Corporate Housing or Buying a House?

About a house. . .

Okay, okay, I know that’s not really unusual in my line of business.  But it was a house he saw online at Yahoo! Real Estate in the foreclosure section.  Those “listings” aren’t real.  If the properties actually were for sale, then they would not be at the prices shown.  It’s what they call in advertising a false leader: something not real that gets you in the door to get you to buy another product.  In this case it’s Realty Trac trying to get you to buy their services to get useless information.

So, like this house. .. .

That like says $300,000 on it. . .

Is like really for sale. . .

At like - $750,000.

Let’s be real, houses for sale at $300,000 would be bought by a real estate agent and never make it to the market.  They could turn it around and sell it the next day for $600,000 and make a 100% profit in 24 hours and the new buyer would still be getting a good deal.  The day of the $300,000 home in the eastern part of the San Fernando Valley is gone.  Realty Trac is doing us all a great disservice.  They are telling buyers that they can get what does not exist.

And like that home. . .

Has like a NOD. . .

But like it’s not a short sale. . .

’cause like the owners have like equity. . .

The $300,000, as you can see in the fine print on Yahoo! Real Estate, is the estimated value of the first mortgage.  They may have a second or even third mortgage.  Regardless, the market is not so bad that we are having a 60% off sale.  When is someone going to do something about these deceptive practices?  I can warn my clients all day long, but when someone is promising them a fantasy, they don’t like to work with reality.  And like it makes me go like – valley!

Where to begin?

Posted in Buying, Selling, Investing, California Real Estate at 2:13 pm by Cynthia Holt

I came into the office to catch up on some paper work and prepare for the usual weekend rush.  I checked my emails only to discover that the Department of Justice has declared war on Real Estate Agents.  They have created an entire website dedicated to removing “Barriers to a More Competitive Brokerage Market”

More competitive?  Have they been to California?  Where 2% of the adult population holds a real estate license?  Where too much competition has lead to fraud and scams?

The main emphasis of this website is to encourage people to do it yourself.  As I’ve said before, there will always be those of us who need the challenge of at least trying to do it themselves.  Some of us still bake our own bread and do our own taxes.  But real estate transactions, especially in California, have become so complicated and risky that it makes sense for most people to have someone trained in the industry to handle the marketing and sale of homes.  Add into the mix this frozen market and it’s a recipe for disaster.

This DOJ website is directed towards sellers.  They completely ignore the other half, the buyers.  After all, they are the ones who bring the money to the table.  They need the agents to negotiate the best price.  It’s not the commission price that concerns them.  It’s the size of that new mortgage.

What we need is stronger requirements for agents.  At the beginning of this month, California took the first step towards tightening up those requirements.  For many of us in the business we want even tighter restrictions.  Many blame the new people in the business for a lot of the complaints, but I blame the old timers who are too lazy or greedy to give great service to their clients.  It’s time to shut them down and bring back some pride in the industry.

http://www.usdoj.gov/atr/public/real_estate/index.htm

Disturbance of the Peace

I know that many of you out there understand what I’ve just gone through.  I’ve had workmen in my home for three days for a simple repair that should have taken three hours.  I normally write this blog from my home.  But with all the disruption and racket, I just couldn’t get anything written.  The repair is still not right.  But the workmen are gone and there is peace and quiet in my home once again.  So let the writing begin. . .

We know that consumer confidence is down and that much of it has to do with the “credit crisis”.  Lenders made loans to people they knew couldn’t make the payments once the interest rates changed or as soon as they had to make full payments and not interest only payments.  It was a short-sighted gamble to make money off of loan fees.  Those loans defaulted and lenders lost a lot of money.  So, the pendulum has swung the other direction and it is harder than ever to qualify for a loan.

Owners have caught on and they are having a credit crisis of their own.  They will only look at offers from buyers that have been not only pre-qualified, but can show proof of funds for the down payment and expenses.  It doesn’t matter how good the offer looks on paper, the new focus is on proof.  The sellers are crying – “Show me the money”.

