In this video I talk about one of the secrets to buying a foreclosure.  This is going to be the beginning of a series of videos to help real estate buyers learn about buying foreclosed property.  I am an REO agent.  This means that I work for the banks to help them sell their foreclosed properties.  I am going to give YOU the inside tips on how to buy these properties.

Best,
Mark Shandrow
Your Agent for Foreclosures and Short Sales

This just came in from my real-estate coach Tim Harris at www.timandjulieharris.com.  Great article.

Foreclosures accelerated to the fastest pace in almost three decades during the second quarter as interest rates increased and home values fell, prompting more Americans to walk away from homes they couldn’t refinance or sell.

New foreclosures increased to 1.19 percent, rising above 1 percent for the first time in the survey’s 29 years, the Mortgage Bankers Association said in a report today. The total inventory of homes in foreclosure reached 2.75 percent, almost tripling since the five-year housing boom ended in 2005. The share of loans with one or more payments overdue rose to a seasonally adjusted 6.41 percent of all mortgages, an all-time high, from 6.35 percent in the first quarter.

Tumbling home prices are making it difficult for even the most creditworthy owners with adjustable-rate mortgages to sell or get a new loan as their financing costs rise, said Jay Brinkmann, MBA’s chief economist. Prime ARMs accounted for 23 percent of new foreclosures and subprime ARMs were 36 percent, he said.

“People chose the lowest payment option to get into some of the very expensive housing markets and now that prices are coming way down, they can’t sell and they can’t afford the higher payments,” Brinkmann said in an interview. The unadjusted rate for new foreclosures was 1.08 percent, also a record, he said.

Foreclosures started on prime mortgages rose to 0.67 percent from 0.54 percent and the foreclosure inventory increased to 1.42 percent from 1.22 percent, the report said. The share of seriously delinquent prime mortgages was 2.35 percent, up from 1.99 percent.

Existing home sales fell to a 10-year low in the second quarter and the median price for a single-family house dropped 7.6 percent, according to the National Association of Realtors in Chicago.

Sales of previously owned homes rose 3.1 percent in July to an annualized pace of 5 million, boosted by foreclosures that accounted for about a third of all transactions, the National Association of Realtors said in an Aug. 25 report.

Mark Shandrow

This was a great article from Barrons about Fannie and Freddie.

Shares of Fannie Mae and Freddie Mac have declined by approximately 90 percent from the previous year and both companies are reporting quarter-over-quarter losses, leading some to believe than a government take-over or complete privatization is imminent.

MAKING SENSE OF THE STORY FOR THE CONSUMER

· According to the Barron’s article, which states “should the agencies fail to raise fresh capital, the administration is likely to mount its own recapitalization, with Treasury infusing taxpayer money into the enterprises,” consumers would be led to believe that a government bail out is the only option.  Although a cash infusion may be needed, it is not likely that the Treasury would purchase an equity stake in either Fannie or Freddie.  Additionally, the Treasury Dept. must negotiate an agreement with the GSEs.  Fannie and Freddie continue to raise capital on their own and some reports show that the GSEs are looking for private-equity firms or outside investors to provide the financing, which would help raise capital and reassure Wall Street. 

· The article also states, “In the early 1980s Fannie was effectively insolvent, but the government allowed it to continue operating.” Many consumers are not aware of how the GSEs serve the market or what their roles are.  Unlike banks, which lend directly to consumers, Fannie Mae and Freddie Mac operate in what is known as the “secondary mortgage market.” They purchase or guarantee loans from direct lenders in the “primary mortgage market” and either hold onto them until they mature, or sell the loans in the form of mortgage-backed securities.  By the GSEs guaranteeing or purchasing the loans from banks, Fannie and Freddie are able to fulfill their congressional mission and supply an affordable and stable source of capital to lenders, allowing them to offer more home loans.

· Due to tighter lending standards, it is becoming increasingly more difficult for borrowers to secure home loans. If Fannie Mae and Freddie Mac did not guarantee or purchase primary lenders’ loans, the cost of homeownership would dramatically increase as lenders would experience an even greater capital shortage.

· Many financial institutions in the mortgage business are experiencing losses, and while the GSEs are no exception, their portfolios continue to outperform the majority of lenders in the market.  Additionally, unlike private investors which seem to have abandoned the mortgage market, Fannie Mae and Freddie Mac are fulfilling their congressional mission to provide an affordable and stable flow of capital to home-loan lenders. 

