Monthly Archives: January 2009

Virtual Discrimination by Real Estate Brokers

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A real estate broker who operates in 23 states has filed a complaint with Federal authorities against the local MLS for “restraint of trade” practices, according to Inman News. Ryan Gehris, who is a broker of record for flat-fee real estate company Housepad.com in 10 of those states, alleges that the North Carolina MLS’s requirement to physically attend specific MLS orientation classes discriminates against non-traditional web-based brokerages. I think he has a point.

handcuffed to laptop

Do I have to be here?

While I can see an argument for the advantages of attending specific events, I think that the mandatory requirement of attendance takes it too far. I think of it like networking – It makes sense to do it, but if you don’t it’s your business that is likely to suffer and that’s your choice.

In this age of WebEx, Skype or UStream.TV online meetings, it just isn’t necessary to physically go somewhere for most types of training, especially computer training. And the cost and time concerns associated with attending far away events can make it prohibitive, especially for agents that have other obligations and commitments.

The spokesperson for the MLS said the training is “not intended to be a burden to participants and is required because of the substantial changes in technology.” But if people can get a college degree with online training, it’s hard to imagine why basic MLS user training requires someone’s physical presence to be effective.

The real reason may be that the MLS would like to make it hard for non-brick-and-mortar business models because they do not like the competition. I say let their business model succeed or fail on it’s own merits, not because of discriminatory road blocks put in their way.

Rain City Guide Eastside MeetUp

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We’re planning a Rain City Guide “Meet Up” at Crossroads in Bellevue on February 4th at 6:30 p.m. 

I know Rhonda, Jillayne and I will be there.  Possibly Robbie and/or Galen, and others from RCG.

Pretty informal, as most “MeetUps” are.  No pre-planned “agenda” unless someone wants to submit a few topics they would like covered.

I picked Crossroads vs. “a pub”, as I don’t like to encourage drinking and driving.  It will be in the food court area, so people coming from work can grab a bite to eat. 

Hope you can make it, and we will post a reminder the day before or day of “the event”.  Anyone from RCG who is planning to attend should send me an email.  It would be nice if readers could RSVP in the comments here, so I could “reserve” tables as needed, but RSVP is not required.

We’ve never done one of these before (or I haven’t) so if anyone has any suggestions based on their previous experience at “MeetUps”, advices would be much appreciated.

Should builders and banks receive an excise tax exemption as WA State faces a budget deficit?

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House Bill 1495 has been introduced into the legislature and is now in committee.  In these times filled with hope, I am hoping this bill dies or at least comes out looking substantially different.  Let’s take a look.

AN ACT Relating to real estate excise tax exemptions to stabilize neighborhoods…

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
The legislature finds that there is a substantial inventory of unsold or foreclosed vacant homes on the market that is driving property values down and destabilizing neighborhoods. These homes also present an opportunity to provide affordable homes to low-income families, addressing some of the unmet need for affordable housing in the state of Washington. The legislature also finds that providing targeted incentives to housing developers will stimulate the sale of these vacant homes to low-income buyers now and stabilize neighborhoods affected by this growing inventory. The legislature intends to provide such incentives through excise tax relief on sales of homes to low-income first-time homebuyers.

I’ve been asking Realtors in all my classes to begin watching the percentage of financially distressed sellers with homes for sale in their market area.  Agents can do an MLS keyword search using terms such as “short sale,

How to stop escrow madness in an instant

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The most wonderful, beautiful and innocent thing stopped the frenzy,  processes and insanity of end of month escrow transactions in an instant.  That thing was the glow of a sharply dressed very elderly woman who happened to find her way to our office and came to our front reception counter and said,

“Hi, can you help me, I’m lost and I can’t find my way home.”

In the midst of all the domestic and world issues, real estate problems, war conflicts, economic woes, layoffs, stock market crashes, corruptness of Bank and Investment CEO’s, politicians and everything else that batters our minds;  for me, it all became meaningless and subordinate to this gracious lady and her memory ailment. At that point I didn’t care about anything but her and helping her find her way home, which I did.

Escrow.  You just never know what each day will bring.

And the Fed…

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With the Fed’s key rates all ready at a rock bottom 0-0.25%, no one anticipates rates to be lowered.  Any reaction will be from the release of their announcement which is anytime. 

Dan Green, one of my favorite mortgage bloggers, is documenting the impact of today’s Fed announcement to mortgage rates via Twitter.   Check it out.

I’ll update this post in a few moments with my two cents following the FOMC announcement.

Update 11:20 am.  

