Good Property Opportunities on Martha's Vineyard

BANK OWNED PROPERTY (REO): This property was officially listed for resale by the lender on January 26, 2008 at an asking price of $564,900. The price was just reduced to $555,000, and the current town assessment is $697,100. The fact that the price has been reduced is standard procedure for a lender after 30 days without substantial interest in the property. This is a good sign for prospective buyers. The property is located in a nice neighborhood equidistant to all down-Island towns and is a lot of house for the money.

Click here to view property > Edgartown - 6 Mockingbird Drive

Everything is Coming Up Roses, Or Are They Tea Bags?

Rick Santelli was reporting from the pit at the Chicago stock exchange the other day and got everyone stirred up with his suggestion of a Chicago Tea Party . I thought it was marvelous and right on.

Here we are now with a $787 billion stimulus package that includes anemic elements like an $8000.00 tax credit for taxpayers buying a primary residence between Jan. 1 and Dec. 1, 2009. Single taxpayers making less than $75,000 are eligible. That tax credit doubles for married couples. Think about it, an 8k credit is just a drop in the bucket for a buyer in areas like Martha’s Vineyard, and no not everyone who lives here is rich. It’s just not enough. And what about the $75 billion mortgage relief plan the President announced. It’s not right. The Wall Street Journal says, "By investing in failure, the Administration will also prolong the housing downturn and make financing a home purchase more difficult for future borrowers." The New York Times says it is "a good start, but given the dire state of the economy, we fear it still may not be enough."

But what is enough and actually too much is the idea that people who did nothing wrong, the 92 percentile, are being asked to help the 8% that either had no business getting a loan in the first place or defrauded the banks intentionally out of sheer avarice. It’s the hard working people who are continuing to pay their bills even though they are suffering like everyone else today; they are really going to suffer.

Here’s a quick story I heard yesterday from a broker in Florida about one of those people you will be suffering for. This ‘investor’ accumulated no less than 20 properties through no-money down financing during the high time of the market. They did not and have not paid one cent toward an equity share on those properties; they had every intention of not owning the properties long term. The lenders began the foreclosure process about three years ago, but it takes time. In the meantime, this person is consistently making about $20,000 a month in rental income. There are hundreds of scenarios like this one. Why should we suffer for this kind of behavior? They should lose everything and go to jail. But if they go to jail, shouldn’t the enablers go with them? Yes, and that is why nothing will happen to them.

If you are wondering why the foreclosure machine is moving so slowly, let me give you a brief idea by way of another true story. This person is a first time home buyer who will most likely lose their home when their Alt-A loan resets. Mind you this is also in one of the areas where values have dropped by 50%. This person went through foreclosure prevention counseling and as instructed began the bureaucratic procedure with the lender for a loan modification. They spoke to a loss mitigation representative and complied with the instructions they were given. They supplied all the necessary documentation, both on line and via certified mail. They had the person’s name and extension number, but when they called to get a progress report after about two weeks, that person did not exist and both their cyber and paper trail no longer existed. They tried again filling out all the same information, etc. Again after a couple of weeks they contacted the LM department and that person did not exist. However, somehow they were finally able to track down the person that helped them. The representative told them, “You can jump up and down, get nasty and impatient but it will not do you any good. I have over 100 case files on my desk and you are just one of them in the pile. You’ll hear from us when we get to your case.” End of discussion. That’s just one person who has to deal with this enormous mess the government wants everyone to be responsible for.

Bringing it back home to the Cape and Martha’s Vineyard, here in Massachusetts the Warren Group reported the number of homes on Cape Cod that were actually foreclosed on last month was down 8.9 percent. This number is compared to January 2008. In exact numbers, there were 41 foreclosure deeds filed in January 2009 compared to 45 last year. In Dukes County, which is Martha’s Vineyard, the number of foreclosure deeds filed fell to 9 last month compared to 13 in January 2008. That is a difference of 30.8 percent. The experts are not sure what is causing this reduction in foreclosures, but it is a good sign as are the more realistic price reductions posted by the Martha’s Vineyard Information Network database. There are 467 single family homes currently on the market with a total inventory of 680 properties in all classifications. There are 72 single family homes that have been removed from the market since the first of the year. I can assure you everything is for sale, so if you want one of those properties just ask.