To read the full story, please click here:
http://online.barrons.com/article_print/SB121884860106946277.html

Thanks,
Mark Shandrow
Your Real Estate Agent for REO and Short Sales

I regularly deal with a number of large asset management companies and lenders who need to sell off their real estate owned property, often referred to as REO property.  The word on the street is that most are expecting a 100% increase in the number of properties that are going to foreclosure in the next six months.  I have heard numbers like 200,000 new foreclosures are right around the corner because of the high number of adjustable rate mortgages coming due in November, 2008.  These lenders include Aurora Home Loans, Countrywide, Citibank, Ocwen, Chase, Washington Mutual, and Saxon Mortgage, just to name a few.

The good news is that this presents a great opportunity to buy property at significant discounts.  Just as an example, (one of many) I just helped a couple buy a three year old loft condo in downtown Long Beach for $285,000.  This same unit originally sold for $350,000 when the loft project was brand new out of the box and the previous owner purchased the property for $470,000.  My clients were able to get this property for almost $200,000 less than the original loan on the loft.  Plus, the loft was in excellent condition.  It need almost no work to move into.  It was trashed.  Just the opposite, it was in incredible condition.

What is even more exciting is that the property cash flows with only a 20% downpayment.  So, when my clients decide to move into a home in the future they can rent this property out and start building a real estate portfolio.  It is their first step towards accumulating some real wealth.  Now is the time to get serious.

If you are serious and  want to learn more about how to get access to foreclosure and short sales, sign up here:

http://markshandrow.com/foreclosures

You will get access to my EXCLUSIVE foreclosure, short sale and probate properties, many times before most buyers are even aware that the properties are for sale.

Best,

Mark Shandrow
Your REO and Short Sale Real Estate Expert

A great real estate agent and friend of mine, Aaron Simons, sent me this chart about the consequences of a short sale versus a foreclosure.  The chart was developed by the Distressed Property Institute.  I think it does an excellent job of dispelling some myths about short sales and their actual consequences to a borrower.

FORECLOSURE VS SHORT SALE

Homeowner Consequences

Best,
Mark Shandrow
Your REO and Short Sale Expert

This is a great article that come out in the LA Times a few days ago and explains how you can buy a house and get a great tax credit.  Read on . . .

Tax credit for home buyers works like an interest-free loan

Purchasers can shave as much as $7,500 off their IRS bills, though it must be repaid.

By Kenneth R. Harney, Washington Post Writers Group
August 3, 2008

WASHINGTON — Anyone who’s been sitting on the sidelines hesitant to jump into the housing market until conditions settle down should know these dates: April 9, 2008, through June 30, 2009.

They mark the eligibility period for the home purchase tax credit created by the housing bill enacted last week. If you have not owned a house during the last three years — or are considering buying a first home — and you close on a purchase before the end of next June, you may be eligible for a credit of as much as $7,500 against your federal taxes for 2008 or 2009 ($3,750 if you file taxes as a single person).

The new tax credit is expected to benefit hundreds of thousands of buyers. Here’s an overview of the specifics.

* The basic idea: To jump-start housing sales and clear out stocks of unsold real estate, Congress is offering tax credits to encourage new purchasers. Buy any house — new, old, in any location or condition for any price — within the designated time period and the IRS will cut as much as $7,500 off your tax bill this year or next.

For example, if you’re an eligible buyer of a home this year and you owe the IRS $4,000 on your total 2008 income tax bill, your $7,500 tax credit could wipe out everything you owe plus get you a $3,500 refund.

* Eligibility rules: If you own a home now, you’re not eligible. If you sold your home more than three years ago and now rent, you are eligible. The same is true if you’ve never owned a home. Close on a house before next June 30 and you can claim a credit of up to 10% of the purchase price to a maximum of $7,500.

If your adjusted gross income exceeds $150,000 ($75,000 for singles), the credit maximum begins to phase down. You cannot claim the credit if you financed the property using a state or local housing agency’s tax-exempt bond mortgage, or do not plan to use the house as your principal residence.

* Payback: Unlike some past tax credits, this one must be repaid over an extended period. Starting in the second tax year after purchase and continuing for up to 15 years, taxpayers are expected to make pro-rata repayments to the government on their federal filings. Over a 15-year payback period for the full $7,500 credit, the cost would be $500 a year.

