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Wednesday, August 31, 2011

Another miracle of real estate…

I had the opportunity to hear all about yet another miracle of real estate. It seems that the property that I visited recently on a potential listing appointment was somehow overlooked by the angry gods of real estate and spared any apparent loss in value. Nestled in a neighborhood that was ravaged by those same angry gods to the tune of 45% value losses over the last few years, this property was somehow passed over and has retained its peak value, according to the homeowner.

Not only have the gods of home devaluation smiled upon this house, but many of the minions that associate with those gods have also decided that this house will be the exception. The god of home mechanicals has determined that the 30 year old furnace probably has another 30 years in it, so there is no need to replace it, nor the water heater which is after all on 15 years old. The goddess of roofs has decreed that 30 years have not diminished the sturdy shingles that make it up and indeed she has directed many of the shingles to curl up in smiles in celebration. The goddess of the galley kitchen has joined the celebration by assuring the owners that retro-look vinyl countertops are back in favor and that Harvest Gold appliances are again all the rage in kitchen design.

The owners also took offense at my suggestion that replacements for their old aluminum framed windows might add value. They have been assured by the window spirits that aluminum is much sturdier than those new-fangled vinyl windows. They also assured me that air conditioning is not required, since it only gets hot a few weeks each year and the goddess of comfort is perfectly happy with just opening the windows during those warm stretches.

Needless to say, we could not arrive at an agreement on a listing price. They certainly felt sympathy for the unfortunate other homeowners in their sub whom the gods had not passed over and who have sold in the last 2-3 months for so much less than their home is worth; but they opined that they certainly aren’t going to give their home away, so they’ll find someone else who will appreciate its value more than I did.

I thanked then for their time and wished them luck and stood outside for a while looking for any visible sign that the gods may have used to mark this house for the various miracles that have occurred for it. I couldn’t see any through the overgrown bushes that completely obscure the front of the house.

Monday, August 29, 2011

Reading market reports can give yo a headache...

Every week starts off with reports issued by various groups like the National Association of Realtors (NAR) and the Mortgage Bankers Association (MBA) and others trying to analyze and report what it going on in the real estate market. Reading those reports can leave you scratching your head and wondering, “What did they just say?” That is especially true if you read any of the compilation reports where the Arthur combines 2-3 of the other reports.
This morning’s RealtyTimes report had one such article in which the author, Carla Hill juxtapositioned bits and pieces from some of the official releases of various learned groups. Reading any two sentences in a row almost makes your head spin. Delinquency rates are up, but they are also down (new delinquencies vs. 90+ day delinquencies). Home affordability is the best it’s ever been, but no one can afford to buy a house. Huh?

Both NAR economist Lawrence Yun and MBA chairman Bob Nielson agreed that tight credit requirements by banks, in addition to continued economic weakness are the major culprits. Overall sales of existing homes declined by 3.5% in July from June in the U.S. Of course there are some bright spots – a couple of the regions that both groups track are in positive territory – the Midwest with a 1% growth in existing home sales and the Northeast with 2.7% growth. The Midwest even saw 31.3% year-over-year growth in existing home sales.

I guess it’s best just to ignore all of these higher level reports and focus upon the market that’s right in front o me. I report on it every week on my Web sites. Even in my little patch, which covers only 9 townships in Southeastern Michigan there is great variability. A few of the townships – West Bloomfield, Highland and White Lake – are still mired in foreclosures. A few are just putzing along with relatively low sales activity even if their homes are more affordable that ever – Milford, Green Oak and Hartland. A couple are doing OK, with reasonable sales activity – Commerce and Brighton – and one is doing fairly well by today’s standards with new build home sales driving its market – South Lyon. You can see all of the statistics that I report about those markets at

Home prices nationally are still declining and that is generally true in my little patch too; although, the rate of decline has dropped into the low single digits, which is a good thing. I also seeing more and more homes sell for well above their assessed value, which is an indication more than anything that the assessors may have overshot the mark on lowering home values for tax purposes. Low bank appraisals also continue to be a major issue in my market and that issue is not helped by the lower assessed values. Both assessors and appraisers are now using distressed home sales as comps, which has created sort of a downward spiral effect.

