Real Estate - Can we talk short-sales? - Page 2

Originally Posted by jmsremax:
In a static or depreciating market it's hard to pin point "market value".

The best way to figure out what you should pay will be based on a home inspection, appraisal, and a comparative market analysis of other properties with similiar features. If there are any issues that arise from the inspection then deduct it from the price you are willing to pay and add or deduct any features from the property you are interested in to the ones in the CMA. Then take note of what the selling price was and the listing price. Determine what the % of the listing price was actually paid. Hopefully your agent has already informed you about these tools and again good luck.

I have to strongly disagree with you here. An agent IS NOT, and cannot take the place of an appraiser. A CMA IS NOT, and never will be an appraisal.

Unless an agent is expert on home construction, repair costs, market acceptances of depreciation and obsolescence, a student of governmental regulations and laws and their effects on value, an expert in determining highest and best use analysis, plus versed in considering dozens of other factors and their value effects, he/she cannot start to rise to the level of an appraiser.

A qualified appraiser takes all the things you speak of in consideration. All the other professions you have names take only one or two of the factors in consideration. That's why they are what they are, NOT appraisers. How do I know??? Because I am an appraiser, and have been one for over 30 years. Agents/brokers owe their legal allegiance to their principle, and can act only for the benefit of that principle, and are thus, by definition, cannot be un-bias. Not a slap at agents, it's just legally how it works.

While there are a lot of agents out there that are very good at what they do, unless they are qualified and certified as appraisers, they cannot give you an appraisal, and they are even less qualified to determine Market Value than a home inspector is. Sorry. Why is it called a CMA??? Because legally, it cannot be called an appraisal because it does not meet the requirements of an appraisal.

And, NO, it isn't hard to "pinpoint" market value. That is, if you are an appraiser worth your billing.
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Originally Posted by SvilleKid:
I have to strongly disagree with you here. An agent IS NOT, and cannot take the place of an appraiser. A CMA IS NOT, and never will be an appraisal.

Unless an agent is expert on home construction, repair costs, market acceptances of depreciation and obsolescence, a student of governmental regulations and laws and their effects on value, an expert in determining highest and best use analysis, plus versed in considering dozens of other factors and their value effects, he/she cannot start to rise to the level of an appraiser.

A qualified appraiser takes all the things you speak of in consideration. All the other professions you have names take only one or two of the factors in consideration. That's why they are what they are, NOT appraisers. How do I know??? Because I am an appraiser, and have been one for over 30 years. Agents/brokers owe their legal allegiance to their principle, and can act only for the benefit of that principle, and are thus, by definition, cannot be un-bias. Not a slap at agents, it's just legally how it works.

While there are a lot of agents out there that are very good at what they do, unless they are qualified and certified as appraisers, they cannot give you an appraisal, and they are even less qualified to determine Market Value than a home inspector is. Sorry. Why is it called a CMA??? Because legally, it cannot be called an appraisal because it does not meet the requirements of an appraisal.

And, NO, it isn't hard to "pinpoint" market value. That is, if you are an appraiser worth your billing.

First off when did I ever say not to use a home inspector and I never said a CMA was an appraisal. Second, home buyers should use all the tools out there to assist them with purchasing a home.

I would take a home inspector over an appraiser any day in my experiences with both. My reasoning, all the appraiser I've dealt with worked for the town or bank. I have yet to see an appraiser give an estimate that a buyer thought was reasonable and this goes back to 2006 when the market was still going up. Also, appraisals are done annually for town and cities and the price they derive will also determine your property taxes (may not be annual in other states, but in MA it is). We had clients going to town hall meetings to fight over home appraisals because their estimates were still going up even when things were headed south. I do not trust them at all. Again, this is merely in my experiences.

At least with a CMA you are able to see what people were willing to spend on a home and what % discount or premium they paid over listing price. To me, this is a good way to derive a market value....what people actually paid since buyers and sellers are the market not an appraiser. Please note, CMAs are merely a starting point and from there you get a home inspection and then deal with the appraisers to help figure out a price that seems reasonable. My process for my clients was a CMA, home inspection, and you are pretty much forced to get an appraisal from your lender anyways. However, none of my clients paid more than 90% of the value the appraiser came up with on a property they were interested in.

Sorry Brad for jacking your thread.

:-)
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Another thread jack here, sorry:

Only a Certified Real Estate Appraiser can provide you with Actual Value.

The guy that comes around from the city and "proclaims" your home to be worth XX value for tax purposes doesn't even walk through the inside of the home. I'd wager a guess as to say they typically wouldn't actually view the home in person. For all they know the inside could be gutted. Hence why all of your computer generated values and inspectors, and such have no real "say-so" on the final value and why mortgage companies will require an appraisal before lending.

