By Joel Perisnger,
with information from the California Association of Realtors
Contrary to what many believe, the recently enacted Senate Bill 306 does NOT require lenders to review short sale requests from sellers and their agents within 21 days. The new California law, which addresses certain escrow procedures, has been mischaracterized by some real estate agents as landmark legislation calling for a 21-day turnaround for short sale approvals. Unfortunately, the new law is nothing of the kind.
Basically, the bill inserts a short payoff amount request into the existing payoff demand law which generally requires a lender to respond to a request for a payoff demand statement within 21 days from when it is requested, typically by escrow or a short sale negotiator.
OK... So what is a payoff demand anyway? A payoff demand is simply a document provided by the short sale lender stating exactly how much the borrower would have to pay in order to pay off the loan. This figure will include principle, interest and any late fees or other charges. Payoff demands are requested by escrow officers so that escrow companies can know exactly how much money must be allocated to the short sale lender at close of escrow.
The new law essentially requires that lender respond to a request for a short-pay demand statement within 21 days. Since short payoffs are generally requested AFTER the short sale has already been approved, the law will have little or no effect on the time it takes to actually get an approval. Additionally, the lender’s response to escrow can be a short-pay demand statement or even, depending on the circumstances, a written statement electing not to proceed with the proposed transaction.
There is another provision of SB 306 which has caused some confusion as well. In practice, a lender may approve a short sale subject to its review of a closing statement prepared by escrow, but the lender does not necessarily review that closing statement right away. This can sometimes cause short sales to drag on. Under the new law, if a lender fails to approve the closing statement within four days, the closing statement shall be deemed approved, but only if it is "not clearly contrary to the terms of the short-pay agreement or the short-pay demand statement provided to the escrow holder." In other words, the closing statement will be considered approved after the time has elapsed, but it cannot be substantially different than the deal the lender had earlier approved. So, while the new law may help move the process along, it does NOT bind a lender to a short payoff amount in an offer that the lender has not approved.
Senate Bill 306 contains other technical changes in real estate related laws. This new law comes into effect Jan. 1, 2010. The full text of Senate Bill 306 is available at http://takeaction.realtoractioncenter.com/ct/YdL8hFF1jrqu/.
Thursday, October 8, 2009
Monday, May 11, 2009
Borrowing Money Isn’t Getting Easier.
By Joel Persinger
While it has become obvious that many people have an almost religious reverence for our current president, his attempts to rescue the mortgage industry have brought about anything but a heavenly result. He has thrown hundreds of billions of dollars of taxpayer money at the problem, only to find that the problem is far from going away. The only thing that went away was the taxpayer’s money and he can’t really account for where the money went.
There are very few things that government does well. Spending your money wisely and accounting for where your money went are not among them. Not only does your government really have no idea where your money went, the “solution” you paid for did not end up solving anything. Loans are just as difficult to get after the so called “Stimulus” as they were before, if not more so.
To add insult to injury, the right hand of government seems to be working against the left hand. For every program or law the government creates with the idea of getting the money to flow, another government program or law springs up designed to clog up the financial plumbing all over again. Take HVCC for example. HVCC is the Home Valuation Code of Conduct. It was revised as of May first of this year to included sweeping changes to the way that appraisals of residential property are ordered and performed.
Under the new law, appraisals can no longer be ordered directly by your loan officer. Instead, the loan officer must contact a third party organization that will manage and control the process. Regulation requires that all communication between the appraiser and your loan officer must be carried out through the third party. Your loan officer and your appraiser may no longer communicate with each other directly.
The purpose behind the law is to reduce the amount of corruption in the appraisal process. The idea is to keep the appraiser and the loan officer from conspiring to slip bad loans through the system. But, in actual fact the law creates more problems than it solves. Here are some examples: Your loan officer can no longer select experienced appraisers and weed out the inexperienced ones. Neither can your loan officer speak to the appraiser to get a detailed explanation of any issues that have affected the appraised value. Additionally, the third party organization will derive its fee by taking as much as half of the appraiser’s fee! That means that appraisers will have to do twice the work to make the same amount of money. Quality decreases as work loads increase. So, expect the quality of appraisals to suffer and to see more inexperienced appraisers than ever before. Last, but certainly not least, is the fact that adding this additional layer of management increases the amount of time it takes to get the job done. So, the time it takes to close any given escrow will increase. If you put your house in escrow today, don’t count on closing escrow for at least 60 to 90 days, if you’re lucky.
The HVCC issue is just one of many examples of the government throwing monkey wrenches in the works with one hand while trying to grease the machinery to get it working faster with the other. It’s a counter productive approach to “stimulus.” When added to the fact that banks have continued to tighten their lending rules to make borrowing more difficult in spite of having received a ton of taxpayer money, it becomes clear that the only things the “stimulus” packages have stimulated are greed and controversy. Still, one thing remains uncontroversial. If you’re looking for a home loan in this market, you’d better put your sneakers on and get ready to jump through hoops. It will be more work than you think and will take more time.
While it has become obvious that many people have an almost religious reverence for our current president, his attempts to rescue the mortgage industry have brought about anything but a heavenly result. He has thrown hundreds of billions of dollars of taxpayer money at the problem, only to find that the problem is far from going away. The only thing that went away was the taxpayer’s money and he can’t really account for where the money went.
There are very few things that government does well. Spending your money wisely and accounting for where your money went are not among them. Not only does your government really have no idea where your money went, the “solution” you paid for did not end up solving anything. Loans are just as difficult to get after the so called “Stimulus” as they were before, if not more so.
To add insult to injury, the right hand of government seems to be working against the left hand. For every program or law the government creates with the idea of getting the money to flow, another government program or law springs up designed to clog up the financial plumbing all over again. Take HVCC for example. HVCC is the Home Valuation Code of Conduct. It was revised as of May first of this year to included sweeping changes to the way that appraisals of residential property are ordered and performed.
Under the new law, appraisals can no longer be ordered directly by your loan officer. Instead, the loan officer must contact a third party organization that will manage and control the process. Regulation requires that all communication between the appraiser and your loan officer must be carried out through the third party. Your loan officer and your appraiser may no longer communicate with each other directly.
The purpose behind the law is to reduce the amount of corruption in the appraisal process. The idea is to keep the appraiser and the loan officer from conspiring to slip bad loans through the system. But, in actual fact the law creates more problems than it solves. Here are some examples: Your loan officer can no longer select experienced appraisers and weed out the inexperienced ones. Neither can your loan officer speak to the appraiser to get a detailed explanation of any issues that have affected the appraised value. Additionally, the third party organization will derive its fee by taking as much as half of the appraiser’s fee! That means that appraisers will have to do twice the work to make the same amount of money. Quality decreases as work loads increase. So, expect the quality of appraisals to suffer and to see more inexperienced appraisers than ever before. Last, but certainly not least, is the fact that adding this additional layer of management increases the amount of time it takes to get the job done. So, the time it takes to close any given escrow will increase. If you put your house in escrow today, don’t count on closing escrow for at least 60 to 90 days, if you’re lucky.
The HVCC issue is just one of many examples of the government throwing monkey wrenches in the works with one hand while trying to grease the machinery to get it working faster with the other. It’s a counter productive approach to “stimulus.” When added to the fact that banks have continued to tighten their lending rules to make borrowing more difficult in spite of having received a ton of taxpayer money, it becomes clear that the only things the “stimulus” packages have stimulated are greed and controversy. Still, one thing remains uncontroversial. If you’re looking for a home loan in this market, you’d better put your sneakers on and get ready to jump through hoops. It will be more work than you think and will take more time.
Monday, April 27, 2009
Homes Are Selling If The Price Is Right.
By Joel Persinger
Some years back there was a popular TV game show called, “The Price is Right.” It had nothing to do with real estate, but the name of the show has a ring to it when you think about today’s real estate market. Not long ago homes were sitting on the market for months and months without being sold. That is no longer the case in the San Diego marketplace. If the price is right, as the old TV show title goes, the house will sell and sell quickly!
My office has been busy with buyers lately. Every one of my agents who are working with buyers has had the same experience. We have all selected 5 or 6 homes to show our buyers on any given day, only to find out that all but one or two have multiple offers on them before we even get our buyers in the car. In order to find five houses that our buyers may have a chance of buying, we often have to research around twenty homes. Prices are at rock bottom and interest rates are low, so there is a lot of competition out there. That means that buyers have to be ready to compete for the available homes even in a “depressed” real estate market.
Nevertheless, some houses are still not selling. Some sellers are still hoping to squeeze every cent out of the sale. As a result, they price their homes too high and they sit unsold. The message here is simple. If the price is right the house will sell. Therefore, if the house isn’t selling, then the price isn’t right. There is one additional piece to this puzzle. If the price is right, there will be multiple offers on the house. So, if you have only one offer or you have offers that come in slowly and one at a time, then the price isn’t right. Lower it and the number and frequency of offers will increase. This is important because many of the buyers currently making offers on houses are flakey. Just like a mist, they are here one second and gone the next. Having multiple buyers to buy your house will increase your chances of finding a real buyer among all the flakes.
So, if you’re buying, you should prepare yourself for some competition. If you're selling, think about that old game show and make sure the price is right.
