“Don’t let this buyers market pass you by!”
I hope everybody is having a great 2007 so far. Let’s see…Donald and Rosie are in a spat, Beckham is coming to Los Angeles, the Chargers blew another playoff game, and YES…real estate is still overpriced in many areas.
I know it has been a while since my last post, but I am just here to casually remind you to do your own research and not buy into the latest and greatest marketing hype.
I saw this one today on a big ad: “Don’t let this buyers market pass you by!”. And it went on to say how you will miss the next run up if you don’t buy now and let this “great opportunity” pass you by. ARE YOU KIDDING ME? Depending on who you talk to and the location, most would say this ‘buyers market’ has been going on for about 6-12 months. I’m sorry, but after a 5-8 year bull run in real estate which was predominately a ’sellers market’, don’t tell me that a few months where buyers aren’t taking it in the shorts and are allowed to negotiate means that the bubble is ‘over’.
It is nice that property values are much softer in many areas now…but property in many areas is still extremely over valued. So before you fall for the latest and greatest marketing that is being used by real estate agents and brokers, be sure to do the math for yourself and see if it REALLY is a good deal.
That said, stay tuned as I will have more posts coming. Also a big thanks to everybody that voted for me for the REBA award. I took 2nd place in my respective category.
Remember…2007 is the year when things REALLY start getting interesting.
SoCalMtgGuy
January 16th, 2007 06:26
According to Lereah and the housing syndicate we’ve seen the worse. If you don’t buy now you’ll miss another 5 years of 20 percent year-on-year appreciation. We’ve barely begun to get a taste of what a buyer market is about.
http://drhousingbubble.blogspot.com
January 16th, 2007 07:49
I was in Naples, FL over the weekend and caught part of a real estate/mortgage infomercial over the radio. Here is a place that has been rated the number 1 most overpriced city in the nation. The market has been correcting since fall of 2005 and is still has a long way to go. There is probably a two year supply of homes available in the area. So what do the infomercial folks say? Now is the best time to buy a home. You may never see prices like this again. Of course that is what was said in 2005, after all, prices did appreciate 20+% each of the previous 5 years, and real estate only goes up, not down. Tell that to the folks who bought in December of 2005.
January 16th, 2007 15:09
“YES…real estate is still overpriced in many areas”
I think you meant to say ‘most’ or ‘all’ areas.
January 16th, 2007 15:26
Here’s the view from FL, and I was surprised you didn’t say in your article, make sure it’s REALLY a good deal, AND Get an Appraisal. The Appraiser is the ONLY non-commission-driven party involved. I would also add that it’s Crucial to get an Experienced appraiser who knows something besides the hype and bubble “market data” that the realtors spout.
In fact, the “brains” in the analysis side suggest that only appraisers with at least 15 years experience in their local markets (this is crucial - someone relocating from Minnesota to Naples, FL in 2002 may well believe the hype as well)
Congratulations! You Deserved First place, though, along with your appraiser buddy!
Doreen Campbell
Forensic Appraiser
in SE Florida’s Bubble
January 16th, 2007 15:29
I live in Mission Viejo, and I have Cox Cable. The last couple of nights they have been playing commercials on how now is the time to by. The last one that played said “don’t let time pass you by, now is the time to make memories, prices are favorable and that won’t be this low for long”
Give me a break, like you can only make memories if you buy a house!?
RE agents must be desperate, I don’t ever remember seeing commercials on prime time TV.
January 16th, 2007 17:15
NYC. Buy or rent? Should the costs be about the same in an equilibrium market? They don’t seem that disparate..
UWS
Avg. Rent Avg. Sale Avg. Monthlies
Studios:
$1,800+ $450K $625
1BRs:
$3,200+ $750K $950
2BRs:
$5,000+ $1.4 – 1.5M $1,400
January 16th, 2007 17:34
“Appraiser is the ONLY non-commission-driven party involved.”
