Category Archives: Seattle-Employers

Style Trends – Should You Care?

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Looking back at some photos of mine taken in my home when my children were small. Those were the days of colored carpeting, wallpaper, full wall brick fireplaces and large family gatherings.

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We decorated this room in Waverly Prints, from the sofa to the drapes and the wallpaper. Coordinated fabrics from the same family of prints.

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My oldest daughter, Tina in the middle in the photo above, recently said on facebook after viewing these photos, “Thank you Mom for making such a wonderful ‘home’ for us!”

Are we TOO concerned these days about being all the same? Treating our “homes” like “assets” vs a unique environment for our families?

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All too often when I look at homes with clients they all blend together into one repetitive theme of BORING, same…same…same.

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Waverly is still around…and you can get contemporary themes like the one above. But you are more likely to find that in a coffee shop than a home. A little sad really.

I’m not suggesting everyone should run out and buy wallpaper and dark blue carpet. 🙂

But being a bit BOLD and allowing your personality to shine through your home’s decor is long overdue.

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It gets a bit dreary in Seattle, so in the photo above I blended splashes of color with the white overall brightness. If you are one of those people who complains a LOT about the lack of sun in Seattle. You might want to reconsider your choices of interior decor.

Do you have a bit of brightness when you come home each day? Or is your decor adding to the depressing grayness outside?

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It’s a lot easier to be bold with paint colors…though I don’t suggest you be quite as bold as I am. Not too many people would have Grinch style CLAWS on their coffee table.

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Given most people are buying their homes today with the intention of  living in them for at least 7 to 10 years…maybe it’s time for “personalizing” your homes to make a comeback!

Make a nice “home” for your family. Make a Happy Home to come home too. Style trends are so One Size Fits All Neutral.  Reach inside for what YOU like when decorating your home vs what everyone else’s home looks like, or what the magazines say you SHOULD do.

Let’s go back to “Home Sweet Home”. What does your “home” say about you?

Should you buy a New home or an Old one?

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Education Hill RedmondLots of people want a NEW Construction home, the same way they want a new car vs a used car. However starting the home buying process at “I want NEW” is just as wrong as starting the home buying process at “I want a foreclosure”.

As I have said many times, in my experience more people HATE their “home”, and want to move to a different one, because of WHERE it is vs WHAT it is.

“…and underneath all is the land…” and land is a limited commodity. So where is that NEW home going to be built? Maybe…just maybe…on the wrong piece of land. The lot no one built on prior to 2011…for good reason. Even NEW(er) home will raise this issue. So if you have your heart set on a NEW home…the number one question you need to ask is:

WHY DIDN’T ANYONE BUILD A HOUSE ON THIS PIECE OF LAND BEFORE TODAY?

So many people limit their looking to the obvious and the house itself. If you are looking at new or newer construction…begin your investigations at the land that home is sitting on. Looked at one yesterday…without going to it…via Google Maps and the Stormwater Management Comprehensive Plan for that area, and the house was built on a lot IN “The Wetlands”.

Think about that for a minute. What are the various reasons a lot might be available for someone to build homes on today…that is close in to work and good schools and shopping? It’s common sense really. Especially today…after a huge building surge from 2004 to 2008…was there really a piece of land the builders didn’t find and build on during that time? Yes…a few…but not many.

IF wanting a NEW house is your goal…you would be wise to first examine the land of it…and why no one built on it before (unless it is a tear-down lot). Oddly, the one I checked that was “in the wetlands”, well…really, you have to ask yourself. How DID it get built there? Basically one is not allowed to build a house in Wetlands. Why does it not require flood insurance with drainage basins to the north, east AND south of the house?

Think you can “see” all that? Well what about too close to underground gas pipelines? Can’t see that.

My point is you are better off listing all the things you want from a neighborhood, a location and a home, without regard to AGE of home. Then…if none that have the best location are new…well, maybe NEW Construction should not be the FIRST item on your “wish list”.

Prioritize that wish list by the where…before the what in that where. It’s common sense really, isn’t it?

If it has been a Best Place to Live for 10 to 100 years…it was likely built on before yesterday.

Representation by RE Agents: Is That an Oxymoron?

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As we continue to build WaLaw Realty, I am frequently reminded of the tension between “buyer representation” and the realities of being a real estate agent. On the one hand, agents tout the importance and benefits of “representation.” A “representative” acts on behalf of another, the client, and protects the client’s interests. Needless to say, trust is an essential element of any representation.

On the other hand, agents are salespeople compensated by the seller for selling a home. These two roles are inconsistent with one another. A recent experience of mine illustrates the point. [Forgive my use of “s/he” as a gender neutral pronoun, but that’s a lot easier than avoiding the pronoun entirely.]

I was retained soley as an attorney to assist with a non-MLS purchase. As negotiations progressed, my clients realized that they might not reach agreement with the sellers as to the terms. Accordingly, to hedge their bets (they must move from their current residence) they began looking at homes listed on the MLS. To gain access to these homes, they contacted the number on the sign, the listing agent.

