Listen NOW to the replay of this week’s Harris Real Estate University Superstar Interview.

Featured Superstar this week is Sean O’Toole.

LISTEN NOW, CLICK THIS LINK…
http://AttendThisEvent.com/?eventid=14673360

Long time HREU students will recognize Sean as a the founder of ForeclosureRadar.com. ForeclosureRadar.com is one of the best sources for information about foreclosures, defaults and overall market trends.

Recently Sean wrote an insightful (and some say controversial) article titled: Foreclosure Roulette – A game of extend and pretend.

The thesis of Sean’s article is that the banks have more or less done everything they can to extend the foreclosure ‘process and time line’…by pretending that there is some sort of resolution in the works with the defaulted homeowner. Sean noticed an erratic trend with California foreclosures. Some homeowners would live (usually payment free) in their homes for months…extending to years…with no foreclosure. While other defaulted homeowners foreclosure would happen within months of their first missed payment.

From there he surmised that there is some sort of organized game of foreclosure roulette being perpetuated on American Homeowners. As the roulette wheel spins no one knows where the ball will land…red means they foreclosure proceeds…and maybe white results in perpetual extending and pretending. NOT KNOWING keeps the legions of upside down homeowners in a state of uncertainty and fear.

At this point its quite obvious that Sean’s theory has merit. The banks can’t ‘flood’ the housing market. If not for the sheer financial ramifications maybe for political reasons.

From an agents perspective what does all of this mean?

Years and years (and years) of this sort of market. A housing market dominated by defaulted homeowners who are living for free, millions of REOs..and of course short sales.

Here is Sean’s article…which was also featured on the Huffington Post.

I spoke last week at a real estate investment club and shared with the audience my belief that foreclosures will trickle out over a very long time rather than come as a wave of foreclosures as others continue to inaccurately predict.

I do however, understand the nature of those predictions. Given the number of households that aren’t paying their mortgage (delinquencies) we should be seeing a massive wave of foreclosure notices, and ultimately foreclosure sales. It’s a logical conclusion. But this has become a political problem in a world of financial fantasy, so I don’t believe that simple logic applies.

The reality is that through financial engineering (interest only, subprime, swaps, option ARMs, negative equity, stated income, etc.,) we created trillions in excess mortgage debt that has left millions of homeowners underwater, financial institutions on the brink of collapse, and the FDIC nearly insolvent. Back in September 2008 it became clear that financial collapse was imminent, and the federal government did what it does best – bailed out those who caused the crisis while leaving taxpayers holding the bag for the losses. Pulling this hat trick off required one simple ruse – getting everyone to believe that those losses ultimately wouldn’t be very big.

To do this the government changed the rules. The FDIC who previously forced banks to get bad assets off their books became a leading proponent of saving homeowners with loan modifications that likely just delay the inevitable. With a little government pressure, the supposedly independent Federal Accounting Standards Board was pressured into letting banks account for loans at theoretical values based on computer models rather than current market value.

Next they began rolling out an acronym soup of programs, which they promoted as being help for America’s homeowners – HAMP, HAFA, HARP, 2MP and more. But the reality is that to date these programs have resulted in little more than delays. The government and lenders say that these failures are due to complexities of implementation, difficulty reaching homeowners and a sundry other things. But what if these programs were never intended to succeed? What if they were simply intended to create delays, provide false hope, and maybe get the banks a bit more cash out of homeowners in the form of trial loan modification payments?

Sounds like a crazy conspiracy theory, I know, but hear me out.

The problem faced by both lenders and the government is that they can neither afford to kick homeowners out, or bail them out. For lenders, either scenario forces losses to be recognized, while thanks to mark-to-model accounting rules, and little or no pressure to foreclose from the FDIC, they can instead leave non-paying homeowner in place and push those losses into the future. Many believe that most major corporations manage earnings, what could be more perfect than getting to choose when, and if, they recognize mortgage related losses. For the U.S. government either scenario is political death. Politicians have no appetite for allowing banks to put families on the street en masse through foreclosure, nor forcing banks to deal with the problem through bankruptcy cram-downs or other means. At the same time they realize their constituents who do pay their mortgage (or rent) simply won’t stand for a taxpayer funded bailout of their upside down neighbor. Instead, it seems they believe bailouts should be saved for the truly deserving like the executives and corporate shareholders of banks, AIG, GM, etc.

