By Joel Persinger
Although we have relatively constant weather in San Diego County, that is not the case in many other parts of the country where there is an old saying, “If you don’t like the weather, wait five minutes.” Where my younger sister lives in Florida, this is most certainly true. One minute it’s raining and five minutes later there isn’t a cloud in the sky.
While you might think it far-fetched to use a weather analogy to describe the current home lending market, given our current market dynamics, we could easily adopt a similar saying such as, “If you don’t like the current loan market, wait five minutes.”
Just last Wednesday, my entire staff was present at a meeting presented by an expert in government loans such as those offered by VA, FHA and CalHFA. It was quite an eye-opener for an old real estate dude like me. Government loans have been out of the picture in San Diego County for more than a decade simply because there were better options to choose from. The government loans were available during that time. They just weren’t as attractive as the many non-government programs that were around. However, with the recent tightening of the non-government lending market, “Govi” loans have begun to shine a little brighter.
As the meeting progressed you could have read the shock on everyone’s faces as we discovered that 100% financing was still available using government loans such as CalHFA. For all practical purposes, 100% loans had become a thing of the past among non-government lenders. As a result, we couldn’t get over the fact that they were still possible using government loans. Well… that was on Wednesday. By Saturday CalHFA had announced that the rules had changed. “If you don’t like the weather…”
While many people like to watch the stock market, it is the bond market which has the most immediate effect upon home loan interest rates. Every day my email is jammed with hundreds of messages about the lending market in general: at least six or seven of which are short messages about the bond market which read like this, “The bond market is up by ___ basis points”, followed later in the day by, “The bond market is currently down by ____ basis points”, and so on. Each one of these six or seven daily shifts in the market effects the mortgage rates for that day. What a roller coaster. “You say you don’t like the weather? Just wait.”
So, with loan programs and interest rates that are moving targets at best, how is a borrower supposed to count on anything? It isn’t easy. One thing’s for sure, borrowers who chose to work with knowledgeable, experienced loan officers who have their ears to the ground and their noses to the grindstone are far better off. Now is not the time to be working with amateurs.
Monday, March 24, 2008
Whom does your real estate agent represent?
By Joel Persinger
With the rapid expansion of the foreclosure and pre-foreclosure markets, many real estate professionals have forgotten whom they represent, particularly when the agent represents a seller who is in the throws of a foreclosure. While that agent would most likely have been hired by the seller, he or she would also be required to deal with the lender. The lender would have a financial interest in the home and could stand to lose money if the home was sold for less than what was owed on it. It has been my experience that many agents in this situation cannot seem to figure out whether they represent the seller or the lender. Indeed, I have found that some brokerage firms have no more clue as to whom they represent in these cases.
Just recently, I wrote an offer for a client who wanted to purchase a property which was in pre-foreclosure. The seller had missed some payments. But, the lender had not yet begun the full process of foreclosing on the property. My client was a sophisticated buyer and understood the process of buying such properties. I called the seller’s agent and explained the situation, outlined my client’s intended approach and asked if the agent and the seller were willing to move forward. The agent got back to me later that same day and told me that he had explained the situation to his client and that the client wanted to move forward with the deal. The next day my client tendered an offer. As previously agreed, the offer was low, but only for the purpose of beginning the negotiation with the lender.
Four days went by without a call from the seller’s agent acknowledging that he had received the offer. So, I called him to follow up. He told me that he had not presented the offer and did not intent to. I asked why. He said he did not feel that he was doing what was right by the lender. I asked him whom he represented. With an incredulous tone he replied, “The seller.” I answered, “Then why are you worried about the lender? Shouldn’t you be more concerned with getting your client out from under that house?” He scoffed at me, and ended the conversation. My client did not buy the house. In fact, he has elected to wait until it goes into foreclosure and buy it directly from the lender. In the meantime, it’s still on the market, unsold. The lender has begun the foreclosure process and the seller is in more hot water than ever before. This seller’s agent did not understand whom he represented. Does yours? My advice is, make sure your agent is looking after you before you hire him. Otherwise, you could end up in the same boat as the gentleman in this story.
