Minneapolis/St. Paul MLS Addresses Foreclosures & Short Sales… Kinda

June 10, 2008 By 2 Comments

The RMLS of Minnesota, which is the governing body of the MLS in the Twin Cities and is owned by the 4 local REALTOR associations, has made some policy changes in regards to the reporting of foreclosures on the MLS, effective on Thursday:

The “In Foreclosure/Lender Owned?” field:

  • Initially will be an agent-only field (not available on Customer reports or on public Web sites through Broker Reciprocity).
  • Options are: Yes, No and Not Disclosed
  • For NorthstarMLS, Foreclosure is defined as the homeowner being served official notice of foreclosure by a governing entity (does not include notice of default from the lender when payments are late).
  • If you select Yes, you certify that you have permission from the seller to disclose that the property is in foreclosure.
  • This field is being added in response to the large increase in foreclosure status properties and agents desire to more easily search them when the seller has agreed to disclose it.  Our goal is to initially keep this information on the MLS simple and rely on agents to communicate with each other regarding the details.
  • If you edit an existing listing after the implementation, you will be required to complete these fields before saving the listing.

While I applaud RMLS’s efforts on this issue, it seems to me that they’re missing much of the issue.  This new policy ignores the following:

Houses Listed as Short Sales on the MLS
These houses are listed at a price where they have negative equity at the closing table and the seller has no financial ability to pay the difference so the seller is asking their lender(s) to take less than they are owed (a “short pay” or “short sale”) as payment in full.  In many circumstances a house is listed on the MLS as a short sale far before official foreclosure proceedings have begun, so these situations are not covered by the new policy.  Since offers on houses in a short sale situation can take months to get a response back from the lender(s), it seems critical to me and my buyers that this information is clearly disclosed upfront… often my buyers have no time or no interest to wait around for 60-75 days for a 50/50 chance of a “yes.”  Since banks do not give a seller direction ahead of time on what price they’re willing to accept, the list price chosen by the seller and any offers submitted

Houses that are Lender Owned
Since the new RMLS policy takes into account only those houses that are in the foreclosure process, once the house is lender owned (also known as bank owned or REO), there would be no disclosure of it in this new field.  While responses from sellers of REOs are quicker, they can still take a week and come with 10-15 pages of “AS-IS” addendums, basically eliminating most disclosures and protections for the buyer and overriding most of the contract language that is used on the standard purchase agreement forms in Minnesota.  As such, some buyers have no interest in these properties and many others specifically want these properties since they can typically be purchased for substantial discounts to market value.

Considering that a little more than 1 in 4 of the sales occurring in the Twin Cities today is a foreclosure or short sale, it seems crucial to me that we have the best information possible on these properties and that they are easily searchable and reportable.  The current policy that the RMLS is implementing is akin to have a way to search for “one story” homes but not “two story” or “split level” homes.

Instead of the current policy, here’s my suggested solution:

Two fields on the RMLS:

Short Sale Subject to Lender Approval (with options of Prior to Sheriff’s Sale and Post Sheriff’s Sale)
These properties require the approval of the purchase agreement by the homeowner (easy to get) AND the lender (not as easy to get).

Lender Owned
These properties are repossessed by the lender via foreclosure or deed-in-lieu of foreclosure and the lender/bank is the only decision maker.

This would address all the properties in some stage of lender mediation and would make disclosures clearer to buyers and market data for all users of the MLS that much more reliable.

I’d love to hear thoughts from the public… please leave comments below.

Filed Under: Foreclosures and Short Sales, Info for Buyers, Info for Sellers, Market Stats, Opinion, Personal Experiences Tagged With: , , , , , , ,

Aaron Dickinson and MAAR Publish Report on Foreclosures and Short Sales on Twin Cities MLS

May 6, 2008 By 1 Comment

You can find the report here.

Background

In late October I wrote a blog post regarding foreclosures and short sales listed on the MLS in the Twin Cities. Once I started researching this topic, I found that the information I was uncovering was previously unknown in our market and that the trends it offered were very insightful. I shared this first-step research with Jeff Allen from MAAR and we decided to work together to explore it further.

The hardest part of this whole research project was developing the methodology & technique used to compile the appropriate data. Our local MLS does not have specific flags for foreclosures or short sales, so agents place myriad varieties of disclosures in the Agent, Public and Financial remarks. What’s worse, there’s no way to query all 3 fields at the same time so all the sold data had to be exported to an Access Database and queries run against that. We also had to come up with the appropriate terms. I provided Jeff a list of keywords I’ve seen used, which were then cross-checked to determine if they were reliable list of phrases. Because phrases like: “subject to bank approval” could mean a short sale or a bank owned property, we were unable to split up the data into “short sale” and “bank owned” categories.

