Black, white or some shade of grey?

I’m not normally a shades-of-grey type of person. Generally if there is a clear right and wrong, a stop or go, or a black or white decision to be made I tend towards not seeing shades of grey in the situation that will allow the “little white lie” excuse. There normally aren’t any little white lies... just lies.

Having said that, the current housing situation, coupled with the horrendous economy in our area has had me thinking in shades of grey, in terms of advising clients with distressed houses. This is especially the case if they have already tried one or more of the failed federal programs to help distressed homeowners. Those programs, while well-intentioned, were ill-conceived, poorly executed and never bought into by the lenders involved.

So is it wrong to tell someone to just go ahead and ride out the foreclosure process and let the bank have the house? What about if they and you have tried everything already – a loan mod, a short-sale and appeals to the bank? Is there any rationale to advising them to strip themselves of any and all savings, retirement funds or college funds in a vain attempt to avoid the stigma of a foreclosure? I think not.

The market has already dealt with the most egregious offenders – those who vastly over-reached or lied on mortgage apps. They were the first victims of the downturn and perhaps rightfully so. Now we are seeing the people being displaced who were OK before the bottom dropped out of everything. These are people who had good jobs and got reasonable mortgages on homes that might have been inflated in value, but which represented the market at the time. These are our neighbors and friends and relatives, not a bunch of deadbeats.

Now we are seeing the results of the economy not only destroying the value of our homes but causing an unprecedented level of unemployment, with no end in sight. More and more I talk with or read about the ex-automotive engineers or factory workers in our area who have been out of work for 1-2 years, sometimes longer. They are the type of people who did burn through their 401K money or college funds trying to stay afloat and trying to keep their homes. They also are the ones that initially trusted that the federal programs to assist them would work – until they tried to use them. Now they go to Tea Party rallies and shout slogans about government being too big and taxes being too high.

So, what are we to do when a client with almost no chance of selling (even with a short-sale), asks us what they should do? Obviously we have an obligation to advise them to seek legal advice and financial counseling; but, should we also render an opinion on their options? Most of us have some level of experience with the bigger banks and how they deal with distressed home situations. A few are OK; but, most are so understaffed and overwhelmed that the whole process is broken right now. I find it hard not to empathize with the poor, tapped-out homeowner who has tried and failed to get any real relief from his/her lender.

I know that the consequences of a foreclosure are bad and I usually point them to several articles that outline what the impact, both short and long term, will be. Even a short sale has credit consequences and there are still many stories, rumors or urban legends of lenders going after short sellers for the deficiencies. So, it’s hard to find a happy ending to talk about with these people. In the end it can come down to this – do what you have to do to take care of your family and yourself in these hard times. If that means riding out a foreclosure on a house that will otherwise take you under, then so be it.

I’ll tell them about the foreclosure process, so that they understand what is coming, how much time they have left in the house, what to expect the lender to try to do and maybe point them to some advice on what you can do to start rebuilding your credit. I can help them find a place to rent for their family. I’m not going to look at them and go “tsk, tsk, what a deadbeat”; instead I’ll take a moment to reflect – “there, but by the grace of God, go I.”

Do only scoundrels run?

Have you noticed that it seems that only scoundrels and scumbags run for public office - at least according to the ads being run as we near the election. There doesn't seem to be an honest person among the candidates, or so their opponents claim. Some apparently have lied about lots of important things, whether it be about their backgrounds or their military service or whether they knew (or should have known) about some malfeasance by their campaign staffs. Others have apparently voted for stuff in Washington that many (or at least their opponents) feel is bad for us or associated too closely with people in Washington that some consider to be dangerous to the well being of America.

It's a a little hard to sort out the truth in the calliope of ads, all claiming the the other guy is a crook or worse. Occasionally it seems like one candidate or another will get close to actually saying something positive about what he/she might do in Washington, if elected; however, it appears to be bad form to be too specific, since someone might try to hold you accountable for those statement later and call you a liar if you do do those things.

Of course a number of ads by so-called political action committees or other groups who are not supposedly associated with one candidate or another, try to be helpful by pointing out which candidates are likely to threaten you family and your very way of life, if they are elected. As best as I can tell, if we elect any of these bozos we're in big trouble; but don't say you heard that here. The best thing that I can say about this election is thankfully it will be over soon and we can get back to our regularly scheduled ED and laxative or stop peeing so much ads. Some how crass ads about bodily functions will be an improvement over the slime that is being spread right now.

Even judges, all the way to the top state court judges, seem happy to wallow in the mud at this time of the year, which makes the fact that judges are elected on partisan ballots even more disturbing than it already is. I'm sure that not all politicians are scoundrels or scumbags, but it does seem that a fairly large number deserve the handle during the mean season of elections. Morals and ethics seem to take a back seat to the "do anything and say anything to win" mentality. Civility would seem to be fading in our society and it is being pushed into the background along with the truth, logic and honesty. It is fortunate for the politicians that these personal traits are not required to hold the offices they are seeking either.