Not true. They get there 1st order because they are an apprasier. But if they want to get a 2nd, or 3rd order and a long term career they have extreme preasure to inflate the appraisal to obtain a certain number. The mortgage broker/ or loan officer orders the appraisal. So the appraiser is sort of are on a delayed commission, if they don’t get the price for this home or condo- they will not be getting any more orders ever again.
So the key is to order an appraisal yourself, and tell him I just want an honest one- THIS IS NOT TO GET A LOAN! Then you will an unbiased value of your home.
January 16th, 2007 19:37
Confused has it exactly right. the only way to guarantee a non-baised property valuation is to go out and personally hire your own appraiser. However, borrower should know that by law, that appraisal cannot be used for lending purposes. The lender will usually have their own appraisal done, in which case, most borrowers are reluctant to pay for a 2nd appraisal.
I’ve always found it curious that a small investment of
$300-$1000, depending on the complexity of the property, to hire a truly independent professional, always seems like too much money for borrowers who have no problem borrowing hundreds of thousands of dollars and paying tens of thousands of dollars in closing costs and other fees. Human nature I guess. Nobody wants rain on their parade. Especially if they have already fallen in love with the house. Please dont take this response as any kind of “commercial” for my services. I’m just here to help people think for themselves, and not trust those that stand to make large commissions when deals close. As far as not getting more work if my “value” is not in line with what my clients want, this is true. That is why I am very careful who I choose as clients. 2006 was my worst year ever, as my portfolio lender clients saw their originations cut by more than half. This is a feast or famine business. I save money during the good times, because I know bad times are just around the corner. And I certainly could not do this if my wife did not have a great stable job with full benefits. It can be tough being an honest appraiser, especially in the epicenter of mortgage fraud, that is Orange County, CA. I still wake up everyday and look in the mirror, proud that I am not like the rest of them. The life lesson I plan on teaching our new baby daughter.
Everyone, please be careful out there. The snakes are real desperate for deals right now, as they struggle to hold onto what they thought was the path to riches. The next 6-9 months will see continued lay-offs and negative earnings anouncements by homebuilders and sub-prime lending outfits. Employees of these companies are desperate to close deals, no matter what. The good news is that fraud is getting more media coverage, see the story regarding fraud in Murrieta. Things appear to be coming to light. Do not let yourself fall victim. Good luck.
January 16th, 2007 23:39
Woohoo! It’s 2007! Bring on the crash!
January 17th, 2007 09:38
OC Appraiser, honest people seek out other honest people, so you’ll do fine.
January 17th, 2007 16:56
OK, this is directly from the Headline News for Realtors in FL. Sent out by the FAR (FL Assn of Realtors.
It’s A great time to buy (Bold headline)
That’s the word several local Realtor board/associatins are getting out to consumers via billboards, television ads, radio spots, print advertisements and even bumper stickers. The local multimedia campaigns coincide with phase two of NAR’s “Buy Now” campaign. Two new national television and radio commercials encourage buyers and sellers to ignore the real estate bubble talk and take advantage of remarkably favorable conditions in many local markets. Following are a few talking points gleaned from the national and local campaigns that you may find helpful in your sales pitch:
> Mortgage rates remain in the low 6% range;
> The inventory of high-quality homes and condominiums is abundant (??) (meaning, rush to buy before the huge stockpile is gone?)
> The local economy is strong and unemployment remains low; (til the realtors take your job when they tip to reality or get busted for arranging fraud) What’s Real unemployment when 1/3 of the population is in RE in some way)
> Real estate is a cyclical industry, with peaks and valleys, but historically always a positive, appreciating investment in the long term; (and if not, we’re glad to take 6% to unload the stone from around your neck)
> The Baby Boomer phenomenon continues, and all signs indicate retirees will continue to flock to the Sunshine State over the next 25 years. (only if they can afford to - taxes and insurance are almost as bad as home prices here)
So there you have it, rush out & buy!
