One of the more remarkable methods used (even by "Intelligence Agencies") to establish if something is true or not is to is to label it true if it came from a "reliable source".  Who said it?  If he or she is considered reliable or an authority the data is considered true or factual.  The other - perhaps even more silly - system in use is multiple report.  If a report is is heard from several areas or people it is "true".   Five or ten people hear the same thing and pass it along, it becomes a "fact".

I have been hearing about the Shadow Inventory for well over a year now.  It is HUGE.  It is sensational.  A Big Giant Tsunami (BGT) of inventory is going to be unleashed by the lenders.  Get ready.  Like nothing you have ever seen.  The housing market will be flooded with inventory like never before.  No doubt it will change life as we now know it.

Only it is complete crap.  Nothing but invented data dreamed up and endlessly passed along by organizations and individuals who heard it from someone else (I have not yet tracked the original source for this shadow inventory nonsense as it seems to emanate from "everywhere").  What is really interesting are all the "new facts" dreamed up by "industry observers" to make the Big Giant Tsunami theory still possible - in spite of the overwhelming abundance of easily observable data that would directly contradict the idea of the banks having this huge inventory that they are holding back to be released later.

I bet I have your attention now.  Some of you may even be angry - you damn well KNOW there is a shadow inventory!!!  So lets look over why I am publicly saying it isn’t true and what the thought process was for the people and organizations who have been saying (and continue to assert) it is true.  These people would have no reason to intentionally forward false data.  So what data did they look at to conclude there was a Big Giant Tsunami of inventory the banks have and aren’t releasing?  Charts like this - graphically showing the Shadow Inventory are all over the the media and the internet.

So what system is being used by economists and others to calculate this shadow inventory?  Simple, take the cumulative total foreclosures recorded (the big number) and subtract the current active and pending inventory in the MLS, plus the sold MLS properties (the little number) and the remaining number is "the shadow inventory".  Simple, quick and it requires NO LOOKING at anything - just grade school level math.

To be clear, I am NOT referring at all to any foreclosures yet to come.  Inventory the banks may wind up getting in the future.  I am only talking about NOW.  It is no secret that REO agents are losing market share as they, as a group, have less and less inventory being given to them by their asset managers.  These same asset mangers who - last year - kept telling them that they had a lot more coming in to give them.  It just never arrived for them to give.  The only REO agents I know who are doing better these days are those REO agents who deal in higher end homes.  Those high end agents are getting inventory, lots of it.  This is not to say that all across the country there is no REO inventory, there is - just less and less of it.  The BGT crowd has invented the idea that the banks have the inventory but are keeping it until the prices go up!

How about a few facts that I know are true here in the Phoenix area - and I have every reason to believe are true right across the country (as I can think of NO reason for these facts to only be true here).

Fact: In my local MLS, there are about THREE TIMES as many bank owned homes listed in the MLS as the MLS actually shows.  I know this because two guys who actually look counted them all.  One by one.(Mike Orr of The Cromford Report and Tom Ruff of The Information Market)  They counted them and compared the addresses shown in the MLS, one by one, with the County Assessor records.  These are homes listed by banks who instructed the listing agent to NOT use the term "bank owned" in the listing.

Tom Ruff and Mike Orr spent months going over every deed transfer in Maricopa County (Looking at each foreclosure going to the bank and tracking that house for its current ownership and they could directly account for all but about 5,000 houses) and established that for the Greater Phoenix Area THERE IS NO SHADOW INVENTORY. 

Fact: Major banks often off load huge portfolios of inventory to hedge funds.  Huge portfolios.  Anyone or any organization who is claiming that they are "tracking" what the banks are doing who does not have sufficient access to track those portfolio sales is simply engaging in the simple grade school math referenced five paragraphs above.

No doubt there will be some readers who remain convinced that what they have read about and then co-created must be true.  That’s okay.  If you are happy believing that a Big Giant Tsunami is coming - enjoy the wait.  However, I’m betting you remain completely dry.

For his ground breaking book, "Good To Great", Jim Collins and his research team looked into just about every public company in the United States to find those companies that made the transition from good to great.  Good is the enemy of great - which is why most companies and most people never make that leap.  They are good. They are not great.  To get on Jim Collins "great list" a company had to significantly outperform the other companies in that industry for  a minimum of fifteen years.  Making the great list wasn’t going to be a fluke.  Collins first wanted to isolate the companies, then study them to find out what the great companies all had in common - which is the subject of his book.  A very interesting part of his study was also the direct comparison company chosen that had the same opportunities as the great company - but did not make the leap.  Those companies were studied, as well - to find out what they had in common.

