Larry has some good perspective on the problems of this new Good Faith Estimate...  They must be trying to increase unemployment!

What is Proof of Funds?

What Proof of Funds will actually work and which ones won't?

Just about every REO Home, Bank Owned Property, Foreclosed Home, Short Sale, etc. will require some proof of a Buyers ability to perform.

This blog post is as much of a set of questions as answers for your tips and suggestions on how to overcome this potential road block to a deal.

Before we get going.  I know what a basic proof of funds letter from a bank or credit union looks like.

But what if you don't have a bank?

• What if you have CASH in a more pure or secretive sense? 
• What about a retirement account?
• What about foreign funds?

My Dilema:

I have a buyer we will call him Joe.

He is an older guy and he doesn't really like banks.  He works on more of a true cash basis (nothing illegal), Joe just doesn't have a bank account or keep any money in it.

Joe does own several properties, residential rentals and a couple pieces of commercial dirt with a few minor improvements on it.

Joe has lots of friends.  Lots of Joe's friends want his dirt.  Lots of Joe's friends want to lend him money and secure it with this dirt.  He explained to me that he would quit claim the dirt to his friend and not record it and then if he paid his friend would give it back, otherwise his friend would go file it.

I explained that this is kind of like going all in with a pair of 2s in your hand playing Texas Hold-em and that the proper way would be a NOTE and a Deed of Trust. 

Joe doesn't want to do that, he want to do it his way.  So I said fine, do it your way, just be aware you are risking your entire piece of dirt for potentially pennies on the dollar and based strictly on trust and a hand shake.

Joe put an offer in on a Bank Repossession (REO property in Montrose Colorado) the other day and told me to write the offer up CASH close in 5 days or as soon as he gets proof of clear title.  No further inspection, appraisal, etc.  No bother countering, final and best offer.  (BTW I like this approach, of final and best offer, with people but it doesn't prove too effective with banks in my experiences.)

I told him I would write it up for closing in 10 days because no bank will move fast enough to close in 5.  I based every date my date table x days after MEC (Mutual Execution of Contract). 

We submitted an offer about 15% below the asking price and said the deal was CASH we would put $15,000 (his number not mine, they were only asking for $1,500) down as earnest money and we would put up the rest of the CASH to the Title companies trust account for proof of funds, prior to close.

The banks computer immediately kicked the offer back and said they need proof of funds within 24 hours or they will cancel the offer.

I called Joe and told him and he went on about how ridiculous it was and I said listen "if you want to play with banks you have to play their way."  I also explained the banks have been burned many times before and told someone had cash when they didn't and that is why they ask for it.

I suggested that he should just get the cash and put it into an account that he could have a bank or other financial institution issue a proof of funds letter...  The typical means. 

He said No.  If I pull that money out of my sources, then it will cost me a months interest.  Here is what we will do.  Joe is buying the home for his son Tom.  He said I will write the letter and "be the bank" for my son Tom. 

I said that sounds good, but they will likely just come back and ask you for proof of funds and we will be back here again.  I said, "But we will try it".  We typed up a letter that basically said he was the father of the buyer and going to provide the cash for the purchase and he was going to get this cash from his "private money lenders" and his various assets.  But to them and for this purchase it would be cash and we could produce said cash and place in the Title Companies Trust Account for verification within 24 hours of MEC.

Unfortunately we didn't get to see if it worked.  The bank (or their computer) countered back a mere $2,500 below the asking price after they just told the listing agent to take and advertise they were taking any reasonable offer.

What has been your experience of acceptable proof of funds?

Have you successfully used "private money" proof of funds letters?

Thanks for any tips or suggestions you might have.

Chris Ormsbee

(970) 209-0252

Montrose Gold Team

C21 Action Realty, 1245 E Main St. Montrose, CO 81401

www.c21actionrealty.com/cormsbee

www.soldcore.com

www.yourcoreadvisor.com/blog

Real Estate Agent - Hard Times Call for Desperate Measures.

Was watching ABC's Nightline program on 2/1/2010... The menu was as follows

• Psychic in Denver that talks to Dead Relatives.
• 10 American Missionaries Arrested in Haiti.
• America's first "Legal" Male Prostitute/Gigolo

I saw the lead in after the local news on www.KJCT8.comand thought wow!  That's an interesting
sounding program.  I thought ok, I will watch it.  And yes I said "Nightline" - not "Hollywood Access".

My analysis of the show:

1.  The "Psychic" seemed like a nice lady and like she helped people,
not a weird robe/hat and crystal ball.  (not that I have any thing against
any of these folks, I just wouldn't ever pay for their services myself as
I don't believe in their abilities.  I definitely wouldn't pay $500/hr as many do.)