Buyers don’t like going to lenders.  They are afraid they will destroy their dreams.  But in order to make your dreams a reality, you have to work with a bank, savings and loan, mortgage company, or loan broker.  They are not the enemy.  A good one will fight for you.  They are in your corner.  Shop around and find someone who is a dream builder, someone who makes wishes come true.  And then you and your lender will show them the money!

H.R. 3915, the Mortgage Reform and Anti-Predatory Lending Act of 2007 was passed in the House of Representatives by a vote of 291-127.  Mortgage Brokers hate it.  I consider it some of the best news for consumers in years.  The LA Times said in its article today:

The bill would bar a lender from making a loan unless the borrower had a reasonable ability to repay it, would make clear that federal standards apply to all lenders, including mortgage brokers, and would require licensing and registration for brokers and bank loan officers.

Sounds like common sense, doesn’t it?  Wouldn’t you make loans only to those you think can repay?  Well obviously didn’t.  That’s why so many people are defaulting on their loans.  The Mortgage Bankers Association is against it saying that

. . .this bill will limit credit availability and options for thousands of Americans who want to grab their share of the American dream of homeownership.

What it does is limit the mortgage broker’s ability to make money from false claims.  If a borrower can’t make his or her mortgage payments then they really aren’t buying a home.  The lender reaction to this credit crisis is to make the standards so stringent that it has become almost impossible for anyone, even those with good credit and money in the bank to buy.  They have overreacted to a situation they created.  This legislation will bring back common sense and some balance to the chaos we have now.

Working on the Holt Real Estate Dictionary www.cynthiaholt.com/dictionary has been quite the adventure.  I wanted to create something different and I wanted to include histories of the words mostly because I have often wondered where they have come from and what, if any, were their original meanings.  The first surprise was the word commission:

The word comes to us from the Latin, through the French and originally meant trust. For most of us the word commission today only means the fee we earn. But it really all begins with trust. I am a commissioned agent, one who is entrusted to conduct business on behalf of someone else. Someone who places their trust in me.

The fee is actually a percentage of the business I conduct. The first commissioned agents were the temple priests and priestesses of the ancient world. Part of their duties was to oversee business meetings, contracts, and transactions. Their fee was 10%, which is why we tithe 10% to our churches. The money was used to maintain the temple, its grounds, and house, clothe, and feed the people who worked there. They also oversaw warehouses and held documents in trust. It was a scared duty to be the eyes and ears of the gods they worshiped.

Mine may not be a sacred duty, but agency is a responsibility. Thinking of a commission as a role of trust and not as money in my pocket gives me pause to think. I may not have a temple to maintain, but I do have an obligation to earn and maintain the trust my clients place in me. May I strive each and everyday to do just that.

More about interest rates

All I’ve heard and read about for the last couple of days are the interest rates. Agents, buyers, and sellers are all anxious to get back to “business as usual”. The agents know that changing the interest rates isn’t going to help things. In fact, many blame interest rates that were too low for too long. Others, myself included, blame boiler room mortgage houses. They have no reason to create, and then sell, loans that are viable. They were not and are not accountable to anyone. It’s going to take governmental regulation to change that.

My crystal ball says there are lawsuits in our future – mass tort litigation. Let’s start it now and get it over with. Both the homeowners and the investors on Wall Street will probably try it. But I think only the investors are going to have any chance of getting back some of their money.

Prime Cut

As expected, the Federal Reserve Board cut short-term interest rates; this time by one-half a point.  CNN heralds this as relief for “some beleaguered home borrowers who are set to see monthly payments on adjustable rate mortgages rise later this year”.  The New York Times reports that “the Fed’s move could mean lower borrowing costs on major loans like mortgages”.  But as pointed out by Bloomberg news, what we need to be watching is the Libor. (London Inter-Bank Rate)

The Feds cut interest rates not to directly alter the mortgage market, but to address the fallout surrounding a failing market: lay-offs by mortgage lenders, the down turn in new construction, etc.  The buying and selling of real estate in this country affects more that just the buyer, the seller, and the agents involved.  It is this constant turn over in property that keeps escrow and title companies in business.  As well as lenders, inspectors, makers of carpet and paint, and all those home renovation warehouse stores.  It also is big bucks for plumbers, electricians, landscapers, and carpenters who work on all these home improvements.

