Brokers are sales persons...

Is there a broker out there that will entertain this idea, if nothing more, as an exercise in ideas?

Short sales as we know them should be outlawed! There should be a complete makeover of the current short sale process!

In short, the agreement between a borrower and the lending institution holding the mortgage should be worked out before a real estate agent enters the transaction.

Article 11 of the Code of ethics:

REALTORS® shall not undertake to provide specialized professional
services concerning a type of property or service that is outside their
field of competence unless they engage the assistance of one who is
competent on such types of property or service, or unless the facts are
fully disclosed to the client.

I think that NAR, AAR and brokers throughout the country are violating this standard of practice when assisting with a short sale under the current methods.

There are 3 principles in a short sale transaction and currently, the most important one is conducting business without an agent and mostly without regard to the Code of Ethics.

Realtors are acting as communication conduits between seller, buyer and a financial institution- I feel that is outside our field of competance no matter how many designations or "short sale expert" courses we attend.

The Immoral Short Sale

University of Arizona Professor Brent White is causing quite a buzz with his defense of the individual who is walking away from a mortgage. To summarize: corporations are expected to walk away from bad debt obligations but individual home owners are made out to be a moral disgrace if they do the same thing.



I agree with the professor and will take it a step further and say that a foreclosure is the moral thing to do as opposed to a short sale- which is being tauted as the only thing that will save the housing market.



I think one thing should be stated right up front- both situations have the very same origination: a homeowner is not going to live up to the mortgage obligation that they originated with a lender. So if that is the sin that makes a foreclosure "immoral," then both situations include it.



A foreclosure is straight forward- the owner defaults and the lender takes back the property. The property is returned to the market place and sold to another owner. There is no ambiguity on behalf of either original party or the next owner.



With a short sale, the borrower composes a hardship letter, the lender decides if it is hardship enough, a random price is placed on the property and, in general, the property is not subjected to market forces. The original borrower and the new buyer spend an undetermined period of time waiting to see if the lender is going to approve the transaction and the real estate professionals wonder if they are going to get paid what was promised.



The most "immoral" part of the short sale is that it is prolonging the recovery of the real estate market and the overall economy in general. However, it is being advocated by real estate brokers, real estate lawyers and real estate escrow companies. Why are these parties such strong advocates? Their own financial requirements. Brokers would rather have 400 agents seeking short sale listings than 5 agents being assigned foreclosure listings. Short sales are legal hotbeds and create millions of dollars in billing fees. Title companies that are not associated with a lender account can conduct normal business with agents and try to get their escrows- which they cannot do with REO properties because they are already assigned.

Short sales are a curse on the real estate market right now. They are a dull rusty butter knife trying to cut a loaf of bread. As bad as it sounds, a foreclosure is a clean serrated knife. The bread has to be cut to be eaten and the serrated knife is a much better tool to do the work. The real estate market is the loaf of bread that will feed our economy and foreclosures are the best method to do the cutting.

On "connecting the dots"

The war on terror- we are losing it. Let there be no mistake in that assessment. The bad guys are winning and there is no brightness in the near future.

In terms of lives, we may have killed more of them than they have killed but I am not sure of those numbers. I will never minimize one innocent life taken randomly in the name of a God or ideology but it goes beyond that because we are losing lives and money for no gain with our current strategy.

Think of the cost that the bombers and shooters put out in terms of money and then think of the money that is being spent by the American taxpayer chasing these ghosts. Think of the disruptions that we go through in order to be "safe."

I say we choose the path of passive resistance. Withdraw our troops from Iraq and Afghanistan. cut out the airport hassles when flying. Dissolve the money bleeding government agencies created after 9-11.

So what would happen? My theory is that after so many senseless acts of bloodshed in the name of any religion or cause, that religion or cause would soon be on the hit list of every person in the world. In the case of Islam, any person named Mohammad or Abdul would be publicly scrutinized and assumed to be guilty. There would be no place to hide or plot because the hatred and understanding of the hate would be common and not soldiered by the US government. The dislike and mistrust would be pure and with cause. Even the blind and apathetic would see the hate and brutality motivating the enemy.

Meanwhile, our assets would be preserved and held by the people. Our governments would remain solvent.

