I wonder if squirrelly deals are a part of the “new normal” – the pattern that we have settled into as a consequence of the “Great Recession” of 2008-9? It certainly seems and feels like every deal is a little squirrelly these days, a little more difficult, with a few more issues to resolve. Now, admittedly even before the current economic problems real estate transactions were often fraught with opportunities for screw-ups or blow-ups. This is not a profession for the faint of heart; nor for the perfectionist, since it will drive them nuts.
Even though we are required to point out to the clients that we are not lawyers, just lowly Realtors, we write legally binding addendums and amendments to legal contracts on a daily basis. Thought we are not professional arbitrators we arbitrate disagreement and disputes on many contracts. And while we are neither title company employees nor mortgage brokers, we do much of the legwork for both to make sure that deals go through.
I serve as a mentor for several new agents in our office and I always try to help them understand and make sense out of the chaos that is our business. To a great extent is it part of our job to mask as much of that chaos as we can from the clients, working feverishly behind the scenes to make it appear to be a seamless and smooth process. Sometimes you get help from the agent on the other side and sometimes you end up doing the work for both sides, but the client doesn’t need to see any of that. If you can get to the end of closing and have the client say, “Wow, that was easier that I thought it would be” you have done your job well.
These days, that’s getting harder and harder, especially when the deal involves the infamous “third party” that must approve everything. Banks being involved with sales, whether it is a foreclosure or a short sale, throws a whole new monkey wrench into the process and it is one that even both agents in the deal can’t do much about. Having talked to some ex-bank employees who were involved with these things I can better understand that many times they don’t know what they’re doing or don’t have enough people on board to deal with the tsunami of distressed properties that they have to deal with these days. So, rather than add to the solution, many times they just add to the problem.
I certainly hope that this is a temporary thing, but I may have to have a very liberal definition of “temporary”, Unfortunately we seem to be only in the middle of the foreclosure mess, with another wave or two still to come and most economists still predicting no real relief around until 2011 or 2012. So maybe this is a part of the “new normal” for a while to come. Falling home values and their impact upon appraisals also appear will be sticking with us for a while yet.
There are all sorts of secondary fallout that has occurred because of the economic mess. Divorces are up, which has a big impact on our business. Leases and land contracts are up as ex-homeowners who were foreclosed look for places to live. Failed deals are up dramatically as more an more buyers find defects in the homes that they were trying to buy out of foreclosure or more and more homes fail to appraise at agreed upon prices.
The Chinese have the saying “may you live in interesting times”, which many initially took to be a positive statement, but which really is a curse that meant times that are filled with danger and challenges. We certainly are living through interesting times right now. What an interesting time to be a Realtor!
Wednesday, September 30, 2009
Monday, September 28, 2009
How good is good enought?
“Since nobody’s perfect, how good is good enough?” (Andy Stanley)from the Jack’s Winning Words blog. This is a tough one to call. I tend to be fairly hard on myself when I make mistakes and have a hard time letting others off the hook for their mistakes. In real estate there are so many opportunities for mistakes or something being incomplete that I suppose one could stay mad about it all the time.
So, how good is good enough in real estate? I suppose it would be that if you can get the transaction through the closing, you were good enough. What often happens behind the scenes, if one of the parties isn’t very good at it, is that someone else involved in the transaction picks up whatever piece the not-so-good agent has dropped the ball on and runs with it. Sometimes that means writing an addendum that the other agent should have written or maybe correcting a mistake that the title company people should have caught or pushing on the mortgage guy to get his people moving on the mortgage approval. You basically do whatever is necessary to keep things moving toward and through the closing.
Every now and then I have to go into my manager’s office and ask her to tell me again that it’s OK to make mistakes; that nobody’s perfect. I hate it when that happens, but it is cathartic and hopefully doesn’t happen all that often. The measure that I tend to hold up to others in my “nobody’s perfect” evaluation of them is whether or not they are really making the effort. If they are trying and doing the best that they can, that makes a big difference in the amount of slack that your can cut them. It’s the lazy agent or the truly incompetent agent that I have the hardest time dealing with, and there are certainly those types in the agent mix today.
The worst things I hear back when I’m talking to another agent within a deal is, “I don’t have time for that” or maybe, “that’s not how I do it.” Usually we are discussing some piece of documentation that is either required by state real estate law or which has a material impact on the deal. How can one not have time or just not do important addendums or amendments to a deal? Basically they are just lazy and hope that someone else will do their work for them. These same lazy agents often end up with irate clients at the closing table when the clients see their closing costs for the first time (due to the lazy agent not going over things with them ahead of time). In those cases, I guess they just aren’t good enough.
So how good is good enough? My answer would be that the agents involved were good enough if the closing goes without a hitch, resulting in two happy parties leaving the closing table. That’s a win-win situation, which should be our goal every time. To get to that end, lots of things had to be handled good enough by both agents involved between the signing of the PA and the disbursement of funds to keep the deal together. That’s my answer and I’m stickin’ to it.
So, how good is good enough in real estate? I suppose it would be that if you can get the transaction through the closing, you were good enough. What often happens behind the scenes, if one of the parties isn’t very good at it, is that someone else involved in the transaction picks up whatever piece the not-so-good agent has dropped the ball on and runs with it. Sometimes that means writing an addendum that the other agent should have written or maybe correcting a mistake that the title company people should have caught or pushing on the mortgage guy to get his people moving on the mortgage approval. You basically do whatever is necessary to keep things moving toward and through the closing.
Every now and then I have to go into my manager’s office and ask her to tell me again that it’s OK to make mistakes; that nobody’s perfect. I hate it when that happens, but it is cathartic and hopefully doesn’t happen all that often. The measure that I tend to hold up to others in my “nobody’s perfect” evaluation of them is whether or not they are really making the effort. If they are trying and doing the best that they can, that makes a big difference in the amount of slack that your can cut them. It’s the lazy agent or the truly incompetent agent that I have the hardest time dealing with, and there are certainly those types in the agent mix today.
The worst things I hear back when I’m talking to another agent within a deal is, “I don’t have time for that” or maybe, “that’s not how I do it.” Usually we are discussing some piece of documentation that is either required by state real estate law or which has a material impact on the deal. How can one not have time or just not do important addendums or amendments to a deal? Basically they are just lazy and hope that someone else will do their work for them. These same lazy agents often end up with irate clients at the closing table when the clients see their closing costs for the first time (due to the lazy agent not going over things with them ahead of time). In those cases, I guess they just aren’t good enough.