The listing agent indicated that s/he was busy but that s/he would send another agent to provide access. My clients assumed this was an associate of the listing agent, and the listing agent was taking steps to provide access as part of the job of selling the home. The clients were interested in two homes listed by the same agent, and the “associate” provided access to both, only one of which was suitable for my clients. Total time: Approximately one hour. At the end of the tour my clients informed the showing agent that they intended to use my services if they wanted to move forward. The showing agent did not mention that she was totally unrelated to the listing agent and would have a potential claim on the SOC if the clients purchased either home.

The negotiations collapsed on the first non-MLS transaction, and the clients decided to make an offer on the MLS-listed home. Accordingly, they then hired me as a real estate agent. As my web site makes clear, I rebate the SOC to my client in full (after payment of my flat fee and any additional fee incurred by client). Commission rebates to buyers are quite common and I am certainly not the only broker to offer it. Recognizing the possible claim, I contacted the “associate” who provided the initial tour of the home.

The “associate” was actually another agent working under a different broker in a different firm. The listing agent frequently refers new business to this “showing” agent. Because I cannot rebate a commission to which some other agent has a claim, I asked the showing agent if s/he was going to assert a claim on the commission (as the “procuring cause”). The answer? Yes I am! But as a compromise s/he offered to accept 30% of the commission, a typical referral fee. With a sale price of about $700k, s/he wanted $6k for the hour of work.

The story is still unfolding, so I can’t tell you how it ends. But I CAN point out that this claim on the commission is 100% inconsistent with any notion of “representation.” Again, that relationship is built on trust. At an absolute minimum, the showing agent should have explained the fact that, by opening the door, s/he may be entitled to the SOC. The failure to do so was not consistent — at all — with trust between an agent and a client.

I’m curious to hear some counter-argument. It seems to me that agents have been remarkably successful in having their cake and eating it too. They tout the importance of “representation” only to completely ignore basic principles of fairness to the client when its in their interest to do so. They’ve sold the public a bill of goods, because to agents “representation” is ultimately a means to an end, not an end unto itself. But then again, they’re salespersons, selling is what they do, and why they get paid in the first place. Its not about representation, its about sales. And the phrase “representation by a real estate agent” doesn’t make much sense at all.

Are the “Cash Call” Radio Ads Advertising a 10 Year Fixed Rate Mortgage Bait and Switch?

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I listen to 97.3FM and am a longtime listener of Dave, Luke, Dori (accidentally listening since 1995), Ron, Don, John, @thenewschick and @joshkerns38. I am so sick and tired of hearing the Cash Call radio ads that every time one of the ads run, I switch over to satellite radio and I’ve been meaning to write this blog post for many weeks so here it goes. 

Radio listeners: There’s nothing inherently wrong with mortgage companies that advertise on the radio. This is one business model of many but realize that radio ads are not inexpensive and there are a few ways that a mortgage company can pay for their advertising. One way is to charge you higher interest rates.  But wait, how could they do that when they’re advertising low, low mortgage rates? 

The answer is one you will not want to hear but I’m going to tell you anyways:  The rates advertised are likely NOT the rate that you will get.  The rate advertised is for a loan program that only a very small percentage of people will qualify for.  People with credit scores above 740. People with lots of equity in their homes, people who want a 10 year mortgage, or in the case of Cash Call, people who ONLY live in the state of California.  That’s right, the radio ad that’s running in Seattle comes with one caveat: It’s only avail for California borrowers.

To their defense, the Cash Call radio ad airing on 97.3FM does state that the rate and APR advertised are for a 10 year mortgage but realize that only a very small percentage of people calling that firm will end up with a 10 year mortgage.  This might come very, very close to a classic bait-and-switch scheme without crossing over the line but we don’t have enough facts to make that determination.  For example, one of the facts we’d need is to know how many people who called in actually chose a 10 year loan v. a 30 year fixed loan. So instead of selling a bunch of 10 year loans, the reason for their radio ad is to motivate radio listeners to pick up the phone and call after hearing the low rate and APR.

So, who’s on the other end of the phone?  The answer shows us another way companies that advertise on the radio make money. 

Any consumer who is curious about the licensing status of their loan originator can use the Nationwide Mortgage Licensing System’s Consumer Access website to check on the status of a mortgage company or individual loan originator.  When searching for the company name CashCall you’ll see many, many licensed LOs, okay that’s good. But dig a little deeper and you’ll notice that each person’s employment history contains many months of unemployment right around the subprime meltdown and lots of jobs held at subprime shops or other companies that only do radio or TV ads…Ditech, Amerisave, Countrywide, and other low wage side jobs outside of the mortgage industry.  That leads to the second part of how these companies make money advertising on the radio.

If they can’t offer you the lowest rates they’re advertising, then another way to make money is for the radio-advertising mortgage company to pay their staff a really low fee.  This is justified by the firm because…the company is making the phone ring! All the LO has to do is sit there, answer the phone and close the customer.  This is loan origination at its worst and if you don’t believe me just simply google:  Cash Call Complaints or Quicken Loans Complaints and see how many dis-satisfied customers they’ve left in their wake.