Low inventory is becoming a real issue here, too; especially in our traditional market sweet spot of $200-400K. The people who own those homes now are under water on them and reluctant to put them on the market. So, what “move-up” buyers we have out looking are finding pretty bare shelves in this market. The lease market inventory has also almost dried up, since so many displaced people have been renting while they try to rebuild their credit. It’s very tough to find anything in the lower end of the rental market (under $1,500) that is suitable for a family to live in.

As a Realtor, I guess I benefit from one of the bad news-good news statistics, too. The bad news is that many licensed agents have left the business (especially the part timers). The good news is that I get more of what little business is left. That seems to be true across the country too, with the number of Realtors down considerably and fewer coming into the business. Of course brokers don’t like that, since there are fewer agents to collect monthly fees from to sustain the broker business model. Maybe that will force some changes to that whole model.

So, that’s my report from the hinterlands. Things are good. Things are bad. Things are up and things are down. Everybody knows why, but nobody knows how to change anything. Blame the banks. Blame the government. Blame anybody but me.

Friday, August 26, 2011

Getting ahead of the email from Libya…

I thought that I would post this to allow fellow Realtors to get ahead of the curve on he next big eMail fraud campaign that you can expect.

“Hello fellow Realtor. I need your help. I was a very successful Realtor in Tripoli, Libya until just recently. My major clients – the Qadafi family – were major property owners; however, an unexpected change of fortune made it necessary for them to liquidate their holdings recently. I was able to get short sale approvals pushed through rather quickly during the changes that recently overtook the country and was successful in selling over $50 Million worth of prime Tripoli properties to advancing rebel investor groups.

In the ensuing chaos of the rebellion, the Qaddafi family assets and my commission of some $5 Million dollars U.S. was frozen by The United States and other NATO countries. I am assured by the bank that my commission is safe and that it will be released to me within a few months, if I post a 10% surety bond - $500,000. U.S. .

I am hoping that you can help me with that bond. Since I had to flee the fighting in my country I have no current access to my own bank accounts in Libya, which I assure you would be sufficient to past the surety bond. I am prepared to offer a large premium for your support. I have arranged with four other Realtors in various locations around the world for loans of $100,000 each for a period not to exceed 6 months, with a payback of $200,000 at the end of that period.

As you can tell, I am a very generous man and more than willing to reward those who assist me through this unfortunate time in my life. If you can help, please let me know via return email and I will forward instructions on how to wire your funds to my transfer agent, the firm of Dewey, Cheatum and Howe, in London. Thank you for your support.”

Monday, August 22, 2011

A nation hunkered down...

In today’s Bloomberg News there is a story about homebuyers “hunkering down” in today’s economy instead of buying homes. The story used the definition of hunkering down as hiding in fear. The reporter sited instances where buyers even pulled back offers, based upon the turmoil in the stock market and the resulting uncertainty overall with the economy. People are hunkering rather than buying.

I guess the news is bad. NAR reported that July sales fell to the lowest point this year and Karl Case of the Case-Shiller report even was quoted in the Bloomberg article as stating that another recession may happen if the housing segment continues its swoon.

Indications of the malaise included the fact that applications for mortgages to buy homes dropped to a 13-month low in the week ended Aug. 12, even with rates at historic low levels, according to the Mortgage Bankers Association. The article reported that Bloomberg Consumer Comfort Index sank to the lowest since the official recession. In addition the stock market has been down for 4-5 weeks, so many people have seen their down payment nest eggs disappear. Even with low mortgage rates there has also been a huge increase in cancelled deals due to low appraisals according to the story.

The result of all of this gloomy news is a nation hunkered down, doing nothing until this all blows over. However, this is one of those chicken or egg situations. In the past, the economy has always been led out of recessions by the housing industry. Improvements n home buying led to increases in building which led to better employment and on and on. This time no one is buying, so few builders are building and the whole mess is feeding upon itself.

