Too Little, Too Late for Fauquier?

Fauquier County is working to get funds from the Neighborhood Stabilization Program. The latest information says that they're seeking a grant of $2 million with which to purchase foreclosed homes. They also acknowledge that they're more likely to get only $1 million.

There are certainly still a fair number of foreclosed homes around. Out of the 75 homes sold in Fauquier last month, 28 of them were foreclosures. Out of those 28, 15 would fall into the price range (130K to 250K) that the county is looking at.

But the number of foreclosures in the lower price ranges is shrinking and they are often snapped up fast, sometimes these days, even with multiple offers. It will be interesting to see if a government entity can be nimble enough to compete with the first time buyers who are snapping these up.

The other complication here is the appraisal requirement for the program. In order to qualify for the program the Fauquier can not pay more than 85% of the appraised value of the home. Since the typical homebuyer can get a mortgage as long as the appraisal is 100% or more of the purchase price the bank will certainly find the county's offer more risky. If I'm the asset manager for the bank and I had multiple offers, I'd almost never choose the county offer.

I say all this not to trash the Neighborhood Stabilization Program. It was a good idea. The problem has been in the execution.

While in October 2008 the county was shown as having 228 bank owned properties., the MLS currently lists only 29 for sale in Fauquier County.

In the time it took to roll the program out and talk the counties into participating and then have them put together packages, the worst of the crisis has passed.

The program will still do some good if they're able to actually buy homes. It will help working families afford a home of their own in what is still a relatively high cost living area.

But no one should believe that this program will have any impact on stabilizing market conditions in any neighborhood. Time and the market appear to have already taken care of that.

How it Should Work

Short sales are a pain! You're going to hear that from any real estate agent you talk to, or more likely, even stronger language.

The relationship between banks and real estate agents on short sales has gotten to the point where you could call it adversarial. And, it shouldn't be that way. We should be working together towards a common goal, finding a deal that works for everyone and getting it closed before the house goes into foreclosure.

The thing is, I don't think it needed to be this way. Both banks and real estate agents should have sat down at the beginning of this wave of short sales and worked out some things. Here are some ways the outcomes and the working relationships could have been improved.

• Each bank should have a package of it's procedures in working with real estate agents and owners on short sales.
• Banks should have a link on their main web site that provides real estate agents with everything they need to process a short sale.
• Lending institutions and real estate companies and/or associations should have set up joint seminars where agents and lenders could meet and develop working relationships.
• Banks should have easy access on their web sites to information for their customers who are contemplating going through the short sale process.

No one item here would have completely fixed the problems with the current system. But any and all of them would have helped tremendously. And, this list is just a starting point. There are lots more possibilities.

This is a broken system. A little planning up front might have saved us all a lot of grief!

Love in the Time of Foreclosure

You'll laugh. You'll cry. You'll identify.

If you're not reading the Love in the Time of Foreclosure blog, you're missing out on some great writing.

At  the very least every real estate agent/broker ought to be reading this.

But I'd argue that it deserves a larger audience. I hope they're reading it at the White House.

Fauquier Goes After Foreclosure Funds

I mentioned in a recent blog post that the Commonwealth of Virginia is desperately seeking a home for monies from the federal government, as part of the Neighborhood Stabilization Program, designed to help localities buy up foreclosed properties.

Hallelujah! Fauquier County is going after that money! Kristen Slawter has been working on this for the county and will be putting together a grant application of up to $2 million to buy properties in Remington and Bealeton.

I hope there's a lot of local support for this effort. There is an informational meeting being held at 6 p.m. on Wednesday, April 15th at 10 Hotel Street in Warrenton.

These homes would be rehabbed if necessary and then sold to local low or moderate income residents. There's a huge need for more affordable housing in the county. If we can get people homes and reduce the number of foreclosures I think we've got a win/win for everyone!

Banks Walking Away

According to an article in Sunday's New York Times, it's not just homeowners that are walking away.

Apparently more and more banks are deciding some properties just don't have enough value to be worth the foreclosure process. When you consider that NAR (National Association of REALTORS) has estimated that the foreclosure process can cost a bank $60,000, properties at the low end of the market quickly become more trouble/expense than they're worth.

Of course, if you're a municipality with vacant, deteriorating homes where no one is paying any property taxes, you've got a big problem.