Biting the bullet…

I’ve noticed for the last couple of months that more and more home sales involve prices that are less than what it appears the homeowners owe (at least from the public records anyway) and yet are shown as not short-sales. My own experience this year representing underwater homeowners verifies this trend. Many underwater homeowners are biting the bullet and bringing money to the table to close of the sale of their homes, sometime quite a bit of money.

Most of these sales involve homeowners who wanted to (or needed to) move in order to get on with life. Perhaps the sales were caused by job changes or maybe family changes (it’s amazing how that small bungalow that felt so right for just the two of you when you were first married gets feeling cramped when the second baby comes along). For whatever reasons these homeowners decided to sell, not matter what the financial consequences. So they bit the bullet, sometimes a quite large bullet, just to get out from under that first house mortgage.

In my little market area the percentage of homes sold as distressed – foreclosed or short-sales- has fallen from an average of 50+% earlier in the year to less than 40% for the last three months. That’s the good news. It’s hard to gauge accurately the number of sales that are taking place that involve loses that the seller is absorbing; however, I look at each sale to see if the sale price is at lease at or above the last recorded mortgage level (assuming that the mortgage was taken out within the last 5 years). My gut feel is that 30-40% of the non-distressed sales were made for less than what was owed. That means that those home sellers were biting the bullet and absorbing the value loss themselves.

What is the long term impact of this? Well, for one, it also means that those same people had less money available to make a down payment on something else. Either they went into an apartment or other rental property for a while or they bought something of much less value, since they had little to put down after stripping their savings to get out from under the old house. In either case the long term impact was not good. There loss on the sale will ripple through the economy one way or the other. They won’t show up in the deadbeat statistics, but they will show up in the spending less (because they had less) categories across the board.

What does this all mean? Well me often have heard or read about the “shadow inventory” of distressed homes (foreclosures or the pre-foreclosure inventory that is yet to hit the market). We also have a huge overhang of unrealized losses in America that is just not going to go away anytime soon. We have people who are hanging on, paying their mortgages and hoping/praying/waiting for the values to come back on their homes. Folks, that ain’t gonna happen. That value is gone. At best, if we return soon to historic rates of appreciation (which is certainly not guaranteed) is will take 10 years or better to regain the lost values back to the levels of 2004 (of they ever get that high again).

So, is it time to bite the bullet? Well, I would ask, “Do you have a good reason to sell now?” If so, bite away; because, it will do you little good to try a short-term wait. It’s just not going to matter. What may matter more is that whatever loss you take on the sell side you can partially make up (more than make up if you are upgrading) on the buy side. If you are downsizing because you have retired or taken a downgrade in jobs, hold on to your old house if you can (and have a good mortgage rate) or bite the bullet now and get out from under it before it drags you under. Talk to your financial advisor to figure out the best way to access the money you need to make up the difference between what you an get for it now and what you owe.

Holding companies accountable...

Being held accountable – what a concept!

Source: Dow Jones Business News, Jared A. Favole (10/20/2010)

U.S. Secretary of Housing and Urban Development Shaun Donovan said Wednesday that the onus is on banks to fix whatever foreclosure-related problems are found.

Donovan, who made the statement during a White House briefing about the matter, said problems found thus far haven’t appeared to be very serious, but the full investigation won’t be finished until the end of the year. If more serious problems are found, possible penalties could include fines and a ban against writing mortgages for more serious violations, he added

What a concept – holding those who seriously abuse the public’s trust accountable. One can only wonder what would happen if this concept caught on?

I can see it now. Headlines that read -

The U.S. Transportation Department today banned Toyota from selling cars in the United States because of serious problems with how they handled safety issues and recalls.

The top 5 U.S. investment banks were suspended today from making further sales of derivative products because of past fraudulent or inaccurate sales claims made by their employees.

Both major political parties and several large political action committees were today banned from placing any further television commercials based upon the misleading nature and blatant lies of their past commercials.

Recruiting for all of the U.S. armed forces was suspended today until the Pentagon can produce a coherent policy for gays in the military. The Pentagon immediately denied being incoherent and said of course there is room for happy people in the military.

The U.S. Supreme Court today ruled that lawyer’s fees for class-action law suits must be restricted to no more than 5% of the overall settlement amount. Over 300,000 class-action law suits were immediately dropped.

A teacher in Ohio was actually fired today for poor performance. The teacher’s union has agreed that the teacher in question not having actually been in the classroom class over the last two years is perhaps grounds for review, but has vowed to fight the termination anyway.

Ahhh, well; we aren’t likely to see any of that, just like we aren’t likely to see any banks banned from again foisting bad loans off on consumers and then getting bailed out. But, it does make for a good headline occasionally, especially in the “feel good” election season.

Dumb and dumber...

Under the heading, “Just When You Thought Things Couldn’t Get Any Dumber” comes this story from the Washington Post -

The freeze on foreclosures is putting federal employees with security clearances in a jam.

