Some people intuitively understand

that blogging is about speaking your mind

41 thoughts on “Some people intuitively understand

  1. Hey Ardell, Fun stuff. Can’t wait to get ya’ll on the line tomorrow.
    I think the diversity and synergy the 4 of us will bring to table is personality than one phone conference can fit!

  2. Someone send me a transcript – since I have talked (via email) with most of those n this conference, you guys should know by now that I can’t hear a lick.

  3. According to Sellsius – Time: 11:00 am Pacific, 2:00 pm Eastern (who knows what time in Mountain/Central)

    To call in dial 512.225.9517 and enter caller code 923172#.

  4. Hey, Ardel. I am loking forward to hearing the pocast. It should be interesting discussion especially in light of recent events in the markets. I wonder if they will be at all interested in the Realaors’ perspective on the troubles in the subprime market and trickle up into the (traditionally) more stable loans.?.
    Do you have talking points ready for that? Specifically, I wonder what perspective professional Realators have on the longterm rewards/risks that homebuyers and lenders face, given that Realators gains from a sale are immediate and irrevocable. Since it has always been a good time to buy AND sell a home, people probably should have been asking more forcefully of late if it was a good idea to own a home at current prices… or the loans that backed them. Is it safe to assume that Realators feel less responsible for any possile fallout because they only lead the horse to water… it is the mortgage broker who is holding their head under water and making them drink? That stance of course would come into question with that commercial showing the realator on the phone encouraging the young couple that “They CAN DO this!”
    I just had an interesting idea, what would happen in the industry if realator fees were able to be recalled if a loan defaulted due to bankruptcy in the first 2 years? I imagine anyone who was facilitating loans in California for the last couple years would feel like they had a lot of skin in the game.
    I should state that I am not a Realator, lest anyone should confuse my comments with those of a professional and intelligent person.

  5. Wanderer,

    The talking points are set by the interviewer, and the subject of this podcast has nothing to do with the lending industry. So that’s a no.

    I do think that the lender is called to task if they have a lot of defaults. I saw a builder go to jail in CA for “silent seconds”.

    Generally it is the seller/builder or lender and sometimes escrow, who gets into more trouble over those issues, and not real estate agents. Often the agent is not even privy to the loan details. The buyer does not have to reveal their loan plans to the agent at all. It’s the buyer’s option to include or exclude the agent, once they have a pre-approval letter from a lender.

    By law in almost every state, agents MUST present all written offers, and generally cannot refuse to write an offer by someone who has a loan pre-approval letter, and cannot by law refuse to present the offer to the seller. So the agent is not given leeway to suggest a type of loan is “not good” for the buyer. We can offer an opinion IF we know the loan program being used, but that’s about it.

    I’ve seen a builder go to jail and an escrow person. Never heard of a lender going to jail, or an agent over these lending issues you mention. But maybe someone else knows of other cases.

    The lender is not permitted to reveal the buyer’s loan intentions to the agent without the buyer’s approval. So not likely the agent can be the one responsible for loan issues unless the buyer invites the agent into the loan picture.

  6. Hey Ardell – Great job this morning! My coworker and I listed to it and found it very interesting! We found out about the conference though an email from inman news and from their website. Defnitely an hour well spent! Thanks!

  7. Exactly, Ardel. There is absolutely no accountability for Realators in the whole lending/buying transaction. My suggestion to instill some is tongue in cheek… it will obviously never happen. Hey, if Realators get to bed at night just thinking to themselves, “I worked hard and made my 3% with someone who should understand Caveat Emptor…” so be it.
    If however, you have ever stood at a party and said that you really like being a professional Realator because you get satisfaction from joining new owners in a great positive step of their lives, then you have to participate in the next step too. Many of those people that you KNOW couldn’t have gotten the same loan 5 years ago are going to fail. It’s true, you have no way to know who is going to fail and who is not, but you are fooling yourself if Realators don’t bear some burden for building up the cliff that this market is about to fall over. I would say somewhere in the 3-6% range or maybe a little bit more.

