Which St. Joseph statue?

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[photopress:st_joseph.jpg,thumb,alignright]A couple of weeks ago I was contacted by one of the producers of The Story with Dick Gordon to do a radio show on the practice of burying St. Joseph statues. The call came to me as a result of a brief interview and quote of mine in The Wall Street Journal. You may have seen it in The Seattle Times when they picked it up and ran it on more than half of the of the Real Estate section’s front page. I’ve even seen articles complaining that WSJ’s original article was the most emailed link, over and above many more “important” articles.

I’m not going to rehash the story of whether or not you should. The link to the radio program gives my general feelings on that issue. This post is to help with the confusion of which statue one should use. You will notice that the photos in The Wall Street Journal’s piece show two completely different St. Joseph statues. The first one is more like the one on the left. The image further down in the article is like the one on the right.

Can you order St. Joseph Online?  Or do you have to make the trek to Kaufer’s at 9th and Harrison and get the statue shown on the left, sold separately in the box on the lowest shelf, and not the version sold in the kits?

I recently accompanied an agent to Kaufer’s who needed two statues for two homes and advised her to buy one of each. St. Joseph is one of the saints who has more than one cause for intercession. He is the Patron Saint of Families and he is the Patron Saint of Workers. For those with a more curious interest here is a list of the Patron Saints of various endeavors and maladies.

So if the Father of the family has been relocated and his concern is for the separation of his family, then the statue of St. Joseph holding Jesus may be more appropriate than the one sold in the kit. If the family is in distress as a result of the home sale or purchase, then St. Joseph as Father of Jesus shown on the left is the statue to use. If you are an agent who wants to sell the house as a result of your hard work and efforts, then you would use the statue on the right. This is the one sold in the kits and the one an agent would use most of the time.

For flippers who have done everything well and right within their power to improve the home, and have been reasonable in your sale price expectations, well then possibly St. Joseph on the right will do the trick. But if you have piled up the carrying costs to the point where selling anywhere near the price needed to make you whole is even remotely possible, you may want the statue sold just to the left of St. Joseph on that bottom shelf at Kaufer’s. It is the Statue of St. Jude. The Patron Saint of Lost Causes.

Snowing in Seattle

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Seems hard to believe that just last week it was sunny and bright with not the faintest hope of snow.  One of my Thanksgiving houseguests from California was hoping to see snow falling, something he has never seen in his life.

I snapped a couple of shots for Mike to show that his prayers were answered.  Just a week or so late.

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Mortgage Fraud Case Studies

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We’re lucky to be living far, far away from the mortgage fraud happening in other parts of the United States, right?  Not so fast. In part two of this three part series, we’ll take a look at some mortgage fraud cases in Washington State.

Case Study: Century Mortgage; How to succeed in a down market and earn six figures your first year with no experience.
This case involved a mortgage broker, loan originators, a Realtor, an escrow closer, and an appraiser.  Homes in a Spokane neighborhood had been on the market for many months with no sale.  The mortgage broker talked the Realtor into taking the homes off the market and then relisting them with an increased price.  Straw buyers were found; people who could not otherwise qualify to purchase a home but wanted to become homeowners.  The terms were as follows: 80% first mortgage loan and a 20% second mortgage carried back by the seller.  The mortgage lender was very happy with the 80% LTV loan. At closing the seller’s second mortgage was discounted to $1.00 and paid off.  So the lender believes they are making an 80% LTV loan when they are really making a 100% LTV loan.  Of course the home must appraise for the higher amount so the appraiser made some extra cash off of each on of these deals as did the Realtor and escrow closer, for knowingly hiding the facts from the lender.  The Century Mortgage scheme (no relation to defunct subprime lender New Century) was played out in many neighborhoods in the Spokane area.  The mortgage broker, loan originators, Realtor, closer, and appraiser all lost their license, and banned from the industry for life or for a specified number of years, and some were sentenced to do jail time in the federal pen.  What concerns me about this case is that this could likely happen again because this scheme needs one important element: desperate sellers.

