John Rebchook is a former Rocky Mountain News reporter with more than 30 years of experience in writing and communications... Watch a video at the end of this blog
First, Ryan Lantz used Short Sale ProLogic.com to determine how many homes in the 80219 ZIP Code are in some state of foreclosure. It found 280.
Then, Lantz, a co-founder and managing director of Claremont Information Systems, developer of Short Sale ProLogic, used it to create a custom map of homes in the Barnum West neighborhood, south of West Sixth Avenue and north of West Alameda, that were in foreclosure.
Short Sale ProLogic pinpointed 131.
Next, Lantz narrowed the search to homes that had at least three-bedrooms and one bath and at least 1,100 square feet, as those would have the most appeal to investors. Perhaps most importantly, he asked to see homes not listed by Realtors.
And then there were 16.
In other words, he narrowed his search from a potential universe of 280 homes to 16 houses in seconds.
That is an exercise that could be repeated many times a day and in any neighborhood along the Front Range. It can be customized to search by hundreds of different metrics.
Realtors targeted
Although Lantz and his partners have just begun to market the subscription service for Short Sale ProLogic to Realtors, he said that brokers who have seen it have been impressed.
“Once they have had a preview of what it can do, they think it really provides jaw-dropping data,” Lantz said. “One of the fundamental building blocks to what we do is strict adherence to extremely accurate and impossibly current information. Good opportunities move fast, and the information our clients rely on needs to move faster.”
Lantz believes that ProLogic is going to become a must-have tool for any Realtor trying to find and list short-sale properties – that is, homes that are being sold for less than the mortgage amount. A short sale typically nets more for the bank than a foreclosure, and a deal can often be negotiated between the lender and the homeowner, so the seller is not saddled with the loss on the property.
The software not only filters by geographic area or ZIP Code and home size, but by many other fields, such as the loan balance, lot size, age of construction. It can even find distressed homes by lenders that hold the mortgage, such as Bank of America, Wells Fargo or U.S. Bank. It can also sort homes by a timeline from the day the filing of the Notice of Election & Demand (or NED, also sometimes referred to as the Notice of Default), the first public record on the start of the foreclosure process. It can also search by the number of days until the scheduled public auction. Or, if you wanted to search by adjustable rate mortgages, you might type in homes with at least an 8 percent mortgage, making the assumption that anyone saddled with such a high rate hold an ARM.
Getting in before sharks circle
It provides about as close to real-time information as possible. Most brokers learn about the NEDs 10 to 12 days after the filings, Lantz said. At that time, he said the beleaguered homeowner is inundated with fliers, calls, and e-mails from brokers and others, and they don’t know which way to turn. From the homeowner’s perspective: “The sharks are circling,” Lantz said.
“We get live feeds from county public trustee offices about every 15 minutes. By getting to the homeowner early in the process, a Realtor can counsel them on their best options, which in many cases, if not most, is a short sale,” said Lantz.
Lantz is familiar with real estate, both in good times and in bad times.
Rich history
Before Lantz helped launch this venture, he handled $900 million in land sales from the Las Vegas office of Richmond American Homes, which is owned by Denver-based MDC Holdings. After leaving MDC, following the real estate collapse, in early 2008 he and partners started buying distressed properties through a real estate group called Cypress Partners.
“On average, we wanted to buy a property that represented 55 cents on the after-repair dollar,” Lantz said. “So if the property was worth $100,000 after it was fixed up, we’d buy it for $55,000.”
Cypress ended up buying between 250 and 300 properties and mortgages, worth about $20 million.
They developed the software as a means to find properties that would make sense to buy.
“We needed timely data that was excellent and accurate,” he said.
But so many investors started snapping up distressed properties, that they drove up the prices, and they felt properties were too expensive to fit their financial model.
On the other hand, they had the basic platform for a software tool “that removes a lot of complexities of short-sale opportunities and quickly identifies opportunities,” Lantz said. “We knew we had to find a way to monetize it.”
They decided to target Realtors as their primary market for the subscription program, although Lantz believes it could prove a valuable tool for investors as well.
