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Tips for Entering Distressed Properties

April 3, 2012  |  by Anne

Although there are signs of recovery in the market, a number of distressed properties are still on the market. MRIS uses these definitions for distressed property terminology as follows:

  • A Yes answer in the Foreclosure field refers to a listing where the property is going through the foreclosure process. The seller still owns the property until the foreclosure is finalized by the courts.
  • An REO refers to a property where the foreclosure is complete and the bank owns the property. The REO field can be found in the Current Financing/Loan pick list.
  • A Yes answer in the Auction field means that an auction is scheduled for this property. Properties subject to an auction must be available for showing prior to the day of the auction.
  • Potential Short Sale refers to any property that is underwater and is subject to bank approval.

For even more tips on entering Short Sales, check out the MRIS Compliance page on MRIS.com or visit the MRIS Short Sale Center in Matrix!

 

 

Posted in Blog, Featured, Keystone

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23 Responses to “Tips for Entering Distressed Properties”

  1. Michael Sarvi says:

    This is going to lead to a lot of incorrect data. Currently most agents are entering REO as "Yes" in the foreclosure field. As an appraiser it is my job to report to my client the foreclosure AND the REO data about the neighborhood I am appraising. MRIS would do us all a service if it would just combine the REO and foreclosure field. Since there are few true foreclosure sales and the confusion of doing it the way you suggest, I believe this would help the integrity of your data. I know the Fannie Mae trains their agents to list their properties and mark "Yes" in the foreclosure field. That is a large percentage of REO listings and by MRIS insisting on doing it this way corrupts the data.

    • Bill says:

      I agree! I would say "99.9%" of agents also look at it the way you explained, I know I do. "MRIS insisting on doing it this way corrupts the data" …MRIS will need another "drop down" right next to "foreclosure" labeled "REO" to straighten this out.

    • Res. Appraiser says:

      What is being communicated here is SALE TYPE. The 2 principal types would be non-distressed and distressed. These speak to the circumstances surrounding the sale of the property. There are multiple possibilities under each heading. Sale Type is a key consideration in understanding the listing, how it fits into the larger market and the market overall.

      Perhaps a better way for MRIS to approach this is to create the selection of Non-distressed or Distressed heading boxes with drop-downs for the many subcategories?

  2. L Hilton says:

    Thanks Michael. I am an appraiser as well and find the agents "definition" of Foreclosure confusing and misleading. If it is an REO the Foreclosure status should be a YES……

  3. Ed D. says:

    You have a client who is interested in looking at homes that have been foreclosed. What entries should you make in the search? Looks like we are making it very difficult to search for foreclosures based on what your rules are and what agents are entering. Doubt seriously that most agents will read this article but I could be wrong. Would not be first time either!

  4. C ODea says:

    Just because the property is underwater and requires 3rd party approval doesn't mean they are not going thru the foreclosure process. Most of them are and they are trying to sell their home as a short sale before the gavel goes down. Foreclosure/REO mean the same to 99.9% of us. I agree with the above comments and something needs to be modified.

  5. Ray says:

    As an appraiser, I feel that most of us have to do extended research of the sales because many are not reported correctly in Matrix. MRIS should rewrap the whole distress sale thing into a package that is clear and understandable at one glance. Then we could do searches that are meaningful, and get search results that we've truly asked for. In addition, accurate statistics could then be generated to characterize the current, complex marketplace. Accuracy starts with the agent's ability to correctly document the conditions of sale. Without the right tools, the issue snowballs.

  6. Jeanne says:

    MRIS needs to listen to the agents and appraisers that are out working these properties. This is causing a lot of misinformation and confusion with agents, buyers, sellers and appraisers. The data is in fact corrupt in our world, when we search for listings and do CMAs and Market Analysis, we have to look at each individual property to ascertain what it is because we cannot trust the system. We may not even know that a property is going through the foreclosure process in some cases. I would guess that there are appraisals that are inaccurate because of this, no wonder we are having problems with appraisal. There are also foreclosure websites that do not pull foreclosure listings if that field is not filled in. I was notified of a complaint because I had not marked property as a foreclosure and threatened with a fine if I did not change it, I even talked with compliance and they were not sure of the rules, so I changed it and gave up. So what was that all about. No one really needs to know if some one is in the foreclosure process, not as much as we need to know that they are a foreclosure. Make another field if you feel it is necessary, but you are only creating confusion.