2.  The arrested folks in Haiti are in more trouble than they think, in my opinion. I wish them well and while they surly mean and/or meant well, it does seem they may of been a bit overzealous in their efforts.  As a UNICEF individual stated, (loosely para-phrased)

"We have to make connecting these children with their natural parents job number one."

"Can you imagine being a mother, separated from your child, unsure of their where-abouts, only to find out they had been adopted out of the country to another family or place"  and (my thoughts) because you are poor you would have no means to do anything about it.

I agree with the UNICEF, guy...  Protect, love and care for the children, but find their parents, only if after this whole mess is sorted out and the parents are confirmed dead should the children be adopted out.

I believe in adoption (I have two adopted children myself) and I believe it is a well intentioned act, but one must respect the children's existing family if one exists, they must want or need to give the child up. 

Even this skirts on questionable if the parents are "promised a LOT" or paid a "lot" essentially bribed to sell their child off to save or help their others...  To me this is wrong!

3.  Now for the funny part... Mr American Gigolo...

Forget his name, but he did have nice abs... (tinge of jealousy).

Former Marine, a bit "cocky" you might say.

Anyway, the funny parts to me were as follows:  while interviewing purveyor of the "ranch/farm/brothel"...

She says she may expand in the future and add more guys.  She continued, and it wont be hard to find more guys...

We had over a hundred applicants for the position.... she lists off various people and careers... and ends with "and even a couple of real estate agents".   (at least she didn't say "Realtors")

I laughed and nudged my girlfriend like hey hey... but then I thought why do we really need more mud slung our way...

I know times are tough and I gotta say, it doesn't sound like this would be too "hard of work". Still why mention your a "real estate agent" on your application?

Do Real Estate agents ooze sensuality and sizzle?  

Then the news reporter asked how many people he had slept with and he said only three...  The reporter questioned if his lack of experience didn't concern him.  This number 3 struck me as odd and made me try to remember the formula from "Failure to Launch" or some movie... but at the end of the interview they said he had already had 4 clients so far (4 women mid 30s to 40s who each booked a 2 hour session at I think $350/hr), plus he had earlier mentioned what a good deal it was for him cause he had been homeless on the streets of LA after a failed Porn Career. 

He didn't elaborate on how that Porn Career had failed... but he probably didn't have a good agent representing him and they took his "performance and package" and never paid the guy and said "too bad so sad, sue us". 

Anyway, not really a big deal, I just thought it first funny, then kinda sad...

It is at least something to write about.  I guess it also points out that as Real Estate agents or especially as Realtors, we probably ought to think about the consequences of our actions to the fellow members of our community.   (But I refuse to be PC or keep my opinions to myself in blogs, sorry...)

On the lighter side I suppose any publicity is "good publicity".  It might also make light of the fact that many Realtors are struggling and have second jobs in retail, waiting tables or bar-tending.   I suppose it could bring a new meaning to "closing gifts" and "personal service", but I don't want to go there...

Nobody is perfect.  I don't even expect them to be.   But maybe we should put forth a good effort and try to use our heads and think about the consequences of our actions, not just silly stuff like this but everything. 

The more important thing out of all of this as far as it relates to the state of Real Estate across America, is probably the "actual line up" of Nightline, a once news worthy show in my opinion.  I don't watch much TV and I probably haven't watched the show in 5 years or so and not steadily since Ted Koppel was the host. 

It seems, the apparent lack of media attention or debut in typical media shock and awe type fashion means they are being paid to keep it hush hush till it gets past, then they can start blaming one another and no one will know what really happened (seriously) and everyone will be pointing fingers.  Sorry to tell ya, but its not the people or the person.  Its not Bush or Obama or Reagan or Kennedy, its the process and the decisions being made that have got us here and are going to destroy us if we don't stop them... (bad decisions and their resulting consequences).  In my opinion, President Obama is a very successful "Puppet of the Rich" (I mean the "uber wealthy"), in their hands, the combination is very dangerous.  On camera and in his words he is all about the people, and change and this and that other BS just like every other politician (republican or democrat), then they get to work and the advisors come in and say "ok great job on the speech" now lets get to work, the way this is really going to go down is as follows... Nothing like what was promised.  Often semi-legitimately, due to complications, like a budget.  Other times based on out right lies. 