The government monitors the finances of employees that it believes could be vulnerable to bribery or blackmail. The foreclosure freeze is preventing these workers from settling their debts, so under government guidelines they could lose their clearances.

There are more than 854,000 employees nationwide potentially affected by this, many of them in the Washington, D.C., area. John P. Mahoney, a lawyer at Tully Rinckey, who specializes in resolving security-clearance problems, says many of the affected workers have had security clearances for years.

"Now they are concerned that their clearance will be pulled, or they will be fired because their real estate investments have gone bad," Mahoney says. "It's a very emotionally charged issue."

Source: The Washington Post, Dina ElBoghdady and Dana Hedgpeth (10/20/2010)

I think it would be an absolute hoot if tomorrow’s headline story was – President Obama has been stranded in California because the pilots for Air Force One and most of his security detail have had their security clearances pulled due to foreclosures on their homes.

Or, maybe we’ll see this story – The FBI today reported that Russians posing as foreclosure rescue specialist have been caught trying to compromise sensitive defense information by promising foreclosure assistance to distressed Federal workers in the Department of Defense in return for state secrets. The Russians all had the coveted CDPE designation and most of them claimed to have a straw buyer already lined up for the properties.

It is more than a little disturbing to see that the number of supposedly irresponsible Federal employees who got themselves in financial difficulty with real estate is 854,000. But I guess that tracks the percentages of the general population. After all how many million workers does the government employ? And of that number, how many need or have security clearances?

In other news from your government at work a new plan has been hatched by the HUD people to help people who can’t find out or figure out who holds their mortgage. Under this new plan, if you can find your mortgage under the right shell you get to refinance or do a short-sale.

So far only three people out of the 142,000 that have played the game have won, but that is ahead of the conversion rate for prior federal programs for homeowners, so it has been declared to be a success.

Just do something...

“Never let what you cannot do stop you from doing what you can do.” (Stephen Pierce—Internet Marketer) from my favorite source for inspirational quotes – the Jack’s Winning Words Blog.

I’ll admit to being a worrier and what I would call an over-thinker. Sometimes I fret away the night thinking about all of the worst-case scenarios that cold occur the next day in some situation at hand (usually some confrontational situation). Usually everything works out OK, but I never seem to let an opportunity to worry pass un-worried about it. To some extent that is letting something that I cannot stop or change stop me from doing what I should be doing - perhaps getting better prepared for the situation at hand instead of just conjuring up dire consequences for scenarios that never happen.

In real estate there can be a tendency to focus on what we can’t do and let that stop us from doing what we can do. That happens a lot with short-sales where there are lots of things that are out of our control – things that we can’t do. But there are things that we can (and should) be doing, even in short-sale situations. Things like helping the seller (of that’s who we represent) get their documentation together or get in touch with a good short-sale lawyer. Or, we could be counseling the short-sale buyer on the need for patience and persistence in the process ahead.

Obviously, in real estate we cannot magically produce a buyer; however, there are tons of things that we can be doing to market the property and try to reach the buyer whom we know is out there somewhere. Perhaps we are not being allowed to properly price the house (in your opinion) for the market. That shouldn’t cause us to just shut down. It just adds to the marketing challenge. Try an ad headline like, “It wouldn’t be at this price if it wasn’t worth it.” That might intrigue some would-be buyers to take a look and that’s really what you are trying to accomplish.

Maybe you have owners or tenants in a listed property that make it difficult to show the place. That makes it all the more important to do a great job on the listing pictures and virtual tour. Maybe you could also create a YouTube video and post that, too. The point is to maximize what you can do when you run into some can’t do’s on a listing. Remember that doing something is always better than doing nothing.

The Distressed Homes Tar Babies

When I was a child there was a popular children's story about a character called Briar Rabbit. Now, Briar Rabbit was a feisty little bunny who was always matching wits with the fox and the bear in these stories. He was sort of an early day Road Runner to his nemesis - Wyle Coyote.

Anyway the fox and the bear came up with a plan to trap Briar Rabbit by fashioning a scarecrow out of tar and other things. They correctly guessed that Briar Rabbit would try to strike up a conversation with the scarecrow and get angry if the tar baby didn't answer.

Well it worked and Briar Rabbit took a swing at the tar baby and got stuck to it. The more he got angry and hit it with fists and feet, the more stuck he became. The tar baby had trapped the rabbit-the fox and bear had him.

It was only through his quick wit and gifted tongue that the rabbit later talked the fox and bear into not eating him but to supposedly cause him much more pain by tossing him in the briar patch (or so they were lead to believe). He happily escaped into his natural habitat-the briar patch. In a kids book of that era, that served as a happy ending.

Well today we are facing a modern day tar baby in the real estate world-distressed homes. Whether they are foreclosures or short-sales many of the homes on the market feel a lot like tar babies-the more you struggle to buy or sell them the more they suck you in to a morass that is hard to escape. The bear and the fox were replaced by Bank of America and CountryWide (and others) and they came up with tar babies of their own.

