SuburbanDigs

Lord, Please Save Me From Another Short Sale

The house is in pre-foreclosure. Buyers make offers ostensibly to the owner but, in reality, to the lending institution holding a mortgage in arears and agreeing to accept a short sale -- something less than the actual amount owed. A "home preservation specialist" (read debt collector) is assigned to the case. The Realtor chosen by the owner handles the listing.

Once the offers are in, the bank keeps buyers waiting for months as appraisals are done and numbers adjusted. Queries from the listing agent to the preservationist go unanswered. By 8 in the morning, their phonemail is totally full; most don't respond to email. Weeks elapse. Buyers squirm. Is the whole thing a waste of time, they ask? What's wrong with the Realtors? Why can't they find out anything? After interminable silence, the bank responds in a so-called "demand letter," a scary little document indemnifying the lender from judgements,liens and inherent problems with the property and accompanied by a question and a threat: Mr. and Ms. Buyer, are you closing tomorrow?...next week?...if not, let us bill you -- you who have dutifully come in at asking price and obediently waited for your bid to be acknowledged -- upwards of $300 a day for every day you don't close.

What, Mr. and Mrs. Buyer? You want to test that 100-year old underground tank? Consult with wood-destroying insect specialist? Look at a survey? Run title? Sorry, no time. You should have done that before, spent your own money while waiting for us to process your offer.

Welcome to the wacky world of pre-forclosures, when the "listing agent" serves an essentially powerless and depressed seller and a bank 1000 miles away comfortably bullies potential buyers actually capable of making a deal. Negotiation? Doubtful. Value-added service? None. Respect for Realtors? Zero.

One fine morning the other week at the RE/MAX International Convention, I missed a session that I'm sure would have made me a more powerful agent in order to stay in my hotel room to beg and plead with a bank debt-collecting functionary to help make the deal work -- something that, through the art of compromise, happens every day in the real world of real estate.

Let me back up a bit. The house had been in pre-forclosure for a year; this was the 4th round of offers. The first offer, for asking price, was never processed by the bank, so after 3 months, the incredulous buyer walked out. The next offer, accepted after interminable deliberation, curdled when the bank's "demand letter" insisted on a closing within 1 day. The buyer almost had a heart attack, then withdrew. And so on.

Which brings us to the latest offer from a nice young couple on a mission to restore a falling down estate. Full price offer. Willingness to close in 5 weeks. Not good enough for this bank, which slaps a $9000 surcharge on them for failure to close faster, though they had never promised to do so.

Doug, the other real estate professional in this ridiculous odyssey, was heartsick over the stalemate. After all, his clients had nowhere to move after April 15 if the bank didn't follow through with the closing and waive the $9000 surcharge. Yet the couple went ahead and paid for a home and termite inspection and underground oil tank test.

This is only one pre-foreclosure in hundreds of thousands now engorging the marketplace and showing no sign of abating. Agents are scurrying to take courses in how to handle these transactions but, in fact, there are no rules. One experienced veteran of the preforclosure marketplace has only one word for colleagues and other individuals who want to get into this form of real estate: Don't.

Regarding my deal, with ever more rigid intonation and affect, 3 home preservationist/debt collectors took a year to process the incoming offers and botch them. My protestations, pleadings, and outright groveling in behalf of various perfectly worthy cash buyers resulted in a zero-sum game. The only really proactive decision the bank made was to unilaterally lower the REALTORS' commissions.

Driving to work the other day, I released myself from short-sale angst, from  further attempts to reason with the preservationists and their wacky clarion cries to "close tomorrow." What will be, will be, I told myself.

And then, a glimmer of hope. Yesterday, an perky email from Realtor Doug: "Roberta, Well, my clients are NOT backing out. They are very excited! And they trying to get the people buying their house to see if they could push their closing sooner. We are totally moving forward. It is going to happen!"

Good kids, these buyers. More thank the bank deserves.