Case Study: Property Flipping; How to get rich quick and then go directly to jail
Ekram Almussa and Josh Kebede bought homes in Seattle and on the Eastside, and sold the homes in a matter of days and sometimes hours later, for thousands more. Here’s an example of how it went down: They would purchase a home for, say, $315,000 and hire an appraiser, the same one each time who magically finds that the home is worth $415,000.  The homes are sold to straw borrowers whose names show on title and on the new mortgage documents, but agree to make payments to Almussa and Kebede, who in return promise to pay the mortgage.  All the loans were owner occupied, but none of the properties were occupied by the owner of record. All the loans were sent to the same underwriter at the now defunct subprime lender New Century, Almussa and Kebede’s lender of choice each time. Almussa and Kebede pocket the $100K, plus the mortgage payments that went into their pocket.  Both Almussa and Kebede were arrested and pleaded guilty to federal fraud charges. John Gonzalez, who helped verify employment for the straw buyers, decided to testify against them.

Case Study: Church is where the sinners are
Liza Bautista was a mortgage broker with a strong client base inside her Christian church in Tukwila. After successfully closing several prime loans for folk with A-paper credit, she targeted consumers who were turned down by lenders in 2005 and 2006 (Hello? Who couldn’t get a mortgage in ’05 and ’06?) and created two sets of loan [photopress:liza_1.jpg,thumb,alignleft]documents.  She submitted the credit history and identity of her prime, A paper clients to the lender funding the loan.  When it was time to sign papers, she forged her A paper client’s names on the loan documents and sent everything in for funding.  For the poor credit clients, she hand carried a second set of documents to be signed and then made a special offer to personally hand carry their mortgage payment to the lender each month.  (Note to consumers, don’t ever agree to this.) Of course, the payments never made it to the bank. Liza kept the money and subsequently, the lender started to foreclose on the A-paper owners, whose name appeared on title as the owners of record. When the A-paper clients were finally contacted by the lender and claimed they did not own said house, Liza started running out of places to hide.  The poor credit clients who were thrilled to be homeowners were obviously upset that their name were not on the title to the home and they were evicted after foreclosure.  Liza has lost her mortgage broker’s license. Rumor has it that she is still originating loans under a different name. From a quick search of the King County Court records (search by her name) you can see several court actions indicating the A-paper former clients have sued and won. The escrow company that Liza used had been operating without a license at the time.

As you can see, the most egregious cases of mortgage fraud are more than just a single person acting alone. There is usually a charismatic ringleader who recruits others. Sometimes the ringleader will target new or financially struggling loan originators, Realtors, escrow companies, and appraisers, who are all offered additional cash for participating.

The question that remains is how many defaults/foreclosures are the result of large-scale, organized mortgage fraud, and how many are the result of much smaller scale fraud that likely won’t see prosecution.  There never has been nor will there ever be enough government resources to regulate every single transaction written by every single industry person out there.  It is up to us to help point investigators in the right direction. 

Consumers as well as those of us in the industry can report mortgage fraud tips by following this link.

On CalculatedRisk, I recently read a blog post about securities rating agency Fitch (link opens the 11-page PDF report and requires site registration, but it’s free) opening up 45 loan files inside one of the failed CDOs, and guess what they found? Mortgage fraud galore and very shoddy underwriting which I will outline in Part 3.

Part 1 Mortgage Fraud Basics
Part 2 Case Studies
Part 3 Recent Mortgage Fraud Developments, and Future Outlook

Seattle Neighborhood Roundup…. It's beginning to look a bit like….

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Over on  Beach Drive Blog in West Seattle, help is wanted to find homes decked out in Christmas Lights.   The Paper Noose and the Holiday Artwalk in Georgetown.

Mid Beacon Hill the insiders POV of Beacon Hill , and Cosmo Seattle on Downtown Seattle citizens for parks.