The low prices have incredible appeal for many would-be homeowners, so they take a swing at it. Then they become stuck. Stuck waiting and waiting for an answer from the banks or feeling stuck by sunk money invested in inspections and appraisals. There doesn't appear to be a way out a way to extricate oneself from the tar baby distressed house.

Even for some agents, dabbling in listing these houses they've become tar babies. Money is sunk in maintenance and marketing and all of a sudden there seems to be no way to get loose.
A very real issue is that it is increasingly hard to avoid these real estate tar babies. They make up about 1/3 of the listing on the market today and about 1/2 of all sales these days.

So, what is one to do? If you are a buyer, get a good agent who will keep as much of the tar off of you as possible. A good agent will make sure that you are not stuck in a deal that has no end in sight, by making sure that your offer has out clauses in it that allow you to walk away if you get tired of waiting.

Your agent should also protect your money by having provisions that don't require you to tie up earnest money until the bank has agreed to the deal and will insist that you have the option to wait until that bank approval before you spend your money on inspections and appraisals. Don't let the distressed home tar baby suck you in. Get a good agent and listen to their advice.

For sellers my only advice is to try to work with the bank(s) ahead of time so that you shorten the process once an offer comes in. You want the deal to stick without starting to feel like a tar baby to all concerned. To a certain extent you will probably end up feeling like your home is your own personal tar baby-one conjured up by your bank to keep you stuck. You need to be persistent and patient and persistent . Got the picture? Did I menton persistent?

As for me; well, I'm up to my armpits in tar babies. One half of my current listings are short-sales and literally all of the current offers that I have out with buyers are for foreclosed or short-sale houses. I'm stuck to these houses and to these sales (many of which have now been on-going for months with no end in sight). Please throw me back into the briar patch of a normal real estate market!

The right acronym will make it all better…

I was recently looking through the Rotarian (the magazine of Rotary International) and spotted an article on Hunger in the United States. As I read the article it became obvious that we don’t have hunger in the United States – heaven forbid. In it’s quest for better PR the federal government has decreed that, instead of hunger, we have food insecurity. In fact the estimate in this article, based upon data from the U.S Department of Agriculture is that 14.6% of U.S. households suffer from these “disruptions in eating patterns and reduced food intake due to adverse economic conditions.” George Carlin could have made an entire routine out of this topic.

Now it seems reasonable that if you disrupt a person’s eating pattern and reduce their food intake they will end up HUNGRY. How often have you seen a TV news story featuring some little waif holding out an empty plate and saying – “I’m food insecure and suffering from reduced intake. Can you help?” Maybe I’m just not looking at the right newscasts.

We used to have a federal program to deal with this issue that was called Food Stamps; however, that sounded bad, so in 2008 the U.S. Department of Agriculture renamed the program the Supplemental Nutrition Assistance Program or SNAP. So now, if you’re hungry some government worker can say, “Oh, SNAP.”

Carlin would have had a field day with that, too.

I suppose people are no longer classified as homeless Using that term is, after all, so insensitive. They are probably called shelter challenged. Maybe there’s a government program to provide temporary housing for the shelter challenged run by a division of the Housing and Urban Development Department called the Shelter Challenged Assistance & Relief Extension Service (SCARES).

Those without health care insurance would likely not be classified as uninsured; rather they are Medical Attention Deficient (MAD).

The unemployed could instead be called Currently Underemployed ResourceS (CURS) and the federal programs to help them could be lumped together and run by the Bureau of Underemployed Resources Programs (BURP).

Of course it’s all part of the larger government program that brings together the various government aid agencies into the Centralized Relief Alliance Program or CRAP.

Side effects may include death...

I don't know about you, but it has always struck me as something to be avoided when a particular medicine advertises that "side effects my include death." To me, that seems a bit extreme, doesn't it? These ads are usually on while I'm at the dinner table and are interspersed with adds for various products that will help one not pee at inappropriate times or allow one to defaecate after inordinately long periods.

Other dinner time advertisements feature products that tend to deal with various sensitive female issues or that all-time favorite for men - erectile dysfunction. I've searched a bit in my area and have yet to find a good source for those old bathtubs that people apparently are driven to sit in when they use these erectile dysfunction aids. Apparently libido and bathing have some weird connection

But, I digress; back to our topic if the hour. Apparently there are many ways in which some of these health products can cause death. There is the ever popular swelling of the throat and tongue, which one must assume would prevent calling out for help. Then there is internal bleeding, which would be particularly insidious, since one would not realize that one was bleeding until such time as one passed out and died. Of course many of these products just cause heart attack or stroke, which would be much more noticeable and one presumes treatable.

It would seem that companies that produce products to treat one disease or problem would not want to cause other problems, especially a problem like death. This is akin to providing an athlete's foot cure upon which you have to be warned, "may cause your foot to fall off." Who would buy that? Of maybe an antiperspirant that carried the warning, may cause your underarms to rot and your arms to fall off. Not good.