Being Pollyanna

Okay, it's 2008 and real estate is my oyster. Or so I tell myself. After more than 6 months of relentless bad news pertaining to home sales, the new selling season has started here. In my market, one of the few in the US still holding promise, two houses sold in bidding wars last weekend. My own buyer dance card was full and I traipsed around the Essex County, NJ with carfuls of people who can't wait to live here. Their enthusiasm goes a long way toward allaying real fears I wake up with and chew on with toast and Chai tea over the daily New York Times and Wall Street Journal, where coverage of all the awful things happening to reckless US banks, short-sighted homesellers who took on too much and, even, over the last few days, a French bank's outrageous market loses at the hands of a single rogue trader. Seven billion dollars down the tube? It's impossible to wrap your head around that.

On NPR yesterday, a discussion about Pollyanna, the girl in the popular 1913 novel who quickly became a symbol of everything positive in the world on the eve of war and then, over time, morphed into an emblem of overarching, giddy silliness; a naive optimist for whom decency would prevail in a screwed up world.

And now, as foreclosures tumble on the market by the hundreds, as the duller houses without updates or great locations come up short against fussy buyers in search of bargains, it's easy to lose the positive edge each of us in real estate needs. So, I'm just going to be a Pollyanna this year, looking for the good in everyone, hoping we will all work together to make a better real estate world in Montclair, NJ and beyond.

 

Picking Up the Pieces

It’s always a great feeling to help someone on the financial edge find a place to call home. Even after more than a decade in the real estate profession, I can remember like yesterday each and every time I worked overtime with a particular client others had rejected and helped them reach beyond what they had imagined.

When the current, still worsening sub-prime mortgage mess surfaced, I couldn’t help but remember two clients who were able to buy homes, even with very poor credit, only because of the opportunities they found to secure mortgages through eager sub-prime lenders.

At the closing table, I remember advising these families to formulate a plan – by necessity, a short term plan -- to clear up credit issues and refinance to get out from under the shocking 13 percent interest rate that would, otherwise inevitably, devour them whole when the interest reset in two years. The idea of those absurd new rates sent chills down my spine; there would be no way those bills could be paid unless these people won the lottery. The fierce drive to BE a homeowner sometimes isn’t enough.

When I started in real estate, my first broker assigned me a foreclosure property, a dinky little house with a suspicious underground oil tank and a tremendous leak from the second-floor bathroom that was on its way to caving in the kitchen ceiling. Over the course of my half-year nursing that property, the former owners broke into the basement of the house several times to smoke and drink beer. It seemed weird to me at the time, weird and creepy.

I knew they had fallen catastrophically behind in their mortgage payments and were unceremoniously locked out of their house, their meager possessions dumped on the front lawn for everyone to see. Embarrassment. Ugliness. All of it was there, strewn like so much garbage near the curb.

In their own way, coming back after dark and sitting in a dark, cold, moist basement, might have been a form of closure for that sad little house which they once called home.

These days, I’m more aware than I have been in a very long time what it means to see overgrown grass licking up against houses with cracked paint and dirty windows. It’s easy to go to RealtyTrac.com and see if these houses are on their way to auction. When I do, I understand that without money, nothing is sacred, that families now having to pick up their possessions, must also move somewhere else even if they don’t have the funds for 1.5 months security on a rental. All those hopes and dreams of home ownership, fueled by family, friends, pretty TV commercials, solicitous real estate agents, have been dashed. They are starting on square one again.

Closure -- now that will take time.

Thanks for the Memories?

To Buy or Not to Buy, That is the Question

Back in the mid-Eighties, when our kids were very young and we lived in a 2-bedroom Brookyln Heights apartment, my husband and I started thinking about moving someplace where there was more space. I grew up in a Fifties-style suburb where there was no public transportation and no shops. Just tract housing. My husband, more reticent about a move, grew up in Manhattan, Central Park his "backyard." Neither of us wanted to live far from civilization. We started driving around New Jersey and, one day, found ourselves in a town called Montclair. I looked at him/he looked at me. This is it, our eyes agreed. Leafy, warm, villge-y, it spoke to us and was only 12 miles from New York City, with bus and train transportation.

