Tuesday, October 06, 2009

'Business as Usual'

From the Tracy Press:

[C]rooked real estate agents were so common that to get targeted for prosecution, lenders and agents had to go the extra mile in duping buyers. “When I started out, everyone was doing that, those stated-income loans,” said Susan Wilson, who sells homes for Corral Hollow Real Estate in Tracy. “It’s really discouraging, because no one does them now, but the same people who did them are still selling homes.” She said that realization makes her consider leaving the business. “I just don’t want to be in a line of work where things like that could happen — where peoples’ lives are falling apart because of this industry,” she said.
...
“When we started out, that’s what we were taught,” Wilson said. “Even the veterans, with decades behind them, said this is the way to do it. No one said it was wrong — and when you’re new, how do you know?” In fact, victims of brokers and agents who helped people procure homes they couldn’t afford wonder why the people who misled them are still free. “It’s like business as usual,” Wilson said. “I wonder when, or if, it’s going to catch up with them.”
From News10:
What was expected to be a flood of foreclosures is turning out to be a trickle. Michael Lyon of Lyon Real Estate agreed..."It's becoming a seller's market. I didn't think I would be saying this for years." Lyon predicts that instead of seeing a wave of foreclosures sweep in over the next few months, it will likely now be a steady stream over the next few years.
From Rocklin & Roseville Today:
The greater Sacramento area housing market has improved, but it has not yet fully corrected itself. The first-time tax credit needs to be extended and if possible expanded in order to build upon the progress the market has made. Any uncertainty about the future of the credit has the power to dampen consumer demand. The best way to assure continued housing activity in Sacramento and around the country is to extend the credit and do it quickly. I urge you, even if you are not a potential first-time home buyer to contact your congressperson and ask them to support the extension of the credit.

34 comments:

Diggin Deeper said...

“When we started out, that’s what we were taught,” Wilson said. “Even the veterans, with decades behind them, said this is the way to do it. No one said it was wrong — and when you’re new, how do you know?”

It's called a "gut feel". That pang in your stomach that indicates something's wrong.

A recent case in point.

My wife has been contracted on a short sale listing for the last 6 months. The original owner contracted with a real estate company (that specializes in short sales) in SoCal to negotiate with the bank. My wife agreed to nearly a third of the commission on the sale as a fee for their services.

Upon an offer that was accepted, the "agent" for the short sale RE company suggested that the buyer ask the bank to cover just under $10K in closing costs and other fees. The bank agreed. Eventually when the negotiating began with the bank, paperwork came in from the short sale agent, and it was the buyer who would be responsible for paying those costs and fees. These were stated to be "processing fees" and were to be paid to a company, separate from the "agent's" RE company, and paid OUTSIDE of escrow...My wife balked and advised the short sale agent, the buyer would not agree to the fees, and any fees required would have to be paid through escrow instruction. The agent refused and the deal came to a standstill. After doing some further research it was found that this short sale negotiator wasn't even a licensed RE agent, having only obtained a license a week before the home was to close. The deal was about to fall apart because the "agent" would hold out and not move information on to the bank. As a last ditch effort my wife called the lender who held title on the mortgage, explained the situation, and advised she would not pursue this transaction any further due to ethics issues. Within 24 hours the bank called her back, moved the short sale RE company out of the picture, and escrow is moving forward...

sacramentia said...

Unbelievable. The RE industry has some real ethical issues. These stories leave me wondering how the current real estate sales model survives.

robert said...

The current real estate model survives because organizations like National Assoc of Realtors and many others (MBA, etc.) funnel lots of $$$ to congress via lobbyists and we don't cry foul. So, ultimately it's our fault for allowing the broken system to continue.

Lots of other broken socialist systems that need fixing center around home ownership. The mortgage interest deduction, prop 13, $8k tax rebate for purchase of a home, etc.

norcaljeff said...

So let me get this straight, this real estate agent wants me to lobby my local congressman about the housing tax credit whether or not I want or need a home? Why isn't she lobbying my boss for a raise for me? That's pretty ballsy of her to ask that. But then again she's in sales and that's pretty much their mo.

Giacomo said...

I read the Rocklin lady REA's column from time to time-- she's one clever used-house salesperson, carefully filtering out the most absurd of the NAR talking points and only repeating the ones that might seem credible to local potential buyers and sellers. Naturally, she always does her best to reassure that it's a good time to buy, or sell.

I'm reminded of the last REA we used (to sell) who liked to say the she "hated Realtors," by way of implying that she was different (more principled, harder-working, etc.)

She wasn't.

husmanen said...

My rental has started the foreclosure process. This was inevitable as the purchase price was a bubble price.

However, the owner put over 20% down and is a little underwater in the current market. I contacted the owner and said I have received information that the house is in preforeclosure and I was concerned.

The owner promptly replied with her strategy to negotiate with the bank to get a loan mod. She said she will be signing mod papers next week.

An unknown has now become a known and we are adjusting our plans accordingly. There are plenty of rentals, still much below purchase price parity (PITI) and we have time (NOD 3 months, Auction announcement 21 day, NOT Auction plus 3 months).