Some years back there was a popular TV game show called, “The Price is Right.” It had nothing to do with real estate, but the name of the show has a ring to it when you think about today’s real estate market. Not long ago homes were sitting on the market for months and months without being sold. That is no longer the case in the San Diego marketplace. If the price is right, as the old TV show title goes, the house will sell and sell quickly!
My office has been busy with buyers lately. Every one of my agents who are working with buyers has had the same experience. We have all selected 5 or 6 homes to show our buyers on any given day, only to find out that all but one or two have multiple offers on them before we even get our buyers in the car. In order to find five houses that our buyers may have a chance of buying, we often have to research around twenty homes. Prices are at rock bottom and interest rates are low, so there is a lot of competition out there. That means that buyers have to be ready to compete for the available homes even in a “depressed” real estate market.
Nevertheless, some houses are still not selling. Some sellers are still hoping to squeeze every cent out of the sale. As a result, they price their homes too high and they sit unsold. The message here is simple. If the price is right the house will sell. Therefore, if the house isn’t selling, then the price isn’t right. There is one additional piece to this puzzle. If the price is right, there will be multiple offers on the house. So, if you have only one offer or you have offers that come in slowly and one at a time, then the price isn’t right. Lower it and the number and frequency of offers will increase. This is important because many of the buyers currently making offers on houses are flakey. Just like a mist, they are here one second and gone the next. Having multiple buyers to buy your house will increase your chances of finding a real buyer among all the flakes.
So, if you’re buying, you should prepare yourself for some competition. If you're selling, think about that old game show and make sure the price is right.
Monday, April 6, 2009
Be Prepared for the Long Haul
By Joel Persinger
One of my grandfather’s favorite sayings was, “The more bends you put in the plumbing, the easier it is to stop up the drain.” Well, my dear reader let me tell you… the mind boggling number of changes to the real estate and lending market this past few years have put a lot of bends in the plumbing. When you throw in the oddball things that can sometimes happen with real estate purchases, the drain can be stopped up more often than not.
One of my sellers moved out of the area and left her house to be sold while vacant. So, I sold it for her. The buyers were happy and everything was moving along just fine until the buyer’s lender wanted to know if the room addition was completed with the proper permits. When asked about this, the seller said, “Of course there are permits” and directed me to one of the kitchen drawers where she had left the permits and the plans for the room addition. Naturally, I went to the property at once to secure the permits. The problem is the permits weren’t there.
It seems that a potential buyer who had visited the home had absconded with the permits. We found this out surreptitiously when that buyer contacted escrow and asked, “So, when do we get the house?” The escrow officer was naturally confused by this turn of events and said, “Ah… you don’t have an escrow on that house.” As it turned out, this buyer had been under the impression that she was buying the house even though she didn’t have an accepted offer and had never opened escrow. It took me three weeks to get her give us back the permits. In the meantime, I checked with the city and county only to find that they had lost the originals. So, the only copies were those that the confused buyer had taken. By the time I got them back the real buyer had given up and cancelled escrow.
In another instance, an Army veteran and his wife worked with me to find them a home. We found a great house for them at a wonderful price. The escrow appeared to be moving along smoothly and all appeared to be right with the world. It was then that we discovered that his certificate of eligibility for his V.A loan was being held up. It seems that the V.A. records did not show his entire length of service. In fact, the records only indicated that he was in the military for the short time he was stationed in California. Since his discharge papers and other related paperwork did in fact show his entire service record, the V.A. indicated that all he had to do was to send the paperwork to the appropriate V.A. office and they would make the change. The problem was that we were supposed to close escrow in 15 days and nobody on the planet believed that the V.A. would move that fast. Not even the V.A.
In yet another strange situation, a client of mine was in line to buy a home only to find out that his lender would not accept the appraised value of the house. This was in spite of the fact that it was the lender’s appraiser who came up with the value. No matter how clear we were about the fact that the house in question was a custom home on over an acre of land with a 300 degree mountain view, the lender insisted on deriving their opinion of value by comparing the home to the many tract houses that surround the area at the bottom of the hill. It should be mentioned that the tract houses were on small lots and did not have a view. The decision to reject the appraisal was made by a junior underwriter located somewhere in Pennsylvania.
These are just three of the many screwball situations my clients have faced over the past several months. In most cases, the problems were able to be resolved and the escrows went through just fine. But, in every case an extraordinary measure of patience and perseverance was required on the parts of the clients (as well as everyone else). It should also be noted that every one of the escrows we have closed over the past three years has been a challenge, to one degree or another. The days of the easy home purchase, if they ever existed, are gone!
The bright side to this otherwise dismal tale is the opportunity it presents for you as the home buyer. Since we know that the overwhelming majority of home purchases in this current environment are difficult, it is the buyer who is willing to hang in there for the long haul who will succeed. While other buyers are giving up, you will persevere and thereby accomplish your goal of buying a home. So, here’s my advice: hang in there and be prepared for the long haul. Buying a home in this marketplace is challenging. But, those who are up to the challenge can swing some terrific deals.
One of my grandfather’s favorite sayings was, “The more bends you put in the plumbing, the easier it is to stop up the drain.” Well, my dear reader let me tell you… the mind boggling number of changes to the real estate and lending market this past few years have put a lot of bends in the plumbing. When you throw in the oddball things that can sometimes happen with real estate purchases, the drain can be stopped up more often than not.
One of my sellers moved out of the area and left her house to be sold while vacant. So, I sold it for her. The buyers were happy and everything was moving along just fine until the buyer’s lender wanted to know if the room addition was completed with the proper permits. When asked about this, the seller said, “Of course there are permits” and directed me to one of the kitchen drawers where she had left the permits and the plans for the room addition. Naturally, I went to the property at once to secure the permits. The problem is the permits weren’t there.
It seems that a potential buyer who had visited the home had absconded with the permits. We found this out surreptitiously when that buyer contacted escrow and asked, “So, when do we get the house?” The escrow officer was naturally confused by this turn of events and said, “Ah… you don’t have an escrow on that house.” As it turned out, this buyer had been under the impression that she was buying the house even though she didn’t have an accepted offer and had never opened escrow. It took me three weeks to get her give us back the permits. In the meantime, I checked with the city and county only to find that they had lost the originals. So, the only copies were those that the confused buyer had taken. By the time I got them back the real buyer had given up and cancelled escrow.
In another instance, an Army veteran and his wife worked with me to find them a home. We found a great house for them at a wonderful price. The escrow appeared to be moving along smoothly and all appeared to be right with the world. It was then that we discovered that his certificate of eligibility for his V.A loan was being held up. It seems that the V.A. records did not show his entire length of service. In fact, the records only indicated that he was in the military for the short time he was stationed in California. Since his discharge papers and other related paperwork did in fact show his entire service record, the V.A. indicated that all he had to do was to send the paperwork to the appropriate V.A. office and they would make the change. The problem was that we were supposed to close escrow in 15 days and nobody on the planet believed that the V.A. would move that fast. Not even the V.A.
In yet another strange situation, a client of mine was in line to buy a home only to find out that his lender would not accept the appraised value of the house. This was in spite of the fact that it was the lender’s appraiser who came up with the value. No matter how clear we were about the fact that the house in question was a custom home on over an acre of land with a 300 degree mountain view, the lender insisted on deriving their opinion of value by comparing the home to the many tract houses that surround the area at the bottom of the hill. It should be mentioned that the tract houses were on small lots and did not have a view. The decision to reject the appraisal was made by a junior underwriter located somewhere in Pennsylvania.
These are just three of the many screwball situations my clients have faced over the past several months. In most cases, the problems were able to be resolved and the escrows went through just fine. But, in every case an extraordinary measure of patience and perseverance was required on the parts of the clients (as well as everyone else). It should also be noted that every one of the escrows we have closed over the past three years has been a challenge, to one degree or another. The days of the easy home purchase, if they ever existed, are gone!
The bright side to this otherwise dismal tale is the opportunity it presents for you as the home buyer. Since we know that the overwhelming majority of home purchases in this current environment are difficult, it is the buyer who is willing to hang in there for the long haul who will succeed. While other buyers are giving up, you will persevere and thereby accomplish your goal of buying a home. So, here’s my advice: hang in there and be prepared for the long haul. Buying a home in this marketplace is challenging. But, those who are up to the challenge can swing some terrific deals.
Buying a Home is a Partnership for Good or Ill.
By Joel Persinger
Not long ago, I was meeting with a couple who were in the process of losing their home to foreclosure. Their savings was gone and they were suffering emotionally. Neither of them had slept well for quite some time and both were beginning to experience stress related health problems. During our meeting, the husband sat with his eyes closed, brow furrowed and his arms ramrod straight in front of him as he maintained a death-grip on their kitchen table. He looked like a man, afraid of heights, who was being forced at gunpoint to ride his first rollercoaster. After an hour of listening to his wife explain their situation and how they arrived at such a disastrous financial point in their lives, the gentleman finally relaxed and released his grip on the table. Amazingly, his sudden relaxation immediately followed something I said. Since it seemed to work so well for him, I’m going to repeat it for you.
If you own a home and you have a mortgage, then you invested in real estate with a partner. Your partner is the bank that loaned you the money. You invested with the idea that your home would go up in value over time and that you could live there while that investment increased in value. The bank invested in the same way. Just like you, the bank decided to gamble that the investment would go up in value and that money would be made in the form of interest on the existing loan. They also planned to introduce you to new loan programs as your equity increased in the hope of selling you a new loan down the road.