So how good is good enough? My answer would be that the agents involved were good enough if the closing goes without a hitch, resulting in two happy parties leaving the closing table. That’s a win-win situation, which should be our goal every time. To get to that end, lots of things had to be handled good enough by both agents involved between the signing of the PA and the disbursement of funds to keep the deal together. That’s my answer and I’m stickin’ to it.
Saturday, September 26, 2009
Living in historic times…
“History never looks like history when you’re living through it.” (John Gardner), from the Jack’s Winning Words Blog. We are certainly living in historic times right now. We have just lived through “the great recession” – the worst recession in America since the Great Depression. In fact, we’re still living through the tail end of this recession.
I suspect that years from now we’ll be telling stories to our grandchildren that will have become slightly exaggerated about this time in our history – stories about how bad the stock market was or how much value our homes lost and how much unemployment there was. Hopefully we will be telling those tales while enjoying better times. One thing that I’ve opined here about a couple of times is my opinion that we will be telling those stories in an American context that was funda
mentally changed by going through this great recession.
I have called what I see coming the “reset economy” – a downsized economy where people have less expectation of accumulating great wealth or lots of possessions. The current younger generations were already somewhat in that mode, especially the Gen-Yers who exited college into a very tough job market and have already downsized their expectations. The Boomers and Gen-X crowd finally had it shoved in their faces by this recession. Many in the Boomer generation got the rude awakening that their sacrosanct pension plans were, in fact, up for review and revision and could not be counted upon. Gen-Xers finally were stopped by the recession in their pursuit of “I want everything and I want it now”.
The American dream of home ownership took a bit of a beating, too; although it was perhaps more of a reset back to reality. Would be homeowners must now be much more realistic about what they can afford and plan better for what happens if one or both get laid off or a reduction in work hours. The golden cows – GM, Ford and Chrysler – upon which so many suckled for so long have stopped giving so generously and will certainly emerge from this mess as regular companies and not the worker’s nirvana’s that they were thought to be in the past. For many that means that the era of the McMansion is over and qualities other than size will start to matter more in a choice of a new home(maybe even affordability).
There is probably great value in the hard lessons of this recession, if only people take them to heart and actually change their future behavior. If we can look back and say, “Yeah, those were the years when I learned to live within my means”, or “It was back then that I decided I needed to save for my retirement” or any number of other lessons that should come out of this mess; then it will have had some positive impact upon the country and the American people. If we just go, “Whew, I’m glad that’s over, now let’s get back to shopping until we drop”, then we will have lost an opportunity to learn and are destined to repeat history.
I suspect that years from now we’ll be telling stories to our grandchildren that will have become slightly exaggerated about this time in our history – stories about how bad the stock market was or how much value our homes lost and how much unemployment there was. Hopefully we will be telling those tales while enjoying better times. One thing that I’ve opined here about a couple of times is my opinion that we will be telling those stories in an American context that was funda
mentally changed by going through this great recession.I have called what I see coming the “reset economy” – a downsized economy where people have less expectation of accumulating great wealth or lots of possessions. The current younger generations were already somewhat in that mode, especially the Gen-Yers who exited college into a very tough job market and have already downsized their expectations. The Boomers and Gen-X crowd finally had it shoved in their faces by this recession. Many in the Boomer generation got the rude awakening that their sacrosanct pension plans were, in fact, up for review and revision and could not be counted upon. Gen-Xers finally were stopped by the recession in their pursuit of “I want everything and I want it now”.
The American dream of home ownership took a bit of a beating, too; although it was perhaps more of a reset back to reality. Would be homeowners must now be much more realistic about what they can afford and plan better for what happens if one or both get laid off or a reduction in work hours. The golden cows – GM, Ford and Chrysler – upon which so many suckled for so long have stopped giving so generously and will certainly emerge from this mess as regular companies and not the worker’s nirvana’s that they were thought to be in the past. For many that means that the era of the McMansion is over and qualities other than size will start to matter more in a choice of a new home(maybe even affordability).
There is probably great value in the hard lessons of this recession, if only people take them to heart and actually change their future behavior. If we can look back and say, “Yeah, those were the years when I learned to live within my means”, or “It was back then that I decided I needed to save for my retirement” or any number of other lessons that should come out of this mess; then it will have had some positive impact upon the country and the American people. If we just go, “Whew, I’m glad that’s over, now let’s get back to shopping until we drop”, then we will have lost an opportunity to learn and are destined to repeat history.
Wednesday, September 23, 2009
Nobody said that life is always fair…
In a conversation with a potential client about what to do with an upside-down home the owner said, “It’s not fair. We’ve worked our butts off to get where we are and we’re trying to do the right thing, but I can’t afford to make up the difference between what I paid for this place 2 years ago and what it worth now.” In the back of my mind a little voice was saying, “Well Virginia, no one ever said that life is fair.” Of course, I stifled the urge to let that little voice out and lent a sympathetic ear; however, let’s be honest here – life is not always fair. At least it’s not fair from our own perspectives.
In the case above, life is indeed fair. This owner has lost no more value than any other owner in the same area, so one could say that they lost their “fair” share. Life did not single this owner and this house out to be the only house in the neighborhood to lose value. That seems fair. Our state has the highest unemployment rate in the nation, which is unfortunate and is contributing to our houses woes, but could hardly be called unfair.
It seems to me that claiming that the circumstances one finds themselves in is unfair is just another form of denial. It is searching for some way not to have to take responsibility for the series of decisions that were made a while back that led up to this moment. Sure, you may have a case that you were mislead by some slick-talking mortgage person into refinancing and taking the equity out of the place to buy something else or pay off another debt. You can say that when you bought they told you that real estate always goes up in value and that you believed them. I guess we all believed that. Unfortunate? Yes. Unfair? Not really, since we all were of that same belief and, yet, we all didn’t make the same decisions.
So what are these people who have been “unfairly” put upon by life to do? They could just walk away from the homes that they can’t afford to sell, but that would devastate their credit ratings, which, of course, most believe would be (can you guess it?) “unfair.” After all, they argue, they just did what everyone else was doing and followed the advice that everyone was giving them at the time. I recall some advice my mother used with me as I grew up – something about “Would I jump off a roof just because everyone else did it?” I’d use that with these people, but that might be unfair of me.