Good Property Opportunities on Martha's Vineyard

SHORT SALE: Located close to the hospital and 5 minutes from either Vineyard Haven or Oak Bluffs Harbor, this 2100 sf colonial style 3 bedroom 2.5 bath home on a quarter acre lot is being offered at the distress price of $450,000. The assessed value for 2009 is $576, 700 and it was purchased in 2006 for $612,000. Please note that this property may very well sell for more than the asking price and offer acceptance is subject to approval by the lender.

Click here to view property > Oak Bluffs - 3 Linton Avenue

Good Property Opportunities on Martha's Vineyard

This nicely constructed spec house was just completed. It started out priced at $750,000, but the price was just reduced to $599,000. This puts it at a number for which you would not be able to reproduce this new home. The lot alone is assessed at 258K.

Click here to view property > Oak Bluffs - 10 Eastville Avenue

Agency Disclosure Follow-up for Buyers Only on Martha’s Vineyard

In my recent Blog titled “For Buyers Only on Martha’s Vineyard” I spoke about Agency Disclosure. I want to revisit the subject and add some statistical numbers tabulated by the National Association of REALTORS® (NAR).

Making the decision to be an Exclusive Buyer Agent is one that many real estate practitioners feel limits their potential for maximum income, because you can only walk on one side of the street --- the BUYER’s side. There is no double dipping or switching hats to suit the occasion. Exclusive Buyer Agents have to have a passion for protecting the buying public.

According to a recent essay published in NAEBAhood News written by John Sullivan of Buyer’s Edge in Bethesda, MD, “The abrogation of the common law of agency promulgated by NAR and instituted individually by state legislatures throughout the country … resulted in eliminating the fiduciary duties of obedience, loyalty, confidentiality, and reasonable care.” On my website, I painstakingly put together information outlining the differences and explaining what are the duties of a Fiduciary to a Principal/Client?

Sadly, I have personally witnessed buyer confusion as a result of the foreclosures we are experiencing here on Martha’s Vineyard. A distressed home owner told me the other day that he blamed his agent and the lender for giving him a loan they had no business approving. He will most likely lose his home because he will not be allowed to work it out since he still has no documentation to verify his income. Lenders have much stricter requirements today, as they should have had all along, and those requirements seem to be changing on a daily basis. Sure, the buyer should have known better (caveat emptor), but when he had three so-called professionals who he believed were on his side, he trusted that he was doing the right thing. In most cases, the real estate agents, mortgage brokers and even the attorneys that participated in the purchase sale transactions had no compunction about what they were doing, even though in their hearts they knew it was unlikely the buyer could fulfill their obligation according to the terms of the loan(s).

Much of the confusion comes from the fact that consumers are not informed of the real estate agent’s role in the transaction. According to NAR’s own study, only 30% of homebuyers were presented with the Mandatory Agency Disclosure Form at the first face-to-face meeting to discuss a specific property. Only 28% received the disclosure form when the purchase contract was written, and 22% never received it at all. 20% of the homebuyers could not even remember a discussion about the fiduciary responsibility of the agent or the options available to them. First time homebuyers were the most neglected with only 23% receiving the agency disclosure at the first meeting to discuss property. Those numbers are pathetic. No wonder consumers don’t trust real estate agents.

Massachusetts implemented their Mandatory Agency Disclosure in 2005, but I believe the state has done very little to enforce the law or properly educate consumers, or practitioners.

NAR’s only option for what they call Exclusive Buyer Agency provides a mechanism stated as “with consent to dual agency”. To me that is an oxymoron and the word “Exclusive” should be removed from the NAR Right To Represent Buyer Agreement. Here is the wording some brokers are using. See if it makes you, as a consumer, comfortable and confident that you will receive the maximum care and guidance you want.