We went under contract for our first home and then, out of fear, pulled out. It took us the better part of the next year to make our way back to househunting. The second time was the charm and we found a 100-year old house that needed everything. To us, that meant we were chosen to fix it up. That was at the top of the Eighties housing boom. Over the next several years, our house lost value while we put in a new bathroom, then a new kitchen. Through time, though, the market picked up and we ended up making a lovely profit.

I can't help but see myself in many of the young couples I meet. As a threesome, we and they work through their demons to a place where they can agree to disagree on aspects of houses they like and move toward a decision. In most cases, there's a leader and a follower; one confident, the other indecisive. Their differing personalities eventually coalesce into one vision and they make haste to own a home.

Occasionally, though, they don't. Recently, while showing houses, I bumped into former clients with whom I met nearly every Sunday morning for upwards of 2 years. Incredibly cheerful, often holding hands as if they were out on a date, they hardly ever made offers while looking for what obviously had to be the perfect house. From watching those reality shows on TV about buying, selling and design, they admired much of what they saw, but were rarely tempted. Something was always wrong with a house. Then, nearing our second house-hunting anniversary, they won a robust bidding war on a typically imperfect front-porch colonial in a prime location just a block from one of Montclair’s train stations.

The inspection pointed out the home’s typical flaws – asbestos, old electric and plumbing – and these buyers demanded, in what was then a ferocious seller’s market, tens of thousands of dollars in closing credits. Needless to say, the deal collapsed when the sellers wouldn’t budge and, upon my urging, these buyers took a vacation from their search and from me.

No hard feelings! Well, they’re back and I’m happy to report that they’re working with another real estate professional perhaps willing to give them the additional years of support they will need. To be sure, everybody has a different timetable. Some people decide quickly and never look back. Others wear themselves out chasing a dream of perfection and never make the decisions (compromises, too!) necessary to a successful move.

Most buyers fall into the middle range. They review the inventory over a course of weeks or possibly a few months and make the best decision they can for that time and place, with the funds they have available. When there is reticence to commit, a real estate professional can be an important educator, support system and hand-holder to get the process going and keep it going. But not always. Some people will never purchase; just as some will never sell. Their fears, complacency, lack of motivation get in the way.

Today, I followed up on a showing of one of my listings, an adorable, spacious, updated Craftsman home that, despite the deflating market, has been getting many return showings. A couple who saw the place for the third time yesterday, couldn't find anything wrong with the house. They told their agent they loved it; no other home compared. My careful sellers had turned on all the lights for maximum effect. Then, these buyers, searching desperately for a flaw, turned them all off and announced the home was too dark.

And that, dear readers, is real estate in action!

A Competitor Falters

So Foxtons, the NY-NJ-CT discount broker with the flimsy signs, is nearly gone. I'm sure very few tri-state, full-service Realtors will mourn if an expected bankruptcy filing follows today's announcement that most of the company's employees have been laid off.

This is a company that made it very difficult to sell homes. Luring unsophisticated sellers into their fold by offering a discounted commission structure, Foxtons generally eschewed lockboxes and made every agent outside the company call and set up an appointment to see a property only if the owner were home. Untrained owners were told to show their own properties, which they often did hovering over buyers to the point of suffocation, pointing out a home's virtues even if there weren't any ("We painted the whole house 29 years ago when we moved in.") Making an offer on a Foxton's property was also an experience. Their  "Senior Negotiators" -- who had never seen the properties -- sounded 12 years old and had little knowledge of local markets. On one occasion, I brought in an offer just $5000 under asking for a terrible split level with some kind of weird mound in the backyard. The negotiator said it was asking price or nothing and my buyers walked away. Months later -- in what was then a high market -- that house remained on the market, even more forlorn than before.

