Today’s meeting was led by Ron Largent, who reminds us all that the Realtor vs Affiliate softball epic is approaching. Refreshments were hosted by Mission Hills mortgage, with Redding Branch Manager Cathy Gromacki also providing us with a mortgage minute. Mission Hills will be sponsoring a seminar on Identifying Personality Types, and I believe she said that would be June 25. Cathy made mention of the Juniper Academy Exploration Day sponsorship by the active affiliates, and that they need book donations so the kids have something to read at home. I think she said something like “book ‘em now or book ‘em later” which sounded somewhat politically incorrect , but which made the point with good-natured emphasis. We appreciate the community efforts of our active affiliates, and you should support them with your referrals. And with your book donations at the board office. 

There were introductions and welcomes to 3 new agents who had not yet been to a MLS meeting: Abaro Carter Hadnot of ERA, Jack Delmonte, and Jerry Goll with Coldwell Banker. Jack and Jerry were so new, they don’t even have business cards yet. Welcome all!

  5-6-09 Neil Kalin CAR Seminar.pdf (22.50 kb)

It was a fast paced and comprehensive analysis. I can’t possibly hit all the good points, but I noted these items about Short Sales. The listing agent should very carefully gather ALL relevant information needed to successfully complete a Short Sale at the beginning, or it’s just a waste of everyone’s time. A Preliminary Title Report should be done in advance and it must include a General Index Search that will reveal any liens that may have accrued to the seller that will have an impact on the sale. I wish all Short Sale listing agents made that info much clearer in the MLS listing.

He discussed the forms needed: ARC, SSL, and SSA. He discussed the importance of spelling out in the MLS listing exactly how commissions will be divided. He pointed out that the SSA is actually a binding contract between the buyer and seller, and discussed the important negotiation strategies involved in the timings in section B. While subsequent offers may come in after the sale is pending, those offers should correctly be put in back-up position.

He discussed the importance of the Lender Consent Letter, and determining features of the Release of Lien and Discharge of Debt, and any Reservation of Rights clauses. These terms are central to the seller, and can have a big financial impact long after a Short Sale. Agents are cautioned as to how they advise their clients, with care to not offering legal advice. In some ways, agents who market themselves as Short Sale Experts may carry a higher legal and monetary risk in a transaction.

There's a good Short Sale discussion online at the CAR site:

http://www.car.org/legal/2008articles/short-sales/

The REO section covered the common problems associated with listing and selling REOs. We went through key parts of the REO Advisory (REO) and REO Listing advisory (REOL). While listing REOs has become big business for some agents with friends in the finance industry (interesting discussion HERE), representing those sellers carries risk. Listing agents are often expected to do evictions and property management. Now, large fines can be charged by municipalities for vacant REOs not being kept up. There is even a risk that the listing agents will be responsible for paying those fines up-front. (There was a clear example of the ramifications of this policy in today’s news, where they are tearing down brand new homes in Victorville, because it’s cheaper to destroy them than to keep them up.) There was also discussion of tenant rights after foreclosure, and the problem of squatters, some of whom claim to be tenants.

For buyers of REOs, there was discussion of the ramifications of nearly every REO seller claiming to have no knowledge of the property, although clearly, they often have quite a bit of knowledge.  An institutional seller probably has several detailed BPOs in possession, and perhaps even an ownership history of eviction, or failed Short Sale, and perhaps even mandated safety repairs. There is also indeterminate risk to buyer inherent because often little or nothing is signed by the seller until the very end of the process, which really means that your client has no real contract at all.

There is an excellent Q&A about REO sales information at the CAR site here:

http://www.car.org/legal/2008articles/reo-transactions/?version=1

One interesting point was that these contracts are almost always accompanied by massive addendums that override the protections your buyers have in CAR forms. Some onerous terms include Per Diem penalties and non-refundable deposit requirements. Neil reminded the agents in the audience that real estate contract items are NEGOTIABLE. Your job as fiduciary representative of your buyers is to negotiate for their interests. We need to be more proactive in negotiation, and not just passively roll over when an institutional seller makes demands not in your client’s interests, or when contract terms clearly put your buyer or their money at risk. In addition, some practices by offshore or out-of-state banks, (like non-refundable deposits) may be just plain illegal in California. He made many excellent points.

There were few questions after the presentation about Prelims on a Short Sale, what happens when a NOD is recorded during a Short Sale escrow, when is a squatter a tenant, whether Per Diem penalties were actually being enforced, the new Cash for Keys form and dollar amounts, and considerations when determining when to use NOD-PA for a Short Sale.

Neil was a very engaging and eloquent speaker. He made so many good points, I can’t begin to cover it all here. Obviously, these kinds of distress sales are now more commonplace, but there are risks and duties that must be managed for all involved. It was another excellent and informative meeting!

Upcoming events include HUD sales training, and Earl Salter EA for Tax News. Be there! Skip Murphy.