RealtyTrac Review: Service For Vultures

Dave Charbonneau

October 11th, 2008 at 2:02 am

This article shows a very one-sided view of foreclosure. Not saying it’s a wrong view; I’m not on the attack, here. But a one-sided view indeed.

I’ll share my thoughts because I’ve been on both sides of the foreclosure fence. I’ve made multiple acquisitions from people otherwise facing foreclosure; I’ve sold properties I’ve owned when I was facing foreclosure; and I’ve lost properties to the bank when there was no buyer.

The first thing to understand is that a buyer is not the one kicking a person from their home - the bank is (and, if you want to get the real skinny, the owner/resident is giving up their property value to the bank as they agreed to do when the bank (or any lender) agreed to loan them the cash for the house). I’ve had people thanking me, applauding me, for purchasing their home - I structured acquisitions in a way that was agreeable to both myself and the seller. THIS is free enterprise: When two or more people trade toward that which each feel is in their best interest.

On the flip: I’ve been extremely grateful when I found purchasers of properties when I’ve otherwise run out of options. This was MUCH better than the bank taking the property (where, in several cases, I’m still left owing the difference between what I owed the bank and what the bank sold the property for).

Now, just as there are bad dentists/good dentists, bad mechanics/good mechanics, bad lawyers… and, uh… more bad lawyers , there are those who look at numbers and perhaps leverage their knowledge and skills against the ignorance and lack of experience of others in a situation of duress. Of course these practices are morally destructive. But there was no distinction made in the article between those who seek to create mutual value based upon exchange that is free of deception and coercion.

As such, I’ll sing praises to those, albeit few, who understand value and who realize that individuals are the assets of any given transaction.

I will offer a caveat, however, for those who may be facing foreclosure in today’s market. The days of buying low and selling retail may not return for awhile. This means it’s a lot more difficult for a Knight In Slimy Armor (as we’ll call them in light of the original article) to get a property ‘moved’ as in the ‘good ole days’. There are plenty who have had contracts that did nothing but tie their properties up for many months, and they’re dropped right before deadlines. This is like when you’re following a truck down the road and they quickly change lanes to avoid the stopped car - who is now in front of YOU. This is ugly (I’ve had it happen to me where my neighbor and church leader was the real estate agent - watch out for that stalled Winnebago!!! Ouch!). The fast flippers aren’t so fast anymore; especially w/the banking & bailout scandals abound. So, be cautious (more on this in a sec.).

However, there are those who have the capital and a solid buy & hold plan (or if they are working with others who have these); times are great for these folks.

So, I said I’d get back to the “Be Cautious” statement. You’ve heard this often, and yet what the ‘bleep’ does this mean? Few ever explain it, they just say, “Use Caution.” Here’s how you be careful out there.

First, while it’s a tough time for you and your family, educate yourself. Find out why all these folks want to buy all these houses. What are they doing with them? If your bank won’t negotiate with you (maybe they will, but many may be holding out for bailout money rather than your money - but make certain YOU ASK THEM), if they won’t negotiate, stop paying them and buy a real estate program and study it. They’re still all over the late night TV show. Some are much better than others. Better yet, look for some on eBay (why pay retail?). Pay for overnight shipping (time is of the essence here).

Once you discover why all these folks want your house, you’ll realize that you’ve got a great BARGAIN you’re seeking to sell. When you realize this, you’re in the driver’s seat. You have the asset (actually, YOU are the asset and you’ve just increased your own value by moving yourself to a position of knowlege, and even more-so by viewing yourself as the value maker rather than the victim of your circumstances. Really, you ARE the asset here - not the house).

Once you’re in this position of knowledge, you may want to find your own buyers, and bypass the dude who’s sending you postcards every other day. Or, you might want to call EVERYONE who is sending you postcards and announce you’ll be accepting bids on the property, for both dollars & terms.

If you get low-ball bids, you can take them to the bank and seek what’s called a short-sale (where the bank takes less than what is owed). If they accept, you may want to ask that they accept the lower payment as FULL payment; excusing you of any difference. You’re in the drivers seat here, too. Banks don’t really want MORE bad debt, and face it, you don’t HAVE to sell the house, something is better to them than nothing, in most cases (I did this on my personal residence that was in foreclosure - I miss the huge basement, but I still have the experience under my belt).

