I don’t make this stuff up folks.  It is getting to the point where I think loan officers need to seriously think about who they do business with.  It matters zero how low the rates are for this lender if they can’t close or create an atmosphere where it is so difficult to work with that it places stress on your long term business relationship with your customer:

A fully executed, signed and on-time delivered loan package was rejected resulting in a full re-draw due to:

“the vesting on the Deed of Trust said, Husband and Wife, instead of Wife and Husband.”

This is an extremely easy fix, but yet it was rejected.   No progress was made in trying to convince the lender how absurd this was nor how foolish the lender looks to the professionals involved in closing the transaction, never mind how dumb they look to the borrowers who have every right to request another lender.  This places the borrowers loan lock in question and adds expenses including wastes an unbelievable amount of time that could be spent on transactions placed with lenders that have their act together.

This past Sunday, I was given a book by a gentleman who by most measures is financially well off and more importantly is a success story both personally and professionally.  The book he and his wife offered me is called, “Stop Acting Rich,” by Dr. Thomas Stanley (Ph.D) of famed bestsellers The Millionaire Next Door and The Millionaire Mind.

The real estate industry is an incredible laboratory.   It provides us with an interesting foray of social and cultural samples and Dr. Stanley heavily uses housing early on as the springboard for this book.  Perceptions of wealth and happiness seem closely correlated to what the cultural norms place on us and pressure people to become what Dr. Stanley terms, “aspirational Millionaires.”   But, is true wealth achievable and what does it look like?   If you emulate most real millionaires profiled, you won’t be driving a top tier BMW or always wearing Enzo Angiolini, Ferragamo or Allen Edmonds shoes.

In my view, much of what is written in the text is really a story about real estate and how housing shapes our habits of consumerism.   And that is why is it a fascinating read into what people perceive as true wealth.

From the Preface in “Stop Acting Rich“:

The reason why so many homeowners today are having a difficult time making ends meet goes way beyond mortgage payments.  When you trade up to a more expensive home, there is pressure for you to spend more on every conceivable product and service.  Nothing has a greater impact on your wealth and your consumption than your choice of house and neighborhood. (emphasis added)

More exerpts from Dr. Stanley:

• My research has found that most people who live in million-dollar homes are not millionaires.  They may be high-income producers but, by trying to emulate glittering rich millionaires, they are living a treadmill existence. (I know several people who are “aspirational Millionaires.”)
• In the United States, there are three times more millionaires living in homes that have a market value of under $300,000 than there are living in homes valued at $1 million or more.
• Most millionaires do not reach the millionaire threshold until they are near 50 years of age.  Most became millionaires, in large part, because they led a frugal lifestyle.  By the time they reached the millionaire category, they were set in their ways, so even after becoming wealthy, they typically remain frugal. (do you know frugal millionaires like this?  I do.)

“Ours is a culture of hyperconsumerism.  Not only can and do we buy nearly everything (except for the truly outrageously expensive), but we seen to have come to believe that we can and should have it all and that who we are is dependent on the ability to live the right neighborhoods, with appropriately sized homes filled with brand-name appliances, with prestige cars parked in the driveway with expensive golf bags and clubs in the trunk, and so on.”

“In a way, the credit crisis of 2008-2009 is serving as something of an intervention.  But the for treatment to work, you must take a cold hard look at your balance sheet and at your life, and determine if you would be wealthier if you would stop acting rich.” – Thomas Stanley, Ph.D, author of Stop Acting Rich

This book should be at the very top of the list for those in the real estate business.   Get rich slowly seems to be more in vogue today but, sadly, Dr. Stanley feels that although the recession may have caused many to take a breather, every indication is that we will pick up right where we left off when gentler and more favorable economic winds blow again.

Working largely in an industry within real estate that provides a service behind the scenes presents problems in conveying value to the people who recommend our services:  Realtors and Loan Officers.

It has always been an awkward situation.   Realtors and Loan officers are customers, not clients.  There is a difference, not in importance each plays in a transaction (very important), but in how the relationship is treated by each party to the other.

You have essentially two camps:

1)       Agents and loan officers who believe that they control your business by intimidation or by the threat of moving their business to a competitor or both.  They sometimes feel like title and escrow companies “owe

Have been seeing this man walking around with no shirt on through rain and cold and…for about a week now. My guess is he is in training for the annual Polar Bear Plunge.

Took a walk over to Green Lake today and snapped a few pics of a random sampling of Seattle Homes.

A recent interview with Cato Institute Senior Fellow Randal O’Toole brings to light another significant factor in our greater Seattle housing market’s recent run up and fall down – the effect of our state growth management and local urban planning regulations on the price of housing and the creation of the shortage mentality in buyers during that period.  

Here is a link to the article, courtesy of Realty Times: http://realtytimes.com/rtpages/20091105_restrictive.htm

In essence, the Cato Institute study found that the bubble wasn’t really national, it was mostly confined to about a dozen states, all of whom were practicing some form of what urban planners call ‘growth management’ – basically pushing the bulk of housing growth into limited urban areas (sure sounds familiar). The effect of that practice was to boost the price of land inside the urban area, and make housing more expensive – and incidentally increase the tax revenues and job growth of cities in preference to counties – hmm.  That same restriction also allowed the cities to impose more and more permitting restrictions that caused more expense and longer lead times for developers – and thereby both restricted supply and raised prices to consumers even further.

