Just let the market be the market. Why try to fix things that can not be artificially fixed? Do this and others will call foul. How about those that already sold their homes at low values because of the foreclosure comps? Now, will we have to help them regain their 'lost' money? Let it be and everything will eventually heal. Stop picking at the scab. It will only make it worse.
By Martha C. White
msnbc.com contributor msnbc.com contributor
updated 5/25/2011 7:15:27 AM ET 2011-05-25T11:15:27
Pity the poor Nevada homeowner. With home prices tumbling there at perhaps the fastest rate in the nation, it has become nearly impossible to get a handle on how much a home is worth. Why? Because appraisers, who base home values on comparable sales, have to depend on the plummeting target of “distressed” property sales that dominate in the state.
Nevada state Sen. Mike Schneider is trying to fight back with proposed legislation that aims to set a floor under prices, which have fallen well over 50 percent on average in the Las Vegas area over the past five years. A few months ago, he sponsored a bill proposing a radical new mandate for appraisers: Stop paying attention to those “distressed” sales. Legislators in other states and industry executives are watching closely.
The legislation's legality has been called into question because it runs counter to the Uniform Standards of Professional Appraisal Practice, the federal regulations home appraisers are required to follow.
Opponents — who include professional appraisers and their trade association, as well as some skeptical realtors — say there’s no way such a law can be worded that wouldn’t require appraisers to violate those regulations. This opposition persuaded sponsors of similar bills to abandon their campaigns in Maryland and Missouri. Likewise, action on another such measure is stalled in Illinois.
Nevada’s Schneider is soldiering on, however, crafting verbiage to replace his initially proposed distressed-property exclusion with a kind of “rounding up” mechanism by which appraisers could assign a higher value to a foreclosure. Paul Bell, president of the Greater Las Vegas Association of Realtors, acknowledges the challenge presented by federal guidelines but says lawmakers must try to legislate a reversal of what he calls an artificial devaluation of homes.
“We’ve had new home contracts fall out because the homes appraise for less than what it costs a builder to construct a property,” Bell says.
“Banks are just dumping properties, and there’s no relevance to the price,” Schneider says. “Those bulk sales should not be considered as true sales, and they should be adjusted in value in some way.”
“When people want to sell their homes, they’re going up against all these properties sold at fire sales,” says Illinois state Rep. LaShawn Ford, who introduced a foreclosure valuation bill in that state. It failed to survive an initial vetting in the legislature because of the conflict with federal appraisal standards, but Ford says he’s reworking the details to reintroduce a version in fall session. “I’m not going to give up on it.”
Leaving aside the question of whether these laws could be worded so they wouldn’t conflict with federal rules, appraisers say there’s also a serious logistical problem: In some parts of the country, the only houses selling are foreclosures. A law that excludes these would give appraisers no way to determine a home’s value.
In Sedona, Ariz., for example, only two out of about 1,000 sales last year were not distressed properties, says Richard Hagar, owner of American Home Appraisals in Mercer Island, Wash. A bill excluding these properties wouldn’t give him enough information to value a home or would force him to assign artificially high home values, he says.
“Distressed properties are the market,” Hagar says. “That is
market value.”
Real estate data seems to back up this assertion. Sales of distressed homes accounted for 37 percent of all existing-home sales in April, according to the National Association of Realtors. Prices are still falling, with the median price of homes sold down 5 percent from a year earlier, according to the association.
Hagar said today’s prices, while painful for homeowners trying to sell or refinance, are an accurate reflection of the market. Also, consider the effect of recent federal tax credit programs that were aimed at bolstering the market but were suspected of falsely inflating prices. After the final credit expired, home sales dropped by 33 percent and a modest increase in prices quickly reversed.
Is there anything a homeowner can do besides despair as they watch their property values slide? Aside from long-standing advice to keep yards tidy and paint schemes neutral, there are a few things homeowners today should keep in mind.
A recent study conducted by the Department of Energy found that houses with a solar energy system sold for $17,000 more than comparable homes without them. If you’re going to install any “green” features, though, hold onto your old utility bills, which can give an appraiser a better idea of the enhancement’s value.