Broadway Seattle on Capitol Hill is a Walker’s Paradise, and walkability in Issaquah Highlands.

 Capitol Hill  on new Public Art on Capitol Hill, and an afternoon moon in Kirkland 52.

Captain Columbia City, keeping an eye on seismic activity in Seattle neighborhoods.  Leaves + drains = problems and how neighbors can partner up with the city to remove problems at Miller Park Neighborhood Association.      

 Kirkland Weblog and enjoying a fine dinner at favorite place, and a sweet spot in Issaquah Undressed .

West Seattle Blog – the annual Christmas lights are up on Beach Dr’s best home display.  Lastly, where to find the snowiest place on Capitol Hill Seattle, you might want to know if the weatherman is right and we get snow this weekend! 

Self-Directed IRA's with Checkbook Control

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I’ve blogged a couple of times here at RCG about the benefits of using a self-directed IRA as an investment vehicle in Real Estate. When I originally set up my self-directed IRA I loved that I could control my retirement funds not only in securities but also in real estate.  I had to educate myself by going to seminars and talking to the very few professionals that understood the process.  However, being the do-it-yourselfer that I am, I traveled around the country attending lectures and symposiums until it started sinking in.

I set up the necessary entity and rolled over my IRAs and Seps into a Roth IRA (paid the taxes), created an LLC to buy real estate and then had my Roth IRA buy shares of my LLC.  This has been a great way to grow my retirement without ever paying taxes on the profit.

However, the process was cumbersome, I never thoroughly understood all the scary laws that would cause my self-directed IRA to loose it’s status and it was not always as fluid as I’d like. Such as, had I not attended the classes and done the research, I wouldn’t have even known where to go for the custodian that is required for the self directed retirement accounts.  Then, I had to find an accountant and an attorney who specialized in them.  Again, hard to find. Additionally, although I had good services in my chosen Custodial firm, I didn’t have the ability to have instant access to my money, and in fact, last month when I tried to take a distribution, it took over a week to get the cash out.  What if I’d wanted to purchase a home on the court house steps? not possible with my custodian.  I have no access to cash, nor do I have a checkbook.

Recently, I’ve learned of a completely different way of investing with self-directed IRA’s that’s being offered here in our own backyard in Bellevue. The company is Guidant Financial and they’ve developed a product called ‘Auriga’, (Auriga means the helsman of one’s ship).  Although I’m just learning about this product, it appears to provide a solution to problems inherent in custodial accounts by giving you checkbook control over your retirement account.  Additionally, Auriga allows the retirement plan to invest in more than one vehicle, and in my case, where my LLC sometimes is the owner of the property and sometimes is the lender, it allows for that flexibility.  Guidant is not the Custodial account for the IRA’s but has negotiated a very low fee thru a custodial business relationship that is not based on increasing the fee as the account increases in value.  The way they do this is to provide all the legal, accounting and guidance as Guidant Financial, streamlining the custodial role. My experience is that the custodian cannot give legal, accounting or much of any assistance in setting up the account, but it does charge an annual fee based on the size of the account.  Guidant Financial charges a one time up front fee for the setup and continued operation of the IRA account.  As your account value grows, the costs are still minimal since the custodian fees are not based on the size of the asset.

For more information there will be a webinar on Wednesday November 28 at 12pm.  I know that I’m not alone out there with my self-directed real estate investing.

Why are sales down and prices up?

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We all know the market is slowing down.  Inventory is rising.  The number of sales are fewer.  BUT the prices are still going up.

To better understand what is REALLY going on, you have to look at what is not selling and why.  The two charts below show that the price of properties SOLD keeps going up year to year.  Likewise, the properties currently in escrow have a median price higher than anything ever sold to date.

BUT the median price of homes NOT sold is way out of proportion to what the sellers SHOULD be asking. 