The good to great company that made the grade in banking was Wells Fargo.  The direct comparison bank - that had the same opportunities, but did not act upon them and did not move towards greatness - was Bank of America.

Currently, Wells Fargo is the very best bank to deal with for a short sale.  The very best.  The other banks that are factually as good as, if not better than Wells (Wachovia, World Savings) are owned by Wells Fargo!

I’ve written before about Bank of America.  When it comes to short sales, from an agent’s, buyer’s or seller’s perspective, B of A / Countrywide has been, and is still currently, the absolute worst lender in the United States to deal with - and pretty much everyone in the industry knows it.

Now the good news.  A month or so ago one of the most powerful and truly influential people in real estate, Dave Liniger  assembled some top B of A executives and several United States Senators in the same room.  I think it is fantastic that Dave Liniger can contact them, tell them when and where he needs to see them and have them actually arrive.

Mr. Liniger proceeded to tell the B of A executives that their reputation - in the area of short sales was just awful.  He told them that he had about 100,000 agents with RE/Max and that he doubted very many of them would even consider directing loans to Bank of America.  He pointed out to them that if they had any hope of keeping their agent driven business they had better stop making enemies over in their short sale division.  The senators were a little surprised and dismayed at all the specifics Mr. Liniger pointed out had occurred with regard to loan modifications that never happened (after people were put on wait for six to nine months) and that the same thing was happening with short sales.

The Bank of America executives were shocked and said they had no idea such things were happening and (the good news) vowed to correct each and every one of types of behavior that Liniger had pointed out to them.  Dave Liniger is predicting that B of A short sales will soon be as easy to do as Wells Fargo short sales.

To be fair, B of A is already improving.  The loss mitigation companies they’ve hired to handle some of their short sales is not (repeat, is NOT) difficult to work with, at all.

I personally do not believe that B of A will ever consistently achieve the stellar results that Wells does.  The reason?   The executives were shocked at what Dave Liniger had to tell them - they didn’t already know.  A great executive would have not only known it was happening, they would have been able to predict it and prevent it from happening.  Great executives make it their business to know what is happening in their business.  That said, I still believe that B of A will make great strides and improve tremendously.  I want to add, I am grateful for Dave Liniger stepping up and to B of A’s top management for owning up.

Short Sales are only going to get easier!  So, THANK YOU!

I’ve personally written about B of A Short Sales before and so have many others.  I don’t know if this will get any real traction but below is an unedited (and unsolicited) email I received that was sent out to Realtors across the country.

It’s crazy. Agents are Bank of America’s biggest customer. But they treat us like dirt on short sales. It’s like we don’t matter to them at all. However, we do matter and a whole lot more than they realize. Did you know that their mortgage division is one of their largest profit generators? That means when you send them a buyer, you’re actually helping them make more money. Why are we helping them out by sending them our customers? 

Let’s simply stop sending them business. Hey, we all know they’re making money! They have enough in the bank to pay Ken Lewis seventy-one million in retirement bonuses. And now they’re paying out forty-five billion to the feds so they can hire on a new CEO. Maybe they could use that to hire on more staff to negotiate short sales. Nope! Getting a new CEO is more important than taking care of their most important customers.

Here’s the scary data. We all know that short sales save money. One study showed a 20% higher net on a short sale versus an REO. That’s a lot of money! On a $150,000 mortgage, that means a savings of $30,000. This is their Achilles heel But, they aren’t taking the losses personally. No wonder they don’t want to hire on more staff. But, it costs Uncle Sam. Let me explain.

I remember reading somewhere that 45% of BOA’s loans were owned by Uncle Sam, thru Freddie Mac or Fannie Mae. When we show the American Public that BOA is costing Uncle Sam and the taxpayers tons of money, they will be outraged. So, join me in telling them how we feel and help me get the word out on this atrocity. We can get them to hire on more staff and do a better job on the short sales. But, I need your help.

Go to my site, http://www.SSAgentAdvocate.com and sign up to stop sending your buyer’s loans to them. Do your part to help make short sales work so everyone benefits.

Sincerely,

Ben & Chris Curry - We work at KW in Gainesville, Florida

P.S. Don’t think BOA’s CEO, Ken Lewis, cares about agents. And don’t think that REOtrans is going to solve the problem either. No amount of technology is going to change the fundamental problem. They don’t have enough staff. How can negotiators even think straight when they’ve got 400 files on their desk? Would you?