Even attempts by the government to encourage home buying by keeping rates low and promoting program after program to encourage lenders to loosen up have not worked. The encouraging news that foreclosures were down the last couple of months was driven as much as anything by the lenders’ reaction to the various robo-signing investigations into foreclosure irregularities, not by shifts in the fundamentals of the housing market.

So, what’s a Realtor to do in this hunkered down world? In my area at least, there are still sales happening – they are just low-end sales to investors and first time buyers. So I focus upon them. There are few move-up buyers (those in the move-up sweet spot in this market of $200-400K) out looking, but I do get an occasional one or two. They are usually very finicky and are really looking to steal a move-in ready house at “destroyed foreclosure” prices. It’s just the nature of the market.

Many of the buyers in the move-up price range in this area aren’t the classic move-up buyer with a house to sell or who just sold; they are the people who lost their own homes to foreclosure 3-4 years ago and now have repaired their credit enough to start looking top buy a home again. They have to be vetted carefully with a good mortgage person, so that I don’t waste a lot of time with wishful thinkers instead of real buyers. More than once my mortgage person has had to tell them that they still have work to do on their credit before they should be out looking.

I guess that Realtors need to use the other definition of “hunkered down” that I found on-line in the Urban Dictionary – “to get to work, to focus on the job at hand.” We have to hunker down to the basics and work harder at sales that return less in order to get through this mess. If there is any good news to come out of all of this it’s the exit from the real estate business of the marginal, would-be Realtors and part-timers. That has concentrated what little business there is out there to the Realtors who have hunkered down to ride this thing out. So, hunker down fellow Realtors and let’s work our way through this recession. And for all of you would be home buyers, I'd say, "Get out there and do the patriotic thing - buy a house and help America get out of this recession."

Friday, August 19, 2011

The good ole days were always that good...

“How easy it is to think that the good old days were only good.” (Herb Chilstrom), from the Jack’s Winning Word blog.

Herb had a good point. We hear a lot about the good ole days in real estate and we tend to think about and mention only the fond memories; however, all was not always good in the old days. Those who have been in the business for longer than the last 8-10 years can tell stories that will make you cringe at the thought of going through what they went through in some of those old days, especially the days of hyper-inflation when mortgage rates were well above 10%.

I’m not sure that I can point back to good ole days, since I‘ve only been doing real estate for 10 years. It seems to me that I’ve been in what has consistently been described as a buyers market for all of that time, although certainly not as bad as it has been for the last few years. I’ve heard stories about the days when there were sellers markets and how frenetic the pace was back then, with bidding wars for almost every house. The Realtors who lived through that era don’t make it sound all that good either.

I suppose the best that one can hope for, in terms of perhaps a rational market, would be a “normal” market, whatever that it. I’ve seen differing definitions of what a “normal” market might look like, usually expressed in terms of inventory levels, days on market levels, mortgage rate levels, a balance between buyers and sellers and other factors. It must be a rather elusive mix because I haven’t seen it in 10 years. Perhaps the balanced market is like Bigfoot, often talked about but seldom, if ever, seen.

I suspect that people describing the “normal market” are actually reminiscing about some time in their personal lives that they remember as happy times and they associate those times with the real estate market. You really can’t turn back the clock, so longing for the good ole days is really a waste of time. Better that you should put that energy into figuring out how to deal with the days that are in front of you – for some, these are the “good ole days” that we’ll all tell our grandchildren about some day.

Tuesday, August 16, 2011

Hello, I’m an experienced Realtor and you’re an idiot…

Did you ever hit one of those long-term Realtors who thinks that everyone else in real estate is an idiot because they don’t all do it the way he/she does? It’s particularly maddening when they are also the type that starts most sentences with “I’m not going to let my buyer(seller) do that… or maybe I won’t even show my buyer (seller) your ridiculous offer, unless… or maybe I would never let my buyer (seller) use that type of mortgage company, I’m going to require them to get pre-approved by…

Some of the Realtors that I’ve hit lately, especially in the short sale market have been condescending to the point of being just plain rude. It’s certainly true that I don’t know everything about short sales, but I do think I know right from wrong and how to advise my clients to do what’s right – for them. Perhaps that is the issue; it may not be “right” for these old timers’s clients, at least not in their minds.

