Monthly Archives: June 2010

The Short Sale Samba–A Lender Does a Slow Dance, while Innocent People Involved are Victimized

Short Sales & Foreclosures, ,

This is a true story. After going back and forth with respect to the consequences, legal and otherwise, I have decided not to name the Lender. What has happened, nevertheless, is true and it underscores a power within the financial institutions in our country which is unbridled, and, in my mind, abusive.

A client came to me with a problem with his mortgage. He is an unemployed father of three children, and saddled with two mortgages on his residence in suburban Boston, which he cannot pay. In fact, he had not made a payment on his mortgages, or his property taxes, in some time. He told me that he had the property on the market for the last nine months, with six different realtors, and he had not elicited one offer which was even worthy of consideration.

I suggested he work with one of my trusted realtor contacts, and that perhaps the reason he was not getting any offers was the fact that his asking price was far above the value of the residence. He met with my suggested realtor, she did her homework on value, and they agreed on a new listing at a reasonable price, which the realtor was reasonably certain she could get.

In fact, the realtor received multiple offers at the lower price, one of which was with a cash Buyer (with proven funds to close) and a forty-five day closing. We assembled all of the required information, including two (2) brokers opinions of value, a proposed HUD-1, and a purchase and sale agreement with a five(5%) deposit which my firm is(was) holding.

The Lender was initially unresponsive. They were “swamped” with requests for short-sales, and did not have an analyst available to determine if the short-sale would be approved. After several follow up inquiries, we found that an analyst had been assigned to the matter, and we would be hearing from the Lender “soon”. By the way, the time that the analyst was assigned was considerably beyond the 45 day closing window, but our Buyer was willing to extend, and various extensions had been executed.

The final correspondence with the Lender indicated that the analyst had reviewed our proposal and would be willing to submit out short sale for approval, but only upon the following conditions:

     1. The Lender would “charge-off”, probably means, “sell for pennies” the line of credit second mortgage. This is a short hand statement which means that at some point in time a “bottom fisher” who purchaed the debt would be coming after my client.

     2. My client would be required to sign a promissory note for any balance remaining on the first mortgage after the short sale. It was possible that the Lender would consider issuing a Form 1099 for the difference rather than require the promissory note.

     3. If my client does not agree, in writing, with these terms, the request for the short sale is automatically rejected.

My client will not go forward with these terms. This means that at some point in time, the two mortages will be foreclosed upon. The Lender will be required to absorb the expenses of foreclosure, no less than $30,000 in Massahusetts and then pay an REO realtor a commission to sell the property after foreclosure. In the meantime, my client continues to live in the residence, without the Lender receiving any payment from my client. The process, including an eviction after the foreclosure, can easily take nine months. Why does this make any economic sense for the Lender, given the fact that the suggested short sale price is the true current market value of the residence?

The saddest part of this scenario, however, does not concern the Lender or my client. What about my realtor friend who worked so hard to find a Buyer and then finally sold the home? Why should she get nothing for her efforts? What about the Buyer who offered a fair price and expected, at some point, to purchase this home of his dreams? Why should these people be punished because the Lender has some view of making the person who is down on his luck “pay the price”

These are difficult times for many people. Very rarely does the Lender sue the Owner for mortgage deficiencies. Why shouldn’t this, and other, properties be put back on the market so we can move forward to establish a rational residential real eatate market? I find this all perplexing as much as anything else because we, as a professional, are powerless to make Lenders, who we have bailed out with public funds, act responsibly and with a view to the general well-being of our citizens.

Seller’s attending closings–Very little to gain: Perhaps a lot to lose

closing, Litigation/Disputes, ,

In my over 40 years of conducting real estate closings in New England, I wouldn’t say I have seen everything. I would say, however, that I have seen enough to reach the conclusion that having the Seller present at a real estate closing is rarely a positive experience, and in some instances, is an invitation to trouble.