In addition, bigger bedrooms and bathrooms are more popular and therefore worth more than small ones, so don’t carve up your bedroom to add a walk-in closet. Generally, more bedrooms and bathrooms also command a premium, says Ken Chitester, spokesman for the Appraisal Institute, but converting your garage into a master suite is a wash: The two features are valued about the same.
© 2011 msnbc.com. Reprints
Here is another great article/blog about setting expectations. All too often, Buyers get frustrated with their Realtor. many think we are just trying to earn a buck and we really don't care about our clients' needs. Yes, people have actually said that. Sometimes, it is the Realtor's fault. Some really are chasing a dollor. But the blame game can go both ways. Many Buyers are either unrealistic in their expectations, or are not communicating their needs effectively.
Using a Real Estate Broker to assist in buying a home is just like any relationship. It takes work, it takes practice, it takes time and it takes commitment. There is no 'one-size fits all'. It should fit like a shoe. You might have to try a few to find one that works for you.
But as the article below explains, YOU, the Buyer must understand that the real estate world may not be your Oyster. You may have to sacrifice to get what you want. Sellers are not ALL clamoring for YOUR business. Some may NOT want YOUR lowball offer. And perhaps you can not afford granite, tile a cul-de-sac and acre lot on your budget.
On the same token, we Realtors must listen. We Realtors must ask questions. We Realtors must communicate.
Its a two-way street with traffic passing in both directions.
=================
Q: How would I find an agent motivated to help me? A while ago I was thinking about buying a house, but the agent kept showing me houses out of my price range. She did not provide information on first-time homebuyer programs, etc. Help! --Daphne W.
A: Agents have long had a bad rap for showing people more expensive properties than they could afford, hoping the whiff of granite and rubbed bronze would intoxicate buyers into spending more than they planned.
The fact is, the recent market dynamics have educated all real estate players -- buyers, sellers and agents -- with a hard reality check, and lending guidelines are so tight that most agents know buyers don't have much wiggle room.
The last thing they want to do is set you and themselves up for failure by getting you into contract on a home you can't afford and the bank won't let you buy.
On today's market, it's much more common to see one of four reasons why buyers end up in situations like you've described, where they're working with an agent who is nice, but totally off-target in terms of the information and listings they offer.
First is that some agents are clueless. (Before the agent haters of the world rejoice, though, I should point out that this is the source of a very small percentage of the agent-client "issues" I see.) More often, there's just an agent-client mismatch.
Second is that the client is not being clear with the agent about their wants and needs. Did you ask her for first-time-homebuyer program information? Were you just expecting her to offer it because you knew she knew you were a first-timer?
Perhaps the first-time homebuyer programs available in your area are like those in mine -- inferior to financing programs that are available to everyone!
Did you tell her what your hard stop on prices was? Does she know what your mortgage approval limit is? Did she tell you she thought you could buy one of the more expensive listings she showed you for less than the list price, or was she hoping you could come up? I know some brilliant real estate agents, but I know very few who also possess the skill of accurate mind-reading.
Third, there are sometimes just good agents and good clients who are a poor fit for each other -- who seem to miscommunicate on everything about which it is possible to miscommunicate. This, too, is rare, but it does happen. You can avoid this by finding your agent by referral -- from a friend, colleague or family member who was in a similar homebuying situation to you.
If you are a barely solvent first-time buyer wanting to buy an entry-level palace and you decide to ping one of the agents you've seen on "Million Dollar Listing," you're setting yourself up for problems.
And this can be related to the fourth -- and most common -- issue that causes the kinds of problems you're experiencing: unrealistic buyer expectations.
If you're telling your agent that you must live in X neighborhood, must have X number of bedrooms and bathrooms, must have X number of thousands of square feet, minimum, and must have a three-car garage, the best school district, and so forth, your agent may be showing you only homes that meet that criteria -- which happen to be outside your price range.
I see this happen all the time: Buyers are stressed because they're not seeing homes they can afford, but their list of must-haves and deal-breakers inherently sketches out only homes they cannot afford.
I had a communication glitch like this with some relocating buyers years ago. They were moving from a very affordable area in the Midwest, where they had a sprawling home, with acreage in an area of beautiful tree-lined streets and award-winning public schools.
And they were moving to my town, which has been known to have million-dollar shacks, some of the worst schools anywhere, and where a few hundred thousand bucks buys you an entry-level, 2-bedroom, 1-bath, 900-square-foot pad -- even now.