Consent to Dual Agency. The BUYER understands that BROKER also represents seller and that if BROKER shows BUYER a property listed by a seller-client a “dual agency” will be created. The BROKER may act as a dual agent who represents both prospective BUYER and SELLER with their informed written consent. A dual agent is authorized to assist the BUYER and SELLER in a transaction, but shall be neutral with regard to any conflicting interest of the BUYER and SELLER. Consequently, a dual agent will not have the ability to satisfy fully the duties of loyalty, full disclosure, reasonable care and obedience to lawful instruction, but shall still owe the duty of confidentiality of material information and the duty to account for funds. The BUYER understands that material information received from either client that is confidential may not be disclosed by a dual agent, except: (1) if disclosure is expressly authorized; (2) if such disclosure is required by law; (3) if such disclosure is intended to prevent illegal conduct; or (4) if such disclosure is necessary to prosecute a claim against a person represented or to defend a claim against the broker or salesperson. This duty of confidentiality shall continue after termination of the brokerage relationship. By signing the agreement, BUYER authorizes BROKER to act as a dual agent and consents to dual agency. If dual agency occurs in a transaction, a notice of dual agency will be given.

Exclusive Buyer Agency is a commitment members of the National Association of Exclusive Buyer Agents (NAEBA) make to consumers. This is a black and white cut and dry commitment; there are no gray areas and it takes passion and dedication to subscribe to this business model. For 100% representation 100% of the time, insist upon working with an Exclusive Buyer Agent when you are purchasing real estate of any kind.

Good Property Opportunities on Martha's Vineyard

There are two properties that I want to bring to your attention. I know they are on opposite ends of the price spectrum but they are both worthy of comment.

The first one is a simple extended Cape that has just been reduced in price to $495,000. The 2009 assessment is 533K.

Click here to view property > Vineyard Haven - 81 Hazelwood Avenue

The second property is an architect designed contemporary in the West Chop area. This is in my opinion a beautifully designed home with a very good address.

Click here to view property > Vineyard Haven - 97 Golf Club Road

For Buyers Only on Martha’s Vineyard

In an article titled ‘AGENCY, Know Your Facts’ published in the January 2009 Newsletter by the Cape Cod & Islands Association of Realtors®, Inc the following points were made under the topic heading “ The Law”. There were many other facts discussed, but I thought these two would be of particular interest to consumers.

• “Designated Agency is a process where the broker of record, with the consent of the consumer, designates one or more agents to represent a Seller and designates one or more agents to represent a Buyer in the same transaction. The relationship with the consumer begins and ends with the designated agent and does not extend to the other agents in the office. In a designated agency firm, the broker is a dual agent and retains all legal and ethical responsibility for the transaction.”

Although there is a definition of Designated Agency on the Mandatory Disclosure form, I do not discuss it as part of my consumer education process because traditional real estate agencies on Martha’s Vineyard only practice Disclosed Dual Agency. The concept of Dual Agency in itself is difficult enough for consumers to wrap their minds around. I have a lot of information on agency representation on my website FOR BUYERS ONLY.

The main reason Designated Agency is not a consumer service offered on Martha’s Vineyard is because the offices are not large enough, and because the principal brokers realize this is much to frothy a concept for them to handle comfortably. But come on folks, read the definition again and see if it does not totally blow your mind. We all know that business is primarily all about the money, and with guidelines like these and human nature such as it is --- I mean really!

The next topic discussed in the newsletter was Agency Disclosure.

• “The Agency Disclosure requirement stipulates that at the first personal meeting to discuss a specific property, prospective Buyers and Sellers be notified of the agency relationship using the state disclosure form, which must be signed by the Buyer or Seller and retained on record by the broker for a minimum of three years.”

In Massachusetts, as stated above, the Agency Disclosure form is a Mandatory requirement. It is not a contract and therefore does not bind the consumer in any way to the agent they are working with. It is an effort to avoid misunderstanding and litigation by providing full disclosure. However, many agents do not present the Agency Disclosure form to the consumer at all. Perhaps they are fearful it will be off-putting or, in reality, it is because they themselves do not understand it and don’t realize it is the law. Also, many agents present the mandatory disclosure to consumers with the implied assumption that it binds the consumer to them as a ‘client’. This misrepresentation and use of the Agency Disclosure form is critical to any relationship actual or implied.