The initial, introductory cost to subscribe to the software is $50 a month. They officially launched it at the Colorado Association of Realtors annual meeting at the Broadmoor Hotel in Colorado Springs in October. In Colorado, Short Sale ProLogic data includes Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas, El Paso, Jefferson, Larimer and Weld counties.
Broker intrigued
Bobby Burnett, who this year will handle 100 to 150 short sales, heard about the program through another broker in his Keller Williams office.
Burnett said it his understanding that the program can help him find homeowners early in the process.
Homeowners facing foreclosure are understandably basked cases, he said.
“They have been through hell the previous four to six months and they have spent all of their money,” Burnett said. “They’ve tried every option, with loan modifications being the biggest joke of all.”
But if he can get to someone early enough Burnett said he could provide them with their best option. He agrees with Lantz that is almost always a short sale. Burnett said that a lot of firms are trying to get into the space of providing Realtors with information to comb through foreclosure records.
“This sounds like a very interesting one,” Burnett said about Short Sale ProLogic. “It is possibly a very good one and it is very reasonably priced. And they are local, which is very important to me. There are so many out there that are not local, and I would not spend any time with them. “
So good he hates to g
Yan Kaminsky, manging partner at Metro Broker’s Elite Realty Group, has been using the program for five or six weeks, and he loves it so much that he would like to keep it to himself. “I hate to I hate to let the secret out,” Kaminsky said in an e-mail. “It has changed the way I do business.” He added that he thinks all real estate agents will be using the program in the coming years. He used two words to sum it up: “Powerful system.”
“The large amount of distress in the marketplace is changing values,” Kaminsky said. “There is absolutely no arguing that. The interesting thing is that until ShortSale ProLogic was launched a real estate agent could not identify or quantify this distress in a market or submarket. ”
He especially likes it for its ability to create market reports. “These reports, literally change my conversations with sellers,” he said. “I walk into my listing presentations with the ability to counsel my potential clients on exactly how to price their properties to sell given specific distress in their neighborhood. For example, if the average days on market in a given neighborhood is six to nine months, I look at the SSPL Market Report to identify homes in the neighborhood that are in distress because I will be competing with these properties as they hit the MLS over the next six to nine months. By knowing exactly where these properties are located, how many there are in a given neighborhood, and how similar they are to my subject property, I can adjust my strategy accordingly. Ultimately… this is the shadow inventory everyone is talking about. I am excited that neither my clients nor I have to ignore it any longer.”
Update edge
Short Sale ProLogic’s ActiveTrack Technology system will notify subscribers by text or e-mail within minutes of a NED being filed. Not only does the information get to Realtors quickly, it is much easier to search than looking at “800 or 1,000 properties on an Excel spreadsheet,” Lantz said, as many Realtors currently do. Typically, title insurance companies will e-mail that information to Realtors on every Friday, or every other Friday, he said.
The software not only allows Realtors to identify homes that are not currently listed by other brokers, but also allows them to find distressed homes that have recently acquired by banks at public trustee auctions – so called Real Estate Owned, or REO properties – or by investors.
That is important, Lantz said, because those homes represent future competition for home sales, and will better help a broker estimate a realistic price for a short sale.
Shadow market lit
That market is often referred to the shadow market – homes that are currently not being actively sold, but are waiting in the wings to add to the supply. Some banks, for example, have not put all of their REO inventory on the market, for fear of further depressing prices. Rather, they hope the market will improve and the homes will ultimately fetch more in the future. Some fear that the shadow market could lead to another round of softening of the housing market.
“This can shed light on that mysterious shadow market,” Lantz said. “It’s extremely important information for Realtors.”
Short Sale ProLogic’s data shows that in Denver County alone there have been 3,825 foreclosure filings in the first nine months of the year, with 448 being reported in September.
And with 12,674 properties in the metro area foreclosure process and another 4,000 new filings a month being added to the pipeline statewide, “there is a tremendous opportunity for Realtors who are able to work smart and streamline the short sale process,” according to the company.