Should you use a real estate agent. I can’t tell you what you should do. But I can tell you that I have lost more deals using real estate agents than not. A good use for real estate agents is to hire them to look over paperwork (an attorney who is a RE specialist would be better). But I’ve found, for me, that agents, like politicians, have a tough time excluding their own natural self-interest from transaction. And, as also true with many a politician, it appears that it becomes very tempting for them to think that they know better what’s good for you than you do. Just saying. In the time it would take to find a GREAT agent, and that is what you would need, you can educate yourself as to what you need.

Shucks, I’ve never put down all this information before. Perhaps I should start a Q&A column for those who are looking for some direction? What do you think?

Anyway, sorry for the lengthy post. Hope it can help one or more good people move forward.

Ken Montville

October 11th, 2008 at 8:39 pm

Dave’s comment is a good one even if it is a bit on the longish side. I would add that in addition to RealtyTrac providing foreclosure information they also provide decent statistical information.

However, more to the point, is this thing called personal responsibility. There is plenty of blame to go around about the current mess and even the Presidential candidates (at least the one who’ll lose) is suggesting that we, the taxpayers, buy up the mortgages, reset them at the current [lower] values and adjust payments accordingly. (Let’s see. If I buy a car and it depreciates in value can I go and have my loan amount re-set with lower payments if I say I can’t afford the payments? Boat? Computer? Stuff I buy with my credit card like clothes or flat screen TVs?)

As much as some of these folks may have been bamboozled there are plenty that saw a huge number of people getting rich (on paper) with real estate and wanted in at any price by any means possible included Option ARMs, 100% Interest only, and other more exotic mortgage product. I liken it to the dotcom bubble where people saw their neighbors and co-workers making money hand over fist and didn’t want to miss out on this one.

Greed. Yes, on the part of the mortgage industry and other real estate professionals (full disclosure: I’m a Realtor) and also on the part of the home buying public that “had to have a house.”

It is sad that people will have to find another place to live (Will all these folks become on-the-street homeless? I think not.) and it’s really sad that the housing boom is responsible for this current economic bust. However, I knew plenty of clients that had the intelligence and foresight to say “No” to outrageous mortgage approvals and bought homes that were within their means.

There is no easy way out of this but the sooner the housing stock (known as inventory in my circles) is reduced to where there is some equilibrium between supply and demand the better. That means identifying foreclosures or short sales and getting them sold to buyers that can afford to own them.

I just don’t buy into the everyone has a right to a house.

Dave Charbonneau

October 11th, 2008 at 9:57 pm

Hmmm… a Realtor that I agree with? The world really IS upside down.

Jim

October 13th, 2008 at 7:49 pm

The 1st response from Dave is pretty good IMO.

Personally I think it depends on what the details are. IF the home is already bank owned then theres no harm in buying it. The original owners are already out of the picture.

Pre-foreclosure homes where foreclosure process has started but not finalized are a bit different. At that point a buyer could negotiate a deal with the original owner to avoid foreclosure. That could be beneficial for the original owner if they can avoid foreclosure and escape the situation mostly intact. But there are certainly vultures that will search pre-foreclosure homes and make unscrupulous lowball offers to try and profit from peoples ignorance or fear.

But you do have to look at WHY the homes are in foreclosure. I’m certain that there are foreclosures that are due to genuine hardship. But I think its safe to assume that MOST homes in foreclosure right now are mainly because people bought homes that were more expensive than they could afford and did so with subprime loans with risky terms like interest only periods. Now I know that a lot of people didn’t really understand their loan terms or thought that real estate would not go down in value but that was their mistake.

From what I’ve seen, most of the foreclosures are not little old ladies being kicked out on the streat by a black garbed big mustachioed character villian. Most of the foreclosure stories I’ve seen are of middle class people with decent incomes simply living beyond their means in McMansions that they couldn’t really afford in the first place.

On the other hand I know someone personally who got behind in a few payments on a HELOC once and the bank started foreclosure proceedings rather quickly, and as soon as it started people started coming around their home trying to buy the property. SOME of those people were nothing but slime bags.

There are vultures out there for sure. But not all people buying foreclosures are evil, services listing foreclosures aren’t inherently bad and many people being foreclosed on right now are in that situation purely due to their own financial risk taking or excessive spending.

By the way, Google Adsense has an ad up right now for Realtytrac. I found that amusing.

Jim