Court Decisions Favor Realtors

In the news this week are two California court cases in which a real estate broker received due compensation under the California Association of Realtors buyer/broker agreement and the other case in which an attorney was penalized for asserting frivolous accusations against a broker.

Schaffter versus Creative Capital Leasing Group is the first case. In this case, the buyer in 2002 signed a CAR buyer broker agreement in which the buyer agreed to compensate the broker for contracts for the purchase of 16 new units in condo developments. The buyer closed on eight of the transactions, however, went into default on the other eight contracts. The broker was not given his compensation when the buyer and seller agreed to return the deposits back to the buyer except for $1,000.

The broker sued the buyer for all unpaid compensation for all of the 16 transactions. In this case, CAR submitted an “amicus curiae or “friend of the court” brief” to support the broker’s position in the case. The buyer on the other hand used the agreement he had with the seller to prove his case explaining the transaction to default on eight of the contracts was done between buyer and seller, thus no compensation was due the broker. The court, however, disagreed with the buyer and agreed with the CAR agreement and stated, “As CAR explains in its amicus brief, the ‘default’ provision of the Buyer Broker Contract recognizes that when a buyer defaults under a purchase agreement, it would not be fair to deny the broker the right to be paid for services rendered under the Buyer Broker Contract.” … “The seller’s post-default conduct is, of course, immaterial to determining whether the buyer defaulted.” The court awarded the broker the compensation for all 16 contracts along with all attorney and court costs.

The next case was Fields versus Sycamore Ventures. This court case centered on a buyer that after buying a new home found mold and leaky pipes. The buyer upon finding this discovery filed a lawsuit against the broker with 18 legal claims. The majority of the claims against the broker such as breach of warranty, nuisance, and trespass were without merit. The court agreed the claims were unwarranted and awarded the broker $13,500. The court will send their decision to the State Bar of California to decide if disciplinary actions are warranted against the attorney for the buyer, Miller Law.

With so many foreclosures on the market and all the hype out there about making a fortune with foreclosures, just about everyone is looking to buy a great home at a much-reduced price. The problem is that most people do not how to purchase foreclosures or they become very confused once they start the process.

There are three popular ways in which to buy foreclosures – from the homeowner, at, from a local Realtor, or at a real estate auction.

Buying from the homeowner can be a wonderful way in which to purchase a home that is close to going into foreclosure. The main problem with this is that so many real estate investors wish to purchase the home for practically nothing and leave the homeowner out in the cold. The proper way to purchase from a homeowner is to make sure they receive at least a portion of their equity, buying it for the amount owed on the loan will give the homeowner nothing, except his credit rating. You can find homeowners that do not care about the equity but only wish to save their credit, in this case, and then you are not the one putting the homeowner out in the cold. In order to work with homeowners that are in trouble is to listen to their wishes. Some may only wish to receive enough money from the home sale to put a down payment on another home they can afford.

On the other hand, beware, with buying from the homeowner. You should ensure that they only have one mortgage and that there are not any other liens of any type on the home. You may find out that you bought more than you were ready for financially.

Buying through a realtor is probably the best way to buy a home in foreclosure, if you use a real estate agent that specializes in bank owned real estate property. If you purchase through a realtor you will have the time you need for checking out the home, have appraisals done, and home inspections. You will also receive a clear title; this means that there will not be any type of liens of the home. You will be purchasing a home just like any other home on the market only that it is owned by a bank instead of an individual.

The last way in which to buy foreclosures is through a real estate auction. These are homes that are now the property of the lending company and they were on the market, but did not sell. The problem with buying foreclosures at an auction is that there are several people there also bidding on the property. You must have cash in hand at the end of the auction if you win the bid. You do not have time to inspect the property and you may find that the home is need of expensive repairs once you have the title in hand.

