Suggested by Bill Burruss: Congress somewhat reluctantly passed a $700 billion bailout for financial firms, hoping to shore up their books and loosen credit strings. What’s your reaction?
(If you want to read more about how Sweden handled its eerily-similar credit crisis in 1993, you can read this New York Times article.)
This article from Friday’s WSJ — authored by George Mason University economist Russell Roberts — asserts that misguided Congressional policies and priorities were a root cause behind the rise in home prices that lead to the current economic crisis. It’s a must-read….
If you’re having trouble understanding the implications of the government’s intervention on GSEs Fannie Mae and Freddie Mac, or if you need a little help explaining it to your clients, this 150-second video from the California Association of REALTORS® featuring Joel Singer, their Executive Vice President, might be helpful to you:
How much would a home in one place cost if it was in another? Every year the people at Coldwell Banker find out. They compare similar homes in different markets to create the equations that let you compute the difference. It is very interesting.
For example, a $250,000 home in Richmond would sell for $252,941 if it was in Virginia Beach, and only $220,588 if it was in Roanoke. (If it was in Queens, NY, it would run $526,471. That is a lot of money.)
You can do your own comparisons at the Coldwell Banker site. It includes nine Virginia regions. Please have fun.
Hot off the AP Wire…
Gov’t may soon back Fannie, Freddie
Friday September 5, 10:58 pm ET
By Alan Zibel, AP Business Writer
Gov’t may soon take over troubled mortgage finance giants Fannie Mae, Freddie Mac WASHINGTON (AP) — The government is expected to take over Fannie Mae and Freddie Mac as soon as this weekend in a monumental move designed to protect the mortgage market from the failure of the two companies, which together hold or guarantee half of the nation’s mortgage debt, a person briefed on the matter said Friday night…
Demand goes up, and prices go up with it. But eventually prices go too high and demand slakes off. (Then the media comes in to announce the "crisis.")
But then — and this is that cycle thing at work — prices drop and demand increases again.
And what do you know:
More Americans waded into the housing market last month, lured by falling prices that helped send sales to their highest level since February.
At least a third of properties bought in July involved foreclosed homes snapped up at bargain-basement prices or homes sold at a loss by owners who had no alternative, according to the private National Association of Realtors.
?
OK, ready? Repeat after me… “NO”
Try it again…”NO”
That’s what you should be saying firmly when the bank/lender says or “demands” that you lower your commission on your short-sale listing.
That’s also what you should be saying firmly when the listing agent says that the bank “demands” that the commission be lowered and that you, as the buyer’s agent, have to “split the difference”.
Too many agents are letting banks get the best of them. I’ve said “no” several times and have never had a problem. There are plenty of other agents that have also said “no” and have not had a problem either.
Can you actually say “no”?
Yes, you can! And you should. If you haven’t already, check out Lem Marshall’s presentation on short-sales which covers what’s required and what’s not and what’s legal and ethical.
Will the bank kill the deal if you say “no”?
I’ve yet to hear of a bank not approving a short-sale over 1 percent worth of commission. If someone has, please let me know and I will stand corrected.
So next time the bank tells you that you have to cut your commission to almost nothing, just say “no” and move on to the next subject. You’d be surprised at how well that works…
Over the past two weeks, I have had three separate buyer clients who have decided not to pursue a home (or homes) in a particular neighborhood or town because of the distance it would put them from their place of employment. All three work in Harrisonburg, and have decided to primarily look at properties located in the City.
These buyer were considering homes in towns roughly 20 miles away, which (if we only examine gas costs, and their work commute to Harrisonburg) would equate to roughly $2,000 of extra fuel costs per year. (20 miles, 20 mpg, 2 trips/day, 5 days/week, 50 weeks/year, $4/gallon)
This wouldn’t include other increased costs such as:
To put $2k/year in perspective — if these fuel savings were instead used to allow the buyers to afford a larger home, they could increase their loan amount by $26,000! (30 year fixed, 6.5%).
Are others seeing these same sort of fuel-based buying decisions in your parts of the Commonwealth?
From this morning’s New York Times:
WITH the nation embroiled in a housing crisis, one would expect the Department of Housing and Urban Development to be playing a central role. But HUD is a marginal player. Although its Federal Housing Administration division has agreed to underwrite new mortgages, it is merely following the leadership of the Federal Reserve and the Treasury Department.