Let’s replace the bank with a friend and see how this actually works. Say, for example, that you want to buy a duplex so that you can live in one unit and rent out the other. You only have enough money to pay for part of the duplex, so you need somebody to go in with you in order to be able to do it. You and your buddy decide to do this together and you both plunk down your money on the property and pay all cash. As part of the agreement, you get to live in the property and you and your buddy split the profit derived from renting the second unit. Since your buddy doesn’t get to live there, you both agree that he will have the right to sell the property and keep the money, if something goes terribly wrong.
Everything seems to be going along fine, but suddenly the hillside in the backyard collapses and destroys the duplex. As a result, you no longer have a place to live and both you and your buddy have lost the income from the rental unit. As if to add insult to injury, your property is now worth less than half of what you paid for it, because the building has been destroyed. In this situation, would you be the only one who loses? I don’t think so. Your buddy would lose too. But, you might actually lose more than your buddy. You have to find a job, a place to live and you lost your property in the process. Your buddy, on the other hand, already has a job and a place to live. In addition, he gets to sell the vacant lot to get some of his money back and he doesn’t have to share a dime with you. This is the way it works with a bank.
You and a bank purchased a property together. You both agreed that the property was worth what you paid for it and you both stood to gain if your investment worked out. But, you both took a risk as well and you both stood to lose if things didn’t work out as planned. So, if you lose, the bank will lose too. That is as it should be. While you bear some responsibility for making a bad investment, you do not bear it all. The bank may have invested more than you, but that’s why the bank gets to keep the property and sell it in an attempt to regain some of its lost money. You don’t get to do that.
Now that you understand that your home was an investment and that you weren’t alone in thinking it was a good one, give yourself a break. Every investor makes mistakes. That’s generally how they learn. So, learn something from it and move on. In the meantime, do the best you can to reduce your losses and when bedtime comes each night, leave that day’s guilt behind you and get some sleep.
Not long ago, I was meeting with a couple who were in the process of losing their home to foreclosure. Their savings was gone and they were suffering emotionally. Neither of them had slept well for quite some time and both were beginning to experience stress related health problems. During our meeting, the husband sat with his eyes closed, brow furrowed and his arms ramrod straight in front of him as he maintained a death-grip on their kitchen table. He looked like a man, afraid of heights, who was being forced at gunpoint to ride his first rollercoaster. After an hour of listening to his wife explain their situation and how they arrived at such a disastrous financial point in their lives, the gentleman finally relaxed and released his grip on the table. Amazingly, his sudden relaxation immediately followed something I said. Since it seemed to work so well for him, I’m going to repeat it for you.
If you own a home and you have a mortgage, then you invested in real estate with a partner. Your partner is the bank that loaned you the money. You invested with the idea that your home would go up in value over time and that you could live there while that investment increased in value. The bank invested in the same way. Just like you, the bank decided to gamble that the investment would go up in value and that money would be made in the form of interest on the existing loan. They also planned to introduce you to new loan programs as your equity increased in the hope of selling you a new loan down the road.
Let’s replace the bank with a friend and see how this actually works. Say, for example, that you want to buy a duplex so that you can live in one unit and rent out the other. You only have enough money to pay for part of the duplex, so you need somebody to go in with you in order to be able to do it. You and your buddy decide to do this together and you both plunk down your money on the property and pay all cash. As part of the agreement, you get to live in the property and you and your buddy split the profit derived from renting the second unit. Since your buddy doesn’t get to live there, you both agree that he will have the right to sell the property and keep the money, if something goes terribly wrong.
Everything seems to be going along fine, but suddenly the hillside in the backyard collapses and destroys the duplex. As a result, you no longer have a place to live and both you and your buddy have lost the income from the rental unit. As if to add insult to injury, your property is now worth less than half of what you paid for it, because the building has been destroyed. In this situation, would you be the only one who loses? I don’t think so. Your buddy would lose too. But, you might actually lose more than your buddy. You have to find a job, a place to live and you lost your property in the process. Your buddy, on the other hand, already has a job and a place to live. In addition, he gets to sell the vacant lot to get some of his money back and he doesn’t have to share a dime with you. This is the way it works with a bank.
You and a bank purchased a property together. You both agreed that the property was worth what you paid for it and you both stood to gain if your investment worked out. But, you both took a risk as well and you both stood to lose if things didn’t work out as planned. So, if you lose, the bank will lose too. That is as it should be. While you bear some responsibility for making a bad investment, you do not bear it all. The bank may have invested more than you, but that’s why the bank gets to keep the property and sell it in an attempt to regain some of its lost money. You don’t get to do that.
Now that you understand that your home was an investment and that you weren’t alone in thinking it was a good one, give yourself a break. Every investor makes mistakes. That’s generally how they learn. So, learn something from it and move on. In the meantime, do the best you can to reduce your losses and when bedtime comes each night, leave that day’s guilt behind you and get some sleep.
Monday, March 23, 2009
Is Spending Money You Don’t Have a Good Plan?
By Joel Persinger
YourRealEstateDude.com
Over the past few days I have been approached by several clients who expressed concern that the U.S. Government is leading us into disaster by printing trillions of dollars in a vain hope that doing so will save the economy. On thing all of these folks had in common was their belief that the United States Government is spending money that it doesn’t have. Is that true and if so, is it a good plan?
There’s an old joke that goes, “What do you mean I don’t have any money in my account? I still have checks!” We all know that if I write checks without sufficient money in my bank account, the bank will refuse to cover my checks and vendors will eventually stop accepting them. My checks will become worthless. If I want to dig myself out of the hole and get the vendors to accept my checks again, I will have to borrow the money to cover the checks that I’ve already written, along with any I might intend to write in the future. Then, I will have to find a source of income, like a second job, in order to pay the debt on the money I had to borrow.
When the government prints money, it is essentially writing checks even though it has no money in its bank account. Just like my checks, people will eventually stop accepting the government’s money, because its money will have become worthless. The only way for the government to stave off such an eventuality is to borrow enough money from other countries to cover the checks it has already written, along with any it might intend to write in the future. Then the government will have to find a source of income to pay the debt on the money it had to borrow. Unfortunately, the government cannot get a second job. All it can do is raise taxes on generation after generation of Americans.
It may be disturbing to know, but should be point out that the government doesn’t make anything, grow anything, produce anything or sell anything. Basically, the government doesn’t make any money of its own. The Government is like a horribly fat old uncle who sits on your couch all day, eats your food, watches your TV, minds your business and bosses you around without ever pitching in to help pay the bills.
Many of us think that the government is our benefactor, but the reverse is actually the case. We are the government’s benefactors. We design and manufacture products, grow crops, provide services and run profitable business, while old, fat Uncle Sam sits on his behind and sponges off of us in the form of taxes and bosses us around.
But, what does all this have to do with the housing market? First of all, the economy functions as a unit. You cannot easily separate one section from another. Consequently, what affects one sector eventually affects them all. Therefore, when money is devalued, it takes more of it to buy goods, services and real estate. If you’re old enough to remember the late 1970’s, you remember the recession of the Carter years. We faced double-digit inflation back then. Prices of goods and services were sky high. People lost jobs all over the country. You could only buy gas for your car on odd or even days, depending upon whether your license plate ended in an odd or even number. And even when it was your day to buy gas, you had to wait for long periods because cars were lined up for blocks.
Like it or not, what happens with the economy affects everything. Many highly regarded economists and gurus, including those in the Congressional Budget Office, seem to be rightly concerned that printing all this money will send our economy into a tailspin, driving us headlong into a deep recession. If that happens, it may take more money to buy your house, but you may not be able to sell it. People will be too busy trying to scrape together the money to buy bread, eggs and gasoline. No matter how desperate you may be for a cure to present ills, it seems obvious to this real estate broker/investor that writing checks when you have no money and borrowing money that you cannot pay back will only make our current economic problems worse.
YourRealEstateDude.com
Over the past few days I have been approached by several clients who expressed concern that the U.S. Government is leading us into disaster by printing trillions of dollars in a vain hope that doing so will save the economy. On thing all of these folks had in common was their belief that the United States Government is spending money that it doesn’t have. Is that true and if so, is it a good plan?
There’s an old joke that goes, “What do you mean I don’t have any money in my account? I still have checks!” We all know that if I write checks without sufficient money in my bank account, the bank will refuse to cover my checks and vendors will eventually stop accepting them. My checks will become worthless. If I want to dig myself out of the hole and get the vendors to accept my checks again, I will have to borrow the money to cover the checks that I’ve already written, along with any I might intend to write in the future. Then, I will have to find a source of income, like a second job, in order to pay the debt on the money I had to borrow.
When the government prints money, it is essentially writing checks even though it has no money in its bank account. Just like my checks, people will eventually stop accepting the government’s money, because its money will have become worthless. The only way for the government to stave off such an eventuality is to borrow enough money from other countries to cover the checks it has already written, along with any it might intend to write in the future. Then the government will have to find a source of income to pay the debt on the money it had to borrow. Unfortunately, the government cannot get a second job. All it can do is raise taxes on generation after generation of Americans.
It may be disturbing to know, but should be point out that the government doesn’t make anything, grow anything, produce anything or sell anything. Basically, the government doesn’t make any money of its own. The Government is like a horribly fat old uncle who sits on your couch all day, eats your food, watches your TV, minds your business and bosses you around without ever pitching in to help pay the bills.