Think about who might be the single largest contributor to political campaigns during 2006. No, not oil, uh-uh, not big Pharm, guess again……….. Yes! NAR - so they can Afford those commercials. Imagine getting 5 to 6% of almost all the foreclosure sales? Lenders are in CA or someplace, and have to unload this crop of homes/units. Then will be the time to buy. There’s already a company in FL called “Condo Vultures”, check it out.
Doreen
January 17th, 2007 17:40
The mortgage industry must be getting really desperate - I just got my first mortgage refinance telemarketing call today. Next thing will obviously be the same types of calls from realtors - “Now is a great time to buy you know.. renting is for chumps.. don’t pay someone else’s (bagholder) mortgage”.
Ahhh… it’s very painful on the way down isn’t it.
January 17th, 2007 20:45
I’m not paying my landlord’s mortgage. I’m paying less than half his mortgage. ROFLMAO
January 18th, 2007 06:42
A note on appraisers: finding one who knows his stuff AND remains independent of the REIC is next to impossible. (At least this is true in tight, clique-ish towns where people know each other.)
Appraisers get more business if they’re on realtors’ good side. I might hire one once every several years. Realtors can tilt their entire herd of clients in an appraiser’s direction - or away from him. Although, they’ll assure you they can’t do that and make a big show of handing out lists which imply, in writing, there is no bias.
In this town, realtors sit collectively like vultures, ready to rip apart any appraiser who is dimwitted enough to say anything negative about a house. I SOOOO look forward to the day we collectively wake up and get rid of the middlemen. They’re bleeding us dry - whether it’s a 6% fee for nothing, insurance - or taxes….
January 18th, 2007 11:39
Deja Vu,
Try the Appraisal Institute website for a referal. Also heed OC Appraiser’s comment about getting an independent appraisal - one that is for “private use” and not for the use of a lender. Doing the above in sequence should help you get decent guidance in any loan decision. Oc Appraiser’s point was spot on - why would someone entering into a 400k-1.5m decision not spend another $350- $1000 to avoid being a sheep?
January 18th, 2007 15:07
“I’m not paying my landlord’s mortgage. I’m paying less than half his mortgage. ROFLMAO”
I also like the one: “Don’t throw your money away on rent.” Instead we should throw away twice the money on interest.
January 18th, 2007 16:40
Good News!
Our software vendor (appraisal) has been working on forms for about 6 months, called General Purpose (Residential, Condo, etc) Which are NOT FNMA forms and are clearly labeled and designed for the Homeowner market - So that we don’t violate any stuff or make someone other than the Lender the client and so forth.
They’ve been released, so now it remains to work a few bugs out but Essentially, we are in Business to appeal to the sense of logic of the general public, to spend a few hundred to avoid a mistake of tens of Thousands!
Speaking of Middlemen, Deja Vu, there is some grassroots group trying to do away with them, and at least grumbling a lot about the sharks/realtors. They are just salespeople. Gone are the days when they were really useful, especially listing agents. Give me a break! 3% for typing in a listing?
Joe Homeowner I think was the name, he was sparring with Blanche Evans at Realty Times and being told by other realtors that the sellers using realtors had to make up for the times people wasted realtors’ time interviewing them & chose someone else or sold by owner. So now trying out your options, shopping, is a crime against the leeches? Oh my….
Another form of middleman for appraisers is the AMC or Appraisal Management Company. The ones that are subsidiaries of large lenders farm out appraisals to the Low fee bidder. Mostly new guys without a clue except how to run the software and what words get the file past underwriting. The sooner That middleman is eliminated, people will then choose appraisers on Merit, Experience, Credentials, Reputation, instead of who’s cheap and fast ( before the Lis Pendens is filed)
Check out FlipperNation’s Flip Tips - Funny! But then Scroll Down, to where it says Other articles that would be a lot more important if Richie and David reviewed them. The first one is very good, by The Real Estate Professor - He’s giving the industry what-for, from an independent and non-syndicate view. http://realtytimes.com/rtapages/20050930_flippers.htm
This article educates the would-be “investor” and tells it like it is. By the time your manicurist is talking about it, the profit is over. He makes a good point that I noticed in the last RE Bust. The word “foreclosure” actually seems a lot like “Flea Market”, in that the public will pay More for those, Thinking it Must be a Bargain if it’s a Foreclosure or some piece of junk at a Flea Market. I used to think, “Fool! Put your Hand down” at the FHA auctions, years ago.