Often it comes down to this: You have a hand that life has dealt to you. You can fold it and take the consequences of that or you can try to play it out and see if you can somehow make a winning hand out of it. To continue the poker analogy, you’re all in and you’ve seen the (market) flop. So far you’re drawing dead, but there’s still the turn card and the river card to go. The bank is showing a pair of aces but you have a chance at an inside straight. It’s a horserace and you’ve at least got live cards. Life’s not always fair – sometimes it’s a gamble, but living it is always better than the alternative.
In the case above, life is indeed fair. This owner has lost no more value than any other owner in the same area, so one could say that they lost their “fair” share. Life did not single this owner and this house out to be the only house in the neighborhood to lose value. That seems fair. Our state has the highest unemployment rate in the nation, which is unfortunate and is contributing to our houses woes, but could hardly be called unfair.
It seems to me that claiming that the circumstances one finds themselves in is unfair is just another form of denial. It is searching for some way not to have to take responsibility for the series of decisions that were made a while back that led up to this moment. Sure, you may have a case that you were mislead by some slick-talking mortgage person into refinancing and taking the equity out of the place to buy something else or pay off another debt. You can say that when you bought they told you that real estate always goes up in value and that you believed them. I guess we all believed that. Unfortunate? Yes. Unfair? Not really, since we all were of that same belief and, yet, we all didn’t make the same decisions.
So what are these people who have been “unfairly” put upon by life to do? They could just walk away from the homes that they can’t afford to sell, but that would devastate their credit ratings, which, of course, most believe would be (can you guess it?) “unfair.” After all, they argue, they just did what everyone else was doing and followed the advice that everyone was giving them at the time. I recall some advice my mother used with me as I grew up – something about “Would I jump off a roof just because everyone else did it?” I’d use that with these people, but that might be unfair of me.
Often it comes down to this: You have a hand that life has dealt to you. You can fold it and take the consequences of that or you can try to play it out and see if you can somehow make a winning hand out of it. To continue the poker analogy, you’re all in and you’ve seen the (market) flop. So far you’re drawing dead, but there’s still the turn card and the river card to go. The bank is showing a pair of aces but you have a chance at an inside straight. It’s a horserace and you’ve at least got live cards. Life’s not always fair – sometimes it’s a gamble, but living it is always better than the alternative.
Tuesday, September 22, 2009
Each and every day
“No matter how you feel, get up, dress up, and show up.” (Gloria Starr, Business Consultant) from my favorite source for these short quotes – Jack’s Winning Words.
I think I’ve actually used that same quote before or something close to it, but it is always good to reinforce those thoughts.
Last year some time (I don’t exactly remember when), I started wearing a tie everyday to work again. I became know as the “guy in the tie” around the office and several agents asked why I wear it every day, even if I don’t have appointments with clients that day. My retort is that I owe my fellow workers the same level of professional respect as I’m trying to show for my clients. My clients are most often dressed very casually, as is the custom these days, and that’s fine with me. I still choose to project a look of business professionalism, which I hope carries through to how I actually conduct my business.
The “show up” part of that quote above is also important. We have mostly dual-career agents in our office right now, which means that most have other, often full-time jobs. They are doing real estate either as a supplement or with the goal in mind to someday get into it full-time. That’s fine and I wish them well; however, in real estate one must show up, be visible as a Realtor, put in the time as the agent on duty or with clients, in order to be successful. Too many part-timers seem to be of the opinion that putting in a one day a weekend or a few hours here and there will do it for them. It ain’t gonna happen! To pervert an old saying – “If you want to make a dime, you gotta put in the time.”
I would also add to the quote above – “get psyched up”. It’s important to start each day with some little personal motivational exercise that can get you in the right frame of mind for success. Sometimes I forget to do that and I’ll catch myself halfway through the day all down or tired feeling. I need to go back to Go and get myself up for the day. I need to see the challenges of the day as opportunities to excel. I need to see the frustrations for what they are – small blips on the road to success. I need to remind myself of my goals and the goals of my clients and focus upon those, instead of allowing my attention to be diverted by short-term adversities. It’s not always easy to get up and to stay up, but the alternative is a real bummer that I prefer to avoid.
Sportscasters always say about Tiger Woods that one of his biggest advantages on the tour is his ability to get focused and stay focused throughout the round. I try to stay focused upon my real estate business while I have that tie on. There'll be time to relax and enjoy other things when the tie comes off at night. So, if you see the guy in the tie; say hi! You’ll feel better. I’ll feel better. And we’ll both have a great day.
I think I’ve actually used that same quote before or something close to it, but it is always good to reinforce those thoughts.
Last year some time (I don’t exactly remember when), I started wearing a tie everyday to work again. I became know as the “guy in the tie” around the office and several agents asked why I wear it every day, even if I don’t have appointments with clients that day. My retort is that I owe my fellow workers the same level of professional respect as I’m trying to show for my clients. My clients are most often dressed very casually, as is the custom these days, and that’s fine with me. I still choose to project a look of business professionalism, which I hope carries through to how I actually conduct my business.
The “show up” part of that quote above is also important. We have mostly dual-career agents in our office right now, which means that most have other, often full-time jobs. They are doing real estate either as a supplement or with the goal in mind to someday get into it full-time. That’s fine and I wish them well; however, in real estate one must show up, be visible as a Realtor, put in the time as the agent on duty or with clients, in order to be successful. Too many part-timers seem to be of the opinion that putting in a one day a weekend or a few hours here and there will do it for them. It ain’t gonna happen! To pervert an old saying – “If you want to make a dime, you gotta put in the time.”
I would also add to the quote above – “get psyched up”. It’s important to start each day with some little personal motivational exercise that can get you in the right frame of mind for success. Sometimes I forget to do that and I’ll catch myself halfway through the day all down or tired feeling. I need to go back to Go and get myself up for the day. I need to see the challenges of the day as opportunities to excel. I need to see the frustrations for what they are – small blips on the road to success. I need to remind myself of my goals and the goals of my clients and focus upon those, instead of allowing my attention to be diverted by short-term adversities. It’s not always easy to get up and to stay up, but the alternative is a real bummer that I prefer to avoid.