Put aside the possible distractions of having another “persona” at the closing table who wants to comment about the length of the process or the interminable amount of paperwork involved in a typical real estate closing. That is part of the territory, and I believe I, and the other people in my law firm, know how to deal with that. Also, put aside the possible antagonisms that may have developed between the Seller and the Buyer over some aspect of the pre-purchase and sale negotiations about the property. The real estate professionals at the closing table should have the skill to deflect this aspect of the process, so things can proceed at an acceptable pace.

The real problem is the potential for litigation about the condition of the premises based on a comment, or lack of comment, made by an attending Seller. If I am representing a Seller at a closing, armed with a durable Power of Attorney, I am duly ignorant about the history of the home or the condition of the premises. If I am asked about the “spot” on the bedroom ceiling, or the trace of water that the inspector found in the finished basement, I can truly answer “I do not know”, and that will be the end of the discussion.

What if the Seller is present and asked the same question? As a point of fact, there was a water problem, maybe 6 years ago, and the derivation of the problem had been found, and the problem resolved. The Seller just had not gotten around to “painting and patching” the spot on the ceiling. That explanation would be honest, and should be sufficient to end the discussion. What if the Seller panics, and thinks, if I mention water now, I may kill the sale, right at the closing table? So, the Seller either denies that there was ever a problem or otherwise lies about why there is a spot. Months, or years, later, there is a water problem in the home, and the Buyer clearly remembers the Seller stating, at the closing, before many witnesses, that there was NO water? The chances for a lawsuit, even after closing, are greatly increased.

The moral of this story is that we, as real estate professionals, are better served if the Seller does not attend the closing. If the Seller wants to meet the Buyer, or convey information important information about the home to the Buyer, suggest a post closing event. Better yet, suggest that the Seller write down information for the Buyer and deliver it at the closing. While the writer hates to be as defensive as the suggestions in this post appear, litigation after a sale is costly and never really benefits either the Buyer or the Seller.  It certainly is not a felicitous event for a realtor. The Buyer is purchasing a “used” home in most circumstances. Small problems are bound to appear. Gratuitous, or even fabricated, remarks at a closing by the Seller can be costly. Use your influence on your customer to prevent the problem before it arises.

Short Sale Shenanigans–Do not get involved; Do not let your clients get involved!!!

Short Sales & Foreclosures,

It was bound to happen. Short sales, the new salvation for an inconsistent real estate market, have too many characteristics which facilitate fraud. One party, the Lender, is being asked to take a “hit” for immediate payment on a delinquent mortgage. Another party, the Buyer, is getting a great deal on a home or condominium . The third player, the Seller, is getting out from under an onerous debt, and given the chance to “move on” with his or her life.

I have written in the past about the dreadful performance of many Lenders in addressing requests for short sales. I have a request in front of an unnamed Lender right now that is for fair value with a cash Buyer. The last word I have from the Lender is that the “analyst” who will make the short sale decision has not as yet been determined. In a word, this transaction has little or no chance of succeeding, even though it represents a good opportunity for all people involved.

That is one side of short sales. The more tawdry other side is the apparent current practice of providing post short sale credits to Buyers (and Sellers) by realtors once the transaction is completed. In effect, the parties are “re-arranging” the real substance of the short sale, generally to the detriment of the Lender who gave approval to same.

I heard today about a transaction where the closing agent for a short sale, had two HUD-1 Settlement Statements  prepared to reflect the transaction, one which described the sale the way it had been presented to the Lender who approved the short sale, the other which described the credit given by one or both realtors, probably designed to backstop the realtor’s tax ramifications.

My advice to each and every one of you. Do not participate in ANY of these types of post closing credit schemes. They are fraudulent, and people involved with the fraud can, and will, be punished. There is no positive spin you can put on HUD-1 (Version 1) and HUD-1 (Version 2). There is only one legitimate Settlement Statement, and it is the one that was presented to the short sale Lender who approved the sale.