So, I kept showing them what they could afford. And they kept hating it all. Then, finally, a switch flicked in my brain, and I said, "I think you think I'm not hearing you. So, let me take you to the home I think you want."
And I drove them over to a neighborhood similar to what they were used to and pulled them up to the curb of a home for sale that met their every criteria. They gasped with delight -- yes! this was it -- exactly what they'd been looking for! (Subtext: Why did it take you so long to show us this house?)
The list price on that home was more than two-and-a-half times what they were preapproved for.
Your agent might have been trying to tell you that your expectations were unrealistic, or trying to show you exactly what it would cost to get the home you said you wanted. You don't mention whether you ever found suitable listings at the right price range online and requested to see them, but that's certainly one way to get on the same page with an agent.
Moving forward, I'd urge you to be more aggressive in locating a suitable agent by getting a referral from another entry-level, first-time homebuyer who had a good experience with his or her agent; use any of the many real estate listing websites to conduct some proactive research into what listings are available and what you can get in your local market for the money you plan to spend; and do some investigating on the Web into first-time buyer programs in your area as well.
Before you contact agents, collect several referrals, then search for their names online to see if you can find any reviews from past clients, their own website or their participation in real estate Q-and-As online from which you can ascertain that they are first-time-buyer-friendly.
Then, walk into your first meeting with your next agent prepared with your mortgage preapproval paperwork, intelligent questions about specific listings, your local market, and what assistance programs they can help connect you with, and you'll likely have a better outcome the next go-round.
Tara-Nicholle Nelson is author of "The Savvy Woman's Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, http://www.rethinkrealestate.com/.
I see it alot: Someone advertises a short sale as 'Approved'. Wow! That means, well, what does it mean?
No short sale is 'approved' until the buyer is about to close. So, why do people advertise short sales as approved?
First, you have to figure out what they mean by 'approved'. Does it mean the Seller's financials are approved? Does it mean that the home is approved? Does it mean that there is a Buyer, and his offer is now approved to go to the closing department? Or does it mean that the Seller is going through the FHA pre-foreclosure/pre-approved short sale process, or perhaps the HAFA short sale process?
What I find out many times, is that a Seller's agent will advertise a short sale as 'approved' when there WAS an offer on the table, and that offer was provisionally accepted by the 3rd party. However, for some reason, the Buyer has backed out of the contract and the home is now available again.
Does this really mean that the short sale is approved? Does it mean that the previous Buyer's offer price was approved? Not really. See, anytime a 3rd party accepts an offer, it is 95% of the time contingent upon a specific buyer, a specific loan program, a specific price, and a specific payoff amount. So, if a previous Buyer backs out, then the short sale file may have to go through the entire process again. This doesn't sound like an approval to me. Sometimes, if a new Buyer comes in and offers the same price at the same terms, I have seen the lenders substitute Buyer's names. However, this is rare.
So, next time you see "Approved", make sure you find out HOW it is 'approved'.
Clarifications to Existing Guidelines Lead to a More Streamlined Short Sale
On March 30, the Home Affordable Foreclosure Alternatives (HAFA) program was revised again to further streamline the short sale process. HAFA offers significant cash incentives to consumers and servicers who successfully complete a short sale transaction or deed-in-lieu. Complaints that federal programs have had little affect on foreclosure rates has led the US Treasury to continually revamp the program to assist more distressed homeowners. In a prior update, eligibility requirements for HAFA were relaxed so thousands more distressed US homeowners could qualify.
Clarifications in the March 30 update will make servicers more accountable in communicating with agents and homeowners regarding the status of their files. Revised guidelines also require servicers to make certain third party verifications regarding homeowner use of the distressed property as a primary residence in the previous twelve months.
For specific details regarding recent HAFA updates, you can download Supplemental Directive 11-02 here
The HAFA program is constantly evolving in an effort to bring more distressed homeowners and servicers together to avoid the fallout of foreclosure.
By Les Christie, staff writer April 14, 2011: 5:27 AM ET
NEW YORK (CNNMoney) -- On the surface, the foreclosure crisis seems to be easing. The number of foreclosure notices filed during the first three months of 2011 fell 27% compared with the first quarter of 2010, according to a report from RealtyTrac released Thursday.