If we aren’t willing to either kick non-paying homeowners out of their homes, or bail them out, what other option is there? The answer is clear. It’s the same thing we’ve done with national deficits for years. Trade tomorrow for today, with a policy of extend and pretend. I have no doubt this is the present policy, and that this will be the policy for years to come as we work through wiping out the trillions in excess negative equity that was created during the bubble.

A member of the audience during my talk asked if this policy was really possible, after all we can’t just let non-paying homeowners stay in their homes forever. If paying homeowners figured that out, everyone would stop paying, and then our financial system would crumble.  I agree, and it’s clear the banks realize this too. But it is a problem that is easily solved by the diabolical game of Russian roulette. So long as lenders continue to foreclose on at least a handful of homeowners each month, in what from all appearances is a completely random game of chance, they’ll keep those willing and able to pay their mortgage doing so. Those who decide not to pay their mortgage will find themselves playing today’s update on the Russian game, Foreclosure Roulette, wondering each month whether they’ll get another free month in their prison of debt, or finally be shot and forced to move.

An interesting new monthly housing report from CNBC and Trullia.

Unlike virtually every other housing report this new report is a forward looking…meaning, Trullia is going to share the areas of the country (and price ranges) that are seeing an INCREASE in activity. The thesis is that home buyers start their searches online first. Knowing where they are looking and in what price ranges should tell us what is happening next.

Realtors, what do YOU think about homeowners who are doing ‘strategic disposals’ (short sales, foreclosures) of their real estate?

A vast majority selected the option: I think its the best financial move for many upside down homeowners.

After you have read this post, watch the 4 new videos: Harris Real Estate University Mid-Year Real Estate State of the Union videos.

Here are the comments:

1 The banks need to work with these homeowners. They are the ones whose values are getting screwed by thier neighbors who walk or choose to short sale. Most strategic defaulters walk ONLY after they have been told that nothing can be done by the banks or their investors. I see it on a daily basis! It is truly sad what is happening to the responsible homeowners.

2. Are they doing it because it is the “in thing” to do?

3.These people need to be advised to the consequences. Fannie mae already stated that they are going to come down hard on strategic defaults. I believe other banks are going to follow suit. Not only will credit scores be compromised for many years, these people will also have default judgements hanging over their heads which will hinder them the ability to purchase on credit other things including cars, boats, etc. Unless these people have the means to become a cash only consumer, I think it is a bad business decesion to do a strategic default. A better decision would be to ride out the recovery or sell and finance the loss.

4. I’m conflicted.

5. It’s a sound solution to a devestated financial blunder created by the worlds banks.

6.I think it is the best financial move for many homeowners that are facing an imminent foreclosure. It is my job to educate them on the alternative to foreclosure, provide them with a “graceful exit strategy”, but at the same time, assist those that may be able to qualify for some type of home retention.

7. Complicated- adding fuel to fire of housing crisis. Part of me says selfish, making crisis worse. Makes sense financially. Banks mysteriously are allowing it.

8. Some cases it makes good sense and in others I sort of have a moral problem with it. If you need to move to a better area or move for a job its fine, but bailing out because you were stupid and used your home for an ATM and tapped out all the equity, well that is just wrong.

9. I think if we can help them then do it. they have to be willing to do their part as well!

10. I don’t see short sales in the same category with the strategic defaults, if you define “strategic” as the ability to pay, but just not doing it

11. I think it is a personal decission. I really have no opinion for or against. I do have a strong opinion that the banks (servicers, mortgage holders, etc.,) should have gone further to keep home owners in their homes with realistic loan mods. In addition, I am somewhat disgusted that the fed bailed the banks out without any contingencies attached to the money.