Mortgage rates, however, especially variable and adjusted rates, are based on the bond market and the Libor.  The Prime Rate may affect the bond market and the Libor, but not necessarily.  I have to assume that one of the reasons the Fed made a half point as opposed to a quarter point cut was to affect the bond market and influence the Libor.  It’s still a wait and see game.

Paint the door red

There’s an old superstition in real estate that when a property doesn’t sell - paint the door red.  I never have found out where the belief came from, but I’ve known agents who swear by it.  In difficult markets, we often turn to superstitions and look for the magic formula.  Agents who use the red door concept say that they use it to create an invitation into the home.  It’s what we refer to in the business as a “spot of color” – a.k.a. a focal point.  The focus becomes on the door, the entryway into the home.  People are intrigued and it creates a curiosity to explore the home.  It is the ultimate in curb appeal.  Most homes won’t sell if the buyers never get to see the inside.  If the front doesn’t look inviting, they will just drive on past.  So, find a way to make your home looking inviting.  Give it some color.  Cut back the shrubs and let them see the front door.  Rake those leaves.  Mow the lawn.  And if all else fails, paint the door red.

Giving Back

For many of us in Real Estate we feel a sense of duty to our community.  We feel that is not only our responsibility to know about our community, but to give back to it.

Yesterday morning my office presented a check to the Burbank Association of Realtors in the amount of $5,000 to be used for scholarships.  Both the association and Dilbeck have charitable foundations.

Sold Down The River

It’s an old story, one I’ve heard too many times before.  A homeowner receives a letter saying that their mortgage has been bought by a company they’ve never heard of before.  Payment coupons may or may not arrive prior to the next due date on their mortgage.  There may be confusion over payments because the new lender hasn’t provided the necessary information to make payments.  A few phone calls later and the homeowner thinks everything is fine. Then a letter may arrive saying that they don’t have proof of insurance.  A few more phone calls, a certified letter, and maybe a fax or two later and the homeowner again believes that everything is okay.

But it doesn’t end there.  Payments get lost or late fees are applied to on-time payments.  A bill for an insurance policy that was never ordered by the homeowner will arrive with a payment demand.  It is the stuff of nightmares.

If this is happening to you, you’re not alone.  You may want to get a financial councilor to help negotiate with the lender; you may even need an attorney.  For others, refinancing is the answer.  With adjustable rates thrown into the mix, this can result in an insurmountable predicament.  In the worse case scenarios, homeowners will have to sell their homes.

If your loan is sold be vigilant.  Keep records of all communications with the new lender.  Not all lenders are predators, but if your home is being attacked – defend yourselves.  You worked hard to purchase your home.  Don’t let unscrupulous businesses take it away from you.

If you have Litton Loan Services, please see this website  http://www.lieffcabraser.com/loan-servicing.htm

It's that time.

I guess it’s the Mom in me; I don’t like to see my clients put all their investment eggs in one basket. Everyone should have a diversified portfolio, but in light of the recent changes in the mortgage lending market, a retirement plan is a must. I’m not talking about pulling out money from your IRA, Keogh, or 401k to use as a down payment; I’m talking about reserves. With the implosion of the sub-prime market, lenders are going back to their old ways. They are more nervous than ever and would like to lend money to only those who don’t need it, like in the old days. So, today’s borrower needs to show reserves, up to 4 months worth of mortgage payments (Principle, Interest, Taxes, and Insurance). Reserves are monies or liquid assets, such as a retirement plan, that will NOT be used to purchase the house. As I said, they prefer to lend money to those who don’t need it.

Opportunity Time

I think we would all agree that, at least in Southern California, this is not a hot market.  It is not a bad market; however; it’s a changing market.  Buy low, sell high – the standard investment strategy.  But most investors will tell you that they make the most money in a changing market, be it real estate, stock, bonds, or commodities.  A changing market is Opportunity Time for investors.  This is often the time when they find the real bargains.  Since most of us are not really investors of Real Estate, but home owners, we would just like to sit out a changing market.  But even if you’re not an investor, while you’re sitting on the sidelines, this is an Opportunity Time.