This is really a form of bullying, which many Realtors use as what they believe is a negotiating tactic. It’s as tiresome as the agent who whines their way through a litany of issues large and small that they have with the property that you represent as preparation for some low-ball offer that they may have advised their client to thrown in. Both waste time and both are really ego-driven attempts at misdirection to see if they can get the other side to blink or tire out and capitulate.

I’ve even had one of these prima donnas dress me down in front of her client because I didn’t have my client offer the best home warranty for her client – not the one that she always offers her clients. HELLO. I represented the other side, honey. I did the best I could for my client. You saw the warranty well ahead of closing, why didn’t you advise your client to upgrade it, if it wasn’t what you would have offered.

I guess it’s all just human nature. There will always be people in any profession who see it as a zero sum game – in order for them to win, you have to lose. I hope that I try to play the game such that everybody can feel like they won.

I’ve only been at it for 10 years, so I guess that old school agent with 20-30 years in the business will always see me as an idiot who doesn’t know what he’s doing or who is doing it wrong. So, I smile and try to stay calm and let them rant and rage and vent until they’ve run out of steam…and they always run out of steam, because once the hot air is gone, so is the steam. There. See, I feel better already.

Monday, August 15, 2011

Homeowners are just collateral damage in this fight...

The Sunday Detroit News had a front page story in the Sunday paper with the headline Homeowners Forced Out While Seeking Relief, with the sub-headline – Fannie Mae Pressures Banks To Foreclose, Contrary To Promises To Keep Families In Homes, Preserve Neighborhoods. The story took up three pages inside the paper, including lots of back story information about Fannie Mae and Freddie Mac and FHA and all of the other government organizations with fingers in this pot.

Newspapers love to take potshots at large government organizations, even if they are easy targets. There is usually enough ineptitude to flesh out the story. Throw in an All-America family with a hard luck story and you have the makings of what passes for journalism these days.

The gist of the story was that this local family fell on hard times and got a year behind on their mortgage. They were in the process of negotiating a HAMP loan modification when the bank foreclosed on their home, supposedly under pressure to do so by Fannie Mae. There’s a lot of fuzziness in the story and everyone who might have had really good first hand information refused to be interviewed for the story. One telling comment that was captured in the story was made by a Fannie Mae official who said that Fannie Mae needs to keep pressure on the banks to speed up their HAMP processing, so they push for foreclosures to motivate the banks. Notice that no mention was made of the families who are in those homes.

The truth is that all of these bureaucrats, whether with the banks or the GSE’s or other government organizations, just see these cases in the abstract. These are assets to them, not people’s homes. They have rules that need to be blindly followed, not individual situations that need to be evaluated on a case-by-case basis. I’m absolutely sure that the bureaucrat who made the decision to foreclosed on the home that was featured had (and has) no idea about the family that lives there, what they when through to get into that situation and what they were trying to do to make things right.

The bureaucrat at Fannie Mae doesn’t care. It’s not their job. They just know that the bank had requested yet another extension to the foreclosure process - one too many in their estimation – so, it was time to show the bank who’s boss and force the foreclosure. Nor did the guy or gal at the bank care. To them, it was just another asset that went into foreclosure. After all those people out there (whoever they are) would have probably just defaulted on the new loan, too.

So, “those people” out here sued. They sued the bank. They sued Fannie Mae. They sued anyone that they thought might be part of the giant conspiracy to throw them out of their home. And they made noise locally, which the local newspaper picked up on and decided would make a good story.

Will they get to keep their home? Will the bank, Fannie Mae, Freddie Mac and others be held accountable for actually following the rules of HAMP? Will pigs fly? We’ll probably never know. The story has run and the paper is on to tomorrow’s headlines.

