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Distressed Sales

:
Potential Pitfalls &
Opportunities for Buyers

2009 REALTORS® Conference & Expo
Saturday, November 14, 2009
9-10:30 a.m.
San Diego Convention Center

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Moderator

Haley Hwang, e-PRO, SFR
Coldwell Banker Residential Brokerage
Glenview, Ill.

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Agenda

 Overview of distressed properties
 Timelines for distressed-sale transactions
 Ideal buyer candidates
 Questions to ask listing agents
 Potential pitfalls for buyers
 Q&A (last 30 minutes)

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How Do You Answer?

 Should I buy a short sale or foreclosure property?

 Why can’t you get me a great deal on one of those
corporate-owned homes?

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Why can’t I buy this?

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For the price of this?

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Short Sale Expert

Scott Thompson
Mortgage Resolution Services Inc.
Rancho Cordova, Calif.

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Foreclosure
Expert

Mike Phillips
Century 21 All-Pro
Kansas City, Mo.

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Relocation Expert

Liz Nunan
Houlihan Lawrence Real Estate
Armonk, NY

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Short Sale & Foreclosure Attorney

Stanley J. Czaja
Czaja and Associates
Chicago, Ill.

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Did You Know?
Distressed Sales in the U.S.

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– NAR
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Did You Know?

1 in 136 U.S. homes received a
foreclosure filing in 3Q 2009

– RealtyTrac

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Top 10 Foreclosure States (3Q 2009)

1. Nevada (1 in 23) 6. Utah (1 in 97)
2. Arizona (1 in 53) 7. Georgia (1 in 119)
3. California (1 in 53) 8. Michigan (1 in 122)
4. Florida (1 in 56) 9. Colorado (1 in 131)
5. Idaho (1 in 97) 10.Illinois (1 in 141)
– RealtyTrac

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Did You Know?

For every short sale that closed in 2008,
eight homes went into foreclosure.

– Fannie Mae

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Roughly 3.4 million homes are expected
to go into foreclosure by the end of
2009, up from 1.2 million homes in
2007.

– RealtyTrac

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Distressed Sales Defined

What Is a Short Sale?

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Distressed Sales Defined

What Is a Foreclosure?

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Distressed Sales Defined

What Are Corporate Inventory
Homes?

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Estimated Timelines

 Short sales
 Foreclosures (REO)
 Corporate inventory homes

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Advocate for Your Buyers!

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Who Are the Ideal Buyers for
Short Sales?

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Who Are the Ideal Buyers
for REOs?

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Who Are the Ideal Buyers for
Corporate Inventory Homes?

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Identifying Distressed
Properties

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Identifying Short Sale
Properties

 MLS or Agent Remarks (CC: Pursuant to
short sale)
 Special compensation information: short sale
 Tax records – mortgages recorded
 “Bank approval” required
 “Sold as-is”

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Identifying REO Properties
 Listing agent or e-mail address
(reo@risingrealty.com)
 Vacant property tagged by city or village
 “Addendums” required after contract
acceptance
 “No surveys or disclosures,” “EM in
certified funds,” “bank-owned,” “proof of
funds,” “tax proration 100%”
 Tax records – owner is listed as a bank

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Identifying Corporate Inventory
Properties

 Special “addendums” need to accompany
all offers
 “Corporate-owned”
 Tax records – relocation company listed as
owner

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Questions to Ask Listing
Agent
SHORT SALES

 What is the status of your file?
 Do you have more than two liens?
 What is your plan to satisfy the lien holders?
 Do you have any direct experience with the
lenders involved?

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Questions to Ask Listing
Agent
REOs
 How long has the home been vacant?
 Are all systems on or have they been turned off?
 What is the known condition of the home? Are
any major mechanicals missing or non-
operational?
 Will the bank do repairs on the property or offer
repair credit?
 Do you have any other offers on the property?

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Questions to Ask Listing
Agent
CORPORATE INVENTORY HOMES
 How long has the home been vacant?
 What is the known condition of the home? Are
any major mechanicals missing or not working?
 What inspections have been performed already
and can I get a copy?
 What warranties might the seller be offering on
this home?

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Potential Pitfalls
SHORT SALES

 Potential for not closing
 Poorly prepared listing agent
 An inflexible buyer
 Additional lien holders on the property

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Potential Pitfalls
REOs
 Lack of control
 No property history
 No remedy for inspections
 Nonrefundable earnest money
 Firm closing dates
 Condition of the home
 Higher costs

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Potential Pitfalls
CORPORATE INVENTORY HOMES

 Buyer responsibilities
 No contingencies

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Buyer Protections in Contract

 Short sales
 REOs
 Corporate inventory homes

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The Rewards

 Get properties at below market price
 Make a good real estate investment
 Know that they didn’t overpay for a
property

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Q&A

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Additional Resources

 Handouts for Consumers on Short
Sales (put your branding)
 SFR certification (Short Sales and
Foreclosure Resource) – $175 fee waived through
12/31/09!
 NAR’s Field Guide to Short Sales
 NAR’s Field Guide to Foreclosures

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