Lantz said he recently met with a broker who specializes in the Jefferson Park neighborhood Denver. He asked the broker that if he could identify 75 homes within a one-mile radius that were either in pre-foreclosure or were REOs that he did not know about, would he think he is misleading the owner of a home he listing, as far as its true market value? The broker, he said, agreed, but believed he had a handle on the vast majority of the homes competing with his listing.
“I actually found 75 properties that he didn’t know about in a half-mile radius,” Lantz said. “He was shocked. He left as a subscriber.”
Improving odds with specialists
The third-leg of the stool – the first two being quickly finding short-sale prospects and the second finding investor-owned and unlisted REOs – is that they provide a list of short-sale transaction management companies.
These companies, for a fee, will negotiate with the bank to get an acceptable short-sale price for the distressed home. That will save the Realtor countless hours on the phone with the bank, only to be disconnected, as well as dealing with all of the bank’s bureaucracy and paperwork. Currently, they have a relationship with one such company, Denver-based PMH Financial, but they are looking to forge relationships with other companies.
“Honestly, the last thing a Realtor should be doing is negotiating with the bank,” Lantz said. “That’s all these companies do and they are good at it. Realtors are good at marketing and selling homes, and dealing with the emotions of buyers and selling. That is where they should be spending their time doing.”
He said Realtors typically close about one out of every four or five short sales on their own, because banks are so difficult to deal with.
“If a Realtor is working on five short-sale transactions at any given time, he likely will only take one across the finish line,” Lantz said. “That is not a good business model.”
A broker can find himself on hold for hours, only to be disconnected when he gets someone on the line who may be able to make a decision. “The Realtor might be one of 800 calls the bank is getting, so he is thrown in the hopper with all of the rest,” Lantz said. “He might call four or five times a day, send e-mails, with the hopes of getting someone who will tell him the 87 pages of documents his client needs to sign, and what the hardship letter needs to say.”
By contrast, he said when short-sale transaction management expert is negotiating with a bank, the success rate rises to 75 percent. They typically provide soup-to-nut services, “from the time the Realtor plants the sign in the front yard,” until the property is sold, Lantz said. A separate fee is negotiated with the short-sale transaction management firms.
The faster a Realtor can start working with a distressed homeowner, the better the odds are that the bank will agree to a short-sale price, he said.
“The best chance of having a bank agree to a short sale is when it will lose the least amount, and that is usually at the beginning of the process,” Lantz said. Indeed, some Realtors increasingly are finding that banks will not postpone a foreclosure auction unless there is an approved short sale agreement at least 30 days prior to the auction.
Ed Jalowsky, principal of Hottest Homes Realty, said that while Short Sales ProLogic sounds intriguing, he hasn’t had very good luck with short sale transaction firms. “My experience is that most of them have not been worth it,” Jalowsky said. “They charge you $300 or $400 up front and they get paid whether the deal closes or not. They don’t care, because they have no skin in the game.” Lantz said that the different firms are paid in a variety of different ways.
Lantz said to the best of his knowledge, no other group provides this kind of real-time information.
Levelling the playing field
But if the program lives up to its billing, and every Realtor subscribes, is the advantage lost?
“Honestly, what that would do is create an even-playing field,” Lantz said. He compared it to every Realtor having access to MLS data supplied by Metrolist.
“This is not going to replace MLS data, but supplement it,” Lantz said. “Just like every Realtor uses MLS, we believe that every Realtor will want need to have Short Sale ProLogic. If you are one of 10 brokers specializing in Highlands Ranch, and nine of them are using Short Sale ProLogic, this is definitely a tool that you will need in your tool box.”
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Looks interesting. I’m a little confused about the concept so i guess I’ll give them a call thanks for the info.
With no one to keep an eye on Colorado Brokers other than the CREC ( which in itself it a major joke) this is a major tool for real estate fraud. It will finally take the housing market down completely. But who cares, so long as the brokers and lenders make their commissions…that is all that matters…don’t believe me???? Ask Ms Waters or Penny Elder. They protect brokers while the comsumers get screwed… Nice going DORA!!! the whole CREC and real estate market is the biggest joke of the nation. Have your short sales I sure you will make a ton of cash and then maybe your leave our state and go to hell and while your at it…take the Colorado Real Estate Commission with you please…