Archive for the '"Say What? Just Some Real Estate Talk' Category
Red Lining—Alive and Well in Real Estate.
December 12th, 2008 Categories: "Say What? Just Some Real Estate Talk
Red lining. An insidious act that creates barriers and walls off people and neighborhoods by either financial or some other type monetized quantification.
It’s negative transformation at it’s best. Collusion between financial institutions at all levels and appraisers either willingly or unwillingly, directly or indirectly with greed as its motivation.
It appears to be quite prevalent in real estate today and I suspect if one were to undertake a study they would find a correlation between high foreclosure areas such as San Bernardino County, Santa Paula, Fillmore areas and red lining.
The starting point for this disease I suspect is high up in the bundling of mortgages for re-sale on the secondary market (Freddie Mac and Fannie Mae). Meaning that most lending institutions and banks who do not maintain mortgage notes that they have negotiated as part of their own portfolio become active participants to this cancerous disease.
Redlining is a word used to describe an illegal practice of discrimination against a particular group.
It occurs (unilaterally) when, for instance, lenders decide certain areas of a community are too high a risk.
The net effect is that real estate lending institutes who red-line generate barriers by either refusing to give a mortgage to buyers who want to purchase property in those areas, regardless of their qualifications or creditworthiness or make it so difficult that the purchase cannot be pursued.
Today what appears to be occurring regularly are properties in high foreclosure areas are being re-evaluated days before the close of escrow and a pre-conceived (contrived) opinion made and justified (ie., drive by appraisal) designed to decreases a property’s value from 10% to 35% less than the original appraisal taken a few weeks earlier.
Now the lending institution is not saying that it will not make a loan but the action pits the buyer and seller against each other with the buyer wanting to purchase at the lower appraised value and not the contract price negotiatied and agreed to previously.
This slight of hand by the lending institutions generates a depressed sale if the seller has to sell or forces the buyer to come in with more funds to complete the purchase.
The instigator (the bank) sits by and waits for the chips to fall, immune of any responsibility or wrong doing. If challenged it becomes a case of finger pointing and feign incredulity that they would be accused of doing something of this nature. There appears to be limited or no re-course for a seller to challenge these contrived actions.
Is it illegal? The Federal Community Reinvestment Act of 1977 supposedly put an end to real estate red lining. However over the years it appears that legislation may have been enacted which minimized the intent of the 1977 Act or the intent of the act is simply being ignored.
Today, because of the current foreclosure mess, it appears that anything and everything is allowed using the excuse that normality has to be brought into the market place. Essentially it is turning a blind eye to a bad situation.
The amusing thing (if one can call this amusing) is that the institutions who created the foreclosure mess with exotic mortgage products now have flipped to the other side and appear to be the van guards in red-lining high foreclosure areas. Why? They will probably say these areas are poor economic risks.
In effect what is being created is a false market (relative to property value) at the expense of sellers in those areas and supporting the continuation of a down market.
Your comments are welcomed.
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Desktop Appraisals.
November 22nd, 2008 Categories: "Say What? Just Some Real Estate Talk
I knew desk top appraisals played a part in the funding process but I had never been involved in a situation in which a desktop appraisal killed a real estate deal……until this past Friday (everything bad in real estate happens on a Friday).
On this particular property there were two on-site appraisals of the property. The first was done by the sellers because they wanted to know what their home was worth and set a list price that would generate a quick sale.
The property was listed and within a few weeks an offer made, there were the negotiations and a buy price set and off we went into escrow.
Shortly the buyer’s/lender appraiser came to look at the property and appraised it at the negotiated price (which was lower than the sellers appraised value but that was OK. Yes, I was a little upset because both appraisals were accomplished within weeks of each other but I understand that these are opinions of value at the time of the appraisal and it is understandable they would not be the same).
All was well until Friday when someone sitting at a desk, miles away (they could have been sitting on the moon) decided that $ 35,000 cut was in order. I don’t know exactly why the decrease except it was indirectly stated that it kept the price in balance with the neighborhood (I have no idea what that means).
Which is fine except that none of the neighbors had a pool in the yard; none of the neighbors had the built in BBQ, water fountains, and turf in the back yard; none of the neighbors had a brand new air-conditioner/heater and I could go on. I doubt any of this was shown on the statistical pages being looked at.