The bureaucrats involved are used to shrugging off pesky people and lawsuits like this. After all the Federal Government can’t really be sued no mater how stupidly or egregiously it behaves. And, the bank is too big to fail and has pockets that are too deep to really try to win a lawsuit against. So we have the Don Quixote homeowners tilting against the bureaucratic windmill. Little do they realize that they are but collateral damage in the real fight between the Washington bureaucrats and the bank bureaucrats. That fight is not about the homeowners anyway – they are just assets to both sides – it’s about power, who has it and who can make whom blink.

Tuesday, August 9, 2011

Stinking up the place...

Today’s issue of RealtyTimes contains an article titles “Short Sales Still Irritate” by Bob Hunt. It cites a recent survey by the California Association of Realtors (CAR) that not surprisingly showed continued and growing frustration on the part of Realtors with the short sale process and the banks involved with them. I suspect that “Short Sales Still Infuriate” would have been a more apropos title.

The Hunt article discusses the work that CAR (supported by NAR) has done to try to get changes mandated to the banks, thus far to no avail; and their recent spate of advertising imploring the lenders to get their act together. It also gives statistics from the CAR survey that indicate that the overwhelming majority of survey respondents have had unsuccessful or unsatisfying experiences trying to do short sales. At the end it also cites that the survey says that the vast majority of the Realtors surveyed said that they would never recommend the lenders that they’ve had to deal with on short sales – as if the lenders cared.

Therein lies a part of the problem – the lenders just don’t care. They don’t care if Realtors don’t like them or their process. They don’t care if their own clients don’t like them or their process. The only people they care about are the politicians that they buy to make sure that they are kept whole in the current economic mess. The article pointed out that legislation backed by CAR to mandate specific decision timelines for short sales - H.R. 1498, "Prompt Decision for Qualification of Short Sale Act of 2011" - is bottled up in some House sub-committee in Congress, where undoubtedly some loyal lender-sponsored toady will probably keep it off the agenda until it dies.

So, being dissatisfied and unhappy with short sales is, and will be, a fact of life for Realtors and their clients on both sides of the deal for the foreseeable future. I guess we need to get over it and get on with things.

For Realtors who just don’t want to deal with them directly, short sales will be like the skunk that walks around your house at night. You may not have dealt with it directly, but the smell is always there and it stinks up the whole area. Short sale lenders are our skunks as Realtors. Some Realtors will figure out ways to work with them without getting sprayed. Some will try and back off after getting sprayed a time or two and many will just have to continue to do business in the area surrounded by the smell of the skunks that they don’t deal with directly. It stinks, but it is reality.

Wednesday, August 3, 2011

A reasonable alternative...please!

I saw an article yesterday in some news feed that I get from somewhere (it may have even been a blog) that had the headline "When did America become so cautious?" The article was lamenting the lack of out-of-the-box thinking in American politics. Of course, it was focused upon the recent debit-ceiling crisis and the lack of original ideas and their rigidity of the approaches of the two sides in the debate.

I would submit that this is because all of the money and lobbying influence has lined up behind the extreme wings of the two parties. Members of either party who stray from the party hard-line are reigned in or threatened with the loss of committee assignments and campaign support. There is little room left for compromise or common sense.

I do believe that we are in a technology environment right now that would allow the creation and the success of a more moderate, centrist party. The ability of the Internet to support massive crowd sourcing, as evidenced in the recent uprisings in Egypt and elsewhere in the Middle East, could be used to bypass the need for as much on-the-ground party apparatus as has been required in the past. If Ashton Kutcher can get over a million people to sign up to follow him on Twitter in just as few weeks, I can imagine a charismatic politician being able to do even more.

What we have lacked is that intelligent and charismatic person who is willing and able to take on the established parties. Ross Perot tried it years ago with some success. He was eventually undone by his lack of the necessary political and communications skills to express a clear and credible alternative. He became a caricature.

So, we just need to find that independently wealthy, reasonably intelligent and charismatic person who sees personal value in serving his/her country to form the nucleus of a new centrist party and rally around him/her.

I'd sign up to follow him/her on Twitter and help them get other rational and moderate people elected to Congress.. Heaven knows we need someone better to follow that the clowns that we have in Washington now.

