Love's Real Stories

Are you ready to fight the bank? Good luck, especially when it comes to short sales. If you happen to find yourself in a short sale, you’ll have a fight with a bank, alright, but all you can actually do is plead. You’ll become frustrated and angry. You’ll probably find yourself saying, “I hate the bank!” or “How can they treat us like this?” You might think that aggressive action will get results, but you might as well get in a bare-knuckle match with a brick wall. The bank is big. The bank is indifferent. You’re puny. In the end, you’ll wind up like all the contestants before you. You’ll be on your knees, pleading with the big bad bank for mercy.

Why is this so? In a short sale, the seller and buyer of a home must wait for the bank to accept less than it is owed because the house is being sold for less than the loan against it. “Wait for the bank” is an understatement. Buyers have seen their kids grow up and leave home while waiting for the bank. Realtors have suffered dementia and physical atrophy waiting for the bank.

The bank’s method for granting acceptance is to implement a regimen of slow, tedious torture. They lose paperwork, demand ever-increasing stacks of forms, never communicate, and withhold acceptance. The bank hides behind “Asset Managers” who systematically ignore the desperate struggles of their victims.

Enter the California Association of Realtors (CAR). CAR conducted a “Short Sale Satisfaction Survey” of its 150,000 Realtor-strong membership. The results not surprisingly, show overwhelming dissatisfaction. Realtors cite “unresponsiveness, onerous procedures, and long delays” in the short sale process, not to mention high rates of blood pressure, migraines, and divorce.

CAR is fed up with the banks, and has decided to do something about it. What are they doing? They’re pleading.

That’s right. CAR published an “Open Letter on Short Sales” in major newspapers up and down the state, calling on the banks to have mercy on us all. In the letter, CAR President Beth L. Peerce says, “Short sales can play an important role in our state’s economic recovery by accelerating the pace of home sales and reducing the inventory of bank-owned homes on the market. Banks get a nonperforming asset off their books and avoid the headaches associated with disposing of properties they don’t want to own in the first place.”

Ms. Peerce urges the banks to “standardize and streamline” the process, and to “increase staffing with the goal of eliminating service issues.” Then she points her verbal finger at them and says, “Poor and slow service has only exacerbated the problem. Horror stories abound from potential homebuyers and Realtors forced to wait 90 days or more for a response, or being required to fax short sale applications or other paperwork as many as 50 times.”

CAR is a powerful organization with lobbyists and political liaisons that have access to high places, and when President Peerce speaks, people listen. But when it comes to short sales, the banks might as well be on another planet. CAR is reduced, like the rest of us mere earthlings, to one option:

Pleading.

Dear Doug,

What are the best return-on-cost home improvements? We’ll be selling our house within a couple of years, and we need to add some “splash,” but we don’t want to over-do it. Any ideas?

–Home Improver

Dear Improver,

“Clean it and paint it” is the tried and true advice for low-cost preparation for sale. “Re-carpet it” is good advice, too. Leave your personal taste for color out of the equation unless you favor “neutral.” The good people at the paint and carpet stores will know how to guide you to neutral. For the bigger projects that can add more value to your home, we like the advice of Tom Kraeutler, the host of “The Money Pit,” a home improvement radio show. His list looks like this:

1. Front entry doors: The curb is first the step to a successful home sale, so curb appeal is top of the list. Say “Welcome Home” with a new front door, a simple improvement that delivers impact in buyer walk-ups, drive-bys and online look-sees.
2. Extra bedroom: Converting an attic or storage room into a bedroom is a smart way to add value. Kids are moving back in with parents and parents are moving in with kids, combining incomes and living space.
3. Decks: Building a deck is one of the least-expensive ways to extend your living space. Composite decking is a great low-maintenance option, and even building a deck from pressure-treated wood can bring a return on investment of up to 80 percent at the time of sale.
4. Siding: Don’t forget that curb appeal. A tight, tidy home contributes to curb appeal and takes major home improvements off a buyer’s worry-list.
5. Kitchen: The kitchen is a major selling point for a home. Its look and layout might make or break the deal. Kitchens are expensive, but you don’t have to go full-tilt. Just replacing countertops, key appliances or cabinet hardware can transform a kitchen’s look and impact.
6. Windows: Curb appeal again, with the bonus of energy efficiency. People are thinking green these days, and are interested in spending less green. Look into energy tax credits to help justify your cost.
7. Basement: Make an office, apartment, playroom, or shop. Think about those kids and parents sharing living space. If you give them some room to get away from each other, they just might buy your house.
8. Bathroom: Like the kitchen, bathrooms get expensive to remodel, but hold back. Think about replacing the vanity, sink and tub fixtures, and adding new hardware.
9. New power generator: With the aging electrical grid becoming less reliable, access to backup power is essential for a home. Gone are the days of bulky, smelly, portable gas-powered generators. You can now have a neat, compact standby generator installed right next to your outdoor AC unit that can repower most of your home within seconds of losing electricity from the utility.
10. Additions: If done wisely and in a way that won’t price your home out of your neighborhood market, additions are valuable home improvements. Add a second story, expand into a master suite, enlarge the garage or create an extra bathroom.

You’re on the right track, Improver. Fix it, shine it, and make it better, but don’t make it the Taj Mahal unless it’s just for you.

A real estate sale is a series of hurdles. The appraisal hurdle is the tallest, and if it’s knocked over, the other hurdles fall like dominoes. Game over. Escrow is cancelled, everybody goes home.

Dead escrows litter the landscape of real estate sales. More often than not, the cause of death is low appraisal. It’s epidemic.

“I just don’t get it,” said realtor Mary Beeber as she stepped over the body of a freshly killed escrow. “My buyer was one of three competing for the property. We know it’s worth the price. They were so happy they got it. Then the appraisal came in ridiculously low. Stupidly low. It killed the sale. To think my buyer had to pay their lender $450.00 for the appraisal that killed their own deal. That’s the second home they’ve lost to low appraisal. They’ve lost money and the chance to own a home.” Mary paused, and then upped the volume: “Appraisers are idiots!”

An appraiser might take offense; maybe not.

“I see her point,” said Troy Judge, appraiser. “We’ve seen a lot of deal-killer appraisers coming through our area the last few years.” He attributes the epidemic in large part to “geographic incompetence” by appraisers working too far from home. “They don’t know our market,” said Judge. Appraisers unfamiliar with a neighborhood are likely to turn in an appraisal under-value.

The parade of uninvited appraisers invading our market is the result of new rules. The Home Valuation Code of Conduct (HVCC), crafted by the U.S. government, is a rulebook designed to prevent collusion between lenders and appraisers. The HVCC is a reaction to the hyper-active years of the recent past, when real estate values soared, and lenders allegedly pressured appraisers to inflate numbers, so new loans could fly faster and higher.

Well-intentioned as the U.S. government may have been, the HVCC backfired.

“The HVCC turned it all upside down,” said Judge. “I’ve been in this business over 25 years. I know the properties in my area, the neighborhoods, and the boundaries that affect values. The local banks and lenders I’ve built relationships with can no longer call me.”

Now lenders are required to “blind order” appraisals through an Appraisal Management company, and make no direct contact with appraisers. Appraisal Management companies order from a long list, which often results in out-of-area appraisers exploring unfamiliar territory.

The Appraisal Management companies aren’t non-profits; they take a cut of each appraisal fee. The fee they offer the appraiser varies from company to company and job to job. Judge has the opportunity to negotiate, but if an Appraisal Management company doesn’t like his number, they move on down the list.

As a result, buyers are at the mercy of low-bidders, geographically incompetent deal-killers, and they pay for the privilege. Sellers watch helplessly as they lose a sale. Competent local appraisers lose business. The housing market takes another kick in the shin.

HVCC has become a bad word. Appraisers, lenders, and realtors alike are jumping and waving at the U.S. government to get attention and hopefully intervention.