I urge you to disseminate this gospel far and wide. It has been difficult enough to obtain Lender approval of short sales; if the Lender starts to suspect wrong-doing after the short sale, there will be an impasse in short sales that will certainly not accelerate the recovery which all of us all hoping for, and desperately need..

Perfecting Your Persona–Being Different Is Not Enough

Marketing / Communication, ,

While acting as a real estate professional, working on purchase and sale agreements, leases, real estate closings and the like, has been interesting, I must admit that nothing in my over 40 years of practicing has been elevated to the status of “earth-shattering” or even unique. What I do every day is generally routine; many other people are able to do the same things that I do. There is no question about that.

So, sometimes I ask myself why is it that I have been able to achieve a fair level of success here, while some others have failed. I have reached the following conclusions:

1. You must do something in your profession that makes people remember you. It sounds simple enough, and most times it is. In the past few years, I have taken to wearing bow ties. It is not that I look particularly good in bow ties. It is just that I am becoming known as the lawyer “who wears a bow tie.” That small thing sets me apart from other attorneys, which, essentially, has been my plan. I know a mortgage originator who brings a pie, which she has freshly baked, to every real estate closing in which she is involved. She has, naturally, started to be known as the “pie lady.” The connotation is positive; she brings sweet things to her Buyers. Another person I work with always wears a special hat to her closings. Gradually, she gets herself noticed, and commented about, when she changes hat, and it is a discussion item.

2. Once people remember you, you need to be “good“. Obviously, something that makes people remember you is what drives new business to your door. But, now, comes the important part. You need to make that initial reaction have some substance. If you are a practicing attorney, you need to be the one who returns “every” phone call, who schedules closings not for his or her convenience, but for the convenience of the client. You need to always be the person who stays calm when others are frazzled, who always offers solutions when none seem apparent, who never gives up until the deal is closed and the deed on record. If you are a loan officer, you need to be the person who always looks for alternative ways of structuring the deal, who shows up at the closing in case there are last minute glitches, who is always positive and never “kills” a deal that can be rescued. If you are a realtor, you need to have a reputation as being a “deal maker” not a “deal breaker”. You need to work ceaselessly to find solutions when there is an impasse. In certain circumstances, you need to be willing to make concessions on your own fee to make the deal happen. You need to be totally loyal to your client.

As I have said, if you can combine the “persona” you have established with a reputation that is postive, you will set yourself above the rest. People will seek you out, and just you.It is great to be on the first page of Google; it is even greater to have a flock of “raving fans” who go out of their way to refer business to you. Your “positve persona” is the key to success; we all can improve ours through hard work and creative thinking.

Vendor Inclusive Marketing (“VIM”)–Using your tested referral sources to explode your business

closing, Marketing / Communication, ,

Vendor Inclusive Marketing (“VIM”) is probably not new to most of you. You are probably using many elements of VIM in your everyday practice. Because you are a cutting age professional, you understand the worth of knowing the very best electrician in your market. The guy who will show ip promptly at a customer’s home, do an effective diagnosis of the problem,  provide a reasonable estimate for the work to be done and then deliver his services, on time, at the price which was quoted.

Knowing who this person is elevates you in your customer’s eyes, and, realistically, provides a ready source of referrals for you the next listing, next legal engagement or next mortgage application which comes before that artisan. It is just common sense that the person to whom you have given solid, quality referrals will think of you the next time work in your line of business is available. Who knows, your VIM person may go out of his way to promote your services without even being asked.

Given the effectiveness of VIM as a marketing concept, I am making a view suggestions here which cannot help but increase your VIM score and drive business to your door:

     1. Assemble a VIM List of reliable vendors. Your professional experience may have you pretty far along the way on this list already. What you need now is to organize your referrals and get them in a document, or on your Web Page, so you can easily reference them.

    2. Deliver the “VIM List” at what you consider the appropriate time. Because my time to perform is at residential real estate closings, I deliver my VIM List in conjunction with the Notebook given to every Buyer at a closing I conduct (See my post “The Closing Table–An opportunity for marketing”). I put a plastic page for business cards in the last section of my Notebook. I tell my Buyers that the people who are in my book are tested sources. I, and my clients, have used them and they are solid.