While on those sidelines are you sleeping?  Or are you preparing for the next hot market?  Will you be ready?

Have you pulled your credit score lately to check for errors?  Have you looked at your current mortgage and determined whether or not to refinance?  Perhaps now is the time to make some extra payments or do some remodeling?  Have you had an agent out to your property to discuss curb appeal?  Yes, there are quick fixes to make a property more appealing at the last minute, but it is more cost effective to take the time to do it yourself now.  To make your yard look better you can either pay an enormous amount to a landscaper just prior to listing the property or you can start the project now to remove debris, add a few perennials, and fertilize the lawn so that in 6 months you have a great looking yard.  Time for new carpet or flooring?  Should you replace or refinish cabinets?  And what walls are crying out for paint?  Should you invest in energy efficient heating and cooling?  Or new windows that will keep out the noise and the inclement weather?

As a buyer are you studying the markets?  Are you getting regular information sent to you about listings in a neighborhood?  The neighborhood you are currently in and the neighborhood you would like to be in?  Are you shopping for a lender?  Is there anything you can do to improve your credit score?

This doesn’t mean you can’t find a great deal during a changing market.  Often this is when the best deals appear.  But you won’t see those deals sleeping on the sidelines.  We are not moving at a rapid, insane pace.  This is the time for the turtle, not the hare.  There is breathing time right now: time to assess the market and your position in it.  This is your Opportunity Time.

A Property That Makes You Say "Wow!"

Regular readers know that I've never used this blog to talk about a property on the market. The fact that my blog is all about real estate may or may not be relevant to some of you. Nonetheless...

Once in a while, I have the opportunity to walk into a space that demands attention. And that's what happened when I walked into 13261 Venice Blvd. This newly constructed work/live/play space offers the perfect blend of contemporary detail, intelligent use of space & the little things -- like the lit outdoor shower off the bedroom -- that makes you say "Wow!"

In the spirit of full disclosure, this is not one of my listings, but it is a unique property that's well worth a visit. From the high ceilings to the poured terrazzo floors to the plasma TV and fireplace, this is simply a great space. Kudos to 78 Design Group for bringing their unique mix of contemporary style and brilliant attention to detail together to create an amazing property that some lucky person will actually get to call home!

L.A. Times -- Stuck In The Past (...and trying to stick it to me!)

I had a bizarre conversation with an L.A. Times advertising rep today. And that in itself probably wouldn't be very interesting. But the nature of the conversation underscores how difficult it can sometimes be for a real estate agent to provide a higher level of service -- even if you're deeply committed to doing so.

My conversation with this particular ad rep was about an upcoming free seminar that I've put together. The seminar is designed to help people wo want to sell their homes or investment property and minimize their capital gains tax exposure. If you've been a homeowner even for a short period of time in the Southern California real estate market, chances are that your property has appreciated considerably. I thought that putting together a panel of experts (a CPA, real estate attorney, private annuity trust expert, etc.) would be a great way to share some successful strategies designed to minimize or at least defer your capital gains tax liability when you sell your property.

I wanted to advertise this free seminar with a full-page ad in the L.A. Times Saturday Real Estate insert. When I explained to the Times ad rep what I wanted to do, they first checked with their editor and then informed me that my ad would cost almost ten times the "normal agent price" for a full-page ad -- because I wasn't using the ad to advertise my listings. And this is when our conversation became very interesting -- and very animated.

I patiently (well kinda) explained to the Times ad rep that the notion of agents paying to advertise property listings was soon to be a thing of the past. After all, homebuyers today can find property listings anywhere -- realtor.com, MLS web sites, agent web sites, broker web sites...even latimes.com (a website on which this ad rep even tried to sell me an "enhanced online listings package"). But pay to run a print ad just to show your listings? Those days are soon to be gone. It's why newspapers across America are running far less real estate print advertising today than they used to.

