The Gory Details...of Real Estate

The New HVCC Law – Does It Help, or Just Plain Suck?

  So there’s this new law affecting the real estate and mortgage industry, called the HVCC – short for “Home Valuation Code of Conduct”, which went into effect last month, and is the byproduct of a legal settlement between NY attorney general Andrew Cuomo and Fannie Mae & Freddie Mac.

Here’s how it was “supposed” to help: to assure appraisers that they would not be unduly influenced by lenders in the appraisal process.

Here’s where it proverbially, “sucks”: costs rose, and accuracy in appraisals took a nosedive. Moreover, appraisers that are unfamiliar with local markets, inexperienced or both, are using distressed sales - foreclosures and short sales of existing houses - as their comparables

Kenneth Harney from the Washington Post (in my opinion, probably the best columnist covering real estate issues, bar none), wrote a great article recently (full contents here, but I’ll quote some of the highlights below).

How it can affect everyone:

It could directly affect the value of your house - probably negatively - by tens of thousands of dollars

The issue concerns low valuations and the new rules guiding appraisers in both price-depressed and rebounding markets. Consider these snapshots of what's going on:

• In San Diego, Steve Doyle, division president for Brookfield Homes, is trying to close out the final 20 houses of a 120-unit single-family subdivision. Prices range from $340,000 to $350,000. But recently there's been a major hitch: Appraisers assigned by banks are coming in with valuations $60,000 or more below Doyle's selling prices. The appraisers, who Doyle says are unfamiliar with local markets, inexperienced or both, are using distressed sales - foreclosures and short sales of existing houses - as their comparables. Some of the distressed properties are in poor condition, and all of them offer fewer amenities, according to Doyle.
• In Wilmington, N.C., a loan applicant with a house in excellent condition, and an unblemished payment record, sought to refinance into a 4 3/4 percent mortgage. She had purchased the property four years ago for $160,000 and made about $20,000 worth of improvements in the interim. Her loan application, according to Paul Skeens, president of Colonial Mortgage Group of Waldorf, Md., was "a slam dunk. Nothing to it." The house was worth $180,000 to $200,000, according to one estimate. 

But when an appraiser with little local knowledge was sent in by a bank to value the house, he chose two short-sale properties that had both closed in the mid-$140,000 range, and one inheritance sale around $155,000. The last property was "in horrible condition," said Skeens. "I'd call it dog meat." The deal-paralyzing appraised value that came in for the cream-puff refi: $149,000.

Complaints about lowballed appraisals - from builders, realty agents, consumers and mortgage companies - have erupted since May 1, when government-sponsored Fannie Mae and Freddie Mac put their new appraisal rules into effect nationwide. Critics charge that the new system is fostering the use of appraisers willing to work for low fees - sometimes 50 percent below previous standards - and who are willing to conduct home appraisals far outside their typical areas of activity.

Under the HVCC, appraisers are now routinely assigned by appraisal management companies rather than being selected by mortgage companies or loan officers. The management companies pocket as much as 40 to 50 percent of the appraisal fee.

Frustration with the new system boiled over and made its way to Capitol Hill late last month. The National Association of Home Builders called for an immediate change in the rules governing the use of foreclosures, short sales and other distress transactions as comparables for appraisals on non-distressed, typical homes, whether new or resale.

Two congressmen - Travis Childers, D-Miss., and Gary Miller, R-Diamond Bar (Los Angeles County) - have introduced legislation calling for an 18-month moratorium on the appraisal code. In identical letters to James Lockhart, the top regulator of Fannie Mae and Freddie Mac, and Cuomo, the National Association of Realtors also requested a moratorium and complained that the code is raising costs to borrowers, distorting property values and killing sales.

Asked for comment, Lockhart said through a spokesperson that his agency is monitoring the situation, and considers "the views of market participants important."

Bottom line: Be aware of the issue. It affects your equity, even if you're not buying or selling. And watch to see whether Congress fixes the problem.

Why Buying Foreclosures is like eBay These Days.

Anyone trying to buy a home in San Jose, roughly around the $200-230K price range, knows this and knows it well.

The word “foreclosure” on a listing almost guarantees double-digit multiple offers.  And not low-value double digit numbers like 10 or 11. Pfft! Child's play!  In the last week, while pursuing homes for some of my buyer clients, I have seen the following:

• 31 offers
• 70 offers
• 21 offers (and the winning offer was lower than my client’s offer, but was all cash)
• 60 offers (12 being all cash)

Of course I have yet to see anything "beat" the one that had 89 offers.  Kudos again to the Bocage Team from Keller Williams for using Twitter as a good method of communicating to buyers' agents the updates on their listings.