Now we will wait and see what transposes, interesting times.

Giacomo said...

husmanen: we are waiting to mark that point with our rental. Our LL was candid with his predictment (underwater, can't refinance, etc.)and is trying for a loan mod (given what terms he says he needs to stay with the house, I can't see him getting it). But like you, it seems like the timeline on these things is so long that no preemptive action on our part is needed.

I have of a neighbor who was given a loan mod (forgiving part of the principle, no less!) but is STILL now planning a strategic default. Taking the mod was just a delaying tactic, apparently.

Giacomo said...

principle > principal

Sorry, rushed.

Diggin Deeper said...

"I have of a neighbor who was given a loan mod (forgiving part of the principle, no less!) but is STILL now planning a strategic default. Taking the mod was just a delaying tactic, apparently."

Probably without penalty no less! How many times can they go to the Feds without having to worry about some real consequences???

husmanen said...

The way the NODs then the auctions are going we could be here for a long time. There are delaying tactics used by all sides in this market.

If our LL gets a 10% loan modification they will be good for at least another year.

I did do some digging around (personal contacts) and found out that they had a 1.4% teaser rate Alt-A loan that is about to reset/recast, their default amount is a pittance.

I suspect the bank would not deal until they quit paying. Even though there current monthly payment is very low it will explode in the near future with a reset(1.4% to market, say 5%) and the recast (no paying principle and interest for a shorter period of time).

I'll keep you guys posted.

Deflationary Jane said...

The recast has always been the issue. I know many people who have Alt A loans who really believed they were paying the full p&i until they broke out the paperwork. There is a big difference between 3.5% interest only and 5% P&I on a 600k to 850k house.

Don't forget to tack the missing 5 yrs of principle in the total too.

In my immediate neighborhood just over 46% of the homes are in some sort of default, either tax liens, bankruptcies, NODs or already foreclosed.

I like my landlord a lot but he is the walking dead at this point.

Diggin Deeper said...

"In my immediate neighborhood just over 46% of the homes are in some sort of default, either tax liens, bankruptcies, NODs or already foreclosed."

Incredible!

husmanen said...

My area is bad too, we are probably between 25% and 40% currently, including all the homes that have already gone in and out of foreclosure.

But the higher end is different... Sarcasm... off.

We are just behind the curve, it will come, but probably slower than I would like.

On the other hand, one of my brothers lives in a very nice area of Cameron Park and they have had no foreclosures to date, about 30 houses. I guess few got the HELOC bug as the houses are a little older and there has been few changing of hands. We will see though.

RV6Flyer said...

"I know many people who have Alt A loans who really believed they were paying the full p&i until they broke out the paperwork."

Do you really believe these people?? Or are they just embarrassed about being so naive?? Who doesn't use a simple online loan calculator or read the docs before signing such a significant contract??

verification "mentally"

Deflationary Jane said...

RV6,
I believe them only because I know how they conduct the rest of their financial affairs. They don't reconcile their bank accounts or even do the most simplistic of budgeting. They just know when their online checking account is low, that's all they care about. They also don't check their CC statements either.

Sadly, the folks on this board are not your typical home purchaser. We're all a bit savvier then the average bear.

DD,
13 houses on a culdesac. 3 are now foreclosed on, 3 others have tax liens including one where they must have in default for a while because the lien is over 12k.

My circle is a little better at 9 houses with 2 foreclosures, 1 lien and 1 chapter 7 as of June 09. That may change soon because 2 are rentals where the monthly lease doesn't even cover a 2% interest only PITI payment. I may have to wander around the county assessors site again and see what has changed recently.

Cow_tipping said...

Sadly, in my area - in charlotte NC, no where near CA, these seems to be very little pull back in the lower price ranges.
The higher end - the 1/2 million McMansion range is down by 100K+. But that doesn't help me 1 bit, I hate McMancions.
Cool.
Cow_tipping.

Paul said...

Husmanen: Sorry to hear about your rental house. Have you given any thought to just "hanging out" until someone is willing to pay you to leave?

We are very blessed in that our LL is still above water by a healthy margin.

As to areas of Cameron Park without foreclosures, the only area that I can think of that has had "below average" foreclosures, is Eastwood Park. (Not -0-. just far less than most other areas.) Right now, all of the CP zip code has a large overhang of NODs that started in the early summer and will be going to auction over the next few months. Most tend to be higher end properties (over $400k, to $1m).

Diggin Deeper said...

Cash for clunkers was a bust if you look at the blow back on the retail sales numbers that just came out...down 1.5%

The dollar's in the tank, the jobs picture isn't improving, the consumer is on hold, the rest of the world is losing faith in our situation, and real estate has bottomed???

All the pundits are calling an end to this downturn, but the average Joe isn't cooperating...he's got a ways to go before his personal debts get paid down.

The yellow flag is still up until we create more jobs than we lose in month's time...and that still won't gobble up the foreclosure overhang that's being manipulated and hidden from the market...

husmanen said...

