For those who have emailed me out of concern, because I have not written a post in over a week, I have taken a minute away from the services to let you all know that I am OK. I little depressed as is to be expected under these conditions, but OK.
Next week’s Catholic Funeral for the Financial Sector will require that all women wear black mantillas. My choice is the one noted below which you can buy for only $24.99 from HeadCoverings by Devorah
Surprise: WaMu is looking for a buyer. From the New York Times:
Goldman Sachs, which Washington Mutual has hired, started the process several days ago, these people said. Among the potential bidders that Goldman has talked to are Wells Fargo, JPMorgan Chase and HSBC. But no buyers may materialize. That could force the government to place Washington Mutual into conservatorship, like IndyMac, or find a bridge-bank solution, which was extended to thrifts in the new housing regulations.
Citigroup is also considering an offer, but would likely be able to buy Washington Mutual only if it emerged from a receivership, according to a person close to the situation. JPMorgan is maintaining its posture that it will not bid unless it receives government support, according to another person briefed on the matter.
I’m not so sure that any bank is in shape to purchase WaMu in its current form. Perhaps it could be broken up into smaller pieces. Its deposit base is probably worth more than anything else on its books right now.
I’m sad. I can remember walking into Washington Mutual Savings in Downtown Everett on the corner of Colby and Pacific with my dad to open up a passbook savings account. I’ve had an account there just about my whole life. My daughter’s school savings accounts are there. I know many people who work at WaMu. I worked at WaMu as a bank teller many years ago under a very smart, savvy woman named Margaret Bradley who was a very fine role model for a young woman like me in the early 1980s. Washington Mutual was “The Friend of the Family.” I bought that old commercial line and repeated it for years.
I know. It’s just a bank. I’ll get over it.
There are many WaMu employees that live and work here in the Seattle area who had much of their retirement investments within WaMu’s stock options. Whatever the outcome, this can’t bode well for our employment numbers here in the greater Seattle area. I’m under the FDIC limit and will keep my accounts open, and will not be moving them to a new bank. I’ll be seeing this through with them.
This makes me wonder if it will be easier for homeowners to get their short sales and loan modifications approved.
Wall St Journal: TPG Move Opens Doors for WaMu
Bloomberg: WaMu’s Biggest Shareholder Waives Compensation Pact
Calculated Risk: WaMu For Sale
Seattle Times: With Stock Sinking, WaMu Appears Headed for Sale
Seattle PI: WaMu Puts Itself up For Sale
I had an newer agent call me the other day, a bit consternated about how to evaluate a property for which his client had requested a CMA. Sometimes — often — it is hard to evaluate certain properties in this changed/changing market; it can help to get other opinions.
The conversation went something like this:
Agent: “I have a client who is selling the townhouse I sold him last year.”
Me: “Okay. Did you find any any good comparable sales?”
Agent: “Oh yes, there’s an identical unit that just sold in the same complex for the same price my client paid and another one that is on the market for a few thousand dollars more.”
Me: “Well that helps. What does that tell you about what your subject property is worth?”
Agent: “It seems like it’s worth what he paid for the place, maybe a little less. So should I just add the other closing costs to what he paid and list it for that price? I’d hate for him to take a loss!”
I know, this seems silly when you read it from the sidelines. Of course, we have to be honest and direct with our sellers, especially in this market. Sometimes it’s brutal honesty that clients appreciate the most, and it hurts a lot less than trying do something that can’t be done — like sell this townhome for 10% more what it sold for last year. So the answer is, price the unit at what the market will bear — which is what the direct comp unit just sold for, or more advisedly, for maybe a few points less.
For years we’ve been the bearers of great news: “Guess what? I sold you this little Wallingford bungalow in ’93 for $161,000, and now it’s worth $650,000!” Sure it was worth maybe $735,000 last May, but still, it sounds pretty good telling your client they have this nearly $500k windfall. And since ’91, our conversations with sellers have been something similar to that. But now, times have changed. This isn’t news to any of RCG’s readers, but it’s really important for agents, for professionals, to deliver the goods: Clear, honest, and yes, sometimes brutal, information to our clients.