If you sell the house before the end of the repayment period, and you have no gain on the sale, you won’t be expected to repay the remainder of the credit from the proceeds. If you have a net gain, the “recapture” cannot exceed the amount of your gain. In other words, the federal government is taking on all or much of the risk that the value of your new house won’t increase over time.

At its core, the new tax credit works very much like an interest-free loan. You pay the principal back in increments over time, but there’s no interest charge to you.

Rob Dietz, an economist for the National Assn. of Home Builders, says the credit not only will pull first-time buyers into the market but also will have a powerful “multiplier effect” as thousands of sellers of these credit-assisted houses go out and purchase replacement homes for themselves — extending the effect of the credit into the move-up segment.

How do you claim the credit? If you qualify, you simply request the credit on your tax return for either 2008 or 2009, which will be modified for that purpose.

Even if you purchase in 2009, you can take the credit against your 2008 taxes by filing an amended return. The home builders group is launching an educational website, at www.federalhousingtaxcredit.com, with additional information for consumers.

Best,
Mark Shandrow
Short Sale and Foreclosure Real Estate Expert

I met Sara Henninger when her house in Garden Grove came off the market.  It had been on the market with another agent for 6-months-with no offers.  We met and decided to relist the home with a new marketing strategy.  Her ultimate goal was to move out of Garden Grove and buy a home in the community of Costa del Sol in Mission Viejo.  Well, the stars were aligned for Sara.  We received two full price offers on her Garden Grove home in less than 48 hours-with one buyer wanting to close in 20 days.

We then went to Costa del Sol and found a property with upgraded windows, a view, and was the exact model that Sara dreamed about, the Rosa floorplan.  We negotiated hard and Sara was able to sell her house and move into the property in Costa del Sol in 25 days.  It worked out perfectly.

I just got off the phone with Sara and she is LOVING her new place and embracing the community activies.  She was on the front page of the The Casta Courier for being in a variety show, has joined the local gardening club, and her recent remodel was featured for being one of the best in the community.

The greatest thing about the transactions with Sara is that we have become great friends.  She is extremely supportive of me and I love her to death.  We continue to talk regularly, have lunch often, and have become close friends.  Besides helping move into her dream home, this has been one of the most rewarding transaction of my career.

Sincerely,

Mark Shandrow
Your Top Agent for Foreclosures and Short Sales

Recently, the House and Senate passed broad-based housing legislation, which was signed into law by President Bush this morning. Heralded as the most sweeping housing reform since the “New Deal”, it includes the creation of a strong regulator for Fannie Mae and Freddie Mac, changes in conforming and FHA loan limits, a comprehensive modernization plan for FHA, and the Hope for Homeowners plan, which may help distressed homeowners by refinancing them into FHA loans. 

Key Highlights of the Housing and Economic Recovery Act

· Effective Jan. 1, 2009, higher permanent loan limits for conventional conforming and FHA; limits to increase to a maximum amount or ceiling of $625,500, depending on the formula for each metropolitan area.  Note: The temporary limits established in March will expire on Dec. 31, 2008.

· FHA floor limits will remain the same at $271,050.

· The VA guaranty will increase.

· Minimum cash investment for FHA loans will increase to 3.5%.

· A moratorium on risk-based pricing for FHA loans, effective Oct. 1, 2008, as indicated in the Act.

· Elimination of Seller-funded Down Payment Assistance Programs with FHA loans, effective Oct. 1, 2008, as indicated in the Act.

· Condo processing for FHA loans will be streamlined (timeline TBD).

· FHA reverse mortgages (HECM): changes, among others, include higher loan limits, availability with purchase transactions and a modification to the origination fee.

Best,

Mark Shandrow
Real Estate Agent for Short Sales and Foreclosures

This is a great article from the Los Angeles Times about the BofA and Countrywide merger.  The most interesting point is that the CEO of BofA, Ken Lewis, thinks that the California real estate market has about another 20% drop in the not too future…I would have to agree.  This is one of the first sane things I have read in the media about the realities of the real estate market.  I guess Mr. Lewis is probably a little worried about the 28,000+ REOs that Countrywide is still sitting on.  Ouch.

Countrywide takeover will pay off, BofA’s CEO says

The bank still intends to eliminate the name of the mortgage lender, for which it paid $2.5 billion.

By E. Scott Reckard, Los Angeles Times Staff Writer
July 10, 2008

Bank of America Chief Executive Ken Lewis defended his takeover of Countrywide Financial Corp., saying Wednesday that the Calabasas lender “kind of went into a shell and didn’t say much about what they were doing right” when the mortgage business hit the skids last year.