Sportscasters always say about Tiger Woods that one of his biggest advantages on the tour is his ability to get focused and stay focused throughout the round. I try to stay focused upon my real estate business while I have that tie on. There'll be time to relax and enjoy other things when the tie comes off at night. So, if you see the guy in the tie; say hi! You’ll feel better. I’ll feel better. And we’ll both have a great day.
Monday, September 21, 2009
Surf’s up dude…
This week as I studied the statistics from last week an interesting thing popped out. It may be just a one week anomaly or evidence of the start of a long awaited second wave of foreclosures – this round based upon job losses and not just bad loans. What I see in the data from last week is that there are more foreclosed houses above the sold median price than below it. These are houses that are in the $160K and up, many well above 200K. The median sold price in the markets that I’m tracking weekly is $154K so far this year.
What I think I’m seeing here is a wave of foreclosures by people who were able to hold on initially and make their payments; likely people who had good jobs or maybe both adults worked at fairly good jobs. Then something happened. One partner may have lost their job or perhaps lost all of their overtime or something. Now they can no longer hold on. In this area a lot of job losses can be attributed to layoffs in the automotive industry. These are upscale houses in neighborhoods that would have been considered to be white-collar communities. So it is a fair bet that the main breadwinner got wacked in one of the recent layoffs. The way that people are leveraged these days most can not hold out more than a month or two before they start missing mortgage payments and it’s a rapid downhill slide from there.
As part of my weekly research I also look at the public record for each house that has sold and for many of the foreclosed houses there are entries that also point to possible divorces that occurred first and then the foreclosure. Unfortunately an increase in divorces is another sad side effect of the hard economic times. Many marriages cannot survive the stress of financial hardship and many breadwinners react badly to the loss of their jobs and slide into bad habits that break up families.
At a minimum, I’m seeing a much higher foreclosure rate in a much higher income bracket (at least it used to be higher). That is also throwing a whole new class of foreclosed home onto the market – last year’s McMansion is this year’s foreclosed home. Homes that were $300-400,000 are now selling down in the high $200K’s as distressed homes. Some are in great shape and are great bargains; however, the very people who would normally be looking in that price range are hunkered down in their own homes, which have lost so much value that many of them are upside-down on them. These would-be “move-up buyers” can’t sell them are stuck where they are and probably afraid at this point to take on more debt.
We’ll get through this, just as we have the other waves of foreclosures, but out on the not to distant horizon is the next wave of ARM-reset foreclosures, which is scheduled for January 2010, and which many predict will be of tsunami strength. Surf’s up, dude!
What I think I’m seeing here is a wave of foreclosures by people who were able to hold on initially and make their payments; likely people who had good jobs or maybe both adults worked at fairly good jobs. Then something happened. One partner may have lost their job or perhaps lost all of their overtime or something. Now they can no longer hold on. In this area a lot of job losses can be attributed to layoffs in the automotive industry. These are upscale houses in neighborhoods that would have been considered to be white-collar communities. So it is a fair bet that the main breadwinner got wacked in one of the recent layoffs. The way that people are leveraged these days most can not hold out more than a month or two before they start missing mortgage payments and it’s a rapid downhill slide from there.
As part of my weekly research I also look at the public record for each house that has sold and for many of the foreclosed houses there are entries that also point to possible divorces that occurred first and then the foreclosure. Unfortunately an increase in divorces is another sad side effect of the hard economic times. Many marriages cannot survive the stress of financial hardship and many breadwinners react badly to the loss of their jobs and slide into bad habits that break up families.
At a minimum, I’m seeing a much higher foreclosure rate in a much higher income bracket (at least it used to be higher). That is also throwing a whole new class of foreclosed home onto the market – last year’s McMansion is this year’s foreclosed home. Homes that were $300-400,000 are now selling down in the high $200K’s as distressed homes. Some are in great shape and are great bargains; however, the very people who would normally be looking in that price range are hunkered down in their own homes, which have lost so much value that many of them are upside-down on them. These would-be “move-up buyers” can’t sell them are stuck where they are and probably afraid at this point to take on more debt.
We’ll get through this, just as we have the other waves of foreclosures, but out on the not to distant horizon is the next wave of ARM-reset foreclosures, which is scheduled for January 2010, and which many predict will be of tsunami strength. Surf’s up, dude!
Saturday, September 19, 2009
Milford Home Tour Weekend
It’s Milford Home Tour Weekend, so there’s lots to do in Milford on Saturday and Sunday. Obviously the Home Tour is the key event with 6 Milford area homes on the tour this year – three in the Village and three in the Township on North Garner Rd.Other events this weekend include an antique tractor show on Sunday out at the corner of Milford Road and GM Road at the Huron Valley Bank parking lot and the Milford
Car Show on Sunday, which takes all of Main Street to stage and features everything from Street Rods to exotic sports cars. On Saturday there’s also a designer jeans show at The Clothing Cove store downtown. In addition the Pettibone Creek Powerhouse will be open for tours as well as the Milford Historical Museum on Commerce Rd in the downtown area. For the kids the will be lots of fun events at the Log Cabin next to the fire station on Huron St. Click here for a full schedule of all of the events associated with the Home Tour.The Home Tour is 11 AM to 5 PM both days and cost $15 for adults or $13 for seniors, with tickets available at any house or at the Museum. The Tractor S
how and Car Show are free and visitors get to vote for their favorite cars in various categories. I’ll be a docent at one of the Home Tour houses on Saturday, so stop by and visit. Click here to see what homes will be on the tour and to read a little of their history. Come on out to Milford this weekend and enjoy a day with us and get a feel for the "Village lifestyle."
Wednesday, September 16, 2009
If the recession is over, how come…
We are getting lots of signs and pronouncements from various officials and economists that the great recession is over. Even Ben Bernacki, the Fed Chairman, has called the end of the recession. At least, they say, it has bottomed out and we have started back. I guess that’s good news, but unemployment is still high, foreclosures are still increasing and property values are still falling, at least in Michigan. So, if the recession is over, how come my house is still losing value? I get that a lot these days.
Like many other answers that we are searching for these days, the reasons for the continuing fall of home values are complex and not easily covered by cheery pronouncements of the end of the recession. The continued high unemployment has given rise to even more foreclosures in the housing market, these not caused by ARMs resetting so much as by one or both earners in the family being out of work. Many homeowners depend upon having two good income streams in order to maintain their lifestyle. The lost or cutback of one of those incomes can be devastating to the family.