The good word is the HVCC rules are under government review.

The question is, how long does it take the U.S. government make a policy decision?

Dear Doug,

What’s this new law about Carbon Monoxide Detectors? We own our home and we own a duplex rental. How do we comply?

–Law-Abiding Citizen

Dear Citizen,

You declare yourself law-abiding, but apparently you haven’t installed a Carbon Monoxide Detector. You are now an outlaw in your own home.

Take note, Citizen: The new law is in two parts. One part is for homeowners, the other for rental property owners.

Homeowners were required to have installed Carbon Monoxide Detectors in their homes by July 1, 2011. That’s almost two months ago.

Rental property owners must install Carbon Monoxide Detectors in their rental properties by January 1, 2013. That’s over a year from now.

Any property containing an appliance or heater that burns fuel of any kind (wood, gas, oil, charcoal, coal; anything that burns) must comply. Think heaters, water heaters, dryers, fireplaces, and the like.

To the important questions:

1. Where exactly in each home or rental unit should Carbon Monoxide Detectors be installed?
2. Unfortunately the law doesn’t speak to exact placement of the Detectors. The Fire Department recommends installing Detectors centrally located outside of all bedroom areas in the house, and on all floors of multi-story homes, including basements.
3. Both plug-in and ceiling-mounted models of Detectors are on the market. Is it okay to plug the Detectors in at floor level?
4. Carbon Monoxide is “neutrally buoyant” in air, slightly lighter than air, so it builds slowly. Therefore, a floor-level Detector will work theoretically, but might not be advisable because it could be dislodged or tampered with more easily. Kids or dogs or stumbling people are likely culprits. Many varieties of ceiling-mounted models are available, including combination Smoke Detector and Carbon Monoxide Detectors.
5. What’s the big deal with Carbon Monoxide?
6. Unfortunately, there are far too many cases of Carbon Monoxide poisonings and deaths. The gas is odorless, colorless and tasteless. It disorients its victims, puts them to sleep, and eventually kills them, when all they need is some fresh air.

Take note, Citizen: You have been exposed here as a law-breaker. I crack easily under pressure of interrogation, so your identity is in jeopardy. Do us both a favor, and get right with the law, okay?

Start to finish, a short sale is like a maze for rats in a science lab experiment. Bank asset managers (like scientists), release buyers (like rats), into the maze. Unsportsmanlike, the bank-scientists constantly change routes through the maze, adding and moving road blocks, redirecting traffic at will. The buyer-rats, even ones possessing a keen sense of direction and pattern-memory, are rendered helpless. They often lose all will-power, giving up entirely. Every so often, a bank-scientist lifts a gate here, moves a barricade there, allowing a successful run-through. A lucky buyer-rat thinks, “Well, I don’t know how I got here, but the cheese is mine. What a long strange trip it’s been.”

Protest against the banks is underway. Citing cruel and inhumane tactics, calling them out on their unethical short sale practices, is the California Association of Realtors (C.A.R). C.A.R. recently sent letters to the heads of the nation’s largest banks – JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo.

In the letters, C.A.R. made the following demands:

• Provide clear directions and realistic time frames for short sale approval.

• Provide short sale approval requirements up front.

• Disclose whether a loan is owned by the bank, and if not, who has authority for final approval.

• Approve the short sale and acceptable price prior to a property being listed for sale.

• Review and respond to a short sale request within 30 days.
• If a short sale is rejected, be explicit as to why and how it can be corrected.
• Don’t restart the entire process simply because something is missing from a file.
• Have a live person available to provide information about a file’s status and shortcomings, and to assist in problem-solving.
• Increase the speed of processing files. Too often, months elapse and buyers lose interest.
• When a short sale is approved, be explicit that there will be no pursuit for payment on the forgiven loan amount, as required by law.

C.A.R. says they will remain vigilant in the arena of short sales and issue updates on their progress.

Start to finish, short sale buyers, like all buyers, deserve to be given a fair shot, not tossed and lost, like rats in a maze.