It wasn't uncommon to be fielding leads at the front desk of a one's real estate firm and hear a beleaguered Foxton's seller wondering how he could get out of his airtight contract.

Early on, when it was called YourHomeDirect, Foxtons was funded by its British namesake real estate company to the tune of $20 million dollars and the stateside operation grew to about 500 people, most, it seemed when one called, very, very young. Their wet-behind-the-ears buyer agents, who got their clients from Foxton's website and Sunday paper ads, were equipped with company cell phones and cars and paid a salaries.

So, out they went to compete against hungry commission-driven agents. I'm sure the results weren't pretty. The company did better on the sell side, currently with more than 4,000 listings soon to be without a home. In good times, the days-on-market count for Foxton's listings seemed, in many cases, interminable. Now, probably much worse, as they were often promoted at oddly inflated prices reflecting little knowledge of local neighborhood nuances. There's one I can think of right now locally, priced at $850,000, which should be hundreds of thousands less.

The Foxton's business model was flawed from the beginning. It offered bargain commissions but nothing else that would even remotely be considered service-oriented and made it twice as much work for outside realtors to show their properties, while paying them less anyone else. As it turned out, people will pay more for more.

According to Inman News, the online service, "the company had its share of critics and opponents in the real estate industry -- Foxtons officials complained to state officials in New Jersey after receiving dozens of letters from Realtors advising that they would offer a 1 percent share of the commission to Foxtons when the company represented a buyer in their transactions as payback for the company's own 1 percent offer."

Observers are saying that it was Foxton's reduced commission schedule that made it harder to compete in today's complicated market, with homes lingering month after month despite their marketing and advertising efforts. I know some Realtors just bypassed these homes altogether.

It's beginning to look as if the discount model was a high-market model only, impossibly to maintain when houses are, on average, lingering for 9 months on average in NJ and even longer elsewhere.

A company spokesperson said today that the Foxtons business model "has proven itself and, we believe, will have lasting influence on our sector ."

I don't think so.

Our Changing Business

Describing what he calls a "disconnect" between the actual monetary details of the crisis in the sub-prime mortgage market and our healthy economy, a recent New York Times column by economist/actor Ben Stein urges "a little sanity."

"By the metric of a large economy" he wrote, "the effects of the loses, is nothing. The total wealth of the United States is about $70 trillion. The value of stocks listed in the United States is roughly $15 to $20 trillion. The bond market is even larger." But, Stein, wrote, generalized fear and terror have "knocked 6.7 percent off the stock market's value in recent weeks. This amounts to about $1.1 trillion, or more than 30 times the losses so far in the sub-prime market. In other words, these sub-prime loses are wildly out of proportion to the likely damage in the economy from the subprime problems."

A little fear goes a long way, both on Wall St. and on your street and mine. Real estate deals are caving more frequently. Buyers are fearful of making a mistake on a house, overpaying. They want to negotiate starting low -- very low. They worry much more about water in the basement, lack of up-to-date amenities, things that need fixing. A little dingy old wallpaper, something people once expected they'd deal with, has suddenly morphed into "too much work." They’re so consumed be fear that they can’t imagine living in a house without seeing dollar signs in their eyes. Just let us know, one nice young couple asked me the other day. If we live here 5 or 10 years, will it be a good investment? Individual sellers are determined not to capitulate to market changes. They don't want to counter a low offers. They don’t want to reposition the price or capitulate to defects. What about the water pooling in the basement? Sorry, the garage sag isn't that bad. The pipes only leak a little bit. Take it or leave it. At the end of the day, some buyers still take it; they love a house, they want it no matter what.