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In the chart above, you can see that the median price of homes for sale (SFR and Condos) priced under $800,000 sold at a median price of $377,257 in the 12 months preceding 11-25-2005.  (5,826 of them sold with the average days on market of 21 days.)

The median price of homes sold increased 12.7% in the twelve months ended 11-25-06 from $377,257 to $425,000 and the days on market decreased from 21 to 19 and the number of properties sold decreased from 5,825 to 4,932.  So the homes that sold did sell higher and in less time, but fewer properties sold overall.  Partly because the price increase caused some of the sold inventory to jump over the $800,000 mark.

In the 12 months preceding 11/25/07, the median price increased 5.8% for homes sold from $425,000 to $449,950 and the days on market increased from 19 days to 24 days.  Those currently in escrow represent a 4.4% increase over the median of anything sold to date in 2007 at $469,000 vs. $449,950.  So prices are still climbing. 

But the biggest news is that the median price of homes NOT SOLD is $519,245.  That is 15.5% higher than homes sold for in the last 12 months.  Sellers are simply asking way too much to be successful in their efforts.  So when you see price reductions, that means the sale prices are coming down to where they should have been in the first place.  Not as high as sellers would like; but still higher than the comps. 

If sellers don’t Get Real Real Fast, then the market will start undervaluaing due to increasing overpriced inventory. 

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In the chart above you can see that many of the homes priced up to $1,000,000 are even more “off” as to asking price.

The median price of homes NOT sold is $579,000, while the median price of homes sold from 11-26-06 to 11-25-07 is only $470,000.  The median price of those currently in escrow is $495,0000, so prices still increasing.  BUT the properties NOT sold have a median price of 23.2% over the median price of homes sold in the last 12 months.  Way out of line.

Sellers are simply asking way too much with no basis for this pricing.  So to a large extent more things aren’t selling because they shouldn’t be selling.  Sellers are simply asking way too much relative to reality.  Buyers are correct to refuse to buy property for way more than it is worth.

A 23.2% increase?  Who are they kidding?  Apparently…no one but themselves.

Those Whacky Real Estate Contracts

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Be careful if you recently entered into a real estate contract that will run over the Thanksgiving Holiday.

NWMLS contracts do not count Thanksgiving, or Friday, Saturday AND Sunday IF the period of time is 5 days or less, but DO count them if it is 6 days or more. 

If you “sign around” tomorrow for example, and have 5 days to do the inspection, the first day is not until Monday.  BUT if you allow 6 days or more, then the first day is Thursday and Monday is the 5th day!!!  OMG!!! 

Be careful.  Right now less is more, and more will be over before you finish the turkey leftovers.   6 days or more are calendar days.  5 days or less exclude weekends and holidays and NWMLS declared Friday a holiday for the purpose of contracts.

Check with your agent or attorney if you have any questions.

Let's Do Away with Loan Origination Compensation

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Following up with Tim’s post on getting rid of YSP, I thought I’d share my idea on just getting rid of commissions being paid to a Mortgage Originator all together.  Why stop at the misunderstood yield spread premium when the current system is flawed.   Why should be we be compensated based off of what size the loan amount is when we should be paid based on how much work and time is invested with the client.

Mortgage Professionals should be compensated based on how many hours they spend with each client.

  • This would eliminate steering to other mortgage products which might be more lucrative.
  • Assure that consumers would receive plenty of consultation from their Mortgage Professional.
  • Mortgage Professionals would be compensated for helping consumers with their credit, debt and asset management scenarios regardless of whether or not they ever finance a home using their services.
  • If a consumer really needed to reach a LO after hours or weekends; they could pay overtime to the Mortgage Professional.
  • Mortgage Professionals would change their directive from how many millions in loans they are originating to how much time is spent with each consumer.
  • Consumers could freely select one Mortgage Professional to help with getting ready to purchase or mortgage a home and another to finance the loan with no strings attached or hard feelings from the LO.   Perhaps some Mortgage Professionals would become specialist in such areas.
  • Consumers could select various Mortgage Professionals based on their experience which would be reflected in their hourly rate of pay.   This falls in line with suggestions that Jillayne has made on a having a tiered system of Mortgage Professionals.
  • No more YSP.  (Even though this is silly because mortgage bankers receive compensation on the back end and are not required to disclose it).
  • True Mortgage Planners and Consultants instead of “Originators”.