  8. Regarding Accountability – The friend of mine that came close to bailing on his home purchase 2 yrs hence was absolutely hounded by his Realtor on the importance of purchasing a home at any cost.

    After 2 re-fi’s, he’s finally able to afford the payment and all the emergency repairs he rolled into the loan.

    Who was the Realtor that encouraged him to purchase this fixer? His mom.

  9. Wanderer,

    I honestly can’t answer how I will react if and when that day ever comes. Has not happened to me in the almost 17 years I’ve been in this business. In fact a few came to me just months after they purchased saying they needed to leave the State, and I was able to sell their homes without their losing money.

    Maybe I am more responsible than you think I am, given my clients have not faced these problems from 1990 to present.

    Must you continue to hate me and citicize me for what other agents may or may not do? I find it particularly offensive to be labeled and blamed for things that may have nothing at all to do with me as a professional. Don’t you ever feel bad about generalizing everyone as a lying, cheating, cold hearted bitch?

    Many do rely on me for advice regarding lending issues, and I am better than most at providing that advice. But some refuse to tell me anything about their finances, and that is their right. First time buyers usually expect guidance. But high end buyers often do not reveal anything about their finances to me. They have no obligation to give me anything but proof that they are qualified to purchase.

    You are barking up the wrong tree. Actually, you are biting up the wrong tree. I absolutely guide people with regard to solid lending issues more than most agents, given I have the background to do so. But the client has a right to privacy also. Most who can well afford a property, reveal nothing. I have no way of knowing how qualified they are or are not if they do not seek my guidance with regard to their loan. Some do…some don’t.

    Your negative references to me in your comment, you don’t even know me by the way, are misplaced. Don’t you feel bad about that?

  10. Wanderer,

    How about the accountability of “those people that (Ardell) KNOW(s) (that) couldn’t have gotten the same loan 5 years ago (and) are going to fail”? You are talking as if they were forced to live beyond their means.

    Also, do you know of any business that ever says “right now is not a good time to buy”? Does yours?

    Personally, I think the latest forms of financing are financially (if not literally) suicidal. But I could be wrong. It could be that the traditional forms of financing are becoming obsolete. My late grandfather bought his home with cash (in the old country) – he thought loaning money period is crazy.

  11. Bill Waters,

    Excellent. My dad talked me into buying a fixer. My real estate agent tried to talk me out of it – he said it would be too much work as he pointed out everything that need to be redone. It’s eight years later and I’m still fixing it up! Two bathrooms and I’m done. But I’m out of gas. I have no motivation so it will probably be another couple years before it’s done. My point – boy I wish I listened to my real estate agent.


    Only myself to blame.

  12. Hello Ardell,

    I was trying to find an email address, but this was quicker… I really enjoyed Inman’s conference call yesterday and learning more on blogging. It’s obvious why you’re successful at it and we’re excited about implementing it with our firm.

    I hope you don’t mind if I bend your ear from time to time, if there is a better forum for that please let me know. Thanks again on the great advice, I look forward to networking our blogs in the future.

  13. Good luck, Frank. Ask over here on this post when you have questions so Dustin and Galen and others can chime in on answers if the get to techie for me. If you question needs more attention, I’ll make a post out of it to invite other opinions after you post the comment here. If you post it here, or on any of my articles vs. other people’s articles, I will get an email when you comment.

    Up by my photo on the top right is an email link to me, if you prefer. Mine is under Dustin’s photo and to the left of my photo.

  14. Rhonda,

    They told us it usually takes a day for the technicians to get the feed and put it on the site. But it will probably be for subscribers only. I promised Derek a written transcript, since he can’t hear it. Maybe I’ll post that.

    Must have gone OK (I haven’t heard it yet) because I got an email within 25 mnutes from Tom Kelly of KTTH-AM 770 asking me to come to the studio. I picked April Fool’s Day for that one 🙂 Not sure yet what the topic will be on the Radio program.