I went on to explain that since listings are available to everyone everywhere, and agents were no longer the "keepers of information", we had to transform ourselves to "providers of amazing service" if we were going to be successful in differentiating ourselves from the other million agents in our marketplace (see the Manifesto below for more thoughts on this concept).

One of the "value-added services" that I wanted to provide the homeowners in my market was a free seminar that wasn't designed to sell anything -- but simply to provide useful information to homeowners interested in attending. Fuhgeddaboutit. The LA Times wasn't having it -- at least not unless I wanted to pay ten times the normal ad rate for that section of the paper!

And so...my free seminar will go on as scheduled...without an ad in the L.A. Times. The seminar is entitled Tax Savings & Financial Strategies for Home Sellers, and we'll be presenting a great panel of experts on Thursday March 16, from 7 - 9PM at the Courtyard Marriott in Marina Del Rey. You can email me for further information at jon@jonstrum.com if you're interested in attending.

As for the Times? I guess they'd like to keep real estate agents as simple "listers of property" and outdated "keepers of information" so that their business reporters can periodically write articles pointing out how today's real estate commissions are simply too high. Because when an agent tries to deliver real added value to the marketplace, the L.A. Times provides him with nothing more than a 10x financial penalty to promote interest in the event -- and that's not playing fair.

My Response to Newsweek

Jane Bryant Quinn's column in this week's edition of Newsweek explains how homeowners can save money on the sale of their home by working with discount brokers, using "fee for service" brokers or even selling their home themselves.

Saving money is a good thing. But sometimes, basing a money-saving strategy on incomplete information can end up costing you a bundle (see my 6/21 post, A Very Expensive Lesson In Trying To Save Money).

In case Newsweek doesn't publish my response to Ms. Quinn's column, here it is:

Lights...Camera...Real Estate?

Real estate seems to be on everyone's mind, so it was only a matter of time before the major networks rolled out shows that were somehow centered in the real estate universe. And they have.

ABC leads the parade with Hot Properties. Think Designing Women as Manhattan realtors by way of Sex And The City.

NBC's entry in the field is Hot Property (boy, that whole 'hot property' thing must sound like a really great title!). Hot Property is about a Southern belle real estate agent in Houston who uses her charm to mask her cut-throat business antics.

Set your Tivo now...I'm not sure how long these hot properties will be with us. After all, the TV sitcom market isn't the sure-fire blockbuster that the current real estate market is. Maybe it's because in these TV shows, the realtor is the star. But when I'm working with my clients, I make sure that they are the stars.

You'll "Flip" For This

http://www.condoflip.com lets you flip your condo...even before it's built!

CAR: Home Sales Will Escalate & Prices Will Set Another Record

The Sacramento Bee reports that the California Association of Realtors has released its mid-year forecast. The association predicts the median price for an existing single-family home in our Golden State will hit $521,150 this year. That's a 16% increase over 2004's record median price of $450,990.

Meanwhile, economist Christopher Thornberg, of UCLA's Anderson Forecast, is sounding more curmudgeonly every day. "The housing market is in a bubble. At some point in time, we're going to pay for it. It may go for a year, it may go for more," he said.

Now that's stunning accuracy! "It may go for a year, it may go for more." Be sure to set your watch by this prediction.

At least the CAR forecast has changed. In October, this same group predicted that overall sales of existing homes would decline 2.5% this year. They have now changed that prediction to a 1.4% increase in sales due to long-term interest rates staying low when they were expected to rise by now.

The most interesting aspect of the CAR forecast is the methodology they use to calculate the affordability index, which they estimate will be 16% in 2005 (in other words, 16% of California households will be able to afford the median price home).

To calculate that percentage, CAR assumes all buyers make a 20% down payment and dedicate 30% of their income toward housing. Well, here in what we call "reality", actual buyer behavior is WAAAAAY different! With the growth of adjustable rate mortgages and other creative financing, most folks aren't putting down 20%...or anywhere near that. And as far as dedicating 30% of their income toward housing? Not in Los Angeles. In fact, if this one assumption were changed so that buyers were putting 40% of their income toward their monthly home loan payment, the affordability index would be more than 25%!

