Our Ashoka Changemakers to enhance the number of green homes through foreclosure intervention proposal got new life yesterday with a notification that we’d been shortlisted for a leadership prize. Made my day!

The idea was a nice try, even a good thought. But since 2008, servicers have been trying their loan mod thing, and you just have to say it’s not working.

First, let’s separate out those for whom it IS working. Even now, the majority of people with underwater homes are making their mortgage payments. I can’t say why, but I think people feel a sincere obligation to pay their bills. When they signed up for their loans, they took seriously that little part of the note that says, “I promise to pay.” And I also suspect that these same kinds of people are the ones for whom loan mods are working, whose temporary modificatons become permamnet because the borrowers perform.

But a growing number of borrowers is starting to reconsider. The first step in a loan modification is capitalization, where the unmade payments and fees are added to the borrower’s principal balance. If no payments have been made for a year, which is far from uncommon, they get added on to the balance. The new payment may be less, but the borrower is more underwater than before.

Underwater homes may be the single biggest disincentive to completing a temporary loan modification, let alone a permanent one. If HAMP loan modifications are going to work, the disincentive of the inverted loan-to-value ratio must be addressed.

One way is for servicers to be more aggressive in their collections, even filing a notice of default in 60 or 90 days rather than the 120 to 260 and more, as is the case now. That way, the number of payments to be capitalized would be less. One of the stages in the loan mod waterfall, as it’s called, is a principal reduction with very strict protocols. Fewer missed payments added here would make this stage more productive.

But borrowers and lenders could also proceed to short sale more quickly. Short sales are far better than foreclosures, or even deeds-in-lieu. Absent wide-scale principal reduction or an economic recovery, the best path for lenders and borrowers alike is probably the short sale, which you can read about at HabitationStation.

A colleague, Mike Rohrig of the Sunset Group in Beaverton, wrote a really terrific blog on how to choose a Realtor. Click here to read it. It’s short, sweet and so to the point.

What you’re looking for is integrity and competence. One of the things wrong with the real estate profession is the compensation model, where both the buyer’s agent and seller’s agent are paid their commissions from the proceeds of the seller’s house. Break this down further into (a) commission, and (b) where it comes from.

Since compensation is from a sales commission, no one gets paid until–and unless–a sale occurs. Agents list many homes that don’t sell and work with many buyers who don’t buy. The result is a lot of hours spent for no pay.

Which means that when a transaction DOES close, it somehow has to make up for all those that didn’t. The broker, then, works as much on shinning for leads and getting people to like her or him.  Leads becoming clients depends  more on building a relationship than demonstrating integrity and competence.

Think about it. If you had a colonoscopy, does it matter whether or not you like the gastroenterologist? Of course not. You just want the guy to know what he’s doing. And a successful outcome, whether it’s bad news or good news, has nothing to do with how much he likes you.

When was the last time someone chose a Realtor the same way they chose a doctor? I don’t know, either.

Where the sales commission comes from–the sale of the seller’s house–adds to the problem. If the agent representing you doesn’t get paid until the house closes, whose side is he or she on?

Most agents do as best as they can to work around these inherent conflicts, I think, some better than others. But still, how do you choose an agent?

• Referrals are ok.
• Reviews are suspect, because brokers only post favorable ones
• Does a broker’s expensive car mean she’s successful, or is she guilty of conspicuous consumption?
• Does “Number One in Sales,” or some similar tag noting how many deals the broker closes good or bad for you? Wouldn’t a broker just starting out wotk harder for you? For that matter, wouldn’t a part-times also be more focused on your transaction than if he had thirty to worry about

Mike answered some of these questions. And Terradigm has some ideas at Habitation Station.

And I’d love to know what you think!

Homes in or near Multnomah Village and Hillsdale tend not to stay on the market for long, and our listing at 4621 SW Caldew looks like no exception. Click this link to see what enhanced listing does to a property.

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This question continues to come up. The answer is…most likely not, but maybe.

The stakeholders, besides the investor (lender) and the buyer are the listing agent and the asset manager. Lenders retain asset managers, who in turn engage listing agents. Asset managers are graded on how much money they get for a property, the scale being between 90% and 100% of the BPO (broker’s price opinion) value, which sets the listing price.

Anything above, say, 95% is considered good. The other grading metric is how fast the property gets liquidated.

The BPO value is pretty hard. The listing agent, who is quite experienced at BPOs, prepares the first one. These are often verified by unrelated agents performing BPOs on the same property. The listing agent will update these periodically, generally every thirty days. The home’s price will be well-justified, which is why a lowball offer will be rejected.

Acceptance of a low offer is therefore most likely to occur if the home has been listed for at least thirty days and hasn’t seen much activity. Buyers making such an offer are likely to get more attention near the end of the  month than near the first or middle.

But the time-on-market also enters into play. Asset managers’ inventory of unsold properties is updated near the first of every month. The more they have, the worse their performance looks. Therefore, an offer that will close around the 25th of the month will receive more attention than one closing near the first or middle. Since lonas can take forty-five days to close, timing is important.

To summarize: Tender your offer between the 20th and 25th, which will give the asset manager a couple of days to respond. Make sure the closing date is around the 25th as well.

One of my favorite parts of the day is when you first wake up, and promptly fall back asleep into some semi-blissful meditative dream state. It’s kind of like an alternate reality, where the dreams are super vivid and intense, and you can kind of control what happens in them. Then the stupid alarm goes off, and ruins everything.