Only 681,000 properties got hit with some type of filing -- a notice of default, a scheduled auction or a foreclosure sale -- during the quarter, one for every 191 households. There were 215,046 borrowers who lost their homes, down 17% year-over-year.
That improvement was in sharp contrast to other recent housing market metrics, with sales of existing and new homes very weak and home prices still sliding.
"The nation's housing market continued to languish in the first quarter, even as foreclosure activity fell to a three-year low," said James Saccacio, RealtyTrac's CEO.
The explanation for this contradiction is that the foreclosure improvement has been artificial, fueled by banks reacting to paperwork processing issues -- the infamous "robo-signing" scandal -- by cutting back on filings until they can clean up their procedures.
According to RealtyTrac spokesman Rick Sharga, without the cutback there would have been 900,000 filings during the quarter instead of 681,000. There would have been 280,000 to 300,000 bank repossessions instead of 215,000, he added.
Posted on April 23, 2011 by Raleigh Mortgage Guy
According the Triangle Multiple Listing Service, sales of single family homes in
Wake County (Raleigh, NC) are off 15.1% from the same time one year ago.
That’s bad news if you are a home owner trying to sell your home. While they say every dark cloud has a silver lining, I admit that I am stretching here when I tell you that the good news is that the number of new listings are also down, in fact a whopping 16.6%!
To sell their homes in this market home owners have discovered they are going to have to market it for 125 days (up 20% from one year ago) and they will have to accept nearly 8% less than their original asking price. While that is not what we have been accustomed to in Raleigh, it is still a very sexy real estate market compared to other markets in the country!
The great news is that long-term mortgages rates turned lower this week after rising for four consecutive weeks. From Triangle Biz Journal;
A 30-year fixed-rate mortgage averaged 4.80 percent in the week ending April 21, down from 4.91 percent last week, according to Freddie Mac‘s weekly rate report. A 15-year fixed-rate loan averaged 4.02 percent, down from 4.13 percent.
A one-year adjustable-rate mortgage averaged 3.16 percent, dropping from 3.25 percent last week.
“Low inflation is keeping mortgage rates at bay,” says Frank Nothaft, chief economist for Freddie Mac (OTC BB:FMCC). “The 12-month growth rate in core prices was 1.2 percent, which is rather low by historical standards.” Read more: Freddie Mac: Mortgage rates head lower | Triangle Business Journal
This means that buyers who have been “on the fence” who have seen rates trend upward for the past month now have a reason to get off that fence and act and if last weeks mortgage application flurry was an indicator we may have a mini rally here in Raleigh!
My advice – if you are a home seller and have had your house on the market for more than 30 days with no activity, you probably need to get realistic about your homes worth in todays market! Price it to move or take it off the market. If you are a home buyer there has never been a better time to buy a home and if you need more reason to buy here are five very good reasons to buy a home today! Download the complete Local Market Update for Wake County Raleigh North Carolina here.
Ricardo Cobos is a mortgage loan officer in Raleigh North Carolina. If you have questions, call me at (919) 559-3384 or email your questions
What worries me so much is that much of our Short Sale industry is handled by incompetent people. And I am not just talking about the lenders and banks.
What does it take to list a short sale? Not much. Just some smooth talking, a Real Estate license and someone who NEEDS you. And that is discouragingly what is happening: Realtors/Brokers who attempt to cover a short sale, while never having completed one. It takes experience, and if you are thinking of listing your home as a short sale - or if you are a Buyer who is thinking of buying a short sale, following are a few ideas or questions that you should ask of the Listing Agent. The Listing Agent (LA) is the one driving the car. He or she is the one on whose shoulders everything rests. If the LA doesn't know what is going on or how to do things, the short sale will fall apart. Guaranteed!
Do your due dilligence, and make sure you are dealing with someone who has a clue.
- What is your short sale success rate?
- Do you already have a complete short sale package together?
- What communications, if any, have you had with the lender(s)?
- How many liens are there?
- Has the bank approved the list price?
- Have you received any other offers that you are waiting to hear back from the bank on? How many offers are you sending to the bank/lender?
- Does the loan have PMI on it? (Private mortgage insurance)
- Has the Seller been qualified or denied for HAMP eligibility?