We haven't yet seen much of this in our area. Prince William would, perhaps have been most vulnerable to this with their high volume of low cost condos going into foreclosure. But the prices fell fast enough and demand jumped enough that the problem has been dodged.

There seems to be no chance of seeing this kind of thing in Fauquier or Rappahannock Counties. Culpeper does have some foreclosed townhouses selling below $100,000. But the numbers are very small and there seems to be enough demand in that price range to absorb what comes on the market.

Short Sale Warning

I just got back from a class on short sales. Things keep changing and you have to try to keep up with the latest trends.

Here's the biggest take away as far as recent changes to the short sale process go.

Banks are much less inclined to forgive the debt on a short sale. This is particularly true of the second mortgage holder. And, they're willing to hold the deal hostage at the last minute in order to get their pound of flesh.

It brings up the question of whether a short sale, deed in lieu of foreclosure or foreclosure is better for the homeowner. And, I'm going to tell you that if you're a seller wondering that you shouldn't be asking me.

If you're not talking to an attorney who can protect your interests, with this much money at stake, I think you're making a mistake.

A couple of years ago, most debt was wiped out completely on a short sale. So, if you got one done then, be very, very glad!

The other take away is how difficult these things still are. I've seen press reports that they're getting easier, banks are getting more reasonable or smarter or more efficient. Don't believe it!

On a short sale, if you go from contract to settlement in anything less than 120 days, consider yourself lucky!

If you're a buyer you're going to have to weigh your ability to wait that long against the incredible deals that are available on short sales. The truth is that most buyers are deciding short sales won't work for them. That makes the deals better for those few willing to endure the pain of the process.

Sad Ending

A smarter agent/blogger would no doubt have waited to write this blog. Emotions are still pretty raw.

I learned today that a house I have listed for sale in Fauquier has gone into foreclosure.

We've had this listed as a short sale for at least seven months. For slightly less than six months we've had an offer on the table, an offer very close to what the bank's own BPO came in at. We've been unable, despite daily phone calls, to get the bank to move forward with that offer.

In the interim, as the house has sat empty, it's been repeatedly vandalized. The first incident resulted in the theft of both heat pumps. The most recent theft involved copper plumbing and the water heater.

And, over these six months, property values have continued to decline.

The bank is now sitting on a property worth substantially less than the offer they had in their hands.

The owners will have a foreclosure on their credit record rather than the short sale that would have been less damaging.

The potential buyers have wasted all these months and so many hopes and dreams on a house they won't be buying any time soon.

I'm out many months of work for no compensation at all.

And, it didn't have to work this way.

This is the first short sale that I haven't been able to get to settlement. I'll admit to being angry as well as sad.

Would I take another short sale where this same bank held the note? Absolutely not! Will I be warning other agents about dealing with this particular bank? Of course!

If there are days I seem less than sympathetic to the losses being suffered by many financial institutions, here's a good reason why.

Confessions of A Predatory Borrower

Here's an interesting blog post by someone who can sympathize with those caught up in the foreclosure crisis.

"There but for the grace of God..." comes to mind often these days.

Once again, here's another example of the shoddy job we're doing of financial education for our youth.

Foreclosures Frozen

Freddie Mac & Fannie Mae today announced a suspension of foreclosures beginning November 26th through January 9, 2009. 

What does this mean? It's one more sign that there will be a reduced number of foreclosures available in the short term. 

I believe it's too soon to say what the long term impact will be. If they use this time to work out loan modifications, perhaps many of these will never come back onto the market.

If you're a seller, there's reason for optimism. Every foreclosure that isn't competing against you and bringing down prices is good news. (Unless they all get dumped back on the market in the spring!)

If you're a buyer it's time to start wondering how much longer should you wait to buy? Might prices go lower? Yes! Might we be near the bottom? Yes!

If you're buying a house to live in and enjoy for the long term, it's time to think about at least getting out there and looking. Knowledge is always power in a negotiation. The more you know about what prices and inventory looks like now, the better positioned you'll be to decide if it's time to buy.

Foreclosures: More Than We Thought

NPR had a story this morning on their show, Morning Edition, about how foreclosures are counted.

It turns out that they've been undercounted in rural counties by RealtyTrac, the company everyone's been using for these statistics.

HUD is now responsible for counting these, at least temporarily. I'll be digging into how we look locally with these new numbers.