When an agent presents a mandatory agency disclosure form to a Seller and the agent selects that he/she represents a Seller, you can rest assured it is because that Seller has entered into a contractual relationship with the agent who is now the Seller’s fiduciary. The agent has an ‘Exclusive Listing Agreement’ with the Seller. If the agent selects that he/she represents the Buyer, legally that agent can only do so with written authorization and consideration from the Buyer. These are the elements that define a contract (“An agreement with specific terms between two or more persons or entities in which there is a promise to do something in return for a valuable benefit known as consideration”).

Establishing Buyer Representation must be a two-pronged conversation. “Mr and Mrs Buyer, I am required by law to present you with this Agency Disclosure form mandated by Massachusetts Law, which I must ask you to sign before we can discuss any properties you are interested in. I want to be your Exclusive Buyer Agent, but unless we also execute an Exclusive Right To Represent Agreement, I will not be able to advocate in your best interests as your fiduciary.”

If a written contract is not executed establishing a fiduciary relationship with a Buyer, the agent is actually a Facilitator and represents neither the Buyer nor the Seller. Just remember that the Seller will have 100% representation and you the Buyer can also have 100% representation, but only if you enter into an Exclusive Right To Represent Agreement without consent to Dual Agency.

Another Huge Opportunity for Home Buyers

As part of the new Economic Stimulus Bill being thrashed around in the senate, and on top of the Tax Credit proposed for all home buyers allowing them a tax credit at the rate of 10% of the sales price up to a limit of $15,000, there now is Amendment 353.

Amendment 353, proposed by Senator John Ensign, Republican Senator from Nevada, would provide 30 year fixed rate financing at about 4%, for anyone purchasing a primary residence. If this passes the House and if there is more sensitivity by lenders in handling those threatened by foreclosure, we could really be on our way to recovery in the housing market.

You Want a Great Deal, But Do You Really Want a Foreclosure?

Foreclosures represent a mammoth portion of today’s housing inventory. In RealtyTrac’s recently released 2008 Foreclosure Market Report, they showed a total of 3,157,806 foreclosure filings. The number of default notices, auction sale notices and bank repossessions reached 2,330,483 properties.

Up until now most people were of the opinion they could save huge sums of money buying a foreclosure property. However, more people are shying away from that process, and if they are willing to engage at all, they are demanding steep discounts averaging 25% from the listing price, and many are expecting to pay 50% less than for a non-foreclosed home. According to a recent Moody's Economy.com report, since the peak of the market several years ago home prices fell in 70% of all metro areas. Although the decline in most metro areas was modest, prices did decline by 5% in 116 metro areas and more than 20% in about 50 metro areas. In the most depressed markets, a buyer insisting upon a 25% discount doesn’t seem like that much for a distressed property. But this all depends upon how realistic the listing price is.

Banks are still requiring BPO’s as part of their preparation for marketing foreclosures, but the problem with that approach is they are looking back at the market for values, and in declining markets they need to look forward when pricing properties. The result in most cases is banks overestimate the listing price. All they know is what they are owed and that is all they care about. So what happens is properties sit on the market for long periods of time suffering from accelerated deterioration or vandalism. Someone will have to pay for the repairs and the bank does not want to assume any responsibility.

In December, Trulia and RealtyTrac published a survey indicating that in the seven months prior to the study the number of people interested in foreclosures dropped by seven percent to 47%. The first study reported in April 2008 by these market tracking companies recorded 69% of the buyers polled had a negative opinion of foreclosures. Since then the number has risen to 80%. On Martha’s Vineyard there are very few foreclosures and I continue to maintain that buyers can do better negotiating on a non-foreclosure property.

Senate Moves to Expand Tax Credit as High as $15,000

This could be an excellent incentive for some home buyers on Martha’s Vineyard who can qualify. Currently, the maximum tax credit is $7500 and that is only for first time home buyers, but if this new amendment approved by the Democratic Senate passes the House and goes into effect, buyers who are purchasing a home as their primary residence, regardless of whether they are first time buyers or not, will receive a $15000 tax credit or 10% of the home purchase price, depending upon whichever is less. The tax credit will be in effect for one year.