    3. See if you can get your VIM List people to give discount certificates you can give to the Buyer. In these days of required penny-pinching, f you can give solid referrasl, at discounted prices, to your Buyer, you are doing something. Not only will your VIM List people do everything possible to give you referrals, the Buyesr will, as well.

In prior posts, you have commented on my ideas and given me new ideas to build my marketing efforts upon. For instance,one of you suggested that I place a 2010 Calendar, with my firm’s name on it, in the ever-present Notebook. I got my printer to prepare same for free,and he puts his information on the reverse of te calendard, which I place in the insert infron of the Notebook. Win-win for both of us, and a tool to keep our firm’s name in front of the client.  “Drop” marketing,if you will. Please share any of these enhancements with me. We are all working together to develop a better mousetrap. TOGETHER WE CAN!!!!!! (Sound familiar).

The Gospel According to Emmett D–“Corny” Statements to Live By

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My dad, Emmett D. Topkins,passed away on November 26, 1964, when I was 21 years of age. For the relatively short time which I was able to interact with my dad, we had a wonderful relationship. We played a lot of golf together, worked on crossword puzzles and camped out with other friends and their fathers. The only real objection I ever had to my dad was his constant use of “catch-phrases” to describe almost any situation. He was, after all, a small town country lawyer, and I thought some of these “saws” if you will, were corny and lacking meaning.

It is now almost fifty years after his death, and the irony of my life is I use these expressions all the time, and what is worse, so do my three sons and my daugter. I have three grandchlldren to date, and I have this sinking feeling that like iot or not, they will carry on the “emmettisms” for themselves and their children.

So, since I use these statements all the time, I thought I would share a few to see if I can get my readers “hooked” as badly as I and my family are. Perhaps, you have others, and you can share them with me in your comments.

     1. I Never got in trouble for something I didn’t say.

This one is self-evident but it is amazing how much truth there is here. Real estate professionals all have a tendency to “over-sell”.  The price of comparable homes is sometimes exaggerated; statements are made that there was “never” any water in the basement when there is no certainty of that fact; other bidders are described when we are trying to motivate our Buyer to increase his offer. It is part of our culture. How many times these kinds of statements come back to haunt us is difficult to compute. In almost all cases, we truly wish we had said nothing.

     2. If you tell the truth, you don’t have to have a good memory.

As I get older, my memory is not what it used to be. I have learned to rely on the truth as my sole salvation. I do not need to worry what I may have said to this person or that person. I tell them all the same thing–the truth. This simple necessary commitment has lowered my stress level and greatly enhanced my reputation. I just do not lie under any circumstances.

     3. You can’t make a dog walk down two streets at the same time.

This one is a great “catch-all” when you are dealing with a client who cannot make up his or her mind. No need to explain what you are saying. You just say it and move on. If you are lucky, the other person will grasp your meaning, and that will move the person to make a decision.

     4. A Pint’s a Pound the World Round.

This one may go over a few people’s heads, but the gist of the statement is that there are some ultimate truths out there which you cannot escape. Sometimes, I use this phrase just to confuse people and get them away from the subject they are discussing which is taking the negotiations nowhere.

     5. Don’t make an enemy for free.

I like this one and I use it often. It really means that if you have nothing really to gain either financially or otherwise, hold off on berating or belittling the other person. It is really an offshoot of “I never got in trouble for something I didn’t say”. Find other ways to assuage your ego. Don’t castigate or embarrass others for the sake of showing how superior you are. The real estate community in Boston, and I am sure other places as well, is very small. That person you showed up today is somebody you may need to deal with tomorrow, and you are better off letting that person survive without some long-lasting antipathy towards you.

There are other phrases which fit into the category. You probably use them on a regular basis without even realizing it I guess my continuing my dad’s wisdom, such as it is, is a way to pay tribute to a person I loved, and lost too soon. The fact that is appears that these phrases will continue with my dad’s grandchildren and great grandchildren is perhaps the way he, and all of us, are immortal.