A big argument I would have against this is that I would not want someone to not call me because they’re afraid of the bill that would follow after I provide hours of advice.

Your thoughts?

You like Turkey and Christmas more than real estate

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Seriously. Real estate agents have known this forever: people aren’t very interested in buying or selling a home during the holidays. Do you really want to put in an offer and then manage it from your in-laws house in Florida?

Search volumes for Real Estate, Christmas Day, and Thanksgiving Day. Christmas and Thanksgiving alone (without “day”) totally overwhelm the chart for real estate:
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Real Estate agents work whenever you aren’t; evenings, weekends, holidays, but many take December off. Except the ones who sell homes on Christmas Day (it’s a holiday – that means a chance for the busiest of professionals to fly in and close). See you in January!

A Thanksgiving Real Estate Story

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I’m greatful that I get to work in this wonderful world of real estate sales.  Every family that is buying or selling a home has a story to tell me.  Every investor renting, buying or selling a building or entrepreneur buying or selling a business brings the agent into their lives during the transaction and often long lasting friendships are forged. What I love is that every deal is different, every buyer and seller brings new and interesting lives with them.  I’ve learned about nearly every religion in the world (I ask a lot of questions).  I’ve learned why people come to the Greater Seattle area.  I’ve learned all about the books and operations of the businesses I represent and their hopes and dreams and I get to share these dreams.

But I want to share the story of Stacy Bannerman who is The Founder/Director of a Foundation called The Sanctuary For Veterans & Families, with whom one of my agents, Brian Borgen and I are currently working. 

This summer I co-listed with Brian a fabulous waterfront home/retreat/spa/B&B in Vaughn, about  ½ hour west of Gig Harbor with 900 feet of salt waterfront, 11,000 sq ft home and 5 acres.  Working with interested buyers has been fascinating and fun, seeing the property through the eyes of different buyers, such as a retreat for Hollywood stars and a Bed and Breakfast business supported by Social Entrepeurs from Europe.

However, Stacy Bannerman called us from an online ad this fall and thinks the property will be perfect for their needs as the Sanctuary they have been looking for.  Working with Stacy has humbled me and made me realize how thankful I am for our Veterans who have been in harm’s way.

Stacy shared with us her vision for this Sanctuary and explained to me why she was willing to spend countless hours volunteering her time so that veterans could have a place of retreat from the world while they get the special services they need to get back on their feet.

ChavezShe states that “at least 1.6 million American military personnel have served in Iraq and Afghanistan, and Iraq war veterans are exhibiting higher rates of post-combat mental health problems than veterans of any other war in this nation’s history.  

Due to repeat, extended tours, an unprecedented wound-to-kill ratio of 16 to 1, and the high incidence of civilian casualties in a war without front lines, the most conservative estimates now are that at least 30 percent of troops will suffer some post-combat mental health problems. While post-combat mental health issues affect an individual veteran, the aftermath of war impacts the whole family and reverberates across communities.”

Stacey is going through the hoops to get this property under contract, she already has set up work schedules for the operation and arranged to have Bastyr University  handle the rehab portion of the week to help with mental and physical recovery.  The foundation will also be setting up a children’s dayschool so that the veterans can find a safe place to bring their families and get special counseling for a week at a time.

So, today an architect is drawing up the changes to be made to submit to an appraiser and then we get under contract and she’s out raising money.  All this and she has a full time job herself.

I will be so proud to be part of this and sure hope it comes together.  It all feels right and I’m excited and once again, so grateful to be in this business.