Courtney Cooper broke the news on Easter. The Northwest MLS has voted to add a required field: “Third Party Approval Required” and “Bank/REO Owned.” From the NWMLS (no link):
“NWMLS is excited to announce two new required fields; “3rd Party Approval Required
For those who are just tuning in, Sunday Night Stats is a continuing saga that I started back in early January of 2008. Each week is a small piece of the whole, and often shows only those changes that were revealed in the week between posts. For a longer perspective of the Seattle Real Estate market, click the category for “Sunday Night Stats” for other posts in the series.
Last week I did a brief Snapshot showing that home prices appeared to have increased by as much as 10% in a very short period of time. This week I was testing how sales were doing in comparison to the new 2009 Assessed Values. Up until very recently, the mls was giving us the 2008 Assessed Values. Most people know that I use these in conjunction with other valuation techniques to determine offer prices for my buyer clients. As soon as I noticed the change to 2009 values, I started studying the relationship of the most recent sales to these new valuations.
To my surprise, the same 10% increase in prices appeared! I tested late 2008 and early 2009. I then tested the period immediately preceeding the escrows that would have been entered into just prior to the $8,000 Homebuyer Credit being passed. The 10% increase happened in a two week period AFTER the credit passed (allowing 30 days or more for those escrows to close). Given the % increase is the same as last week, using a completely different method, it seems pretty certain that the stimulus is stimulating more than we expected…but it could of course be very temporary. Time will tell.
Before you do this at home, see the end of the post after the charts. I will give you a few tips on how to utilize this type of information around any home you are making an offer on.
(Note: During this same time period of “increase”, “bottom” prices are still available on many homes. 3 buyer clients of mine achieved prices of 86%, 83% and 77% Of 2009 Assessed Values, during this same timeframe showing the Average at 100%. “bottom” is not a month or a day. Every day homes sell at different prices and different values. You do not “miss” bottom. You just have to be willing to find it OR make the choice that you don’t want it. Many people can afford to have their dream home and don’t want to deal with the tradeoffs of buying “at bottom”.
Bottom is not something you wait for, it’s something you put the extra effort into finding…or not.
A few notes. I entered dates at the end of March of 2009 and the beginning of April 2009, until I had about 10 homes. I did not pick and choose the homes to conform to an answer I was looking for. I simply closed the dates when the desired # of homes was obtained. Of course I’m using a small geographic area and the same area is used for all charts, with different timeframes. I did eliminate new construction, as Assessed Value information is not always available for those immediately after closing.
What you may find to be of particular interest is the Days on Market (DOM) and % of Asking Price, is not as good of an indicator of value, nor a reliable one. Review all three charts for all three periods (one is in a link at the end) as I think you will get a lot of tips on how to price and how to make offers, by studying the results of many people’s attempts at different means of pricing .
The results are really pretty much irrefutable, but just to be sure, I did a third set of data for closings immediately prior to the 30 day period following the Stimulus Package being passed. The values were slightly lower…the increase was ONLY in the very short period of time after the credit was passed. Pretty amazing results.
To convert the data to your specific area, simply gather the same information for sold property in a radius around your home or the home you plan to make an offer on. You might not be able to get OLP (Original List Price), but I think the results here show that using that as a basis is not all that helpful. The rest you should be able to get from Zillow or the King County Parcel Viewer, or a combination of both.
If you want the detail chart for the period at the end of February and early March, closings that were entered into before the credit past, CLICK HERE. The Average % was slightly under the second chart in this post for late 2008/early 2009.
Washington State Department of Financial Institutions has released an updated interpretive statement on loan modifications late this afternoon. People who perform loan modification services for Washington State homeowners must be licesed as a loan originator and under the supervision of a broker, or be working under a licensed consumer loan company. Attorney have a limited exemption and non-profit housing counseling agencies are also exempt. Real estate agents are not exempt.
Licensees that charge a fee for loan modification services in advance of the services being provided must obtain a signed fee agreement for loan modification services from the borrower. Any fees paid in advance of services provided must go into the company’s trust account prior to disbursement, or be submitted to an independent escrow or title company to be held until disbursed at the instruction of the parties consistent with the fee agreement. Licensees are prohibited from collecting fees via direct access to a borrower’s bank account or via use of the borrower’s credit card.