Is this giving up or in? I don't think so, it is just another way to fight a battle that we are losing on two fronts. People are dying anyway and while we fight a war with 4 years expectations and judgements- in the form of elections- the enemy looks at the timeline as one of centuries or eternity. At our current rate, we will lose from a slow bleeding death.

Live free or die!

2010 Predictions

Happy New Year!

Home prices will be determined by what buyers earn as opposed to what they can get a loan for. This ratio has already taken a massive correction- which is good.

Home prices- the macro number will indicate that prices are stable or are increasing. This will be the macro "median" price. On a closer inspection I think the numbers will show that homes that are now listed for $500k will be reduced to $399k and below. Homes that are now listed at $350k will drop in price to well below the $300k level. All of these sales will "increase" the median price but the individual sellers and owners will see these numbers as dramatic value depreciation.

The number of real estate agents will continue to decrease. As renewal fees and subscriptions come due, the cost benefit analysis will lead agents to let their license expire and move on to other, less expensive, income searches.

Brokers, lawyers and title companies will continue to push for more short sales. The reason for this is purely economic and has nothing to do with concerns for the market or the economy as a whole. Brokers want more short sales because they can then have 400 agents trying to get listings as opposed to 40 agents with the REO listing accounts. Lawyers want them because they are a legal goldmine and title companies want them if they do not have a REO account from a major defaulted note holder.

The economic recovery will be prolonged by this "short sale fixation." While foreclosure sounds bad, it is actually a good thing for the market. The results are fast and quantifiable. They are generally without prejudice- meaning there is not a "hardship letter" detailing why a person needs relief. Heck, we all need relief but it comes down to whether or not we can pay the bills. If you don't pay your cable bill- they turn off your cable; don't have the money for a Ferrari, you buy a Ford. Utilities are public and have other guidelines- at times. We do not want to have 2,000 home public housing areas scattered across the country.

There is still pain to had but a clean sharp knife is generally faster than a dull, rusty blade that has uncertain results.

ts

The Housing Market Recovery

The housing market is in full recovery mode. If you need an official start date of the recovery, it was July 24, 2007. That was the day that Countrywide co-founder Angelo Mozilo, announced to the top Wall Street analysts that no one had seen a housing downturn coming. And then to make sure there was no misunderstanding about the situation, he stated that we are experiencing a huge price depression not seen since the Great Depression. Wall Street and the financial world has been reeling ever since, despite an all time high in October of 2007.

While some may say that the price declines we have seen, actually starting in early 2007, are far from a recovery but instead a disaster- I say that is the wrong perspective. The market was very sick from early 2004 until late 2006. Historical income and home price relationships were completely out of balance. Tract housing neighborhoods with 1000 homes were springing up everywhere and people were paying $250,000.00 to live there. If this were one subdivision with 1,000 homes it would have been ok, but they were everywhere. Then there were the subdivisions of only 500 homes but the houses were going for $500,000.00. Say the prices in these terms: “a quarter of a million dollars” and “half a million dollars.” I think when it is said like that, the sickness becomes easier to detect. Of course, the semi custom homes became three quarter million dollar homes and if it was custom then it was a million dollars. Are these prices bad? Not at all, with the right numbers.

How did this happen? It was simply a matter of supply and demand. Not housing supply and demand but instead money supply and demand. Money does not follow most commodity rules. With money, the rule is that with more supply you will have more demand. The supply was from everyone. Individuals were investing, looking for higher returns. Countries were investing, looking for higher returns. Wall Street obliged us all by touting a high return instrument known as Collateralized Debt Obligations. They/we could not get enough of them so money was literally thrown at housing. And since everyone wanted higher returns, the money was thrown at the higher return of sub-prime mortgages. These “Asset Backed Securities” offered 1% to 2% higher yields. With a billion dollars on the line, that is significant. Obviously, things did not work out like everyone wanted.

So now the recovery is in full speed mode. Prices and incomes are getting back to historical norms. Since income curtailment accounts for two thirds of foreclosures, that problem will persist as long as the economy is shedding jobs. But for those that are employed, a good house at a decent price is available. Once the recovery is complete, a person making $11 an hour will be able to buy a nice house for around $100,000.00. Since there are a lot of jobs that pay $11 an hour, there will have to be a lot of homes for $100,000.00. And the numbers go up from there.