I do this a lot. Sometimes I can fall back asleep, and pick up where I left off, but only sometimes. I always try and write down what happens in these dreams because they always seem important for some reason – as if some life altering thing just occurred, and by writing them down I’ll be changing the course of human history (at least as it pertains to me).

So the other morning, after one of these episodes, I finally woke up and had this written down: Smoked cabbage and HUAC. Yeah, smoked cabbage and HUAC. I have absolutely no idea what this means or why I wrote it down. No. Freaking. Clue.

I can’t even pretend, and make something up to assuage my own confusion. I can’t even come up with a remote scenario that would involve smoked cabbage and anything – except eating it, but even that sounds marginal at best. And HUAC? The House Un-American Activities Committee? Investigating smoked cabbage? HUAC hasn’t even been active for forty years, and was terribly annoying to a lot of people when it was around. It’s just weird, but seriously I remember it being really important.

here is a great idea in there somewhere, I just wish I would’ve left myself a bit more in the details department because I’m just plain curious. So, the next time someone tells you not be afraid to chase your dreams, make sure you do a lot of second-guessing. Clearly dreams can be scary things, and scary things usually do the chasing – not vice versa.

The above is a guest blog from Jeremy Metzker, who writes for and manages pretty much everything at Micro Brew Maps. On the other hand, if you want to search for the home you’ve dreamed about, click here.

Our sister site, habitationstation.com, ran a post on why buying a short sale property may be better for most people than buying a foreclosure. It’s worth a read and should hold true most of the time. But is there a way to buy bank-owned homes and make good money on it?

Yes, but it’s really hard to do, and I’m exploring how to do it. The habitationstation.com article notes that unless there’s a lot of equity in the home, you won’t be making that good of a deal. People with a lot of quity in their homes are not likely to go into foreclosure, although some certainly do. But there may be another way to profit.

Find a home that had a fair-szed second mortgage when it went into foreclosure. It’s nearly always the first trust deed holder who forecloses, and when that happens, the holder of the second mortgage is wiped out. Take, for example, a $275,000 house that was bought in 2006 with an 80-20 piggyback loan–not at all uncommon. And say it’s worth $250,000 on today’s market when it went into foreclosure.

The back end of the the original puchase loan–the 20%, or $55,000, was extinguished when the holder of the first mortgage foreclosed. The home will be priced around $220,000, or roughly the amount of the first mortgage. Whoever buys this home will own a $250,000 house for $220,000 (for simplification’s sake, reapir costs have been left out).

The trick is to find foreclosed homes that had big seconds on them, and short of attending a lot of auctions, I’m not sure how to do that. But I do have some ideas, and I’ll report back when I see if they work.

Want to buy a home in Portland Metro? Would you just like to kick around through the listings and see what’s for sale–just for fun?

Our new marketing and property site is Habitation Station, where you can search by neighborhood, housing type, price or whatever.  Give it a look!

I offer free, no-charge foreclosure avoidance counseling. It is, however, somewhat limited, because I won’t do someone’s loan modification package. Why?

A couple of reasons. First, because of all the loan mod scammers out there, the liability thing is huge. Second, loan mods can take a lot of time. Since I’m a one-broker shop, I need to be really careful how much time I give away, and people can get just as good a deal on their own anyway. And there are always the HUD-certified counselors out there to help–for free, by the way, which is one more reason to NEVER pay someone for a loan mod (except, maybe, as discussed below).

That said, people more often than not need help with the process. The language is technical, you often get someone different every time you call, lenders’ staff in different departments don’t seem to talk to one another, and so on. You never know where you stand and it can be very frustrating.

I just read an article on Inman News by Jack Guttentag, Professor Emeritus and mortgage guru if there ever was one about a couple of places where people can get loan modification help, ranging from free to low cost. For the record, I receive nothing from them for referrals and have no financial interest whatsoever.

The first is called Mycaal.  Borrowers fill out a questionnaire based on the information servicers need for a decision, and Mycaal provides all the documents you need based on the data in the questionnaire. They charge $98 for their services, which includes, as I understand it, some personal coaching. This is far more than I can provoide and, I suspect, more than some of the HUD agencies.

The other site is the DMM Portal, operated my Default Mitigation Management LLC. This site is kind of a communication platform with many servicers. At no charge, you can develop the documents the servicer needs, submit the package electronically and follow up to see how things are doing. This is cool. And for $150, you can get counseling and assistance in developing your package.

According to Dr. Guttentag, servicers now using DMM Portal are 21st  Mortgage Corp., America’s Servicing Co., Bank of America (but only if you are  in an active bankruptcy), JP Morgan Chase/EMC, Ocwen Loan Servicing LLC/Litton  Loan Servicing, Resurgent Capital Services, Saxon, Select Portfolio Servicing,  Washington Mutual, and Wells Fargo Home Mortgage.

If a borrower came to me for counseling and needed to go further than I can go–and felt a HUD-certified counselor was not a good fit–I would refer him or her to these sites.

For more than a month, we’ve been working on our new marketing website, Habitation Station.

While we’re adding specialization foreclosures and short sales, we retain a special clientele in many parts of Portland Metro. We have clients in Ladd’s Addition, Hillsdale, Beaverton, Cedar Mill, and Milwaukie, just to name a few, and we get more calls every day.

Many other brokers claim to be the “neighborhood expert” wherever they are. Sometimes they really are. While we are certainly more knowledgeable about some areas (Orenco Station comes to mind) than others, we have the resources to learn what needs to be learned and pass it along to customers in the hope of making them clients.

Some–certainly not all–people don’t like being told what they should think, and like to figure it all out with the help of expertise. That’s where we come in.