for buyers, bad for the market.

For an in depth understanding of what happened I suggest you read this blog from my colleague Michael Mekler. This has been a fine example of another blow to the housing market, brought to you courtesy of our nation’s lenders. Hopefully they will reverse their decisions and we can get back to the business of selling real estate via cooperation and a common goal to heal the market and help people purchase real estate.

With the advent and growth of the internet, many tasks are much easier now – you can shop without leaving your home, place your dinner order before arriving at the restaurant, get all the information needed to write a paper without going to the library, and, according to some believers – get accurate property valuations in order to buy or sell a home without a Realtor.  Let’s look at the problem with this last part.

Online home valuation sites (like Zillow and Trulia, to name a few of the more popular ones) are more prevalent today, making home buyers and sellers feel as if they have access to the same information as Realtors. The misnomer is that this is very far from the case. Although there are times when the numbers provided are realistic, more often than not they are incorrect – sometimes by a few thousand dollars, or even as much as $20-50,000. Would you want to make an important decision on value based on a number that may be incorrect?

Realtors still play a very important role in home valuation. Working with a local, experienced agent who knows your area provides not only peace of mind, but information beyond just value. There are many facets involved with pricing a home, and while the starting point is always comparable sales, there are many other important things to consider that software cannot detect. For example, what if you have an oversized yard compared to your neighbors? A view? Multiple upgrades to your home? An addition? These are some of the things that a Realtor will take into consideration in determining value.

Comparable sold properties have likely been appraised before they sold – and appraisers are specifically trained to value homes, taking into consideration similarities and differences between properties. Realtors in turn use these comparable values and then tweak them, as do appraisers, when it comes to factors other than square footage or similar location, that can alter prices. Being a Realtor does not magically allow one to be skilled at this – it takes an in-depth knowledge of the business, the area and the market, as well as experience.

It is important to note that the same is true of rental values. While some sites that offer rental income information may be close or even spot-on, they are not always correct. If you need to obtain rental information I highly advise you to contact a skilled property management company in your area.

While obtaining information online is a good place to start to get an idea of your home’s value, deciding to forgo the expertise of an agent could end up costing you both money and time. There is a big difference between a computer valuation of a home and one completed by an expert. So, if you are thinking of selling your home, or if you are a buyer who is home shopping, please consult with an expert so that you are completely informed and able to make the right decisions.

Buying and selling anything in this economy can be a bit tricky, and that goes for real estate as well. Many buyers, who think they’ll be able to negotiate a phenomenal deal, are often discouraged when they actually get out there in the market and try to do so. Likewise, sellers who price their homes at market value may find it hard to hook an offer, oftentimes having to reduce their price well below comparable value to get it sold. Sellers who do not have to sell are opting not to, which makes for less inventory. Why is it so hard to buy and sell real estate right now?

1. Lender hurdles. Getting qualified for a loan these days is very difficult. Even those who have steady jobs, make sufficient money and have a nice savings on the books are facing troubles. The lenders, who I believe are the main cause for much of the stagnation in the market and the overwhelming number of foreclosures (see previous blogs if you want more detail on this), simply have a death grip on their funds. Anything that is seen as risky, any tiny little thing, gives them cause to deny a mortgage application. This applies both to traditional sales and distressed properties.

If you are a buyer you need to make sure you are working with a mortgage professional who has access to different products, and can help you to figure out which one is best for you.

2.  Foreclosures/Lender owned properties. Foreclosures have been weakening the market for years, and there is no end in site. The lenders simply have too many properties on their books, the majority of which have not even been released to the open market. Once they are, prices will suffer. This tends to make sellers withhold selling their homes (the ones who can), in order to wait for a “better” time to do so. Buyers, who should be able to reap the benefits from the lower prices, still have to go through the loan qualification process. Many buyers are now also afraid because of recent lawsuits claiming bank-owners did not in fact possess title to the homes. If purchased at auction buyers usually do not have the opportunity to have home inspections or even get inside the property; if the property is sold as an REO (lender-owned, post-foreclosure) the buyer can view the property but is provided no disclosures related to it’s history.

3.  Short Sales. Short sales should be a no-brainer, as I have blogged about many times. There are willing buyers out there who want to buy homes in neighborhoods they otherwise would not be able to afford, but for a short sale and the lower prices. Sellers of short sales obviously want to and need to sell to avoid the scarlet letter “F” on their credit. Similarly, banks save lots of money selling their properties short rather than going to foreclosure. Despite the end goal being common, short sales as we know can take a long time. The main reason for this is because of the banks, who dilly dally around and take forever to approve them, work off bad BPOs, and often have inexperienced and downright nasty people in their loss mitigation departments.

