Happy New Year!

We have a few hours to go before we ring in the New Year of 2009.  But I wanted to take a few moments to thank all of our readers, my fellow writers, and the many people who comment here, for making Rain City Guide the special place that it is.

Tomorrow will mark my third anniversary of blogging.  Honestly, I can hardly imagine my world without it.  It’s been a rewarding experience and, I value my “blogfriends” and my “blogclients” more than…well, more than lots of things.

Tonight at midnight, I’ll take a cup of kindess, probably hot chocolate, and think of all the special people in my life.  Not the least of which being, Dustin and Anna Luther, Jillayne Schlicke, Rhonda Porter, Tim and Lynlee Kane,  Robbie, Steph and Harrison Paplin, Galen Ward, Deborah Burns…these wonderful people are part of my extended family.

And as the Coke/Walmart young man said: “When you stock up on Joy, there’s enough to go round”.

Thank you everyone, for being part of the Joy of my Life.  Many Happy Returns…

Mortgage Company Merit Financial Banned from the Industry for Five Years. Scott Greenlaw: Not Banned.

Wholesale Mortgage Company Merit Financial has the dubious reputation as being the very first company on the ML-Implode list which now sits at 312 imploded lenders.

The original Statement of Charges from 2007 focuses on violations of the state’s Mortgage Broker Practices Act such as failing to pay appraisers over and over and over again, failing to maintain a mortgage broker license, failing to attend the required continuing ed classes, failing to maintain an surety bond, failing to adequately disclose fees to consumers, and so forth.

From the Seattle Times

Merit did put loan officers through a 19-step program. “Loan Officer 101” was 15 minutes long…Saulness wasn’t impressed. She sat next to two 18-year-old loan officers. “They didn’t even know how to read a credit report,” she said.  Barry said wryly that many “had no idea what product they were selling, but they knew how much money they could make.” Merit employees proudly posted their résumés, plus photos of their luxury cars and drinking parties, on various Web sites. One loan officer had come to work fresh from being a Hooters Girl. Another solicited clients for two endeavors: writing mortgages for Merit and selling marijuana paraphernalia on the side. Indeed, several Merit loan officers boasted online that doing drugs was a favorite pastime. “Let’s get hopped up and make some bad decisions,” wrote one beside a photo of himself grinning broadly. Numerous former employees, including loan officer Sunny Hoppe, described working at Merit as a raucous — sometimes lewd — frat party. It was “young, hip, drugs and drinking,” Hoppe said, and that was at work. Former employees also said Merit regularly provided a keg of beer for some staff meetings, but Greenlaw said that, no, it was actually two kegs, and employees were free to bring in six-packs on Fridays. Asked about rumors of drug use in the office, Greenlaw said, “We just never checked.”

Washington State DFI and Merit/Greenlaw decided to settle the case and move on.  The Consent Order filed Dec 2008 says our state DFI will collect only $1500 in fines. Merit is banned from the industry for five years. Greenlaw is banned from applying for a mortgage broker/designated broker license for five years yet he is not prohibited from applying to become a loan originator.  Let’s take a look at some of the financial carnage from 2006-07:

Thousands of dollars owed to appraisers for work performed.
Thousands of dollars owed in back wages to Merit employees
Unpaid business and occupation taxes owed to the state of $351,294.
Wells Fargo was owed $244,033.
Firstam  Credco was owed $228,249.

I wonder how he’s been paying for beer and pizza these days. Let’s find out.

Is it a buyer's market? If so…where?

I recently received an email from Christoper Hain of Terra Firma L.A., which caused me to view the chart below.  Often people try to take general median percentages and apply them in the wrong place.

The current median 12 month change in King County is down 12%.  But if you get a house for 12% less where it is down 30%, that’s not a great buy.  If you get a house for 12% less where it is only down 7%, that’s a good (not great) buy.

Chris’ article drives home the point that in one agent’s “service area”, which is not really very big, there are areas down 7% vs. 42%…HUGE SPREAD!!!

Plus he asks the question that is not discussed often enough:

“You could read either end of this chart in completely opposite ways. Perhaps, the ones that have fallen furthest are the ones you want to buy in 2009. Or perhaps, the ones that have held their value best are the ones to bet on long-term.”

I’ll be doing some neighborhood breakdowns for Seattle and Eastside today, and finding our highs and lows in my service areas.  I’ll post a graph similar to the one for L.A. below, as related to our immediate area.