  15. Ardel,
    I don’t hate anyone… Realators or otherwise. I am a fan of personal responsibility though, and I think the industry is sadly lacking in that… not that Realators are responsible for the entire economy either. I have just been struck in the last week by how all of the focus is on the lending side of the equation… as if it is a revelation that many people could not afford the loans they entered. Perhaps slide will stop here in the PNW and we won’t see the same default rises. For many people and my own job, I certainly hope so. Unfortunately, I don’t think this will be the case.
    Hey, I’m a capitalist. I understand that someone is going to make 3% whether the housing market is seriously flawed or not. But I won’t feel bad for calling out a profession that rich escorting pople to the edge of the cliff.

  16. Wanderer,

    Thank you so much for responding, as I was talking to you and not Matthew regarding lumping all agents into one big basket. Isn’t it pretty much true of every profession that 20% are better than the remaining 80%?

    Honestly. Here’s where I am. There’s a lot of overpriced trash on the market. Some of my clients are first time buyers in a low price range. Finding something I can recommend, is like finding a needle in a haystack, and taking months in almost every price range. Right now I am clearly losing money by not selling any old thing and taking months to look and wait for something decent. 4-7 months work at 3% of under $500,000 is a losing proposition. Can we all agree on that?

    I would like to pursue at what point you in particular feel 3% equals too much. If I work with someone for 90 days, almost daily and at least three times a week for 90 days, and get paid say $9,000 for that effort, do you feel that is too much? If I only take one buyer in any price range to avoid conflicts of interest, and handle say 2-3 per month on average at between $7,000 and $12,000 per client…is that too much?

    Where do you generalize at 3% being too much? Is it too much for a client bying a condo at $215,000 if it takes 120 days and 3 offers to find the right one and get it?

    I don’t like generalizations. Can you fine tune your perception down to reality for me? It would be very helpful to me, so if you can, I would much appreciate your thoughtful consideration, and not a knee-jerk “shoot from the hip” response.

  17. Wanderer – Housing IS the economy – it’s no coincidence that GDP growth, when adjusted for mortgage equity withdrawls drops roughly to 0 over the past 5 years. Realtors may not be responsible, but they have been working the sales side of the only growth engine the nation has seen this decade. Had it not been for realestate, we’d have spent 2001-on in a persistent on/off recession.

  18. Bill,

    Personally, I feel (and have felt) that it was 911 that influenced that. I don’t mention it because it is political and a bit whacky to view it that way. But seems to me that the interest rates went down to shore up the housing market to “save face” and prevent the indicident from creating more damage than it did. Same with loose lending. I truly believe it was all about shoring up the economy in the wake of 911.

    So it is not the fault of real estate agents that the recession was “put off” after 2001. It was a concentrated effort by our government to not let 911 create a recession.

    I have not heard others mirror my viewpoint, so do not state it often. But that’s my take. I think if Bush weren’t re-elected, things could have gone differently after that election year. I think if Greenspan were not still vocal, things could have changed as well by now.

    So I agree with your take, but it is not about Realtor’s at all. It was more political, and I wholeheartedly agreed with the government’s actions after 911. Who wanted Bin Laden to be responsible for a recession? No one. Not even you, I hope.

    So yes, I agree, we were complicit in the actions to prevent a recession after 911 in 2001. I for one do not regret that.

  19. Ardell, the recession likely started in Q3 2000 since that was the first quarter of negative GDP growth. By Q1 2001, nobody was questioning we were in a recession. 9/11 (Q3 2001) just managed to kill a budding recovery.

    What the effects of floating the economy on increased mortgage debt going on 6 years now is unknown. It may have no effect. Too soon to tell.

  20. Bill,

    I certainly didn’t expect it to last 6 years. Clearly the low rates of the week of 6/9/05 were the tipping point. I’m hearing rates are going to drop again. If that happens, the rest of the Country will get better and we will jump off the charts again. I can see them doing that for the rest of the Country, what happens as a result here in the Seattle Area is ancillary to the purpose. But I can clearly see that happening.

    Loose lending is not as responsible for the appreciation here, as much as interest rates generally being low across the board back in 05. As a professional, I do hope rates drop below 6%. But I also empathize with those who are getting priced out of the market. Epathy is not my strong suit, so when I empathize, it really is tough on the 1st time buyer, especially in Seattle vs. Eastside.