4.  Title issues. Another problem plaguing the real estate industry is title issues, especially in homes that have been foreclosed upon. There have been several lawsuits against lenders who have been found to have wrongfully foreclosed on homes – after the home had been sold and new owners had moved in. These types of suits seem to be growing, and there is no telling what will happen to the new owners. If found that the banks did not have the authority to sell (because they did not physically possess title), the sale is rendered void. We will have to wait and see what effect this will have on purchasers, but surely it will may scare some buyers away from these lender-owned properties. For sellers, it is imperative to understand any title hurdles at the time your home is listed

5.  Appraisal and BPO issues.  It seems appraisal issues come into play these days more than in times past. This is especially true in areas where there have been a lot of foreclosures or short sales, which bring down comparables. If an appraiser has to look outside a neighborhood s/he may use comps from another neighborhood or complex that really does not compare to the subject home. If the appraiser is from out of the area s/he may not understand the particular nuances of a neighborhood, and that can also affect valuation.

Bad BPOs (Broker Price Opinions – these are ordered by the banks and are typically completed by certified real estate agents, not appraisers) also wreak havoc on short sales. Some properties are hard to appraise/establish value, if they are one of a kind or there are no valid comps in the vicinity, or where the condition of the comps do not compare to the home being appraised. California has hinted at drafting a law about how foreclosure and short sale homes can be used as comps for a traditional sale home. There are problems either way when a home is hard to appraise. Suffice it to say there is a lot of deal-killing going on because of bad appraisals and BPOs. [NOTE: This is not meant to be a degradation of appraisers - most are highly skilled professionals.]

Buying and selling property can be difficult in these troubled times, but the silver lining is that there ARE great deals out there for buyers, and it is possible for sellers to sell their homes as well. One simply needs to know how to best accomplish her/his goals. To do that, you need to start with a great agent.

There has been plenty of recent housing news that could effect the value of your home, so here are some of the latest updates:

Bill to allow visas to foreign home buyers. Congress is considering a bill that would allow foreign homebuyers to purchase residential property in the U.S., in an effort to stimulate the housing market. Buyers would need to spend at least $500,000 to obtain the visas, and would be allowed to split the money and purchase more than one home, as long as one property was at least $250,000. The buyers resident visa would be in place for as long as the buyer owned the home, and the buyers will have to live in their U.S. home for at least six months out of the year.

Mortgage rates may be lowered. The Federal Reserve is considering lowering the mortgage rates again, as the current low rates do not seem to be stimulating housing and the economy. They plan to purchase more mortgage backed securities, with the goal that banks will be able to help homeowners with refinancing and stimulate purchasing, without causing inflation. Since most of the problems with refinancing involve problems with fees or restrictions, will this really help? This could create more mortgage rate risk for the Fed, and realistically how many people will it help? It certainly won’t do anything for the millions of underwater homeowners. It seems to me this is digging a deeper grave, but I am not a mortgage expert so I will leave this to those who are, but my gut feeling says this is not the best solution.

Next generation of homeowners have little confidence in housing. A new study released by Federal Reserve Bank of Boston has found that the younger generation is less willing to purchase homes. Older respondents seemed to be more confident about homeownership after large declines, while younger participants felt opposite. Older respondents saw the drop in the market as cyclical, with the expectation of recovery, whereas their younger peers view the current situation as more permanent. Could this have an effect on housing in the long term?

Study says bank owned property sales may not peak until 2013. The latest study claims that we will see a lot more foreclosures, and therefore many more bank owned homes, until 2013. Bank of America Merrill Lynch analysts claim that although we will not see price drops as steep as those of 2008, we could see a 10% increase in these REO (bank-owned) properties from 2012 to 2013.  For more details of the study click here.

State court voids home sale…could this happen across the country? A Massachusetts state court recently ruled that a home recently sold post-foreclosure was improperly sold, as the lender did not hold the title. The sale was found to be void. So what happens to the new owners? Certainly there will be a big lawsuit against the title companies. But if this becomes the standard who is going to want to purchase a post-foreclosure home? Home buyers rely on title companies to convey clear title…so isn’t this punishing the purchasers and not just the bank? After all, if the title company certifies title is clear and escrow closes, how would a homeowner have any reason to know that there was  a problem with the title? I’m not even going to speculate as to how badly this would fare for housing and the economy in general.

HUD homes for only $100 down: In the spirit of stimulating housing purchases, HUD has decided to offer buyers the chance to purchase a HUD REO (lender owned home) for  only $100 down…yes, you read that right, one hundred dollars. Of course there are restrictions: the home must be a HUD home (a home that is the result of a foreclosure on a FHA home loan), the sale must be for list price, FHA guidelines apply (you have to qualify for a loan), and the state of your purchase must be one that is listed. To find out more search the internet for HUD’s $100 downpayment program orvisit their site.