Now I understand that most really potent drugs probably have really potent potential side effects. I can accept the warning that my medicine may cause vomiting or diarrhea, But, death? I have a hard time with that side effect. And then there are those which warn not take them if you are pregnant or plan to become pregnant. How many pregnancies are unplanned events? So best just not to take them at all.


So, for me at least; I hope that I never have drugs prescribed that may have that unpleasant death side effect. Occasional irregularity I can deal with. In fact I think I saw something advertised last night during dinner that can deal with that or was that for diarrhea? I can never remember if it was for to much or too little, just that at least it apparently doesn't cause death and that's a good thing.

Must we be a zero-sum society?

This is somewhat of a continuation of the thought process from my last post about not playing the sucker in the derivatives game that many large, sophisticated financial are playing. That is just one example of the zero-sum society that we've become; where, in order for there to be a winner, there must also be a loser, so that the sum is zero +1 and -1.

There are all too many easy examples that could be sited, mostly around our sports and leisure act ivies where things are designed so that somebody wins and thus somebody else loses - the sum is neatly kept at zero. There are very few examples to site for non-zero-sum games, since all games seem to be designed to identify a winner in the end (thus relegating one or more others in the game to the role of losers).

People aren't born as zero-sum players. That is a behavior that is taught to children at a very early age. Young children don't pick it up right away and thus may be content with games that no one really wins or losses but everyone has fun playing. It doesn't take long; however, for parents to change the mindset of the young by their behaviour - egging their little ones on to beat Tommy or do better than Amy. They are instilling the winner/loser relationship that is needed to be a zero-sum player later in life. I'm sure that parents see it something positive and good preparation for life, but it is a shame that the youthful innocence that might otherwise allow the child to feel good just about the chance to play with other children is stripped away and the need to beat someone else at whatever you're doing is substituted. The children never even realize that they've been robbed of that innocence that comes from not worrying about competing. So we are lead from blissful ignorance into a life of ignorant competition - a zero-sum existence. How sad.

Schools tried to break the zero-sum equation by shifting from a grading-based system that forced some to be winners (at the top of the curve) and some to be losers (at the other end). The movement that said you're all winners just for trying made lots of kids feel better for a short while, until their parents interceded and demanded a return to the zero-sum game. You just can't get into the best colleges by feeling good about yourself.

The work environment has always been a zero-sum game. When Apple wins in the market someone else (usually lots of others) lose. When China wins in manufacturing, lots and lots of U.S. factory workers lose. Every sales situation has a winner and one or more losers. Every promotion means that others were passed over. Every new product that is developed usually puts some older product out to pasture. It's all zero-sum.

Religion, to the extent that the teachings of most religions are embraced is one source of escape fro the zero-sum game. You don't have to be better than anyone else to embrace religion; however, the zero-sum mentality has crept back to the forefront in the lives of many people who righteously proclaim their faith. These people tend to proclaim that those who do not believe exactly as they do are losers in the game of religion. And, of course, in the larger religious picture we have many different religions all claiming that whatever deity they embrace is the one and only true deity and thus all others are losers because they don't believe in the one true deity.

Women seem to be better at figuring out ways to do things together without the need to boil it down to a zero-sum game. Men will almost always figure out some way to turn almost anything into a competition, with a winner to be determined somehow. Women on the other hand can form groups, tackle problems and/or be nurturing and supportive of each other, without the need for there to be a winner and a bunch of losers. That is a wonderful trait that we men should try hard to figure out (maybe we could beat the women at it. Oops!)

Wow, this zero-sum thing is bigger than I thought. I guess we're not just a zero-sum society, we're a zero-sum people. I better go off and find someone that I can beat at something, so I can good about myself. Maybe there's another way to look at things that's not zero-sum - I think it's called win-win. What a concept!

Don't be the sucker...

I've been reading about some of the more exotic financial instruments that were (and in many cases still are) available which contributed to the financial crisis. Many of these so-called derivatives or derivative-based bonds were based on one very plain assumption - somewhere there had to be a loser, a patsy, a sucker. Almost all of them are based upon paying out to shift risk to someone else - in the final analysis that is the sucker. In many cases leading up to the big crash those suckers were financial institutions - banks both foreign and domestic which had money to invest and little to know knowledge about what they were investing in. In most cases those banks really represented the assets of their investors and depositors - the ultimate suckers in the string.

Recently there have been stories about individual investors, people like you and me, getting lured into the sucker role by the promised high returns on some of these Wall Street inventions. Most of the funds or investment vehicles have fancy sounding names and none that I know of has the word sucker in the name; but they might as well. They are all sucker bets. The individual investor has about as much chance of making a return as you would playing three card Monty on a New York street corner or finding the pea under the shell at the next corner.

So why do people play this sucker game? Because somebody with a fancy sounding title and maybe even a fancy Harvard degree and working for a big New York investment banking company is promising 8-19-13% returns on your money. And what about risk? Heck, why do you think they call them hedge funds, they are there to hedge against risk. True enough; but, whose risk are they hedging? Not the individual investor, because they are at the end of the risk hedge value chain - they are the suckers who take on the risk. If the bottom drops out of a hedged investment way up at the top, everybody down the line collects against the hedge - except, of course the suckers at the end.

