Stop By EPerks....and Get Sued

Have you ever stood in line at the Customer Service counter at a department store and overhead someone who was really unhappy complaining?

This happened to me last week, and while I was taking this all in, it occurred to me that the customers who were complaining in this particular department store really had it easy.

Just imagine shopping at what I'll call Eperks Department Store.

You step up to the counter, unhappy, but well aware that customer service and satisfaction are the linchpins of any business. And so, you describe the problem as you see it, ask for a particular action, and expect that you'll get satisfaction, or at least a civil rejection.

But at EPerks Department Store you're in for quite the surprise. Because before you can fill out the complaint form, you're unceremoniously whisked away by security, and in lieu of an apology, explanation or rejection, they serve you with a lawsuit!

This is akin to what is happening in the blogger dispute EPerks has instigated with Vlad Zablotskyy, who in what appears to me to have been a fully legitimate discussion about EPerks, has now been sued for doing so. No Nordstom service for EPerks. Rather than object, even strenuously object, to Vlad's post with a factual refutation of his blog, he was first threatened, then sued.

As I have commented on other blogs, the facts will become clear as this dispute moves forward. Has Vlad Zablotskyy committed an act so grievous as to warrant a lawsuit? Has EPerks been harmed by what they claim are untruths written by Vlad? Will we have no end of settling grievances with lawyers, rather than civil and full discourse?

In the Bible Jesus is telling his disciples that he's going to enter into Jerusalem, and "even if the people say nothing, the stones themselves will cry out." There was a man who knew that the truth always finds its way, and mandating action (i.e. bringing a lawsuit) is not going to facilitate bringing the message forward.

I hope that EPerks will drop its suit, actually apologize for not letting the "stones cry out", and that each side will move ahead with what was most important in the first place. That would be, of course, doing good work, being good neighbors, and loving you neighbor as yourself. EPerks could dole out some love......it would be way more beneficial to them than their current course.

Jim McKay

Part of the reason I'm in real estate now is because of Jim McKay. Jim died today after a long illness, and was for many of us a voice and personality that reminds us of days gone, both glorious and ignominious.

He covered, of course, the 1972 Munich Olympics where the Israeli weight lifting team was taken captive and then killed after an attempt to rescue them failed. "They're all gone," was all he said, and that phrase still haunts me.

Apparently a good and gentle man, with no outward vices except a love for sports, he wandered off my radar after 1972, but every once and a while I'd see him, and again hearken back to the Munich catastrophe.

Oh, part of the reason I'm in real estate now, the Jim McKay part, is that I inherited a great zest for life after the Israeli's were taken away. "They're all gone" was Jim McKay's wake-up call to me to never take our physical lives for granted, and after that all my undertakings with clients and friends became much more intensely emotional and committed.

"He's gone."

Rest in Peace, Mr. McKay.

Don't be hit by the train...Pay attention!

I recently gave a talk to some local business folks. In that talk I described the distressed market, explaining short sales, foreclosures and REO's. During the talk I was amazed to see that everyone was on the edge of their seats, and this was somewhat surprising since most of these folks were well heeled, and presumably not experiencing the market distress themselves.

After the meeting, a young couple approached me to say that they had enjoyed my talk, and would I be kind enough to talk with them further about listing and seling their condo. We talked briefly, and they indicated that they thought the home was worth about $300,000, and had been purchased some time back for $265,000. Good news, I thought. These folks CAN sell, and they are one of the lucky ones.

Then, once back at my office, I brought up their home, the comparables in their condo project, and that's when I heard the bells ringing, the horn blowing, and watched as the gates came down just before the train blew through the intersection.

They hadn't been paying attention, and unfortunately this train was not going to stop with good news for them. In their complex 10 condos were for sale with the same rooms and square footage. Asking prices were $155,000 to $180,000, and not one penny higher. These folks were just hit by the market decline train, and because they hadn't been paying attention at the railroad crossing, their hopes of selling were dashed and crashed.

Pay attention, people! Real estate happens, and it's happening to you, around you, and because of you right now. When markets are declining or rising rapidly, that's when it is most important to pay attention. Stray from that attention, and the train that left the station with your money on it won't be coming back through town for quite some time.

Why You Should Fear a Short Sale

If you've found yourself in peril of losing your home, and then discovered yourself in a conversation about "short selling" your home, then pay attention to this!

In a nutshell, a short sale is where the owner of a home goes to their bank and says in effect "we are a hardship case, and we can no longer pay our mortgage." It is usually the case that the amount stilled owed by the owner is actually much more than what the home is worth. In this case, the owner is asking the bank to let them try to sell the house for less money than they owe the bank (thus the term "short" sale....because you are going to fall short of paying your whole mortgage), and in doing so the owner is supposed to walk away without having to undergo the pain and damage of a foreclosure.

Let's take an example. A couple bought a home in San Diego for $450,000 two years ago. Mortgaged to the hilt, they financed 100% of the sale, and they currently have a first trust deed and of $360,000, and a second trust deed of $90,000. The decline in prices has resulted in the home being worth only $350,000 now, less than 80% of the price they paid. Their rates are rising, and they can no longer pay the mortgage. They are in trouble financially, and without equity in the home, are unable to refinance and move on with their lives.

So they go to the bank and ask for a short sale. The bank says "okay, but keep paying your mortgage." Then the owner places the home on the market for $350,000, and that home is marketed "pending lender approval." Any offers that come in on the property need to be submitted to the bank. Remember, the $350,000 IS NOT THE PRICE THE BANK HAS AGREED TO SELL AT!!! Rather, it is the price the Realtor has told the bank the home MIGHT sell at, and the only thing the bank has agreed to is to review any offers and possibly accept them.

This is why you should fear the short sale, both if you are an owner in dire straits, or a buyer who is really looking to purchase. Both parties are at the mercy of the bank, and the bank's motivation is not to sell at $350,000. Rather it is to keep the owner paying their mortgage, and thus keep the loan alive. If the bank can keep the owner paying, they forestall foreclosure and the loss on the loan for perhaps enough time for the market to gather itself up and make the home worth more. It's not going to be worth enough to pay the mortgage, but if may be long enough to make the bank's loss less.

Now, here's the really bad news. Let's say you go along with the bank, list your home as a short sale, and then some six to eight months later sell the home. Are you off free and clear? The answer is a double whammy NO. First, during these six to eight months you have been paying the mortgage, digging deeper into your reserves to pay the bank. You'll never get a return on your money. And next, what about your credit? Isn't a short sale supposed to be way better financially than going through a foreclosure? Isn't it?

Well, according to Fair Isaac (the folks who bring you the FICO score), a short sale can cause the immediate loss of 200 to 300 points on your credit score, and this stigma will last on your credit from 2 to 3 years. That essentially means that you are persona non grata in the financial world. What happens if you get foreclosed on? Well, your FICO score will go down 300 to 400 points, and you'll have the stigma of this bad credit for 3 to 5 years. Neither result, either from a short sale or a foreclosure, will be pretty to look at financially, but the difference between the two really needs to be looked at without emotion. When you do that, it is clear to me that many more people should be walking away from their homes in a foreclosure, and not burying themselves in the short sale process.

Fear a short sale. You may want to talk to your financial advisor first about any decision you are going to make that will adversely affect your credit, and certainly if you are in jeopardy of losing your home. But don't take a cursory look. Look long and hard at all your options. You can't change the fact that losing your home is going to be painful. You can't change the fact that losing your home will be stressful and perhaps an embarrassment. You can, however, decide which option really affects you now and in the future, weigh those options, and at least keep the financial damage at a minimum.