Real Estate Agents Help to Kill Property Values

May 30, 2009

As if housing values weren’t tanking enough on their own, now comes word that real estate agents are helping to sink them even further.  With lenders trying to unload their growing inventory of foreclosed properties, they’re turning to real estate agents for appraisals, insead of traditional, licensed appraisers.  The result is agents low balling values to make quick sales and homeowners getting the short end with artificially low property values.  Read Tampa Tribune Reporter Shannon Behnken’s excellent report exposing the practice below:

Broker price options open controversy:

By SHANNON BEHNKEN; Tampa Tribune;

Lenders looking to quickly unload distressed properties are increasingly cutting costs by hiring real estate agents instead of licensed appraisers to value property.

The agents, who often have a stake in selling the property, give low-ball price estimates that artificially push down values, some industry experts say.

Broker price opinions, or BPOs, are performed by real estate agents who, unlike licensed appraisers, have no regulatory oversight of their valuations. BPOs are attractive for lenders because they cost between $40 and $65, compared with about $350 for an appraisal. Critics say the agents are swayed by a desire to collect a commission for selling the home later.

“If Florida was to require all lenders to use appraisals instead of BPOs, these extravagant decreases we’re seeing would stop overnight,” said David Teacher of Brandon-based Superior Residential Appraisals. “Some neighborhoods are back to 1997 prices because of this, and it’s absurd.”

Making ends meet

Amid the greatest housing downturn since the Great Depression, some real estate agents see BPOs as an opportunity to make ends meet, or as a logical extension of their business. Those who defend them say many agents are in a better position to come up with accurate price estimates because they know what will sell.

“To say that real estate licensees can’t give a price on a property just doesn’t make sense to me,” said Principal Real Estate & Auction’s Lisa Rose-Mann, who conducts BPOs regularly. Mann said she never takes a listing as a result of her BPO work.

Using BPOs only to value houses is illegal in 23 states but is permitted in Florida. Some groups, such as the National Community Reinvestment Coalition, want other states to outlaw BPOs as appraisal substitutes in distressed sales.

“We work with consumers around the country and have found this to be a big problem,” said David Berenbaum, executive vice president of the reinvestment coalition. He recently testified in front of Congress that price drops are more prevalent because of BPOs.

The Tampa-St. Petersburg-Clearwater metro area saw the median sales price fall to $135,200 in April.

Prices are down 23 percent from $176,200 in April 2008, according to the Florida Association of Realtors. At the peak of the local market in June 2006, the median sales price was $239,600.

The decrease is largely driven by distressed sales. Because of that, home prices would continue to fall, even with licensed appraisers doing all the valuations, but Teacher, the appraiser, said the prices wouldn’t fall as much.

“I saw a home that likely would have appraised at around $115,000,” Teacher said. “The BPO came in at $65,000, and the bank took $55,000.”

Real estate agents are more likely to come up with a lower estimate because it would be easier to sell the home, said Brad Monroe, a real estate agent and former president of the Greater Tampa Association of Realtors.

Monroe does not offer BPOs for a fee but performs them for lenders when he sells bank-owned homes. He said licensed appraisers should be used most of the time.

“The lender dangles the carrot that when the listing comes open, you’ll get it,” he said. “There’s not much of an incentive to get an accurate value.”

Industry experts say BPOs are used in the majority of current sales because they are most often used in distressed property sales. Teacher says he thinks as much as 90 percent of sales in some Bay area neighborhoods are based on BPOs.

Broker price opinions aren’t new, but the business has blossomed as foreclosures have spiked. Educational Web sites target real estate agents and say the economic downturn is the perfect time to concentrate on churning out BPOs. One touts that BPOs are the “the easiest and fastest way to make big money in 2009.”

Some questions raised

Regulators in some states have raised questions about the recent increase in the use of BPOs. No such questions have been raised by the Florida Department of Business and Professional Regulation, which oversees real estate agents, said spokeswoman Alexis Lambert.

Before agreeing to lend money on a sale, lenders typically order a valuation from a licensed appraiser.

When lenders approve a short sale – meaning they agree to allow a home to sell for less than the mortgage to avoid foreclosure – they often turn to BPOs to make sure they’re getting a fair price. BPOs are also used most often when lenders need to figure out what price to list a foreclosed home for sale.

When the homes are then sold at “fire-sale prices,” the rest of the neighborhood suffers, said Bill Garber of the Washington-based Appraisal Institute. Garber is in charge of the group’s government relations.