  21. I’m curious to know why you think loose lending has less of an effect in this area. Everything I’ve read indicates that Seattle is pretty much average among major cities when it comes to loan types used.

    Regarding the rate drop – are you anticipating a substantial drop? It’s hard to imagine more than half a percent without the catalyst being a full on economic slowdown. Also, a small drop in rates won’t have the same effect it did earlier in the decade when people were refinancing out of 7 to 8% loans – sure it will help some ARM holders – but we’d need to see mortgage rates below 5.5% to see a substantial discount over what prime mortgage holders are already paying on average. Even 5.5% wouldn’t be much help if you’re a priced out first time buyer.

  22. I’m pretty sure all of the appreciation in my other post did not involve any zero down loans at all. I’m 99% sure of that, but will check. I will do a spot check to test my perception, my perception being that the areas with the most appreciation also had fewer zero down loans and the areas with the least appreciation actually had the most zero down loans. Will report my results, but that’s what I am seeing in the last 3 years.

    As to interest rates, it has been my experience that the market reacts to 5.75% differently than 6.125%. People react to rates being 5 something. When rates dipped a hair below 7 to 6 something, there was a reaction. When rates dip below 6 something, there is a reaction. While the payment may not be much different, I absolutely think rates of 5.5% will create a stronger market than 6.125%. That has been my experience over the last 17 years at all price points. Same as $399,950 getting more attention than $409,950.

    People thinking about buying when rates are 6.125% become buyers if rates go to 5.75%. They do feel that rate tips are short lived and pounce on the opportunity while it lasts.

    As to “priced out first time buyers”, the BECU program for those making $70,000 or less helps a lot. No high rate second and almost no costs. I haven’t used the BECU program, as First Tech’s was better. I’m assuming BECU’s is about the same, as it is the same Credit Union first time buyer program, without the optional flexibility piece. I don’t know why First Tech didn’t get new funds for the program and BECU still has some. Last I checked about two weeks ago, that was the case.

    Another avenue one of my client’s used last year was The Pentagon’s Credit Union. Apparently available to all members and no military connection required for membership. That program has no difference in rate between conforming and jumbo. So good for buyers in the jumbo loan range. Some quirks, but I “got it” as the quirks are simply that they operate East Coast style vs. West Coast style. A few bumps in the road, but nothing I couldn’t handle and well worth it to the buyer for the conforming rate on a jumbo loan.

    I had some info on a Bank of America product with no 2nd mortgage needed and no PMI without 20% down. Think you needed 5% down. Didn’t try that one, but I think it’s still out there.

    I’ve never had a client do a HELOC 2nd. Not sure why people use those. I think a lot of the really loose lending is just laziness. There are other programs and fixed seconds and a few options better than that.

    So I don’t think loose loans contribute to appreciation. Loose loans are a product of many other things, and those same buyers did not have to get loans that were so loose, and still could have purchased with better loans than they chose. The loose loan was just the easy way out for both the buyer and the lender and the agent. Easier.

    I’ve even seen lenders push a loan to sub-prime because it was easier to process a sub-prime, and they made more money on sub-prime. Shameless. They pushed it by giving the buyer a letter at more than they could afford, which popped the ratios into sub-prime territory. They did it on purpose and said, “why not, I make more money that way.” The buyer was not even aware. I figured it out in about 5 minutes. I said to the buyer, “Why are you sub-prime?” She said “I don’t know”, so I checked it. She already had the lender letter when I met her.

    So don’t assume loose lending is done so that someone CAN buy. Many can buy without it and don’t know it.

  23. Ardell, it is interesting to hear that – It sounds like you have well heeled clients. My friends that work at escrow (one at a company in downtown kirkland) have observed otherwise.

    A quick look through the KC records shows alot of piggyback seconds – more often than not. When you used to be able to see the deeds of trust on line, it was easy to see that many people were using 100% financing and rolling in the closing costs (typical red flag was a house that had been on the market for 60+ days, then sold for 103% of the asking price, and the 80/20 covered every dime of it)

    Rhonda or Tim (S-Crow) I’m sure are better qualified to discuss trends than I am.