Sure, some appraisers may not be trustworthy/good at their job. But to lump all appraisers into the same category and proceed to say that because your experiences denote a level of untrustworthiness towards them is an afront and quite frankly, a stereotype intended to devalue the profession at best.

Now, just because an appraiser gives a particular value does not mean that the property MUST be sold at that price, right? Ultimately, that decision is up to the seller, right? Though you may have experienced selling house at a mere 90% of the value it appraised for... that is not to say there wasn't a potential buyer out there who would have paid more for it... riiiight? In fact, I think any good agent for the buyer would strive to get the selling price down as far as possible for their client, correct?

Ultimately SvilleKid is correct. Though an agent may not like the result of the appraisal, the Agent is not an expert in that regard and thus the hat must be tipped to the professional opinion of said expert.

So since this is a cigar forum, lets put it in terms we all understand:

I am a cigar expert, especially when it comes to certain Domincan and Honduran Brands. I have had years of training in the subject and privileged knowledge that the cigar consumers do not have access to.

If one were to argue the blend of one of those particular cigars with me, and it was clear that they simply do not have all the information to sustain a winning arguement over the composition of that cigar; while their knowledge may be vast and respectable, it simply may be incomplete or inaccurate. Leaving me, the expert, in the position to provide the correct information, whether the consumer likes that information or not.

So, not to be a terrible thread-jacker, let me revolve back to the topic at hand. Short-selling is a reality in todays market and it appears it will be a reality for some time to come. Whether it is a good thing or a bad thing completely relies on the situation for that particular property. I think it would be foolish to not explore all avenues to obtain the most information about the status and value of a property before making the decision to invest in it. The same goes with just about any endeavour one may attempt to invest in. Ultimately though, it's your money, do what you will with it and the best of luck to you!
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Originally Posted by Smokin Gator:
I have purchased five or six short sales in the last 14-15 months. Much of what I could offer has already been said... but I want to reiterate one point... if you are under any kind of time restraints, as it sounds like you are, I would be very hesitant to get in on a short sale. The quickest one I had was about 6 weeks. The longest was almost 7 month. I would also strongly advise not to put ANY earnest money down until the bank has accepted all of the terms. What I usually do is put down 10-15 percent within 48 hours of the bank signing the short sale addendum. That much tends to get their attention. Also, if it is with Bank of America, Citimortgage, or Indy Mac I wouldn't even bother. They take forever and through endless roadblocks into the situation.

One very positive aspect of a short sale versus a foreclosure is at least you are pertty much guaranteed to get a clean title. Foreclosures, on the other hand, have gotten to be a real crap shoot. If you don't really know what to look for in the title history it can get ugly!!!

Bolded for emphasis. I found one near my house a couple of months ago that I would have bought on the spot. Long story short, Bank of America holds the paper on it, this thing has being in short sale / foreclosure/ auction for 2 years. It has currently been taken off the market...again, because the owner's attorneys are trying to work something out with the bank...again. I would venture a guess that they're holding all the "bad" foreclosures that BoA is accused of against them as a bargaining chip.

I ain't got the time for that shizz.
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We bought our house 2 years ago as a short sale,

Biggest issue was time and the back and forth....contract was accepted dec 8, did not close until march 31, day before foreclosure sale which had already been postponed a couple of times, lenders take forever to work through these. and ours was quick by comparison to some others.

expect the unexpected, as in additional $$ for something or other, once we had the deal done with the seller and 1st mortgage lender, the title company discovered a second mortgage on the property, who even though they would have been foreclosed out, refused to release unless they got something...ended up doing a 3 way split (us and both realtors) of a nominal amount just to get the deal done.

Do not let the sellers agent or yours talk you or force you into using a "3rd party short sale negotiator" such as an outfit called "BGS3" they dont know what they are doing, are a rip off (you pay part of their fee in closing costs) and actually end up raising the price.

All that said, it can be a good deal.,,good luck
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Originally Posted by MiamiE:
Brent I am assuming you're buying properties as investments. You have more experience than me, but why not put a little less down payment and take the hit on the interest rate, being the property wont be around in 5 years. Assuming your plan is to renovate, rent, and flip. If not, disregard. :-)

E... I don't buy to flip. In fact I have not sold a property since 1984. We buy them cash, do any renovations that need to be done, and then rent them out.
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Gotcha! :-) I knew I didnt know what I was talking about.
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The most basic principle to remember if an investment property "can I cover the mortgage and condo fee with the expected rent if rented out?"

Short sales are difficult in my area as there are many fat cat's that get first go on them. Makes sense to preview to bonafide wallets first.
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Originally Posted by jmsremax:
First off when did I ever say not to use a home inspector and I never said a CMA was an appraisal. Second, home buyers should use all the tools out there to assist them with purchasing a home.