“This ultimately brings down values everywhere, and that should concern us all.”

Jack Rodriguez, president of the Greater Tampa Association of Realtors, said he understands the controversy but that lenders know what they’re getting: an opinion. Also, as long as BPOs are legal, he said, real estate agents and lenders will likely use them.

“I can see both sides,” he said. “I see it has a business decision, and a lot of Realtors know how to do this well.”

Delinquent Property Taxpayers about to get Socked

May 29, 2009

Foreclosure Crisis Having Impact on Delinquent Taxes

This is a bad time of year for delinquent property taxpayers.

Local tax collectors are about to begin a yearly ritual that puts homeowners who don’t pay their taxes on the hook for *interest on what they owe, sometimes as much as 18-percent interest.  It’s the annual tax certificate sale, and it brings in big profits for investors.

With foreclosures way up, so is the amount owed in delinquent taxes.  In Hillsborough County, Florida, which is the Tampa area, $161-million in delinquent property taxes is owed for 2008.

Read more

Travel Insurance – Do I Really Need It?

May 28, 2009

By Terry Smiljanich:

So you’ve gotten your travel invoice and see that somehow you signed up for travel insurance (see our article from last week on how you can get tricked into purchasing such insurance). You have to cancel within ten days or you’re stuck with it. But should you cancel it? Maybe it’s something you will be glad to have.

Let’s look at the travel insurance policy that Access America, the company that Orbitz automatically signs you up for to give you “peace of mind.” As always, the details are buried in the fine print.

Trip Cancellation or Interruption

One of the main selling points of travel insurance is to protect you should your trip have to be canceled or if you have to suddenly interrupt your trip due to an emergency.

The Access America policy covers you if you or your traveling companion are seriously ill or injured. According to the fine print, however, such injury or illness must be certified by a doctor who has examined you and recommended that you must cancel or interrupt your travel. Your death also qualifies you to cancel or interrupt your travel, always a good thing to know.

If you are hijacked, you are allowed to interrupt your travel. Also, if there is a “terrorist event” at your destination within 30 days of your arrival date, you are allowed to cancel the trip, unless there have also been other terrorist events at the same location in the 30 days before you obtained the travel insurance policy. Terrorist events must be by an “organized terrorist group,” but don’t include civil protest, unrest, rioting or acts of war.

Forget it, however, if you cancel due to an epidemic or pandemic. Canceling your trip to Mexico due to an outbreak of swine flu would not be covered.

Refunds

Should you qualify under the policy to cancel or interrupt your trip, what exactly do you receive? You get back any payments or or deposits you previously made, less any refunds to which you are entitled.

This refund policy is one of the main reasons you consider before deciding to keep the travel insurance. Have you bought an airline ticket in advance? Is it a refundable ticket? If so, your travel insurance policy will pay you nothing. Is it non-refundable? Most airlines will still allow you to cancel your flight and will provide you with a full credit for use on a future flight, in which case your travel policy will still pay you nothing.

Cruise ships are different. Most cruise lines (Carnival, for example) have prepayment requirements, together with strict cancellation policies. You may have to pay hundreds of dollars of up front costs. If you cancel within 30 days of the scheduled departure, you are entitled to a refund of your deposit. If, however, you cancel between 29 and 8 days of departure, you will owe 50% of the total fare. Cancel within a week and you will owe 100% of the total fare. Your travel insurance policy will, however, cover these differences, if your cancellation qualifies under its strict definitions.

So, if your main concern is trip cancellation and you are traveling by airplane, cancellation insurance is not particularly beneficial. If you are traveling on an expensive cruise with substantial deposits, travel insurance may make much more sense.

Medical Coverage

Travel insurance usually includes some form of medical insurance, covering you should you require emergency medical care while on your trip. The fine print specifies that the treatment must be medically necessary and provided by a doctor, hospital or other licensed provider. Existing medical conditions are also not covered unless you pay extra for this benefit.

Such medical coverage is “secondary” to your own health insurance, so any such costs have to be submitted to your own provider first. The travel insurance policy will only cover any qualifying costs not covered by your own insurer.

Check your own health insurance policy first. If foreign emergencies are already covered, you will be wasting your money on this travel insurance benefit.

On a recent trip to Greece, I fell and broke my nose and hand (at a “temple to Poseidon”). I was treated by four doctors at the main Athens hospital, had a follow up treatment at a clinic on a small Greek Isle, and came home with my x-rays in hand. Total cost? Nothing, due to Greece’s health care system which covers such emergency costs. We are not recommending that you rely on foreign health care systems to cover your overseas medical emergencies, but not having travel insurance may not necessarily pose a problem, depending upon the country.