Homebuyers and refinancing homeowners should be wary of ANY mortgage lender that operates out of state and has no physical prescence in your state. 

Homebuyers and refinancing homeowners should always check the licensing status of their loan originator here and if their LO is not in the NMLS system ask WHY and ask to speak with their manager. Mortgage brokers and non-depository mortgage lenders must license their LOs. Depository bank LOs begin registering their LOs within the NMLS system this year. Maybe the person on the phone calls himself/herself an intake specialist or a loan arranger. Ask to speak with a Licensed LO. If there are no licensed LOs then you’re probably dealing with a lead generation company and I’ll do a serious smackdown on lead gen firms in another blog post.

Companies like Cash Call and Quicken hire the loan originators who have no client base, don’t want to work hard enough to earn repeat business, only work part time, will work for a low wage, and/or are paid to close deals and not serve the best interests of their clients.  Do you want low rates? Go ahead and use one of these companies but you should have extremely low expectations of your rate being as verbally promised or the transaction closing at all. Expect pain and suffering. Some people pay extra for that, but now we’re getting off track.

Do you want your transaction to close? Select a loan originator based on his or her experience and knowledge. Choose a local company with a loan originator located right in your city so you can go into the office and meet with him or her face to face at application.  Yes, this will take time. Do you want your transaction to close and also get a fair interest rate? Then that means you will have to invest some time into understanding your options and understanding the documents you’re signing and that means human interaction whether that’s phone, email, text or facebook messages.  You will need someone to respond to your questions who knows what they’re doing.  It is impossible to be a part time loan originator and serve your clients efficiently because there are far too many changes taking place on a daily basis. 

Kiel Mortgage radio ads are great. The radio ads from TILA Mortgage have improved over the years.  Best Mortgage’s ads are fine.  These are all LOCAL Seattle area companies with local loan originators and company owners who have been serving homebuyers and homeowners for decades.

I notice that on the Cash Call website, and on KIRO 97.3 FM, they’re advertising a “no cost” mortgage loan.  Folks, there is no such thing as a zero cost loan.  It doesn’t exist unless you’re doing a straight interest rate reduction refinance with your same lender, going through that lender’s loan servicing department and I think it’s even rare that that would happen nowadays with so many banks and lenders immediately selling everything to Fannie Mae or Freddie Mac.  Mortgage loans will always have fees and costs involved.  Some of those fees will be to the bank funding the loan, other fees will benefit the loan originator helping you, and still more fees will go to third parties.  Any company that tries to sell you a “no fee” mortgage loan is lying to you. The fees ARE being charged….they’re just being covered by a higher rate or they’re not telling you about the other third party fees that you’ll pay at closing unless you decide to read the fine print. 

So the opening call-to-action phrase on the Cash Call home page is a lie, the radio ads are deceptive and their loan originators are sub-par. I’m sure they’ll make several billion dollars this year, pay a very small percentage of their profits in regulatory fines, and keep on using the radio to find more rate shoppers.  It’s a business model that works. Expect more copycats.

Curbed and Eater come to Seattle

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Today I excitedly Welcome Curbed and Eater to Seattle.

Curbed.com and Eater.com are well known for their fast and furious blog postings in NYC, Chicago, DC and their National Site.

I highly recommend that you bookmark both Seattle Curbed and Seattle Eater and make them part of your daily reading. Unlike other local blogs, Curbed generally has a paid staff of blog posters, so you can expect a quick flurry of relevant postings that will continue on a daily basis.

Curbed, always fun and always something new, a welcome addition to the Seattle Blogosphere!

Single Family Home Reserve Study

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A Reserve Study tells you how much money to set aside monthly so that you won’t have to borrow money when something needs to be replaced in your home. While monies “in reserve” for replacement costs do not currently convey with a home, condos do. It was determined some time ago that that asking people for $10,000 all at once for a new roof did not make any sense for condos, and the time may have come to look at Single Family Homes in the same light.

Yesterday I posted a Reserve Study for a particular client’s home that will be closing next week. I also did a rough sample of a “quickie” Single Family Reserve Study that you can use to modify an offer price when purchasing a home.

In this post I will do a more generic version that you can use to prepare a Reserve Study for the home you currently own, and are not intending to buy or sell.

A Reserve Study is NOT about what you will SPEND ON your home each year, the same way that gas in your car is not counted when saving money toward buying a new car, or to repair your current car.

A Reserve Study is an EARMARKED savings plan to insure that the cost of REPLACEMENT (not repair or maintenance) is available when the item is ready for full replacement. A common rule of thumb for Reserve Studies is that you do not begin to reserve funds until and unless the item is within 35 years of needing to be replaced. Consequently if you have a 50 year item, as example, you may have to spend some money on maintenance during that 50 year period, but you will not begin saving toward it’s replacement until it is 35 years old. the remaining Useful Life is 35 years.

WARNING: DO NOT READ BELOW THIS LINE IF YOU HAVE HEART PROBLEMS.
Single Family Home Reserve Study

While I tend to be fairly analytical, I have to say that chart (which I created) scared the bejeebies out of me! $94,300 for Replacement Costs of ONLY the “MAJOR” Components that have a relatively short “Useful Life”! Holy Caboly!