The Closing Table–A Venue for Marketing!!!

closing, Marketing / Communication, ,

As a Massachusetts title attorney with over 40 years of closing experience, I am often shocked at the number of missed opportunities for marketing that the closing table presents. For my own part, I view the closing table as a chance to market my law firm and to provide the Buyer with an array of services my firm offers. This not only includes helping their friends and relatives with their next real estate transaction; it also includes explaining why home ownership presents a need to bring their estate plans up to speed and to make sure their insurance coverage is adequate. After all, they have just signed up for a large liability in their mortgage, and they want to make sure that if something happens to them, their home (and children) will be protected.

There are several other things I do at each closing:

     1. I always give the Buyers a small gift. Sometimes a special bottle of wine, other times an umbrella with my law firm’s name emblazoned on it.

     2. I have now taken to preparing a large loose leaf binder with the name of the Buyer and the property address. I tell the Buyer to place a copy of the HUD-1 Settlement Statement and a copy of their Owner’s Policy of Title Insurance as the initial entry into the binder. Thereafter, I advise them to place a copy of each and every invoice relating to their home into the binder. If they are diligent in doing this, they have created a wonderful marketing book for you, the real estate professional, to sell their home when that time comes. recently, I have inserted a plastic sheet for business cards. i place mine in the sheet and urge the selling broker or buyer’s agent to place theirs in the sheet, as well. I am a member of a BNI Group. I also place the cards of those BNI Members in whom I have confidence into the binder.

These are the marketing opportunities I have observed for other real estate professionals:

     !. Realtors. A realtor in attendance can often firm up future business by being at the closing and being helpful. I have seen realtors bring small gifts, as well. Many seasoned realtors also backstop suggestions I make to the Buyer, and in general serve as liaisons in the process. It is akin to bringing home the girl you brought to the dance, and the sense of closure is important.

     2. Mortgage Professionals. I am surprised at how few appearances these people make at closings. To me, this is a perfect opportunity to market only to the selling broker or Buyer’s agent who almost certainly in attendance. On many occasions, the listing agent appears, as well. Closings take an hour or so, and there is a lot of dead time for the realtors. What a great chance for a mortgage originator to make a captive sales call. He or she can answer questions, speak about new programs to people who have no choice but to listen. Maybe a new deal sprouts from this initiative!!!

Perhaps, many of you have found closings to be boring chores foisted on you by your superiors. As this post indicates, I view them quite differently, and I urge you to give some thought to some, or all, of the marketing ideas I have shared herein

Adjustments at Closing-Information for you to help your customers

closing,

As a Massachusetts title attorney with more than 40 years experience, I have handled more than 20,000 real estate closings. While there have been many changes in the industry over the course of my career, there are still some basic concepts that have remained constant. There follows a primer on the most standard adjustments which are involved in each and every real estate closing:

     1. Real Estate Taxes: In Massachusetts, most taxing authorities render bills on a quarterly basis. This means that taxes are due on the first of February, May, August and November of each year. The February bill covers the period which commences on January 1 and ends on March 31. The May bill covers April 1 through June 30 and so on. The trick here is to explain to the Buyer and Seller that when you close within a taxing period, there are roughly 90 days of taxes to deal with. That means that if a closing takes place on January 20, the Seller is responsible for 20 days in the quarter and the Buyer for the remainder. A January 20 closing will almost always produce a credit for the Buyer and a debit for the Seller since the February 1 taxes will not have been paid. The Buyer will be required to pay the taxes due on February 1 if the closing take splace on January 20. What makes thing more complicated is the fact that Massachusetts uses a June 30 fiscal year. This means that any taxes collected after July 1 of each year and before December 31 of each year are only “estimates” and there may be post closing adjustments based on whether the actual taxes are higher or lower than the estimate.

