Zillow has launched a new free service allowing consumers to retrieve information on 1.2 million homes that are either in the foreclosure process or owned by lenders — including details like the property’s address and how much the borrower owes.
This decision may have both positive and negative consequences for Zillow, consumers, as well as for the Realtor community.
Zillow is no stranger to controversy. Its latest move to make information about homes that are in the foreclosure process available even if the homes are not for sale will no doubt cause volumes of angry responses from the real estate community.
I have no issue with Zillow providing information on bank-owned properties that have completed foreclosure process and become "real estate owned" (REO).
But providing details about properties that are still in the midst of the foreclosure process may pose substantial risks to the current homeowners.
Zillow certainly has a legal right to leverage public information to support its business model. But have they considered the negative effect this move could have on the homeowner’s family? Until now this information has been buried in paid services. What are the consequences of publishing this information where everyone can see it — and doing so without the homeowner’s consent?
Just last week — before Zillow launched its new service — a Georgia family whose home had been foreclosed upon watched helplessly as a crowd broke into their house and stripped it bare (the family had posted an ad on Craigslist offering free furniture and other household items).
While no one can predict whether Zillow’s move will put other homeowners in foreclosure at risk, there’s no question that smart Realtors and savvy buyers will be knocking on these people’s doors.
The cost to families
Sensitive Realtors who prospect distressed properties understand how devastating it can be for a child to discover that they may be losing their home. As a result, most agents are sensitive about discussing this very private matter in front of any children. One experienced agent approaches the issue by saying, "I saw your home on the list." This allows the parent to avoid having the discussion in front of their children.
Unfortunately, potential buyers for these properties may not realize how devastating their appearance at the homeowner’s front door may be. Merely mentioning the word "foreclosure" could have harmful consequences.
The buyers and Realtors aren’t the only risk, however. There is also the risk that their friends, neighbors, family members, and workplace colleagues will find out about this very private situation. This disclosure can result in additional stress for the adults.
Even worse, when children discover another child may be losing their home, there’s a real risk that they will taunt this child. The result is the child may experience not only feelings of shame, but of insecurity, fear and loss. In the case of small children, it’s common for them to feel that they were "bad" and somehow caused this event to occur.
Risk for new buyers
Many syndication sites are notorious for not removing listings after they have closed with a new buyer. If the property is not immediately removed from the Zillow list once it closes with a new buyer, or if the current owners are able to get current on their loan(s), agents and potential buyers will continue to show up on the doorstep inquiring about the property’s foreclosure status. This can be especially threatening for women who are at home alone or with their kids.
Extend a helping hand
If you ever have wanted to do something to help those homeowners who are at risk of losing their homes, contact them with this list of "Four legal ways to delay or stop foreclosure."
If you don’t feel like knocking on doors, an alternative is to send out a postcard that says: "Do you know someone who is facing foreclosure? If so, visit www.yourwebsite… to obtain a free report on how to delay or stop foreclosure now."
The four strategies to delay or stop foreclosure include:
1. Contact Hope Now, an alliance of lenders and nonprofits that provides free assistance to homeowners and helps them determine if they are eligible for a loan workout. The Hope Now alliance operates a website, HopeNow.com, and a toll-free number (888-995-4673), that connects homeowners with HUD-approved credit counselors.
2. Contact a reputable loss mitigation company (be sure to provide local contacts) to assist the homeowner in working out a payment plan, a principal reduction, or an interest rate deduction (beware of companies or foreclosure rescue scams that require payment of an upfront fee).
3. Consult NACA.net, the website of the National Association of Consumer Advocates (NACA), for a list of consumer attorneys who can help homeowners determine if there is an issue with the lender’s loan documents that would prohibit them from foreclosing.
4. Ask the lender for the original mortgage paperwork. The shortcuts sometimes taken when transferring ownership of notes and assigning mortgages from loan originators to investors — the so-called "robo-signing scandal" — has made it increasingly popular to contest a loan servicer’s standing to foreclose, particularly in judicial foreclosure states where courts handle the process (See Timothy Froehle’s article, "Standing in the wake of the foreclosure crisis," in the Iowa Law Review).
While most lenders have electronic copies of the paperwork, contesting standing can sometimes stop the sale. Even if it doesn’t, it may delay the sale long enough for the homeowner to sell the property or workout a short sale.
A potential upside
Many homeowners who receive an initial foreclosure notice (typically a notice of default) go into denial. They don’t know what to do and hope that somehow this horrible mess will disappear. Having potential buyers or real estate agents knocking on their door may be a wake-up call that they need to take action to deal with the problem.
Steps to take for your business
If you understand how to work with short sales and are committed to helping homeowners keep their home whenever possible, become the Realtor who helps them navigate their way out of this terrible situation. Use the following steps.
1. Monitor Zillow each day for homes that have recently entered the foreclosure process.
2. When you spot a property in your service area, contact the homeowner immediately (preferably in person) to inform them that details about their foreclosure status have been posted on the Zillow. If there is anyone else at home other than the person who answered the door, be sure to reference "the list" as opposed to "the foreclosure list."
3. Review the four options for helping the homeowner to delay or stop the foreclosure process.
4. If none of those options is possible, determine if the homeowner is a candidate for a short sale. If so, invite them to list the property. If not, advise them to talk to a tax professional about the potential tax consequences as well as the effect of having a foreclosure on their credit report.
5. If the owners seem reluctant, explain the advantages of having a for-sale sign in front coupled with "Please do not disturb the occupants" in terms of protecting their privacy as well as making sure they have professional representation if and when someone submits an offer.
Even if you don’t get the listing or the sellers fail to stop the foreclosure, the best marketing you can do for your business is to help distressed homeowners try to keep their home.