Real Estate Investing

When I first heard the word “short sale” at the beginning of my real estate career, I mistakenly thought it meant the sale was going to be fast.  Actually a short sale means the lender will accept *less* for the home than what is owed in the current mortgage, so they’ll be short the loan payoff.

I listed one house as a short-sale and it was approved in advance of the home going on the market.  The seller had a heart transplant and his wife was a secretary.  He was unable to work, but stayed home to care for his two young daughters who in fact helped care for him a lot during his recovery.  When a low income family has to decide between feeding their children and paying for a serious medical condition or making a house payment, making a mortgage payment becomes the third choice.

In this case, when the contract was received we had to write a counter that stated the offer was accepted by the seller but the lender had to review and accept as well.  I had to submit a net sheet to the lender that outlined how much repairs would cost, termite inspection and treatment costs, seller closing fees, broker commissions, and any other expenses.  The net sheet, contract, and other supporting documentation was reviewed by the bank’s facilitator and then passed to the board for final decision.  Thankfully, the mortgage company was very cooperative during the process, which still took two months to play out. 

I was one of the lucky ones in my office who basically had a smooth short sale transaction.  Another agent submitted a contract for a short sale.  The bank has not taken action on the offer for THREE months.  The last I heard from the agent, who has since left my company to open her own office as a broker, her buyer was giving up and finding another property.

Given the glut of foreclosed homes on the market, I would expect banks to jump when they receive a fair offer on a home.  When they drag their collective feet, it has a negative impact on our local real estate markets.  The house is likely sitting empty - an open invitation for vandalism and abuse - which will bring the value down.

Another agent writing at Active Rain told about how he finally began calling the lender every hour asking for a decision.

Unfortunately, like many prior, the lender “misplaced” the faxes and emails I was sending. We also didn’t get to chat with the “negotiator” (I use negotiator loosely with this lender because of their inability to communicate very well,) until the end of April. The last time, prior to yesterday, I talked to the lender was May 2nd! I was supposed to get the approval that day or within a couple of days from then.

And John Occhi of Hemet, California wrote a wonderful piece after he attended a class on short sales.  He has a lot of class notes packed in his post (including a disclaimer that his notes could be written wrong, etc.).  Here’s one note I thought was interesting - especially the bold headline,

BANKS DO NOT INITIATE SHORT SALES. SELLERS & AGENTS DO:
The above Beneficiaries (aka “Bennies”) are always negotiated with by the seller, or assisted by the agent. Lien holders rarely agree to 6% listings. Commissions can range from 1-5%, depending a number of factors.

Meanwhile, if you think you might be interested in buying a short sale property, be aware that it may take a long long time.

Photo from here.

My brother built a mini-house near the back of my parents’ 10-acre homesite as a young adult.  He lived there for years with his dog Ginger (famous for her good nature and killer underbite).  When he married, his bride lived in the cabin with him until she had enough of the one-room domicile.  They now live in a nice older home, but that love shack still overlooks the Tradewater River snaking around the back of my parents property. 

His old living quarters remind me of something that may become a new trend while this economy recovers.  Sheds as homes.  I heard today that some of the poorer families in the Appalachian region already buy sheds and convert them to living quarters.  You can pick up a decent shed for between $1500 and $6784.93 (plus tax), depending on whether it’s a basic design or more flamboyant.

Except for instances of severe weather, I can understand where sheds would be a good alternative to home ownership.  If you have hit a rough patch in your life and don’t want to live under a bridge or in public housing, this affordable shelter could be great for someone with an instinct for surviving on little.  To go more plush and with a little more money, Texans have their Texas Tiny Houses.

Plumbing could ultimately be the biggest challenge, but it’s very common for electricity to be run to regular storage sheds today.  There would probably be county or city codes that would have to be met before power could be turned on (plumbing too), but a London, England newspaper encourages people to consider using sheds as home offices.  Also, look at this shed design that’s already been drawn as a home.  And again to England, we have this site that proves “Sheds can be anything.”

This could be a very interesting trend to watch.  If you see any sheds being used as a residence, please submit your photos to kathy DOT tyson AT comcast DOT net so we can feature them here.

Shed photos from Lowe’s.com.

Craigslist, a legitimate online classifieds site, can be a great place to find landlords, tenants, pre-foreclosure deals, investment property, roommates, vacation rentals or simply a really great home. This blog has recommended the site many a time. However, there are vultures lurking, ready to pounce on the innocent and trusting, and vigilance is required.

In 2005, Craigslist CEO Jim Buckmaster told MSNBC that fraudulent postings made up only one-tenth of one percent of the site’s overall listings. The site has a very well-established method for users to “flag” posts for removal if they are posted in the wrong area or posted too often, etc. (signs of fraudulent activity). Furthermore, Buckmaster said the company was considering charging landlords to post property rental ads on the New York message boards, in the hopes of discouraging fraudulent real estate postings in the area where such activity apparently posed the biggest problem in 2005.

Not sure if they actually implemented such a policy, but it sounds like a reasonable one to implement nationwide because three years later, the problem persists. KGET 17, a Bakersfield, California news station, reported yesterday that a local woman was prey for an online real estate scam artist. As it turns out, the property photos and description that were so appealing to Tiffany Llamas were actually ripped verbatim from a listing handled by a legitimate realtor — the same one who happened to be working to help find Llamas a home. According to the KGET web site:

“The return email read: ‘I and my wife came over to the U.K. for missionary work, so I hope you will promise us that you will take care of our house.’ Llamas said, ‘That’s great but I still want to see the house first, and when he told me send $2,400 via Western Union and then he would, you know, send the keys to me.’”

Llamas didn’t fall for it, but such predators persist on a variety of Internet networking sites hoping that someone will fall for it. Apparently, tenants aren’t the only ones being preyed upon either. This is undoubtedly occurring in the property resale market as well. The Real Real Estate in Connecticut blog points out what can happen to landlords and (in the comments section) what can happen to those seeking roommates on Craigslist.

The blog points out some red flags to beware of with Internet dealings. It may sound biased, but the following qualities are true in the vast majority of cases:
-Poor English, i.e. broken sentences, misspellings and bad grammar.
-Asking questions about details you already gave in the advertisement.
-No direct contact information.
-The writer is overseas. Many of the scams are from people claiming to be in other countries.
-Very often, these people represent themselves as high-income individuals, like doctors, lawyers or professors.

Again, Craigslist itself is not bad, but the way it works has the potential to introduce a lot of people to a lot of scam artists. Never, ever give anybody cash, check, bank account information, etc. without having first met with them and thoroughly checking out the situation. Follow your gut instinct, and above all else, the old rule applies — if it sounds too good to be true, it probably is!