- What are the names of the banks? Are these Conventional, FHA or VA loans? FANNIE or FREDDIE?
- How long do you estimate that the lender will take to provide an answer to an offer?
- Has your seller completely stopped making payments on their loan.
- Is the Seller aware of the legal consequences associated with a short sale, and are they willing to financially mitigate the lenders' loss?
- How did you derive the price?
If the LA doesn't understand or give you a reasonable answer to any of these questions, I would move on.
Posted by Nin-Hai Tseng, writer-reporter, FORTUNE
April 5, 2011 12:05 pm
Homeowners in certain cities are more likely to quickly reduce their price than others. And where are the sellers most resistant to price reductions? New York City, of course.
FORTUNE -- Just how low could home prices go in your town?Despite the fact that rents are now higher in many cities than monthly mortgage payments, the latest report on the health of the housing market offers a dismal picture, showing little sign that home prices are hitting bottom. Prices in January fell 3.1% compared with the same month during the previous year, according to Standard & Poor's Case-Shiller Index. The index of 20 U.S. cities fell to 140, just a point above its spring 2008 low in the wake of the financial meltdown.
In many cities across America, home affordability has returned to pre-bubble levels, making real estate look like a bargain (see Top 10 cities for home buyers). But aside from big-time investors snatching up properties at lower prices, few people are actually buying amid high unemployment and tighter lending standards. In fact, in cities outside major metros with high foreclosure rates, sellers this Spring will likely cut their asking price -- not once, but twice.
On average, U.S. home sellers will reduce their list prices after about 2.5 months, or 79 days on the market, by 8%, according to a new report by real estate website Trulia.com. After making one reduction, 35% of these sellers will make a second.
Not every city has been enduring the long slog, however. Sellers in America's 50 largest cities have been more aggressive and quicker to make the first price reduction than the rest of the country, according to Trulia's analysis of non-foreclosure listings of residential properties between March 2010 and 2011. Minneapolis, MN led as the state quickest to slash prices at an average of 45 days, followed by major cities in California such as Oakland and Sacramento ranging from 49 to 53 days.
Tara Nicholle-Nelson, Trulia's residential real-estate expert, says the difference in urban areas has less to do with demand than with negotiating tactics. Urban sellers may be more aware that they need to negotiate downward than suburban and rural homeowners and may be able to afford to put the certainty of sale over money. These cities tend to discount their listings by slightly less than the national average at 7% and have a higher probability, 42%, of reducing their listing price again.
Given Trulia's micro-look at real-estate trends, it's hard to find the basis for the most bullish arguments in the housing industry. With inflation relatively low and unemployment, although improving, at a high 8.8%, the report confirms prices will likely drop further this year. But it's anyone's guess as to how much, as economists have estimated declines of anywhere from another 15%, 20% or 25%.
If you're a buyer or seller, here's what to expect this spring:
Detroit, with an average discount of 19%, led with the nation's deepest price cuts during the initial listing, followed by other foreclosure hotspots including Miami, FL with 11%, Columbus, OH with 11%, Baltimore, MD with 10%, and Atlanta, GA with 9%. Since these areas are already gravely depressed, the deep cuts could likely have long-lasting impacts on future home values.
The cities with sellers who didn't cut deep enough during the first go-around and will most likely have to cut deeper are Phoenix and Mesa, AZ, Jacksonville, FL, Baltimore, MD and Chicago, IL.
But many parts of the South and the Midwest didn't see prices peak nearly as high during the housing boom and therefore are least likely to have to reduce prices a second time. They include El Paso, TX, Tulsa, OK and Omaha, NE. And what Trulia calls the most "stubborn" sellers often waiting the longest, 80 days, before cutting the initial listing price, are New York City, followed by El Paso, TX, Charlotte, NC, Cleveland, OH, Raleigh, NC, Louisville, KY, Kansas City, MO and Memphis, TN ranging from 70 to 79 days.
Of course, we have all heard that phrase: "Don't take no for an answer". And I didn't do just that yesterday when I was on a short sale follow up phone call.
Always be persistent! I was checking up on a short sale file, as I was told, to call back on Thursday to make sure that file short sale was initiated. When I finally did, I was told that the short sale AND a deed in lieu were both denied. How could that be? We didn't even have an offer yet, my sellers have a hardship, and all of the requested materials were submitted.