REOtrans is like putting a band-aid on, when you lost your leg. Rather than take care of their most important customers, BOA think they have more important things to do. What do they consider more important than treating agents with respect? It’s paying their departing CEO seventy-one million in retirement pay and forty-five billion to the feds. Why don’t they use that money to improve their short sales?

If you think that’s outrageous, then pledge your help at http://www.SSAgentAdvocate.com .

P.P.S. Forward this e-mail to your friends. Let’s get everyone we know on board. Then, we can actually get them to change their policies. Here’s a story from one broker whose buyer got lied to by them.

"I just had the worst experience as a broker in the twenty years of selling RE. The local BOA prequalified a client of mine and gave her a prequal letter saying she was qualified for a $105,000 mortgage. I was concerned with her going to BOA  and was skeptical about them qualifying her because she had her own business and did not show a lot of income, but she had a good bit of money in their bank and I screwed up and trusted them. I tried to get her to check with another lender with no success.

Long story short,  after BOA made her pay off her car, transfer money out of CDs, having the loan processor go on vacation the day before closing without telling anyone. The final loan approval guy calls one week after the closing date to say that the Buyers ratios are over 30 points off!

I am not a mortgage broker but even I know that the first thing you check is credit and the second thing is Dept to income ratios.

The moron’s they have working for BOA allowed this poor lady to go through the expense and hassle of their loan process with Dept to income ratios that where nowhere close to being where they need to be.

They had the nerve to call her a week later to ask for a $400 fee they say she owes them for the loan process. Worst experience with a lender in 20 YEARS!" Paul. 

Pledge to stop your sending your buyer loans to them here http://www.SSAgentAdvocate.com .

Sent By: Ben & Chris Curry P.O. Box 2287, Lake City FL 32056.

If you found the above viewpoint interesting - look for my next post on the subject of Bank of America and short sales.  I think you are going to love it!

I haven’t been blogging much lately (for some months) and needed an easy one to get myself started again.  The gift to me is being able to post this here now.  The gift to you is a really (really really) cool book from Seth Godin you can download for free, here.

I think you will really like it.  I know I have.

Merry Christmas to everyone!

This post started as a comment to Matthew Rathbun’s brilliant post.   At the end I decided to make it a post

Truly a great post, Matthew!

I believe that the bulk of the clamor for “more professionalism” that emanates from agents is mostly self-serving gibberish. A person gets into real estate and then observes that the public does not tend to hold Realtors in extremely high regard. Personally, they want to be held in extremely high regard but can’t really see how they can differentiate themselves in the eyes of the public from all the other Realtors – so naturally, establish how “professional” they are by endlessly talking about how “unprofessional” some other Realtors are.

All the while, without once ever bothering to even trying to define “professionalism”.

You hit the nail on the head here with regard to more education: lawyers, for example, are all “highly educated” and yet are not much more highly regarded than Realtors. Why?

Professions that are “highly regarded” tend to be professions where the advice being given is *exclusively* for the benefit of the public or the person receiving that advice: a librarian, for example. The librarian’s personal biases and preferences may well be part of their recommendations – but few people would suggest that certain books get recommended for reading so the librarian can get extra money. The same “high regard” holds true for professions like nursing but tends to fall off a bit when it comes to physicians (they *are* sometimes thought of as money motivated).

We are all salespeople and therefore will always be – rightly - regarded by the public as salespeople. Some of us are quite “professional” at selling, some aren’t. No set of rules or regulations is going to cause people who have low or questionable morals to suddenly act right. Enforcement alone does that.

What would have to change is the complaint procedure - so that agents (who are in a *much* better position to observe wrongdoing) can easily, and in a very short amount of time, file a complaint (sort of like calling 911). Then the investigation and enforcement unit would have to be able to actually look – instantly dismiss complaints without merit or grudge motivated complaints – and take swift action. In short, we would have *real* justice. As we don’t have such a thing (real justice) anywhere else in our society – in this country or any other – I’m not holding my breath waiting on that one.

The most effective thing one can do is to BE the change they hope to see in others. That isn’t an original thought of mine. But I don’t know a better one.

Bank of America is to be Highly Commended for their complete willingness to give so many intellectually challenged people jobs as executives.  Sure, year in - year out, most other banks have always been willing to hire a few people who couldn’t think straight.  But those other banks aren’t getting any awards for what they did for one simple reason: what they did was so darn common.  Now any buzz kill who cares to can go look and find some other division of Bank of America / Countrywide that isn’t being run totally by retards (for example, their REO loss mitigation department).