12. It’s about survival. It’s about how Congress made sure everybody could buy a house, they bypassed sound economic principles. Those who loaned money may have been forced to do so, but then again they were rewarded by bailouts anyhow. Can we please go back to the Constitution- it proved itself already. The opposite of progress is congress. Poli- is latin for many and tics are blood suckers (politics-politicians). Years ago they were Statesman (loved country more than self)

13. It’s different case by case. If there’s a genuine financial hardship and no other alternative, then yes–it’s time to walk away. But I do encourage trying all other alternatives first (loan modification)

14. Both homeowners and corporations have the moral obligation to live up to the agreements they signed. I would not walk away, but I realize that’s not everybody else’s morals.

Realtors, what are your primary financial goals now?

Gone are the high flying Bentley aspiring days of real estate…..welcome in a new reality.

After you have read this post, watch the 4 new videos: Harris Real Estate University Mid-Year Real Estate State of the Union videos.

Here are a few of the comments:

1. Retirement fund and bringing in more money each month regularly.
2. invest in my real estate education and postion on the internet
3. Short Sale likely
4. Since 2005, the real estate crisis has been an eye opening experience. In the future i am going to be much more conservative in my risk taking , consentrate on low-no debt, and building wealth through diversivied investments. I will never take for granted the real estate market again.
5. Build a nest egg and pay off all debt including the mortgages.
6. Invest in my education to not only stay up w/all the new rules/regulations and be the short sale expert in my area.
7. Buy Apple! Investing in Jobs…Steve Jobs!
8. Increase my bank account! And be able to buy again, hoping next year, I sold my house top of market and didn’t rebuy because 4 months later when I started to really look for a home the market was just starting to tank…I held back to see what was happening am glad that I did.
9. Hard financial reset w/ respect to a rental property that I am short selling, modifying a loan on my current residence, consolidating debt, and possibly working with a tax expert in the next 6-8 months due to a short sale. But I will handle it!
10. Paying off any debts rapidly. (keeping the wife working and happy.)
11. I am making it, had many many challenges. Too broke to file BK.
12. Work through to a nice retirement within 10 years.
13. I’ve lost alot already, keep getting laid off other jobs, reeducating myself so that I can survive and thrive in this new market
14. Working toward getting all my debt paid off as I can, not spending money on anything not really necessary.
15. staying positive been through this before but not with the economy in the shape it is
16. My practice is focuesed on short sales. They take so long to close and are so labor intesive that it is difficult for me to have time for lead generation. Ive been performing BPO’s in order to supplement my income. However, on January 5th, I received the last large order of BPO’s, They did not pick back up until late April and have been coming in at a snails pace. Perhaps Im doing something wrong and my scores have dropped.
17. Trying to profit in the current cycle, but it’s tuff when they can change the rules anytime they want. I am not a pessimist, I am a realist. To protect oneself, one must look at things how they really are.
18. Maintaining present level and actively growing as others leave the field.
19. Re stablish my retirement account, save money for Europe vacation.

Realtors, what are your future real estate plans? (click graph to expand)

THAT is the question that many agents have been asking themselves for the last few years…a vast majority of agents have no intention of leaving the industry.

Remember, after you have read this post..watch the Harris Real Estate University 2010 State of the Real Estate Union Videos NOW.

Here were the comments:

1.  follow the trends, prepare myself and be ready. Be consistent, be the best option

2. Look to market invention…

3. not sure, still waivering on if to stay or go. But where do you go, the jobs are scarce!

4. Pay off debt,save a bundle,write a book

5. I do real estate part time, my other buisness is housing based but want to make a full time shift into real estate with in the next 6 months

6.  Create a leveraged real estate company and get out of the day to day operations within 10 years

7.  Looking for another financial stream to work alongside my real estate pursuit.

8. Cashing in on our short sale real estate knowledge in 4 years 2 months…living bi-coastal…Santa Barbara, CA and Amalfi, IT…running our empire!