You have heard the famous line, “it’s all who you know.” That has proven to be true in many cases – getting a reservation at a swanky new restaurant, upgrading to a better hotel room, getting a great job or a promotion over others who may be more qualified….but who would ever have thought that getting a home sold through the short sale process could be added to this list?

Recently I had a short sale offer approved by a major lender, after months of arguing with them on the issue of price. You see, the lender had a bad BPO (Broker Price Opinion, which is much like an appraisal yet is created by a real estate agent who is certified to do so). I sent them comparables and even analyzed them, but the lender refused to believe what was in black and white. Since lenders have no obligation to share the BPO with the listing agent I was not made privvy to it, but unless there were some magic comparables of which I was not aware, they did not exist.

After months of arguing and of lender demands that the contract price be raised tens of thousands of dollars over comparable value price, the lender denied the short sale. It must be mentioned here that two months before, the lender had accepted a previous offer that was much lower. How could this property have increased thousands of dollars in such a short time, when prices have dropped?

The buyer of my short sale listing happened to have a contact at the bank who holds the loans on the property, and she called in a favor. The executive was surprised at his bank’s demands, and agreed that the second BPO had to be incorrect. With a few calls he was able to help us out – something the bank negotiator was unable and unwilling to do.

As happy as I am that my sellers and the buyer are now able to complete this sale, I am also furious. There are countless sellers out there who are not afforded the opportunity to short sale  their homes, and the qualified buyers who cannot purchase them, because of bad information and unqualified bank representatives. It took a connection with a higher-up to get this home into escrow. There is something very wrong with this picture.

Situations like this are plaguing the housing market. Lenders need to not just believe what a BPO states, as the agents who prepare them are not appraisers. If the listing agent sends over valid comparable data the lender needs to have a qualified individual verify the discrepancies, not just turn down the sale and refuse to have a dialogue to rectify the differences. It should not be about who one knows…these lenders need to stop this insanity.

Understanding the difference between material and non-material terms in a real estate contract is of great importance to the real estate purchaser. While most agents understand need for specificity in real estate contracts, buyers and sellers should also know the difference between material and non-material terms in order to avoid potential problems with the sale of property.

Material terms to a contract are those that affect the agreement as a whole, such as whether a buyer will pay cash or get a loan, the price of the sale or possibly the closing date. If the buyer breaches a material term s/he risks losing the initial deposit, as well as a possible lawsuit/arbitration.

Some examples of material terms include purchase price, close of escrow deadlines, and other terms in the contract upon which acceptance was based.

In most contracts where a loan is obtained it will not be considered a material term if the loan rate or product differs from that described in the contract, so long as the buyer can still perform within the specified time frames. But if a buyer needs to change a material term it can be considered a breach, giving the seller the ability to cancel the contract.

Take the example of a buyer who has made a cash offer but decides to obtain a loan after acceptance. As this is a material term the agent will need to approach the listing agent and ask if the seller would be amenable to this change. Oftentimes it could create a delay in closing, and could be a problem in a short sale transaction (where lenders often approve sales at lower price points when cash offers are presented). The buyer’s agent will need to discuss this change with the listing agent to see if this is possible, and it then should be put in writing and signed by all parties to the contract. If not, the buyer is bound to proceed with the terms as they were defined in the contract, unless that is impossible and you have not yet removed contingencies.

When writing a contract for the purchase of real estate it is imperative to have all the information at hand so as to avoid a material breach after acceptance. Agents should talk to the lender and make sure their buyer is qualified, discuss important dates with buyers, check current proof of funds on cash transactions – these are all things agents know but sometimes overlook. Many potential issues are covered during the contingency period, meaning that if the buyer cannot qualify for the loan s/he wanted during that time, or if a problem is discovered with the property after a home inspection, it is not considered a breach and the buyer can choose not to proceed without repercussions.

Doing your homework early, before submitting a contract, is a win-win for all parties to real estate contracts. Do not worry – that is why you have an agent representing you, and s/he can help walk you through it. Now more than ever it is critical to be diligent, so make sure your agent explains the important details.

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Features include:

• 4 bedrooms + loft/2.5 bathrooms, 2570 square feet, and ocean breezes
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No matter whom you ask – sellers, buyers or agents – the biggest problem with short sales today is still the length of time it takes to get lender approval. It is the number one reason these sales take so long, the reason many end up going to foreclosure, and the main source of frustration for all parties involved in short sales. The magical question is how can we get them approved faster? Well, there are a few ways.