Paul: Our strategy is to 'wait and see' until we get the auction date.

I have a contract with the LL, what they do with the money is not of my concern... until the auction.

When an auction date is set I plan on not paying and putting the money in an 'escrow' account in my bank. Then once the auction occurs, after a few postponements, I will have an extra savings account.

Plus there will probably be a bonus of 'cash for keys'.

However, the best situation is that the LL gets a mod and I stay until I decide I want to leave. Moving is a big pain, especially with kids.

smf said...

All the pundits are calling an end to this downturn

Are these the same pundits that missed the beginning and the reasons for this crisis?

Yeah...I'll listen to them now...

Giacomo said...

"All the pundits are calling an end to this downturn, but the average Joe isn't cooperating..."

I'd wager that in the Halls of Power, press secretaries are rationalizing their optimistic spin on the facts as "white lies" necessary to get Average Joe spending again (buying cars, houses, iPods, etc). Whether or not their spin ends up helping the economy, or just results in more Americans going deeper into debt, the justification of the strategy is baked in.

Diggin Deeper said...
This comment has been removed by the author.
Diggin Deeper said...

The great irony here is that in those "Halls of Power", they actually believe the American people are buying the "white" lies. The "average Joe index" tells a different story as households realize they'll have do more with less. Being told one thing, only to quickly figure out it doesn't apply to you, only creates more disdain for those that are supposed to be looking out for you.

Consumer Sentiment Falls Unexpectedly in October

http://www.cnbc.com/id/33343101

"Indeed, personal finances have undergone the longest and deepest decline in the 60-year history of the surveys, and few consumers expect their finances to improve anytime soon."

no jobs = no consumer = no recovery

Under this scenario, why would anybody bet that real estate has bottomed?

Deflationary Jane said...

Chair Elizabeth Warren introduces the COP October Report: "An Assessment of Foreclosure Mitigation Efforts After Six Months."
http://www.youtube.com/watch?v=5UOyg0AcQHc

so the shadow inventory is still a myth? I'm guessing not. But I now subscribe to a foreclosure service and the activity picked up in late Sept again. This last week was especially busy. Best $40 a month I ever spent.

Deflationary Jane said...

Am I seeing this correctly? A new construction Lincoln home for less then $100 a sqft? Remember when we were told this could never happen? LOL
MLS 90079233

Jacob said...

I had looked at Lincoln and saw some existing homes at the time for under $100/ft2 and they seemed nice.

Nice homes. Itty bitty lot.

Aside from the lot size what kills the deal is the Mello Roos.

Probably $300 or $350 for that home, then another $115 for HOA. Why it costs that much to mow a 1 ft wide patch of lawn I will never know...

Deflationary Jane said...

Ahhhh HOA and MR, the bane of all my woulda coulda deals. The taxes with MR for the place I rent now are just under 10k a year -ouch! I'm glad I'm sticking to a straight land deal right now.

Jacob said...

$474 in taxes on this one then $115 on MR...

Jacob said...

Per month.

Diggin Deeper said...

"I'm glad I'm sticking to a straight land deal right now.'

DJ...If the land has ag potential, you should get a break on those taxes. Also, you may want to consider water, both abundant supply and quality, as important criteria...If your talking about close-in, not so important...

Diggin Deeper said...

Government unveils new mortgage help

http://news.yahoo.com/s/ap/20091019/ap_on_bi_ge/us_mortgage_help_4

A couple more of these "give away" programs and they might get it right ...

Beware of government programs that freely spend money you don't have...

patient renter said...

"This initiative is critical to helping working families maintain access to affordable rental housing and homeownership in tough economic times"

Good grief. These clowns are trying to pump up housing cost and keep it affordable at the same time.

Cow_tipping said...

patient renter said...
"This initiative is critical to helping working families maintain access to affordable rental housing and homeownership in tough economic times"

Good grief. These clowns are trying to pump up housing cost and keep it affordable at the same time.

Thursday, October 22, 2009 10:39:00 AM


Yes, you see, funky financing really benifitted the middle men. The mortgage brokers, the realt-whores among others. They get their commissions based on the price. The Banks are stuck with the loan they have advanced and the borrowers are stuck with Interent only negative arm crap. The public is stuck with bailing out the 2.
Cool.
Cow_tipping

HOUSE2008 said...

Hi everyone! Well here it is yr & half later. Still love the house but it IS getting uglier out there. 4 homes foreclosed in my circle. One that just bought last year is looking to sell! Ouch. Just got a notice in the mail from FHA on a loan mod. Didn't ask for one. I agreed to the price when I bought it & have a decent % rate 4.75. So what gives? Hmm. A LOT of paperwork though.

Read the post & replaying to Deflationary Jane: Shadow inventory. Somebody help me with this thought please. China has 1T in U.S. Debt. China has recently started to flex political muscle holding our debt over us to them.
A strong hand no doubt. Our Govt on the otherside of the table has quietly gathered a MASSIVE inventory of homes that have little value. Who has the stronger hand? Could the US default on those loans? It'll come to a boil in a year or two.