The area where this property is located has been hit hard with foreclosures and prices have dropped significantly but it appears to me that lenders exacerbate the problem with their sense of value for a neighborhood.
Two appraisers showed the property’s worth at a far higher dollar figure but what rule this particular day was the statistical document that sat on some-body’s desk, many miles away making an assessment of this home’s value.
When the numbers (on-site versus desktop) are looked at there’s was a significant cut that if annualized on a percentage basis (I estimated higher than 65%) would exceed any responsible threshold.
That is tough to take and wholly unwarranted. I know of no place in California or elsewhere that has suffered that type of value decrease. It certainly soured the seller in this case and left me with a bad taste in my mouth.
Something is wrong with desk top appraisals (sour grapes…..you bet I lost a deal) and desk top appraisals is an area that really has to be looked at. There is vodoo statistical science at play. I suspect that the lender will echo some corn feed reflection of their responsibilities, the risk involved, and some other story to justify their appearance of righteousness in their assessment of value and it would be garbage.
While lamenting over my disaster other associates began telling me of their experiences with desk top appraisals. One had $ 90,000 taken off the on-site appraised value; another $ 65,000 and others in the neighborhood of $ 35,000 to $ 50,000. I was told I was lucky because more often than not they were told of their desk top cuts a day or two before escrow closing. I had a week.
From what I gathered from the talks, all of these potential sales fell out of escrow.
Maybe it is me that is living on another planet but (repeating myself) desktop appraisals must be examined because today it appears they are doing more harm than good.
Comments please.
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What The Rich Think Of Real Estate.
August 2nd, 2008 Categories: "Say What? Just Some Real Estate Talk
A recent survey was conducted by Coldwell Banker of affluent homeowners focus.
This survey consisted of 305 U.S. homeowners whose primary residence were valued over $ 1,000,000 ($2,000,000 in California) and who have investable assets of more than $ 1,000,000. The average annual income of respondents was $ 754,000.
Summary points of the survey.
Real Estate Prices. 85% of the high end homeowners surveyed in 2008 were optimistic that real estate values would increase significantly to moderate over the next 5 years. The 2007 survey figure was 67%. A sizeable increase from prior year.
Primary Home Dream Locations.
When asked about where they would build their primary dream home:
- 27% indicated an island location;
- 22% indicated a rural location;
- 18% said suburbs;
- and 18% felt that some foreign country would be their dream home location.
Second Home Locations.
When those surveyed were asked about locations for a second home the replies were:
- 45% near a beach;
- 23% near a lake or river;
- 23% in a warm climate;
- and the other responses were in the mountains, near a ski resort or in another country.
Must Have Home Amenities. The must have amenities in the home that the affluent either have or plan on getting were:
- 86% either have or plan on getting a designer kitchen.
- 74% either have or plan on getting a customized home entertainment center.
- 57% either have or plan on getting an indoor gym/fitness room.
Surrounding Home Features: When the respondents were asked what surrounding features they wanted around their primary residence:
- formal landscaping (77%)
- water views (43%)
- swimming pool (38%)
- hot tub (35%)
- boat dock (17%)
- putting green/golf course (16%)
- and some stated a tennis court or basketball court.
Other points of the survey.
The living room was the primary room that is used to impress house-guests and entertain.
Lastly the survey also noted that 17% would move if they could obtain a specific zip code and 80% stated that they move to keep up with friends. So location is of extreme importance to the affluent.
The basis for this article was the 2008 Coldwell Banker Luxury Survey. In addition review my article http://www.venturacountyretalk.com/2008/03/15/when-luxury-items-become-necessities/. I do think that the InterNet will influence many home luxury items in the very near future.
Your comments are welcomed.
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One Of A Few……
July 15th, 2008 Categories: "Say What? Just Some Real Estate Talk
John Duffner Earns National Luxury Home Designation
Ventura County, California –July 15, 2008 – John Duffner, real estate broker associated with Rushing Real Estate and Investments, Inc. located in Santa Paula was recently awarded the Accredited Luxury Home Specialist (ALHS) Designation from The Luxury Home Council.
The Accredited Luxury Home Specialist (ALHS) Logo is testimony to the agent’s training and expertise in the luxury home marketplace. To display the ALHS logo and be accepted into the Luxury Home Council, each member must successfully complete the Accredited Luxury Home Specialist Course, represent a buyer or seller in at least two transactions where the purchase price is at least twice the average sales price and the agent must be in good standing with the National Association of REALTORS®.