1.  Get all documentation to the lender immediately. You may think, “no kidding,” but you would be surprised to know how many short sale sellers do not have important paperwork to lenders before listing their homes. Paperwork can hold up decisions for a long time, especially if it is not completed before an offer is accepted. Your agent should help you in obtaining all the necessary paperwork before you receive an offer – even if your lender will not accept it until that point it is important to have it ready.

2.  Try to get lender approval on the short sale price before you list your property. Some banks do this now, like Bank of America. They will actually get all your paperwork and do a complete evaluation of your home, including an appraisal, and tell you what price will be acceptable to them.

3.  Work with an experienced short sale agent. Just taking a short sale certification course is NOT enough to make one an expert. Make sure your agent has experience with short sales and is an excellent negotiator (if s/he is an attorney that is a plus), OR that s/he is working with a highly skilled negotiation team. Your agent does not have to do the negotiating herself – many agents work with negotiators, as it is a job that takes many dedicated hours. Find out who the negotiator is and what experience they have.

4.  It helps to have contacts. We all know that knowing someone gets you much further in just about any situation than just being another number. Many short sale agents and most short sale negotiators have contacts with various lenders – contacts they can go directly to if there are any problems. I have a few and they have helped me in three short sale situations recently. I know for a fact that none of those would have been accepted so quickly had I not made some calls (and I represented the buyers in all of them). It definitely pays to have contacts in high places (in fact, stay tuned for my next blog, in which I will cover an actual situation with a short sale that you will NOT believe…)

There is no magic button to push to speed up lender approval of short sales, but some lenders are making things easier. Some, unfortunately are not. I have a list of those that are helpful, and when I show one of these properties I feel confident that personally I may be able to help. The same is true when meeting a seller who wants to list a short sale. If you are thinking about short selling your home make sure you understand the process, the skills of the people who represent your sale and are standing behind you, and all consequences involved in a short sale. It is never smart to jump into anything without being well informed.

The distressed property market continues to be a big part of our real estate market, and there is a lot going on as of late. Here are some of the highlights:

First time homebuyers getting tired of short sales: A survey conducted by Campbell/Inside Mortgage Finance revealed that first time buyers have had enough with short sales. This segment of buyers purchased around 40% of short sales in August, compared to 54% of all short sales purchased in November of 2009. Some of the reasons sited for this drop in short sale purchases are frustration with timelines to get the home through escrow, paperwork glitches and appraisal issues, and overall dissatisfaction with short sale lenders. Short sales are still seen as good bargains by many buyers, as they typically sell for 27% less than similar traditional sale homes, making them a great deal for many first time and repeat home buyers who do not have to move immediately.

Florida may change to a non-judicial foreclosure state. The state of Florida, one with a large number of foreclosures, is heeding the cry of many homeowners and buyers by contemplating switching to a non-judicial foreclosure state. Currently a judicial foreclosure state – which means that all foreclosures must go through the court system to be finalized (and there is a huge backlog) – Florida’s foreclosures take longer than those in non-judicial states, up to three times as long by some estimates. Some lawmakers are afraid that these lags will cause lenders not to lend in the state, and that the current system stagnates the market and leads to neighborhood blight. The court system, as we know, can be very slow, so I think this is a good idea, although some lawmakers are opposed to a change with the status quo.

State attorneys general still not close to agreement in robo-signing scandal: Yes, it pains me to report that once again, there is no final decision in the robo-signing scandal. Lenders and attorneys general cannot seem to come up with a punishment for the lenders that makes all happy. Really? Whose money is being used for these attorneys general to meet ad nauseum and figure this out?  I frankly think it ridiculous. Some AGs are saying that the banks should not be held liable for things that have not been investigated yet (what?), and that the liability should be placed on Wall Street and not so much on the lenders. Come on people – accept the blame and move on. The committee has stated that it the lenders will not be released from all civil liability…the saga continues.

Fixing the foreclosure mess may take more than a year. The latest statistics on fixing the foreclosure nightmare are that it may take more than a year, according to one story in HousingWire.com. Not a big surprise to many folks, and much of the long fix is due to the robo-signing fiasco. Over 4.5 million files must be examined for signs of improper foreclosure procedures, and new plans put in place to prevent such incidences from occurring in the future.

Some interesting numbers: 31% of all home purchases in California in August were short sales. In San Diego county alone, there are currently over 2500 short sales on the market today, with 1098 pending and over 3000 awaiting lender approval (contingent status). In the last six months in the county there have been 3412 short sales that closed escrow, with an average market time of 149 days. The point is that short sales are still very much a part of our current market, and I don’t think that will change any time soon.