REO Failure at Fannie Mae

    By far, the most egregious act of total incompetence we have uncovered in the REO markets is at Fannie Mae.  Below is the saga of a Fannie Mae property and the utter failure of executives at Fannie Mae to show even the slightest bit of concern.  In fact, the head of Property Disposition actually tried to make excuses for the asset manager and broker involved, and then sweep this one under the rug.  It actually took me more than two hours on the phone to finally get someone's attention at Fannie Mae.  I spoke to people in Dallas, Atlanta and Washington . . . and only one lady out of two dozen people expressed any concern whatsoever.  Any.

    The man that really dropped the ball at Fannie Mae and refused to correct the problems is none other than Rick Gebhart, Director of Property Disposition.  He's the poster child when it comes to incompetence and lack of respect for his position.  By the way, if you are a real estate agent, and you have experienced problems with hidden listings or incompetent REO agents, please email me.  I am working on a story for an international business publication.  Your input will remain confidential.

    Here's what we uncovered. 

    Hidden Listings - We've been finding an increasing number of "hidden listings" of REO properties.  A hidden listing is when a broker lists the property in such a fashion that it cannot be found by local agents working with buyers.  This might be unintentional, due to gross negligence, or it might be fraud.  The fraud end is clear.  If the listing is hidden, eventually the REO owner will keep dropping the price until it is sold.  At some point, when the price is low enough, the listing agent can call a friend to buy the property, which they will flip after closing. 

    How To Hide Listings - I will discuss the Fannie Mae owned property in question.  This property was located at 838 SE Warren Way, Stuart, Florida in the Martins Crossing Subdivision.  The official MLS Area for this subdivision is "7 - Stuart - South of Indiantown."  In this case, the broker from Miami, 100 miles and a two hour ride away, listed the property in "1 - Hutchinson Island" and under the subdivision "Martins Xing."  There was no way anyone searching for a home in this AREA or in Martins Crossing would find this listing.  But this is only one step in the art of hiding listings.
    Another way to hide listings is to not complete the listing data correctly.  Some of sneaky things we find in hidden listings is . . . zero scare feet, no bedrooms, incorrect age of property, no room sizes, and if you can dream it up, these folks have tried it.  Here's the hidden listing we are writing about - Click Here
    Out of Town Brokers - The best asset managers and REO owners will only allow local brokers to sell local listings.  This makes sense because they know the area best and they can service the listing best.  It is impossible to service listings when you are 100 miles away and a two hour ride on the best of days.  The maximum area allowed for brokers is generally 30 miles from their offices.  Fannie Mae assigned this, and other properties, to a broker more than 100 miles away.  The broker - Eddie San Roman of First Realty Service in Miami.
    For Sale Signs - All agents use For Sale signs when they are allowed in a community.  It is an inexpensive way of marketing your property and your name.  In this case, the broker used a Warning Sign as you can see below . . .
 
     To the left is the actual sign that was placed in the front window of this Fannie Mae home.  It is actually REQUIRED by Fannie Mae, and if does not even hint at the fact that the property is for sale. As you can see, it is a far cry from a FOR SALE sign.  In fact, it is WARNING people to stay away.
     I'm not sure a WARNING sign has the same impact as a FOR SALE sign, but obviously it meets with the approval of Fannie Mae's Director of Property Disposition - Rick Gebhart.  

    Finding Hidden Listings - In addition to building the TEAM at Morgan Florida Real Estate Group, I built "m3 Interactive Marketing," and it was through our Internet Team's expertise that we set out to find the hidden listings.  Through a proprietary system we can no find and reveal hidden listings.  We do this through a combination of automated and manual techniques, and what we are uncovering should make any asset manager's hair stand on end.  
    No Excuses - We hear it all from guys Eddie San Roman.  In this case, he told us he made mistake with the area, and he didn't know the difference between "Area 1 - Hutchinson Island" and "Area 7 - Stuart - South of Indian Street."  As I told Eddie, I don't buy it, and no one else should.  This is like the difference between a home in Malibu and a home in downtown LA.  Moreover, as you can see from the screen shot of the MLS listings, if Eddie had bothered to check how the local experts were listing homes in this market, he would have seen the correct area.  So are we talking about gross negligence or fraud?  Eddie would have also seen the correct spelling for the subdivision Martins Crossing, but he either didn't spend the 10 seconds to look or he didn't want this listing to be found.