Many of us think that the government is our benefactor, but the reverse is actually the case. We are the government’s benefactors. We design and manufacture products, grow crops, provide services and run profitable business, while old, fat Uncle Sam sits on his behind and sponges off of us in the form of taxes and bosses us around.
But, what does all this have to do with the housing market? First of all, the economy functions as a unit. You cannot easily separate one section from another. Consequently, what affects one sector eventually affects them all. Therefore, when money is devalued, it takes more of it to buy goods, services and real estate. If you’re old enough to remember the late 1970’s, you remember the recession of the Carter years. We faced double-digit inflation back then. Prices of goods and services were sky high. People lost jobs all over the country. You could only buy gas for your car on odd or even days, depending upon whether your license plate ended in an odd or even number. And even when it was your day to buy gas, you had to wait for long periods because cars were lined up for blocks.
Like it or not, what happens with the economy affects everything. Many highly regarded economists and gurus, including those in the Congressional Budget Office, seem to be rightly concerned that printing all this money will send our economy into a tailspin, driving us headlong into a deep recession. If that happens, it may take more money to buy your house, but you may not be able to sell it. People will be too busy trying to scrape together the money to buy bread, eggs and gasoline. No matter how desperate you may be for a cure to present ills, it seems obvious to this real estate broker/investor that writing checks when you have no money and borrowing money that you cannot pay back will only make our current economic problems worse.
Monday, March 16, 2009
Dealing With Your Lender When You Can’t Make Your Payments
By Joel Persinger
Over the weekend, I received an email from a fellow asking me how to deal with a lender that was threatening foreclosure. In his case, he was not yet behind on payments and the lender had threatened to foreclose when the borrower called to ask for help. The borrower wanted to keep the house and expressed a desire to work with the lender by making partial payments. The question he asked me was, “Does a borrower have a right to keep the house, if he makes a partial payment.” With so many folks facing the same or similar issues, I thought you might like to know my answers to his question.
Not being an attorney, I can’t give you specifics regarding a borrower’s rights to keep the house by making a partial payment. However, it has been my experience that agreements allowing a borrower to remain in a home while making a partial payment are generally made outside the structure of the original lending agreement and are for short periods only. Your loan documents may contain a provision addressing the issue of partial payments. They may also address any rights you might have under such circumstances. Therefore, if you are wondering about your rights under the terms of your loan agreement, a good place to start would be examining those documents.
As for lender responses to telephone calls, you must first understand that banks employ different persons in different departments to do different things. As a result, the Customer Service Department may have a completely different response to a question than the Collections Department, which may have a different response than the Workout Department, and so on. That having been said, there are seven generally accepted “truths” you might wish to consider.
1) Letters generally work better than telephone calls. If you need to work out a payment strategy with your lender, you might try writing a letter. Draft your letter to the bank explaining your financial hardship, how long you feel the hardship will last and any proposed solutions you may have. Prior to sending the letter, you should contact your lender and ask for the “Workout Department” or for a supervisor. One or the other may be able to provide you with the appropriate address to which you should send the letter. You should also try to get an email address. That way you can send the letter by email, as well as by certified postal mail return receive requested. The email will provide you with a record of what you sent, to whom you sent it and when it was sent. Certified postal mail, by comparison, will only prove that you sent something, but will not prove what you sent.
2) Working these things out with banks is like trying to solve a problem with the DMV. It can try even the calmest person’s patience. Therefore, it is import to remember that perseverance and patience are the watchwords of the day.
3) Banks do not generally like partial payments. If you call your lender and say, “I’m having some financial troubles. Can I make a partial payment for a few months?” don’t be surprised if the first answer you receive is, “NO.” The bank is not going to just take your word for it. You will have to provide financial records and documents to prove that you cannot make the payment.
4) Banks don’t want to foreclose on your property. They just want their money back in the form of a payment. However, they will threaten to foreclose in order to motivate the borrower to pay. It should also be noted that they do have the power to foreclose, at some point, if the borrower does not pay. So, it is best to work on the problem sooner rather than later.
5) Collections people at banks tend to use threats as their first response to just about everything. So, don’t be terribly insulted if they threaten you the first, second or even the third time you talk to them.
6) Quite often, banks don’t see the situation as a problem when the borrower is making the payment. After all, the borrower is making the payment! So, what’s the problem? It’s when you completely run out of money and the bank doesn’t receive your payment that the light bulb will go on and the bank will realize that a problem exists. It’s sad, I agree. But, it’s the truth nonetheless. I should clearly point out that I am NOT advising you to stop making your loan payments. You should contact a quailed attorney for advice prior to making any such decision.
7) Dealing with problems like these is not easy. But, the sooner you start working on them the better. The worst thing you can do is to pretend that they will go away on their own.
Over the weekend, I received an email from a fellow asking me how to deal with a lender that was threatening foreclosure. In his case, he was not yet behind on payments and the lender had threatened to foreclose when the borrower called to ask for help. The borrower wanted to keep the house and expressed a desire to work with the lender by making partial payments. The question he asked me was, “Does a borrower have a right to keep the house, if he makes a partial payment.” With so many folks facing the same or similar issues, I thought you might like to know my answers to his question.
Not being an attorney, I can’t give you specifics regarding a borrower’s rights to keep the house by making a partial payment. However, it has been my experience that agreements allowing a borrower to remain in a home while making a partial payment are generally made outside the structure of the original lending agreement and are for short periods only. Your loan documents may contain a provision addressing the issue of partial payments. They may also address any rights you might have under such circumstances. Therefore, if you are wondering about your rights under the terms of your loan agreement, a good place to start would be examining those documents.
As for lender responses to telephone calls, you must first understand that banks employ different persons in different departments to do different things. As a result, the Customer Service Department may have a completely different response to a question than the Collections Department, which may have a different response than the Workout Department, and so on. That having been said, there are seven generally accepted “truths” you might wish to consider.
1) Letters generally work better than telephone calls. If you need to work out a payment strategy with your lender, you might try writing a letter. Draft your letter to the bank explaining your financial hardship, how long you feel the hardship will last and any proposed solutions you may have. Prior to sending the letter, you should contact your lender and ask for the “Workout Department” or for a supervisor. One or the other may be able to provide you with the appropriate address to which you should send the letter. You should also try to get an email address. That way you can send the letter by email, as well as by certified postal mail return receive requested. The email will provide you with a record of what you sent, to whom you sent it and when it was sent. Certified postal mail, by comparison, will only prove that you sent something, but will not prove what you sent.
2) Working these things out with banks is like trying to solve a problem with the DMV. It can try even the calmest person’s patience. Therefore, it is import to remember that perseverance and patience are the watchwords of the day.
3) Banks do not generally like partial payments. If you call your lender and say, “I’m having some financial troubles. Can I make a partial payment for a few months?” don’t be surprised if the first answer you receive is, “NO.” The bank is not going to just take your word for it. You will have to provide financial records and documents to prove that you cannot make the payment.
4) Banks don’t want to foreclose on your property. They just want their money back in the form of a payment. However, they will threaten to foreclose in order to motivate the borrower to pay. It should also be noted that they do have the power to foreclose, at some point, if the borrower does not pay. So, it is best to work on the problem sooner rather than later.
5) Collections people at banks tend to use threats as their first response to just about everything. So, don’t be terribly insulted if they threaten you the first, second or even the third time you talk to them.
6) Quite often, banks don’t see the situation as a problem when the borrower is making the payment. After all, the borrower is making the payment! So, what’s the problem? It’s when you completely run out of money and the bank doesn’t receive your payment that the light bulb will go on and the bank will realize that a problem exists. It’s sad, I agree. But, it’s the truth nonetheless. I should clearly point out that I am NOT advising you to stop making your loan payments. You should contact a quailed attorney for advice prior to making any such decision.
7) Dealing with problems like these is not easy. But, the sooner you start working on them the better. The worst thing you can do is to pretend that they will go away on their own.
Monday, March 9, 2009
The Truth about Loan Modifications
By Joel Persinger
Loan modifications are a relatively new bread of animal. They popped up as a cottage industry in response to the troubled housing market. Real estate companies, having suffered as a result of the slowdown, and attorneys, looking for a quick way to make a buck, began positioning themselves as “Loan Modification Experts.” Not being loan modification experts ourselves, my staff and I embarked on a search for a reputable loan modification provider, to which we could refer our clients. What we found was less than encouraging.
After having interviewed dozens of self-proclaimed “Loan Modification Experts”, we came to discover that no such thing really existed. When asked how many loan modifications they had done, most “experts” were deliberately vague in their responses. Some gave us numbers that meant nothing and some refused to give us numbers at all. Most gave us answers that went sort of like this, “Oh… ah… we’ve signed up 300 clients so far!” To which I would ask, “But, how many loan modifications have you actually completed?” The answers I received ranged from, “Well, that’s hard to say…ah… you know… ah… we’re just getting started” to “Ah… I don’t really track those numbers… but, I can check around and get back to you.” They never got back to me.