It’s like having the word “Foreclosure” on a home for sale is now a competitive advantage.  Got a foreclosed listing in San Jose? Doesn’t matter what kind of shape the house is in, you’ll probably get more than a few offers. 

Simple fact is, the prices for some areas have now become attainable for first-time home buyers (which is a GOOD thing for our economy, both on the local level as well as the big picture) as well as real estate investors with a long term perspective. “Flippers”, those people who made it look oh-so-easy on HGTV, are a rarity today – thank goodness!

But you gotta set your expectations properly at this price point in the market.  It’s not like the condition of any of these homes is anything near mediocre.  As they say in consumer goods, “your results may vary”, but for me my verbal reaction when walking into any foreclosure always ranges from “oh…this is in ‘ok’ condition” to “holy crap how could someone leave a home in this condition”.  Five words that unfortunately I don’t think you’ll hear me say any time soon in a foreclosure “wow, this is really nice”.  Buyer beware!

A Dying Breed: Paying Over $1M for a Mt. Carmel Home

  It seems like just yesterday – ok, maybe 2 or 3 years ago – when a new listing in Mt. Carmel that came on the market with a price tag higher than $1M didn’t raise an eyebrow. Heck, there were even some bordering close to $2M that I thought “well, if someone’s willing to pay that much, then that must be what it’s worth.”

Of course, these are wildly, WILDLY different times now in real estate. That shouldn’t come as a shock to anyone, right?  Well, as experts in what we do, many of us Realtors can quickly and generally assess a home’s list price relative to its neighborhood and say, “yes that’s priced well”, or “what the hell is the color of the sky on THEIR planet?”, or “what are they smoking in their pipe?”  You get the idea.

I’m talking now, of something that seems to be getting more extinct than journalistic integrity in real estate reporting (oops! Did I just say that out LOUD?), and that is, paying over $1M for a home in the Mt. Carmel area.

Let’s do a quick look at the numbers: out of the 16 homes that have sold in Mt. Carmel in the last 6 months, only one of them sold for over the elusive $1M price tag (that would be 263 Iris, for $1.238M, which, incidentally, was one heck of a gorgeous home). 

And out of the 17 homes currently active for sale, 8 of them are priced at over $1M.  A few of those have been on the market for 361 days, 259 days, 116 days, and 98 days.

Now this absolutely is not saying that any of these homes currently on the market is not worth its asking price.  As I always say, the value of your home is whatever a buyer is willing to pay you (and for you to accept). If you're a seller, then this blog post and this one are MUST READS.

And what I also say is that if your home is on a busy street, and you want to sell it in under 1 year, do NOT price it as if it were set further in on a neighboring, non-busy street.  It’s a pretty rare breed of buyer that wants to buy a $1M+ home on a busy street, especially if they have children.  An even rarer bird is the buyer who will pay over $2M to live on a busy street – I just seem to think, if it were me and I were spending over $2M on a home, I’d be more inclined to look in, oh, Emerald Hills, Woodside, Portola Valley, Los Altos, San Carlos hills…but that’s just me, what the heck do I know about what buyers want (rhetorical sarcasm…don’t answer that!).

Time will always tell what these homes eventually will sell for.  Timing is everything – if you were fortunate enough to sell a home 3 years ago for a price that no one would touch in today's market, you may be more lucky than anything else.  I can’t reiterate this enough when it comes to buying or selling property: timing is everything.

 

89 Offers? In San Jose? And a good use of Twitter, too?

Ok, now this just sounds insane. Or maybe I should have started it as “I never thought this would happen to me, but…” (echoes of Seinfeld’s Kramer reading from Penthouse Forum).

It’s mind boggling, but the notion of multiple offers – particularly on the lower 1/3 of the market here in the Bay Area– is as prevalent now as it was 3 years ago. Now granted, the affected market segment is much more specific – I don’t really see this happening much on the higher end of the market (above $900K). But now that lending has thawed a bit from the catatonic state it was in Q4/’08 and Q1/’09, there are a TONS of investors and first time home buyers that are scooping up homes once priced in the $500K+ range which are now priced in the $200K-300K range.

There’s a huge “dang, this is a bummer” element for any agents like myself, representing buyers who keep getting outbid, or beat to the punch by others making offers on homes the day they come on the market.  It seems like in Q4/Q1, that a home would come on the market, and the buyer mentality was “I’ll just wait 2 months, and they’ll be lowering their list price”.  Let me opine here, that mentality is as long gone as Dick Cheney’s sanity.  My recommendation to any buyer out there is this: if a home seems priced ‘right’ (totally subjective), don’t wait to make an offer on it, because chances are someone else will. Oh, and making lowball offers?  Don’t even bother, as the window where you could go into contract offering 10% or more less than the list price has pretty much shut for good.  Lowball offers? You might as well just stand on the rooftop and say “I don’t really want this house.” Don’t try it, as that train left the station in Q1.

