Tuesday, October 12, 2010

Pickens County Georgia Foreclosures: Unravelling the Mess of Moratoria, Fraud, Lawsuits, and Wall Street Arrogance.

While foreclosures in the headlines are nothing new--it seems this has been a favorite topic for traditional news media and bloggers alike (myself included), for the past couple of years--the latest headlines have spurred a whole new level of not just discussion, but possibly action as well.

In brief, the latest issue involves the improper handling of foreclosure and loan documents by several of the largest lenders in the country. Documents submitted to the courts as part of judicial foreclosure actions were supposedly not properly verified and attested to by the lenders, as required by law, essentially committing a fraud upon the court and bringing the legality of the foreclosure into question. In anticipation of the legal challenges that are certainly going to follow, a number of these banks have imposed a moratorium on foreclosures in 23 states, allowing themselves the opportunity to go back and review and fix the problem as necessary. Bank of America has extended their moratorium to all 50 states.

While there is much discussion as to the likely impact of this latest development, most of it is just blind guesswork, as no one really knows how this is going to play out. Some feel the temporary halt to foreclosures, aside from temporarily benefiting the affected homeowners, will allow real estate markets a chance to recover during the lull in activity from bank-owned REO properties that tend to inflate inventory and deflate prices. Some go so far as to say that there will be some sort of reprieve for delinquent homeowners during the moratorium, thereby undoing much of the doom-and-gloom we have been hearing about the staggering numbers of delinquencies and underwater loans across the country.

Others argue the opposite, that this is only going to delay a recovery, as potential buyers avoid purchasing foreclosed homes or sit on the sidelines altogether, until they are certain their purchase isn't going to be impacted by lawsuits. Many who were formerly "predicting" we were on our way to a recovery, now suggest this will be the catalyst for a reversal, and that the housing market will take several more years to recover.

In light of the numbers of people affected by the bank actions, current public sentiment against Wall Street, the issue being framed within words like "fraud" and "illegal", and with an important election just ahead, it is no surprise that politicos have jumped on the cause for some people-pleasing speaking points, and the attorneys general of 40 states (as of this writing) have announced the launch of investigations into the matter.

For me, only one thing is certain . . . the further uncertainty this all creates.

Many desperate homeowners likely see this as a merciful intercession on their behalf. Unfortunately, at least as it appears right now, provided the lenders can show the facts asserted in their filings were correct, they will get away with their lack of candor before the court, and the foreclosures already completed will stand. The banks are certainly going to mend their ways before completing any more judicial foreclosures, so that the issue doesn't come up again, and at the end of the day, delinquent homeowners will remain in default, with the likely end result still being that of a short sale or foreclosure. The actions of the banks, dishonest as they may be, aren't likely to remove the obligation to pay debt as agreed upon by the borrower. Of course, they may get to live "rent free" for a couple of years in the meantime, but the idea that thousands of foreclosure actions will now be reversed, is perhaps a false one.

And not all states are affected equally. Here in Georgia we have "non-judicial" foreclosures, which means the issue in the other impacted states, where foreclosure requires approval from a judge, and where the paperwork that was submitted to the court now appears "voidable", is not applicable in Georgia. This confusion about the process for borrowers in different states is likely to create misunderstandings and unwarranted lawsuits, without any real gain for distressed homeowners.

Any government action, as is usually the case, is likely to be more showcasing than problem-solving. Lenders will be (further) vilified from the podium, and some low level functionaries will be fired and/or prosecuted, but in reality the cozy relationship between politicians and the vast campaign funds proffered by the banks is likely to ensure that there is no dissembling of their power, even in the face of yet another suggestion of greed-driven ineptitude. They are after all, too big to fail. It wouldn't be surprising to see the creation of yet another government, or government-sponsored, entity to "oversee" the issue, the cost of which unnecessary, overpaid paper-shufflers will be borne by us, the taxpayer/consumer.

The decision to buy for some buyers, it's true, may be adversely swayed by what's going on . . . all of those buyers who are carefully tracking what's going on, understand the potential ramifications (if any), and are basing their decision solely on such a clinical analysis of fact and prognostication. Other buyers, those who bury their heads in the sand at the first hint of bad news and who choose not to try to understand the underlying fundamentals, may also lean on this as a reason not to buy . . . but who weren't going to buy anyway in this uncertain environment.