  7. Fran says:

    Many if not most of all properties trying for a short sale are indeed "going through the foreclosure process." The short sale marketing has often only been allowed by banks to delay foreclosure. I agree that there needs to be more clarity in this area. When prospects are looking for a foreclosure, in most cases they are referring to a property that no longer belongs to the Sellers. Please consider the confusion, corrupted data, and strong possibility of misunderstanding on the part of agents, buyers, and appraisers and revisit the input guidelines.

  8. Mike says:

    I agree. 99% of the Real Estate Professionals view the Foreclosure field already foreclosed i.e. as an REO. Simply changing the label to REO would solve the problem. End of story!

  9. Karrina says:

    I agree. I always thought that "Yes" on foreclosure meant that the bank had already taken the property. I did notice that a few foreclosed properties have started showing up without the Yes field checked. It will be simpler if the data instructions were the same as the world we live in. Yes for already foreclosed properties. If the properties are merely in the foreclosure process, then they could be either short sales or regular sales, and anything could happen.

  10. lauren says:

    I agree – I would never enter data this way – it just does not make sense. Sometimes MRIS implements changes that just do not make sense to the people who are utilizing the system! MRIS should consider speaking with the realtors and appraisers who use MRIS on a daily basis before making changes to the system or writing the rules that are actually different from the way we do business. Short sales are another issue in the way they require commission to be entered since the banks can sometimes reduce commission in the short sale process. It seems like MRIS is putting us in a bad position instead of helping us to make our jobs better, easier and without setting us up to be out of compliance.

  11. rob says:

    After reading many of these comments, it's clear to see there are still agents that want to confuse reo with foreclosure. PLEASE add a drop down for reo because the reo agents will know where to put an reo. We only put reo properties in foreclosure because most agents don't know what reo means. Years ago I'd put my properties in reo but agents would get upset because I didn't put them in foreclosure. It would be also helpful if filling in management companies for hoa and condos were mandatory.

  12. Joy says:

    As an REO agent, I always mark foreclosure box. I also agree, MRIS needs to listen to the agents. REO means it's already bank owned and is a foreclosed property. With some banks considering going into the rental business, in lieu of foreclosing (FNMA), how is this going to be addressed?

  13. Mike says:

    I believe there needs to be a refinement of the info in Matrix keeping in mind the following – Foreclosure is when the Owner is behind on payment and the mortgage holder (the Bank) is in the process of taking the property because of that, It is likely that if a sale happens before the foreclosure auction it will most likely be a sort sale as well, so the listing agent needs to have all the financial info on the property. It's important to know this info because the Bank is not the Owner nor the Seller, however in the case of a short sale the Bank will need to approve the sale. And, the property could go to foreclosure auction even if there is a contract of sale in place. The distinction being foreclosed and REO are essentially the semething, the foreclosure prosses is over and the Bank owns the property. So, it's my opinion that the foreclosure drop down box in Matrix should have the options of No, Foreclosure or Foreclosed.

  14. MRIS_CMO says:

    I just wanted to let all the posters know that MRIS does respect (and needs) your feedback on this — that's why we started this post to begin with. In addition, everyone needs to be aware of the compliance/legal aspects of this issue as well as the myriad of lender requirements that differ/conflict with each other. In addition, even Fannie/Freddie/HUD are unclear and inconsistent which makes it even tougher to manage.

    This is indeed a huge issue and we're on it — and your feedback is very critical to the successful outcome of this process. That being said, unfortunately, it's not an issue of "MRIS should do it this way" because of all the other complications that we have to balance for legal, compliance and possibly NAR mandates.