The person with whom I was talking was just a grunt, so they had no answer. I was told that the file was referred back to the customer retention department. OK, so I was transferred. That person then told me that I was in the wrong department - I had to speak with someone from the FHA department, after all, it was an FHA loan. OK - makes sense. Then, that person, with a huff and a sigh, told me that this had all been done wrong. He proceeded to tell me that we couldn't do a short sale. WRONG! That's not the answer I was looking for.
It also pays to know a little about what you are talking about. Sir Mensa Scholar told me that since the property was not occupied, a short sale was not possible. I told Mr. Genius to look again... FHA/HUD rules state that a non owner-occupied home is eligble for a short sale if the hardship of the situation warrants abandonment. All along, Mr Brainiac kept sighing, letting me know that he was in getting frustrated.
I told him to recheck his facts and tell me who I needed to speak with. During the course of the conversation, he proceeded to give me incorrect information: such as the borrower MUST be 90 days late. WRONG Einstein! Its 30 days late. I corrected him.
Again, he told me that they would be happy to consider a Deed In Lieu. Really? I was just told that a DiL was out of the question. I asked him why he was forcing a DiL when we wanted a short sale. I told him I was not getting off the phone until I could speak with a supervisor, or someone who knew more about short sales than he. I was not going to accept his answers. He then admitted that he is not allowed to talk about short sales and proceeded to work on a DiL. At last, I demanded a supervisor. He then admitted that I needed to talk with the short sale department.
Well, so the circle come full 'round. The short sale department was where I started. This time, however, I was met with the kind voice of Jennifer. After making nice with Jennifer right off the bat, she educated me on WHY the SS was denied. Simply... the homeowners had not tried for a modification first. Actually, they had, but it was never recorded in their file.
So, I learned 4 things:
1) You attract more bees with honey than with vinegar
2) Sometimes you have to use vinegar to get past the worker bees and to the Queen.
3) In HAFA and FHA short sales, homeowners MUST attempt a modification
4) A denial must be on record in order to proceed.
Often, I log on to Real Estate advice forums to help answer questions from buyers and sellers. And too often, I hear the same thing: "Well, Zillow said my home is worth $250,000, but you say it is only worth $210,000" or "Zillow appraised my house at $300,000" or "Zillow didn't take into account my new granite counters and my $1000 rose garden in the backyard...". It is the same thing over and over again. Consumers erroneously think that Zillow is an 'appraiser', and that what Zillow says goes.
I hate to break it to you, but Zillow is most often incorrect. In fact, Zillow admits that they might be incorrect. Following is a snippet from what Zillow has posted, in their own FAQ, about their 'Zestimates':
Is a Zestimate an appraisal?
No. The Zestimate is not an appraisal and you won't be able to use it in place of an appraisal, though you can certainly share it with real estate professionals. It is a computer-generated estimate of the worth of a house today, given the available data. Zillow does not offer the Zestimate as the basis of any specific real-estate-related financial transaction. Our data sources may be incomplete or incorrect; also, we have not physically inspected a specific home. Remember, the Zestimate is a starting point and does not consider all the market intricacies that can determine the actual price a house will sell for, such as entertaining offers, negotiating, closing costs, timing, etc.
How do we come up with the Zestimate?
We compute this figure by taking zillions of data points - much of this data is public - and entering them into a formula. This formula is built using what our statisticians call "a proprietary algorithm" - big words for "secret formula." Currently, we have data on 100 million homes on Zillow and calculate a Zestimate on 72 million of those homes.
Where does all the information come from? How can you know all this stuff?
It all comes from public data. The data is public because it's a consumer's right to have access to information about what is to be their most important investment - their homes. What? You've never seen it? That's because it is hard to find and hidden in multiple sources. Zillow has done the legwork for you by getting huge amounts of data from many sources and creating something unique that the public sources don't provide - a Zestimate of your home based on the public data.
So... there you have it. Zillow is not exact; Zestimates are culled from incomplete (and often inaccurate) public data; Zillow has never seen your home; Zillow is merely a starting point.
For more information and Zillow secrets, visit the
Zillow FAQ.