9. I have a full time job but will continue to work hard to make real estate sales and investing full time

10. working to build my BPO business. I want to stay in Real Estate.

11. I will kee my RE F/T job and get focused on more education

12. Looking to open an RE Office.

13. Real estate until I work my self to a nice retirement

14. I’m educating myself and trying to make $ so that I do not have to leave real estate….hard!!!

15.  List REO’s & do BPO’s using my 35 yrs. Real Estate experience & stay as active as possible.

16. Want to succeed in the new market or go down trying.

17. Looking at marketing plans that are free, finding owners looking for property management, BPO’s when they come about and plan B all at the same time.

18. this is my profession!!

19. Unless this is the greater depression, I will continue to figure out the cycle and try to profit from it.

20. I have taken a part time job to supplement my income, but I know there’s a future in Real Estate for me and I haven’t lost hope.

21. I want to learn and adopt with the current market

22. Plan on continuing with 25 years under the belt now, but keep an eye and ears open for an additional income stream.

23. Continue to train (thru HREU) to become the REO & Short sale expert in my community. Continue to work harder to increase my listing inventory and close my short sale faster.

24. My immediate goal is to acquire asset assignment from major banks or Asset Mgnt. company.

Realtors, What is your biggest challenge…now? As you can imagine this survey question sparked a lot of responses….

This is part 2 of 5.

Remember, after you have read this post..watch the Harris Real Estate University 2010 State of the Real Estate Union Videos NOW.

Here were a few of the comments:

1.  Buyers who are competing with investors cash.

2. Just finding properties for my clients. Getting short sale/ REO listings…

3.    One of my asset management companies has stopped assigning REO listings…why? They keep saying they have no assigments in my areas…been putting off completing my Fannie Mae application…working alot of BPO’s…but I will handle it.

4.  i’m overwhelmed!

5.  Transaction taking much longer, financial problems getting very distractive.

6. still trying to get started doing BPO’s & get REO assignments without success despite erolling in your class 2 mos. ago. HELP!!

7.  Finding the short sale sellers at the right time and getting them to list with me. Also lack of BPO’s in Orange County.

8. Lenders who keep changing the rules during the under writing process. Appraisers who think they are inspectors

9. With some companies or realtor doing hundreds of sales per year and others a few if any what is that telling the real estate community from a business perspective. How can you fit in of course unless you are working for a major players in their arena especially if banks are assigning inventory…

10. Buyers and Sellers are just frozen in disbelief.

11. The overpriced sellers are the banks.They need to Lower prices until offers are made.You know supply and demand, basic economics. These politicians are self serving – look at Harry Reid from your State-unbelievable.

12. Continued frustration and roadblocks to getting short sales closed–especially with the 2nd lienholders.

13. bank investors wanted an unrealistic NET

14. Consumer confidence, even with some of the lowest rates in history people are concerned whether or not they will have a job.

Getting responses from banks is probably the most frustarting.

15. Closing BoA / Equator short sales. I have 6 that are taking forever to close.

16. There is a major problem because in Chicagoland there seems to be zero buyers. I need at least an offer on some of my short sale listings so I can work them.

Thank-you to the 1000′s of Realtors who participated in this years Harris Real Estate University mid year survey. This is part 1 of 5 of the survey results.

Watch the HREU State of the Real Estate Union Videos. Learn what maybe happening next for housing and what you need to be doing now.

Here are a few of the comments:

1. Big government will stick their noses in again and slow the inevitable price delclines til the REO inventory is finally consumed.

2. Too many pre-forclosure homes in front of us. Going to hit hard.

3. Until inventory of forclosures and short sales are depeleted, Home value will continue to drop. HAMP is delaying the foreclosure process which will drag the whole process out a few years but at least will help prevent a flood of foreclosures at one time.

4. I’m glad we have NAR. Thank you for the look ahead possibilities. I am taking “massive action”
5. I believe the remainder of Obahama’s “reign” will somewhat depended on November elections. I anticipate short sales will be the focus. The credit “hit” are homeowners biggest obstacle to cooperate with a short sale vs. throwing up their hands and letting properties go into foreclosure.