Wouldn't it be interesting to hook the Politicians up to a lie detector machine while they were giving campaign speeches and ads?

e.g. Vinny over at the Union says they need some favors in Chicago and as your "advisor" I am supposed to remind you that if it doesn't work out, it won't be pretty and its going to cost you a lot on your next re-election campaign...  If it does work out, they will be fully behind you in the next election.   Then we hear in the next speech, "Together we are working to rebuild Chicago's inner cities for people who need it the most, people like you and I, struggling just trying to get by day to day.  We are going to create Jobs by providing housing."   The reality is Vinny's uncle owns a construction company with tons of Union employees, they are stacked to get the job...  They do get the job... it ends up costing probably 2-3 times what it would of cost in the private sector (that means 1/2 to 1/3 as much housing as could of been built.) But the Union bosses, the Union Plumbers, Carpenters, etc. that happened to be employed there are the ONLY Union people to benefit (that are just like you and I).  The fat goes to the Fat Cats making the back room deal... This is just a made up movie type version, but I am convince more and more every day I read and open my eyes that this type of thing goes on not just daily but 24-7.  We need a UNION to protect us from our own Government, not our employers anymore.

Don't be quiet, be loud, be heard.  This 4 Trillion Dollar Budget is up for vote (they hope quietly and without much voter opinion).

Thankfully, someone was running commercial spots in the middle... of the program (even the networks will tell the truth if you pay them).   I didn't catch who paid, but I liked it.  Thank You!

That's a 4 TRILLION dollar budget proposal, when we are in a country that is already broke and facing huge deficits.

I am no politician, and no economist, but I know we need jobs more than anything, especially more than more bank bailouts.   I heard unemployment for white males hit 25% (those are depression like numbers).   Even if this number is wrong, things are bad on the employment front.  I am having to warn clients not to buy in Montrose, Colorado, or anywhere for that matter, unless they already have a good job lined up.   If I didn't I would be unethical in my opinion.  

I think if we had jobs, everything else would fall back into place.

The only highlight from President Obama's budget that sounds worthwhile based on what I heard on the local (Montrose, Colorado) news coverage at www.KJCT8.com is that they have proposed tax cuts for small businesses to encourage them to hire new employees... (jobs) that sounds good to me!  BUT if the "health care" and other fat regulations and taxes are placed as a mandatory burden on small or large business as well, then the "cut" probably won't even offset the increase.

If a 4T Dollar Budget passes, I think we are all doomed and I think, I better start working on my CIPS (Certified International Property Specialist) certification, because we will probably have a large migration away from this country (of working people and entrepreneurs, the wealthy may stay and be supplied essentially slaves as part of the "enlightened or enabled" class, we that stick around will be the slaves. In many respects we already are...  How free are you?) 

Once saddled with this debt and the resulting ridiculous taxes... there would be zero attraction for a company opening up to do business here in the USA.  Just like the reason Amercian companies have been leaving in groves for foreign lands to open their manufacturing and distribution plants and taking their jobs with them.  Its not just cheap labor its regulation and taxes as well. 

It really equates to FAT government!

We need some severe pruning to keep the tree alive... The disease, of empire and resume building, ridiculous procedures, crooked campaigns and votes influenced strictly by lobbyists, owed favors or backroom secret "insider" deals, abused positional power, abused absolute power, different laws policies or services for the regular guy, but something else for us...  

How is the public represented by this crap?

But hey that's just my opinion!  For all of you believers out there, you will surely get lots of immigrants to replace us from socialist nations (that have now evolved) where they are or were used to hand outs.   But if you are a Realtor, I am not sure how you are supposed to get paid!   If all the houses are "free" and owned by the government.   Hopefully the government will have a relocation division and will be hiring unemployed Realtors, but I bet they pick their unemployed banker friends over us...) 

Eventually when no one works and everyone has their hand out for a free government hand out, it will fail. 

No production = No nothing, Nada, Null, 0

How do you tax that?

If you agree write your congressmen and senators and tell your friends and family to do the same... 

If you disagree I respect that as well, still write your congressmen and senators...

Be heard, its the best we can do.  If we don't speak up and demand they do the right thing, probably what they promised to do when they got elected, then they seem to do whatever the lobbyist tell them to.  

From where I am sitting, I don't think they have MY Back!

Chris Ormsbee

(970) 209-0252

P.S. - Sorry no pics on this one, all copyrighted stuff...

P.P.S. - Write or call your local representatives... 

www.MontroseGoldTeam.com

www.SoldCORE.com

www.c21actionrealty.com/cormsbee

Paula from NY just posted up this great blog about right pricing in todays market.  I thought it was worth a re-blog here to make sure all my followers saw it.

It is very critical in this market we face today.

What's HUD and What's a HUD Home?

What is HUD?

It might be a short texting acronym for How yoU Doing.

It is actually The Department of Housing and Urban Development.

Check them out yourself here:  www.hud.gov
 
What exactly is a HUD Home?

HUD is a government agency.  The Department of Housing and Urban Development.  They back up FHA Loans and when these default, HUD can end up liquidating the assets on the open market or through other channels.  They also promote home ownership, so they can offer first time home buyers some good options through their various program.  In addition in these tough times they are heading up the government directives like "Making Home Affordable" program. 