The truth is that loan modifications are in their infancy and the landscape is constantly changing. As a result, no-one is an expert and no-one really knows how to get them done consistently. The proof of this statement can be found in an email exchange I had with a young “Loan Modification Expert” who was referred to me about two weeks ago. Following a lengthy discussion on the phone and some emails back and forth, I was finally able to clarify my desires by asking, “What I need to know is, what percentage of the time are you successful in negotiating a loan modification with the banks that is acceptable to the homeowners and is successful in keeping the homeowners in their homes?” It took two days to get the response. But it was quite an eye opener when it arrived. The young man came strait to the point in telling me that their success rate was somewhere around 40%. That means that far less than half of all the loan modifications they attempt are successful.
Many companies will tell you that they are successful in negotiating a loan modification 90 percent of the time or more. What they aren’t telling you is the fine detail associated with that percentage. For example; one company we spoke to was successful in getting lenders to make a loan modification offer 90 percent of the time. However, the overwhelming majority of those offers were so bad that the homeowners did not accept the offers, because the modifications that the lenders offered would not have helped them at all. Actually, you can probably call your bank and get them to offer you the same bad offers 90 percent of the time all by yourself and you won’t have to shell out $3,500 to a “Loan Modification Expert” to accomplish it.
All that having been said, for those who actually have succeeded in getting their loans modified through such service providers, the money spent may have been well worth it. The important thing is to understand the genuine odds of success. From this real estate broker’s experience, the chances of success in a loan modification are a crap-shoot at best. Still, there is a chance and if you’re willing to take the gamble, perhaps a loan modification is for you.
Loan modifications are a relatively new bread of animal. They popped up as a cottage industry in response to the troubled housing market. Real estate companies, having suffered as a result of the slowdown, and attorneys, looking for a quick way to make a buck, began positioning themselves as “Loan Modification Experts.” Not being loan modification experts ourselves, my staff and I embarked on a search for a reputable loan modification provider, to which we could refer our clients. What we found was less than encouraging.
After having interviewed dozens of self-proclaimed “Loan Modification Experts”, we came to discover that no such thing really existed. When asked how many loan modifications they had done, most “experts” were deliberately vague in their responses. Some gave us numbers that meant nothing and some refused to give us numbers at all. Most gave us answers that went sort of like this, “Oh… ah… we’ve signed up 300 clients so far!” To which I would ask, “But, how many loan modifications have you actually completed?” The answers I received ranged from, “Well, that’s hard to say…ah… you know… ah… we’re just getting started” to “Ah… I don’t really track those numbers… but, I can check around and get back to you.” They never got back to me.
The truth is that loan modifications are in their infancy and the landscape is constantly changing. As a result, no-one is an expert and no-one really knows how to get them done consistently. The proof of this statement can be found in an email exchange I had with a young “Loan Modification Expert” who was referred to me about two weeks ago. Following a lengthy discussion on the phone and some emails back and forth, I was finally able to clarify my desires by asking, “What I need to know is, what percentage of the time are you successful in negotiating a loan modification with the banks that is acceptable to the homeowners and is successful in keeping the homeowners in their homes?” It took two days to get the response. But it was quite an eye opener when it arrived. The young man came strait to the point in telling me that their success rate was somewhere around 40%. That means that far less than half of all the loan modifications they attempt are successful.
Many companies will tell you that they are successful in negotiating a loan modification 90 percent of the time or more. What they aren’t telling you is the fine detail associated with that percentage. For example; one company we spoke to was successful in getting lenders to make a loan modification offer 90 percent of the time. However, the overwhelming majority of those offers were so bad that the homeowners did not accept the offers, because the modifications that the lenders offered would not have helped them at all. Actually, you can probably call your bank and get them to offer you the same bad offers 90 percent of the time all by yourself and you won’t have to shell out $3,500 to a “Loan Modification Expert” to accomplish it.
All that having been said, for those who actually have succeeded in getting their loans modified through such service providers, the money spent may have been well worth it. The important thing is to understand the genuine odds of success. From this real estate broker’s experience, the chances of success in a loan modification are a crap-shoot at best. Still, there is a chance and if you’re willing to take the gamble, perhaps a loan modification is for you.
Wednesday, March 4, 2009
Can Obama’s Stimulus Plan Help Homebuyers?
By Joel Persinger
February 23, 2009
There’s quite a buzz among real estate folks and the media regarding the new Obama stimulus plan and how it might help home buyers. One of the items most talked about around the water cooler in my office, is the $8,000 tax credit. But, before I get into the specifics of how this tax credit is suppose to work, let me remind you that the actual stimulus plan probably weighs ten pounds when printed and won’t be fully understood for many months, if ever! Consequently, anything I tell you now will only paint a small part of the picture.
In basic, the new law says that first time homebuyers who purchase homes anytime from the start of this year until the end of November 2009, may be eligible for a tax credit. The credit could be as much as $8,000, but not more. This is a tax credit, rather than down payment assistance. So you have to come up with your own down payment. Then once you have completed the purchase, you can apply for the credit when you file your tax return at the end of the year.
The benefit of a tax credit is that it is a dollar-for-dollar reduction in the actual taxes you owe, rather than a reduction in your taxable income. Reducing your taxable income by $8,000 might only save you $1,000 to $1,500 in your actual taxes. On the other hand, a credit is real money that goes toward your actual tax bill. So, if you were to owe $8,000 in income taxes and qualified for the $8,000 tax credit, you would owe nothing. Better yet, the tax credit is real money. That means that you can receive a check for all or part of the credit, depending upon your tax liability. For example, if you end up owing $4,000 in taxes, you can offset that $4,000 with half of the tax credit and still receive a check for the other $4,000!
This may sound great, but it doesn’t apply to just anybody. You must either be a first time homebuyer or someone who has NOT owned a home during the past three years. Additionally, the program phases out as your income increases. According to the reports I’ve read so far, the phase out begins when couples make more than $150,000 per year or when single borrowers make more than $75,000 annually. Once you hit either of those income limits, figuring out what credit you are eligible for, if any, may require a degree in either accounting or rocket science. My advice is, speak to your accountant… even if you’re a rocket scientist.
How much this program will actually help home buyers remains to be seen. But, if you’re a first time buyer, it certainly is worth checking out. Just make sure you get good advice from qualified professionals along the way.
February 23, 2009
There’s quite a buzz among real estate folks and the media regarding the new Obama stimulus plan and how it might help home buyers. One of the items most talked about around the water cooler in my office, is the $8,000 tax credit. But, before I get into the specifics of how this tax credit is suppose to work, let me remind you that the actual stimulus plan probably weighs ten pounds when printed and won’t be fully understood for many months, if ever! Consequently, anything I tell you now will only paint a small part of the picture.
In basic, the new law says that first time homebuyers who purchase homes anytime from the start of this year until the end of November 2009, may be eligible for a tax credit. The credit could be as much as $8,000, but not more. This is a tax credit, rather than down payment assistance. So you have to come up with your own down payment. Then once you have completed the purchase, you can apply for the credit when you file your tax return at the end of the year.
The benefit of a tax credit is that it is a dollar-for-dollar reduction in the actual taxes you owe, rather than a reduction in your taxable income. Reducing your taxable income by $8,000 might only save you $1,000 to $1,500 in your actual taxes. On the other hand, a credit is real money that goes toward your actual tax bill. So, if you were to owe $8,000 in income taxes and qualified for the $8,000 tax credit, you would owe nothing. Better yet, the tax credit is real money. That means that you can receive a check for all or part of the credit, depending upon your tax liability. For example, if you end up owing $4,000 in taxes, you can offset that $4,000 with half of the tax credit and still receive a check for the other $4,000!
This may sound great, but it doesn’t apply to just anybody. You must either be a first time homebuyer or someone who has NOT owned a home during the past three years. Additionally, the program phases out as your income increases. According to the reports I’ve read so far, the phase out begins when couples make more than $150,000 per year or when single borrowers make more than $75,000 annually. Once you hit either of those income limits, figuring out what credit you are eligible for, if any, may require a degree in either accounting or rocket science. My advice is, speak to your accountant… even if you’re a rocket scientist.
How much this program will actually help home buyers remains to be seen. But, if you’re a first time buyer, it certainly is worth checking out. Just make sure you get good advice from qualified professionals along the way.
What’s Happening with Foreclosures?
By Joel Persinger
February 17,2009
Not long ago, the question I was most often asked was, “How are the interest rates today.” But now, the burning question on most people’s lips appears to be some version of, “What’s happening with foreclosures?” Unfortunately, a good answer is difficult to come by.
Over the past year or two, healthy banks have been gobbling up sick ones and have been trying to deal with the financial illnesses that the sick banks brought into the deals. A prime example of this is the purchase of Countrywide Home Loans by Bank of America. Since the day the deal was announced, trying to work with Countrywide to resolve the problems of distressed homeowners in “pre-foreclosure” has been a nightmare. In every way, Countrywide has lived out the old saying that, “The right hand doesn’t know what the left hand is doing.” This is not to single out Countrywide. Just about every recent purchase of a distressed bank has yielded a similar result. Nevertheless, this kind of thing can make figuring out the real estate and lending markets quite challenging for both real estate professionals and homeowner.