6. Nice Caves! We’re in a depression economy. It’s 1929 x 10…and recover is 10 to 15 years away. Invest smart…Share your knowledge and be of service to those who need your knowledge!

7. This was phenomenal information. I am so glad that HREU is out there – these classes have been just the best resource available. Thank you. I plan on taking immediate action.

8. L shape recovery – prices are going to come down again, but not as dramatic as before and will stay that way for at least 6 months and will stager until the unemployement rates improve….strong buyers buyers will be in the market (large downs, high ficos) but they will be offering less because of the market.

9. Based on the flow of data that I have been accessing from my coaches, the videos of interviews, it seems very clear. Bad economy, bad housing conditions, bad unemployment levels, maybe worse, markets reacting negatively, more & more homeowners will scramble to avoid foreclosure leading to short sales & deed in lieu’s…

10. Reasale property will go easy for $30.000-$50.000. down,after banks show them an example…

tighter lending policies, reduced buyer pool, reduced equity, already low low interest rates, dramtically increased inventory, two huge waves of loan resets coming, faltering economy- recipe for disaster. Major changes necessary somewhere or home prices will plummet.
12. scary but true

13. We are seeing higher end homes in Orange County, CA beginning to drop there prices but there are some pockets of Condos and homes that are holding fast on their prices and still selling. I wonder what will happen with the HOA’s though with them being so behind and when the short sales happen and they get paid off most of the extra money goes to the lawyers and not the HOA’s. Will Condo owners be forced into taking care of the grounds on their own?

14. Only take listings that are priced correctly learn to walk away from over priced ones

15. Don’t believe that home prices can go significantly lower without bankrupting nation…

16. Seems like they are running out of houses to foreclose.

17. The high end will see significant price declines.

18. Logic, reason,statistics, supply and demand. This is not fortune telling, but forth telling. Do certain things and consequences will follow as night follows day. It can be solved rather fast if the Govt. would get out of the way and let free enterprises prevail, but then again we are the Govt.aren’t we? All welfare states turn into police states, and all nations are destroyed from within. I pray daily that the American people wake up in time to save this Constitutional Republic.

19. I believe things will get worse before we see recover.

Yale Professor Robert Shiller (from the S&P Case/ Schiller discusses the uncertainty in housing..

For the growing number of struggling homeowners in this country, more help is on the way. Additional aid from the federal government will begin making its way to them next month — one program would help qualified homeowners refinance their mortgages after seeing their property values fall below the amount they owe, and the other includes another round of funding to help the unemployed or underemployed with their payments.

It’s easy to see the need for such programs. Theoretically, they keep people in their homes and bring some stability to fragile housing market. But the plethora of programs announced since the housing crisis started have largely been failures, suggesting that any effort to fight foreclosures and boost home sales is going to be a futile one.

Home prices have shown few signs of sustained recovery. While the S&P/Case-Shiller Home Price Index showed a 1% rise in June from May — its third consecutive monthly increase — the index’s committee chairman at S&P warns that it’s nothing to get too excited about as other more recent data on home sales and mortgages point to fewer gains ahead. Purchases of new homes in July fell 12.4% from the previous month to an annual pace of 276,000, the weakest since data began in 1963, according to the U.S Commerce Department.

Not even record low mortgages rates have boosted home sales or enticed a debt-weary public. Of course, this doesn’t seem much of a shocker. Experts say home prices – which have fallen by more than 30% since 2006 — are still inflated by 15% to 20% in many areas.

So why try to prop up prices any longer with federal programs? Is it time to simply let prices freefall, clearing the way for a genuine correction of the real estate market?

It’s true that there are plenty of reasons to keep prices from falling lower. For one, a further decline would put more mortgages under water, adding to the litany of foreclosures and the worries for banks. And falling home prices would probably fan worries about deflation, which could send the overall economy into another tailspin — further depressing everything from wages to sales to consumer confidence.

Source: Fortune