The fraud is getting really subtle today, hard to catch, particularly in bubbles. And fraud and flipping frenzy/hype has shot the “value” or price of many Edge of great areas way up. Kind of like if you can’t take the house to the good area, you can take the value to the house, if it’s within a few blocks. AVM’s (computer value models, used in underwriting, reviews and even some lending) don’t “See” the difference that you and I as local residents & appraisers see clearly. Things are Coming to Light, as OC said (or was that SoCal?) lol, one of the white-hat guys in my industry.
Hey, CA appraisers - Steve Smith is doing some really good stuff. He’s Institute, but way realistic compared to most of that crowd. Giving a class for like $10 a head, with graphs & more to prove your point and document your stuff. He needs like a minimum of course, to make it worthwhile, but he will show up & do the powerpoint and give lots of handouts on the methods, from MAI/SRA view, but like you haven’t seen before. He will email you the package too, if you like - just wants to improve the profession. Of course, I’m preaching to the choir, but maybe you guys know someone who could use this too. Prob is those who need it don’t See a bubble….
This too, shall pass, if we hang in. Like a reader said, honest people will find good appraisers, and it will be fine, after a little pain and bloodletting. Unfortunately not enough NAR blood and far too much type FB for me.
Be careful out there and don’t buy the hype of “phase two” or any subsequent phases. I’m wondering when they will bring out the tear gas and stun grenades! (Undt you vill Like it!)
Doreen
January 18th, 2007 17:06
I needed a redbull and 3 cups of coffee to keep up with that last post.
January 18th, 2007 17:51
Great post Doreen. And thanks for the very educational link too!.
:-)
January 18th, 2007 18:26
Any appraisor can you help:
Lets say you order an appraisal and think the number is low and want to get another one done.I have heard that once you get an appraisal it goes into a database and other appraisors and their watchdogs know that a previous appraisal was done.The appraisal becomes somewhat of real number and others do not want to stray to far from it.I know that brokers will go down a list and call appraisors to make sure they can get close to a predetermined value.They do not want to have to order a second appraisal if the first one doesn’t come close to the value they need.Do you have any insight to the first appraisal being somewhat concrete and others are afraid to stray too far from it?
January 18th, 2007 20:12
Arizona,
No, there is no national database. Actually, one is being formed now, by concerned appraisers, and it’s often been suggested as a way to keep tabs. Yes, brokers Do number-shop but that will soon blow up in their faces in record numbers, as it’s already doing in bubble areas. Lenders are cracking down. Think of it as job security and filling the idle hours. During the boom, there was little need and no time, to review very carefully, Each appraisal. But now, we want to be busy all the time, to avoid the ax. (that is staff, underwriters) ALSO, the prevalence of what I call “Desperate House Lies”, dictates that it Does take longer today to Do a responsible appraisal, and to get it through underwriting.
That said, many brokers are realizing that by the time they call “the usual suspects” for a high ballpark, the borrower may have applied elsewhere - desperate times call for desperate measures. FBs one step ahead of Lis Pendens can’t wait around for appraiser/broker phone tag. Worse, when one Does the job, it may come back from underwriting cut to shreds and get stuffed up the broker’s And appraiser’s noses. In the meantime, Mr borrower runs away or gives up on refi or goes elsewhere to close, without broker games.
So the smart ones now See that the experienced appraiser is their best ally to avoid wasting time. Now more than ever, for the commissioned L/O or broker And for the beleaguered fee appraiser, Time is Money. That’s one reason I went back to the Desktop as a “ballpark” that 1) I could get paid for, and 2) the owner/broker, whoever coughs up the scratch, can then use as a tool to “get real” and at least they Know what the responsible ballpark is, with more certainty. It’s not a full appraisal and typically Won’t be used to fund a loan. It’s Inexpensive but we do the Work, instead of telling the guy something to make him go away.