    We Found It - The very first hit of my Internet Marketing TEAM for hidden listings was this one.  When we found this listing, we just missed it by a few days.  It was listed at $224,900, which was about $40,000 below the lowest priced similar homes selling in this subdivision.  Eddie had just accepted an offer on this property for less than the already ridiculously low listed price.  But he told me the offer had some closing date issues.  My client submitted an offer of $228,000 for this listing priced at $224,900.  That's a nice premium for Fannie Mae, and I had another client prepared to offer $260,000.  But Fannie Mae said they were happy with the contract they had accepted, even though it was less than the $224,900 list price . . . and despite our written offer of $228,000.      

    Happy Ending - Even though I provided Mr. Gebhart with complete documentation of the issues and digital photos of the warning sign, his response left me flabbergasted.  Instead of agreeing to investigate or to hold the broker or asset manager responsible, Mr. Gebhart gave me permission to contact the State of Florida.  Here's a quote from his response to me . . . you may want to contact the licensing entity within your state that investigates these matters.   I had to read it three times.  First, I have no damages, other than two clients that are upset for not having the opportunity to buy this house at the "below market" price Eddie sold it for and Fannie Mae accepted.  Second, Eddie didn't screw up my listing.  He screwed up a Fannie Mae listing and put a WARNING sign in the window.  You would think Fannie Mae would want to press charges against Eddie.  Not Mr. Gebhart.  He's happy as a clam.  So Eddie continues to get REO listings 120 miles away from his office, and continues to mis-list properties.  

    Extra Happy Ending for Eddie - As if Fannie Mae should not be embarrassed enough, they were forced to pay far more than the going rate to sell this home.  The selling agent commission of 4% is a full 33% above the average.  So let's say the normal commission would have been $13,494.  Fannie Mae paid $17,992 for a whopping $4,498 more than the going rate. 

    Why Fannie Mae Collapses - You might think this is an isolated case, but it is not.  Let's do the math.  Even looking at this conservatively, this home should have sold for $250,000.  If Fannie Mae received a full price offer on Eddie's reduced listing price of $224,900, that means Fannie Mae lost $25,100.  Now add in the additional commission they paid of $4,498 and the loss grows to $29,598.  And let's not forget this house was on the market for 259 days so the carrying costs of insurance, taxes, maintenance and utilities will conservatively have cost Fannie Mae another $12,000 . . . and the loss grows to $41,598.  If Fannie Mae were running a business like this, they would be out of business.  Hold on, strike that.  Fannie Mae is a business.  And it gets worse.
    Eight months ago when this home was first placed on the market by Eddie in his hidden listing mode, it would have fetched $300,000 on the market.  The total lost revenue to Fannie Mae was $116,698 . . . plus the asset managers fees.  As you can see, the numbers don't add up for Fannie Mae, and when you have a guy running the show like Rick Gebhart, you can see how easily Fannie Mae goes bust this year, maybe next.  On the other hand, if they take things seriously, clean up the process and get rid of the bad asset managers and brokers, they might just be able to squeak it out.  NOT.

    If you'd like to hear Rick Gebhart's side of this, here's his contact info:

Rick Gebhart - Director of Property Disposition for Fannie Mae
Phone: 972-773-7474
Manager: Gabrielle B Harrison
Email: rick_gebhart@fanniemae.com 

REAL ESTATE AGENTS - I am working on a story for an international business publication. If you have experiences of hidden listings as are referenced in this piece, please call me, Mike Morgan at 772-260-5448 or email me at Mike@MorganFlorida.org