Look at Beverly Hills, as example. Even in that small area (which due to the TV show most think of as 90210) there is a variance in % down for the three different Beverly Hills Zip Codes of 90210, 90211 and 90212.  Big difference between 24% down and 42% down…in one small area.

I’m going to try to do the neighborhoods accurately, vs. Zip Code.  i.e. Wallingford, Green Lake, East of Market, West of Market, etc…  I have to use a polygon search feature for that.  It’s time consuming, but given this is still “the holidays”, now would be a good time for me to expend the excess effort, and the results will be of value in tracking changes during 2009.

7% down to 42% down…it boggle’s the mind. Here’s Chris’ chart:

Housing prices down 7%?  or 42?

Housing prices down 7%? or 42?

Lending Woes: A Deeper Consumer Analysis

This may seem like an odd analogy, but I remember this story about my Mom when she was having her 7th baby.  She was in “a ward” with only curtains drawn around each bed.  She overheard some people telling the lady in the bed next to her that she should have “her tubes tied”.  They were explaining the procedure to her.  My Mom jumped out of bed, ripped open the curtain of the woman next to her and yelled  “I want one of those!!!”  The people were embarassed and said, “I’m sorry but we’re only allowed to offer these to single women on welfare having their third child.  You weren’t supposed to hear that.”

Yes…I’m suggesting that to some extent The Information Age is in part responsible for the Subprime Crisis.   Subprime loans did not come into being in late 2003.  2003 is the year more people said “I want one of those!!!”

Couple that with the fact that the World as it IS has come to the conclusion that spinning words (like Death Tax vs. Estate Tax) is a persuasion tool. We used to say, “You can’t get a good loan, but we can find you a BAD loan, if that’s what you want.”  Most people said, “No, thank you…we’ll wait.”  Loans had letters that were easy to understand.  A Paper  = most lenders.  B through D Paper was a different lender for buyers with one or a few correctable issues over the short term.  Z Paper was basically the Mob with a license to lend.

People understood the alphabet, and they knew that a C-Mortgage was not as good as an A-Mortgage.  Life was more Transparent back then.  The need for Transparency today is largely due to the fact that professionals hide truth behind more persuasive language.  Don’t get me started on Listing Agent vs. Agent for the Seller.  Everytime I hear a buyer say “The listing agent was MY agent, looking out for me (and I heard it twice in the last 4 days) I want to scream. How the heck can you believe that “the agent for the seller” is looking out for you, the buyer? Maybe because they use the words “listing agent” for that reason. But that’s a different, though related, subject.

Couple that with small businesses (who only offered Sub-Prime loans) getting gobbled up by larger “one stop shops”.  All of a sudden the lender could give you an A Paper loan or a C Paper loan without a loan denial in between. When there was a loan denial in between, the buyer had a legal out with the Finance Contingency.  When the approval came…but it was for “a bad loan”, the buyer was locked into the transaction with no legal out.

Couple that with Real Estate Agents only caring if the buyer could get a loan, period…without caring on what basis.  Couple all of THAT with the fact that many Finance Contingencies did not give a buyer “a legal out” if they could not get a conservative “A Paper” loan, but could qualify for a SubPrime loan.

There are many factors that contributed to this mess.  Perhaps a fuller understanding of how the world changing in many and small ways led do the catostrophic consequence, will help all people who played a small part in the Country’s demise, change their small part in The Crime of the Decade.  In the end it was mostly No victims; no villains, just a lot of small tweaks and changes that snowballed into a Crisis Situation.

Let’s go back to the world as it was for a minute. 

1) Conventional Loan = 20% downpayment, 28% of gross income for housing payment, 36% of gross income for total recurring debt including the housing payment.  An 8% spread for debt payments.  If debt payments equalled 10%, then the housing portion was reduced to 26%.  There were no Credit Scores.  All credit issues were underwritten by hand and each and every negative item was explained by the buyer, in writing.  A separate letter for each negative item.

2) FHA Loan = slightly more lenient terms and dramatically reduced downpayment requirement.  The biggest reason to use FHA vs. Convential being the downpayment requirement, not the looser standards as to ratio and credit issues.  Almost no downpayment – 3% vs. 20% at the time. 

The first change was a long time ago! It started as a quiet whisper, like the people talking behind the curtain in the next bed from my Mom.  Some people were getting loans with only 5% downpayment, conventional.  When I started in real estate in 1990, most people’s perception was that they needed 20% downpayment or FHA.  Few knew that they could get a 5% down conventional.