The “list” may have come from the truth that once you do an appraisal, it’s hard to get it assigned to another lender - that is for the owner - and if the owner orders it and Then shops for loans, it’s a red flag to underwriting. Not that the red flag is Needed in Most cases. However, some savvy borrowers Do tell brokers they want a certain amount and do shop their own for-sale-or rent appraisers. I tell them to go take a flying flip at a rolling donut but they find someone. In the case of the honest owner/borr, they are frustrated and learn mistrust of their best ally, the appraiser, and think a few hundred is entirely too much and yes, don’t want two appraisal fees.
What I said earlier about there being a new format is Great news for Everyone involved. The Desktop is not a full report, and assumes accurate records and truthful phone talk with owner, average or better condition, etc. But it’s cheap, quick and does give a good idea for decision-making and a Tool for Shopping.
The Alternate (general purpose)format is a field visit (or may be optional, just got forms today and have not used/printed and fully read yet) but is Different, so that the owner has that, goes shopping, and lender would then call the appraiser to Update that and address/assign to the lender. In That case, it’s less of a conflict and easier for all involved. The focus is different, more user-specific format for the public. Altogether win-win and we get a more direct relationship with the owners, who then see who we really are and our true value, hopefully.
There are too many new guys out there, clueless is the problem as far as consumer protection goes. Those in collusion with mtg brokers also won’t like the empowerment of the consumer - and their work in the hands of owners means that more bogus reports will go to Boards and the like. But the new format is more forgiving and less specific in terms of rules, limiting conditions, etc. We’ll see how it works. Definitely more a consulting role for us - I like to help people and to see the light bulb go on, educate them about appealing their taxes, standing up for themselves and not getting ripped off.
I gotta get a better name
Doreen sounds so lame - someone get me a name, Ok?
I know it’s a long answer but
January 18th, 2007 20:27
AZdude-
Appraisals ordered by brokers or lenders for Federally Related transactions are legal documents. They are also confidential documents per Federal appraisal standards (USPAP-Management Section). As a result, typically, when one is completed, it is viewed only by the client (bank or broker) and then, maybe, the borrower. If those parties do not “like” the appraisal, they are free to order and pay for another one, via some other appraiser. That (new) appraiser will see the original appraisal, ONLY if the client or borrower give it to him. As far as the “value” is concerned, it is not placed in some database or anything. Its just a legal document. In my experience, the only appraisers who are afraid to stray from an original appraisal are HACKS. They are afraid to stray, because they cant back it up if they do. These people are just form fillers who cherry pick comps to fit the value that “everyone” needs to close the deal. This is considered gross incompetence at best, and fraud at worst. And is a violation of USPAP under the competency rule. That is why a good way to find a competent appraiser is to ask a few questions, and listen for what he asks you. If he asks you, “so what do you think its worth?”, find yourself a new appraiser, because he is looking for a baseline value, and doesnt really know how to analyze the market and form his own opinion of value, backed up by market data. Also, ask the appraiser if they do “comp checks”, if they say yes, again, find a new appraiser, as comp checks (predetermined value opinions) are also a violation of USPAP, and those that do them, typically cater to slimmy mortgage brokers, and either lack ethical standards or just dont know enough to know that it is a violation. Brokers are notorious for calling every appraiser in town, until he gets one to promise a predetemined value. So all the appraisers in town compete for this slime balls business by making promises that are not only unethical, but compromise the entire industry and well being of our financial markets. But they are too stupid to understand those complexities. They just think that its their job “good customer service” to give the “client” any value he wants on the report. As long as the appraiser can “find” it in the mls, and its not too far away, then the value is there. This is NOT an appraisal. This IS one of the reasons the market is where it is. I only wish more of them were going to prison. I guess in due time they will either get busted or leave the industry for the next “hot, get rich quick” gig. Good ridance.