This past week, ForeclosureRadar.com released its California Foreclosure Report for January 2009. The report states, in part, “January brought an unexpected, across the board drop, in the total Notices of Default, Notices of Trustee Sale, and sales at auction, not only from the prior month, but year over year as well. Even after accounting for the fact that January had two fewer days than December, only properties sold at auction saw a slight increase of 3.4 percent. Analyzing the data at the lender level, it appears these drops can be primarily attributed to the significant changes taking place among the Country’s major lending institutions. Wells Fargo, with its recent acquisition of Wachovia, saw a drop in Notice of Default filings of 46 percent, while JP Morgan, which acquired Washington Mutual, saw a drop of 49 percent. Bank of America, which earlier acquired Countrywide, saw a significant 281 percent increase in filings, though still below the levels Countrywide experienced in the second quarter of 2008”
At first glance this appears to be good news. Hey… foreclosures are down! But, just when you thought it was safe to go back in the water, the report continues by stating, “Given the significant integration issues faced by most major lenders today, it would be irresponsible to draw any conclusions about market direction from current foreclosure numbers.” In plain English this means that since the lending institutions have no idea what their doing and since their proverbial right hands have no idea what their left hands are doing, nobody really knows what direction the market will take and ForeclosureRadar.com’s California Foreclosure Report, while interesting reading, means absolutely nothing.
So where does that leave you and me? Currently, foreclosures are down, but tomorrow they may be up. Who knows? What we do know is this: prices are down and still decreasing. Interest rates are low and loans are available to those who can actually repay them. Sellers are having a tough time and buyers are finding deals. Basically, it continues to be a buyer’s market. If you are a qualified buyer, you should be buying.
February 17,2009
Not long ago, the question I was most often asked was, “How are the interest rates today.” But now, the burning question on most people’s lips appears to be some version of, “What’s happening with foreclosures?” Unfortunately, a good answer is difficult to come by.
Over the past year or two, healthy banks have been gobbling up sick ones and have been trying to deal with the financial illnesses that the sick banks brought into the deals. A prime example of this is the purchase of Countrywide Home Loans by Bank of America. Since the day the deal was announced, trying to work with Countrywide to resolve the problems of distressed homeowners in “pre-foreclosure” has been a nightmare. In every way, Countrywide has lived out the old saying that, “The right hand doesn’t know what the left hand is doing.” This is not to single out Countrywide. Just about every recent purchase of a distressed bank has yielded a similar result. Nevertheless, this kind of thing can make figuring out the real estate and lending markets quite challenging for both real estate professionals and homeowner.
This past week, ForeclosureRadar.com released its California Foreclosure Report for January 2009. The report states, in part, “January brought an unexpected, across the board drop, in the total Notices of Default, Notices of Trustee Sale, and sales at auction, not only from the prior month, but year over year as well. Even after accounting for the fact that January had two fewer days than December, only properties sold at auction saw a slight increase of 3.4 percent. Analyzing the data at the lender level, it appears these drops can be primarily attributed to the significant changes taking place among the Country’s major lending institutions. Wells Fargo, with its recent acquisition of Wachovia, saw a drop in Notice of Default filings of 46 percent, while JP Morgan, which acquired Washington Mutual, saw a drop of 49 percent. Bank of America, which earlier acquired Countrywide, saw a significant 281 percent increase in filings, though still below the levels Countrywide experienced in the second quarter of 2008”
At first glance this appears to be good news. Hey… foreclosures are down! But, just when you thought it was safe to go back in the water, the report continues by stating, “Given the significant integration issues faced by most major lenders today, it would be irresponsible to draw any conclusions about market direction from current foreclosure numbers.” In plain English this means that since the lending institutions have no idea what their doing and since their proverbial right hands have no idea what their left hands are doing, nobody really knows what direction the market will take and ForeclosureRadar.com’s California Foreclosure Report, while interesting reading, means absolutely nothing.
So where does that leave you and me? Currently, foreclosures are down, but tomorrow they may be up. Who knows? What we do know is this: prices are down and still decreasing. Interest rates are low and loans are available to those who can actually repay them. Sellers are having a tough time and buyers are finding deals. Basically, it continues to be a buyer’s market. If you are a qualified buyer, you should be buying.
Tuesday, February 3, 2009
Real Estate Prices Have Tumbled… Bad News or Good?
By Joel Persinger
In every economic shift there are winners and losers. By nature, and with the help of the news media, most of us focus so strongly on the losers that we miss the winners almost entirely. This column is dedicated to those who are winning.
A couple of months ago, an old client of mine called me and said, “Joel, I want you to help my son to find a house he can buy.” Just over a week ago that same young man closed escrow on his first house. The property was a pre-foreclosure and had been left in terrible shape. But, this young fellow and his father work in the construction industry. They have lots of friends and contacts to help whip that house into shape. I’d be willing to bet that inside of a month, that place will look great.
Just yesterday, I had the privilege of having lunch with a fine couple who are looking for their first house. They both have great jobs and good credit and are so excited about the possibilities and their dreams that they can’t stop talking about them. She wants to have a home that she can call her own. He wants to have a garage with a work bench, so he can fix his own car and tinker with his own projects. After doing a little homework on their behalf, one of my loan officers felt very strongly that these folks are more than qualified to buy their own home. You never know, I just might be telling you about their new place in these pages soon.
A good friend of mine has wanted a house with a view and some elbow room for years. He grew up in Montana and likes to have a bit more than ten feet between his house and his neighbors. For some time now he’s been looking up at the house on the hill across from his place. You know the house. It’s the one with the 300 degree view and two acres of land. You probably have one just like it in your neighborhood. My buddy has been wondering what it would be like to live up there for years. Well, it looks like he’s going to find out. With any luck, my friend will own that house in less than a month.
These are just three stories of the millions that are out there. We never hear about them because good news doesn’t sell papers or increase viewership. Sure, people are losing jobs and homes. But, let’s not forget that when unemployment reaches 9 percent, it means that 91 percent of the people are working. Likewise, even if the number of foreclosures reaches 10 percent, it would mean that 90 percent of homeowners are paying their mortgages on time. News organizations and politicians make their livings by focusing on the negative. Here’s my advice: look for the positive. It’s easy to see, there is generally more of it and making it your focus will let you sleep better at night.
In every economic shift there are winners and losers. By nature, and with the help of the news media, most of us focus so strongly on the losers that we miss the winners almost entirely. This column is dedicated to those who are winning.
A couple of months ago, an old client of mine called me and said, “Joel, I want you to help my son to find a house he can buy.” Just over a week ago that same young man closed escrow on his first house. The property was a pre-foreclosure and had been left in terrible shape. But, this young fellow and his father work in the construction industry. They have lots of friends and contacts to help whip that house into shape. I’d be willing to bet that inside of a month, that place will look great.
Just yesterday, I had the privilege of having lunch with a fine couple who are looking for their first house. They both have great jobs and good credit and are so excited about the possibilities and their dreams that they can’t stop talking about them. She wants to have a home that she can call her own. He wants to have a garage with a work bench, so he can fix his own car and tinker with his own projects. After doing a little homework on their behalf, one of my loan officers felt very strongly that these folks are more than qualified to buy their own home. You never know, I just might be telling you about their new place in these pages soon.
A good friend of mine has wanted a house with a view and some elbow room for years. He grew up in Montana and likes to have a bit more than ten feet between his house and his neighbors. For some time now he’s been looking up at the house on the hill across from his place. You know the house. It’s the one with the 300 degree view and two acres of land. You probably have one just like it in your neighborhood. My buddy has been wondering what it would be like to live up there for years. Well, it looks like he’s going to find out. With any luck, my friend will own that house in less than a month.
These are just three stories of the millions that are out there. We never hear about them because good news doesn’t sell papers or increase viewership. Sure, people are losing jobs and homes. But, let’s not forget that when unemployment reaches 9 percent, it means that 91 percent of the people are working. Likewise, even if the number of foreclosures reaches 10 percent, it would mean that 90 percent of homeowners are paying their mortgages on time. News organizations and politicians make their livings by focusing on the negative. Here’s my advice: look for the positive. It’s easy to see, there is generally more of it and making it your focus will let you sleep better at night.
Tuesday, January 27, 2009
Real Estate… It’s a Jungle Out There.
By Joel Persinger
YourRealEstateDude.com
When I was a kid, my uncle’s favorite saying was “It’s a jungle our there.” It always sounded like a slogan I might read in a newspaper advertisement or see on TV and I never quite understood what he was talking about. Then I got into real estate and his meaning suddenly became crystal clear.
Ask any real estate professional and you’ll find that the current real estate market is indeed a jungle. Just about every transaction reminds me of a journey through a misty rainforest full of pitfalls, booby traps and dangerous critters with big teeth. Just when you think you’ve figured out where the dangers lie, something pops out of the bushes and starts tearing everything apart. That kind of challenging business environment is understandable, once you come to terms with the fact that the market is dominated by foreclosure and pre-foreclosure properties.
In such a market, buying a home is a daunting task, largely due to what I call the “who cares bug.” When properties are facing foreclosure, many sellers move out and leave the properties to fall into disrepair like old, dead animals left out in the sun to rot. If the sellers haven’t stripped the homes of anything and everything, the looters and thieves who break in repeatedly, do it for them.
In the past two months, we’ve had one home broken into four times, another house in which someone tossed a concrete block through the front window and took all the copper wiring out of the house and still another home that the police had to chase people out of who had broken into the place to throw a party! This doesn’t happen all the time, but when it does, selling the house can be difficult. By the time a buyer comes along, the house is in such a state that the buyer’s lender may not want to lend against it.
