You are not your credit score! | Marty Macisso | Maine Short Sale expert agent
The landscape of short sales is changing in Maine as inventory shortages and record low mortgage rates have provided an environment for short sale banks to continue to drag out the short sale process.
There are many misconceptions about short sales and one common one is that lenders will take any offer submitted to them to "get rid of the property" . While lenders are not in the business of owning homes and managing property – this above fact could not be further from the truth. They want to be paid 100% of what the property is worth just like any other home owner.
When either buying or selling via the short sale process you must realize the bank cares not about the principal balanced owed but rather what the current market value is. They come at this process in terms of NUMBERS. What is their Net Tangible Benefit? Meaning will they make as much money back in their pockets by selling the property as a short sale as they would at a foreclosure sale? If they have offers that are much lower than the current market value it makes no sense for them to accept it as they'll make more back via the foreclosure process.
In some cases, the short sale process can seem impossible when it comes to submitting paper work and documents and offers to the banks. It can be a black hole. You send in documents and call to follow up and get an agent in India who has no idea what your talking about. Perhaps they threw your documents in the shredder because your agent omitted an account number? Who knows.
However, some lenders like Wells Fargo, Chase, Bank of America, ASC just to name a few, actually have their short sale process in a streamlined and professionally organized system. I know its hard to believe. The Equator system is a web based system that allows the short sale expert real estate agent input the Maine listing into the system to initiate the short sale. This takes expertise and only a few certified real estate agents in Maine are able to do this, but it dramatically cuts down on lost time and increases the communication and accountability on the side of the banks. No more "lost paperwork", we can now track step by step where the process is and what documents pertaining to the short sale may be missing.
It gets tricky when multiple lenders are involved because every bank wants to get paid more than the other will allow. However the expert short sale agent will know how to deal with this not only when it happens but how to set it up before hand to prevent the battle at the very end. Some Maine real estate agents won't even think to ask how many liens or mortgages are on the property, wow – that's unbelievable. The junior lien holders will only get paid a fraction of what the 1st short sale lender will receive however, they can reject and ruin the entire process if they don't agree to the terms of the first bank. Sounds complicated and tricky, right? IT IS!
However there are certain programs to use up front to make sure this battle does not occur or its more smooth of a negotiation. Just ask a Maine short sale expert. Local banks here in Maine do not like the short sale option, however they will approve a short sale but they will not forgive deficiency balances entirely. They usually ask for a promissary note to pay back some of the difference left over. This is unfortunate but its better than a foreclosure, which gives a bank 100% of the deficiency and ruins credit forever while creating a public record for the owner.
There are many challenges, especially when the real estate agent in Maine has no clue about the process or uses a 3rd party to do the work for them. That's a complete sham, a failure of their fiduciary duties to their client because they are not entirely consumed with the short sale process. Pick a short sale agent with a track record and who knows the process better than the banks do.
SACO - Residents of Mary Avenue have been watching a vacant house deteriorate for the past four years. Thieves have stolen a roof vent, causing water to leak into the house and create mold. Vandals have spray-painted graffiti on the windows, knocked over cans of paint, destroyed a back deck and removed the metal railing at the front entrance.
Earl Jamieson, 74, stands in front of a dilapidated house, which he says is bringing down neighborhood property values, on Mary Avenue in Saco. He is trying to sell his own property next door.
Photos by Gordon Chibroski/Staff Photographer
Realtor Marty Macisso, right, chats with owner Jeff Quirk, who is fixing up a house that he bought in Scarborough after it was repossessed by a bank in a default. Quirk is buying such properties at auction, fixing them up and reselling them.
"This is taking down the neighborhood," said Earl Jamieson, 74, who is trying to sell his house next door. He said the previous residents bought the house at the top of the real estate market and later abandoned it. The bank now owns the house, but has yet to put it on the market. And so it languishes.