The rest--the majority--are going to continue to be driven by the less "newsworthy", but far more significant, factors that make up the human condition: employment, marriage, death, divorce, birth, health, education, and the other "little" things in life that play a major role in our decision to buy, or not to buy, a home. My opinion is that job security, the ability to actually get a mortgage, the overall economy, and so on, are far more likely to shape the direction of real estate markets across America, in Georgia, and right here in Pickens County, than all the frothing at the mouth of media pundits as to how the world as we know it is about to change over yet another sleight-of-hand by corporate banksters.

For me, I think the bigger concern for buyers than the doubts about whether purchasing a foreclosed property is a safe bet or not, is the further eroding of any semblance of trust borrowers have in the banking industry and mortgage process itself. With all the negative press about TARP funds, huge executive bonuses for overseeing otherwise failed banks, mishandling of short sales, toxic loan offsets, deceptive loan practices, and now this, borrowers--particularly first time buyers--have to be thinking real hard before taking the leap into entrusting their hard-earned dollars to an industry so rife with shady practices and mismanagement. My advice to clients is increasingly to avoid the big names if possible and seek out local lenders and community banks who still care about "reputation", and who don't have millions of taxpayer dollars, and Treasury Department buddies, to fall back on.

Beyond this distracting discussion of who did what and when, the disturbing (and growing) number of homeowners behind on payments, and the number of homes with negative equity around the country, hasn't changed in any way. Unless the underlying fiscal crisis is addressed in a more meaningful way, the economic landscape remains unchanged. The home saved from imminent foreclosure today, is still faced with it tomorrow . . . possibly along with the neighbor's home. All this hoopla about legal technicalities does no more than delay what is coming, making the argument about whether the moratorium is a "good" or "bad" thing rather redundant in my opinion. We still have an economic recovery to navigate.The only potential positive would be if the delay allowed for some solution to be worked out for distressed homeowners in the interim, and if Wall Street firms were finally brought to their knees by their own gross negligence, the way any other dysfunctional business would.

The reality of either taking place, is minimal. Efforts at fixing, rather than forestalling, the foreclosure crisis have proven futile, as there are too many moving parts. The only resolutions given real consideration are those in which the banks suffer minimal loss, if any, and executive salaries don't have to be cut, which solutions invariably come, once again, at cost to the taxpayer/consumer. Likewise, the idea of "negating" foreclosures as a penalty for the current improprieties is unlikely; the cost to the banks would be too steep. There will probably be some "negotiated" settlement with the government, (ala BP, in which a lowball settlement will save the banks from much greater and more costly consequences, while looking good to the consumer). Part of that settlement may entail some sort of concession for homeowners in default, but when the smoke clears, the banks will endure no undue hardship.

They are after all, too big to fail. Again.

Sunday, July 25, 2010

The Pitfalls of Personal Property (Part II): Avoid This Costly Trap When Buying or Selling a Home in Pickens County, GA

NOTE: I am not an attorney, and this is personal opinion based on my real estate experiences over the years, not legal advice. For specific questions, concerns, or contractual guidance, please consult with legal counsel.

My previous post identified personal property as an area of real estate transactions that can lead to disagreement (and unpleasantness), between buyers, sellers and their respective brokers, up to -- and beyond closing -- and is therefore an area requiring particular attention.

Experience has shown that there are certain gray areas as to what constitutes personal property and what doesn't in the sale of a home. Buyer expectations that the above-ground swimming pool, hot tub, garden arbor, projection screen, or gorgeous plantation shutters were to remain with the house lead to surprise and exasperation when occupying the home and finding them gone.

Sellers on the other hand face claims that the flat screen TV above the fireplace was "attached" and therefore real property, not personal, and should have been left behind, or that the electric generator is an integral part of the home and should never have been removed.

So which is it? Short of a lengthy (and expensive) court battle, it can be hard to tell. There are some conventions, but they are constantly shifting and can vary between jurisdictions. Some buyers moving to Georgia are often surprised to learn that while the stove / oven / dishwasher are invariably included in the sale, the refrigerator usually isn't . . . even if it is the matching piece to the other appliances. Sometimes the microwave is included, sometimes not.