This is one of the reasons buyers are more and more looking beyond “current defects” when doing a home inspection, and rightly so.

Let’s break this down a bit, as a Reserve Study has a lot of subjectivity vs objectivity. I will give you the benefit of my thinking, so that you can adjust accordingly, if needed.

1) ROOF I used 25 years and $12,000. This assumes a 25 to 30 year composite shingle. This Reserve Study is for a five year old home, but covers most any home with a composite shingle. For the most part 20 year shingles went the way of the dodo bird in the late 1980s or so. Any home with a 5 year old roof, whether the home is new or not, likely used at least a 25 to 30 year shingle. I also don’t expect “lifetime warranty shingle” roofs to last more than 25 years. In the last 5 years, 80% of all homes sold regardless of age had this type of roof and 87% of all homes built in the last 5 years had this type of roof.

Once in awhile you see a 50 year shingle and more often a 35 year shingle. But most are 25 to 30 year shingles. If you have a tile, flat, torch down or shake roof, you will have to adjust the numbers to that style.

I used $12,000 as I have recently seen a very good roof on a large home done for that price, even though the next door neighbor paid $18,000 for his roof. I have also seen an owner put one on using experienced relatives for $4,500. Much depends on the size of the home, the type of roof and the size and configuration of the roof. But $12,000 should be doable for the average home with room to spare as to price.

(NOTE: STOP POWER-WASHING YOUR ROOF EVERY SIX MONTHS! YOU ARE DAMAGING THE SHINGLES AND VOIDING YOUR WARRANTY! There are other and better ways to remove moss from your roof and keep it off.)

$12,000 divided by 25 years divided by 12 months = $40 a month.

2) SIDING Most newer homes use HardiePlank siding, or a reasonable facsimile. This is a cement based product that can last up to 50 years, and normally has a 30 year warranty. If you have a home built in the 90s, especially the early 90s, you may have an inferior pressed wood product that looks similar, but likely has been replaced or needs to be replaced. Wood siding has about the same life expectancy as HardiePlank.

I’ve heard the number of $20,000 used often for Siding replacement to HardiPlank, but that varies based on the size of the home. If you have HardiePlank you may not need new siding at the same time as a new roof, and the siding may even last twice as long as the roof. I’m using $55 a month due to the higher cost of re-siding vs putting on a new roof, but there is some leeway there given I expect HardiePlank to last longer than the 30 year warranty by as much as 10 to 20 years.

3) PAINT EXTERIOR – If you have real wood siding, you likely need to paint it at least every 15 years. If you have HardiePlank siding and like the color, you may not need to paint it at all. Paint usually bonds differently to HardiePlank than wood, and style colors may change every 15 years or so. If you have vinyl siding, you only have to save for replacement cost, and not for painting at all, given you really can’t or shouldn’t paint vinyl siding. Lot’s of subjectivity here. If I were doing a Reserve Study for a newer HardiePlank house, I likely would have ZERO in the monthly here. If you have a brick exterior, you don’t have to paint it, but you do have to “re-point” it, which can be quite costly for large and older brick tudors here in Seattle.

4) WINDOWS Most newer homes have vinyl windows with a life expectancy of 20 years. Often people replace the glass vs the window due to a broken window seal. Some windows are better than others and rarely does someone replace all of their windows at the same time. Wood windows can last indefinitely with repairs vs replacement. Lots of variables here including how many windows do you have? For that reason I’ve skimped on the total amount in reserve for windows to insure that you have enough to do a room or two at any given time, with room to spare. Quality of windows can vary greatly, even when windows “look” about the same. Most homes have a sliding glass door or two as well, so $7,500 cap on reserves is likely about right for most homes and most people who have “newer” windows today.

5)SEWER PIPE You don’t often hear much about Sewer Pipes unless you have an older home. I have no Reserve Amount here given the life expectancy or a sewer pipe, but wanted to mention it because of Root Problems. Tree roots can damage most any sewer pipe, especially on an older home.

Roots in the Sewer Pipe are a significant issue for older homes in Seattle, and sometimes in Bellevue and other Eastside cities as well.

So while I haven’t cautioned to reserve money for replacement cost, this item is worth mentioning because a Home Inspector generally does NOT inspect the sewer pipe, and if you are buying a home you need to have a separate inspection done of the Sewer Line. If there are a lot of trees on the property and the home is 50 years old or more…having a Sewer Scope is pretty much an imperative “additional” inspection.

6) Heater/Furnace/AC The cost I used is for a pretty good furnace without air conditioning. Life expectancy of a gas heater is usually longer. Life expectancy of an electric heatpump that is used for both heating and central air conditioning is usually shorter. Many people buy a house with a $2,500 heater, but spend up to $4,000 (or more) to replace it. That has more to do with air quality in the home than heating it or cooling it.

7) HOT WATER TANK I find there is a huge variance in life expectancy of a cheap electric hot water heater and a glass lined gas hot water heater. Also the cost has skyrocketed recently due to a bunch of added bells and whistles.

