Author: ft Editorial Staff

A helping hand for negative equities

This article explains the services a broker can provide to clients with negative equities in their properties. Here are some tips for listing agents and brokers looking to market their services to owners with negative equities who either want to sell their property or get a cramdown of the loan balance and keep the property. Listings in multiple listing services (MLSs) for moderate- to lower-priced houses (excluding those that do not qualify for FHA financing, such as jumbo loan properties) generally fall into three categories: real estate owned (REO) properties held by lenders, which make up roughly 35% of listings; properties whose owners have no equity and are candidates for cramdown arrangements or short sales which represent roughly 60% of listings; or properties which have an equity and will generate net sales proceeds for the owner, the remaining 10% or less of listings. The Troubled Assets Relief Program (TARP) and pool servicing arrangements contain compulsions which are preventing lenders from doing anything about principal cramdown arrangements or short sales discounts. Lenders operating under these conditions are unwilling to agree to a discount or radical modification of a loan to meet property values. This means the agents and brokers are going to have to adjust the services they offer as short sales are no less likely to happen than cramdown arrangements with the lender. Whichever occurs, the listing agent in...

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“Shadow inventory” could further depress home prices

Banks are holding between 30-60% of their REOs off the market, inventory known in the industry as shadow inventory. In the Bay Area, for example, banks repossessed 51,602 residential properties between January 2007 and February 2009. Only 30,823 were listed and resold during that same period, leaving 20,779 (40.3%) unaccounted for. With anywhere between 80,000-100,000 shadow-inventory homes in California, it’s obvious that the foreclosure numbers are being artificially depressed by the banks holding on to these REOs. Whether it’s due to a bank system overwhelmed by the sheer number of homes they need to process to get them market-ready, or due to lenders deferring sales in order to turn a blind eye to the real extent of their actual losses, we can definitely expect more homes to hit the market and further depress home prices. How much those prices drop will depend on whether the banks are and will continue to strategically hold back some of their REOs so as to not flood the market. first tuesday take: The delay in getting properties foreclosed, some 800,000  to go in California during 2009 through 2013, will delay the recovery. Just as investors thankfully rolled into the market of single family residences (SFRs) as buyers to rent or flip the properties, they will soon, with equal force, feel uncertain about the future as the dumping of the coming flood of properties...

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Zestimates are great conversation starters with sellers and buyers. Zillow has done more for our bottom line than NAR ever has or will. Don’t fight the current of the river, learn to run with it. Disruption is inevitable in any industry that is fragmented or inefficient. Granted, it does feel like armchair experts and platforms are plentiful in real estate these days, but when the tide rolls out we will see the value proposition of the truest professionals in this industry shine once again.

Justin Bonney, on Zillow’s impact on the real estate industry

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