I would take a home inspector over an appraiser any day in my experiences with both. 90% of the home inspectors I've met are people from Non-real estate professions that have taken an on-line course, paid the membership fee for a "certification" and hung up a shingle. PEOPLE - do your homework before you hire ANY home inspector! They do not even have to be licensed in most states, don't have to have ANY real estate, construction or engineering experience/training. I can become a home inspector next week. Literally. It takes that little time to do the online work, send my money in, and wow, I'm a certified home inspector. I'm not saying there are not good ones out there. I'm saying there is a need to verify for yourself the qualifications of ANY home inspector, because they have very low requirements for entry into that field. A home inspector is not even required to be independent. They can have biases and connected interests that do not work to the advantage of the buyer (or seller). My reasoning, all the appraiser I've dealt with worked for the town or bank. A lack of knowledge, or limited experiences with the appraisal profession. 90% of appraisers are, in fact independent. We do work for any number and types of clients. We either work for our own company, or for an appraisal company. Very few banks maintain their own in-house appraisers, except in a review position. I have yet to see an appraiser give an estimate that a buyer thought was reasonable and this goes back to 2006 when the market was still going up. It is not the appraiser's position to give values that buyers think are reasonable. It it the appraiser's duty to give unbiased value opinions. If the appraiser spent all his efforts to give the value desired by one specific party, it wouldn't be an appraisal! Why pay for an appraisal just to demand that it be biased and support your opinion? It all goes back to the appraiser being an independent source of valuation that IS NOT a champion of either party's cause/position! Otherwise, it isn't an appraiser you have hired, it's an advocate (actual legal term for person that is paid to support a specific position) Also, appraisals are done annually for town and cities and the price they derive will also determine your property taxes (may not be annual in other states, but in MA it is). Again, this shows the lack of true knowledge of the profession and the processes involved. While the county appraisers call them appraisals, NinjaVanish is 100% correct. These are NOT appraisers like those that you would use for individual home values. They are merely employees of the taxing authority. They do not inspect the interior. In our area, they often drive by the house, and guess at the size. Then, they plug the square foot into a statistical program, punch in a quality, condition and location factor that they establish (without the benefit of an actual inspection!!), and boom, a value is spit out. The correct term is Mass-Appraisals. They have little relevance except for the taxing authority to use to raise revenue. In our area, it is a racket by the taxing authority, with a built-in annual appreciation and a re-appraisal with new mass-appraisal stats every 5 years. They value everything as high as they can get away with, because that means more tax revenue. I spend substantial time every year either fighting these valuations for individuals, or explaining to the homeowner why they can't afford my $400 fee (not to mention the other $1250- 1500 in attorney and court costs) to fight a bogus mass appraisal value that will result in an ad valorem tax increase of $150-500. Often it's just not economically feasible to fight the county. This is known by the county, hence the "racket" comment. The point is, these are NOT the appraisers that are used when you want to get an independent valuation. We had clients going to town hall meetings to fight over home appraisals because their estimates were still going up even when things were headed south. I do not trust them at all. Again, this is merely in my experiences. Again, you are NOT talking about independent appraisers. You are talking about tax authority employees whose job is to raise revenue for the taxing authority. Apples and oranges.

At least with a CMA you are able to see what people were willing to spend on a home and what % discount or premium they paid over listing price. To me, this is a good way to derive a market value....what people actually paid since buyers and sellers are the market not an appraiser. Again, this represents a lack of knowledge of what an appraiser does. An appraiser's job is to use this very market data, the interactions of buyers and sellers, the physical data of the property, the understanding of the subject's local and general market, the effects of economic and governmental factors, and far more factors than are considered in a CMA, to estimate the value. Anyone that relies on a CMA should become knowledgeable as to what is involved in producing a CMA. I am a member of the local NAR's (National Association of Realtors) MLS system, so I can not only use the sales data contained there in as a part of my appraisal process, but so I can also have the information needed to contact the parties to the transactions and find out the ACTUAL thoughts and motivations behind the sales. It's called data verification, and it is not done as a part of standard CMA's. However, by being a MLS member, I CAN go to the MLS website, click on a simple link, input a home address, and produce a CMA, without ever looking at the subject house, knowing the motivations of the parties to the sale, or verifying anything at all about the subject or sale properties. The value range, sales selection, and report are all done automatically by a program within the website. How accurate can that be? Just saying, before anyone make a judgement on the validity of a value source, they need to study what is required of the person that is producing that report. Please note, CMAs are merely a starting point and from there you get a home inspection and then deal with the appraisers to help figure out a price that seems reasonable. My process for my clients was a CMA, home inspection, and you are pretty much forced to get an appraisal from your lender anyways. However, none of my clients paid more than 90% of the value the appraiser came up with on a property they were interested in. Just because your clients paid less than the appraised value doesn't mean the property wasn't worth the appraised value!!! Were they unhappy that they purchased the properties below market value. I'd bet they were happy for that fact!

