Got you to look, didn’t I?!!

It sure looks like the real one in Washington, DC.  Actually, this one is in Georgia.  A guy in DeKalb County, Georgia built this replica of the White House complete with an Oval Office and Lincoln Bedroom.

Unfortunately, he fell on hard time and the bank issued him a foreclosure notice for $1.7 Million.  A faith based coalition of churches and community activists came together and was able to get the bank to renegotiate the loan to make it more affordable for the owner to keep the property.

It is currently for sale for $9.8 Million.  If you can’t win the White House, maybe you can just buy it!  Read the full article here.

Steve Perry at the MinnPost wrote a very interesting article about who is really getting hurt by the foreclosures in Minneapolis.  Mr. Perry interviewed Ryan Allen, an assistant professor of Housing and Community Development at the U regarding the research he has done into Minneapolis Foreclosures.  Professor Allen presented his findings last week at the State Demographic center and the Humphrey Institute.

You can read the entire interview here.

The city of Saint Paul is debating an ordinance that would require rental property owners to attend a class every 2 years.  This class would be required in order to obtain or renew a rental license in St. Paul.  Read more about it at the Saint Paul Real Estate Blog.

There are so many loopholes and bear traps that these REO banks put their documentation when buying foreclosed properties. Here is just one clause that I use to protect my buyers as much as possible:

Buyer and seller agree that if property is condemned, loses its zoning or rental license, has new code compliance orders issued, or otherwise changes status with any governmental jurisdiction prior to closing, the buyer may cancel this agreement by written notice to the seller’s agent and all earnest money will be returned to the buyers.

This clause is especially important when dealing with vacant properties in Minneapolis or Saint Paul.  Occasionally between the accepted offer and the closing, the city can come in and slap the property with a vacant building fee or more code compliance.  You want your customer to have an out if those costs could be too high.

On the radio yesterday I heard that “the officials” were saying that cybercrime and identity theft are up dramatically. They blame it on the weak economy. I guess criminals are getting laid off and taking pay cuts like the rest of us and are therefore putting in some extra hours to make ends meet!

The following is my explanation of sale that I was involved in. I was only made aware of the design of this sale at the closing table and really pieced it together after reading about similar scams in following weeks. This scam did not affect me or my buyer, but as you will read, probably affected the seller and bank. While I am not implying these next people are criminals, their techniques sure don’t smell on the straight and narrow. I have heard the Department of Commerce is looking into it. You can decide for yourself.

Situation:
Buyer/Investor watches the pre-foreclosure lists.  He contacts a homeowner on the list (who may or may not be selling his house) to buy their property.  Buyer/Investor writes the offer contingent upon the bank approval for a short sale on the house.  The homeowner signs docs and/or gives the buyer/investor personal information linked to the loan to negotiate with the bank on the homeowner’s behalf.  Sometimes this will be in the form of a power of attorney.  Occasionally, the document will not allow the homeowner to even know the details of the short sale.

The buyer/investor will begin negotiating with the bank on the short sale.  Typically he does not disclose to the bank that he is also the buyer of the property!  In my sale/example, it turns out he was telling the bank that he could get them no more than $75,000 for the property even though the seller had paid $180,000 only 2 years previously.  At the same time, other properties in the neighborhood (of the exact same layout, age, and condition were selling for $115,000).

Concurrently, the buyer/investor puts the home on the market looking for a “replacement buyer”.  This could be you; it could be one of my customers.  In this scenario, they were selling the property through a real estate agent on the MLS for $113,000.  They were set at the correct price for that property.  The buyer/investor is betting on being able to sell the property to the replacement buyer prior to the short sale falling apart on him.  The investor/buyer often has no liability or responsibility to execute on his purchase.  He will have lots of contingent fine print that gets him out of the deal if he can’t get the bank to take the short sale or more importantly if he can find the replacement buyer.

Problems:
On the surface, you may be thinking, why is this bad? This buyer/investor is just good at pulling all the pieces together and making money being the middleman. Let’s examine who can/will get hurt:

• Homeowner gets hurt if they waste time with this buyer/investor while the clock is ticking during the redemption period.  If the buyer/investor walks, they get nothing but closer to losing their house.
• Homeowner gets hurt as often these buyer/investors are not negotiating in favor of the homeowner with the bank.  They can possibly leave the homeowner with a large unsatisfied debt (of the difference between the mortgage and the sale price)-most legit short sale real estate agents will insist that the bank waives any deficiency judgment.
• The selling bank gets hurt as it only receives $75,000 for the property in the short sale when the retail buyer (you or my customer) actually would have paid $113,000 for the property.
• Although the buyer of the property is usually oblivious to this scheme, they can be hurt if the buyer/investor does a double close and leaves chain of title issues These can happen as these buyer/investors will often use a land trust or other legal instrument to hide their identity/liability.

These type of schemes are hard to spot on the buyer’s side of the transaction. All we ever see is paperwork back and forth with names we don’t recognize and situations we are not aware of. As a seller, though, you need to keep your eyes open in this market as new schemes or “creative programs” are popping up all the time.

Are you spending hours and hours on the Minnesota MLS sites trying to find that needle in a haystack.  Are you looking for that foreclosed property for just the right price in just the right area?  Do you kick yourself if you miss a day of looking at the MLS?

I have had a lot of requests lately for this so I am putting the offer out to everyone.  Go to this simple registration form, fill in your preferences, and I will set up a daily email with all the foreclosed properties that meet your criteria.

How easy is that?!  Every day you will get an email automatically that you can look through at your leisure.  The new system even has the ability to put properties in the “trash” or in your “favorites” to track.

Scott