'Jingle mail' is key to post-boom market

Southwest Florida Foreclosure News

If no-money-down was the real estate password for the first half of the 2000s, "jingle-mail" might be the word for rest of it.

It is real estate agent jargon for property owners, unable or unwilling to pay their mortgages, sending the house keys to the bank, giving up their homes.

Bank-owned properties have become the hot new field in residential real estate, as the excesses of 2004-06 come home to roost. The need for players is growing rapidly along with Southwest Florida's spiking foreclosures.

For 2007, 142 properties out of 6,188 sales were officially tagged as being distressed in the Sarasota Multiple Listing Service for a rate of 2.3 percent. But the number of homes swelled to 8.1 percent in January, 8.7 percent in February and 10 percent last month, says Jose Lopez, a distressed-property specialist with Rose Bay Realty who is tracking the phenomenon.

"It keeps growing and growing and growing," Lopez said. Even the incomplete month of April already is higher than that for all of 2007. "I wouldn't be surprised if we end up this year at six to seven times the amount of these type of properties that were sold last year."

More than 1,800 homes in Sarasota, Manatee and Charlotte counties slipped into foreclosure in March, bringing the region's 2008 total to 5,500, reports California's RealtyTrac, which follows foreclosures.

Nationally, repossessions spiked in March, but foreclosure auctions did not keep pace, signalling to RealtyTrac that many more homeowners are resorting to "jingle mail."

It is not a path practitioners are recommending, because of the credit implications.

"We are trying, step one, to explain to the homeowners, 'You don't realize the consequences of 'jingle mail,' " said Michael Saunders, president of the Sarasota-based company bearing her name, which just set up a division to tackle distressed properties. "They will not be able to get a home loan for five years, possibly ten years, if they mail their keys to the bank."

Saunders joins a long list of players in REO -- standing for "Real Estate Owned," or the line in a bank's accounts where such mistakes are tallied up.

Her new division, dubbed "MSC Asset Management Group," is starting with the some of the region's community banks that are handling distressed properties, hoping to leverage her firm into some deals with the larger lenders. "Right now the Wachovias and the BofAs -- those big banks, I believe, are still sort of in denial," Saunders said, referring to Bank of America.

Even with that denial, national foreclosures more than doubled to 1.4 million in 2007 from 700,000 the previous year.

Adjustable-rate mortgages now resetting and many times pushing up monthly mortgage costs by 35 percent are "the thing that is going to continue to spike it up," said Budge Huskey of NRT LLC, who oversees more than 100 Coldwell Banker Residential Real Estate offices in Florida from Sarasota.

The nation is riding a huge wave of ARM resets that began in the first quarter and will endure through the first quarter of 2009, Huskey said. Just as the upside to the market in 2004-05 was accelerated by greed, the downside is being accelerated by fear and apathy.

"As housing values are going up, people are more apt to do everything they can to hold onto their homes," said Huskey, whose company runs what is probably the largest management division in the nation for bank-owned properties. "There is a behavioral element, too, that in a declining environment, people are less likely to save their property. A lot of people think, 'Well, there's nothing I can do.' "

Oh give me a home

On a sunny Tuesday afternoon, foreclosure property specialist Tom Waters of Coldwell Banker makes his way in a four-door Nissan pickup truck to his latest assignment, a newly vacated home at 6924 Waverly St. in the Whitfield neighborhood of Manatee County.

There are no extreme signs of distress outside, except for a few weeds shooting up in the front yard, and the old door knobs and latches that the locksmith left on the ground in front of the entryway.

Waters, with the new keys, unlocks the front door as he ticks off the list of jobs he does with each new repo file, and the order in which he does them.

First, if there is somebody in the house, he offers them "cash for keys." Typically, that means paying the occupant (whether tenant or owner) $500 to $2,000 to sign a contract that they will vacate within 15 days, avoiding the protracted process of legal eviction.

At Waverly, said Waters, the owner-occupants would not even answer the door when he went there to make his cash-for-keys pitch a few weeks ago. Now the property is his to manage, on behalf of the reluctant owner, a California bank.

Before he leaves, Waters puts an 8-by-11-inch Xerox sheet in the window, serving both as an advertisement and a warning:

"Your Perfect Partner, Coldwell Banker.

"FORECLOSURE. No Trespassing. Violators will be prosecuted. For more information on this and other bank owned properties, Contact Tom Waters, Broker Associate/Realtor at 941 228 5373."

"Whitfield is a pretty nice neighborhood," notes Waters' broker, Elizabeth Klements, who is along for the ride.

She predicts a quick sale.

"This neighborhood knows what is going on. His phone will start ringing before the sign goes up," Klements said.

Waters does not know exactly what his price recommendation will be yet to the lender for this three-two with a pool.

"I would want it to be under $199,000," he ventures.

The tipping point

Lopez, the distressed property specialist at Rose Bay, is not courting banks for their listings, preferring instead to work with buyers, finding the best deals among homes owned by banks or requiring bank approval because they are worth less than the loan. He then works at making them even better deals by making low-ball offers.

"There are some agents out there saying the bank will forgive up to 10 percent, that any offer has to be 90 percent of what is owed," Lopez said. "That is absolutely ridiculous. They will do 20 percent with no problem, and I have seen as high as 50 percent."

Among the best places to look for bank-owned properties are big subdivisions where builders set up a lot of homes fast. One prime hunting ground for Lopez and others is GreyHawk Landing, just north of Lakewood Ranch off State Road 64 in Manatee County.

Lopez is now making a bid for a property there that requires lender approval on the sale. The previous owners paid $590,000. The MLS offers it for $345,000.

"Right now we are looking at an offer in the $275,000 range, maybe even less," Lopez said.

Lenders list homes at aggressive prices, and many these days are open even to low-ball offers.

In pricing the properties for the lenders, there is always an invisible tipping point below which a bank-owned home will elicit offers, sometimes several at once, says Waters, the Coldwell Banker foreclosure specialist.

He has seen it again and again.

"You may adjust the price down by $10,000, and it's like 'Where were these people?' " Real estate agents know when it happens because the phone starts ringing.

Back at his office, Waters thumbs through some past deals, looking for a good example.

"This one was on the market for a while," he said, opening the file on 5299 Benjamin Lane in Ashton Glen, a pricey eastern Sarasota subdivision typified by large lots and spacious homes.

"This is definitely an end-user home," said Waters, meaning it is unlikely to be used as a rental.

Back in April 2005, when the property was new, it sold for $540,000. Once it was taken over by the lender, Coldwell Banker got it into the MLS at $439,900 in September 2007.

Various price reductions followed.

The one that did the trick was when Waters dropped the asking price from $350,000 to $319,000. That opened the proverbial floodgates, and Waters suddenly found himself refereeing an actual 2008 bidding war with at least three legitimate buyers.

"We sold it for $340,000."