After we had extracted the relevant properties, the next task was analyzing the data to determine what trends were evident and how they could be useful to the REALTOR membership as well as the public at large. Once we compiled these reports, we then had to submit our findings and report proposal to the MAAR Board of Directors for approval. Once we received that approval, we spent the last few weeks putting final polish on the report.

As mentioned before, here is the report. Tip of the hat to Jeff Allen @ MAAR for the excellent write-up of the analysis and to the MAAR Marketing Department for polishing up the report into something visually attractive.

Filed Under: Community Issues, Foreclosures and Short Sales, Info for Buyers, Info for Sellers, Market Stats, Opinion, Personal Experiences Tagged With: , , , , , ,

Foreclosures & Shorts Sales Should Be Classified As Such on MLS

February 28, 2008 By 3 Comments

There’s a lively discussion going on in our office regarding foreclosures and short sales and their impact in this market.  I was going to call it a debate but typically a debate has two opposing viewpoints whereas of the people I’ve spoken to, we all seem to be in agreement: the MLS should add a flag for foreclosures and short sales.

Right now most agents do disclose if their listing is a foreclosure or short sale by saying something in either the Agent Remarks, Public Remarks, or Financial Remarks.  The problem with this method is that agents use 10+ different ways to describe it and can put the data in any of the three fields, making it rather difficult for an agent to either query only for those properties or exclude those properties.

If the RMLS would include flags such as “IS a short sale” and “IS a foreclosure” then agents working with clients that are specifically looking for those properties could easily find those properties for clients looking for them (thereby increasing exposure to those that want those properties) and could filter out those properties for buyers that for one reason or another they have expressed an interest in not considering.

Further, when doing a CMA or other market research, it would make it much easier to determine if one of the biggest factors affecting sales price today was associated with a particular property.

Part of the argument I’ve heard in the past on why we should not add flags to the MLS is that this is a short-term issue and we shouldn’t be so quick to rush in and change things for a short-term solution.  I’d have to disagree for the following reasons:

  • Foreclosures & short sales are certainly a much larger issue right now, but they have always existed and always will exist at some level
  • REALTORS are notoriously slow to adopt new technology/practices, but there’s no reason we have to be, this is an easy thing to program into our system and wouldn’t take more than a few hours to implement if it was given the go-ahead.
  • This is a material characteristic/fact of the property- as much of a characteristic as style, location, and price.
  • As even an entry-level DBA (database administrator) would tell you, your data is only as good as the person entering it, the consistency of the procedure used to enter it, and the way the data is stored.  By making it a simple “check box” we will guarantee that a search for this characteristic will include all properties, assuming the agent clicked the check box of course.
  • If we have this data stored consistently, it makes it much easier for the REALTOR community to parse the data for research purposes, which could allow us to provide the public and private sector with better market intelligence.
  • I’m a big believer in things being taken to their highest and best use.  The MLS is the best source of real estate information known to man but can be taken even further if we implemented even 1/2 the foresight that most startup companies employ.

A few hours now could save hundreds or thousands of hours over the next few years in painful manual processing and help keep our MLS relevant in changing market.

Filed Under: Info for Buyers, Info for Sellers, Market Stats, Opinion Tagged With: , , , ,

Coming Soon to the Twin Cities – 10,000+ More Homes for Sale

January 23, 2008 By 1 Comment

Every week I look over updated stats from the Minneapolis Area Association of REALTORS to see what new things I can learn from them and I’ve found another interesting thought:

As of 1/22/2008, the Twin Cities region has 12.2% more listings today than we did a year ago.  The 3-month average is 10.8% higher this year over last as well, so this is clearly a solid trend.

June 2007 to September 2007 saw a peak of about 35,000 listings.  If we’re currently running a little more than 10% ahead of last year, it seems pretty easy to envision a peak of around 38,500 listings this year.

As of January 22nd, we stood at just under 28,000 lisitngs so we’re looking at approximately an additional 10,500 listings on the market in the next 5 months.

Now this is all just a guess but if you think it through I believe you’ll see it makes a lot of sense.  I’ll have to revisit this post this Summer to see how I fared.  Anyone care to make their own prognostication?

Filed Under: Info for Buyers, Info for Sellers, Market Stats, Opinion Tagged With: , , , ,
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