But I challenge anyone to find any other bank that even comes close to Bank of America / Countrywide’s short sale loss mitigation departments for non-stop, over the top policies and procedures that make life difficult, impossible or at least a lot less profitable for the following four groups (not listed in their order of importance and there may well be others).

• All agents - either on the buyer or seller side
• All potential buyers of any property where B of A holds a 1st lien position
• All of the sellers (their borrowers) trying to work with them to avoid foreclosure
• Themselves.

If B of A is in a 2nd lien position, oddly enough they have workable policies in place (seller IS going to sign a note prior to close to pay the bank a small part of what they owe).  They don’t flex on this issue but it is a knowable and not completely unfair rule.  If they are in 1st lien position their standard and unvarying behavior (if that behavior were being attributed to an individual person) is nothing short of psychotic or completely retarded - at least down at the imbecile level.  No rational judgement, no possibility at all of dealing with them the same way we deal with all the other banks on short sales.

Other than limited personal - and for the most part, completely anecdotal data, most agents doing short sales on the buy or the sell side have a very odd picture of the overall scene.  Loads and loads of mostly worthless gibberish.  Notice how Chase and Wells Fargo are grouped in the same category as Bank of America?  Wells does not ever pay any of the buyer’s closing costs and won’t pay for a home warranty.  But ….. you can routinely close an escrow from start to finish with Wells in about 30 days.  Actually close, it takes less then two weeks to get an approval.  Same with Chase.  Try that with B of A / Countrywide (who collectively have about half of all problem loans in the U.S.)  It takes a minimum of 90 days to get any response back from B of A.  And if you send them anything after submitting the original package (anything, even a better offer) that 90 day clock is reset.  So, with B of A four to five months to actually close a transaction is not uncommon.

It gets better.  Here is a charming response we received from  B of A a month or so back:

"Bank of America is now requiring most sellers to contribute to the loss in order to qualify for a short sale. Please prepare your client for that probability and be ready to let me know how much cash the seller can bring to closing. If no cash is available, the alternative is a promissory note for a larger portion of the loss. this requirement is firm–no contribution from the seller will result in the short sale being declined. There are vary few exemption made to this. The approval time once the file has been submitted will depend on the size of the loss, the investor and the MI insurer, if any."

Arizona is one of ten states that have "anti-deficiency protection" due to the nature of how foreclosure works here - it takes only 90 days from the time the lender files for a Trustee’s Sale for them to take the house back.  Therefore, the anti-deficiency protection (very basic rules - there are others: The same purchase money loan is still on the property, e.g., they never took any money out of the house via a refi and it was a residential property of 2.5 acres or less).

The response from B of A above was on a transaction where our seller would have no possible liability of any kind if the bank were to foreclose.  None.  In this case there was precisely nothing they could legally do to go after him and yet, even after being told this and being asked to please verify it with their legal department, they were not willing to budge - forcing the seller to let them foreclose.  They get a house back that they really don’t want for many reasons, a neighborhood winds up with an abandoned home that will invariably sell for less money after the bank gets it back and so it goes.   

It is as though a complete division of Bank of America executives went looking and anything they found that could slow down the process, make it more difficult for everybody involved or simply thwart the actual goal completely - they carefully noted what that was and then adopted it as firm policy.  I’m impressed.

At any given time we all have a limit.  That limit varies depending on a number of factors: the nature of the problems, the emotion tied to the problems, how far down into "seriousness" one is, even how well rested or hungry one is at the time.  Bottom line, it becomes too much when there is more external push against self than there is left of self to push back.

I’m really not interested in proselytizing but I ran across this little gem the other night and I saw so much potential for anyone who could understand it that I wanted to share it.

The rationality of the mind depends upon an optimum reaction toward time.

DEFINITION: Sanity, the computation of futures.

DEFINITION: Neurotic, the computation of present time only.

DEFINITION: Psychotic, computation only of past situations.

So when a person is handling situations and problems quite well they have their attention mainly on the future.  They are happily creating a future which they can clearly see - and they are making that future they see a reality.

Down from that is the person who is "working in the present".  This is usually thought of as good and very pro-survival but is factually in the neurotic category, not unlike a rat in a maze.  Handling an escrow can fall into this category.  One’s attention is thoroughly stuck in the present and they can not see much of a future, as handling now is such a struggle.  Like an air traffic controller, they can not take their eyes off of the screen.