My take on all of this is that it is best not to be cast in the role of the sucker, even if the rewards look good in the beginning. There is no end game that makes sense if you are playing the sucker. The truly sad part of all of this is that a whole bunch of really well educated people, who really do understand this all, know exactly what they are doing to the suckers downstream and they are OK with that. Apparently courses in ethics and morals were not a part of the curriculum at their fancy schools. Rather than the golden rule "Do unto others as you would have them do unto you"; these folks live by the motos "There a sucker born every minute" and He who has the gold rules." Sad, sad, sad.

Odds and ends...

Some days I don't hit upon any particular theme for this missive and this is one of those days.

I'm not sure what to make of the brouhaha over the fact that several states have now caused many of the big banks to declare a moratorium on foreclosures. On the one hand there is certainly evidence that some banks may have not properly processed some paperwork for some foreclosures. How many banks or foreclosures were involved? No one seems to know, not even the banks themselves. So the solution seems to be to throw out the entire barrel of apples because one apple has been discovered to be bad. A typical political solution, good for press coverage and photo ops. I don't think anyone has claimed that the foreclosures in question should not have happened, but just whether the bank minions followed the law and procedures to the letter. So, now we are all in a sort of limbo state on whether foreclosures will proceed or not. It just adds to the mess.

Right now short-sales are an even bigger mess. More and more delinquent homeowners are being advised or encouraged to try a short sale as a means of avoiding foreclosure. That has just exacerbated the problems of banks being short handled in their distressed assets departments. I am now three months in to two short sale offers with clients and there is no end in site on either offer. The listing agents send in the offers and all of the necessary hardship documentation and it just seems to fall into a black hole at the banks, especially if the bank is Bank of America, which is hands down the worst to try to work with. One of the two that I'm involved with was also a case where there are two loans - a primary mortgage and an equity line of credit. Having two banks to deal with takes the frustration to a whole other level and is a scenario that none of the Federal programs really addressed.

Right now does seem to be a good time to list your house, if you have to sell; at least in this area it is. I say that because we went through months and months of declining values and declining inventory locally. Now the value plunge as stopped (or at least slowed to an almost imperceptible pace) and inventory is near all time lows in many price bands or housing categories. The low inventory has occurred for many reasons; but, a main reason was that people were holding their homes off the market and waiting for the market to turn around. It's hard to make the call that we are at that point, but by the tie we can say that for sure it will be something that we look back upon and ask ourselves why we didn't jump in then. So jump in now. We are either there (at the inflection point for this market) or darned close.

I had some feedback today from a buyer who has been looking for condos and looking to financing his buy. He told me that he finds it darned near impossible to find a bank that will loan on a condo. I'll have to check that out. I just listed a condo for sale (and lease) and it woud be good to know ahead if potentiasl buyers are goign to run into that problem. More on that as I find out.

Don't fear have hope...

“Things never go so well that one should have no fear, and never so ill that one should have no hope.” (Turkish Proverb) from my favorite source for inspirational quotes - the Jack's Winning Words blog.

I suppose that we are in the mode of things gong so ill in real estate that what one is left with is primarily hope for the better. I'm not sure what the impact of the recent calls for a foreclosure moratorium will be on the market. Things are so screwed up right now that no one seems to be really sure what is happening from day to day. The only certain thing is that we need to get this whole mess behind us and that means getting all of these distressed houses out in the open and sold off. Delaying the inevitable doesn't seem like a good idea.

The banks need to either foreclose them and get them sold off or take their haircuts now by forgiving the lost part of the equity involved and refinancing the homes for those who want to stay and can afford a lesser payment. That obvious solution seems to be one that just gets little public discussion and has no traction with politicians. I suspect it's mainly because the big banks are also big political contributors and the politicians would rather play to them than to their so-called constituents.

But, hey. as the Turkish proverb says, we can still have hope. Failing that we have the upcoming ultimate reality show to watch for a while - the November elections. It's sort of like being at a movie marathon where the movie "Dumb and Dumber" is playing constantly.

Rodin would have loved short-sales

“Patience is also a form of action.” (Auguste Rodin). Rodin, the famous sculptor, could have named his statue "The Thinker" waiting on the bank to respond to short-sale an offer. In fact Rodin may have sculpted the entire process without realizing it. See below.

Stage 1 -

I just put in an offer and now we're waiting for a rely.

Stage 2 -

What the hell have I gotten myself into?

Stage 3 -

The hell with it. I'm out of here.





There are many other Rodin statues that show people in grotesque positions which might also be appropriate in various stages of the short sale process, depending upon the bank(s) involved. Who knew that Rodin was so prescient?

Situational ethics...