Aren't statistics fun? The good news, is you don't have to deal with them when you're ready to buy your home. Because every single case is a little different, I make sure that my loan consultant focuses on your individual needs...and doesn't worry about what the aggregate population is supposed to be doing. And that's when reality trumps theory and that's why more families get into the home of their dreams every single day.

Google Makes Its Move

The Internet's six-hundred pound gorilla, Google, has gone into the real estate listing business. Protests to the contrary aside, this is a bold move as well as an interesting experiment. Google's latest move will tell us whether a generic search engine can effectively function as a vertical search site. How does Google manage the transition from all-around search site to something specific to real estate? From a user interface perspective, in the most natural way possible. When I visit Google and enter Los Angeles real estate as my search term, I'm invited to refine my search by adding a specific area and type (rental or sale) of real estate that I'm looking for. Up pops a Google Map full of listings that correspond to my search criteria. An incomplete set of listings for now...but can any realtor afford not to be included? Would anyone not want their listings to be included? Of course not. And there you have it...while the MLS's and the NAR have fiddled, Google just effectively burned down Rome. Round Two promises to be interesting.

Boston Corporate Housing

One Response to “Is the Economy Finally Cooling? Sacramento Mortgage Rate Update”

Nice Posted! Its so very informative and knowledgeable for your visitors or readers.
Thank You for sharing.. Keep up the good work..

Preventing Fallout: 5 Questions Every Agent Should Ask (Part V)
Sacramento Mortgage Rate Update: What the hell happened? »
This entry was posted on Monday, June 18th, 2007 at 3:30 pm and is filed under Credit & Ficos, Loan Fraud, Qualifying. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

It’s hard to believe that something as shady as this goes on undetected, but I’m sure there are many Web sites trading on this scam than I can imagine. It’s a shame.

I don’t know which is more disheartening, the fact that people will sell this service or the fact that consumers will buy it.

In the end we all complain about the cost of stuff, but this is flat out cheating and the honest people pay. If the first law of human nature is that people want to feel good and they don’t want to feel bad, the second law has to be that people cheat. Not always, not always in a big way, but people cheat. Sad

Excellent article. I think I’m going to link to this when I discuss financing. Thanks for the info.

I definitely agree about the internet lenders.

The benchmark conforming 30 year fixed rate mortgage improved slightly to 6% this week on reports indicating a slowing economy and falling inflation.

Behind the Numbers

In a week chock full of economic news, January new home starts plunged 14.3%, oil prices lead the Producer Price Index lower, industrial production slowed, unemployment rose, and consumer sentiment weakened.

In testimony before both the Senate and House Banking committees, Fed Chairman Ben Bernanke projected that inflation will moderate over the next two years, reinvigorating hopes of a Fed rate cut later this year.

This morning’s release of the Labor Dept. report for November jobs shows non-farm payrolls sliding by 533,000 jobs, just a smidge more than the expected loss of 350,000.

Sorry folks. I guess server issues has taken me out of action the past few days. Tomato Blogs is working on the problem and seems to have restored the archives up through December. Hope to have it all back shortly. Don’t go away. I’ve got a week’s worth of pent up frustration and updates to share with you.

Lenders have finally begun pricing the new Jumbo Conforming Loans. So far, Fannie Mae will only be accepting delivery of the 30 year fixed on April 1, with the 5/1 ARM on May 1. Here is a comparison of the a) normal conforming 30 yr fixed, b) the new jumbo conforming 30 yr fixed, and c) the regular jumbo 30 year fixed, all from the same lender?s rate sheet today at 3pm.


a) 5.5% at 1 point / 5.875% at zero points
b) 6.5% at 1 point / 6.875% at zero points
c) 7.5% at 1 point / 8.000% at zero points

Similarly, here are the d) traditional FHA and e) new Jumbo FHA 30 yr fixed rates:


d) 5.750% at 1 point
e) 6.625% at 1 point