The Fed leaves the Funds Rate unchanged stating that “the economy has weakened furthe”r since their last meeting in  December.   They also reaffirmed their committment to continue buying mortgage backed securities:

“The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability. The focus of the Committee’s policy is to support the functioning of financial markets and stimulate the economy through open market operations and other measures that are likely to keep the size of the Federal Reserve’s balance sheet at a high level. The Federal Reserve continues to purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand the quantity of such purchases and the duration of the purchase program as conditions warrant.”

Click here for today’s FOMC Statement and be sure to follow Dan Green’s reporting on the reaction of mortgage backed securities.

2009 $8,000 "1st time" buyer credit

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IMPORTANT UPDATE!  Bill signed on 2/17/2009.

Original post below:

Back in October, I wrote this post about the repayment feature of the 2008 $7,500 1st time buyer “credit”, including this link to more information as to who qualifies, and the terms of the “credit”.

Yesterday on Twitter I noticed Ryan Hukill’s post referencing Kenneth Harney’s article suggesting that:

“… Congress might be on the verge of transforming it into a true tax credit — one that never has to be paid back…” for purchases made on or after 1/1/2009.

I personally don’t see how changing the repayment terms for people who bought houses last year can be part of a “stimulus” package.   Posting this so that people who are eligible for the credit are aware that there may be a change in the repayment feature. (update: Apparently Obama agreed with me, as there does not appear to be a change in the repayment feature for homes bought from 4/9/08 through 12/31/08 and the 2008 $7,500 Loan/Credit.)

Ruin Sity Gaide

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I love this comment posted by David Losh over on Seattle Bubble.  I decided to give it it’s own post before it faded away into oblivion. 🙂

“If you do come to the internet for information about a home purchase or sale you are in the wrong place. This site (Seattle Bubble)  has excellent financial crisis dialog, but is very short on Real Estate information. It does provide much more information than a Ruin Sity Gaide, but still this is just entertainment.  The internet Real Estate sales business model is a very long way off if it will ever be viable. radfun hired the expodia.com sales person to push the Real Estate sales agenda on line. Sellers with problems flock to the online Real Estate sites along with the week end warrior home shoppers. It’s a mish mash of confusion that radfun happily collects fees for. In time it will be obvious this was just a continuation of a problem rather than a solution. Be very careful of what you think you will learn about Real Estate online. These are sales people looking to collect your money for doing nothing, that’s the business model.”

"Over-priced" Houses That Don't Sell

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As I wander through the various message boards, I often read about people’s frustration regarding “over-priced houses that can’t possibly sell”.  To a buyer who likes the house, and is waiting for the price to be within reason, this can be very frustrating.

What they fail to understand is that every house that is for sale, is not necessarily going to be sold by the current owner. 

1) Divorce – Often in a divorce, one of the spouses is offered an option to buy out the other spouse.  In a market like this one, sometimes the agreed upon price must be tested.  Say the spouse who is leaving wants the buyout price to be $600,000. Let’s say they bought it for $400,000 and put $100,000 worth of improvements into it.   They put it on market for $$599,000 and keep reducing the price to $519,000.  Then it goes off market (this is a real case) and it never comes back on market.

Meanwhile, a buyer has been watching it, who wanted to buy it for $485,000.  He’s been watching it for 7 months.  He feels “used” and frustrated that it went off market before it hit an asking price of $499,950 .

Once the value was proven to be $400,000 plus $100,000 at best, the two spouses agree on the “buyout” amount, and one of them gets to stay in it.  It was only ON MARKET to prove to one of the spouses that the price of $600,000 was unrealistic.

2) Passive Aggressive – saying YES and meaning NO.  Husband and wife have a fight and the wife calls an agent to list the house, planning to get a divorce when the house sells.  Husband signs the listing paperwork at a price at which he knows it won’t sell.  He appears to be cooperating with the sale, and blames the market for the wife’s failed plans 🙂  They make up at some point, take the house off the market, and live “happily” ever after…until the next fight.

3) “Mom, you HAVE TO move” – Well meaning children tell Mom she’s too old to live in that big house all by herself.  She’s tired of hearing it, and agrees to put the house up for sale.  High price and awkward showing instructions.  “Can only be shown with listing agent present’ or “Can only be shown on weekdays from 10 a.m. to 4 p.m. and not on weekends”.

Sometimes these homes are on market from April through October, every year, year after year, with the price increasing every year.  Kids wonder why Mom’s house won’t sell, but they stop bugging her about her need to sell it.