The beginning of all of these problems goes all the way back to there.  Conventional lending guidelines made FHA less desirable.  The primary purpose of FHA was low downpayment…no longer a big spread between the two.

THEN in the early 90s, the lenders started stretching ratios from 28% to 33% of gross income on “the front end”  BUT the back end was only stretched to 38%, at first.  Stretched ratios entered the scene ONLY for people with little or no debt payments (just like tubal ligations being only for single women on welfare).  It had a stated and targeted “appropriate” audience.

When cars started costing more, lenders had to start figuring out a way for people to buy a house who already owned a car.  In many cases in the early nineties (before car leasing became popular, and probably why car leasing became popular) most young couples who each owned a car, could not buy a house.  The two car payments sucked up their whole back end ratio and subtracted from their front end ratio.  “I thought we could get a mortgage for 28% of our gross income or 33% of our gross income?”  “Well, yes…but the combined value of your two new cars is almost as much as the house you are trying to purchase!”

Everyone agreed that people needed both cars and houses…so ratios grew and grew and grew.  So, Sniglet, the changes in FHA are NOT fascinating at all. In fact FHA hasn’t changed all that much.  What’s happening is that lending standards on the Conventional side are creeping back to “The Way We Were”, putting the spotlight back on FHA, which is closer to the way IT was IF you cut out “automated” approvals.

Before you even think about buying a house, get your “other debt” issues down to no more than 10% of your gross income.  If you make $45,000 a year and your wife makes $25,000 a year, and you each have a car with a $400 monthly payment, you are spending 14% of your gross income on car payments!

Of course this Rise and Fall story would clearly fill a book.  But until everyone understands that a bailout or bandaid in ONE area only (or two) is not going to fix what ails this Country, we cannot have HOPE…and HOPE is what we need more than bailouts and fixes.

As I said in one of my previous posts: “2009 will not be a year of great change.  It will be a year of Great Hope for Change, one small step at a time, via you and me acting the best we can in each moment.”  Falsely creating hope with “Talking Points” and “Good News” articles is NOT the solution.  Expecting any one source to be the Messiah, is NOT the solution.  Every single person doing their part to improve the situation…is the only long term solution.  That means YOU!

Stop looking for someone else to come up with an answer.  Get out your teacup, and start emptying out your own little piece of the ocean.

I kissed a girl once. I was almost 50 years old and was in the middle of a divorce from a 20 year marriage.  I just wanted to make sure before I started over again, that I wasn’t starting out on a faulty premise that had been “fed” to me.  2009 is the year to test your foundations…so that when “The Rocovery” does come…it isn’t the old mess wrapped up in a bright shiny red bow.

Seattle Real Estate Recovery in 2009?

I’m busy making James’ Biscotti , but I just got a Tweet from Matt Goyer over at Redfin about a Cover Story in the Seattle PI.  I glanced at it and everyone and their mother is putting in their $.02 about the Seattle Real Estate Market in 2009.

You can read it HERE

I didn’t see much of a concensus.  The usual suspects saying it’s going to be good vs. the usual contra-suspects saying it’s going to be bad.  I’ll look at it more closely when the bis-cotti is twice baked (biscotti means twice-baked; not biscuit).  In the meantime, if anyone sees a strong case for believing in one person more than another, let me know.

James, your recipe calls for “a lb. of flour” and I have a half used 5 lb. bag.  I guess I’ll have to Google how many cups = 1lb. of flour 🙂

We’re back to work…but’s it’s still Holiday Time too!   Plus, we can’t really do any meaningful year end or 4th Quarter stats until a week or so into the New Year.

So far, December is neck and neck with November as to median prices (per square foot), and 12% down for the year.

Real Estate Agents, Seth Godin and Tribes

Everyone who is going to buy or sell a house in 2009, should answer this question before choosing an agent:

Are you looking for a Leader-Agent, or are you looking for a Follower-Agent?

For those who have never heard of Seth Godin and/or Tribes, the hyperlinked words in this sentence are links to valuable resources, in that regard.  Now…forget Seth.  This is not a post about Seth Godin and Seth Godin is not in my tribe. 

This is a post about how people CHOOSE a real estate agent, and how agents decide whether or not they should work with a given potential client.