January 18th, 2007 21:03
Amen, OC!
However, will they go to prison fast enough? Of course the ones with the real power to influence Everything, the realtors will NOT go there half as often as they need to, due to their huge and powerful, not to mention, wealthy group’s lobby, clout and so forth.
Another things is that the appraiser’s client’s purpose is the determining factor for the appraisal’s focus. Appraisers Can report value as an advocate, a negotiating tool, as I’ve been asked recently to help negotiate short-sale by clients.
What’s your take on that, OC? Seen it there yet? I’d think what we see here in FL, you are already further into but not sure. What about the states with the bubbles, like ours? All those extra tax increases from higher sale prices and how many times homes changed hands and are re-assessed… In FL, all bets are off when it’s sold - our taxes are more like 2% and many cases, more. Non-waterfront higher end seems more stable here than waterfront, maybe less of a spike? All the “rules” for what brought more (anything in the frenzy, very little now) have changed. Of course the rote adjusters are having issues with that concept (actual analysis rather than simply writing a number in?)
Our tax and insurance creates as many FBs as P & I - all four pmt components spiking up is wreaking havoc here. Grandma lives here, too. I’m thinking CA population is younger overall but could be wrong, been to SoCal coast a few times but maybe Palm Springs is where they hang there.
South FL has south Americans, Centros, whose elections recently made good news for us, but it’s a lot to prop up. Those with means from SA will come back here and family will join them. Sunbelt never has sucked for long, slight correction & move on. However, last time there were differences.
1) Way more Equity
2) Fundamentals still made sense/existed - underlying economy
3) Far fewer people Employed in Real estate (unempl figures skewed now)
4) No war going on then - less national debt, China was not where they are now
5) Different currency and Wall St climate/ideas/balance
6) Investors were actually people with knowledge
7) Real estate was Not Internet-based - nothing was
8) Sensible loans then - insanity ARMs now
9) Huge Plastic Debt and Bling mentality now (covered in part by other items but a huge issue itself)
10) Oh, yeah, Condo Conversions - Hit & Run, screws up absorption and Looks so easy to Flip City residents
Makes me ill to think/write about it….
Those most Qualified to invest in RE Know better!
Least able take advice from the 6% Syndicate crowd and Sleazy Brokers who need not even look them in the eye or risk personal safety on FBs going postal, due to GetMeALoan.com
Argh, I shouldn’t get started, it’s too depressing
January 18th, 2007 22:33
For a consumer; it is best to get an inflated appraisal. It will get you a better interest rates with the best terms. As long as the consumer does not want to sell the home soon and expect that price. But in that case, why is the consumer refinacing anyways.
So for purchasing- get your own appraisal to make sure you are not over paying. then get one from the mortgage broker so he/ she can use it for the lender.
For refinacing- have the broker call his most liberal apprasier that he has a relationship that is pre approved for the bank you will be going to.
January 19th, 2007 06:25
Thank you doreen and oc appraisor for your insight.I have been wondering about this appraisal issue for some time.
There is a lot of shady dealing going on out there for sure.I think I know what to watch out for.
Thanks
January 19th, 2007 10:44
Confused-
I guess you could say that as a borrower (consumer), an inflated appraisal is best if you are refinancing, due to LTV ratios and lower overall interest rates. I think what people need to understand is that inflating an appraisal or looking the other way, when you see the roof caving in and the kitchen has been gutted is FRAUD. Transmission of the file to the client (broker) is a FEDERAL offense. We are talking about defrauding a Federal institution (member FDIC bank).
I guess if Joe consumer can sleep well at night, along with Joe broker, and Joe appraiser, then sure, its OK. And considering that this type of behavior is very prevelant and looked at as a little white lie, kind-of like not reporting to the tax man the $10k gift from uncle Ted, it speaks volumes of the kind of society we have become and continue to spiral into. The one bright spot in all this is that I know that markets can only be fooled and manipulated for so long. In the end, the markets tell the people how they should behave, and often leave a lasting impression on those who took advantage of a particular market environment.