Luxury Home Council Members receive numerous benefits to assist in marketing and selling upscale properties. Advantages of membership include access to the members only section of www.luxuryhomecouncil.com and www.luxuryhomesandproperties.com to market luxury listings, a subscription to The Luxury Home Expert a monthly online magazine, discounts on products and services, access to the REALTYU® Alumni Association and the ALHS database for networking and referral opportunities.
John Duffner joins an elite membership of top real estate agents throughout the United States.
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Foreclosure Time Schedule.
June 13th, 2008 Categories: "Say What? Just Some Real Estate Talk
Listed below are the key elements that are applicable for California Non-Judicial Foreclosures under Deed of Trust.
The foreclosure process is initiated by the borrower (called trust-or) not making payments to the lender (beneficiary). The first missed payment is designated as a default, but most lenders do not begin the foreclosure process until the third payment is missed.
The lender will attempt to resolve the defaulted payments and if this cannot be done the lender will instruct the Trustee to begin the foreclosure process.
The schedule of events are:
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Is $ 5 or $ 10/ Gallon Gasoline Going To Kill Real Estate In Ventura County? Or Any Other Place?
May 25th, 2008 Categories: "Say What? Just Some Real Estate Talk
Gasoline at $ 5 per gallon? You have to be kidding!
What! $ 10 per gallon gasoline…..you must be plain nuts!
Well I was surprise to see gasoline pass the $ 4.00 mark and there is nothing to suggest that it will not go to $ 5. Ten $ may be a stretch but if we don’t get our act together that will be reached in a blink of an eye.
Without going into too much of a discourse there will be a significant impact to spending patterns. I am not talking about not ordering a pizza or anything like that.
And one can take years to address the causes of the fuel price acceleration. The blame game will cover demand, supplies, geopolitical events, speculation, social engineering and in-action in the development of our own resources.
Things are currently underway to undo the situation but time is needed.
The military is testing the conversion of coal to fuel for use on military aircraft, ships, trucks and whatever else is needed for military operations. The United States and China have the largest deposits of coal throughout the world. It will be used.
Do not be surprise to see restricted areas open for drilling. Watch for accelerated spending on nuclear plants and hydrogen applications. Wind mills and the like have limited energy application (especially for automobiles).
So what is the impact to real estate? None. However there will be changes.
There is that old slogan in real estate— ”location”, “location”, and ”location“. This will become extremely important in the short term.
Real estate spending patterns will change from buying in suburbia to buying in metropolitan areas. People will want to live closer to work, shopping and general entertainment activities.
Purchases of new furniture, kitchen items, perhaps remodeling will be put on hold. So this subset of real estate will suffer.
In the short term large cities will start to accommodate real estate buyers with more condos and apartments. Old building will be re-made. Prices will increase because the demand will be higher than supply (sounds like the quandary we have with gasoline).
Areas like Los Angeles have already started this drive and other large cities have been taking baby steps but soon metropolitan areas will be looked at as the place to live.
Such actions will reduce driving, will be close to people’s work, allow people to still do what they want to do but everything will be closer.
As prices increase and as supplies become limited suburbia will be moving into metropolitan areas until the fuel pipeline rights itself.
As with the spike of gas prices in the early 1980’s, things will settle out and as then real estate wherever it is will do well.
For your real estate needs give me a call.
Your comments are welcomed.
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The Squeeze……………
May 5th, 2008 Categories: "Say What? Just Some Real Estate Talk
It is starting to become crunch time and you will be hearing a lot of jaw boning.
Approximately 65% of the banks have positioned themselves to minimize approving refinancing or new home loans according to a recent poll.
Things are difficult now but will get a lot worse before things get better.
As reported in the Los Angeles Times (Sunday, May 4, 2008: Author: Kenneth Harney) banks have taken further steps to curtail other type mortgage loans, such as:
- Cash out refinancing
- Loans with less than full documentation of borrowers income, credit and assets
- Mortgages for certain second-home purchases
- Investment loan applications in which the buyer already owns at least three other rental properties.
- Mortgages to borrowers with nontraditional credit
- Short term construction loans that convert to permanent mortgages
- Adjustable rate mortgages in which the first adjustment occurs within 60 months after closing.