With the rapid expansion of the foreclosure and pre-foreclosure markets, many real estate professionals have forgotten whom they represent, particularly when the agent represents a seller who is in the throws of a foreclosure. While that agent would most likely have been hired by the seller, he or she would also be required to deal with the lender. The lender would have a financial interest in the home and could stand to lose money if the home was sold for less than what was owed on it. It has been my experience that many agents in this situation cannot seem to figure out whether they represent the seller or the lender. Indeed, I have found that some brokerage firms have no more clue as to whom they represent in these cases.
Just recently, I wrote an offer for a client who wanted to purchase a property which was in pre-foreclosure. The seller had missed some payments. But, the lender had not yet begun the full process of foreclosing on the property. My client was a sophisticated buyer and understood the process of buying such properties. I called the seller’s agent and explained the situation, outlined my client’s intended approach and asked if the agent and the seller were willing to move forward. The agent got back to me later that same day and told me that he had explained the situation to his client and that the client wanted to move forward with the deal. The next day my client tendered an offer. As previously agreed, the offer was low, but only for the purpose of beginning the negotiation with the lender.
Four days went by without a call from the seller’s agent acknowledging that he had received the offer. So, I called him to follow up. He told me that he had not presented the offer and did not intent to. I asked why. He said he did not feel that he was doing what was right by the lender. I asked him whom he represented. With an incredulous tone he replied, “The seller.” I answered, “Then why are you worried about the lender? Shouldn’t you be more concerned with getting your client out from under that house?” He scoffed at me, and ended the conversation. My client did not buy the house. In fact, he has elected to wait until it goes into foreclosure and buy it directly from the lender. In the meantime, it’s still on the market, unsold. The lender has begun the foreclosure process and the seller is in more hot water than ever before. This seller’s agent did not understand whom he represented. Does yours? My advice is, make sure your agent is looking after you before you hire him. Otherwise, you could end up in the same boat as the gentleman in this story.
Saturday, March 1, 2008
Is now a good time to buy?
By Joel Persinger
This past Friday I had lunch with an investor friend of mine who regularly buys distressed properties. We were having a meeting to discuss the work my agents are doing in finding such properties so that his investment group can buy them, thereby helping our clients get out of there financial binds. During our conversation some interesting subjects came up. I thought you might find one of them interesting.
The investor was telling me about some of the networking groups he had been part of over the years. He was helping me identify some potential business opportunities. Right in the middle of a sentence he paused, looked at me with a puzzled expression on his face and said, “I can’t believe how much some of these groups have shrunk in the last couple of years. All those people who were so excited about buying and selling a few years ago are gone.” I asked, “What about you?” He said, “I’m still in. I’m glad their gone. It makes things easier for me.”
When I was a boy my grandfather, a long time real estate investor and broker, asked me what I thought would happen if my grandmother’s favorite department store had a sale. I replied, “She’d be there all day.” Then he asked me what I thought would happen if that same store raised its prices by half. I said, “She’d never go.” With a giant smile upon his face, he exclaimed, “Exactly! And yet, people do precisely the opposite when it comes to real estate. Remember that, Joel. That little fact about human nature will serve you well some day.”
My investor friend was expressing amazement at witnessing the same phenomenon that my grandfather had taught me about forty years earlier. When prices go up, people scratch and fight for the chance to buy real estate. When prices go down, they all sit back, holding tightly to their wallets and wait for prices to start going up again so they will feel safe enough to buy. If you take a moment to apply that way of thinking to the supermarket or department store as my grandfather did, you will quickly recognize the insanity of that approach.