Summary

There are other miscellaneous travel insurance coverages, such as lost or stolen luggage, but these extras are not, of themselves, worth the cost of travel insurance, which usually runs between 5-7% of the total cost of your trip.

Travel insurance makes sense if you and your family are planning an expensive trip with substantial nonrefundable costs. Several websites (for example, here, here, and here) give advice on how to evaluate the need for such insurance.

Travel insurance should be, however, a voluntary choice you make, and not something quietly slipped into your bill by an online travel service.

Travel Insurance – How Did I End Up Ordering That?

May 21, 2009

More and more travelers are finding out that their travel costs include a bill for travel insurance that they don’t remember ordering. How did they end up with travel insurance? And what the heck does it cover, anyway?

How You Got Travel Insurance

Many people planning a cruise or a long vacation decide to get travel insurance to cover the risks that they might have to cancel their trip due to unforeseen circumstances. Going out and getting travel insurance is fine, but having it forced down your throat is something else entirely.

If you book travel through a popular online travel service such as Orbitz, you might discover that somewhere along the way you “asked” for travel insurance. How did that happen? Well, as you were working your way through the various web pages and filling out information, you might not have noticed the little box that “asked” if you wanted travel insurance. You also might not have noticed that the helpful people at Orbitz already filled a “yes” in the box for you.

Why would a company like Orbitz force you to uncheck a box that is ordering an extra service you will be billed for? When asked why it engages in such a practice, Orbitz states: “We have found that many of our customers choose travel insurance when booking an international vacation to protect their investment. Therefore, we default to ‘Yes, Add Ticket Protector Plus’ to provide this peace of mind.”

Really? To provide “peace of mind” Orbitz makes the choice for you? It sounds more like Orbitz wants to provide mindless “choices” rather than peace of mind. Shouldn’t travel insurance be something you choose to get, rather than have Orbitz choose it for you?

We think any form of preselected extra options on an online service is just a way to trick people into buying something they may not necessarily want. This type of marketing practice is the reason that you should be very careful when filling out web pages for a service you are buying. Don’t let someone make mindless, and sometimes expensive, choices for you.

How You Cancel Travel Insurance

Once you discover that you purchased travel insurance and decide that your “peace of mind” is better served by canceling something you didn’t want to order, what do you have to do?

Once again, read the fine print. You have only ten days from the date you inadvertently “ordered” this insurance to cancel it. Waiting until it shows up on your credit card bill is too late, even if your trip is still months away. Sorry.

Assuming you’re astute enough to notice that you are going to be charged for something you didn’t want, it should be fairly straightforward to cancel it, right? You call Orbitz, but it tells you to call “Access America,” the company actually providing the travel insurance. I guess that even though Orbitz wanted to order it for your convenience, it’s not convenient for Orbitz to undo the transaction for you.

So you call the telephone number provided, and after working your way through a convoluted “message tree” (you know, “if you’re calling about … press …”) you are ultimately directed to another website where, after working your way through some more forms, you can finally get your policy canceled and now can wait to get a refund of the premium you’ve already been charged- assuming, of course, that you acted quickly enough in discovering the charge and going through this cancellation procedure.

If you are too late, or if you had decided all along that travel insurance is something you actually want, what is it? Does it cover, for example, that trip to Mexico you had to cancel due to the swine flu outbreak? (Here’s a hint – no). And who is Access America? We will help answer those questions next week when we examine the fine print on these insurance policies.

Body Language: Learn How to Spot a Liar & Avoid Getting Scammed

May 13, 2009

Sometimes words don’t matter.  Watch now and learn more about body language. Retired FBI agent Joe Navarro says it’s often more reliable than what someone actually says.  Consumer Warning Network’s Angie Moreschi interviewed Navarro, an expert on human behavior, about his new book What Every BODY is Saying, to get some insight on how to avoid getting scammed.   Click the video above or click “read more” below for more information.

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Fight Foreclosure: Make ‘Em Produce the Note

May 12, 2009

Using the “produce the note” strategy is something all homeowners facing foreclosure can do. If you believe you’ve been treated unfairly, fight back. We have created templates for a legal request, a letter to your lender and a motion to compel to help you through the process.  Read the step by step “how to” under the videos.

Special note:  In some states, a lender can foreclose on your home without going to court.  These are called non-judicial foreclosure states.  You can still use the “Produce the Note” strategy in these states, but it takes a few more steps on your part.