So back to the 89 offers.

Ok, so I (representing a buyer) present a good, slightly over asking price offer on an REO (bank-owned) home in South San Jose.  Couple days later, an automated email from the listing agent comes back saying they’re doing a multiple counter-offer, to ALL of the 72 offers they received.  I go to check the Listing Agent’s listing updates on Twitter, and they now have 89 offers. I wouldn't make that up if I tried. Eighty....nine...offers.

I then picked up my jaw from desk upon which it hit….

Now here I venture to my geek side – this now, is actually a pretty good application of Twitter to real estate.  Many of these foreclosure-specialist listing agents have 20, 30, 100 listings – all foreclosures – they are juggling all at the same time.  Updating status on each listing in MLS with this amount could be a time-consuming task. Using Twitter, the agent gives to-the-minute updates on if offers were submitted to the bank, if they’re in counter-offer with a buyer, if they’re taking no more offers, etc. – much more useful information that could be gleaned from the “Notes” section in the MLS.

But back to this multiple offer topic. No matter what you read, the market in many instances in the Bay Area, is showing PLENTY of signs of life.  Yes, things slowed down early in the year, as did almost every micro-market in the world.  But even in price points between $800K - $1.3M, there are homes that are going in to contract within 2 weeks of coming on the market. It’s becoming less and less of an anomaly. If a house is priced right based on its location, it will sell.

 

Give Me Money -- That's What I Want!

The Beatles weren't singing about the US economy, but they may as well have been. So as everyone knows, this year the government unveiled its new $787 Billion Stimulus Plan to infuse the economy with money and confidence. That's some serious money!

But have you ever wondered who's actually getting that money. What types of projects may be funded. And, how does it impact your state and local community?

Here’s the site with the answers: www.StimulusWatch.org

StimulusWatch.org was built to help the government keep its pledge to invest stimulus money smartly and to add transparency and accountability to the process.

At StimulusWatch.org, you can find and review projects that are candidates for funding by federal grant programs. You can even sort the projects by activity, expense, and need.

Better still, you can access a list of projects by state, so you can see how the Stimulus Plan may impact your state and local community - including costs, number of jobs, and exact locations. Simply select your state and review the projects under consideration. You can even add comments about the value of the projects listed ("$5M for that?!?!")

It's convenient, interactive, and easy to understand - check it out…

(mucho thanks to my mortgage mensche, Adam O’Donnell, with Guarantee Mortgage, for the heads up on this)

Stimuli Plan "Stuff" -- Good Times, Or Is It Just Me?

I must say, I am impressed with the speed with which some of the President's programs from the Stimulus Package are hitting the market.  It's quite a change from last year -- remember back in Feb 2008 how we were all in a lather about the new conforming loan limit going up to $729,750? Well how long did actually take before normal, everyday people were able to obtain those lower-rate loans? August? I can't recall because it just seemed to take bureaucratically and ridiculously long.

Anyway, first things first. The U.S. Treasury Department went live on March 19 with its "Making Home Affordable" program, which aims to help home owners refinance or modify their mortgages.

The campaign includes a Web site at makinghomeaffordable.gov as well as a telephone hotline number at (888) 995-4673.

The federal government is targeting 9 million home owners whose loans are held by Fannie Mae or Freddie Mac.

Secondly. Freddie Mac reported a drop in the 30-year fixed mortgage rate to 4.98 percent during the week ended March 19 from 5.03 percent the prior year, marking the lowest rate since 4.96 percent in mid-January.

Experts say rates could fall further in response to the Federal Reserve's announcement that it will add $1.2 trillion to the economy to alleviate the credit crisis.

Curing the Housing Crisis with Puppies & Kittens

"Ah, if I'd only followed CNBC's advice, I'd have a million dollars today -- provided I started with a hundred million dollars."

Hilarious line from Jon Stewart (watch clip below or here).  He lambastes Rick Santelli from CNBC, who think we "shouldn't bail out loser homeowners", but rather we should bail out winners like AIG. Hmmm.

The Daily Show With Jon StewartM - Th 11p / 10c

CNBC Gives Financial Advice

Daily Show Full Episodes
Important Things With Demetri Martin

Political Humor
Joke of the Day

 

But even funnier, is Stephen Colbert's interview with Jim Cramer last night -- where Colbert popped up endless video of puppies and kittens during Cramer's yapping, with the intent of improving market psychology and making people feel safe about investing in the market.