In our area the cutback of overtime alone has resulted in many homes being lost. Many of our automotive-oriented families counted on overtime as the means to pay for the house and the toys and the other things that came to symbolize the middle-class lifestyle. Drive through any middle class area and you’ll find the Harley’s and the street rods and the jet skies and other toys with for sale signs. When times are tough the toys must go. But that is just the tip of the iceberg. The real losses are the homes that these same workers can no longer afford and they are adding to the already bloated inventory of foreclosed and short sale homes on the market today.
Another thing that has happened (to use a sentence that sounds like something that Yogi Barra might say) is something that hasn’t happened. The Government program to encourage banks to do loan modification has gained almost no traction with banks and most still are not doing anything to help distressed borrowers refinance their homes into affordable loans. It just hasn’t happened. Most banks seem to prefer foreclosing on their clients than trying to work with them so that they can keep their homes.
So, in our area, foreclosures continue to drag home prices down. Home prices are now down between 35-50% from their peaks just 3-4 years ago and continuing to slide. The pace of the decline has slowed and that’s good news; but, for homeowners who bought 3-4 years ago it’s way to late to save them. They are so far underwater on their homes that they have little choice but to walk away when they get into distress and that just adds to the problem.
Like many other answers that we are searching for these days, the reasons for the continuing fall of home values are complex and not easily covered by cheery pronouncements of the end of the recession. The continued high unemployment has given rise to even more foreclosures in the housing market, these not caused by ARMs resetting so much as by one or both earners in the family being out of work. Many homeowners depend upon having two good income streams in order to maintain their lifestyle. The lost or cutback of one of those incomes can be devastating to the family.
In our area the cutback of overtime alone has resulted in many homes being lost. Many of our automotive-oriented families counted on overtime as the means to pay for the house and the toys and the other things that came to symbolize the middle-class lifestyle. Drive through any middle class area and you’ll find the Harley’s and the street rods and the jet skies and other toys with for sale signs. When times are tough the toys must go. But that is just the tip of the iceberg. The real losses are the homes that these same workers can no longer afford and they are adding to the already bloated inventory of foreclosed and short sale homes on the market today.
Another thing that has happened (to use a sentence that sounds like something that Yogi Barra might say) is something that hasn’t happened. The Government program to encourage banks to do loan modification has gained almost no traction with banks and most still are not doing anything to help distressed borrowers refinance their homes into affordable loans. It just hasn’t happened. Most banks seem to prefer foreclosing on their clients than trying to work with them so that they can keep their homes.
So, in our area, foreclosures continue to drag home prices down. Home prices are now down between 35-50% from their peaks just 3-4 years ago and continuing to slide. The pace of the decline has slowed and that’s good news; but, for homeowners who bought 3-4 years ago it’s way to late to save them. They are so far underwater on their homes that they have little choice but to walk away when they get into distress and that just adds to the problem.
Is all lost, then? Is everything gloom and doom? No. If you are a buyer, it is still a great time to buy and first-time buyers are snapping up bargains all over the place. If you are a seller with 10 or more years of ownership you should still be OK. You won’t be as happy as you had hoped with what you can get, but you can still sell and then maybe you’ll become a happy buyer, too, and make some of it up on that side. And if you were a real long-term owner, the paper loss you are having trouble dealing with was just that – a paper loss. You still made out OK on that house you built or bought in the 60’s or 70’s for $50-100K and are now selling for $200k (instead of the 350K it was worth a few years ago). Give it up and get over that loss. You had a great place to live for a long time and still made out on the deal.
Monday, September 14, 2009
You cannot defeat me....
“If I were asked to give what I consider the single most important advice, it would be this: Expect trouble as an inevitable part of life and when it comes, hold your head high, look it squarely in the eye and say, ‘I will be bigger than you. You cannot defeat me.’” (Ann Landers) from the Jack’s Winning Words Blog.
Now, I admit that I’m not a regular reader of Ann Landers or any of the other daily columns of that ilk; however, this seemed to be particularly applicable to my real estate career, since I get so many opportunities to look trouble (or issues or whatever else you want to call the little glitches in life that occur) in the eye. Real estate transactions tend to riff with opportunities for the various people involved to drop the ball – the mortgage company, the title company, the appraiser, the home inspectors and, yes, the agents involved all have multiple tasks to perform any one of which can hold things up or mess things up. Most of the time everybody does what they are supposed to do and things move along to a smooth closing. Then there are the deals from hell.
If I had to rank the issues that cause frustration and delays in deals it would be a tight race between the home appraisers and the mortgage underwriters. Home inspectors can and do cause problems too, sometimes causing undue concern over easily remedied issues; however those are out there for everyone to see and can be fixed or negotiated. Since the passage of the HVCC (Home Valuation Code of Conduct), appraisals have increasingly become matters of great concern. Appraisers from out of the area are often assigned to do the appraisal and often know little about the local market, so appraisals often come in too low and cause problems.
Then there are the underwriters. Many buyers find what appear to be attractive deals at on-line sites, which represent out of state lenders, such as eloan.com and others. I guess I can’t blame them for being sucked-in to what appears to be a great deal; however, too many of those on-line loan sources don’t provide written Good Faith Estimates and many of them end up unveiling lots of hidden fees when the HUD-1 document is finally produced. I try to encourage my buyers to work with local lenders, so that we can easily stay in touch and make sure that everyone understands everything as the deal progresses.
Of course, the real estate agents involved can also cause problems in deals, often because of trying to go too fast and forgetting something. Not clearly stating everything in writing at the front-end of the deal with a well written Purchase Agreement and Addendums can mean days of scrambling later to try to correct an oversight. Even worse are cases where an agent from either side let’s his client sign something that puts them at a severe disadvantage or cost them money. It happens.
So there are lots of opportunities to use the words of Ann Landers in the life of a Realtor. The key in her words and in other similar advice is not to let adversity overcome you, not to let it win. There will be a tomorrow and another deal, so deal with what is in front of you as best that you can and move on with life. Early in my blogging here I had another post that is also applicable that advised that one must be able to say “So, what!” and let go of failures or things that one cannot control and move on. That is still good advice.