But Bank of America still plans to dump the Countrywide name early next year in favor of the Bank of America brand, Lewis confirmed.

Often cast as having epitomized the lax lending standards that buried millions of Americans in unaffordable loans, Countrywide, the nation’s largest mortgage lender, was on the ropes when Bank of America agreed to buy it six months ago.

But in an interview with Los Angeles Times reporters and editors, Lewis said Countrywide had been painted with too broad a brush, and he promised to do a better job of defending it than its co-founder and chief executive, Angelo R. Mozilo, had done.

“There’s always another side to any story, and we’re going to tell it,” Lewis said, praising Countrywide’s efforts to avert foreclosures, which he credited for helping almost 100,000 borrowers remain in their homes this year.
“We don’t think in every instance that Countrywide was the bad guy,” Lewis said.

On a weeklong California trip that included a Town Hall Los Angeles luncheon address Wednesday, Lewis acknowledged that loan losses at Countrywide were at the high end of estimates that Bank of America projected in January.

But he said Bank of America paid so little for the lender that once the books on the deal were closed, the Countrywide operation would immediately show a profit — with the potential for huge growth in income when the mortgage industry recovers.

Charlotte, N.C.-based Bank of America bought Countrywide for stock that was worth $4 billion when the deal was announced in January but only $2.5 billion by the time the deal closed July 1.

Lewis initially said he wanted to study whether to keep the Countrywide brand, which was extremely well recognized even if it was tarnished.

“I went in thinking that there would be some way to use the Countrywide name,” he said Wednesday. But as the mortgage meltdown worsened, with Countrywide at its center, that possibility disappeared.

Lewis also reiterated his stance on the company’s dividend, now $2.56 a share annually.

“Given our view of things, we do not expect to cut the dividend nor do we expect to have to raise capital,” he said, even though many other financial firms have taken both of those steps.

But he added that Wall Street clearly didn’t believe him on those issues, given how far Bank of America’s stock has fallen in recent months. It fell $1.48 to $22.06 on Wednesday, and is down 46% year to date.

As for the housing market, Lewis said Bank of America’s latest forecast called for a further 15% decline in home prices nationwide, with the decline going into at least the first quarter of next year.

In the case of California, Florida and other markets that had the biggest booms, a further 20% decline is more realistic, he said.

Mark Shandrow
Keller Williams Realty

Well, last Friday was the first time I actually “lost” control with a client.  We have been negotiating a short sale with this one particular client for about 3 weeks making great progress.  In fact, it looks like we will be able to get the approval on the short sale today.  This is a personal best–21 days to get bank acceptance.

This particular client, unfortunately, is also going through a divorce where two wonderful kids are involved.  The wife is extremely demanding calling our office every two days requesting progress updates and accusing us of not doing our job.  In almost all situations, we are extremely polite and provide updates and reassurance that we are doing our job.  But, she calls again and yells at us some more.

Her situation is intense.  I can’t imagine what life would be like to lose my wife and my house in the same time period.  This client also recently changed professions.  She must be going through a lot–this I can understand.

Last Friday, the wife called and started yelling accusing me of not moving fast enough.  I guess the stress of dealing with all these evictions, foreclosures and short sales just got to me and I exploded.  It was very unprofessional.  I tend to be very relaxed and can handle almost any situation with grace and care.  Not this time.  I told her to get off my back and stop badgering us.  I have a very difficult time working with people that don’t appreciate our skills or the sacrifices that we are making for them.  As you may know, short sales are very time consuming and expensive.  Typically, I spend approximately $2,000 in resources getting a short sale closed.

The irony is that we are going to get a short sale done for her in record time, but she still is not satisfied.  To say the least, the conversation ended very poorly. Later that day, the husband called and wanted to know what happened.  I explained the situation and we have now worked out an arrangement where I only communicate through him.  My only communication with the wife since this incident has been via email, where I offered my deepest apologies for treating her badly.

So, what is the lesson here?  I learned a huge one.  No matter what, you can not lose your cool in this business.  There are many times that I want to scream and holler at a client, but you have to bite your lip and be supportive.  It is our job as a professional and realtor to be supportive.  We are hired because we are the best and know what we are doing, but the human side of this business is equally important.

Mark Shandrow
Keller Williams Group