If you do wish to purchase bank owned property, remember, banks are not in the business to sell real estate. Do not even try to find the person in charge to talk with concerning a property you wish to purchase. Find a good real estate agent that understand the process of buying bank owned property and you will soon have the title of the home in your hand.

The Mortgage Bankers Association released their Weekly Mortgage Applications Survey for the week ending September 5, 2008, which is a survey conducted of around 50% of all the United States retail residential mortgage applications. The survey has been conducted since 1990 and includes commercial banks, thrifts, and mortgage bankers.

Over the last week of August, mortgage applications increased 7.5% over the prior week as reported by the Mortgage Bankers Association due to a rush in purchase loans.

During the time period of August 22 to August 29, the purchase loan index component rose 1.5% with an increase in the refinance index of 2.1%. The government index rose 19.9% mainly due to FHA loans.

Even though we saw an increase in purchase loans, refinance loan applications dropped to 34% and adjustable rate mortgage loans dropped to 6.6%.

The Mortgage Bankers Association stated the average interest rate on 30-year mortgages dropped to 6.39%. With a 30-year mortgage, borrowers were required to pay 1 point on average in order to receive the rate. The average rate on 15-year fixed rate mortgages rose to 5.95% with borrowers paying for 1.03 points and the average for 1-year adjustable rate mortgages dropped to 7.11% with borrowers paying for 0.35 point.

After another week, we are still seeing increases in mortgage applications through this survey. An increase 9of 9.5% was noted and the Refinance Index increased 15.4%. The 4-week moving average for the seasonally adjusted Purchase Index rose to 4.4%.

On a 30-year fixed rate mortgage there was a decrease in the interest rate from 6.39% to 6.06% with points rising to 1.02.

On a 15-year fixed rate mortgage there was a decrease in the interest rate from 5.96% to 5.73 with points lowering to 0.98

The average contract interest rate for 1-year adjustable rate mortgages decreased from 7.11% to 7.00% with points decreasing to 0.30.

If this is any type of an indicator, the housing industry may be seeing a good turn with more people seeking mortgage loans. As long as we are seeing more mortgage applications being filed, we may see the light at the end of the tunnel within a few weeks.

If you are up late at night you have more than likely seen those commercials that let you know with their secrets you can make a fortune if you purchase real estate for banks and turn around and see the property. This sounds like a pretty easy way in which to make money, but the truth is that you may not know what you are getting into and may actually lose a bundle of money. If you really wish to buy REO’s and make money then you should learn just how the entire process works before you jump in with both feet.

REO’s are real estate properties that a bank or lending company owns due to the bank taking the home from the homeowner due to foreclosure. REO’s are also homes that the bank owns instead of putting them up for action. When you see bank owned properties the main reason the bank keeps the property is that the balance of loan is equal or greater than the value of the home.

Once the property is put up for auction, you need to know that you will have to pay the balance left on the mortgage loan, along with other fees that the bank adds to the sale. Some of the fees that can be added to the purchase price include accrued interest, attorney fees, and other fees that occurred during the foreclosure process. The money you pay at the auction will be in cash! This is why most bank owned properties in up in the hand of real estate investors instead of a homebuyer with the desire to live in the home. The banks want the cash at the time of the auction, this means you will not have time to find financing and thus real estate investors are sure to grab it up at the auction due to having cash in hand.

Another big problem with purchasing bank owned property is that amount of time you have to do your homework and learn about the property. There could be liens on the property, and the remainder of the loan balance could be more than what the property is worth.

Now, if the home does not sell at auction, it will of course go back to the bank and become a REO or bank owned property. Once the bank has the property back after the auction, there are no liens on the property; however, the bank is not going to sell the home for less just to put money on the books. They will be more willing to take a loss but they are certainly not going to give it away.

Once the bank has the property, the individuals in the home will have to be evicted. Some lending companies may do repairs or sell the property “as is”. The bank will, however, take care of any IRS tax liens or Home Owner Association dues.