  24. Bill-

    2007 YTD purchase closings at our office with 100% financing is running exactly at 50%.

    This is down from 71% of all purchases in 2005 our office handled that were 100% financed. The other half 2007 YTD purchases were cash transactions and down payment borrowers.

    This is why I continued to hold firm that 100% nothing down financed programs have been a primary driver of the market. But that’s just my opinion. As the year unfolds, I project the 100% financed numbers to drop, mostly due to tightening lending “standards” that will eliminate some from the buyer pool in the Puget Sound region.


  25. FYI, I have had people with enough money to buy cash and incomes well over the amount needed to afford the purchase, use zero down stacked costs.

    Just because the loan is zero down stacked costs, doesn’t mean someone doesn’t have $400,000 in a 401k and other investments. I’ve seen that a lot.

    Some people do that rather than sell their investments, and feel current interest rates warrant financing it all.

  26. Every one of the 2007 YTD 100% financed transactions I mention in post #28 were originated with sub-prime lenders and sub-prime terms (ie, higher interest rates & terms consistent with sub-prime loan products: 1yr ARMS, I/O , PPP’s, etc…)

    Some of the sub-prime lenders funding these loans: First Franklin, Argent, New Century (prior to their recent problems), Wells Fargo (sub-prime), etc….

  27. Ardell, I totally agree that experienced investors can net more than the mortgage interest on their loans. Another one of my escrow friends works at a firm that caters to high end borrowers, and yes, even if they are buying 0 down, they have other assets that could be liquidated for a down payment, and that’s irrelevant in their purchase, because that is their choice.

    Experienced investors with good credit have alot of options available. Interest rates under 6% encourage this.

    Still, the question is whether this represents the overall market. As far as I can tell, these wealthy individuals make up *some* portion of the market, but unless you can figure out how influential (by market share) they are, it’s hard to say what the impact is. I’d guess they represent less than 10% of homes sold zero down. Definitely a market driver, but not a big player in price appreciation.

    I think that nation wide and locally most 0-down borrowers are first time buyers. Maybe not in prime areas of bellevue and kirkland, but for the puget sound area as a whole.

  28. Tim, I’m interested in hearing how the loan mix changes due to lenders tightening standards in the past 2 months. My impression is that the tightening hasn’t had any impact, with the exception that a handful of subprime borrowers have been disqualified.

  29. Tax records are not updated for Feb 07 yet, but I ran Redmond – $400,000 to $600,000, single family and condos, sold in Jan 07 and came up with 81.1% financed. Only one sale was zero down. Not exactly “wealthy individuals”.

    Just people who likely had equity in their lower priced condo, and then traded up bringing their equity into the new purchase. A few may have rented and saved, but by and large people who buy a little condo or townhome, before they are ready to purchase a home, have some equity to trade up with.

  30. Given Bill’s latest question I did July, same area, same price range. 83% financed with only 10% zero down. High appreciation area; appreciation not funded by zero down loans.

    So far my perception is matching reality. Highest appreciation areas do not have the highest zero down loans. I’m using a $400,000 to $600,000 price range, so these are not “well heeled” consumers.

    Looks like the world is not “going to hell in a handbasket” 🙂

  31. Not all of my zero down clients are subprime. Many have 5% or more down, and elect to go zero down to keep what would have been the down payment liquid. Plus, some may want to have the higher mortgage balance to create a larger tax deduction benefit.

    Dustin–great add with the comments update! 🙂

  32. Rhonda, I’d guess that 30-40% percent of zero down buyers are subprime. What’s your estimate?

    I agree that if you only have a few % to put down, you’re probably better off holding on to it.

  33. Bill, When I have some extra time, I’ll review my database to see. Your figures sound pretty good…maybe closer to 40%. When people move into a home, they often don’t realize what expenses may pop up on them…so I do like to see borrowers have extra $$ in the bank vs. plopping it all into the house. There is a cost to extracting the equity later.

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