Tuesday, August 2, 2011

“Ignorance is innocence - stupidity comes with experience”

What a great quote to follow up yesterday’s post about short sales. As I look back on things, I think I can claim innocent ignorance in my first couple of short sale experiences. Now that I’ve had a few short sales, I must now admit to the stupidity that comes with experience. That’s one reason that I sought out a partner for the negotiation portion of the short sale business. The more that I experience what goes on in short sales, the more stupid the whole process appears to me.

The main speaker at the recent ConEd class that I attended on short sales made the point early in his presentation that one must leave common sense out of the process. He had great stories about the nonsense that his company runs into all the time in dealing with the lenders on short sales. There is little place for logic or common sense in the process.

Perhaps the most telling indicator that common sense might not prevail is the classification of all of these homes by the lender as “assets.” They are not someone’s home, they are assets. They are not a lovingly cared for family treasures, they are assets. They are not the single most expensive and important possession in someone’s life. They are assets. Once they are abstracted to the status of assets and then lumped with other assets into investment instruments that become the possessions of investors, all connection with reality and common sense is lost.

Assets, after all, must be dealt with using rules and computer models and their fates be decided by committees. Asset managers must be assigned. Committees must meet. Databases of the assets must be created and reports must be generated. Decisions cannot be made in haste with assets. And decisions must be made in an orderly fashion and with the consent of the investors in these assets. An organizational structure must be created to deal with these assets, perhaps even special Web sites created. Why, an entire industry could grow up around these assets – and has.

Meanwhile out in the asset in question it’s been two months and no one has heard anything back from the lender about the short sale offer. Dad still hasn’t found work and the old family asset is starting to deteriorate. The family is innocently ignorant of the stupidity that is going on in the experienced land of asset management.

And yet that is our world of real estate. We do the best that we can to counsel patience and persistence to the people living in the assets. We hold hands with them. We commiserate with them. Sometimes we may cry or pray with them. Out at our end these assets are still someone’s home.

Monday, August 1, 2011

Short Sales are with us for a while...

I took a Real Estate Continuing Education class last week that was put on by the owner of a company that does short sales negotiations. He had lots of interesting statistics and stories about short sales, both the horror stories and the good ones. The thing that I took away more than anything else is that this issue will be with us for many years to come. I guess that was pretty obvious because of how far home values have fallen (at least in this area). Locally we are at about 1995 home value levels, which is about 40% lower than the 2006 peak values. So almost everyone who bought in the late 1990's and early 2000's is pretty much guaranteed to be under water. The presenter at this training opined that short sales will be with us (and probably will represent the majority of our business) until at least 2020. I have no reason to doubt that prediction.

I'm not a big fan of short sales. Let's face it, they are a pain in the rear; however, they are also a fact of life in real estate and so much better than a foreclosure. So, after checking them out further, I decided to partner up with this short sale negotiations outfit and re-institute my short sale Web site as a way to generate some business. I own some interesting URL's oriented around short sales and they tend to generate leads. I had turned off ny short sale web sites because the last set of short sale negotiator partners that I had turned out to be sleazy operators, even though they were attorneys (maybe that shouldn't have come as such a surprise).

I'm also theorizing that an improving economy will increase short sales, since there has to be lots of pent-up demand to sell in the Baby Boomer segment that is at, or near, retirement. They need to downsize for retirement and their loss of job income may qualify as their hardship. Certainly many have put themselves in untenable mortgage positions, with most believing when they did so that property values would continue to rise. There also has to be a huge group that needs to move somewhere to take advantage of work opportunities that should start opening up in an improving economy. They'll need to sell here in order to move for jobs.

It's possible that the programs that are being experimented with by some of the big banks to reset loans amounts as part of a loan restructuring will catch on. So far those are aimed at letting the people with toxic ARMs refinance and I'm sure the banks are not real big fans of them either. The banks used to offer a deed-in-lieu option too; but, that has largely fallen out of favor.

So, if you are in Michigan, go to and check out our short sales program. Doing a short sale certainly beats letting the place go into foreclosure or being really stupid and just walking away.