Learn more about Making Home Affordable here:   http://www.makinghomeaffordable.gov/

According to their web site:

"HUD's mission is to increase homeownership, support community development and increase access to affordable housing free from discrimination. To fulfill this mission, HUD will embrace high standards of ethics, management and accountability and forge new partnerships--particularly with faith-based and community organizations--that leverage resources and improve HUD's ability to be effective on the community level. "

So what does this mean to you?  

Well HUD works with FHA, The Federal Housing Authority, which is actually a part of HUD itself.  When someone defaults on their FHA guaranteed Loan or Mortgage, then the house can end up going back to HUD to liquidate if it hasn't been successfully sold previously by the bank or the home owner in a short sale.

If a house is very upside down, it may be destined to go back to HUD's liquidation department, because FHA has minimums they are allowed to take in a Short Sale.  These minimums are based on the original purchase price, appraisal and loan amount.  So if a house was way over-priced a couple years ago or has really declined in value, no buyer will be willing to pay what FHA is required by law to take as a minimum amount.  Then the home goes back to HUD to liquidate, they have the leeway to go below these minimums and meet the markets price.

HUD uses MCB - Michaelson, Connor and Boul, for the State of Colorado and in Montrose  as a REO asset management and liquidation company.

MCB handles all liquidations for HUD in a region of the United States including Colorado.  http://www.mcbreo.com/st_comain.htm

According to their website, MCB covers the following states for HUD:

• Arizona
• Colorado
• Michigan
• Montana
• Nevada
• Utah
• Wyoming

HUD hires one Real Estate agent for a very large multi-county region, they get a small amount of money for listing each of the properties in the MLS.   

For the Montrose Colorado area this agent is Marilyn Hammar.  Please don't call her.  She just puts the listings into the MLS for the Government.  She doesn't do photos, she doesn't inspect the properties, she doesn't have knowledge of them beyond what she is provided...   

Here is a link to a list of all the local listing Brokers for MCB REO in Colorado.  Use these names for your local agent to easily search (by agent) all the HUD homes in an area...

http://www.mcbreo.com/colorado/collb.htm

In cold regions and seasons, HUD will typically have the homes winterized and secured with a standard key that is the same for all HUD homes in an area.   This allows any agent to show the home (as long as they have a HUD key in their office). 

A Real Estate office and its Broker Owner (here at Century 21 Action Realty in Montrose Colorado, that is Ninah Hunter - www.c21actionrealty.com ) must be registered with the company responsible for liquidating HUD assets in your region in order to make offers on properties. 

Registration is not hard but does require some paperwork.  Once a company is registered any of the employed agents or brokers can submit HUD offers on behalf of their buyers.

Sometimes HUD properties will be featured in auctions, online or offline.  Here in Colorado MCB allows electronic bidding online.

Just like with Bank Owned properties don't expect HUD to fix a lot of things for you.  You are better off documenting the need and reducing your offer price and then taking care of these things yourself.

HUD/FHA do offer a "K" Loan (a smaller streamlined version of their 203K Rehabilitation Loan).  The "K" Loan allows a buyer to finance in and escrow the repair costs for the home.  The repairs must be cosmetic and not structural in nature and are limited to $35,000.

The FHA 203K Loan will handle structural repairs but it is a lot more paperwork. 

The "K" Loan is perfect for repainting, replacing carpet, tile or linoleum, etc.  

The 203K Loan grown up version can be used on a complete gut and remodel, an addition, etc. 

Both the "K" Loan and the 203K Loan lend based on the "after repaired appraised value", then the draws for repairs or improvements are handled like a construction loan.  Here is a link to the governments page about these loan programs.  Check them out if you are a buyer, a Realtor, or even an owner stuck with a property in need of a lot of rehabilitation.

http://www.hud.gov/offices/hsg/sfh/203k/203kmenu.cfm

So what are you waiting for go out and buy a HUD home today... Just kidding, but it sounded good. 
If you are in the market already for a house and you are looking for something that might need a little work, a HUD home is a great place to look...

But a Realtor is really the best place to start, because they will have HUD homes, REOs, short sales, desperate sellers (divorce, illness, death), retail secondary market, new construction, etc.   They allow you the best shot at looking at the whole market.  But it never hurts to look around a bit on your own.

Check out my websites for properties, homes and information about the Montrose Colorado area.

www.SoldCORE.com

www.COrmsbee.c21actionrealty.com

www.MontroseGoldTeamBlog.com

Hope this helped you get a better understanding of what a HUD Home is and how you might go about looking at one.

If you want to buy or sell a home in Western Colorado, especially in Montrose and the surrounding areas, give me a call. 

My name is Chris Ormsbee and I can be reached on my Cell phone at (970) 209-0252.