What we cannot have is an artificial, government induced, stop to the price recovery. The market must rule! Prices have to recover so that the number of homes at a certain price level matches the number of jobs at the appropriate wage level. The government “cavalry” touted by some, is nothing more than a bunch of Bolsheviks’ on horseback.

The Demise of the Real Estate Agent

The consumer calls the number given for customer service and expects to get a voice on the other end. However, this is a lost attribute and is one of the most often heard complaints about big companies. “I can get tech support but I will be talking to someone in India,” or maybe “It took me pushing 7 buttons to eventually get a person on the line and then they told me they were not the right person.”

Well, in no other business like the real estate business is a voice expected and needed on the other end of the line. Sadly, this is disappearing because of the development of the supper agent. In a quick disclaimer, yes I am angry and bitter but with reason. The only real estate market occurring right now is the REO market. This market is sourced from lenders or servicing companies that pick agents and then dole out the listings based on a criteria that is unknown to most if not all. It seems that they get infatuated with certain agents and just dump too many listings on them. Of course, as an agent it is almost impossible to say no and even harder to recommend that they be given to another agent. This is creating what I call the “Super Agent.” This is not a good thing. I have called about listings and actually been told by the listing office that I would not get the listing agent on the phone. I was appalled.

Now I will offer that the advent of the cell phone and the blackberry has made communication too easy. But we as agents have to adapt to that. It is a fact of life and if you are too swamped to answer your phone or return messages, maybe, just maybe it is time to say no or to bring more agents into your inner circle. If we cannot receive calls from clients or inquiring agents then what good are we? Our business, in normal times, is about talking with people. These are not normal times, but neither was 2005 and I think some of the same mistakes are going to be made again.

One of the biggest mistakes lurking is the one of greed. These super agents will not pass on listings or bring other agents into the fold because of good old fashioned greed. They do not see that there is enough to go around and what you give is what you get. There are agents that will make a lot of money in this down market and believe they are the best thing to hit Mother Earth.

I just hope the consumer gets a voice on the line before we are replaced by an electronic device. Real estate is a people oriented business by design and we have to cater to that!

Loan Officer Criteria- TRUST

There are still way too many people that will tell you almost anything you want to hear when it comes to getting a home loan. Be advised, some will say anything to get you as a client.

I am dealing with several loan officers, as I write, that have become deaf and mute as the close of escrow date approaches. I am just trying to get a feel for how things are going in the transaction and can not get a phone call returned or an e-mail answered.

The big picture is that getting a home loan is about as hard as it has ever been. And this is for people with great credit and good income included. While guidlines may not have changed much, they are being enforced as never before. Everything has to be included in the loan package and the underwriters are catching mistakes made by loan officers that are delaying transactions.

So what does this mean to you, the prospective home buyer. Find a loan officer that you trust. If things sound too good to be true, they probably are. Some things to look for and ask:

1.- Are you a mortgage broker or a loan officer?- Brokers are licensed, LO's do not have to be.

2.- How many investors do you have access to?- A Broker will generally have more than one at their disposal.

3.- How long have you been in the business?- Beware of the LO that got into the business in 2005 or 2006. While they may be competant, many got in to make a bunch of money, they did, and now they are hurting. Some are in the wave of people losing their homes right now and are severly distracted by their own life. Some are probably on their way out of the business and are looking to get one last commission before they move on. And guess what, if the commission turns out to be difficult to obtain, they are nowhere to be found.

4.- When will you have loan documents to Escrow for me to sign?- This is almost a trick question because it is almost indeterminate in the best situations. However they answer should be something like, "I will strive to have them to Escrow at least two days before the scheduled close date." Some caveats should follow but that is the goal.

5.- Will you keep me informed of the progress of my loan?- Loan progress is not a mystery. There are steps that should occur in a timely sequence: appraisal, termite, preliminary title report, etc.

Listen to the answers to these questions and any others you have. Better yet, watch the LO while you are asking them, if you see noticable discomfort, beware.

I have a great Mortgage Broker that will answer any and all questions you have. Call me and I can get you his number or you can ask me the question and I will get the answer from him.

Why is he so good?- Because I trust him! He will tell me "no" just as soon as he will say yes.

Always remember, if something sounds too good to be true...it probably is. Money is cheap by historical standards but there are hurdles to getting it. Make sure the person jumping them for you is someone you trust!