If it isn’t the sellers with the “who cares bug”, it’s the agents hired to sell the homes. When a bank forecloses on properties, the homes are typically assigned to brokerages that “specialize” in selling such properties. Given the number of foreclosure properties on the market, such agencies quickly become overwhelmed. As a consequence, buyers and their agents can never get a response out of them. It is quite common for buyer’s agents to leave messages, send emails and even send in offers without ever getting a response from the brokerage selling the house. Even if a response does come, it is generally from a clerk or assistant whose previous job, judging by the attitude they project, must have been at the DMV.
As an agent, you begin to realize how common the “who cares bug” has become when you return a call from another agent and he or she can’t stop thanking you for doing so. Just yesterday I called a fellow back who had left me a message about one of our listings. He was absolutely thunderstruck and delighted that I had actually returned his call. He thanked me over and over again for the entire ten minutes we spent on the phone. I almost couldn’t get a word in to tell him about the house. He was too excited about having gotten a call back. It was almost as if he had been locked in a dungeon for thirty years and I was the first person he had talked to in all that time.
Facing these kinds of challenges, buyers can become frustrated almost to the point of giving up entirely. The key to staying in the game and eventually winning is to set your expectations properly in the first place. Since you’ve read this article, you are now well prepared, because now you know what to expect. So, dust off your pith helmet and safari gear, steel yourself for a challenging adventure, use lots of bug repellent to ward off the attacks of the “who cares bug” and remember, house hunting in this market can be a great experience, but you’ve got to be prepared. It’s a jungle out there.
YourRealEstateDude.com
When I was a kid, my uncle’s favorite saying was “It’s a jungle our there.” It always sounded like a slogan I might read in a newspaper advertisement or see on TV and I never quite understood what he was talking about. Then I got into real estate and his meaning suddenly became crystal clear.
Ask any real estate professional and you’ll find that the current real estate market is indeed a jungle. Just about every transaction reminds me of a journey through a misty rainforest full of pitfalls, booby traps and dangerous critters with big teeth. Just when you think you’ve figured out where the dangers lie, something pops out of the bushes and starts tearing everything apart. That kind of challenging business environment is understandable, once you come to terms with the fact that the market is dominated by foreclosure and pre-foreclosure properties.
In such a market, buying a home is a daunting task, largely due to what I call the “who cares bug.” When properties are facing foreclosure, many sellers move out and leave the properties to fall into disrepair like old, dead animals left out in the sun to rot. If the sellers haven’t stripped the homes of anything and everything, the looters and thieves who break in repeatedly, do it for them.
In the past two months, we’ve had one home broken into four times, another house in which someone tossed a concrete block through the front window and took all the copper wiring out of the house and still another home that the police had to chase people out of who had broken into the place to throw a party! This doesn’t happen all the time, but when it does, selling the house can be difficult. By the time a buyer comes along, the house is in such a state that the buyer’s lender may not want to lend against it.
If it isn’t the sellers with the “who cares bug”, it’s the agents hired to sell the homes. When a bank forecloses on properties, the homes are typically assigned to brokerages that “specialize” in selling such properties. Given the number of foreclosure properties on the market, such agencies quickly become overwhelmed. As a consequence, buyers and their agents can never get a response out of them. It is quite common for buyer’s agents to leave messages, send emails and even send in offers without ever getting a response from the brokerage selling the house. Even if a response does come, it is generally from a clerk or assistant whose previous job, judging by the attitude they project, must have been at the DMV.
As an agent, you begin to realize how common the “who cares bug” has become when you return a call from another agent and he or she can’t stop thanking you for doing so. Just yesterday I called a fellow back who had left me a message about one of our listings. He was absolutely thunderstruck and delighted that I had actually returned his call. He thanked me over and over again for the entire ten minutes we spent on the phone. I almost couldn’t get a word in to tell him about the house. He was too excited about having gotten a call back. It was almost as if he had been locked in a dungeon for thirty years and I was the first person he had talked to in all that time.
Facing these kinds of challenges, buyers can become frustrated almost to the point of giving up entirely. The key to staying in the game and eventually winning is to set your expectations properly in the first place. Since you’ve read this article, you are now well prepared, because now you know what to expect. So, dust off your pith helmet and safari gear, steel yourself for a challenging adventure, use lots of bug repellent to ward off the attacks of the “who cares bug” and remember, house hunting in this market can be a great experience, but you’ve got to be prepared. It’s a jungle out there.
Tuesday, January 20, 2009
Will Obama Save the Housing Market?
By Joel Persinger
Whatever your opinion of President Obama might be, it is an undeniable fact that millions upon millions of people worldwide have become convinced that he can cure what ails us. But can he?
As of this writing, President Bush is still in office and President-Elect Obama is about to be sworn in. Interest rates are the lowest I will probably ever see in my lifetime, buyers are busily buying homes, homeowners who have equity in their homes are quickly refinancing and sellers who were hopelessly attempting to sell homes that would not sell a few months ago are now successfully selling their homes in short sales and moving on. The system is far from healthy and there is much left to do. But, in spite of the concerns expressed by many including me, the underlying support for the market that has been provided by the federal government’s purchase of mortgage paper has helped get things moving again.
Those decisions were made during the previous administration and will not be fully implemented until well into the new one. If it goes well, President Obama will get the credit for work done in President Bush’s term and probably won’t bother to mention Bush in the process. If it goes poorly, the new administration will get the blame and shift as much of it to President Bush as can be shifted. That’s just how politics works.
The question now is, what will Obama do to improve the situation? Thus far, other than in broad generalities, he hasn’t really said anything of substance regarding what actions he might take and no-one in his administration seems to be talking either. This leaves us having to guess what he might do based upon his actions thus far. What amazes me, in the absence of any clear articulation of his plans, is that so many people that I talk to are unwaveringly convinced that Obama has a magic bullet in his pocket and is just waiting until after inauguration day to pull it out. Unfortunately, I have never been a good magician’s assistant and must point out that no magic bullet exists and that any hinting to the contrary is just smoke and mirrors. Fixing the housing market and the economy will take wisdom, leadership, fiscal responsibility, hard work, time and patience.
Thus far, President Obama has failed to display many of these traits. The inauguration is an example. Throwing the most expensive and lavish inauguration celebration in the history of this county while in the middle of a national economic crisis demonstrates neither fiscal responsibility nor leadership. In fact, it is an insult to the millions of Americans who are losing their business, jobs and homes. President Obama may be capable of great things. Only time will tell. Still, if he has any hope of restoring the vibrant housing market and economy of the United States, he will have to stop pretending to be a rock star and start being a leader.
Whatever your opinion of President Obama might be, it is an undeniable fact that millions upon millions of people worldwide have become convinced that he can cure what ails us. But can he?
As of this writing, President Bush is still in office and President-Elect Obama is about to be sworn in. Interest rates are the lowest I will probably ever see in my lifetime, buyers are busily buying homes, homeowners who have equity in their homes are quickly refinancing and sellers who were hopelessly attempting to sell homes that would not sell a few months ago are now successfully selling their homes in short sales and moving on. The system is far from healthy and there is much left to do. But, in spite of the concerns expressed by many including me, the underlying support for the market that has been provided by the federal government’s purchase of mortgage paper has helped get things moving again.
Those decisions were made during the previous administration and will not be fully implemented until well into the new one. If it goes well, President Obama will get the credit for work done in President Bush’s term and probably won’t bother to mention Bush in the process. If it goes poorly, the new administration will get the blame and shift as much of it to President Bush as can be shifted. That’s just how politics works.
The question now is, what will Obama do to improve the situation? Thus far, other than in broad generalities, he hasn’t really said anything of substance regarding what actions he might take and no-one in his administration seems to be talking either. This leaves us having to guess what he might do based upon his actions thus far. What amazes me, in the absence of any clear articulation of his plans, is that so many people that I talk to are unwaveringly convinced that Obama has a magic bullet in his pocket and is just waiting until after inauguration day to pull it out. Unfortunately, I have never been a good magician’s assistant and must point out that no magic bullet exists and that any hinting to the contrary is just smoke and mirrors. Fixing the housing market and the economy will take wisdom, leadership, fiscal responsibility, hard work, time and patience.
Thus far, President Obama has failed to display many of these traits. The inauguration is an example. Throwing the most expensive and lavish inauguration celebration in the history of this county while in the middle of a national economic crisis demonstrates neither fiscal responsibility nor leadership. In fact, it is an insult to the millions of Americans who are losing their business, jobs and homes. President Obama may be capable of great things. Only time will tell. Still, if he has any hope of restoring the vibrant housing market and economy of the United States, he will have to stop pretending to be a rock star and start being a leader.
Should you fire your agent when he sets boundaries?
By Joel Persinger
For as long as I can remember, and I started in the real estate business almost 20 years ago, consumers have felt that real estate agents should be available at a moment’s notice, 24 hours per day and 7 days per week. This unfortunate and unrealistic expectation was actually propagated by real estate people. In fact, when I started in the business, my broker at the time admonished me on this very subject just five minutes after I joined his office. “Joel,” he said, “If you’re going to survive in this business, you must make certain that you are always available to your clients at any time of day.” I thought he was insane! But, he was the broker and I was new. So, I made myself available 24 hours a day, seven days a week. It almost killed me.