I know everyone (including me) is rather distracted by the events going on in the financial market mayhem over the past two weeks, but many mortgage holders of ARM’s tied to the LIBOR Index should be re-evaluating their long term mortgage strategy. Because LIBOR has been very low, many were complacent to make serious consideration of refinancing into a fixed rate. I read many comments about LIBOR Index being very favorable, and to an extent is has been true, until…….
The overnight Libor rate in US dollars ratcheted up 3.3 percentage points to 6.44 percent, the largest increase in 7 yrs.
This could change the tone of all the ARM mortgage holders, whose mortgage index is tied to the LIBOR, who were hoping for little payment change when their adjustment period arrives.
About 6 million U.S. mortgages, including almost all subprime home loans and 41 percent of prime ARMs, are linked to the London Interbank Offered Rate, or Libor, according to First American CoreLogic in Santa Ana, California.
Further down the article, Seattle’s Bill Fleckenstein remarks:
“If the Libor market seizes up and stays that way, it’s going to complicate everything,” said Bill Fleckenstein, president of Fleckenstein Capital in Seattle. “What you are seeing is the unwinding of the financial system as we know it.”
I’m preparing this post so I’ll be ready to publish as soon as I hear what movement, if any, the FOMC will take to rates. I really can’t guess if they’ll leave the Funds rate unchanged or cut. This morning, the Fed Funds Futures had a 100% change for a 0.25% cut and a 50% changes for a 0.50%. Although reducing the Fed Funds rate is great for home owners with HELOCs, it could mean higher mortgage interest rates for the rest of us.
And the decision is….(to be continued)…
Update September 15, 2008 11:15 am: NO CHANGE! In a unanimous decision, the Fed Funds rate remains at 2.0%. You can read the entire press release by clicking here.
From the WSJ tonight:
The outlines of plans to determine the fate of Lehman Brothers Holdings Inc. emerged today even as it became increasingly clear that a clean sale of the entire firm to a big bank would be too difficult to execute. A sense of optimism that a rescue could be arranged today dimmed as a growing sense of gloom descended on Wall Street. Executives from top banks in the U.S. and Europe huddled with federal regulators in an attempt to come up with plans to either buy pieces of Lehman or prepare for an orderly winding down of the firm in a manner that would minimize the collateral damage for the ailing global financial system. After 6 p.m., the formal meeting ended for the day with no resolution
Barclays and Bank of America were named as showing interest in purchasing parts of Lehmnan but neither wants to buy all of Lehman without some form of government help and so far the government has been reluctant to offer any assistance.
There is fear that fire-sale prices of what’s on Lehman’s real estate book could spark a problems for more Wall Street firms as they are forced to admit the street price of their assets.
Here is an actual ad posted on craigslist today, hat tip Dick from the CR comments:
Lehman Brothers (Midtown West)
Reply to: sale-837736866@craigslist.org
Date: 2008-09-12, 10:18AM EDTHey guys — I’m looking to get rid of my investment bank. Nice assets. Slightly beleaguered. Will consider trades. Ask for Richard.it’s NOT ok to contact this poster with services or other commercial interests
PostingID: 837736866
Sunday and Monday should be interesting. Anyone betting on a emergency rate cut?
God Bless America and all those who serve including those who have sacrificed their lives.
This flag has flown at my house since 9-11. For me, walking past the flag into my house has been a daily reminder of how lucky I am to live in America and how much sacrifice was laid before me, by prior family members of earlier generations, to enjoy the freedoms I have that we should never take for granted.
This has been on my mind for a while, so I’ll throw it out there for people to discuss. Sometimes a non-agent can introduce topics that the real estate community may be uncomfortable in discussing with their clients. So, here goes…..
The topic: Is this lousy news for sellers just the spice to get them to realize that the white- hot markets of 2005-2007 are long gone?
Price reductions have been taking place for sometime. Months and months. But, many have been token reductions and the conversations I hear and read on blogs is that, in some instances, resistance has been fairly strong.
What good does it do when a seller who reduces a price by $3K on a $650,000 listing that has been languishing on the market for months? If today, after weeks of small incremental reductions, the listing is priced at $550,000, there is no agent on earth representing a buyer that will take it seriously. Especially after seeing the price reductions go on and on for months. I don’t know who is torturing who: the homeowner doing this practice or an agent who can’t pull the plug on the listing? I’ve heard that not taking a listing is not in the DNA of agents (I’m teasing of course.)
