Tuesday, November 28, 2006

"Sounded Like a Good Idea"

From the Lodi News-Sentinel:

No money down and adjustable rate mortgages sounded like a good idea two years ago when the housing market was still a seller's playground. But lenders say in today's buyer's market these loan programs are leading to more defaults and foreclosures, which last month reached a year-long total of 1 million homes nationwide.

"Pick-a-pay" loans are the worst possible on the market because they lure buyers who really can't afford to purchase a home, said Dennis Peck, a Lodi lender with All Valley Mortgage. "They're given an option to pay below interest and it sounds great to them at the time," he said. "The problem is nobody explains to them those low payments won't last."
"It's a result of people getting loans who probably should be saving money instead," Peck said. "People don't see down the road; they just want a low monthly payment."
In San Joaquin County 1,809 homes entered some stage of foreclosure last month.
[Duane] Burg, [manager of Guild Mortgage in Lodi] said in the last six years he has only helped two people through foreclosure - and both were last month. He said foreclosures will probably continue to increase for at least two years while the housing market stabilizes.

"This little down-cycle can really hurt people, but if they can just hold on, their homes will begin to appreciate again," Burg said.


RMB said...

Ah the moron's still haven't seen the light. This "little" down cycle may see Mr. Burg closing up shop and looking for a different line of work, possibly selling amway. The 4X ARM resets next year ought to get things hopping in the forclosure market.

AnalysisGuy said...

Today’s report on Sacramento has been released!
Daily Home Price Analysis

Merced Going Quickly said...

"This little down-cycle can really hurt people, but if they can just hold on, their homes will begin to appreciate again," Burg said.

Wait for appreciation? This is what got these GF in their positions in the first place. Go ahead wait, wait another 10 years.

razor said...

This question is off topic, but I need advice. What is the best tactic for low balling these sellers? Should I use the listing agent or should I go through one of the agents at their office? I've noticed when low balling the listing agent, some insist their listing is "priced right" which is BS. I know these greedy Brokers and agents want all the comission off the sale. I've done okay going directly through the listing agent, but not good enough..no deal. Any ideas or tactics?

Anonymous said...

An offer is simply a price you are willing to pay. Do not get your feelings involved when making an offer. If they don't like your offer move to the next deal. Your not trying to make friends gere.

razor said...


It’s not my feelings being smashed here. It’s the listing agents feelings that seem to be stomped on. I’ve successfully managed to low ball one seller down from 269K to 237K. But there was concession on top of the low ball I asked for. That concession was all closing cost to be paid by the seller.

This particular seller bought in 95’ and didn’t owe much. The listing agent was all for the deal, but the seller refused to pay for the closing cost, so I walked. On this one, the seller reduced the price down to 237K and the house sold in three days. So, I actually sold the house for them..ouch. This has happened twice..double ouch.

See these listing agents get the whole pie when they list and close the deal. It seems to be working somewhat. But, I’ve ran into a couple listing agent’s that get worked up stating their listing is “priced right” This is the problem I running into and goes back to my original post. I need tactic info on low balling.

Rick Heinrich said...


when you make these low-ball offers are you acting like an investor or a home buyer? i know, we need to curb emotions but often times realtors (who are after a commission) are less likely to sell when you come in investor garb.

Anonymous said...

what do you guys think of Greenspan's announcement today that the "worst is over" for the housing market?


patient renter said...

I read about Greenspan's comments earlier today. He said that the worst was over, then said he expects prices to drop. Seems like a contradiction.

Anyways, I've always wondered why it is that such a seemingly credible guy like Greenspan seems to act like a spokesperson for the NAR. Nothing is wrong, everything will be fine, prices will not drop (which he said previously), etc.

karl marx brothers said...

yes, I think it just adds insult to injury when you twist the knife(seller closing costs) after sticking it in for the lowball drop . ..
i.ve found after years of business negotiations there is no need to get a little something extra money-wise if yer already reaping a good profit, because people are human after all, not robots, complete with feelings and egos that get bruised leading to botched deals.

after I make my main deal it leaves me room to concede some smaller but face-saving other bargaining points.

just my observation/experiences.
people use whatever works for their situation, and I see what yer talking about here in the fact that you structure a good deal only to have it shopped elsewhere later after possible minor disagreement.

good luck to you ,,,, and one final thing is I always always try to stay civil & polite as long as possible. You wouldnt BELIEVE how many deals have gone thru using some courtesy when it gets rough.

razor said...

karl marx brothers,

This is a learning experience for me and is just the start of my low-balling activity and it's fun.

After several years of being priced out, I'm finally able to go for it with some low-balling.

I'm not an investor, just a guy looking for a home for the right price. I've got plenty of time and patience and I think this will work, I just need to fine tune my skills.

Never show any real estate agent what your max approval letter is good for. My lender faxes me what I request and then later if needed, I'll come up with another approval a little higher..it works.

Thanks for the advice.

paranoid renter said...

If we believe the market is going to fall further, does it even make sense to engage in low-balling?

It probably makes sense to patiently sit on the sidelines for the next couple of years or so, unless you have cash to buy the home outright and plan to keep it for a long time.

patient renter said...


I agree. The general consensus, at least among readers of this blog, is that prices will fall well below what you could lowball a house for right now, if you're just patient and wait a bit.

If you need to purchase now though, or are okay with the idea that prices may (or probably will) fall further, then buy now.

razor said...

Just to make things crystal clear. I would not be looking to buy for the next year or two, but my situation requires it.

Happy Renter said...

"but my situation requires it."
Your obviously married.

Gwynster said...

LOL I took the hubby to the KB homes in woodland today. He went over them with a fine-tooth comb. He's convinced that the whole place is still 40 to 25% overpriced.

His main complaints were roof trusses using staples and zero interior wall insulation.

I'm so glad he agrees with me on the housing market. I always feel really sorry for people who have spouses who don't grasp finances.

karl marx brothers said...

no interior wall insulation?
I'm not a construction housing guy but arent utility companies always urging us to use more insulation?
so ,,,,, I guess I figured most
new(er)homes would come with it already ?!

maybe builders are pissed about falling sales & pinching every last penny ??

RMB said...


I'm sure husband was very thorough in his inspection and I just want to point out a couple of thing. The roof trusses are probably engineered trusses using staple plates and they are about 2X the strength of traditional trusses. As far as interior insulation, unless the home has zone climate control the insulation serves no purpose (except noise control) and will actually impede the climate control process creating imbalances in the temperature. The important parts are the exterior wall (insulation and construction), roof, appliances, plumbing fixtures, and slab construction. Most builders will try to cut corners in one or more of these areas and the houses will not last as long. The biggest corner cutting I am seeing lately is using foam backing for the stucco exterior walls. Next time you are at a house press on a stucco wall and if it flexes, they are using foam. As cracks develop, water seeps in and saturates the foam and never gets out. Over time mold and algae grow and the wall takes on a nice green tint. Some of the houses that are about 10 yrs old are having all of their exterior walls stripped and replace with proper stucco.

Just my $0.04 worth

karl marx brothers said...


very educational /thanks

Gwynster said...

RMB Thanks for the info!

My husband was concerned about the noise level inside the house but we didn't think about how the insulation would effect the climate control.

I'm also glad to hear about the engineered trusses.

While viewing the models, we did see some structures with crack in the stucco and assumed it was due to settling.

KB did say they were getting ready for a release of halfplexes. I know Centex keeps pushing theirs back due to not selling their current inventory but it seems KB is chugging along.

I don't take any of the papers. Is KB running any big discounts like Lenner? My husband is now have a grand time looking at the models and doing research so we'll have some idea of where we want to buy in a couple of years.