But, for the rest, the search for the perfect place to live, framed by more rigid mortgage guidelines -- higher credit scores, less debt, more money down, etc. – will be increasingly frought in the days and months to come. The other day, a local attorney told me one of her deals fell apart the day before closing. It just fell apart. Like that; without warning the buyer walked away. At a closing of my own last week, the buyers found some mean scratches in the bedroom floor during their walk-through. They produced digital snapshots taken when they’d first seen the home of a dresser which obviously had been dragged across the floor by the owner as she was moving out. The seller, meanwhile, protested that there had never been a dresser positioned there. The deal was held up two days while the disagreement continued. Whoa!

And so, I got up the other morning, looked at myself in the mirror and said: Roberta, admit it, every day is a stressful day. That way, I don't have to be surprised when stress hits an hour after tranquil morning coffee on my deck, when a client/seller pulls a home off the market in defiance of a lower-than-expected outcome or a client/buyer asks for $10,000 in credits where a year ago he would have asked for $500.

Are things out there discombobulated, or what?

Win Some, Lose Some

I don’t think I’m being corny when I say that every listing that comes my way is a gift. Earlier in my career, when I had very few of them, I wondered what it took to become a real player in the marketplace, someone who would regularly be called in to compete for business. These days, while I have many times the personal inventory as a decade ago, it’s still impossible to fathom why some people trust you implicitly from the get-go and others choose someone else to work with when you know you’ve done a fine job presenting yourself.

Twice this week, listings for which I competed went to someone else. In both cases, the sellers (or sellers’ families) took copious notes about my ideas for sprucing up their house while educating them to the changing market and realistic pricing, and then didn’t use me. In one case, the grandson even called me twice for the names of contractors he should use to make my suggested repairs.

In the other case, after rushing back from a summer vacation weekend to catch out-of-town family interviewing Realtors until 5 pm Sunday night, (“yes, of course we want to see your PowerPoint!”), following up with detailed staging proposal the next day – which was never acknowledged – I received this lovely note in response to still another email I sent their way last weekend:

“Sorry I haven’t gotten back with you but things at home and work have been crazy. We decided to go with another Realtor but really appreciate the interest and effort you gave to us. You had some really great ideas which we will most likely use on our [own] home.”

Do tell. My ideas, which have always gotten me in trouble, are good enough to take to another state but not good enough to list a little house in my own town.

About a decade ago, I worked with my first million-dollar clients. Young and beautiful, they were full of promise. They drove a convertible. They drank lattes and sometimes brought along one for me. When you’re a novice agent, it’s not so easy to find expensive people who trust you and I treated them with kid gloves over a period of several months while they waited for the absolute perfect show house. I literally bounded off the gurney after an important CT scan in Manhattan to rush back home to meet them. Bucking up as I met them, I didn’t say I had been on intravenous just an hour before or that I was actually quite tired. We roamed through the mansion of the week, for which they expressed incredible enthusiasm and promised to make an offer the next day.

In fact, I never heard from them again. Through my time in real estate, I have come to believe that, in those instances when I really go the absolute extra 10 miles, rise up from the sick bed, cut short a vacation, work on a national holiday or in the middle of a snowstorm, or disappoint my husband and family in some way because I’m convinced clients need me desperately – those are the times when…nothing happens; when I don’t make get the listing or make the deal. At times like this, I find myself asking, How much is too much? When is value-added just a joke on me?

Once a Realtor has invested considerable time in a client without an outcome -- a conclusion to the exercise -- it’s incredibly difficult to pull back and speculate if and when that person will make a successful offer. I’ve discovered that some people, no matter how energetic their search, will never buy. They’re predisposed to a fear of spending too much, of the commitment inherent in a house sale and, in some cases, they just can’t make a decision. Our job, at that point, probably is to convince them not to buy or sell and just be happy with who they are and where they live.

Weird, but true!