I know of some agents who have broken their backs and have spent a lot of money on listings only for the seller to eventually pull the plug on the listing out of frustration. And then, (drum roll please) have the $500K+ listing end up renting for under $2000.00/mo. Any sellers out there understand the rent-to-price ratio relationship over the history of residential real estate? Now, on the other hand, many of today’s agents have little experience in working through a correction and pricing and marketing a home effectively. If we are honest, there was not a lot to do in a white-hot market to generate the offer: place the listing on the NWMLS and arrange a time with the seller to accept multiple offers. I hear some were even nice enough to offer coffee and pastries to the agents sitting in cars outside of a property waiting for their turn to submit their offer. How times have changed.
I have seen a couple of examples of the substandard work ethic and marketing in my neck of the woods in Snohomish Co: outrageously poor marketing, only to have another professional agent come to the rescue and have a successful sale. Good for that agent and good for the seller to recognize when a change is needed.
Will agents bring the Seattle Times clipped article to listing presentations? When is real estate bad news good for moving sellers in the right direction and getting the market moving? Perhaps today. Or, maybe we still have a long way to go in understanding how damaging the excesses of next to zero lending standards will turn out to be and the artificial appreciation it fostered.
PS. Those who are currently in the market to buy should be in conversations with your loan officers regarding the recent drop in interest rates. Just today, our office is hearing that there are 30 yr fixed rates at 5.5% at par, some even indicating a small rebate at that rate. Consult with your loan officer.
Mac clearly has the best commercials on TV these days. I love most of them and while I don’t like Apple Computers, I can’t help but be enticed by the Mac Commercials. Those Ad guys should be making a mint, and deservedly so!
How can you not love the commercial for MacBook Air where they slip the laptop into an interoffice envelope? OMG! It makes you want one in the worst way. At least until I remember that I can’t work on the thing because I use almost all Microsoft Software products in real estate and the mls doesn’t function well on a Mac.
I was working in something, when all of a sudden a FREE MacBook Air popup danced across my screen somehow. And as much as I hate to admit this…I couldn’t help myself. The commercial from the TV popped into my brain and triggered that “I have to have it” subliminal message along with the fact that is was totally FREE…and I entered into The Land of Continuous Offers, following the never ending “to get your free MacBook Air pick 2 of these offers…then 3 of these…then how but this…then before you leave…then and then” and I got sucked into the black hole of offers with no further mention of my FREE MacBook Air 🙁
Oh, I just remembered how I got sucked in. I was making sure my spelling of Il Salvatore was correct, and went to one of these free transalation sites where I saw the FREE MacBook Air.
Well I got through it and ordered two things that I kind of needed that were almost free 🙂 knowing that there was a possibility that I wouldn’t get that FREE MacBook Air (though I still daydream that the mailman is going to be delivering it any second.)
What I forgot to do was use an email address that I never use! It’s been so long since I’ve had to do this that I just plum forgot. Now I have to visit my junkmailbox every hour or so because…I opened Pandora’s Box of Neverend Spam Emails!Still…if I do get the FREE MacBook Air…it will have been worth it. What are the odds? Why would Mac allow these sites to use their product to drag people into a scam? I would think a company like Apple would protect their reputation better than that, given the amount of money they spend on their ads.
If anyone out there has gone down the Free MacBook Air rabbit hole and actually received a FREE MacBook Air, can you reach out and ease my pain please? Thanks!
As a bit of a follow up to Ardell’s post below about lease purchase options, another option may be seller financing or a seller carryback. But, if you choose to go this route how will you handle payments? One of the best ways to make this less of a burden for the seller is to bring in a third party to handle all of the details associated with servicing the loan terms.
Most traditional transactions with conventional bank financing use an escrow service for handling things such as taxes and insurance. This is similar but the escrow firm is also handling the servicing of payments, calculating interest and principal payments and such.
An example of a company that provides such a service is Contract Servicing.
Always do your due diligence for any company you will hire, but this might be a good place to learn a bit and find that these services exist for a variety of property contract sales and the myriad ways in which they are negotiated.
