According to officials in Stanislaus County in California, the entire region is at risk economically, educationally and in terms of employment thanks to short sale investors[1]. Stanislaus county is the mortgage fraud capital of the country, and many in the media and in the local government are drawing a direct correlation between the laying off of hundreds of city workers and slashing educational budgets and government services and short sales. Why? Because short sales impact property values, and property values determine taxes. And taxes, as we all well know, impact the growth of government and related services.
Some real estate agents and brokers are jumping in on the mud-slinging as well, targeting lenders as well as those rotten short sale investors. “[Bank’s] motivation has nothing to do with the best value for the property,” asserted Scott Abell, an associate at Century 21 in Oakdale, CA. “They’re trying to rid themselves of bad mortgages, converting rotten assets into cash. And the collateral damage is impacting us all.”
Two of every three homes purchased in the area are purchased via short sale, and the local media has determined that this, in conjunction with the fact that a recent report by CoreLogic deems one in every 200 short sales “suspicious,” warrants a witch hunt. The local DA agrees, blaming lenders right along with the short sale investors: “Taxpayers have bailed them [banks] out, and they’re going to keep bailing them out. As long as [lenders] can keep passing the loss along, they don’t want to talk to me about their losses.”
Do you think that this negativity about short sales is fair? Aren’t they helping hundreds of thousands of people? Do you think that non-federal short sales are going to continue to be a viable investing option?
Thank you for reading the Bryan Ellis Real Estate Letter! Your comments and questions are welcomed below.
[1] http://www.sacbee.com/2010/09/04/3007034/stanislaus-county-short-sales.html
Native son of CA, no longer living there. Tree huggers and the
idiots you are quoting should be good enough reason for anyone
to run like hell. Schools huh ? Apparently they cannot read or
reason, try some basic economics for starters. If you can not understand or debate the issue, point fingers, place blame, make
“bad people” out of those smarter than you. Does that sound familiar,
like the present administration, I digress.
Strange isn’t it. No mention of how all these homes made it to REO status to begin with. No jobs=inability to pay mortgage. Sure, there were some bad mortgages issued, but remember that the mortgage crises went on up the ladder to Alt-A and beyond. My question would be: How are these investors going to unload all these REO properties in a bad local economy and make any money? Most of these properties are certainly in need of repairs and maintenance. So, who’s going to buy them? How do you unload them? Investors are never the bad guys, but so often seem to be portrayed as such.
Short sale helping people out? I don’t think so. Not if they want to stay in their home. Not if the investor buying the property doesn’t demand a waiver of deficiency judgment or they won’t close. Not if the lender 1099s them for the deficiency and they have to pay income taxes on it.
The lenders have already been paid back for every mortgage in default by the bailouts. But instead of being nice about it, they squeeze every drop from the homeowner by doing fake trial loan mods to collect as much money as they can before they ultimately foreclose on the property, and then the fed gives them even more money to do that!
That’s why only about 3-8% of short sales actually are approved by the banks. (depending on where you live.)
I buy short sale listings for cash, but it’s not a fun job. These folks are angry and depressed and scared. There is a better way.
This really centers on the lack of ethics or even understanding by many realtors. As soon as they hear something that gets people riled up and shows a prospect of once again artifically raising prices, they tend to be all over it. Not all realtors but too many, realtors. It is really time for them to do some policing of themselves.
Short Sales help everyone! Keeps a foreclosure off someone’s record! Properly structured ones have no deficeincy judgements! Makes the lenders more money than a foreclosure! Gives realtors more money than a foreclosure! Keeps values higher than a foreclosure! Even helps out Fannie, Freddie, VA and HUD!
Anyone that thinks the Bailouts have paid Banks all the difference is totally uninformed about the value of the housing market! Anyone that thinks Short Sales are not a lot better than a full blown foreclosure has no understanding of finance, personal and business, or the housing market!
Short Sales investors are helping people every day! Take them all out of the equation and look at what happens to the housing market! You ain’t seen nothing YET!!
Tisk, Tisk, Tisk. Isn’t this sort of like the Kettle calling the Pot Black?
First of all, it was the fraudulent banking and retail real estate industries that not only led to the Real Estate crash, but to the economic crash as well. You see, whenever Wall Street’s top investors see a decline in one market (i.e. goods and services including Mfg.) they simply move all their monies to a different market. And this time they began speculating in real estate. This of course put the pressure on the industry as a whole to maximize efforts in order to maximize profits. After all Wall Street has now stepped up the Anti. What followed was an industry wide assault on lending regulations, procedures and ethics all in the name of profits, and at any cost. It was a regular feeding frenzy as small mortgage banks and big banks pushed hard to get the paper flowing. The purpose was simple: Drive real estate values up as quickly and as high as they would or could possibly go in order to show immediate return on the Wall Street investment dollar. It was easy once Freddie and Fannie jumped on board. It wasn’t long before real estate brokerages jumped into the melee, as they quickly realized that they had no other choice-commit fraud (by pushing these bad loans to insure clients bought a house no matter their true ability to pay for it down the line) in order to continue to sell houses. Or lose business. Or did they have to do this at all? Actually the answer is simple: NO. I have preached for years that inflation is not an uncontrollable natural occurring phenomenon, but rather a totally man made entity. And therefore it can be stopped altogether. But what happened a few years back shows me that doing the right thing does not have a place in business today. And real estate brokerages proved this point by doing the wrong thing and in turn became one more wheel on a “Runaway” train. Now on to the investors.