While the Great Recession may have officially ended in June 2009, its legacy remains visible in the form of deteriorating housing stock. Maine homeowners who are "upside down" in their mortgages — meaning they owe more than the house is worth because the property value has declined — are reluctant to spend money to maintain their homes, and it's much harder to get home-equity loans for upgrades, according to real estate and construction professionals.
In some cases, people have abandoned their homes, or banks have taken possession through foreclosure. Empty homes lower neighborhood property values and become targets for thieves and vandals.
The tragic fire in Orrington last weekend, in which a father and three children were killed after cardboard boxes placed too close to a wood stove ignited, highlights the substandard quality of housing on the market. The family was in the process of buying a house that had been vacant for nearly a year, and its hot-water furnace was inoperable because heating pipes had frozen while the house sat empty last winter.
The government doesn't keep statistics on how many empty houses there are in Maine or how much money people spend on home repair. While foreclosure activity in the state is trending downward, the issue is not going away anytime soon.
In October alone, 131 properties in Maine had received a foreclosure filing and been repossessed by the bank, according to RealtyTrac, a national real estate information company. The number of new foreclosures, which was 479 last November, has been holding steady at an average of 114 a month for the past nine months.
The statistics, however, don't count "shadow" inventory, the number of bank-owned homes that are not yet on the market, as well as the homes with delinquent mortgages, but on which the foreclosure process has not been completed.
In Maine, it takes a bank an average of 570 days to complete the legal work to foreclose on a house, according to a study by the Federal National Mortgage Association. That's why people see vacant homes in their neighborhoods with no "for sale" signs on them, said Peter Judkins, chairman of the Maine Bankers Association.
Many national lenders now prefer to sell the homes before they complete the foreclosure process. This is called a "short sale," meaning the house is sold for a price that is lower than the principal owed on the loan.
Short sales allow families to leave their house with dignity and without debt, said Martin Macisso, an agent with the Regency Realty Group in South Portland.
"When one family is able to make this transition successfully, that's one less vacant and abandoned home to pull down values for the surrounding community," he said.
The new owners, however, often find the house needs a lot of work because the previous cash-strapped owners had neither the cash nor the incentive to maintain it, said William Fogel, a Portland attorney whose practice includes bankruptcy law.
When people owe more money to the bank than their house is worth, their behavior changes, he said. They no longer act like owners because they no longer view their property as an investment.
"They have no money or savings," he said. "They live in the house until the house falls apart or they go bankrupt."
Over time, whole neighborhoods can become blighted, he said.
Carl Chretien, owner of Chretien Construction in Saco, which does remodeling work, said people aren't keeping up their houses the way they used to. When he drives around town these days, he sees a lot of houses that need painting, and people now wait until their roof is leaking before they replace it.
"The roofs are starting to look pretty shabby and worn," he said.
Chretien is now working in Saco on a roof covered with asphalt shingles that are so old he can see the plywood underneath.
Statistics kept by the Maine Department of Labor tell the same story. The number of residential painters employed by contractors fell from 739 in 2007 to 549 in 2011, a decline of 26 percent. The number of electricians, finish carpenters, plumbers, roofers and tile contractors similarly declined.
Still, some people see opportunity in this market. Jeff Quirk of Scarborough is buying foreclosed homes at auction, repairing them himself and reselling, or "flipping," them. He is now finishing work on a house in Scarborough that he bought after it had been vacant. He recoated all the walls, put down a new kitchen floor and installed a new hot-water furnace to replace the one that was damaged while the house sat empty.
When families experience a financial crisis, houses can fall into disrepair quickly, he said.
"When people are upside down on their mortgage, that's not the only part of their life that is upside down."
Staff Writer Tom Bell can be contacted at 791-6369 or at:
This house at 580 Dow Road in Orrington, scene of a multiple-fatal fire Saturday, stands charred from the inside out on Tuesday.