Screwy Summer

Over the last several weeks, as mortgage companies, banks and hedge funds have seen their investments depleted and their ability to function compromised, we Realtors have been waiting for the the proverbial other shoe to drop. Yes, by now there are 5 million unsold homes on the market nationally. Bad news pours forth from the nightly news and newspaper headlines. Some sellers, saddled with adjustable mortgages with higher interest rates coming due, are on tragically on target to lose their homes. Many sellers have been waiting a year or more to find a buyer. Some probably never will, now that mortgage guidelines have so tightened that only the strong will survive...iffy appraisals, lots more questions about the application and documentation, and, finally, an endless underwriting period. It used to take two, three, maybe four days at the very end to have the mortgage package reviewed. That's doubled or tripled in many cases. Not to mention the down payments needed now. No more 100 percent financing...even 95 percent is suspect. Credit even a smidgen compromised? No go for buying a home. Will it end with no business in this business that has been so good to us?

I thank my lucky stars to have landed in the NY-NJ-CT tri-state area long before I even thought of going into real estate and found my second career here. The NJ market that I work in, just a few miles from the City, has been good to hard-working agents. We've prospered. Our clients have prospered. It was too good to be true, perhaps, but the good part lasted so long that even though we knew a change was coming, it took a long, long time and, while it stayed away, our market thrived beyond all expectations.

Thing is, it is not so bad even now where we are. Our company's in-house mortgage entity collapsed some days ago, but a strong local bank picked up the business and, against expectation, even these deals are closing. In the past few days, we on the Baldwin Dream Team sold a wonderful house at full price after just a couple of days on the market. We sold a condo. We rented a luxury condo. We brought buyers to another property, priced around $700,000, and that one, awaiting the seller's decision,  looks rosy for us, too. Business, in other words, could be much worse.

One of my real estate brokers once said that the most important real estate concept is that the buyer pool is constant. Fueled by life changes -- marriage, parenthood, divorce, growing families, diminishing families, death -- real estate rolls along. The dips come when the buyer pool gets nervous or fed up and steps back. Those who don't have to buy just wait. But those who do...are still around, still looking to find a place to call their own. We just have to find them and help them feel relaxed enough to make a deal. Zipping around the other night at dusk with a cute, young couple on the cusp of marriage, I thanked my lucky stars for their good fortune. We really don't need multiple offers to make this real estate work the way it should. We just need people like this who want to move forward with their life plan despite bad press and menacing lenders and a surfeit of worrysome economics.  It's time to thank them, one by one.

Cat's in the Closet?

     Let’s see. My blood pressure went up this week over…missing cats and a client who fell down a flight of stairs while holding her toddler. In real estate, it’s the little stuff we sweat as it comes tumbling down some days, in one deal after another.

     My sellers decided to put their home on the market while they were on vacation. Their cats like to slither out the door so I put notice in the MLS listing and a sign on the front door to caution agents against feline escape. Most real estate agents know cat behavior well. There often are more cats living in the houses we sell than people.

     One of three tabby/white felines that I couldn’t tell apart in this rambling Victorian, Peanut had been just fine a few hours before, when I last showed the house. After hearing from the cat sitter, the owner called me from her woodsy outpost in Vermont, her voice trembling. The sitter then called me. She’d looked in every closet, in the dark basement, under beds. No Peanut. It was nearly 9 pm. My husband thought I might be home for good but I went out to join the search.

     Nerves frayed, we trolled the house again, left food on the porch, called her name, shook a box of cat food. Silence. Then...was that Peanut on the landing? We counted 2 other cats under the dining room table, rolling about, oblivious. Peanut. Strolling down the stairs, all mystery and attitude.

Next day, my cute client from from the the other coast brought her parents to see the big house she and her husband thought might be the one. We strolled through its attractive, sizable rooms, surveyed the large property. Her small child played on the swing set. One last look on the second floor just as I’d walked down to the foyer. Above me, a thunderous bumpty-bump-bump-bump. Seven uncarpeted stairs. She clutched the baby and both slid with a giant thud onto the second-floor landing.

     Silence. Baby screams. Mommy screams.

     All was well. A big scare but no bones broken. No baby boo-boos.

     This is a ready-for-anything business.