The main thing to remember when you are purchasing bank owned property is that many banks will list the property for an amount they know is way below market value just to get individuals bidding on the property. Once you are in a bidding war, you can almost forget buying. The main reason is that you find a property perfect for you family listed at $135,000, you have been searching and you know that that price is at least $50,000 below the rest of the homes in the area. The bank knows this as well, and has listed it as such to get interest in the property. Now, if you make an offer of $135,000 just like they were asking, you will receive notice that the owner is accepting bids until such and such date, and you will have to wait to see if you win the bid. The problem is real estate investors know the properties worth and will bid higher. It is best to stay out of these bidding wars, unless you are ready for the long haul and many disappointments.

The best way to really purchase bank owned property is through a real estate agents that understand the ins and outs of the process to guide you through everything. A good real estate agent will let you know if you have a chance of purchasing the property or not.

Today, all over the news we are still hearing about cases against various fraudulent mortgage practices throughout the time that America was in the huge real estate bubble. California has also seen court cases against fraudulent lenders as far back as June 19, 2008 when Abner Betech, Said Betech, Aviva Betech, of San Diego, Angel Armendariz and Lucette Montane of Chula Vista and Rafael Santiago of Riverside working at Creative Financial Solutions located in San Diego were accused of mortgage fraud. The complaint alleged that all six created a plan to “defraud and to obtain money and property by false and fraudulent means, related to mortgage fraud.”

This was one of the first of many mortgage lenders trying to cash in on the real estate bubble any way they could even if it was by illegal means, plastered on the news. All over the US, more and more incidents are occurring as was seen on September 2, when the news hit the papers and wires concerning Robin Neil Snyder of Pikesville, Maryland. U.S. District Judge Catherine C. Blake sentenced Snyder to 97 months in prison followed by 3 years of supervised release for 13 counts of wire fraud, money laundering, and obstructing justice arising from a scheme to defraud commercial loan applicants. In this lenders case, he set up a fraudulent website promising clients a loan in the millions, but they had to pay upfront fees.

Not all loan officers in trouble are the same as Snyder, such as the ones in San Diego. These lenders “received commissions from the lenders when the loans closed… received payments from lenders, sellers, and buyers when loans closed.” They obtained mortgage loans for borrowers that were not qualified for the loans by “concealing the true purchase price of the homes by submitting false purchase contracts; submitting false loan applications; intentionally concealing the fair market value of the home; using misleading appraisals; and submitting false bank statements and income documentation.”

The legal system is coming down hard on lenders that cheat or try to cheat loan applicants. Is the beginning of better and more fair lending practices or will lending companies become gun shy to lend money to anyone unless they have excellent credit.

With these types of news flashes, many people are growing reluctant to even try to apply for a loan due to the tactics of these unscrupulous lenders. As real estate agents, we must work together to put the trust back on the lending companies that are the backbone of economy in America if we want to see a turn around in the housing market. Talk with your homebuyers, have a list of trustworthy lenders ready for them, and aid in finding a home in their price range instead of showing them homes beyond their means. We have to work together to get over this housing crunch and the only way is to build trust with homebuyers and home sellers.

There is more and more evidence that our society is shifting from conventional mortgages to Government Insured mortgages, so for lenders there is a question whether they should become a FHA approved lender.

Look at the past activity. In July 2008, 29.1 percent of loan applications were for government issued loans. In just one year, the share of loans that are government issued has tripled. Since July 2007, we have seen an increase of 317 percent from conventional to FHA refinance applications, 260.8 percent conventional to FHA refinance endorsements, 133.9 percent applications for government-insured loans, and a 502 percent decrease in conventional loan applications.

Looking through more data it can be surmised that FHA is fast becoming the wave of the future for many wanting to purchase a new home. In January of 2007, FHA loans were only a mere 1% while Fannie Mae and Freddie Mac were at 60% for Lenders One. Scott Stern the CEO of Lenders One stated, “FHA is the fastest-growing product,” and went on to state that, “Now we are almost 48% conventional and 48% FHA.”