It's time for another rant about this topic. I walk my dog every morning, usually between 5:30 and 6 AM. That means that I'm out walking him in the dark these days. But, dark or light, it seems that motorists at that hour of the day (if the truth be told at almost any hours of the day) seem to think that the stop signs of Milford are under some sort of sundown rule - that is they don't matter is it's dark.

Now, there are two stop signs on the two block between Union St and Main St - the one at Union and Summit has a street light and a large, illuminated, four-faced stop sign over the intersection, with a flashing red light. The other, at Main and Summit, just has the four signs on the corners, with no illumination or flasher. Perhaps I could understand if someone did not see the signs on that corner and ran the stop; but, they also run the stop at Union and Summit. Just about every day I see people just barely slowing down enough to see if there is traffic approaching from the side street and then bombing on through the intersection. In many cases at the other corner they don't even slow down

I see this as just one indicator that many in our society have become enamored with situational ethics. They don't see it as right and wrong, black or white; they just see it as "what's in it for me and what's the chances that I'll get caught?" In Milford the chances of getting stopped for a traffic violation are extremely low. Our gendarmes are apparently all busy dealing with the major crimes that happen in the community or perhaps still engaged in the search for Jimmy Hoffa

I think this is really just an indicator of a larger social problem...the rise of situational ethics. It would seem that more and more people see the laws of the land as something to be evaluated within a personal context and some determination be made if they are going to obey those laws at that time and in that situation. The premise that our laws would be obeyed by the citizenry was never really based upon the presence of police to enforce those laws...there just aren't enough police available to do that. Instead, our laws are based on the assumption that the citizens will voluntarily obey them, once enacted. Our tax code is based upon much the same principle; although the IRS has done a better PR job of building fear of getting caught if you cheat on your taxes. In truth the IRS has little enforcement capability and relies heavily on computerized models to try to spot scofflaws.

Aside from those examples, where I run into situational ethics the most is in the business world. In real estate we have all sorts of unethical behaviours, usually associated with people who are taking advantage of those already down on their luck and in trouble on their mortgages. Of course, some of those homeowners got into that position by lying on their mortgage applications in the first place and that was another case of applying situational ethics. I hit lots of cases of "don't ask...don't tell" situational ethics in real estate. Usually it's the homeowner asking me if they really have to reveal some secret that they know about their home on the Seller's Disclosure (the answer is YES) or a buyer trying to game the Fannie Mae preference for owner-occupied sales (YES, you do actually have to live there, if you claim to be buying it to live in or face a $5,000 fine).

I learned long ago that situational ethics is a quagmire to be avoided. Like lying in general, situational ethics immediately puts you in the mode of having to remember whatever story you made up to justify to yourself or others what you just did. It's not worth it. Honesty and transparency are the best way to a good night's sleep every night (not that I believe that the guy who ran the stop sign this morning is going to lie awake tonight thinking about it, but the guy who cheated a client today or lied to his/her boss today might

So, if you call me to be your Realtor, don't ask me if you really have to reveal that you made improvements to your home without the proper permits. You already know what the answer is and what I'm likely to tell you. If you're a buyer, don't tell me that you don't plan to tell the mortgage company that your wife just got laid off but you plan to go ahead with the purchase anyway. If you're another agent, don't ask me to reveal my client's financial situation so that you can better help your client in the negotiations or don't tell me about your client's "little white lies" and expect me to keep the secret. I just don't work like that. I actually stop at the sign (well, most of the time anyway).

I missed you, too.

I went to a neighborhood party over the weekend where a neighbor who also happens to be a regular reader of this blog mentioned to me that he was happy to see that I am back to more frequent blogging posts. I have to admit that I missed it (and you who read all of this), too.

I enjoy writing this blog and the others that I post to occasionally. I wrote here some months back that I was embarking on the ambitious path of a dual career. I'm still dong real estate, but I am also working for the local Xerox Agent/Reseller - The Digital Document Store - in Milford. I sell the full line of Xerox products and services locally and as far over as Macomb County. In addition the store does all manner of business printing, from business cards to big outside banners.

Starting out in any new business venture like that is always daunting. It took me months to begin to understand the product line and the acronyms and the business practices involved with this new job. I say begin advisedly, since I am still in a steep learning curve, but not as steep as before. I don't feel like I'll embarrass myself when I go out to meet clients anymore, but I still lean heavily on the owner and my fellow sale person for advice and help.

During these many months my real estate business has been putzing along somewhat on it's own; although I have devoted enough attention to it to keep it viable. The real estate market itself has been pretty slow and much of the activity (mine included) has been on foreclosures or short-sales. I recently listed two historic homes in the Village of Milford - one a short-sale place in need of attention and one a really nice, move-in ready place - both within easy walking distance to downtown Milford. I also recently listed a place down in Taylor, Michigan. How did I end up with that?