    Please keep your comments coming, as we need input from all stakeholders — but I think it's only fair you all understand the other implications and "handcuffs" we have on this! John Heithaus

    • Michael Sarvi says:

      To follow up, I'm working on an appraisal in Fort Washington, MD. There is a very active distressed property market there. I have to report in a Market Conditions Fannie Mae/Freddie Mac form "Are foreclosure sales (REO sales) a factor in the market?". So now that I see how MRIS is asking the agents to enter these, I did several searches. I did one where I marked "Yes" in the foreclosure section. I got 35 properties. Then I marked "No" in the foreclosure section and selected "REO Sale" in the current financing section and got 2 properties. ALL other fields were the same. If I leave the foreclosure field blank and select "REO Sale" in the current financing section, I get 5 properties. If I leave the foreclosure field blank and select "Foreclosure" in the current financing field, I get 5 properties, 4 of which are the same as the prior search when I selected "REO sale" in the current financing section. I searched where I marked "Yes" in the foreclosure section and then put "REO sale" in the current financing but selected "Not" underneath. It returned 32 properties. When I go through them all but 3 were REO sales.

      Whether these are entered correctly or not, you can see, the data you get is skewed by how you search. It is inconsistent with how you are asking it to be done. Some agents are selecting both "REO Sale" and "Foreclosure", some neither, some mark "Yes" and some "No" in the foreclosure field. All together using all the different searches, which takes up a lot of time, I identified 37 properties that are either foreclosure or REO properties. As far as I could tell only 4 or 5 were truly foreclosures and to be honest, I'm not sure if they were or not.

      • Ruth says:

        MRIS, are you still listening? Here's a suggestion: Take "Foreclosure, REO, and PreForeclosure out of the "Mortgage" section in Keystone. Create a separate field called "Distressed Property." Selections are mutually exclusive (pulldown list) and include: PreForeclosure, Foreclosure, REO, Other. Short Sale is a different field, and is either Yes, No, or Undisclosed. This will help with accurate entry (a property is not both "Foreclosure" and "REO" — it's one or the other. Then, an appraiser using Matrix can search for any or all of the fields under Distressed Property, and can search Short Sales additionally if desired (some sort sales are not foreclosures, and may or may not be "distressed.")

  15. Cindy says:

    Why would it be so difficult to add another drop down with REO if you wish things to be done this way? I agree with all above – 99.99% of us interpret the YES under foreclosure to mean a REO property. Having it hidden in the REO section of financing causes WAY too much confusion – besides the prominent location of Foreclosure brings things to everyone's attention. Hide that and put REO in it's place if you are concerned about compliance/legal aspects.

  16. Res Appraiser says:

    What is being communicated here is SALE TYPE. The 2 principal types would be non-distressed and distressed. These speak to the circumstances surrounding the sale of the property. There are multiple possibilities under each heading. Sale Type is a key consideration in understanding the listing, how it fits into the larger market and the market overall.

    Perhaps a better way for MRIS to approach this is to create the selection of Non-distressed or Distressed heading boxes with drop-downs for the many subcategories?

  17. Ruth says:

    I disagree that "Foreclosure" and "REO" are the same — they're not.

    I think the intent of the current "Foreclosure" field is to trigger a disclosure to the buyer that the listed property is subject to foreclosure. From a buyer agent's point of view (and for the listing agent), this is a significant disclosure. If the bank forecloses before a contract settles, the contract buyer loses out. This risk does not exist for a REO property. A property "in Foreclosure" may also be subject to short sale and/or auction.

    The REO property has already been foreclosed, and is no longer "in foreclosure." Both may be distressed, but lumping them under the current "Foreclosure" field is not helpful — it doesn't accurately indicate when the necessary disclosure applies.

  18. Michael Sarvi says:

    I understand there is a difference between a "Foreclosure" and an REO listing. I'm just trying to make the point that very few agents are entering it that way. Also, it is not as easy to search for REO properties the way that MRIS is suggesting that they be listed. For an appraiser using this database to do our Market Analysis forms that are now required, we have to answer "Are foreclosure sales (REO sales) a factor in the market?". They are lumped together by Fannie Mae and Freddie Mac and this is how most of the agents are listing them. Right or wrong, the database is only useful if the data is entered right and if the users are getting the information they need from the service they are paying for.

  19. Daniel Murrill says:

    Their is so mch information on REO and Short Sale on the internet that I dont know where to start. I would like to work with REO properties but how do you get the listing? As a Associate Broker I need to be trained in selling Bank Owned properties.

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