A loan modification normally begins with a hardship analysis which is an examination of the borrower’s current mortgage, income, expenses, and ability to repay. The hardship analysis includes meetings or conversations with the borrower(s) and a determination of the borrower’s eligibility for a modification based on the particular lender’s eligibility requirements or the eligibility requirements of a federal modification program. The hardship analysis, sometimes referred to as “Phase I services,
Two things happened yesterday, prompting me to write this post today.
1) One of our buyer clients closed on a bank-owned property at 20% under current market value.
2) Someone asked in comment #61 of this post “What percentage of homes sold from Jan-Apr 2009 are foreclosures and short sales? What percentage of the above graphs are attributed to those numbers?”
We were exceptionally pleased with the result of yesterday’s closing, especially when the new lender’s appraisal came in at 20% higher than the sale price. Given how tight lenders have been on appraisals lately, that was an awesome bargain. One of the quirks of the contract when you purchase a bank-owned property is that the bank-seller may have the right to cancel up to the day of closing. There is often no home inspection negotiation, so you do a home inspection for your own information and adjust your offer price accordingly prior to making an offer, or prior to finalizing the contract.
Other than that, I have to say clients buying a bank-owned vs. a short sale was much easier and a very rewarding experience for all involved. The commission to both agents was cut dramatically, but that may be why there weren’t too many offers, so worked out well for my clients. There were huge risks of the seller keeping the Earnest Money if the buyers failed to close, many more than in a normal transaction, but as long as everything goes well and it closes, that was a stress factor but not a disadvantage in the long run.
Now to 2) and the picture at the top. There are many types of “as-is” bargain sales, and always have been. When someone is using the mls as a source of information for stats, most “as-is” bargain sales are always part of the mix. They are difficult, if not impossible, to identify and remove from the stats. To remove bargain sales from the stats today, and then compare to a previous year without removing the bargain sales from those stats, would be of no value.
The question “are foreclosures included” suggests that there are some misconceptions about what “a foreclosure” is. In WA, foreclosures are usually “non-judicial foreclosures” called Trustee Sales, and they don’t happen in the mls. So those would never (or at least almost never) be part of the stats if someone is using the mls. You can tell if you are buying “a foreclosure” if you are buying it outside “on the Courthouse steps” in the rain 🙂 and not in the comfort of an escrow office.
Pre-Foreclosures
Bank-owned Post-foreclosures
Estate Sales
Relocation Properties
All of the properties named above are most often discounted and have “as-is” addendums, but are handled through a normal escrow closing. That means you usually have a lot of the risks removed with regard to the property having liens after closing.
When you buy “a foreclosure” vs. a pre-foreclosure or a short sale, you have to buy them cash and they are not cleared of liens and you usually buy them sight unseen and without someone “representing” you as to the purchase.
In my experience so far, buying a good property that is bank-owned seemed to be a really good deal with less risk than buying at foreclosure. As long as you do a really good inspection and know the condition of the property well, they don’t take nearly as long as most of the short sales.
Bargains in the form of Estate Sales and Relocation Properties have as-is addendums, but most often allow for an inspection negotiation phase after you enter into a contracted price.
Not all bargains are alike, and some sellers will sell at bargain prices and “as-is” even though they are not shown as one of the options in the picture. You may not find your “perfect dream home” in these options, but if it’s a bargain you’re looking for, one of the options shown in the picture is a good place to start.
“First time home buyer credit
Dear Renter,
Youve been patient. Youve waited for the perfect time to buy a home. Well this is it. Home prices have bottomed out. Many experts see prices rebounding from current lows. The $8000 Federal Tax Credit is available for a limited time. The….. Buyers Rebate is yours when you use me as your Buyers Agent. And now Mortgages are at their lowest since 1971…Your patience has paid off!”
Seattlerenter asks if this is legal and ethical, specifically, using the phrase “home prices have bottomed out.” Since I do not practice law, I cannot answer the legal side. In this blog post, I will analyze the ethical question.