Freddie Mac has announced that it will restrict financing of second homes and real estate investment purchases.
Freddie Mac has also noted that they will not finance properties of any kind if the individual has four or more properties. So it appears for the time being that 4 is the magic number. Own four and financing for other real estate properties could be difficult, if not impossible.
Lenders indicate that the steps being taken are in areas they see as inordinate risks.
It is surprising that the people who created the problem (sub-prime mortgages and credit cards) are the same people who are squeezing out people interested in various type of mortgage loans.
Those individuals who are seeking loans based on “stated income” do not stand a chance of getting any type of mortgage in the near term (or as someone stated: maybe never).
So consumers have very few options and will have to accept for the time being that mortgage loans will be extremely difficult to get. Tighten that belt.
Steps being taken by the various financial institutions will negatively impact the real estate market, especially new home buyers. If you are a real estate investor lots of luck in getting a mortgage.
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Don’t Buy Today and Count On Crying Tomorrow!
March 5th, 2008 Categories: "Say What? Just Some Real Estate Talk
How many more sunsets or sunrises will have to pass before you realize that now is the time you should own a home.
Prices have decreased significantly and there are many great properties available that you can call your own.
Just imagine how great it will be to watch the sunsets and sunrises from your own place called home.
Don’t act today and you will be crying tomorrow. Don’t put yourself in the spot of saying: “Oh, I should have…….”; “Darn, I could have……”; “Jeez, I had the chance of getting that place for……”.
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What Is A Problem To One Is An Opportunity For Another
January 28th, 2008 Categories: "Say What? Just Some Real Estate Talk
In some areas of the United States real estate has been in the tank.
This has not gone unnoticed by investors in foreign countries especially since the dollar is down against most currencies.
Investing in the United States has been a safe investment but it just got better. True what has distinguished the United States from other States is our stability and security. Other countries that investors feel are stable and safe include Germany and England.
But with the weak dollar real estate looks extremely good for the bargain hunters.
Foreign investors appear to be favoring retail, hotel, industrial, multi-family (apartments) and office properties.
The areas that have seen strong foriegn investments are the cities of New York, Washington, DC, Los Angeles, San Francisco and Seattle. Las Vegas is another area that is starting to look good to these bargain hunters.
It also appears that countries offering the best opportunity for appreciation aside from the United States are China, India, Russia and Mexico.
Article Source: Foreign investors love U.S. real estate by Prashant Gopal
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Buffett Screwed Up….And Became A Millionaire
January 18th, 2008 Categories: "Say What? Just Some Real Estate Talk
It is interesting how people look at millionaires. Many think that all were born with a silver spoon in their mouth or were very lucky or, or, or.
What they don’t know about are the mistakes they made in achieving their accomplishments.
Also of interest is the fact that millionaires don’t think of themselves as millionaires. But one facet shows that a number of millionaires became millionaires because they went against the norm.
For example, Warren Buffett began as a paperboy for the Washington Post. His first entrepreneurial endeavor was as an odds book publisher (can I say bookie??) for gamblers at race tracks.
He next moved into pinball machines where he started the Wilson Coin-Operated Machine Company.
His investing mentor was Benjamin Graham whom Buffett study under. But Buffetts’ first large venture was the purchase of a controlling stake in a textile mill in Massachusetts. The mill was Berkshire Hathaway which eventually went bankrupt.
Warren Buffett took the time to learn, take reasonable risks and had that sense of mind to know what was good for him and not act on the basis of what the guru’s were advising.
Today many people hold themselves captive to the constant sell of doom and gloom. If we don’t have a problem just wait and the news, TV or political guru’s will make one.
Today we are working through a scare fest in real estate. That and global warming are the current arena’s of fear.
Today should be a day when one looks around and does what investors of all kinds do…..ask where they can make some money.
As a real estate broker I come in contact with people who will verbalize all of the language that they have either read or heard about how the real estate market will be in the tank for years. They will not move until it is written and they read that they can move. When they do it is too late.
To succeed one has to take the time to study, make mistakes and have the common sense of knowing what is good for themselves. Just maybe with their own common sense, patience and strength, they will become millionaires without knowing they are millionaires.
For those awaiting the written word, go, take the time to rummage around in the real estate arena, look for deals that make sense to you and be prepare to make some money. Tomorrow you will be glad you did.
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