If you are looking to hire an agent, but you want to give the agent a list of things to do,.   Or you want the agent to have a list of things that the agent will do, in sequence, regardless of whether or not that step is appropriate at that time. Then you are looking for a Follower-Agent.  That’s OK! 

What’s not OK is for you to pay a LeaderAgent-Price for a Follower-Agent, or expect a Leader-Agent at a Follower-Price.

What’s not OK is for you to hire a Follower-Agent, lead him, and then blame him when the results are less than satisfactory.

The “picture” below is my integration of Godin’s Tribe Concept, with the age old Probe, Evaluate, Close Concept.  The more quickly you can Probe, Evaluate and Close in each moment, the less time you will waste dealing with people who are just Not In Your Tribe. 

“CLOSE” = Determining if someone is right for any of your Tribes, quickly putting them in the “right” Tribe, or putting them on the outside of the Cycle Chart altogether.  The more quickly and accurately you can “close”, the happier you will be in 2009.  That’s true of all business and personal “choices”.

“Outsiders” are not bad people.  Well, a few are.  In the photo below, you will see dots outside of the circle.  Those are people you choose not to deal with, for whatever reason.  The one’s with the X over them are the bad ones 🙂 

Truth is, we all have many Tribes.

Tribe 3 is the Real Estate Transaction for a couple without children who want to hire a few followers to “assist” them. 

Tribe 1 is more reflective of my typical real estate transactions:  4 equally important forces all doing their part well.

Tribe 4 is indicative of the networks used by each of those 4 people in Tribe 1, to accomplish their part of the transaction.  Each Leader-Participant has a Tribe of followers.

For Agents:  If you are a single practitioner, then you likely will have 24 to 36 people in your Tribe in a year’s time.  Stop trying to be all things to all people.  Recognize that 24 – 36 fabulous “Tribal Relationships” is all you need, and learn how to quickly “Probe, Evaluate and Close”, to select the best mutual relationships.

For Buyers: The most important thing for you to understand is that most often, a buyer will not know that they need a Leader vs. a Follower, until it is too late to go get one.  That’s just a weakness of the system.  Knowing that up front may help you…maybe not.  It is what it is.

For Sellers: Be honest with yourself about your ability to be objective.  Don’t hire an agent; and then act like a For Sale By Owner.  You just complicate things to the point where no one is successful.  If you want to run the show…GREAT!  Just make sure you hire a Follower-Agent and pay a Follower-Price.  Don’t hire a Leader-Agent and spend all of your time butting heads with the agent.  That tension will lead to failure somewhere along the line.  Knowing that up front may help you…maybe not.  It is what it is.

Tribes and Choosing

Tribes and Choosing

Priceless "Gifts" for my Readers at Christmas

How do you give back to “the anonymous many”?  Those who “speak back” to me in comments, are my most prized and loved readers.  Imagine singing to an audience that provides no perceivable reaction?  But I also appreciate the thousands of silent readers who sometimes email privately, and more often stay in the shadows.

What do you give to “an internet audience” whom you appreciate SO MUCH, and yet cannot “see”? Priceless Gifts you can enjoy today…and for many years to come…as long as the links don’t break.

What a wonderful gift we have in the internet.  Unbelievable that we can experience this Pulitzer Prize Winning composition, The Little Match Girl Passion by David Lang performed at Carnegie Hall.  We even get to see David Lang’s own account of what he hoped to convey with this piece.   Gift #1

Award Winning Photography from the 2007 Winner of the Photobloggie Awards.  Imagine making a 2009 Calendar for your own personal use, using 12 of these magnificent photos of your choosing. Gift #2

We love our dusty old cookbooks, and the new ones as well.  But what a gift to be able to SEE and almost SMELL a recipe via the wonderful world of video on the internet.  I chose this half moon ravioli recipe, made with Azumaya,  because of its simplicity.  A ten minute from start to finish gourmet fantasy that you can “stuff” with pretty much anything you want.  I would use ricotta cheese vs. mascarpone.  Gift #3

We are the internet, you…me…RCG.  A powerful, growing force to be reckoned with.  I give you a tale of how the power can be unleashed in real, and meaningful ways without bounds:  Gift #4

2009 will not be a year of great change.  It will be a year of Great Hope for Change, one small step at a time, via you and me acting the best we can in each moment.

I would very much appreciate any return gifts you may have, via links, sent to me, ArdellD at Twitter.  I will continue to share my passion for real estate with you…and hope you will in like-kind, share your passions with me.  Be change; influence a mind.

Buon Natale!