4) Short Sale – Bank approves a sale price of $450,000.  House sits on market at $450,000.  No offers.  Owner can’t lower it below what bank has indicated they will take.  Bank won’t reduce the amount they will take, because they have an appraisal at $450,000.  House sits on market until someone buys it at foreclosure.  Some owners keep reducing it every couple of weeks, but mls says they can’t offer it at a “fake” price not ratified by the Bank…big Catch 22.

So when you look at the inventory of homes for sale, understand that they will not all be reduced to a price at which they will sell.  Often you will not get the real story about the seller’s motivation.

2009 is the Brightest Year

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Last night was “Chinese New Year” and unlike 2008, which was “a blind” year, 2009 is “a bright year”.  Now before you get all excited about this Year of the Ox, let me explain what “bright” means.

Remember the movie “Wait Until Dark”? The fear and damage caused to the blind woman, when simply being touched with a scarf, by her “torturer” in her darkness?  It wasn’t WHAT he was doing…it was that she couldn’t see it coming…couldn’t see who and what it was.  That was 2008.

In the ancient culture  of Chinese New Year, the  “eyes” of the year are on February 4th. The dates that encompass each year are determined by the cycles of the moon. Some years, like 2008 have NO February 4th, and so are blind years.  Others have only foresight, with February 4th in the beginning, but not at  the end.  Some years have only hindsight, with February 4th at the end of the year, but not at the beginning.

2009, which started last night at the first new moon of 2009, has two February 4ths, giving us “the brightest” of years, with both foresight AND hindsight.   The year begins on 1/26 and ends on 2/13 this year, so 2/4 comes around twice. Bright doesn’t mean GOOD, it means if you don’t see it coming…and if you look back at the end of the year and “wish you had” done things differently…then you were choosing to bury your head in the sand, and you refused to see the handwriting on the wall.

  1. Thinking about flipping a house?  Think again.
  2. Thinking low priced home sales all around you, are not going to affect your property’s value? Think again.
  3. Think the real estate market is going to come back to the point where all people with a real estate license can make a decent living?  Think again.
  4. Think Obama is going to turn this market around by the 2nd Quarter? Think again.
  5. Think throwing good money after bad is going to save the economy? Think again.

If you bought a property in July of 2007…bite the bullet – or stay in it.  Wishing the market is going to get back there soon, is not going to make it happen.

In a “bright” year, you know what to expect and you base your actions accordingly.

  1. Try to get a loan mod, ONLY if you can afford the resultant new payments.
  2. If you see no hope of your income getting back up to anywhere near where it was when you bought the house; let it go to foreclosure, wave goodbye, and reduce your expenses.
  3. If you are a move up buyer, understand the house you buy is also down in price, and reduce the sale price on the one you are selling accordingly.
  4. If you are afraid of losing your job, stop buying toys you don’t need to have, and put 3-6 months of expenses in the bank, just in case.
  5. Recognize that Obama as President means we have the Leadership to help us do what WE need to do…not an Il Salvatore with a magic wand.

It’s a bright year…use it wisely.

Obama plans on tighter regulations for mortgage brokers

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From the New York Times

The Obama administration plans to move quickly to tighten the nation’s financial regulatory system. Officials say they will make wide-ranging changes, including stricter federal rules for hedge funds, credit rating agencies and mortgage brokers, and greater oversight of the complex financial instruments that contributed to the economic crisis.
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Aides said they would propose new federal standards for mortgage brokers who issued many unsuitable loans and are largely regulated by state officials. They are considering proposals to have the S.E.C. become more involved in supervising the underwriting standards of securities that are backed by mortgages.

None of this should be a surprise for regular readers of Raincityguide.  I’ve been talking about tighter rules for mortgage brokers since 2001 and here on RCG for two years.   Mortgage brokers will always argue that they are already tightly regulated. In some states, brokers have tougher regulations than consumer loan companies.  Hey, wait a minute.  Is President Obama going to let the consumer loan companies slide by without proposing tougher regulations for them as well?  The top two largest predatory lending lawsuits were against consumer loan lenders Household Finance and Ameriquest. Both companies settled out of court and “admitted no wrongdoing” even though there was lots of evidence that their sales people were meticulously trained by management on how to do wrong. 

Maybe tougher minimum sanctions and penalties are in order as well.  We must also realize that these new regulations mean nothing without enforcement.  I would rather see the states be in charge of enforcement than the federal government (well, with the exception of Florida where they have proven their supreme incompetence.) We need only to look at RESPA and the miserable job HUD has done trying to enforce this massive piece of regulation since 1975.  So if it’s going to be up to the states, then the industry should prepare for a higher cost of doing business as a mortgage broker or consumer loan lender.  This will be passed on to the consumer in the way of higher fees, rates, or both.