WHERE THE HOT WATER TANK SITS IS VERY IMPORTANT!

Consider “resultant damage” from the tank blowing. If the tank is IN the home or in any finished and heated living square footage, just replace it when its time is up. If it is in the garage in an area that would cause little to no damage if it blows, maybe you can push the age to and past its limit. The main issue is what will be damaged if it leaks.

Often if you have an electric tank one of the coils will go before the tank itself. You can’t “see” that, but you will know if you are getting less hot water. Personally I don’t believe in replacing the coil. Just get a new hot water tank if one of the coils goes out. I’d rather see someone skimp on some of the costly bells and whistles than stretch the time to replace the tank by replacing a coil.

8 & 9) FLOORING Lots of variables here. Many homes have lots of wood and little carpet. Others have almost all carpet except in the kitchen and bathrooms. Many people replace carpet with a wood or laminate product instead of carpet. In some homes you can replace the heavily trafficked area, like the steps, without replacing all of the carpet. More people using the home shortens the life expectancy of carpet and fewer people in the home lengthens the life expectancy of carpet.

My biggest concern here is “wood” floors. There was a time when wood floors pretty much NEVER needed to be “replaced” as you just sanded them down and refinished them. More and more even very expensive homes have newer “engineered” wood products, that can’t be sanded at all or can only be sanded lightly a couple of times.

Most people prefer big, thick, wood floors that rarely, if ever, need to be replaced. But many people who THINK they have that type…do not.

10) APPLIANCES I used a fairly low amount here as “appliances” break into two categories. Built-in appliances are part of the home. Usually that is a stove and a dishwasher and a range hood or microwave. Sometimes a cooktop and one or two wall ovens. Then there are appliances that are “personal property” such as your washer, dryer and your refrigerator. Those you can move from house to house…or not…your choice. I am only including the appliances considered to be part of the “real estate” vs “personal property”. Lately people have been paying some insane amounts for Washers and Dryers! Since washers, dryers and refrigerators are personal items, they can vary greatly as to cost. Those are not counted in this Reserve Study.

11) DECKS Another tough one. I’ve seen decks cost as much as $20,000 for a fairly modest sized deck near the ground. Many homes in the Pacific Northwest, even new ones, have extensive decking. Due to rot issues in this climate, we are seeing Trex decking used more and more, but usually only for the flooring and not some of the other components. Once in a while I see a deck that should just be thrown away when it goes, and not replaced at all. I saw a particularly troublesome cantilevered balcony deck like that…just get rid of it! Decks vary to personal taste and lifestyle, and can add considerable maintenance and replacement costs to a home.

12) HOME WARRANTY This is a big catch all that can help with a lot of items not mentioned like ELECTRICAL and PLUMBING. Rarely do you replace ALL of your electrical components or all of your plumbing. Even when you see a home advertised as “all new electrical” or “all new plumbing” that is rarely, if ever, the case. In a new home, you wouldn’t expect to replace either, but a home warranty is likely a good thing to have for both of these and also includes heater, hot water tank and built in appliances. I did not eliminate the other items from the Reserve Study as who knows if warranties will be around in 20 years and rarely does an owner renew that warranty for more than a year or two. Not sure why, but many who get them the year they purchase the home, do not renew them.

As you can see, the total cost to replace these items can often hit during the same 5 year period when the home is 17 to 22 years old!

Preparing in advance, is recommended and warranted. If you are buying a 14 or 15 year old home, knowing what if anything has been replaced since it was built is important, as you likely need to have a lot more in reserves after closing if you are running into that 15 to 25 year period. While buying a 30 year old home might have these things replaced, you may spend as much or more on updating the kitchen and baths. I recently saw a home that needed a new roof that was only 14 years old, but that is rare. But maybe rare in the past tense vs the future tense, depending on the quality of the builder.

If you have any questions, feel free to ask, regarding why I did or did not include certain items. There is really no “guide” for A Single Family Home Reserve Study, as I don’t know anyone else who has done one before.

I think this one is fairly comprehensive and accurate as to the monthly of $400 for a newer home and $700 for an older home with some things already replaced, but that needs more updating in the next 10 years or so.

March Madness for Real Estate Events

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I’m a volunteer on the planning committee for the next Seattle Real Estate BarCamp and I’m amazed at how many events being planned for real estate professionals in March…it’s borderline madness!

Here are a couple that I’m aware of:

March 2, 2011 – Northwest Video Marketing Summit brought to you by Frank Garay and Brian Stevens of TBWS fame.   Cost is $100 and you’ll leave the day long event at the Seattle Center with your own video blog.  Follow on Twitter:  #vmssea

March 3, 2011 – Seattle RE BarCamp takes place at the Seattle Center Northwest Rooms (same location as last year).   RE BarCamp is a FREE event where the real estate industry can come together to learn from each other (social media, tech, trends, etc.).  It is NOT intended to be a “class room” with instructors.   It’s an “un-conference” where participation from attendees is required.  The agenda is determined the morning of the event based on what is suggested by the participants.  If you’re wanting to be taught and not comfortable with the BarCamp format, you might want to consider other events.  Twitter: #rebcsea

March 9, 2001 – Agent Reboot  at the Washington State Convention Center.  This is more of a sit down and learn type program with a set schedule of what will be taught.   Cost is $49 if  you pre-register.