So, how to get around this?

  1. Investigate.
  2. Negotiate.
  3. Document.
  4. Record.
  5. Double-check.
As a buyer, observe everything. If you have a question about whether something stays or goes, or if there is something in particular you want, ask. Ask your agent or the seller, and make a note of what was said. Jot down all you see or want before making an offer.

In Georgia, a Seller's Property Disclosure will include a lengthy list of items that remain with the property (everything from door hardware and outlet covers, to shelving systems and ceiling fans). Read through the list carefully, and again, ask about items not included or left unchecked if they are important to you. If not checked, you are going to face a tough battle arguing they were supposed to stay, fixture or not!

I have seen disclosures in which items like phone jacks and light fixtures were not checked as "staying". Often this is just an error, but why rely on an incomplete document, when a simple question can settle it?

When it comes time to write an offer, be sure to include anything in writing that you are asking for, have discussed with the seller / their agent, or for which there is need for clarification. Ensure that items are fully and accurately described, so that there can be no mistake or confusion. Leave nothing to rest upon any "verbal agreement", unless you really aren't that concerned about it and are willing to take your chances on not getting it.

If the seller is to leave the oven, does that include the racks and broiler pan? Do the floor lamps include the lampshades? Does the king size master bed that is to stay include the box springs and mattress? Be thorough and put it in writing! Itemize all personal property on a separate bill of sale as an exhibit or addendum to the agreement.

If there is an item of particular value included in the sale (TV's, digital projector, boat, etc.), which could be readily switched out for a lesser model, you may even consider recording the specific make, model, year and if available, even the serial number, to ensure there is no "accidental" switch prior to close. Yes, it can happen.

With the seller's permission, take pictures and / or video of the interior and exterior of the property, particularly if you are including furnishings and artwork in the sale. This will provide a visual record if any dispute arises. Total recall is difficult in a home you may have visited only a couple of times and it becomes your word against somebody else's.

Finally, once you have identified what you want and / or expect to get with the home beyond the structure itself, have made it clear to the seller what those expectations are, and have thoroughly documented them, go back and check! The closer to the actual closing date and time you do a final walk-through the better.

On more than one occasion I have seen light fixtures "traded out" prior to closing, despite a disclosure saying all light fixtures were to remain and with no other agreement to the contrary. I have seen a built-in instant hot water heater at the kitchen sink replaced with a cheap soap dispenser. A propane tank drained of all fuel. A newer washer & dryer set switched out for an older set.

Rose bushes and other flowering shrubs seem to be another favorite last minute change of heart by sellers, who, often for sentimental reasons, just to decide no one will notice or care if these are gone. Wrong. Buyers do notice. And they do care. Sometimes just as a matter of principal as much as anything. Other times the item was significant to them as well.

And it's not necessarily a dishonest or spiteful intent by these sellers, or a reflection on what "type" of people they are. And not all sellers do it. Some leave even more than was agreed upon, rather than move it. Homes are just usually a big part of our lives, filled with memories and years of love and labor. It is often only as that big "closing day" approaches that we suddenly realize how big of a change it truly is in our lives and try to salvage a part of it.

So, if that rose bush or antique chandelier is important you as a buyer, go ahead and put it in writing. And then go back and check that it is still there.

Much of this is equally true for a seller. When placing your home on the market, examine everything. Anticipate that as part of the negotiations, a buyer may ask for anything they see, not just your home, so try not to be offended, and be prepared as to how you will respond. Requests can range from including artwork and window treatments, to electronics and personal decorative items, as part of the sale. Decide what you are willing to part with.

Document thoroughly in the seller's disclosure what is definitely included (stove, shelving, fences, irrigation system, etc.), and give your agent a list of what you would be willing to consider subject to a suitable offer (furniture, tools, etc.), but also go ahead and identify in the disclosure items you are absolutely not including in the sale if there is question as to whether it might be considered a fixture or you just aren't willing to part with it (attached gas grill, custom built bookcase, ball and claw bathtub, etc.). The more clarity provided to all parties up front, the smoother negotiations are likely to go.