He believes that FHA is receiving more good publicity and the at the federal mortgage insurance program are helping with this new trend. The main reason the federal mortgage insurance program is aiding is that fees have not raised and they have not tightened their underwriting standards that we have recently seen with Fannie Mae, Freddie Mac and others.

In July 2008, Ginnie Mae reported 24.9 billion in fixed issuance whereas Freddie Mac was only at 20.3 billion. This is the first time in history that Ginnie Mae had been above Fannie Mae or Freddie Mac.

August is looking great as well for Ginnie Mae since they have issued 25.3 billion to date while Fannie Mae is at 24.0 billion and Freddie Mac is at 16.5 billion.

With this trend, more and more homeowners are searching for government issued loans for all kinds of reasons over conventional loans. Not only should lenders look into becoming FHA approved, but also more agents should be seeking these lenders to help homebuyers in search of their dream home.

Today, with foreclosures at the top of the list in sales and many distraught sellers looking for a way to sell their home, real estate agents need the know how in order to succeed in the market today. Many agents are falling to the wayside and in search of a new avenue for employment.

To make it in the market at this point in time, agents need to understand all they can about foreclosures and short sales. Foreclosures are the legal process that occurs when a homebuyer does not meet their terms and conditions of their loan agreement and the lending company takes the property for their own. Short sales involve a lending company taking a reduced amount of money as a full payoff for the property in question while it is in foreclosure.

Utilizing online public records to learn of home sellers that are in trouble of foreclosure will be a major asset for real agents. In the beginning, homeowners may not believe they are going to have to sell their home or even consider the fact they are going to actually lose their home. Many hang on until they are booted out of their home.

However, a good agent will contact these distraught homeowners and work with them to find a solution in selling their home before it is too late. Homeowners are searching for a way to keep their home or to sell it so they will have at least a bit of cash in order to find a new home. Real estate agents can talk with the homeowner and explain their options and when they are ready, they can list the home for sale.

Tips

First and foremost, when you are dealing with sellers that are in foreclosure you need a totally new approach. No hard sells! These individual are losing their home, there could be severe circumstances such as a death in the family or divorce that has caused this dilemma. In most cases, they are living month to month and are scared. You need to listen to their situation and be caring. Once, you understand their situation, you can suggest solutions such as a short sale.

Next, you must understand the inner workings of foreclosures and the ways in which you can help homeowners get the most they can by selling their home. You will need to learn how to negotiate their debt and in some cases learn how to talk with the IRS in order to remove IRS liens. Short sales are another area you need to learn as much as you can. After you learn how both of these processes work behind the scenes, you will be able to work with homeowners and help them out of this situation. Learn about the various loans available and the guidelines concerning the seller’s financials, as each one is different such as FHA and VA have different guidelines.

Learn how to find buyers. One awesome way in order to compile a list of investment buyers is by attending a few foreclosure auctions. Get yourself noticed by placing ads in the local newspaper or online as an expert in investment properties.

You must also get in touch with sellers. Look for homes that are in the foreclosure process and contact the homeowners personally. Let them know you can sell their home with your database of buyers.

With this knowledge, a real estate agent will be able to make a living doing what they enjoy instead of seeking new employment opportunities.

President Bush signed the Housing & Economic Recovery Act on July 30, 2008 with reservations due to the bill giving relief to Fannie Mac and Freddie Mac. Not only did the Democratic Congress add this provision to the bill but also there is another provision that is causing frustration for Americans. The provision prohibits the Federal Housing Administration commonly referred to as FHA from using any type of down payment assistance programs in which the seller will benefit from the transaction.