     2. Condominium Common Area Fees. These are generally monthly fees. The Seller brings a Certificate from the Consominium Trustees which indicates that the monthly fees have been paid through the end of the month. The partiesd then adjust what is owed based on the actual time during the month that the Seller occupied the Unit. Sometimes, the Seller is behind in his Common Area Fees. The Trustees issue a “wet” ceritifcate that can only be delivered if the total amount of arrearages is collected by the closing agent. This is workable, but tricky.

     3. Balance of Seller’s Mortgages. Most Sellers underestimate the amount of their mortgage payoff. They forget that their mortgage has interest accruing in arreas, so that if they close on the 25th of the month, they owe the principal balance of the mortage plus accried interest. The writer has had “heated discussions” with Sellers over the amount due. This is compounded by the usual custom of taking a few extra “per diem” interest charges to take into acocunt delay in getting themortgage payoff to the Seller’s mortgage lender.

There are other adjustment that come up from time to time, but the ones set forth in this post are the most common. Take some time to understand adjustments in your  state. Knowledge is power, and the more effectively you can explain these comments to your client, the easier and smoother your real estate closing will be. It  aldohelps if you have an erxperienced conveyancer steering you through the process!!

Virtual Homes—Take a look at the future world of Buyer transactions

Marketing / Communication, ,

I need to start this post by saying that I do a lot of legal work for the realtors at Virtual Homes, and I am extremely friendly with some of the principals of the Company. One principal, Lynda Longmire, and I have been friends and business colleagues for more than thirty years. All of that being said, I am literally knocked off my feet by the website, www.virtualhomes.com. It is my belief that the approach developed in this website is a template for virtually all Buyer transactions in the future.

The Virtual Homes website is powerful because it furnishes would-be Buyers with a plethora of information about a community in which they might have interest. This not only includes statistics about the town in question, but also recent newspaper articles concerning real estate. The maps of current listings really give a potential Buyer a great sense of what is available and where.

The reason this website works is that it uses the age old networking concept that “givers gain”. Virtual Homes provides so much information, assists so much in the pre-selection process that a person who uses the site is more than willing to work with Virtual Homes agents to finish the transaction. The “trust” which we are all seeking in our professional endeavors is established early in the game.

I urge all of my Active Rainmakers to look at this site and tell me you have seen a better initial presentation of real estate anywhere in the United States. I certainly have not!!!!

Elliott Topkins

www.topkinsandbevans.com

Own to rent to Own–A frustrating Journey with a happy ending

Uncategorized

As a Massachusetts title attorney with more than 40 years of experience, I frequently run into situations in the real estate area which I find worthy of reporting.

There follows one such situation, which, fortunately, would appear to be coming to a positive conclusion for my client. My client lived with her Aunt and parents in a home in suburban Boston. The home was owned by her Aunt. About two years ago, her Aunt lost her job and was unable to pay her mortgage or her property taxes. She informed the Lender about her problem, and asked for a Loan Modification to lower her monthly payment, which my client and her parents would help pay. Despite frequest requests, no Loan Modification was agreed upon, and the Lender foreclosed on the property.

This is where the story gets interesting. My client, her parents and her Aunt remained living in the home. About six months after the foreclosure, the Lender instituted eviction proceedings to remove the occupants from the home. This is when my client retained my firm to assist her.

We ascertained from my client that she and her parents had been able to save up a substantial amount of money by living in the home rent free for the past two years. We made the decision to contact the Lender’s lawyers to determine if they would consider our purchasing the home for its now fair market value and stop the eviction proceeding. After some negotiation, we have now entered into a purchase and sale agreement to purchase the home for its current fair market value, using as a downpayment the money my client saved during the pendency of the foreclosure and the eviction.

While this represents a positive result for my client,it also highlights the absolute lack or direction which most Lenders have when a Borower gets behind in his or her payments. The Lender accomplished absolutely nothing by not working with my client’s Aunt. When will calmer heads prevail in situations like this? I would be interested in hearing similar stories from any of you. This one “takes the cake” as far as I am concerned.