1% for Authenticity

2009 is definitely the year to try to make the World a better place.  If 2,000 to 2010 will be the decade of greed, then let’s make 2010 to 2020 the decade of “authenticity”. The age of “What you see is what you get”.  Showing what you ARE vs. what you think you should show them to get them to choose you.

Many years ago, 1% of the budget for building new construction in many big cities had to include 1% for “art”.  I remember the authentic ones of my time.

Aspring to Authenticy

Aspring to Authenticity

Authentic Art is about what IS, or what one at least HOPES TO BE.  Philadelphia’s been hoping to be The City of Brotherly Love for a very long time, long before this artwork made the scene in Love Park at JFK Center in 1978.  It’s a lasting reminder of what the City is supposed to be all about.

City of Clothespins?

City of Clothespins?

When they put this 45′ clothespin up outside my office window across from City Hall in 1976, many of us were not happy with the choice.  It was 1976.  It was the bi-centennial of a great city.  What did clothespins have to do with that?  Yet the artist’s view of Philadelphia was one of city folk hanging clothes by clothespins out of their apartment windows…I guess.  That’s what they get for hiring an artist who never lived in Philadelphia.  Wasn’t very authentic, even less so today,I’m sure.

So what is “authentic”, what would 1% for Authenticity look like?

Longaberger Building in Ohio

Longaberger Building in Ohio

Back in 1993 or so, I gave these Longaberger Baskets as closing gifts.  I hired a woman to bake home made sweet breads to put in the baskets, that people could eat while unpacking at their new home. 

Wouldn’t it be great if all businesses and professionals were that obvious?  Imagine having a meeting at Longaberger and trying to find the building.  Would you need a GPS when “within range” to find that place?

What would Authenticity look like?


Enter at your own risk

Enter at your own risk

The receptionist at the bottom would assign an evaluator.  Alt-A loan? – 4th floor.  NINJA Loan? Top Floor.  The visual and the feeling of being on the top floor, with the perception of little support underneath would say it all…no?

Look around the big cities with the 1% art rule.  You can spot them, because over the years the impact has been dramatic with only 1% going toward art.  What will 1% of time, effort and resources going toward authenticity look like, a decade from now?

Tips from King County for the winter weather

We were contacted from local county officials requesting us to post information to help our readers regarding the potential winter weather:

Are you prepared?  Steps to stay safe in this weekend’s storm

With high winds forecast for this weekend and possible power outages, it’s time to take steps to stay save and avoid carbon monoxide poisoning.

How to avoid carbon monoxide poisoning

Carbon monoxide can kill you or cause serious injury.  Carbon monoxide gas comes from burning fuels such as gasoline, propane, oil, kerosene, natural gas, coal or wood.  Here are some steps to prevent carbon monoxide poisoning.

  • Never use a gas or charcoal grill, hibachi, or portable propane heater to cook indoors or heat your home.
  • During a power outage or at any other time, do not operate fuel-powered machinery such as a generator indoors, including in the garage.
  • Avoid combustion “space heaters” unless there is an exhaust vent.

Carbon monoxide poisoning can strike suddenly and without warning.  In some cases, physical symptoms of carbon monoxide poisoning may include splitting headache, nausea and vomiting, and lethargy and fatigue.  If you believe you could be experiencing carbon monoxide poisoning, get fresh air immediately.  Call for medical help from a neighbors home.  The fire department will tell you when it’s safe to reenter the home.

For a full list of carbon monoxide prevention tips and other safety and disaster information in English and other languages, visit www.kingcounty.gov/health/disaster

Other important safety tips

  • Make sure you are wearing enough warm clothing before going outdoors.  Wind speed can create dangerously cold conditions even when the temperature is not that low.
  • If you think power will be out for several days, check with your city for location of warming shelters.
  • Watch for signs of frostbite and hypothermia-slurred speech, confusion, uncontrollable shivering, stumbling, drowsiness and body temperature of 95 degrees Fahrenheit or less.  Get medical help immediately if you think someone has frostbite or hypothermia.
  • Check on elderly friends, family, and neighbors to make sure they are safe.
  • If power goes out where you live, keep food safe by keeping the doors closed on your refrigerators and freezers as much as possible.  A full freezer can stay at freezing temperatures about two days” a half-full freezer about 1 day.  Potentially hazardous foods, like meet and fish, should be discarded if thawed and warmer than 41 degrees.

Update: News Release from the City of Seattle