Whenever I point this out, many people say, “But, you can’t find any deals in this market!” You should know that I’ve been hearing that same statement for my entire career. Indeed, I heard it a number of times from those who were watching my grandfather make money in troubled times forty years ago, while at the same time denying that it was possible for him to do so. Even my investor friend said it at lunch the other day. But, unlike many others he didn’t forget the most important part of the statement. He said, “You can’t find any deals in this market, unless you know how.”
This brings me back to another lesson my grandfather drilled into my head from the time I was six years old. Over and over he would remind me, “Joel, you don’t have to be smart. Just hang around smart people.” So, if people are telling you that finding a deal in today’s real estate market can’t be done, you are hanging around the wrong people. I encourage you to take steps toward meeting people who know where the deals can be found and how to find them. Because, the fact is that now is the time to buy!
This past Friday I had lunch with an investor friend of mine who regularly buys distressed properties. We were having a meeting to discuss the work my agents are doing in finding such properties so that his investment group can buy them, thereby helping our clients get out of there financial binds. During our conversation some interesting subjects came up. I thought you might find one of them interesting.
The investor was telling me about some of the networking groups he had been part of over the years. He was helping me identify some potential business opportunities. Right in the middle of a sentence he paused, looked at me with a puzzled expression on his face and said, “I can’t believe how much some of these groups have shrunk in the last couple of years. All those people who were so excited about buying and selling a few years ago are gone.” I asked, “What about you?” He said, “I’m still in. I’m glad their gone. It makes things easier for me.”
When I was a boy my grandfather, a long time real estate investor and broker, asked me what I thought would happen if my grandmother’s favorite department store had a sale. I replied, “She’d be there all day.” Then he asked me what I thought would happen if that same store raised its prices by half. I said, “She’d never go.” With a giant smile upon his face, he exclaimed, “Exactly! And yet, people do precisely the opposite when it comes to real estate. Remember that, Joel. That little fact about human nature will serve you well some day.”
My investor friend was expressing amazement at witnessing the same phenomenon that my grandfather had taught me about forty years earlier. When prices go up, people scratch and fight for the chance to buy real estate. When prices go down, they all sit back, holding tightly to their wallets and wait for prices to start going up again so they will feel safe enough to buy. If you take a moment to apply that way of thinking to the supermarket or department store as my grandfather did, you will quickly recognize the insanity of that approach.
Whenever I point this out, many people say, “But, you can’t find any deals in this market!” You should know that I’ve been hearing that same statement for my entire career. Indeed, I heard it a number of times from those who were watching my grandfather make money in troubled times forty years ago, while at the same time denying that it was possible for him to do so. Even my investor friend said it at lunch the other day. But, unlike many others he didn’t forget the most important part of the statement. He said, “You can’t find any deals in this market, unless you know how.”
This brings me back to another lesson my grandfather drilled into my head from the time I was six years old. Over and over he would remind me, “Joel, you don’t have to be smart. Just hang around smart people.” So, if people are telling you that finding a deal in today’s real estate market can’t be done, you are hanging around the wrong people. I encourage you to take steps toward meeting people who know where the deals can be found and how to find them. Because, the fact is that now is the time to buy!
Thursday, February 28, 2008
When Will The Market Get Better?
By Joel Persinger
At least three or for times a week someone will take me aside and ask me, “When will the market get better?” Of course I always find myself asking, “What do you mean by better?” and the answer is almost always equivalent to, “Back the way it was when things were good.” “Good” is the buzz word for the time a few years ago when prices were sky rocking upward and houses were selling so fast that real estate professionals could hardly hang up the “For Sale” signs before the properties were sold. Unfortunately, these good times were not normal and, as anyone who reads the paper can tell you, the prognosticators predict that such a market is not likely to return any time soon.
This very fact has brought about a burning in the bellies of many homeowners which is stoked by worry over declining home values and when, or even if those values will ever climb back to their previous highs. Real estate values, having experienced an unbelievably rapid increase over a short period of years, have dipped dramatically as the market has adjusted to that unprecedented, unrealistic and meteoric rise. As news persists of ever declining prices with no end in sight, more and more homeowners are starting to sweat.