My favorite example of some of these practices is the number of brand new houses built in Kirkland in the past few years that have a detached garage with a qualified accessory dwelling unit above it.  How many buyers qualified to buy a $1.5 Million house would want a detached garage, let alone a large ADU they have no intention of renting to a stranger on their property?  But it sure helps the city of Kirkland meet their growth management requirement for additional ‘housing’ units.

There’s a lot more more interesting analysis and discussion in the article – well worth reading.

Well it’s all approved and just needs the President’s Signature, so I think we can pretty much call this Homebuyer Credit Bill a done deal.

I am not going to call it an extension of the $8,000 credit, for fear that too many will miss the added $6,500 credit for *move up buyers. Two credits in one bill.

We won’t have the IRS links until after the Bill is passed, of course, but I updated my post of last week to reflect all of the things I expect this bill to have. Very little change from what was expected.

On the $6,500 credit looks like close date is not an issue and contract needs to be on or after Nov. 7.

So there it is…a two for one special. $8,000 First Time Buyer per the definition in the current bill PLUS a $6,500 credit for move up buyers for home purchase up to $800,000*who have owned their current home and lived in it consecutively for 5 of the last 8 years.

I rarely write on investor topics, because most of my topics come from recent issues discussed with one or more of my clients. But this week I was speaking with one of the few investor clients I choose to work with, though I use the term “work with” loosely, as most of the time I tell him “no, I don’t think that’s going to work out well for you.”

The client is looking at relatively lower priced homes. Without getting into too much detail due to confidentiality reasons, suffice it to say that the property purchased would end up back on market in a short time. While I am helping him purchase, and may or may not be helping him sell it later, I cannot move a step forward (for him) if I see a chink in the plan going ALL the way forward. Some will say that’s not my job, just write it up and let him buy the thing…but my brain just isn’t wired that way. But that’s the subject of another post.

It is very difficult to have a wide enough profit margin on a flip project to make it worthwhile. For that reason and many others, this is not a time when I accept investor clients without a lot of thought and penciling out of the numbers. That rules out most if not many investors except those “able” to do a lot of the work vs. hire it out. EXCEPT there is that problem of local laws that suggest, and buyers who want, ONLY a licensed contractor making those repairs and improvements.

But that is not the biggest current chink in the plan. The problem as I see it is balancing the timing of the soon to be buyer credits with The FHA 90 day seasoning rule.  Lower priced home sales over the next slightly less than 6 month period will most likely be supported by a new credit for buyers who are in contract on or before April 30 of 2010, this based on information available at present. What will happen at the end of that period is anyone’s guess, but my guess is that it will not be extended beyond that date in a meaningful way and that the market will react negatively come May 1, 2010. Even if the powers that be move to a phasing out stop-gap credit, I think that will be a total waste of money on all fronts, and that May 1, 2010 is D-Day anyway you slice it. It’s the day the carrot on the stick is no longer fit for consumption and a new carrot will not be forthcoming.

OK…moving on…why is this a problem? You write up the purchase, you close in 30 to 45 days…say mid December. Now, in order to get the property in escrow with a buyer before April 30, 2010 you rush a team of workers in there and get the whole thing done and back on market in 4 weeks by Jan 15, 2010. That gives you 105 days to get it into contract with a new buyer, right? Not so fast…maybe not.

Let’s assume that many if not most people in that area have been buying via FHA vs. 20% down or more Conventional. Each area is different and in this case FHA is the primary means of purchase in this price range for owner occupant buyers. In the instant case, the house specifics suggest the buyer will NOT be someone with lots of downpayment. Now let’s assume that if you can’t sell the house via FHA, you probably won’t sell it at all. Now let’s add one of the “newer” FHA restrictions (of many) The 90 day Seasoning Rule. This rule requires that the owner (my client) own the property for at least 90 days (seasoned ownership) before selling it. There are some exceptions to that rule, including banks who have foreclosed on the home:

On September 1, 2009, the rule was somewhat relaxed.  FHA now allows for a waiver when the property  is owned by a bank or some other foreclosing entity.  It also allows for a relaxation of the rule when a home is sold by a state or federal agency.

Now let’s go back to our timeline. He closes on the purchase on Dec. 15, 2009. He has to own it 90 days before the buyer can get FHA financing, that takes us to March 15th. Now his 105 days starts looking more like March 15 to April 30 or 45 days. There is no easy answer here and you can list it on January 15th and say “cannot close before March 15 IF the buyer is using an FHA loan”. But if you can’t get loan approval until March 15, you can’t close ON March 15 as a result….you see where I’m going here.

This weak market is not all about supply and demand. This weak market is not all about tighter lending standards as to income and downpayment needed to purchase. This weak market is not purely based on the rise and fall of the Homebuyer Credit.

Rather…this weak market going all the way back to August of 2007 (for the Seattle Area) is about the rules of the game constantly changing so much and so fast that sometimes waiting on the sidelines for the dust to settle becomes the best option. For flippers…well, it ‘s a very, very tough time to be one and it is not for anyone who wants to put on rose colored glasses. Get out your crystal ball and look at all the chinks in the armor.