First we need to differentiate between real estate agents and Realtors. Everyone is an agent but only some are members of the National Assoc of Realtors. In order to solve any ethical dilemma, it’s important to first consult the minimum moral standard; the law. First we would consult the state agency law. Next we would look to other state laws that may answer the question such as consumer protection laws. After that, there may be a federal law that addresses the question. If we still have no answer, we would consult MLS rules. After that, we would check with our own company for policies and procedures and company ethical codes that address honesty and advertising. Perhaps we belong to a professional association. Then we would consult the ethics code of that association for guidance.
Real estate agents who belong to the Realtor association consult their Code. Here is the link to the NAR Code of Ethics.
As we see in Article 1, a duty of honesty is paramount when working with a client. But at this point, we are soliciting to obtain a client. We don’t have a client yet. Standard of Practice 1-3 says, “REALTORS®, in attempting to secure a listing, shall not deliberately mislead the owner as to market value.” In order for the marketing piece to be deceptive, the real estate agent must have known about the falling market in advance and intentionally choose to mislead potential home buyers and sellers. Since we can’t know the future, this article may not fit our situation. Article 2 says “REALTORS® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property.” If Realtors have facts that lead them to believe that now is NOT the bottom, then they might be in trouble here. For home sellers, that’s not going to be a problem (since selling NOW in a down market is better than waiting.) This would only be problematic for a buyer who was lead to believe through exaggeration, that we are at the bottom.
Here is what I’ve been waiting for. Article 12:
“REALTORS® shall be honest and truthful in their real estate communications and shall present a true picture in their advertising, marketing, and other representations.”
How would a Realtor put up a defense against an Article 12 ethics violation for sending out the above letter? Well, I suppose what he/she might do is to provide some sort of analytical proof with numbers, statistics, and graphs as to how he/she arrived at an affirmative realization that “now” is the bottom of the market. This Realtor may be able to defend against an ethics complaint by saying that he/she WAS being honest, based on the facts known at the time, and based on his/her analysis.
This leaves homebuyers to make their own decision as to if this particular Realtor’s personal opnion and analysis of the market can be verified by other third parties.
A prudent decision for a Realtor (who is going to embark on a bottom calling ad campaign) to do is to take his/her personal bottom calling statistics and analysis and have it reviewed by a neutral third party for accuracy. Similar to how we had our thesis papers reviewed by professors and then winced when they tore up our paper with obvious errors and made us do more research. We were better students because of those professors, even though we didn’t like doing the extra work, but I digress. Without neutral third party review, a bottom-call is just one person’s opinion.
If ever hauled in for a professional standards committee hearing, there would be ample documentation from a wide variety of local, state, regional, national, and international economists , Nobel Prize Winners, and other real estate industry experts who could provide solid opinions based on known facts as to if we were at the bottom on the day that marketing piece was mailed.
The third to the last step in any professional ethical dilemma is to consult one’s own set of values. What kind of a real estate agent/Realtor do I want to be? What behavior do I value in this world? For example, if I value honesty then I need to also be honest with other people, too. Careful reflection is important when considering all the possible consequences. Realtors value honesty, justice, beneficence and non-maleficence, responsibility, respect for persons, loyalty, and compassion. These values are hidden all throughout the Realtor Code. How does our marketing campaign support the values that we believe in?
The second to the last step is to make the decision.
The last step is to look back and reflect on what we did, how it turned out, and if we’d do anything different next time.
The person making the “bottom call” in the letter claims to have experts who agree with him/her. Who are these experts and where can the letter reader go to get more information? Perhaps the real estate agent who wrote the letter could provide that information in the letter.
At best, the letter brings to mind the viagra, porn, and loan mod spam in my spam bin, and I haven’t even touched the typos and the deception regarding the $8,000 tax credit.
If Realtors care about their ethics as much as they claim to, then Realtors should talk with each other about the possible consequences of calling bottom in marketing material and provide guidelines as to what research to use. It goes without saying that we would have benefitted from guidelines like this when we rode the real estate bubble on the way up.
Using the NAR’s economist as the only source would be a very, very bad decision.
King County Single Family Home Prices. Just a couple of quick graphs tonight. First week in April 2009 compared to first week of each month so far this year. The first graph is $ in thousands, the second graph is median price per square foot.
(required disclosure) Stats are not compiled, posted or verified by NWMLS.
