TEAM EMPOWERMENT MORTGAGE CHATTER: August 23; 5 Quick Tips for September 2011; Distressed Property: The Impact on House Values; Foreclosures Down, Delinquencies Back Up; Short Sale Fraud Rising, Freddie Mac Wants Your Help; Fixing Housing Crisis: Jobs

“Be fully aware. Be engaged. Remind yourself to live in he present moment, The Zone.” – Jim Fannin: Nightingale-Conant Author



 1. Build Trust In Order To Remove Fear

In times of uncertainty, fear will manifest itself. You cannot sell a person through their fear. You must talk them through their fear. Take the time to explain what is happening and how it impacts the market. Explain to your clients which options are available and then allow them to pick the option which is best for themselves and their family.

2. Snap Back To Work After Labor Day

We hope everyone enjoys the holiday weekend. However, be ready to ‘snap’ back to work immediately. The month of September will be crucial in deciding your income for the last quarter of 2011. Your success in 2012 will be determined by your fourth quarter in 2011.

3. Price Adjustments Are Crucial

More and more states are clearing the way for banks to resume their foreclosures. As this distressed property inventory comes to market, there will be increased downward pressure on home prices. Make sure each of your listings has a compelling price to guarantee it sells before being confronted with this discounted inventory.

4. Take a Class on How to Write an Effective Business Plan

For most real estate professionals, anything they put into contract after October 15th probably won’t close until 2012. That means that a ‘new year’ starts on that day. What are your goals for next year? What is your plan? Have you committed your goals to a formal business plan? Treat your real estate business like you would any other business. Take a class on how to structure a business plan and see your income skyrocket.

5. Be Passionate and Determined, Yet Humble

Real estate professionals are working hard to turn the housing sector of our economy around. And we are succeeding. We must stay the course and not let the current uncertainty in the financial sector deter us from our goals. Our success is entirely in our own hands…




Chip Wagner, an icon appraiser in the industry and our good friend will discuss the impact distressed properties have on housing values.

Contrary to the alarming nature being used in reporting that appraisers are killing deals, I would bet that most of my peer appraisers are not seeking the lowest possible sales to use in their appraisals. They are searching the data available in the real estate market for the best comparables out there. But the reality is that good comparables are hard to find.

Just last week, I was finishing up an appraisal in a condominium in a Chicago suburb. It is a 246-unit development that has 24 listings available. In the past 12 months, there were 5 sales, of which 4 were distressed (short sales and foreclosures). The one arm’s-length transaction sold pretty low too, and when confirming with the listing agent, we found that the owner needed to sell (but not under duress) and understood the oversupply in their marketplace and didn’t want to sit on the market for a year or more competing with the overpriced competition. In this same condo development, in the previous year (13 to 24 months ago), there were 15 sales of which 6 were distressed (still 40%, but not 80% of the market). As a result, the average sales price has dropped over 15% in the past year.

First of all, with 24 competing on the market and only 5 sales in the past year, which is a 2.5 year supply of inventory. A balanced market is 4 to 6 months, so a 2.5 year supply of inventory is going to place significant downward pressure on prices.

What does this mean to overall values?

According to, foreclosures, on average, sell for a 35% discount and short sales sell for a 10% discount. These distressed properties might not be in the same physical condition as the non-distressed properties. However, at sizable discounts, many purchasers are more than willing to absorb the risk of purchasing a property “as-is” and doing the necessary repairs as well as playing the waiting game with lenders in purchasing short sales.

There comes a point where distressed market competition becomes the marketplace. The appraiser may consider making an adjustment for the “terms of sale.” For example, if using a short sale or a bank-owned foreclosure comparable in an appraisal, an adjustment could be made to reflect the discounted value of that comparable. I have done this in many of my appraisals, without underwriter or appraisal reviewer concerns. The appraiser must support this adjustment and thoroughly explain why it was made.

There are other scenarios where distressed competition is a very small portion of the market, and these sub-markets appear to be doing better. But even if there are not distressed sales flooding the marketplace, we are still often challenged with finding decent comparables – and that is the volume of sales taking place.

In the entire Chicago area, according to local MLS data, in January 2006 we had over 83,000 detached homes to sell in the previous 12-month period. In July 2011 it has fallen to 38,300 detached homes to have sold in the past year. What this tells us is that on average, neighborhoods that once had 20 comps to select from for consideration in our appraisal reports, now have 8 comps to select from. And you can bet with the typical market having 30% distressed competition, this is down to 4 or 5 arm’s-length transactions. This is making the appraiser’s job more difficult than ever. Comparables are limited, and the motivations and terms of the sale are complicated.




The number of delinquent mortgages more than 90 days late–those that are closest to bank repossession–declined during the second quarter, the Mortgage Bankers Association reported on Monday. The country is back to 2007 levels in foreclosures–with fewer borrowers losing their homes to bank repossessions, MBA reported.

Also, MBA found that loans originated after 2007 are performing better than those issued earlier. Mortgages issued from 2005 through 2007 represent 30 percent of all mortgages. Yet, they account for 65 percent of defaults.

MBA’s report over improvements in foreclosures were masked by a slight rise in the number of troubled mortgages–borrowers who have missed at least one payment–during the second quarter. While delinquencies only increased 0.12 percentage points to 8.44 percent, experts say after two years of improvement in delinquencies, the increase was worrisome.

“Delinquencies are mirroring what’s taking place in the employment market,” Jay Brinkmann, the MBA’s chief economist, told CNNMoney.




Freddie Mac is reporting an increase in short sale fraud and is reaching out to the real estate community to educate them about the signs of short sale fraud and ask for their help in reporting it when they see it. Freddie’s investigation unit is reaching out to REALTOR® associations through seminars and articles in educating real estate professionals to better detect short sale fraud.

The mortgage giant is reporting cases of some real estate professionals’ hiding better offers from Freddie Mac and the distressed home owner or even rigging sales at a low price so that the property can later be flipped for a higher profit. Also, Freddie Mac reports a growing number of “flopping” schemes, in which a scammer buys a short sale from Freddie or banks by using a fake title or loan document and then sells the property to a legitimate buyer at a higher price.

“There are many conscientious real estate professionals who want to do the right thing,” writes Shelley Poland, a vice president at Freddie, and Robert Hagberg, the associate director of fraud investigations, in a blog post. “We often receive calls in our servicing, quality control, fraud investigation, outreach, and HomeSteps divisions from real estate agents who know they’ve seen something inappropriate and won’t look the other way. They understand that real estate fraud turns a shortsighted profit at the cost of the public’s long-term confidence in home ownership and the housing industry.”




A new report argues that if banks wrote down the mortgage principal of underwater borrowers it could pump $71 billion per year into the economy and create more than 1 million jobs annually. The report — “The Win/Win Solution: How Fixing the Housing Crisis Will Create One Million Jobs–comes from The New Bottom Line, a campaign that represents about 1,000 nationwide faith-based and community organizations.

The campaign argues in the report that by lowering home owners’ mortgage payments by an average of more than $500 per month–or $6,500 per year–that it would free up about $6 billion dollars per month that home owners could then spend on such items as buying groceries, household necessities, school supplies, etc.

“Home owners across the nation are struggling to pay their boom-era mortgages with their recession-era salaries and the economy is suffering for it,” according to the report. “Writing down the principals and interest rates on all underwater mortgages to market value would serve as the second stimulus that America so desperately needs, only without added costs to taxpayers.”

The group is pressing State Attorneys General, who are currently in settlement talks with the nation’s largest banks over allegations of foreclosure abuses, to stand firm on its request for principal reductions for underwater borrowers.

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