By Tom Bell
The father and three children who perished in the Orriginton fire last weekend were living in the house under an unusual arrangement that is discouraged in the real estate industry, according to several real estate agents who are familiar with sales of financially distressed properties.
Benjamin Johnson III, 30, and his three young children died Saturday in a fire that was ignited by cardboard boxes placed too close to a wood stove. The mother, Christine Johnson, 31, was rescued from the roof by firefighters.
Investigators said they found one smoke detector in the house, but it had no battery. The state Fire Marshal’s Office and the Orrington code enforcement officer said Wednesday that there were no code violations in the house and that there was no legal requirement for the home to have a working smoke detector.
Real estate agents said the housing arrangement – which allowed the Johnsons to live in the house rent-free for months until the sale was completed – is discouraged because it poses financial risks to all parties. At the same time, no one has suggested that the broker, the bank or the owners were in any way liable for the tragedy.
The Johnson family planned to buy the two-story Cape and were waiting for the sale to close. They were heating the house with a wood stove because the pipes for the hot water heating system had been broken while the house was vacant last winter. They planned to replace the system once the sale was finalized, giving them access to the bank loan they were using for the house purchase, according to the real estate agent who worked on the deal.
The house was being sold as a “short sale,” meaning it was being sold for a price that is lower than the principal owed on the loan. Banks often prefer to sell a property at a loss rather force the owner into foreclosure because they typically end up with more money.
The house’s owners, John Costello and Heather Bemis, had moved out in May 2011. The Johnsons moved into the house in March 2012 after they received approval for financing and a purchase-and-sale agreement was signed, said Philip Cormier, the real estate agent who worked for the Johnsons.
Short sales can take many months to complete. At the time, the Johnsons were living in a cramped mobile home in Brewer with a leaking roof.
Cormier said he encouraged the Johnsons to consider moving in while the bank was processing the sale, and that Costello and Bemis agreed to let the family live in the house because a vacant house is an easy target for vandals and copper thieves looking to steal pipes.
Cormier said he warned Benjamin Johnson a couple of weeks ago that the house was not designed to be adequately heated by a wood stove and that the deal would not close for another two months. Cormier said he suggested that Johnson buy a direct-vent heater.
JPMorgan Chase Bank, which held the mortgage for the home, was not aware that Costello and Bemis had allowed another family to live in the house, said Melissa Shuffield, a spokeswoman for the bank.
Several real estate agents who are experienced in short sales in Maine said that agents and banks typically discourage the practice because it creates too much financial risk for all parities.
“It’s really not how it’s done,” said Marty Macisso, a short sale specialist at the Regency Reality Group in South Portland. “It becomes a liability for the owner and the bank.”
Even though the bank, seller and buyer have agreed to a price, the bank can still reject the deal until the last moment, Macisso said. If that happens, the seller may have an angry tenant who may not want to leave or allow the house to be shown to other potential buyers, he said.
Moreover, a buyer who invests money in upgrading a house before the short sale is finalized could lose the investment if the deal falls through, Macisso said.
Danni O’Halloran, a real estate agent in Bangor, said she has never had a buyer move into a house before the deal was finalized. Although vacant homes are a target for thieves and vandals, she said, banks would rather have a home vacant than occupied by the prospective buyer.
However, while the arrangement in Orrington is uncommon, there are situations in which such a deal might make sense for both parties, said James Stoneton, with Coldwell Banker American Heritage Real Estate in Bangor. He said he is seeing a lot of short sales of vacant homes that have been burglarized and stripped of materials.
“It depends on the circumstances,” he said. “In this situation, as tragic as it is, without the fire it may have been just the right thing for the buyers and sellers.”
Costello and Bemis did not respond to a request for an interview.
Staff Writer Tom Bell can be contacted at 791-6369 or at:
Marty Macisso of Regency Realty Group discusses the Mortgage Debt Relief Act extension for the entire 2013 year. Now is the time to list your home as a short sale if you have not.