Sorry Brad for jacking your thread. :-)

Since these discussions deal with the resources needed to make informed purchase decisions, it is not a thread jack to put the truth out there for consumers to know. The point I would make here, for Brad, is that you need to be aware of the qualifications and requirements to be a professional in the various fields mentioned. You need to know what is involved in the production of their work product. You cannot simply accept that a product has value because it is from some source that someone says you should use. It all flows back to the individual that is involved, and the experience, education and qualifications of that individual.
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Interesting info.... We must have had less than ideal appraisers and great home inspectors. Tip about inspectors..... make sure your inspector is licensed by the state. Its easy to find...simply go to your state's licensing board website.
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Well thanks for all the input guys, had a great talk with my buyers agent and we are going to put an offer in with a 30 day window contingency on it so we are not tied up for months and are going to have the contact looked over by a real estate lawyer.

Cross your fingers and toes for us.
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Best of luck Andrew!!!
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I heard there are banks sitting on so many properties that they have a 10 year plan to slowly release them not to flood and de-value the market.

If anyone is interested in short-sale or foreclosure in the Boston area, my friend works for one of the largest Real Estate law firms locally. He has an inside track on many, but he lacks investors who can sign a check in short order.
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Originally Posted by mosesbotbol:
I heard there are banks sitting on so many properties that they have a 10 year plan to slowly release them not to flood and de-value the market.

Unfortunately, you are 100% correct in the huge inventory story. It is a big worry for many related industries as well as the federal government as to what will happen when the economy turns around and these homes are released on the market! Unless the banks want them as a drag on their spreadsheets forever, they will probable be released for sale at a quicker rate than the market can absorb. I've been on the bank's side of this in the early 1980's, responsible for (at the height of that recession) foreclosing, valuing, repairing and selling over $40 million in OREO (Other Real Estate Owned). But that amount is nothing compared to the lender-owned ORE out there today. Scary, at the best!
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Any recommendations on the best resource(s) to find short or foreclosed residential real estate in any specific location?
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Originally Posted by billybarue:
Any recommendations on the best resource(s) to find short or foreclosed residential real estate in any specific location?

Before I bought my house a year ago, I really wanted to consider foreclosures and short sales. Problem is that there are a lot of sharks in that segment and getting any information on listings online requires subscriptions from what I could find out.
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Originally Posted by colimo:
expect the unexpected, as in additional $$ for something or other, once we had the deal done with the seller and 1st mortgage lender, the title company discovered a second mortgage on the property, who even though they would have been foreclosed out, refused to release unless they got something...ended up doing a 3 way split (us and both realtors) of a nominal amount just to get the deal done.

Had the exact same thing with mine, though the bank (BofA) actually approved it in a month, but it was the third go around with people dropping out with the wait. Day before closing found out there was a second, even though I asked, and they wanted $3k to approve. Ended up splitting it with the realtor and seller. But other than that mine went really smooth and I love the hell out of the house. One nice thing about short sales is the houses are still lived in and cared for. I looked at a lot of forclosures but they were all beat to hell or ransacked. Good luck on finding something you like. :-)
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the deal with short sales it to make sure your agent and the listing agent knows what they are doing.

what you have to do to get a good deal is to prepare the bpo for the bpo agent (brokers price opinion). what is happening now is banks are paying out of work agents 45 bucks to go and give a value on a house. its essentially a summary appraisal with active comps as well. These bpo agents have to drive, take pics and prepare a report. 2-3 hours of work. what some people will do, especially if you agent has bpo experience, is to prepare the whole bpo for the agent coming out to the property, hand him a cd with the bpo and the pics, and meet him at the property. tell him that we have done all your work for you and talk the lingo so he knows the bpo is good. "we used recent comps" "we made sure to include the address verification pic, street view pics" etc etc and he will know he's got all his work done for him.

And you have to research the loan situation ahead of time before making offers on short sales. certain ones you know will not go through. ex. heloc, credit unions, private money loans etc. and you don't have to waste your time on those. multiple loans are workable as long as the agent knows what he is doing and we know who the lenders are. and preparing mulitple huds correctly so there is room to negotiate etc.

just find an agent that can verify he's closed a bunch of short sales and it should help.
short sales nowadays are easy as long as you don't go after the ones that have no hope, and the realtor on the listing and buying side know what they are doing.

a CDPE agent probably gives them some sort of knowlege though by no means they are an "automatic expert".

any questions pm me.
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