An REO Buyer can select thier own escrow/title company: Effective October 11, 2009, the Buyer's Choice Act prohibits an REO lender to require a buyer to purchase escrow or title insurance from a particular company. This law expires on January 1, 2015. Assembly Bill 957.

For more info, click here.

New Freddie Mac policy will help real estate agents obtain "reasonable" compensation for short sales. Effective Aug. 1, 2009, Freddie Mac states:

Unless a real estate broker's sales commission exceeds 6% of the property sales price, Servicers must not,
as a condition of the Servicer's acceptance of an offer, renegotiate the real estate broker's sales
commission to an amount that is lower than the amount that was originally agreed upon between the
broker and the Borrower. In the event the sales commission exceeds 6%, the Servicer must renegotiate the
commission to limit it to 6% of the property sales price.

Click here to view news release in its entirety.

Prior, rarely did a lender allow more than 5% comission to be shared by cooperating brokers, but often any shortage not anticipated when the approval process began then fell to the agents to pay out of comissions. Basically, if your short sale took 6 months from submission of offer to close of escrow, and the seller accumulated expenses and debt against the property during that six months, any expenses not made aware to the bank at the start of that 6 months wouldn't be provided for or authorized by the bank. For example: On a $500K transaction, if the bank limited the commission to 2.5% maximum, this allowed a $12,500 maximum commission for the agents to share. Then, if the sale expenses/debt exceeded the authorized net by $5,000, either the transaction could not close or the agents sacrificed $5,000 of their commission.

There still may be deficit on short sales, but with the ability to obtain a minimum of 5 to 6% commission per transaction, it definitely helps agents successfully close transactions and remain in the black.

It appears lenders are implementing a new policy that will affect "flipped" homes. While there is money to be made fixing up REOs and reselling them, there may be less money made if you can't sell them immediately. Why? The income of house flipping is typically based on speed. The faster you can flip it and unload it, the more you profit.

So enter the latest fly in the ointment: lenders are beginning to refuse to loan on a property that hasn't been off the market for six months.

As it is, most REOs aren't in the best condition, so often the purchase is made with cash. And now that the house is rehabbed and will qualify for a loan…..well….HUMMM.

Buyers, do some research on your prospective purchase first and check with your lender on their policies!

Stories about families losing their homes to foreclosure due to illness, job change, and other sudden factors are now the norm, unfortunately. They miss a payment or can't make full payments, are turned down for a "loan remodification," and foreclosure appears to be the only option. I encourage all our readers if they are facing this possibility, talk to an experienced real estate agent before you get too deep in the foreclosure process!

There are alternatives–maybe not the ones you'd choose–but you can avoid foreclosure and the bankruptcy/debt associated with it by selling the home. If you have the ability to catch up and pay off the past due on the loan, and stay in the house, that's the simplest solution. But if you can't pay off the debt when it's due to avoid the foreclosure, paying partial payments is unlikely to stall the process.

A sale or short sale is an unfortunate option, but likely best for the struggling owners. It often comes with "debt forgiveness" so you can avoid bankruptcy.

There's a lot to say about this topc, but the most important thing I wanted to stress is to call an experienced real estate agent and discuss your options. Banks may seem flexible, if you call, but the legal terms of your note are going to prevail. Don't wait until you have 30 days to be out of the house before taking action. Some agents specialize in short sales and they can be very helpful in discussing your options. Often if the bank has an offer on your property in hand, they will delay the foreclosure process.

Buyers seem to be hesitant in making a commitment to one house over the other–taking their time to see homes and less eager to make an offer.

Perhaps this is an effect of the last six months of REOs and short sales. Once you get used to playing the field and submitting muliple offers on multiple properties, sometimes it's hard to see a "normal" sale and commit to pursuing just that one home. Which home to buy ordinarily is a multi-faceted decision of economics, suitability and emotion. But, when you deal with foreclosures it's like gambling. You learn to not get attached to any one home as the best offer gets it.

A good offer on a "normal" sale is still what I recommend in terms of making that commitment. Having the option to negotiate with the seller is a great benefit! Terms can be worked out in a matter of days or hours, rather than weeks and months!