Investors perform a necessary service in times like these. For instance, when a victimized home owner can no longer afford their now inflated mortgage and the banks are having to deal with the self inflicted issue of taking back many and short selling the rest, investors offer a solution to both parties. The homeowner gets out from under the weight of the falsely inflated mortgage burden and the bank gets relieved of a bad asset. In many cases these “Evil” investors have actually rented the properties back to the original borrower so they could continue to have a roof over their heads thus allowing them to re establish themselves, that is as long as they are still working, (Aye,Aye,Aye, what a wicked web they wove). The collateral damage here was astronomical.
Another service investors bring is revitalization as they spend their money, NOT “MONOPOLY” money such as did the aforementioned industries discussed above. By doing this they are doing their part to re establish neighborhoods across the entire country. All the Banks and Real Estate Brokerages are doing is whining about lost sales and lower bottom lines and how new regulations that HAD to be drafted and implemented, were hurting their financial ledgers. And they are the ones who were bailed out, and by the same victims who are now losing their homes due to the illegal acts of these industries.
So the bottom line is this; The industries are using investors as the newest “Scapegoat” to avoid answering the primary question, and that is: Are Banks and Real Estate brokerages getting off too damn easy?
Don’t blame those who are now cleaning up your mess, but instead step up to the plate and work to find answers that take all parties into account, and stop Whining! you caused this, so step up and help fix it. NOW!!!!!!
slundin, very well stated. Couldn’t agree more!!
Liberals. Interesting, no matter what we do to better the economy, they can’t see; not even want to go back and aknowledge the fact, that they created the problem in first place.
People who can not come up with solution, can only be smart enough to bad mouth these who serve the need of the market.
It’s easy to blame someone else for the incompetency of themeslves on the office which they are elected, and expect to solve problems. Always cut Education and Services from the Budget, never considere to diminish the size of Government.
What a heap of garbage. The mortgage scam notwithstanding, home prices were enormously inflated to begin with. All the SSI is doing is bringing them back to a reasonable level. They should be applauded. This is yet another example of idiots in office who don’t have a clue.
tough luck for the realtors. the reality is realtors were never prepared for this market. realtors havent dealt with foreclosures since the last foreclosure boom in the 90s. i am an investor as well as a realtor. got my license so i can move some of my short sales via double close as well have direct access to reos. if realtors knew how to properly perform short sales…they would access to the deals they claim are so often getting snatched up. realtors oftentimes try to get the house to sell at retail price because their commission is tied to the sell price. i have got homeowners who have dropped their listing agent only to turn around an have my company do the shortsale successfully because we want it below market value and of course we will turn around after repairs and sell for fmv which places the correct taxes back on the books. sounds to me like everyone is playing the blame game…
Whew! Where do I begin?
That article is SO bogus and clueless on so many levels…. Some choice tidbits: “…tricking lenders into selling homes for substantially less…” and “…values of properties go down artificially…”
My personal experience is lenders who are tricking themselves into valuing properties HIGHER than current, retail FMV. Let’s not even get into retail vs. distressed values.
And what about “values of properties go UP artificially”? Which is what is the root of this whole mess…. And there’s nothing “artificial” about central valley crap RE reverting back to its intrinsic, much lower value. It simply was NEVER worth the ridiculous prices that were paid. You ever been to the central valley? Hot and smoggy as hell; not exactly a sane person’s 1st choice.
Everyone’s got an opinion, but very few actually know FACTS. And then they go mouthing off…. Seldom correct but never in doubt.
Good to know the DAs probably won’t have time to chase too many people. I can rest a little easier about being a target of a witch-hunt…
Hoo–ray, SSI’s!…providing a dignified way out for that mortgage-company abused, former- homeowner! As was so eloquently and succinctly stated earlier, lets see, “…Short Sales help everyone! Keeps a foreclosure off someone’s record! Properly structured ones have no deficeincy judgements! Makes the lenders more money than a foreclosure! Gives realtors more money than a foreclosure! Keeps values higher than a foreclosure! Even helps out Fannie, Freddie, VA and HUD! Chris on 06/09/2010 in 10:55 ”.
[And the interim hero, the SSI makes an honest profit for her/his efforts! I say interim because, once the former homeowner learns strategies to delay her/his departure from the home, builds a nest-egg of the $$ savings, and then takes advantage of the SSI’s work and shops for and negotiates a replacement home at a more affordable price/term level (not necessarily in the same "'hood") and re-invests a significant portion of that savings back into appreciating assets…she/he then becomes the true “HERO“ of the debacle.]
slundin, I agree.
Admir, the last time I checked . . . CA had (and still has) a conservative governor, so blame the liberals, conservatives, and anyone else who’s responsible for causing this mess. Many Blue-Dog Dems (myself included)–who are also investors–are just as ticked about all of this nonsense.
A correction: California has a nominally Republican governor who is in no way conservative. Important distinction. — Bryan Ellis
Sometimes, I wish that SSIs would collectively boycott short-sales temporarily to force the media, government, and others to have to re-evaluate their positions. How long will we investors be willing to put up with riding in the back of the bus on this issue?
We’re not the problem!
slundin also indirectly raised another issue that our nation will have to address: our government has become a tax parasite. Rather than address the fact that they built their budgets on increasingly, unsustainable math models, they rather attack anyone who’s not losing money as they are. Instead of crying about the loss of tax revenue, they could take a portion of their capital and start buying up some short-sales too. Doing this would help them to increase their revenue, and would give them another alternative to shooting themselves up with some more tax crack.