The Colbert ReportMon - Thurs 11:30pm / 10:30c

Market Psychology - Jim Cramer

Colbert Report Full Episodes
Political Humor

Rap Battle
Joke of the Day

Beware of the Property Tax Reassessment SCAM

So, this is more of a warning of something you may receive in the mail, that in my opinion is a trying to scam uninformed homeowners, and kind of a total crock of you-know-what.

So in the mail today, I get this official looking letter from "Property Tax Reassessment", from a p.o. box in Los Angeles. The letter looks official, heck it even has the parcel number of my property.

Why do I think this is a crock? Firstly, they're asking me to send in $179 by 2/26, and if I don't, I have a service fee of $30 on top of that.  For this fee they'll submit all the documentation to the county and "act as my agent" in all dealings with the County Assessor's Office.

Secondly, they're implying that my home might be OVER-ASSESSED by $263K.  Being in the business, I have a really, really good idea what my home would sell for if I were to put it on the market today, even in today's unpredictable market.  And there's just no way in heck my home is worth as little as they're proposing what it "should" be assessed at.

Please don't fall for this....it may be legal, but it REEKS of scam and deception.  Read the following articles for reference:

http://www.venturacountystar.com/news/2008/aug/15/hscam-header-header-header/

http://www.sandiego6.com/content/unit6/story/Property-Tax-Refund-Scam-Hitting-Mailboxes/FXaKYyPcZkmrtPHeRVNizQ.cspx

Getting your home reassessed for property taxes, it's REALLY easy, and can be done online in almost any county in California (and I'd be happy to help you find the right forms if you need any help).

Gory Details Podcast -- Market Update with Adam O.

 

Here we are, the first episode in 2009 of the Gory Details Podcast....the longest running real estate podcast here in San Mateo County,

With interest rates changing sometimes more often than a baby's diaper, what's a homebuyer or seller to think?  Take a listen to this months episode, because joining us today as our special guest to the Gory Details is a highly respected mortgage broker from Guarantee Mortgage, Mr. Adam O'Donnell.

Click away below, because the January 2009 edition of "The Gory Details Podcast" is now available!

(1) iTunes users, get it right here

(2) Or get it at http://edgory.podshow.com

(3) And, always available at http://www.edgory.com

Happy listening!

Gettin' to Know All About Asbestos 101

Just got some very educational content from Joe Lederman, from the Mesothelioma Cancer Center.  What does that have to do with real estate, you ask? Can you say, asbestos?  If, like many residents of the Bay Area, your house was built before the mid-1970's, then the presence of asbestos is something to get yourself educated on. So here we go..

 

Throughout the 20^th century, asbestos was regarded as an ideal form of insulation and piping in many building applications in the world. With its qualities as flame and heat resistant, it was not only versatile, but extremely durable. Although there is evidence showing that companies and manufacturers knew of asbestos’ health hazards, it wasn’t until 1990 when the California Air Resources Board began to regulate the amount used in surfacing applications.

It is very important for California real estate residents to take the proper measures to inspect and remove the substance. With the consistent growth in technology and public awareness, there are currently a number of products which replace the need for asbestos. You should be aware that exposure to asbestos can cause a significant number of health concerns.

With its thriving industrial and entertainment history, much of California’s economy has also had success in ship-building, power generation and mining. These industries found many needs for asbestos. Homes and buildings built before 1980 still maintain the possibility of containing asbestos.

Frequent exposure can result in the development of asbestosis and malignant mesothelioma. This form of asbestos lung cancer has a latency period that can last from 20 to 50 years, making it one of the more difficult diseases for physicians to accurately diagnose. Mesothelioma treatment has varied results on patients. However, patients usually receive poor prognosis from doctors because the illness can reach its later stage when it is finally diagnosed.

With many citizens now living an environmentally conscious state, individuals in California should hire licensed abatement contractors who will perform in house inspections to search for any hazardous building material that may be present. The removal of asbestos is an extremely finite process which needs to be performed wearing protective gear and masks. Alternatives to asbestos include cotton fiber, which can reduce energy consumption up to 35 percent, and cellulose.

Reporting many problems and sources of asbestos-laden materials, The California Environmental Protection Agency has set standards and regulations in regards to asbestos use and abatement. Despite knowledge of the state’s asbestos problems, many communities throughout California still find themselves constructed atop asbestos deposits.

Adapting green alternative materials such as cotton fiber can reduce energy consumption up to 35 percent annually. Other options include the use of cellulose and lcynene foam. In this day and age, there is absolutely no need to put anyone’s health at risk for asbestos exposure. These new healthy options allow homeowners to live healthy and clear of health polluting substances.