Way down scale, stuck on the past, is the person who can not visualize a future or even really see much of the present.  Fact is, we have all been - each and every one of us - in each of these three states with regard to different subjects at one time or another.  I am reminded of a truly beautiful quote from Winston Churchill, "If you are going through hell, keep going."

Where were you going before the excreta hit the rotor?  What was it you wanted in the first place?

Survival pertains only to the future.

COROLLARY: Succumb pertains only to the present and past.

If you can again see what it was you wanted - even if you can only see it dimly at first - keep looking there.  What were your goals?  What was it that seemed so delightful, that just thinking about it made you feel better?  How would life be if you had that now?  That is where to put your attention to get out of the mess.

An individual is as happy as he can perceive survival potentials in the future.

This was just now posted on AzCentral with the headline, "Foreclosures surged in July.  This is what passes for "reporting" by most media about the real estate market.  June foreclosures were 5,149.  July’s numbers (per the article) were 5,316.  A difference of 167 foreclosures or 3.24%.  And that is being called a "surge".

I wonder if anyone’s paycheck went up at an annual rate of 3.24% they would ever consider it a surge?

This isn’t to suggest that the number of foreclosures going up is ever a good thing - just that reading past the headlines and actually looking at the numbers might shed a bit of light on the subject.

If anyone cared to truly examine some relevant market statistics for the Greater Phoenix area here are a couple I personally find quite interesting: The current "success rate" for all listings in ARMLS is 64.8%.  You can see that (along with some other very interesting numbers) here.  But since most of the sales occurring are lender owned properties, that number doesn’t mean too much to me.  Let’s break it down.

Scroll down on this page and you will see the breakdown, based on types of listings.  The success rate (percent of all listings of that type that sell) for lender owned is 91.4%.  Not very surprising - at least not in our market.  But look at the comparison between "normal listings" and short sales.  The numbers are almost the same!  Normal listings success rate is 50.2% and short sales success rate is 49.4%.

I know, I know, the normal listings stat surged way ahead.

It’s true.  I really don’t like salespeople, I don’t like to listen to a sales pitch and anytime someone says, "I just need twenty minutes in person to explain it to you", I already know in advance that whatever it is I don’t want it.  And, for sure,  I don’t want to listen to them explain it to me.

It is also true that I have made my living on straight commission since I was 17.  I have not had a "job" or worked for wages, I’ve lived on commissions all these years.  Several times over the years people who wanted to get me to sit still for a sales pitch so they could give me a "briefing" or "enlighten me" have pointed out that my attitude on this subject would harm by business.  I don’t think so.  In fact, I believe my attitude has helped my business.

Once I am interested in buying something I do want information: whatever facts and data I might consider important.  But notice it is whatever facts and data I might consider important.  I don’t want to be "rushed".  I want to take my time.  That amount of time might only be a few seconds, but still - I want to make my decision based on my time schedule not the schedule of someone else who needs to move things along.  I don’t want to allow someone else to fixate my attention and then evaluate the relative importance of all the various "facts" for me.  That’s my job.

The person who "only needs twenty minutes" wants to attempt to evaluate - for me - the relative importance of various data and then try to tell me what to think.  All for my own good, of course.  No thanks.  I just want the facts, all of the relevant facts and then it is my job to decide which facts are important and which ones are not so important.  To me.  Those last two words are the key.  To me.  Which facts are important to me?

I believe it is the same, most of the time, with our buyers and sellers.  In most cases we wouldn’t even be talking to them for very long if they weren’t interested in buying or selling real estate (I’m pretty sure I wouldn’t, anyway).  My job is to make sure they have all of the relevant data.  It is up to them to decide which of those data are "important".  Is it a two-story home?  Single level?  Does it have a swimming pool?  How close is the school?  How much is the house?  How much have other homes nearby sold for?  Will I evaluate those last two for them?  Absolutely.  But it is still up to them to decide if it is the home for them or - if a seller - the offer is acceptable.

There are lots of examples of this but really, I want to treat them the way I would like to be treated.  The way you would like to be treated.

Here is a link for a webinar I did about a week ago for Number 1 Expert.  You do have to fill out a short form to listen and give them them information to get to the actual recording.  It is about an hour long and you will see slides on the screen that are in sync with my answers.  They titled the talk, "How to Stay Positive in Uncertain Market Conditions".

Some good stuff.