Review any offer carefully to ensure you understand all you are being asked to give up, and don't be scared to counteroffer, identifying those items not included in the sale, just to keep everything clear.

Create your own photographic / video record of the interior and exterior of the home -- you may need to defend yourself against a claim that something was there that no longer is, or vice versa. (A less frequent issue in transactions, but still a possibility.)

Basically, as with so much in life, open communication throughout a real estate transaction is fundamental and vital. When buying or selling a home, aside from avoiding some awkward moments, some very expensive mistakes can be easily side-stepped by approaching the transaction in a thorough and systematic fashion . . . and by ensuring that all parties are on the same page from day one.

Get it in writing!

Tuesday, June 29, 2010

The Pitfalls of Personal Property: Things to Keep in Mind When Buying or Selling a Home in North Georgia!

There are several problem areas that can upset the apple cart in a real estate transaction, most notably buyer financing and inspection issues, but personal property is one often overlooked area that can cause considerable unpleasantness and/or confusion for both buyers and sellers.

While financing and inspections are generally handled during the due diligence phase of the agreement, and are therefore "accounted for" and addressed before the transaction progresses too far (even if this ultimately means a dissolution of the deal), personal property on the other hand is usually a beast that only raises its ugly head shortly before, or even worse, shortly after, closing. A time when dealing with it is extremely difficult, nerve-wracking, and often costly . . . if dealing with it is even possible.

Much of the issue lies within the understanding between the parties as to what constitutes "personal property" to be taken by the seller, and what will remain and be conveyed as part of the sale as either "real" or personal property. The simple answer as to what constitutes personal property is anything generally not attached to the home or land being purchased, and therefore not considered a "fixture", but in reality the answer is more complicated. And it is usually only at some point during a pre-closing walk-through, or when the buyers actually move in to the home, that this difference in understanding reveals itself . . .

  • Generally a refrigerator is not considered a fixture as it merely plugs into the wall . . . except it is also often plumbed or "attached" by way of the ice maker line, so is it real or personal property?

  • Many gas grills are now "attached" to a gas line in the same way, does that make them a fixture?

  • And what of wall-mounted flat screen TV's?
These are some of the more obvious examples, but items like window treatments, hot tubs, shelving systems, and satellite dishes all come into play. And if the window treatments are to remain, is it just the attached wall mounts, brackets, and so on, that remain, or all the drapes, valances, and tie-backs associated with them as well? Even if the buyer and seller agree on what constitutes real and personal property, and what stays with the home, is the buyer assured of actually getting what they anticipated? Not necessarily so. And for this reason, documentation is key.

In the state of Georgia, a Seller's Property Disclosure is usually available from the seller, and is a document I highly recommend be included as part of any real estate purchase agreement!!! The standard seller's disclosure form, as drafted by the Georgia Association of REALTORS, provides -- aside from the expected disclosures about any faults, flaws, repairs, reports, or other issues relating to the property -- an extensive list of items which may be considered "personal property", and which the seller must check off as either staying or going. This is a great start, but that's all it is, a start.

Even with mutual understanding and a written agreement, there can still be pitfalls for both buyers and sellers when it comes to the handling of personal property in any real estate transaction, which I will cover more in more detail in my next post . . .

Thursday, April 29, 2010

Jasper GA Real Estate Three-Year Sales Data: Home Sales Stats 2007-2009

A review of sales data for homes listed in real estate in Pickens County GA over the past 3-years, shows an apparent decline in overall home sales of roughly 37% since 2007. The number of homes sold in the Jasper area that weren't some form of foreclosure, short sale, or other corporate-owned property however, actually showed a more significant drop -- around 54% fewer sales over the 3-year period -- while the number of home sales identified as some form of distress sale in the same period, doubled.

Not surprisingly, average home sale prices reflected a similar pattern . . . declining along with sales volume. Average overall home sale prices dropped approximately 14% over the 2-year period, with bargain-priced distress sales clearly a factor in pulling the overall average down. As can be seen in the graph below, non-distress sales showed significant year-on-year drops in average price. Interestingly enough, distress sales in fact posted a 33% gain in average sale price over the same period -- narrowing the gap between the average sale price for distress and non-distress homes.
Median sale prices showed a similar trend, with non-distress sales showing lower median sale prices (down 9%), even as bank-owned homes and short sales rose 13%. The graph below actually suggests an acceleration in median price declines for non-distress sales between 2008 and 2009, versus the more gradual declines shown in average sale price during that same time.
Part of the reason for this shift in median sale price lies in the makeup of sales volume. With the gap between the distress and non-distress sales gradually closing, there are fewer non-distress sales, selling within a more limited low/high range, even as more distress sales sell within a wider low/high range, bringing the two closer together.