Now, I admit that I’m not a regular reader of Ann Landers or any of the other daily columns of that ilk; however, this seemed to be particularly applicable to my real estate career, since I get so many opportunities to look trouble (or issues or whatever else you want to call the little glitches in life that occur) in the eye. Real estate transactions tend to riff with opportunities for the various people involved to drop the ball – the mortgage company, the title company, the appraiser, the home inspectors and, yes, the agents involved all have multiple tasks to perform any one of which can hold things up or mess things up. Most of the time everybody does what they are supposed to do and things move along to a smooth closing. Then there are the deals from hell.
If I had to rank the issues that cause frustration and delays in deals it would be a tight race between the home appraisers and the mortgage underwriters. Home inspectors can and do cause problems too, sometimes causing undue concern over easily remedied issues; however those are out there for everyone to see and can be fixed or negotiated. Since the passage of the HVCC (Home Valuation Code of Conduct), appraisals have increasingly become matters of great concern. Appraisers from out of the area are often assigned to do the appraisal and often know little about the local market, so appraisals often come in too low and cause problems.
Then there are the underwriters. Many buyers find what appear to be attractive deals at on-line sites, which represent out of state lenders, such as eloan.com and others. I guess I can’t blame them for being sucked-in to what appears to be a great deal; however, too many of those on-line loan sources don’t provide written Good Faith Estimates and many of them end up unveiling lots of hidden fees when the HUD-1 document is finally produced. I try to encourage my buyers to work with local lenders, so that we can easily stay in touch and make sure that everyone understands everything as the deal progresses.
Of course, the real estate agents involved can also cause problems in deals, often because of trying to go too fast and forgetting something. Not clearly stating everything in writing at the front-end of the deal with a well written Purchase Agreement and Addendums can mean days of scrambling later to try to correct an oversight. Even worse are cases where an agent from either side let’s his client sign something that puts them at a severe disadvantage or cost them money. It happens.
So there are lots of opportunities to use the words of Ann Landers in the life of a Realtor. The key in her words and in other similar advice is not to let adversity overcome you, not to let it win. There will be a tomorrow and another deal, so deal with what is in front of you as best that you can and move on with life. Early in my blogging here I had another post that is also applicable that advised that one must be able to say “So, what!” and let go of failures or things that one cannot control and move on. That is still good advice.
Thursday, September 10, 2009
Looking up from the bottom…
Lots of recent reports from various economists and others who track the economy say the same thing – the recession has bottomed out and the economy is starting back. Some of the economists have called the bottom of the recession to have been in April or May of this year, with things heading back up since then. We have now had 3-4 months of positive indicators, including an increase in the number of home sales. We are still on the downward track, as far as home values go, but we may be stuck in a pattern that will overshot the mark in that category, just because it will take time for lenders and appraisers to adjust to the turnaround. We also still have quite an overhang of foreclosed or short sale homes on the market, with no end in site yet.
So what does this mean for buyers and sellers? Well, many buyers, especially first time buyers, have been in a buying frenzy for a couple of months now, trying to make sure that they get in under the end of November deadline for the first time buyer tax credit. Investors are still going strong, too, with many buying up blocks of houses all at once. There seems to be a lot of ad hoc investor groups that have sprung up lately with lots of money to spend on distressed real estate. There has also been an up tick in move-up buyers out in the market, as they realize that they should buy now, before they miss the best prices in decades in the market. The increase in buyer activity, especially at the low end of the market, has resulted in many homes receiving multiple bids.
What about people who want or need to sell? Certainly the general economic turn around is good news and we are likely near the bottom on the value loss that occurred over the last 2-3 years. If they are planning to buy something else after they sell, at least these sellers will get the benefit of the down market on the buy side. If not, they will have to deal with the loss that they may be taking, be it a paper loss or a real one. It is still necessary to price to a market that is being driven by distressed homes. It’s more important than ever to get and heed the advice of a good Realtor about pricing for this market. With inventories declining and more buyers out looking, now is a good time to get on the market. Trying to wait out the bottom and regain some lost value will likely just result in a long delay in getting on with life, without a lot of added reward on the price.
So that’s the view from the bottom, looking up. Now’s the best time in the last 12-18 months to buy or sell and not acting soon will mean that you’ve missed the opportunity.
So what does this mean for buyers and sellers? Well, many buyers, especially first time buyers, have been in a buying frenzy for a couple of months now, trying to make sure that they get in under the end of November deadline for the first time buyer tax credit. Investors are still going strong, too, with many buying up blocks of houses all at once. There seems to be a lot of ad hoc investor groups that have sprung up lately with lots of money to spend on distressed real estate. There has also been an up tick in move-up buyers out in the market, as they realize that they should buy now, before they miss the best prices in decades in the market. The increase in buyer activity, especially at the low end of the market, has resulted in many homes receiving multiple bids.
What about people who want or need to sell? Certainly the general economic turn around is good news and we are likely near the bottom on the value loss that occurred over the last 2-3 years. If they are planning to buy something else after they sell, at least these sellers will get the benefit of the down market on the buy side. If not, they will have to deal with the loss that they may be taking, be it a paper loss or a real one. It is still necessary to price to a market that is being driven by distressed homes. It’s more important than ever to get and heed the advice of a good Realtor about pricing for this market. With inventories declining and more buyers out looking, now is a good time to get on the market. Trying to wait out the bottom and regain some lost value will likely just result in a long delay in getting on with life, without a lot of added reward on the price.
So that’s the view from the bottom, looking up. Now’s the best time in the last 12-18 months to buy or sell and not acting soon will mean that you’ve missed the opportunity.
Tuesday, September 8, 2009
Another lost weekend...
I created the post below on Monday night, September 7th, after having devoted yet another holiday weekend to the real estate business instead of to family and friends and enjoying the moment. I suppose it was cathartic at the time; but I did not post it then, because I was already down enough about working through the weekend. The real message here is to try harder to achieve some balance in life between work and family, between the reason you think you are working and taking time to actually enjoy those reasons. I need to do better at that.