Well, I run a web site called http://www.mishortsales.net/ (you can also get there with http://www.mishortsales.com/) that is devoted to giving people facing short-sales valuable information about the process. The lady that owns the home in Taylor found me there. Visit that site or recommend it to anyone that you know is facing that potential. I don't solicit heavily there, but try to give people the information that they need to get ready for the the short-sale process

And remember that if you need to make copies of all of those short sale documents that are required, come in and see us at the Digital Document Store in Milford. We're on the corner where Commerce Rd make the turn into Milford, where the Back Yard Birds store used to be. And if you run a business and need a copier/printer, give me a call - I can help with that, too.

First-time buyers buying down

A recent report from The National Association of Home Builders (NAHB) while the national median existing-home price for all housing types was $178,600 in August, up 0.8 percent from a year ago, sales of distressed homes rose to 34 percent, up from July, and were 3 percent over August of 2009. In our area the numbers have always been higher and stood at 45% at the end of September. That is actually very good for our area where distressed sales have been over 50% for the longest time. The median home price in the little market that I track was at $159,537 at the end of September, which shows the impact of the higher percentage of distressed sales.

These factors are affecting the way first-time buyers are buying. The NAHB report shows that there is a growing segment of first-timers looking for smaller and less expensive new homes. First-timers are a large market segment, with a reported 8.4 millions first-timers nationwide.

Bob Jones, chairman of NAHB says that builders are increasingly gearing their homes to the needs of first-time buyers. That trend is expected to continue in the period ahead as the economy begins generating more jobs and more people in their 20's form households. One reason that the homes need to be cheaper is that many of these first-time buyers are also first-time workers and are feeling the impact of the two-tier pay scales that were negotiated over the last few years. Older workers may be making $25-35/hour, but new workers are hired in at $15/hour for much the same work. They just don't make the money to to able to buy the bigger houses of the past.

New homes are also a better match for the needs of a population that is much more attuned to sustainability. Compared to what is typically available in the existing housing stock, they are more energy-efficient, easier to maintain and have designs better suited to today's lifestyles.

The NAHB report goes on to point out that this demographic of first-time buyers are, on average, buying homes with 1,874 square feet, though a whopping 46 percent are buying homes smaller than $1,500 square feet. With half of first-time buyers reportedly earning less than $60,000 a year, maybe this move could spell a new, more responsible, trend when it comes to spending? Wouldn't that be novel in America?

In our area most new-build projects are still stalled out as local builders find it difficult to get loans to build anything. I've noticed a few starts in what were stalled projects, but very few. The Lyon Township and South Lyon areas continue to show the most strength locally for new-builds. There is still appeal to being out along the I-96 corridor.

I can't identify the first-time buyers in the statistics that I track for my little 6-township market, but I have posted the final numbers for September. You can go see all of the statistics that I track, as well as numerous charts from national services at my Web sites - http://www.movetomilford.com/, http://www.themilfordteam.com/ or http://www.mihomebuyer.com/ (which is a first-time buyer oriented web site).

On an anecdotal note, recent historic home sales in the Village of Milford point to a minor recovery of sorts in that market, with recent appraisals supporting a rising price per square foot for well-maintained and updated historic homes. That's good news for my market and for the Village.

And when they got there the cupboard was bare...

That line from an old nursery rhyme might well be used to describe the current real estate market in our area. For reasons that likely includes a good deal of disgust over what has happen to home values; the inventory of homes for sale in my little patch of the market is very low, maybe even historically low; especially in the "sweet spot" of this market - the $200-$300K range.

Traditionally that $200-300K sweet spot is the most active part of our market and represents those move-up buyers who are making their second home purchase - moving out of their first home, their starter home. That's just not happening right now due to concerns about employment. The average DOM (Days On Market) for that segment is now above a year in this area. Add to that the frustration of the loss of 30-40% of the home's value over the last 2-3 years and you have a formula for market stagnation. And, that's just what has happened.


The Village of Milford Market has only 9 homes that fit the sweet spot definition and is doing OK, since they only average 107 DOM. Out of the nine, eight are privately owned, so only one foreclosure in the group; however there is also one short-sale in the privately held group. So, 2 out of 9 homes that are for sale on the Village are "distressed sales", which may make them less attractive to many would-be buyers. That leaves only 7 homes in the sweet spot in our little Village market. a few years back we would likely have had between 15-25 for sale in that same range at any one time.

What this all means is that, even though the market is still described as a "buyers market", in news stories, it is really a good time to list your house, if you want to (or need to) sell it. There is little competition right now. Sure, there are fewer buyers out looking and they are expecting lower prices; but, they also have much less to choose from, so your home has a better chance of selling. This applies not just to the sweet spot that I've been discussing here but pretty much across the board in all price ranges.

So, if you've been holding off until the market bottomed out and started back, I'd tell you that now is a good time to jump in. Prices have stabilized and there is low inventory. No, I can't undo what the market has done to your home's value; and, if you intend to wait until it comes back, you're in for a long haul. If you just wanted to make sure that prices wouldn't keep dropping if you put it on the market, I think we've arrived at that point, so go for it. Give me a call and let's take advantage of the low inventory situation to sell your house.