Whether, or for how long, this trend will continue, remains to be seen. However, sales data for the first quarter of 2010 suggests a continuation through at least the first 3-months of this year, with an even higher percentage of total sales being lender-owned or short sales, and at higher average and median prices than in previous years, while "regular" sales continued to post declines.

Overall, the combined effect of lower sales volume and a greatly increased presence of discounted foreclosure / pre-foreclosure properties has pulled sale prices down over the past few years, but, the rate of decline in volume and price definitely seems to be slowing -- a leveling off that is essential if there is to be any hope of a recovery any time soon for real estate and home sales in Pickens County, GA.
For more information, contact Trent Cluley, Keller Williams Realty.

(All sales data obtained and compiled from First Multiple Listing Service and is believed accurate, but is not warranted.)

Sunday, March 07, 2010

Pickens County Georgia Foreclosures and Short Sales: Lots and Land Feeling the Pinch.

Foreclosures and Short Sales in Jasper GA Spreading to Land & Lots . . .

There has been plenty of discussion already about the decline in the sales volume and prices of homes for sale in Pickens County GA, and the rest of the country. And lately, the subject has been turning more to the possibility of a significant downturn in the commercial real estate sector. Less has been said however, about a key element in both residential and commercial real estate sales . . . the land beneath.

As housing sales have slowed and new home construction has dwindled, so too has the demand for residential building lots and larger tracts of land for development. In the Jasper area, including Big Canoe, there are, as of this writing, 530 residential lots for sale. Within the last year however, out of all the lots listed in real estate, there were only 22 sales. A rate of sales that equates to almost 25-years worth of inventory!

For larger, undeveloped tracts of land, the numbers are somewhat better, but still daunting. 109 parcels of land listed, with only 8 sales or pending sales in the past year --or, just under 14-years of inventory.

Aside from the obvious softening in price as a consequence of high supply and low demand, the foreclosure and short sale trend that hit housing so hard now appears to be trickling over into the lot and land segment as well, further impacting prices. What used to be a relatively rare phenomenon -- foreclosed land available for sale -- is becoming increasingly common.

At this writing, of the 530 land lots for sale in Pickens County, 52 are listed as lender owned, foreclosure or short sale. Nearly 10% of all active listings! For undeveloped land, 4 of the 109 available parcels are listed as bank owned, and 1 of the 8 sales in the past year is on a foreclosed property.

Many of the lots are in higher priced neighborhoods, such as Big Canoe, Georgian Highlands, and The Preserve at Sharp Mountain (which has a large number of bank owned lots for sale, several at very aggressive prices), as well as other mid-range neighborhoods like Wild Timber, Hunter's Ridge, and Arbor Hills. And that doesn't account for all the lots that have been foreclosed on and which aren't individually listed for sale in real estate at this time -- neighborhoods such as Dogwood Trace and Madison Ridge.

Overall, as with the impact of lender owned homes for sale in Pickens County, the drag on prices of bank owned land is likely to be felt by those trying to sell in a non-distress position. With many of the REO's offered at less than original purchase price, competing is difficult.

Tracking sales that have actually closed in the past year, and their closed sale price to list price ratio, lends support to this idea. Sale prices are often 20% or more lower than the list price (and in some cases substantially less so, 30-40% or more lower). On top of this, in the present economic climate, more land owners are finding themselves in a "must sell" situation, more so than discretionary, and are being forced to accept less than in better times.

All of which points to a burgeoning opportunity for land buyers.

With high inventory and many great options available, I expect to see (and have already started to see) growing interest in some of these land bargains in and around Jasper, Georgia.

For more information on land deals currently available in and around Pickens County, GA, or specifics on any of the neighborhoods mentioned, feel free to contact me with your questions!