March 15 -17, 2001 – Real Estate Coach Tom Ferry will be at the Meydenbauer Center.  Cost $197.

Am I missing anything?

If Your Loan Originator Isn’t Licensed Today, They Need to Work for a Bank or Credit Union Tomorrow

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All mortgage originators who work for mortgage brokers or correspondent lenders/consumer loan companies must be licensed with the NMLS as of July 1, 2010 to take a residential loan application for property located in Washington.   If your mortgage originator works for a bank or credit union, they only need to be registered with the NMLS (which means “do nothing” at this point).

Last Friday, Deb Bortner, Director of Consumer Services for Washington State’s Department of Financial Institutions, issued this statement:

“Unfortunately, many applicants did not submit by the deadline. I want to assure you that, even with the current budget reductions and staffing constraints, our Licensing Team is doing all it can to balance a timely review while complying with the recent provisions of state and federal laws that are designed to provide increased consumer protection. While we will process as many applications as possible by July 1st, we will not be able to fully address the volume of late applications that we are currently receiving.

It is important to remind each member of the industry that on July 1 an individual may not act as a Mortgage Loan Originator unless he/she is licensed or has received official written e-mail communication from DFI outlining the conditions under which that individual can work…”

It’s unfortunate for consumers that Congress made two separate classes of mortgage originators: Licensed and Registered.   You can follow the dollars to figure out how that happened.    In my opinion, all mortgage originators should be held to the same standards.   Consumers should not have to determine whether a mortgage originator is licensed or not and what licensing means verses a simply registered mortgage originator working for a bank mortgage company or credit union.  With that said,  I’m thankful to be in the licensed category since those LO’s who are licensed are held to a higher standard than a registered loan originator per the SAFE Act.  

Tomorrow, many mortgage originators employed at consumer loan companies/correspondent lenders or mortgage brokers who did not jump through the licensing hoops quick enough will either need to cease taking applications or go work for a bank or credit union.  Again, this is for residential mortgage applications on properties located in Washington State (this applies to mortgage originators not in the State of Washington but taking applications on residential property located in Washington).   

You can verify if your mortgage originator is licensed by checking http://www.nmlsconsumeraccess.org .   You can run a search by entering their first and last name along with the state abbreviation.   If your mortgage originator works for a bank or credit union, they’re not required to be licensed and registration is not available for them yet.

Can Seattle Home Prices Drop “Another” 22%?

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Can Seattle Home Prices Drop Another 22% was a question raised by many here in the Seattle Area, after Zero Hedge posted the Goldman Sachs forecast for Major Cities showing Seattle at a 22% drop by year end 2012. After calling for modest to almost no declines in several major cities, Goldman predicted a 22% drop for Seattle with the 2nd highest drop being only 12% in Portland, and even a 7% gain for Cleveland Ohio and a 5% gain for San Diego. That would put Seattle at minus 27% compared to San Diego for the same period.

You can pick up Goldman’s rationale or lack thereof in that first link, we’ll stick to how likely it is that Seattle could drop “another” 22%. First let’s take a look at where a drop of that size would takes us, in the graph below.
graph (1)
Important to note that I made a slight modification of the raw data for the graph above to account for modest home size variances, equalizing the data as to size of home or price per square foot. The closest rounding point was a median sized home of 2,000 sf. The data is in thousands, so top left in January of 2007 would be $430,000 median home price for a 2,000 sf home and bottom left would be $253,000 for a 2,000 sf home in January of 2001.

I posted a full chart of all of the raw data for those who want to create their own charts and modifications showing actual median home prices for the years in the graph above, median square footage of homes sold in each 30 day period and the # of homes sold. This is for Single Family Homes vs. Condos and King County vs. Seattle Proper.

Back to the graph above in this post. The top line is Seattle Area Peak in 2007. The turquoise and purple lines are “where we are” in 2009 and 2010 without significant difference except for seasonal variances in that 18 month period. I ended these graphs and the data at April 30 2010 due to the switch out of mls systems locally, but am seeing reports that May came in above April at $379,000. So the raw data suggests there is the normal seasonal bump up in May, as additionally influenced by the final tax credit closings which will continue until after June closings, and possibly slightly beyond.

The red line is the hypothetical Goldman Sachs prediction scaled against 2009 data at 22% below in each consecutive month.

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Before moving to conclusions, we need to visit the volume stats (graph below). I have been tracking volume for years in addition to price per square foot, as volume signals recovery or not more so than home prices alone.

graph (2)

Analysis is dependent on rationale of which data to apply, and for my purposes I have been using 2001 and 2002 as “Base Points” for two reasons:

1) 2001 is the earliest I will go when tracking home price and volume data, as Credit Scoring as the primary focus of lending pre-approval guidelines and risk-based pricing, was not a factor in the 90’s. Keeping apples to apples as to the number of people who can qualify to purchase a home, 2001 is a good start point.