Produce the Note – Steps To Follow:

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Fraud By Mortgage Companies Key Cause of Foreclosures

May 11, 2009

Figuring out just how much junk major banks have on the books was a goal of the federal government’s just released “stress test” for the 19 major banks receiving federal bail-out dollars.  There’s still no clear answer, but we continue to see more evidence that a high percentage of sub-prime mortgages were steeped in fraud and have a high probability of failure.

The American News Project just released the video above which reports fraud carried out by employees of  major sub-prime lenders, like Ameriquest, was a key factor in the mortgage meltdown.  Consumer Warning Network first reported our findings on this very issue more than a year ago, and is cited in the ANP report.   ANP reporter Lagan Sebert talks with a former Ameriquest employee who says her company promoted a system rife with fraud as a way to make profits faster.

New Gasoline Pricing Scam – Let the Buyer Beware!

May 11, 2009

In a new attempt to mislead consumers, gas stations everywhere are resorting to a new technique – advertise one price and charge another. As you are driving down the street looking for a fill up, you see the following sign advertising gas at a very reasonable rate:

You pull in, insert your VISA card, and fill up with high test at what you think is $2.29 per gallon. If you bother to look carefully at the price on the pump or at your bill, however, you see that you’re really being charged $2.34 per gallon. In a typical 18 gallon tank, that’s almost a dollar more than you thought you were going to pay! What gives?

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Banks Win – Homeowners Lose

May 6, 2009

By Angie Moreschi:

Chalk up another one for the banking lobby.  The Senate deep sixed the provision many homeowners facing foreclosure were hoping could offer them a second chance.  The Senate defeated an amendment for the so called “cram down” provision, that would allow bankruptcy judges to modify primary residential mortgages for homeowners facing foreclosure.

This would have helped to prevent thousands of foreclosures, because the threat of court-mandated modifications could have prodded more banks and loan servicers to negotiate in good faith with struggling homeowners. The run-around homeowners get when they try to work with their lenders is exactly what led to Consumer Warning Network’s grass roots campaign to force lenders to “produce the note.” It seems that’s still that last, best way to hold lenders accountable when they try to take your home.

Read more in this St. Pete Times article on the defeat of the “cram down” provision:

Published:  St. Pete Times

Monday, May 4, 2009


The score: Banks 1, Homeowners 0. That is because the U.S. Senate has caved in to the banking lobby and refused to allow bankruptcy judges to modify primary residential mortgages for homeowners facing foreclosure. This would have been the best way to prevent hundreds of thousands of foreclosures, because the threat of court-mandated modifications would have prodded more banks and loan servicers into negotiating in good faith with struggling homeowners. President Barack Obama, who claimed to support the idea, didn’t fight hard enough for it and the banks won.

The Senate defeated an amendment last week to give bankruptcy judges the power to alter the terms of home mortgages. The opponents who sided with the mortgage industry over homeowners included 12 Democrats and 39 Republicans – including Florida Republican Mel Martinez. You would think a senator from the state with the second highest mortgage foreclosure rate in the country last year would have seen the wisdom of giving bankruptcy judges more discretion. Florida Democrat Bill Nelson showed commendable backbone, standing up to the banking lobby and voting for the amendment.

The banks fought hard to send this modest initiative down in flames and prevent federal judges from lowering interest rates, extending payment periods or reducing principal – known in banking parlance as “cramdown.” Primary residential mortgages are the only type of loan that cannot be restructured in bankruptcy court.

Majority Whip Richard Durbin of Illinois, who was the measure’s chief champion, declared that banks “are still the most powerful lobby on Capitol Hill. And they frankly own the place.” Many of these banks, including Wells Fargo, Bank of America and JPMorgan Chase, are recipients of taxpayer-funded bailout money. Essentially, they are using taxpayers’ money to fight against a public policy that would have helped many taxpayers – including many in Florida. And the Senate let them win.

Lenders Inability to “Produce the Note” Leads to Shady New Practice

May 4, 2009

foreclosure signMortgage lenders who were sloppy with important paperwork in the hey-day of the housing boom are now turning to questionable practices to clean up their mess so they can foreclose on homeowners.  It all stems from the lenders inability to “produce the note” when they try to take someone’s home.

To get around the break-down in paperwork, these companies hire people to be “fake” Vice Presidents to sign documents from one company to another, so a foreclosure can proceed.  The St. Petersburg Times exposed the practice in an investigative report, in which they interview CWN founder Chris Hoyer.

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