There was a 1945 film called The Lost Weekend, starring Ray Milland and Jane Wyman and based upon a best selling novel about the travails of an alcoholic who goes on weekend binges. I suppose that if someone wanted to they could write a novel called Another Lost Weekend about a workaholic Realtor spending yet another holiday weekend away from friends and family while trying to sell a house. How sad. I just spent another of those lost weekends trying to cement a deal and I’ve started to regret it. I regret not spending more time with my wife, not getting away somewhere for the last weekend of summer, not taking some time to enjoy the fruits of the labor that seem so all consuming at times. We are in a crazy business and if one doesn’t try awfully hard to avoid it, the business can consume all of the time that we have. You have to step back every now and then and ask yourself what you are working all those hours for, if you never take any time off to enjoy life?
I have a very understanding and very long-suffering wife who puts up with me and my crazy schedule more than she should have to. Not everyone has that level of spousal cooperation and understanding and I suspect that there are many divorces that can be laid at the doorstep of being overwhelmed by the time demands of the business. Like a black hole, the real estate business sucks up whatever time there is with something to do. If you let it, it will literally consume 24 hours in every day, seven days a week, 365 days a year. If traded stories with old, retired (burned out) realtors who reported leaving their families on Christmas day to go show a house. That’s just crazy! Yet it happens.
So I just lost another Labor Day weekend working on a deal. Was it worth it? If it closes I’ll make some money 20-30 days from now, but I won’t ever get the three days that I just lost back. I’ll never get to go on that picnic that I didn’t go on or play with my grandchildren at the park or just sit and relax on my front porch. I’ve lost that and that’s just sad. It’s weekends like this that make me stop and think about whether what I’m doing is really worth it – not just the money aspect, but the quality of life aspect, too. I do enjoy many things in the business, just not lost weekends.
There was a 1945 film called The Lost Weekend, starring Ray Milland and Jane Wyman and based upon a best selling novel about the travails of an alcoholic who goes on weekend binges. I suppose that if someone wanted to they could write a novel called Another Lost Weekend about a workaholic Realtor spending yet another holiday weekend away from friends and family while trying to sell a house. How sad. I just spent another of those lost weekends trying to cement a deal and I’ve started to regret it. I regret not spending more time with my wife, not getting away somewhere for the last weekend of summer, not taking some time to enjoy the fruits of the labor that seem so all consuming at times. We are in a crazy business and if one doesn’t try awfully hard to avoid it, the business can consume all of the time that we have. You have to step back every now and then and ask yourself what you are working all those hours for, if you never take any time off to enjoy life?
I have a very understanding and very long-suffering wife who puts up with me and my crazy schedule more than she should have to. Not everyone has that level of spousal cooperation and understanding and I suspect that there are many divorces that can be laid at the doorstep of being overwhelmed by the time demands of the business. Like a black hole, the real estate business sucks up whatever time there is with something to do. If you let it, it will literally consume 24 hours in every day, seven days a week, 365 days a year. If traded stories with old, retired (burned out) realtors who reported leaving their families on Christmas day to go show a house. That’s just crazy! Yet it happens.
So I just lost another Labor Day weekend working on a deal. Was it worth it? If it closes I’ll make some money 20-30 days from now, but I won’t ever get the three days that I just lost back. I’ll never get to go on that picnic that I didn’t go on or play with my grandchildren at the park or just sit and relax on my front porch. I’ve lost that and that’s just sad. It’s weekends like this that make me stop and think about whether what I’m doing is really worth it – not just the money aspect, but the quality of life aspect, too. I do enjoy many things in the business, just not lost weekends.
Sunday, September 6, 2009
The most dangerous words in real estate…
I believe that the words “I assumed” are probably the most danger-filled words in any contract-based scenario; yet I hear those words all the time in my real estate business. Real estate transactions are based upon the Purchase Agreement CONTRACT. That means that everything that is relevant to the transaction should be spelled out in the contract somewhere or should be verified within the context of the contract. Nothing should be left to assumptions. Yet time after time and law suit after law suit the defense of at least one party to the contract starts with the words “I assumed.”
It really doesn’t matter which side did the assuming. It was a mistake to assume anything. Examples – “I assumed that the house was hooked up to city water, since all houses in that area are.” “I assumed that the seller would leave the utilities on through the day of closing.” “I assumed that the title company would find any unpaid water bills.” “ I assumed that any special assessments would show up in the title search.” “I assumed that the bank had to pay all back taxes and assessments at closing.” “I assumed that I’d be allowed to use the shared driveway that the previous owner has ‘always used’.”I assumed that what my mortgage guy had been telling me would be what showed up on the closing documents.”
These are all statements that I’ve heard used (or heard about) in deals over the years. They also have one other things in common – they all caused problems with the deals – many times causing the deal to fall apart and occasionally resulting in law suits. They wer all bad, some might say stupid, assumptions made by a buyer or seller or even by real estate agents.
Here’s the bottom line. Don’t assume anything. If you don’t know for sure, check it out. Go ask the city, township, village, county, whomever, and be sure. If you don’t understand something ask and keep asking until you do understand the answer. If you don’t have a written good faith estimate from your lender, demand one and under stand what it says or ask questions. Never accept “trust me on this”, as an answer. Get it in writing and then read and work and ask until you understand the answer. NEVER ASSUME!
It really doesn’t matter which side did the assuming. It was a mistake to assume anything. Examples – “I assumed that the house was hooked up to city water, since all houses in that area are.” “I assumed that the seller would leave the utilities on through the day of closing.” “I assumed that the title company would find any unpaid water bills.” “ I assumed that any special assessments would show up in the title search.” “I assumed that the bank had to pay all back taxes and assessments at closing.” “I assumed that I’d be allowed to use the shared driveway that the previous owner has ‘always used’.”I assumed that what my mortgage guy had been telling me would be what showed up on the closing documents.”
These are all statements that I’ve heard used (or heard about) in deals over the years. They also have one other things in common – they all caused problems with the deals – many times causing the deal to fall apart and occasionally resulting in law suits. They wer all bad, some might say stupid, assumptions made by a buyer or seller or even by real estate agents.
Here’s the bottom line. Don’t assume anything. If you don’t know for sure, check it out. Go ask the city, township, village, county, whomever, and be sure. If you don’t understand something ask and keep asking until you do understand the answer. If you don’t have a written good faith estimate from your lender, demand one and under stand what it says or ask questions. Never accept “trust me on this”, as an answer. Get it in writing and then read and work and ask until you understand the answer. NEVER ASSUME!
Thursday, September 3, 2009
Has the dam burst and the pent up demand be loosed?