2) 2003…toward the end of 2003…was the beginning of ZERO down/sub-prime lending standards. So all years from 2003 through mid 2007 will include an extra bump up as to volume and price created by that loosest of lending standards.

For both of the reasons noted above, it has been my long standing premise that volume of homes sold should be and can be expected to return to 2001 and 2002 levels as to number of homes sold.

One caveat: The number of condos built between 2001 and present is beyond proportional. Those additional “residences” in the form of condos and lofts in the Seattle Area will rob volume from the single family stats in some, and many, areas.

Note: In the second graph above, the volume of homes sold in October of 2009 (green line) exceeded the number of homes sold in October of 2001 (black line). This may not seem like something to view as a positive sign. But given the tremendous drop in volume as noted in January and February of 2009 to unprecedentedly low levels, surpassing 2001 volume stats by October of that same year was HUGE. Of course these numbers at both ends are influenced by the short breaks in the tax credit for home buyers in both January of 2009 and October of 2009…but still a significant signal reflecting that volume has the opportunity to recover to 2001 levels. NOT to 2007 levels! Volume cannot and will not recover to 2007, nor do I expect prices to do so until 2018 at the earliest.

Those who are waiting for a return to 2007 as to price and/or volume would likely have better luck betting on your favorite horse.

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So, just how low will Seattle Area Home Prices go? Well first off let’s acknowledge that Seattle Area Home Prices WILL go DOWN. That seems obvious to me from the RAW DATA, but amazingly I still see many people questioning whether or not the market will go down at all from here. Hard to believe, but yes, some think the current level of $379,000 median home price is going to go up and not “EVER” down from there. One would think the credo of “home prices will never go down” was dismissed along with The Easter Bunny…but no. Some are still looking for a V-Shaped or U-Shaped “Recovery”. Sad but true.

A- Home prices will most assuredly drop by 4.3% in the very near future and likely by 4th Quarter 2010. (See blue square in the RAW DATA link above.) That is where home prices were in March of 2009 before the tax credit was renewed. So seems obvious without the credit, that is where prices will go back to…and likely lower than that without a new tax credit to prop up prices from that point forward.

B- The Tax Credit was meant to stop the downward spiral and eradicate the portion of loss created by momentum and NOT the portion of downward spiral created by fundamental economic problems. It was to eliminate the Fear Factor and the over-correction. Not the market’s legitimate decline point. Consequently the “safety net” being removed is going to create an additional drop of at least 5% in addition to the 4.3% drop noted above, which would take us to a drop of 9.3%.

C- Goldman Sachs is incorrect in its analysis of a 22% drop, because they do not apply the above A and B factors to all Major Cities. So their basic rationale is not credible, nor the number that emanated from that incorrect rationale.

D- Near the end of the time frame for the tax credit, home buyers were not as likely to enter into contracts with short sales and to some extent even bank-owned properties, for fear they would not close on time. Consequently, the median home prices were overly weighted to the high end of my bottom call. The mix of property from here through year end is going to push more toward the 37% under peak of that same bottom call vs the 20% side of the equation, with more “distressed” property in the mix. Not because of increased foreclosures, but because of more people being willing to buy them without a drop-dead-must-close date via the tax credit. It’s really just common sense, and pretty much a given.

Look for a 9.3% drop at some given point between now and the end of 2011. That would be any month in that period with a median home price of $343,753 or thereabouts.

As to 2012??? I expect a significant impact on price, with further declines, stemming from continued layoffs between now and the end of 2012 on a fairly large scale. But this last prediction borders on “the crystal ball method”. So let’s end with a 9.3% drop from $379,000 median King County home price by year end 2011, with an added caution that significant improvement to 2007 price levels will not likely happen before 2018.

In other words…”EXPECT the worst; HOPE for better than that.”

(required disclosure – Market Observations and all stats in this post and the graphs herein are the opinion and “work” of ARDELL DellaLoggia and not Compiled, Verified or Posted by The Northwest Multiple Listing Service.

Loan Home Inc. Lead Generation Scam

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Loan Home Inc. is a lead generation company telling consumers that they can be paid for the referral of their own transaction, or the transaction of friends and families.

Before we tease apart why consumers should avoid this obvious scam, let’s briefly review what mortgage lead generation companies do.  Loan originators obtain clients from many sources.  Some have built up a strong client base over the years, others make sales calls on Realtors asking for client referrals, others work at a bank and possible customers walk into their branch on a regular basis.  Not all LOs like working with Realtors because they demand high quality service, and not all LOs have a client base. Some LOs work for companies that advertise on the radio.  TILA Mortgage, Paramount Equity, American Equity, and Best Mortgage are some of the companies that advertise on  KIRO 97.3 FM in the greater Seattle area.  Radio advertising is expensive but it works. The phones ring at specific times and the LOs are there to pick up the phone but since the firm is paying for the radio ads, the LOs will typically split the fee income with their firm as they should. 