A few weeks ago, a home buyer shared some pricing scenarios a fellow mortgage originator was offering to them.
Scenario 1 looks like the mortgage originator wants the borrower to believe they’re only making a half point in loan fees and the borrower is paying an additional 0.625% to buy down the rate further. How the borrower should look at this is that if they select Scenario 1, they are paying 1.125% to have 4.50% for a rate. (This was provided to me in mid-March and does not reflect current pricing).
On most current Good Faith Estimates have the following lines designated for “points”
In all my years (9 as of April Fools) of mortgage originating, I’ve never seen an estimate with 0.5% origination and 0.625% discount points. It just seems silly to me. This really illustrates why a consumer should just add up the points paid regardless of if they are entered as discount or origination–if you’ve paid either, you’re paying points. In fact, as I’m sure I’ve mentioned before (but it’s worth repeating) you should add up all closing costs disclosed in Section 800 of your Good Faith Estimate to see what you are paying for interest rate. Some lenders may have additional fees, such as processing, underwriting, funding…etc. Unfortunately, APR is not a fool proof way to compare interest rates.
While I’m dishing out advice, selecting a Mortgage Professional by interest rates–when we are currently receiving a new rate sheet ever 5 hours is crazy. Odds are, you’re not comparing apples to apples and rate quotes don’t mean anything unless you’re locking in at that moment.
In this current market, make sure:
Dow breaks 8,000 April 2, 2009
Whether you are talking about the stock market or the housing market or the economy in general, it is very interesting to watch the discussions of “bottom” and “a recovery”. Today the Dow is peeking into the 8s, with headlines of “Dow Crosses 8,000 in Broad Rally”. I was surprised by this sentence in that article:
“We have more and more evidence that the economy is heading for some stabilization, and we see some leading indicators that show that the bottom could be near,” …
I admit I am confused by that statement. If the market does stabilize from here out, wouldn’t that make “the bottom” behind us vs “near”? If we never get there again, wouldn’t March 9th when the Dow closed at 6,547 be “bottom” vs some date in the near future? Does “bottom could be near” mean we will shortly be under 6,547? I’m pretty sure that is not what they mean. I think they mean bottom isn’t bottom, until “they” choose to declare it as bottom at some point in the near future.
I expect some will see stabilizing as “a recovery” while others won’t view the market as “in recovery” until it is up past it’s historic high point. I clearly don’t expect home prices in the Seattle Area to be significantly higher in May of 2010, than they are in May of 2009. I expect to be “at bottom” for at least 3 years.
So what does “at bottom” mean to you? What does “a recovery” look like to you? I find it very interesting to study the various differences in people’s perspectives on these two concepts.
I have been focused on what the big banks are doing to the mortgage broker industry because as someone who works for a correspondent lender, it’s closer to home. I am convinced that the big players are attempting to wipe out the mortgage broker industry while smearing it with mortgage meltdown blame so they can keep their hands clean. (If anyone can provide proof of a bank admitting they created mortgage programs and guidelines that were instrumental in creating our current climate, I’d appreciate it). I believe some major banks see this period in history as a grand opportunity to grab as much mortgage market-share by stepping on the little guy. And it appears they may be doing it to their own mortgage originators who are employed at home loan centers.
Over the weekend, The Seattle Times covered a local story about how a group of employees from JP Morgan Chase’s home loan center in Bellevue “made some mistakes” when they “jumped ship” for a mortgage company. What struck me, besides what it’s reported the employees did, was their reason for leaving:
“What prompted the mass migration. According to written statements from the lending officers, last fall it got increasingly difficult to complete the deals they lined up after Chase moved it’s loan processing from Bellevue to Tempe, Ariz. And in January they were told their work would be shifted into the bank’s branches….”
JP Morgan Chase has a much larger local presence with the acquisition of WaMU and their network of bank branches. Will Bank of America do the same with Countrywide’s home loan center loan originators? I’m assuming that loan originators located inside a bank branch are not compensated the same. Banks could employ people with less experience and originators who do not have their own client base…they’re counting on consumers to just walk on in and apply for a mortgage….just trust “the bank”.
I know that if I worked for a mortgage bank loan center, I’d bone up on my Teller skills.