All of a sudden I’m busier that a one-legged man in a sack race. I have two accepted offers working a third in progress and two that I’m told by buyer agents will be in soon. I’ll also be writing an offer for one set of buyers that I’ve been working with and I have a new listing and two in the works. What the He** happened to cause all of this activity?
I certainly can’t blame it all on the $8,000 tax credit. Only two of these deals even involve anyone who even qualifies for that. I guess a bit of it is pent up demand, at least on the buyer side. On the sell side, I think a lot has to do with reality finally setting in and people needing to get on with life. They are more willing to list at reasonable prices these days.
Even in the face of 10%+ unemployment in Michigan, there seems to be some weird form of optimism taking over – thoughts that it can’t get much worse, so it’s time to come out of the foxholes and get on with life. Of course, some portion of this activity, at least on the sell side, is the result of 1-2 years of fighting with sellers to get them to let go of the past and price to the market. It’s amazing how “fast” a property will sell when you get it priced right, even after 2 years on the market.
There have been many articles written about the so-called pent-up demand in the real estate system – people who have been putting off new home purchases until the economy settled down a bit. Maybe we‘re seeing some of that in the current up tick in real estate. Whatever is causing it, I certainly welcome the change.
I certainly can’t blame it all on the $8,000 tax credit. Only two of these deals even involve anyone who even qualifies for that. I guess a bit of it is pent up demand, at least on the buyer side. On the sell side, I think a lot has to do with reality finally setting in and people needing to get on with life. They are more willing to list at reasonable prices these days.
Even in the face of 10%+ unemployment in Michigan, there seems to be some weird form of optimism taking over – thoughts that it can’t get much worse, so it’s time to come out of the foxholes and get on with life. Of course, some portion of this activity, at least on the sell side, is the result of 1-2 years of fighting with sellers to get them to let go of the past and price to the market. It’s amazing how “fast” a property will sell when you get it priced right, even after 2 years on the market.
There have been many articles written about the so-called pent-up demand in the real estate system – people who have been putting off new home purchases until the economy settled down a bit. Maybe we‘re seeing some of that in the current up tick in real estate. Whatever is causing it, I certainly welcome the change.
Tuesday, September 1, 2009
On the road to hell…
My mom used to use a particular phrase a lot when I was growing up. Whenever I used the excuse that I had intended to do something but had not done it, she would say, “The road to hell is paved with good intentions.” I suppose somewhere along that road are the good intentions of the people who came up with the Home Valuation Code of Conduct (HVCC). Per haps it is also just another example of lawmakers rushing to do something about something that is bad and ending up creating something worse – the law of unintended consequences.
HVCC was a well-intentioned try at dealing with the too cozy relationships (or too pressured relationships) that existed between banks and appraisers. The ability of the banks, through those relationships, to influence the appraisers work contributed greatly to the real estate crisis, which precipitated the financial recession that we are in. So, obviously something had to be done to fix that. Enter the politicians; trying to make names for themselves and to appear to be leading the effort to reform these nefarious practices, they rushed through the HVCC as their solution.
The idea behind HVCC had merit – to try to insulate the appraisers from any undue influence by the lenders. The devil in this case was in the details, or maybe the lack thereof. The three-page law is so vague that lending giants Fannie Mae and Freddie Mac have had to publish 5 pages of frequently asked questions to try to clarify it. At it’s core it moved the responsibility for hiring the appraisers away from the lenders and requires a middleman role, with an appraisal management company (AMC) in between the lenders and the appraisers. Ironically enough it was the practices of an AMC in influencing its appraisers that initially kicked off much of the concerned that caused the law to be written.
So now everyone should be happy right? We have solved the problem by creating another level of bureaucracy to protect the consumers’ interests. So, why the furor? Well that new level of bureaucracy was not free. It increased the costs to the consumer. It also required appraisers to work through those AMCs and the AMC owners have used that as a lever to reduce what they pay for appraisals. So both the appraisers and the consumers got the Ziggy on this. The only winners were the AMC owners, many of whom it turns out were the same clowns who were making bad loans a few years back Many appraisers have left the business rather than work for the lower pay that the AMC’s offer. The results have been a disaster in many areas, with AMCs assigning out-of-area appraisers who are unfamiliar with the local market to do many appraisals and the buyers and sellers, the banks and the realtors powerless to do anything about it. Deals have been delayed or lost altogether, due to poor appraisals.
HVCC was a well-intentioned try at dealing with the too cozy relationships (or too pressured relationships) that existed between banks and appraisers. The ability of the banks, through those relationships, to influence the appraisers work contributed greatly to the real estate crisis, which precipitated the financial recession that we are in. So, obviously something had to be done to fix that. Enter the politicians; trying to make names for themselves and to appear to be leading the effort to reform these nefarious practices, they rushed through the HVCC as their solution.
The idea behind HVCC had merit – to try to insulate the appraisers from any undue influence by the lenders. The devil in this case was in the details, or maybe the lack thereof. The three-page law is so vague that lending giants Fannie Mae and Freddie Mac have had to publish 5 pages of frequently asked questions to try to clarify it. At it’s core it moved the responsibility for hiring the appraisers away from the lenders and requires a middleman role, with an appraisal management company (AMC) in between the lenders and the appraisers. Ironically enough it was the practices of an AMC in influencing its appraisers that initially kicked off much of the concerned that caused the law to be written.
So now everyone should be happy right? We have solved the problem by creating another level of bureaucracy to protect the consumers’ interests. So, why the furor? Well that new level of bureaucracy was not free. It increased the costs to the consumer. It also required appraisers to work through those AMCs and the AMC owners have used that as a lever to reduce what they pay for appraisals. So both the appraisers and the consumers got the Ziggy on this. The only winners were the AMC owners, many of whom it turns out were the same clowns who were making bad loans a few years back Many appraisers have left the business rather than work for the lower pay that the AMC’s offer. The results have been a disaster in many areas, with AMCs assigning out-of-area appraisers who are unfamiliar with the local market to do many appraisals and the buyers and sellers, the banks and the realtors powerless to do anything about it. Deals have been delayed or lost altogether, due to poor appraisals.
What’s next on this issue? Nothing motivates a politician more than the opportunity to save us from ourselves. Likely some well-intentioned politician will see an opportunity to make a name for him/herself by fixing this mess and we will undoubtedly progress further down the road to hell.
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