Lead generation companies troll the Internet for consumer leads, use banner ad campaigns, and/or send out mortgage email spam and then sell these possible homebuyer or refinancing homeowner leads to loan originators who pay a fee to receive that person’s contact information.

I receive all kinds of emails from lead gen companies every week trying to sell me leads (I do not originate loans.) Recently I’ve been responding to the emails and asking if the salesperson can send me samples of the advertising material used to procure the leads.  I’ll bet you’re not surprised to hear that NOT ONE COMPANY has replied to my request.  Why? Because lead generation firms blatantly violate state and federal  lending laws in their advertising.  Loan originators typically won’t talk about lead gen tactics because they might already be addicted to the crack that is also known as mortgage leads and they don’t want to turn in their crack dealer.

Clamping down on lead generation firm advertising is not my personal top priority but it should be a priority of any loan originator who wants to advertise legally.  The more the industry continues to buy leads procured by using deceptive advertising, the more the industry is unable to get their own phones to ring by advertising legally. 

This new scam is quite clever:  Loan Home Inc.  says anyone can “sign up” their own self(!) for this program and when they decide to buy or refinance, Loan Home Inc., will connect them with a “reputable, ethical” mortgage broker or mortgage loan originator and the consumer will be able to get money back (sounds awesome!) after closing. Whoo hoo! Sign me up! The consumer can also sign up friends and family and get money back when they buy or refinance, too!  What could possibly be wrong with this cool-sounding idea?

Well consumers, what’s going to happen is that your name and your friends/family names will be SOLD to mortgage brokers and loan originators who have no clients or who are willing to pay money to Loan Home Inc., for the ability to earn money off your deal. That’s right, you are an object to be bought and sold to the highest bidder. 

Realize that whoever Loan Home Inc., sells your contact information to, is going to have to pay Loan Home Inc. a fee and that fee will be much higher than the money you are going to “get back” from Loan Home Inc. because LHI is going to keep a percentage of that fee to cover its costs as well as to make itself a nice profit.  Next, whoever has purchased your lead is going to increase the fee you pay BY THAT AMOUNT OF MONEY IF NOT MORE. 

In the LHI example, on a $250,000 home loan, consumers are paid $800 for their own home loan lead. If so, then the person who purchased your lead will simply increase the fees consumers pay by……$800.  Since the majority of people do not come in with cash at closing on a refinance, consumers will be financing that same $800 over the term of the loan; not necessarily a good financial decision.  Another way for the lender funding the loan to earn back the money they have to pay LHI and you is to sell you a loan with a higher interest rate. Worst case, the consumer will pay higher fees as well as a higher rate just for the ability to get back $800 on a $250,000 loan.

LHI also sets up a nice-sounding multi-level marketing plan in their powerpoint slideshow. 

I wonder if they hired an attorney who understands Section 8 of RESPA to review their business plan?

Section 8 of RESPA prohibits anyone from giving or accepting a fee, kickback or anything of value in exchange for referrals of settlement service business involving a federally related mortgage loan. In addition, RESPA prohibits fee splitting and receiving unearned fees for services not actually performed.

Violations of Section 8’s anti-kickback, referral fees and unearned fees provisions of RESPA are subject to criminal and civil penalties. In a criminal case a person who violates Section 8 may be fined up to $10,000 and imprisoned up to one year. In a private law suit a person who violates Section 8 may be liable to the person charged for the settlement service an amount equal to three times the amount of the charge paid for the service.

It doesn’t sound like the company owners have a background in mortgage lending.

From their FAQ page:
Q: Will there be additional fees added to my loan?
A: No. The lead generation compensation that Loan Home pays does not constitute an added cost to the loan or the loan process. By paying you, we are taking profits from the mortgage companies and returning them to you!

Oh boy! Let’s stick it to the mortgage companies.  What a great sales tactic. I’m sure the mortgage companies love reading that.  Please do not fall for this, consumers.  There is no way in hell that any mortgage company is going to just give you back its profit.  You ARE paying for the money Loan Home Inc., is giving back to you.  It will be in the form of a higher interest rate or in the form of higher fees or likely both.  There is no such thing as free money.

Please, please do not fall for this scam. Instead find a local loan originator who lives in your community. If you want to shop, then ask for a Good Faith Estimate from three or four sources on the same day:  Your retail bank (where you do your checking and savings), a mortgage banker (a lender that does not offer checking and savings and specializes in mortgage lending), a mortgage broker (who can shop the market for you), or a credit union.

LHI says they are ready to do business in several states (including WA) yet I can find no business license issued to “Loan Home Inc.,” or a license under the name of either of their founders in Washington State. 

Interestingly, when I read the biographies of each of their founders, the name of the web page (look up at the very, very top of the web browser) says “Linda Torres.”  That’s just sloppy webmaster work but it did entice me to bing her name.  Looks like there’s a Linda Torres who’s a loan originator in the Chicago area and the two other founders are from Chicago.  I wonder if the leads are being funneled over to their friend Linda who appears to be one of the other founders of Loan Home Inc.