Like any other market, real estate ebbs and flows. The tide comes in and the tide goes out. History has proven that it never comes in without later going out and it never goes out with later coming back in. The tide came in and stayed in for quite a while. Many people enjoyed swimming in the warm water and some, overcome by the euphoria of the times, foolishly braved those good days without sunscreen. Somehow, the tide staying in as long as it did protected them from getting burned. But once the tide went out, those who could no longer stay in the water started getting pretty hot and many have gotten themselves a might bad burn. It will take quite a long time for the pain caused by the changing tide to pass. But, pass it will and the tide will come in again. However, in the meantime this tide has left thousands of foreclosures and soon to be foreclosures behind on the sand.
When a market is flooded with distressed properties such as foreclosures, the owners of those properties sell them at a discount in order to move them quickly and thereby cut their losses. The result is that the values of surrounding properties which are not distressed are driven down as well. It will take many months for all those properties to be foreclosed upon and resold. In that time, banks will price them very low and continue to reduce the asking prices in order to get them sold fast. That will cause home values to continue their decline as this bloated inventory of distressed properties are reintroduced to the market.
So, how long will it take? Truthfully, no one really knows for sure. Most predictions I have heard have estimated that our current market will stick around for another year or two and that it may take eight to ten years until prices reach their previous highs. The only thing I know for certain is what anyone who has ever watched the tide at the sea shore can tell you. When the tide stays in a long time, it tends to stay out a long time as well. But, give it time. It will be back!
At least three or for times a week someone will take me aside and ask me, “When will the market get better?” Of course I always find myself asking, “What do you mean by better?” and the answer is almost always equivalent to, “Back the way it was when things were good.” “Good” is the buzz word for the time a few years ago when prices were sky rocking upward and houses were selling so fast that real estate professionals could hardly hang up the “For Sale” signs before the properties were sold. Unfortunately, these good times were not normal and, as anyone who reads the paper can tell you, the prognosticators predict that such a market is not likely to return any time soon.
This very fact has brought about a burning in the bellies of many homeowners which is stoked by worry over declining home values and when, or even if those values will ever climb back to their previous highs. Real estate values, having experienced an unbelievably rapid increase over a short period of years, have dipped dramatically as the market has adjusted to that unprecedented, unrealistic and meteoric rise. As news persists of ever declining prices with no end in sight, more and more homeowners are starting to sweat.
Like any other market, real estate ebbs and flows. The tide comes in and the tide goes out. History has proven that it never comes in without later going out and it never goes out with later coming back in. The tide came in and stayed in for quite a while. Many people enjoyed swimming in the warm water and some, overcome by the euphoria of the times, foolishly braved those good days without sunscreen. Somehow, the tide staying in as long as it did protected them from getting burned. But once the tide went out, those who could no longer stay in the water started getting pretty hot and many have gotten themselves a might bad burn. It will take quite a long time for the pain caused by the changing tide to pass. But, pass it will and the tide will come in again. However, in the meantime this tide has left thousands of foreclosures and soon to be foreclosures behind on the sand.
When a market is flooded with distressed properties such as foreclosures, the owners of those properties sell them at a discount in order to move them quickly and thereby cut their losses. The result is that the values of surrounding properties which are not distressed are driven down as well. It will take many months for all those properties to be foreclosed upon and resold. In that time, banks will price them very low and continue to reduce the asking prices in order to get them sold fast. That will cause home values to continue their decline as this bloated inventory of distressed properties are reintroduced to the market.
So, how long will it take? Truthfully, no one really knows for sure. Most predictions I have heard have estimated that our current market will stick around for another year or two and that it may take eight to ten years until prices reach their previous highs. The only thing I know for certain is what anyone who has ever watched the tide at the sea shore can tell you. When the tide stays in a long time, it tends to stay out a long time as well. But, give it time. It will be back!
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