19 years and at least a thousand gray hairs later, I am the broker and I am routinely caught admonishing my agents NOT to be available 24 hours a day, 7 days a week. Those thumping sounds you hear are all the old school brokers crashing to the carpet having fainted from shock after readying this article. Many of the old school folks believe that a real estate agent must be available to jump every time a client blinks in their direction. Consequently, consumers expect what the agents have been foolish enough to deliver: constant availability.
Not long ago, I ran into an agent who told me that he NEVER turned off his cell phone. Furthermore, he proudly announced that he answered it even if his clients called in the middle of the night. “I had a customer call me at 1AM the other day,” he said, “and I picked it right up.” When I questioned the wisdom of such a policy, his wife, who was also a real estate agent, began to lament the fact that her husband would never consent to going on vacation unless the vacation spot had good cell coverage.” Now, I ask you; would you live like that?
I have an agent who recently joined my office and I quickly found that he suffered from the same backwards point of view. He allowed his clients to control his schedule to the point that he didn’t have a life outside of real estate. I urged him to set some boundaries by establishing business hours during the week, take at least one day off every week and meet with clients in the evenings or on weekends only by prior appointment. No sooner had he begun to follow my advice then one of his clients began to complain. The end result was that the client fired him and started working with another agent who promised to be available 24/7.
I submit to you that anyone who wishes to achieve a level of professionalism in any industry must possess knowledge, patience, honesty, integrity, strength of character and discipline. The practice of real estate is no different. Therefore, if the agent you work with does not have one of these basic qualities, such as the discipline to manage his own schedule, then he may not be the best person to work on your transaction. Likewise, if your agent has let you run him ragged and is now in the process of growing in his character by establishing disciplined boundaries in his business, firing him could be a grave mistake. You might be firing a newly established professional in order to hire an amateur. An agent who is organized and disciplined about his schedule is an agent who will likely be organized and disciplined in his approach to providing for your needs. To me, that sounds like a winning strategy.
For as long as I can remember, and I started in the real estate business almost 20 years ago, consumers have felt that real estate agents should be available at a moment’s notice, 24 hours per day and 7 days per week. This unfortunate and unrealistic expectation was actually propagated by real estate people. In fact, when I started in the business, my broker at the time admonished me on this very subject just five minutes after I joined his office. “Joel,” he said, “If you’re going to survive in this business, you must make certain that you are always available to your clients at any time of day.” I thought he was insane! But, he was the broker and I was new. So, I made myself available 24 hours a day, seven days a week. It almost killed me.
19 years and at least a thousand gray hairs later, I am the broker and I am routinely caught admonishing my agents NOT to be available 24 hours a day, 7 days a week. Those thumping sounds you hear are all the old school brokers crashing to the carpet having fainted from shock after readying this article. Many of the old school folks believe that a real estate agent must be available to jump every time a client blinks in their direction. Consequently, consumers expect what the agents have been foolish enough to deliver: constant availability.
Not long ago, I ran into an agent who told me that he NEVER turned off his cell phone. Furthermore, he proudly announced that he answered it even if his clients called in the middle of the night. “I had a customer call me at 1AM the other day,” he said, “and I picked it right up.” When I questioned the wisdom of such a policy, his wife, who was also a real estate agent, began to lament the fact that her husband would never consent to going on vacation unless the vacation spot had good cell coverage.” Now, I ask you; would you live like that?
I have an agent who recently joined my office and I quickly found that he suffered from the same backwards point of view. He allowed his clients to control his schedule to the point that he didn’t have a life outside of real estate. I urged him to set some boundaries by establishing business hours during the week, take at least one day off every week and meet with clients in the evenings or on weekends only by prior appointment. No sooner had he begun to follow my advice then one of his clients began to complain. The end result was that the client fired him and started working with another agent who promised to be available 24/7.
I submit to you that anyone who wishes to achieve a level of professionalism in any industry must possess knowledge, patience, honesty, integrity, strength of character and discipline. The practice of real estate is no different. Therefore, if the agent you work with does not have one of these basic qualities, such as the discipline to manage his own schedule, then he may not be the best person to work on your transaction. Likewise, if your agent has let you run him ragged and is now in the process of growing in his character by establishing disciplined boundaries in his business, firing him could be a grave mistake. You might be firing a newly established professional in order to hire an amateur. An agent who is organized and disciplined about his schedule is an agent who will likely be organized and disciplined in his approach to providing for your needs. To me, that sounds like a winning strategy.
Thursday, January 8, 2009
Is now the right time to buy?
By Joel Persinger
YourRealEstateDude.com
I’ve been asked the age old “timing” question over and over again for many years. Lately, the question has been, “Is now the right time to buy.” The general answer is quite simply, “Yes.” However, there are some specific things that buyers should consider before getting started. Here is a short list:
How much money can you spent? This gets into the “B” word that nobody likes. In order to set yourself up for success, you must have a budget. If you don’t have one, get one. If you don’t know how to put together a budget, I strongly suggest that you take a class on budgeting and have a working, functional family budget before you start house shopping.
What kind of loan should you get? Lending is as individual as clothing. One size does not fit all. Each loan must be tailored to the particular needs of the borrower. Therefore, the first consideration is not the loan, but the skill, experience and integrity of the Loan Officer and the lending company. If you use a Loan Officer who is lacking in any of these areas, you may find yourself getting a loan which does not properly fit your needs.
Once you have found a good Loan Officer, you should explore the various loan products that are available to you based upon your credit score, down payment amount, debt to income ratio and other factors. Then you can select a loan which will help you accomplish your goal without putting you at risk of losing everything a few months or years down the road.
What type of property should be your focus? First, you should consider my grandfather’s old rule, “Buy a home that you can own, not a house that will end up owning you.” If buying your dream home is going to leave you with more month than money, put your dream back in your pocket and buy a home that you can afford. If buying that dream home will require you to get a crazy, lunatic, risky loan, then STOP! Some things are best not forced. Remember, it is far better to be content in a small house, than to be miserable in a big one.
Having figured out what you can actually own, you should decide what kinds of homes will be easier for you to buy. In this market, most of the homes that are for sale are either bank owned properties or pre-foreclosure properties (short sales). Bank owned properties will generally close escrow sooner and be less hassle to buy. However, they often have multiple offers on them as a result. Short sales are more difficult to buy and require much more patience.
Either way, the same is true about Realtors as is about lenders. If you start off by selecting the right Realtor, your buying experience will go much more smoothly. In this market, that means hiring a FULL TIME, experienced Realtor who understands the buying process as it applies to a foreclosure marketplace. Such a Realtor must be professional in word and deed and have extraordinary patience.
So, getting back to the question at hand, the answer is, “Yes.” It is the right time to buy. However, in order to succeed, you must first understand your own finances. Then you must put together a team of professionals who can guide you through the process. And finally, you MUST control your own emotions and desires. A very wise man once prayed, “Lord, give me what I need and not just what I want.” If you take this approach, house hunting will be a great experience!
YourRealEstateDude.com
I’ve been asked the age old “timing” question over and over again for many years. Lately, the question has been, “Is now the right time to buy.” The general answer is quite simply, “Yes.” However, there are some specific things that buyers should consider before getting started. Here is a short list:
How much money can you spent? This gets into the “B” word that nobody likes. In order to set yourself up for success, you must have a budget. If you don’t have one, get one. If you don’t know how to put together a budget, I strongly suggest that you take a class on budgeting and have a working, functional family budget before you start house shopping.
What kind of loan should you get? Lending is as individual as clothing. One size does not fit all. Each loan must be tailored to the particular needs of the borrower. Therefore, the first consideration is not the loan, but the skill, experience and integrity of the Loan Officer and the lending company. If you use a Loan Officer who is lacking in any of these areas, you may find yourself getting a loan which does not properly fit your needs.
Once you have found a good Loan Officer, you should explore the various loan products that are available to you based upon your credit score, down payment amount, debt to income ratio and other factors. Then you can select a loan which will help you accomplish your goal without putting you at risk of losing everything a few months or years down the road.
What type of property should be your focus? First, you should consider my grandfather’s old rule, “Buy a home that you can own, not a house that will end up owning you.” If buying your dream home is going to leave you with more month than money, put your dream back in your pocket and buy a home that you can afford. If buying that dream home will require you to get a crazy, lunatic, risky loan, then STOP! Some things are best not forced. Remember, it is far better to be content in a small house, than to be miserable in a big one.
Having figured out what you can actually own, you should decide what kinds of homes will be easier for you to buy. In this market, most of the homes that are for sale are either bank owned properties or pre-foreclosure properties (short sales). Bank owned properties will generally close escrow sooner and be less hassle to buy. However, they often have multiple offers on them as a result. Short sales are more difficult to buy and require much more patience.
Either way, the same is true about Realtors as is about lenders. If you start off by selecting the right Realtor, your buying experience will go much more smoothly. In this market, that means hiring a FULL TIME, experienced Realtor who understands the buying process as it applies to a foreclosure marketplace. Such a Realtor must be professional in word and deed and have extraordinary patience.
So, getting back to the question at hand, the answer is, “Yes.” It is the right time to buy. However, in order to succeed, you must first understand your own finances. Then you must put together a team of professionals who can guide you through the process. And finally, you MUST control your own emotions and desires. A very wise man once prayed, “Lord, give me what I need and not just what I want.” If you take this approach, house hunting will be a great experience!
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