A few of the seller funded down payment assistance programs have been cited for causing serious problems and have lead to major losses for FHA as recognized by The U.S. Department of Housing and Urban Development (HUD) Inspector General, the Government Accountability Office, and the Internal Revenue Service. FHA noted had $4.6 billion in unanticipated long-term losses in its annual re-estimate this year, mainly due to the increase in seller-funded loans in its portfolio. Not only has FHA lost money, but also foreclosure rates for these loans have been to blame for three times higher than other FHA loans.

Is there help for individuals looking for a down payment assistance program for a FHA loan?

The answer could be yes. Representative Al Green (D-TX) introduced the “FHA Seller-Financed Down Payment Reform and Risk-Based Pricing Authorization Act of 2008” (H.R. 6694). This bill will reinstate FHA seller funded down payment assistance for those with certain credit scores. At the time of this writing, H.R. 6694 is pending in the House Committee on Financial Services. There is at this time, no Senate companion bill has been introduced.

Due to all the concerns of Senate Banking, Housing, and Urban Affairs Committee with these type of seller assistance programs, similar legislation in the Senate may not be forthcoming.

On August 14, 2008, the US Department of Housing and Urban Development (HUD) publicized it settled the federal lawsuit with Property ID Corporation, Realogy Corporation, Cendant Corporation, and Coldwell Banker, under the Real Estate Settlement Procedures Act.

The settlement will necessitate all companies to treat hazard disclosure reports as settlement services and not continue operations of a hazard report company assumed to be frauds by HUD.

This settlement gives HUD the authority to ask for a permanent injunction and disgorgement of illegally profiting of the companies under the Real Estate Settlement Procedures Act.

Another settlement in a federal class action lawsuit involves the companies must pay a total combined of $35 million in which most will be given to California consumers that purchased the hazard disclosure reports back to the year 1996.

The entire lawsuit boils down to the fact that HUD alleged that the Property ID Corporation of Los Angeles made payments to real estate brokers in the state of California in the way of referrals made by consumers. These are considered kickbacks and are against the rules set forth under Section 8 of the Real Estate Settlement Procedures Act.

HUD learned that year Property ID had created a scam with real estate brokers. The scams were created to funnel money instead of produce hazard disclosure reports which is required by California state law. The law states that home sellers or their agents have to provide information if a property is located in fire, earthquake, or flooding area.

The brokers had a few methods to get their agents and franchises to refer their customers to Property I. D. In most cases, they were given a pre-printed contract with Property I.D. as the provider of the hazard disclosure report, however, other methods were also used. The brokers were paid $25 quarterly for each report they conned consumers into purchasing with the other $75 going to Property I.D.

Reported filings for July were 29,285 foreclosures in the state of California. This is the highest total among all the states in the US. RealtyTrac Inc. stated the activity increased 5% from May and is up 85% over the same month in 2007. Default notices are up 34%, auction notices are up 67%, and bank repossessions are up 427% from 2007.

This does look grim for homeowners in the state of California; however, there are things that can be done to save your home. You can talk with your lender to see if you can refinance your home, talk with a realtor about a short sale, or try to sell your home prior to going into foreclosure.

If you are a homebuyer in the market for a wonderful home in the San Diego area, all these foreclosures could mean that you could find a dream home for a much less expensive price tag than just a few months ago. However, home price sales in California are beginning to stabilize which means the housing slump is close to an end. Many may not believe this is true; however, home sales in the San Diego area are on the rise. In 2008, we have started seeing a trend of more homes being sold in this area of California. In April there were 2,472 homes sold, in May 2,656, and in June 2,789. This is a tad less than last year at this time; however, it is quite a bit improved over 1,789 in March of this year.

Many homebuyers may be afraid to tackle a foreclosure especially with all the horror stories of homes in need of repair and so on and so forth. However, a home in foreclosure does not mean that the home was taken care of properly, only that the homeowners for some reason is not able to afford their mortgage at this time. To learn more about foreclosures in the San Diego area you can talk with a realtor, they have the information as to how long the home has been on the market and what repairs the home might need.