This is no accident. HUD’s sidelined role is a product of its anachronistic approach to both housing and cities. It might be best to simply close the agency and create a new cabinet-level commitment to urban development.
Complete story here.
The following is an account of a loan horror story recounted by a Charlottesville lender.
First, a solution:
What Realtors can do to avoid a similar scenario: Work with lenders who have successfully closed at least five loans in the past twelve months of the type they are proposing. Work with lenders who have a reputation for ethical conduct. Choose your lenders based on factors other than glad-handing, happy talk or willingness to buy you lunch.
Take note of last-minute loan blowups and share that information with your business associates and clients. (I know many Realtors already do this when their client is proposing use of an on-line lender about whom the Realtor has already heard horror stories.) There are plenty of good lenders who would be happy to competently handle your deal, and there’s no reason for lenders who blatantly abuse their industry partners and clients to be making money.
What Buyers can do: ask lenders for names of satisfied clients who did the type of loan they are considering. This is perfectly reasonable. Don’t buyers and sellers ask Realtors for testimonials from happy clients? (ed. note: one of my more favorite questions of late is, “tell me about one of your dissatisfied clients, and why they were so dissatisfied”)
We’ve never seen a lender hauled before a panel of their peers on ethics charges (as happens in the Realtor community) though there’s certainly been ample cause. That’s unfortunate, but forewarned is forearmed.
Now, the tale:
Buyer (happens to be first-time but that doesn’t matter) and Seller enter into a contract, after two Realtors spend the usual hours marketing, showing, driving, negotiating and doing paperwork …
Buyer is going to do an FHA loan. They’re so popular now, for good reason. Buyer is hooked up with a lender. Don’t know how they connected, whatever, but if it was his Realtor who referred him to the lender we hope she’s learned a lesson.
The lender is not FHA approved. He’s pretty sure he will be, soon, so he originates the loan. Home inspection, appraisal done and paid for. Commitment letter issued (hearsay, I didn’t see it). Two weeks prior to closing the lender apparently gets worried that this FHA approval isn’t going to come through. It likely never will.
He contacts at least two local FHA lenders and attempts to refer the deal to them. One of them turns it down flat and the other takes the application, runs it through his underwriting system and can’t get an approval.
The lender doesn’t notify the borrower or Realtors at this or any point. Now we get into hearsay, in italics.
Two days prior to closing the lender told the borrower that they didn’t qualify for FHA (they didn’t, but the lender didn’t even have the option. If they’d been an experienced FHA lender they’d have know he didn’t qualify). The rate went from about 6% to 7.75 or higher. Closing costs/payment also went way up.
This is the problem with hearsay but you get the idea. The lender had flipped the loan to FNMA/conventional, got what’s called an expanded approval, which has high rates and high PMI. The payment was at least $200 higher and this was an “affordable” home.
On closing day the listing agent went to the closing table with the sellers expecting to sign. They were at the table when they found out the buyer’s loan wasn’t going to close.
At that point one more FHA-experienced lender was called in and ran the loan through his underwriting system- it wasn’t approved.
The listing agent is out all her marketing time and expense. The seller has lost valuable marketing time and now has a stale listing if they didn’t before. The buyer’s agent is out all the hours spent driving around a client who didn’t qualify, negotiating, doing paperwork etc. The potential buyer is out appraisal fee, cost of home inspection, maybe more, and has given up the lease on his rental unit so doesn’t have a place to live.
Oh, also, the lender didn’t get paid his commission. He put all these people’s time and money on the line in the slim hope that he might get paid. They all got screwed by this industry partner. (Sorry for the salty language.)
This is an easy problem to avoid. There are a lot of lenders out there now who don’t have what it takes to manage the current market. They might not be able to do the loan and not even know it. They might be able to but not know how. I hate to see you guys lose time and money. We are all in the same boat. There are a lot of good lenders who can get deals closed in this lending environment and will tell you if it’s not going to work.
I hope you can make this into a cautionary tale to help your readers- buyers, sellers and Realtors. Let me know if you have questions or need a referral to the other lenders or Realtors involved. I’m not sure they’d talk but I’d hope they would, to help someone else avoid a similar problem.
This story originally appeared on RealCentralVA.com and appears here by request.
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