Doreen, I’ve tried to shop the restricted use desktop appraisal as a viable product, with NO success. I have realized that any broker asking for a comp check, is not going to spend money on it when he can get it for free by calling the next guy on the list. And the next guy on the list is just giving a ballpark, non-USPAP compliant, without the signed certification and proper Scope of Work.
What needs to change are the ethics in the industry. The belief that asking an appraiser to violate regulations is OK, as long as it saves me time and money. I do however, see a market for our professional services to home buyers or sellers as private party clients. I think as the consumer becomes more educated and aware of the fraud out there, they will seek out reputable professionals for themselves. Marketing is tough though, since homeowners and buyers actually think they can get a free and accurate valuation on Zillow or some other web based site. When in fact, they are better off making an offer on the place, site un-seen, and just pulling a number out of the air to see if it sticks. The consumer just needs more education and the players (appraisers, brokers, agents) need to be held accountable for their actions, and it needs to be made public. With the current declining market cycle, I think we might see some of these things happen. Dont count on it though, after all, we do live in a society where everyone wants something for nothing and feels entitled to everything. But thats another topic all together.
January 20th, 2007 16:52
SoCal,
How sure are you that 2007 is the year that things will really get interesting? Is this a rock solid 100% sure?
January 21st, 2007 14:24
Well, I dont know how SoCal feels about 2007, but let me give you my take, based on my boots on the ground analysis.
I would call 2006 as the year where things got interesting. After all, it was the first year, at least here in OC, that prices really didnt go up. From about 2000-2004,5, if you bought a house in OC, you made $100k every year. That was pretty much a guarantee every year. This is what contributed to the frenzied environment. Just imagine you are broke. All you had to do was buy a place, hold for 1 year, sometimes only 6 months, and BAM, you werent broke anymore. It was like magic, or the lottery, where every ticket is a winner.
Now came 2005-2006, with higher interest rates being the first nail in the coffin, and the doubling of inventory the second. Less buyers able to qualify and a drop off in activity of over 25%. These factors put some fear into those folks who bought to make that $100k that everyone else was making every year. More and more folks wanted to take that money off the table, only to realize it was too late. So, they took a wait and see attitute, talking about how Spring of 2006 was going to be the saving grace. Well, Spring came and went, with no increase activity, only slower sales and stable to declining prices. This type of market environment will KILL anyone who got in and relied on appreciation. These exotic loans count on appreciation. Brokers sold them to 85% of the buyers, saying “dont worry, in a year you can refi, take cash out, and all will be OK”. But we all know what happened. And many folks still in their houses having just made a payment to the IRS also know what happened. More are starting to realize that they will be forced to wait out this market, and few will actually have the cash funds or income to do so.
2007 will bring even more defaults and foreclosures, this I guarantee. And if you dont look at the new home number, which I dont, and neither should you, due to all the incentives and other fre-bies, 2007 will also bring continued REAL price declines. Again like 2006, with some sub-markets and neighborhoods experiencing more than others, with some marginal increases in lower cost areas. As the year rolls along, we will see Spring come and go yet again, with even more inventory on the market and continued sagging sales, this time due to tighter lending standards and limited use of the Option Arm loan. I’m calling for a YOY 6-8% drop in prices for the resale product, this includes condos and sfrs (Resale only, because I cannot predict what builders will give out for free next). I dont usually make predictions, but I’ve been real close to this market over the last several years and specialize in Pre-foreclosure: If you buy a house today in OC, it will be worth the same or less in one year.
Kinda wide, but all the markets in OC are very local.
A market I know very well: If you buy an SFR in Aliso Viejo today, it will be worth less in one year. This I can say with 100% certainty. We can look back in one year and select all the SFR’s in Aliso that contracted between Jan 15, 2007 and Feb 15, 2007 (should be less than 20 sales, of which, we will be able to extract good comparables, and will also probably find one of “our” sales for 2007, has again resold for less or is active for less in 2008).
Again, this I guarantee. This senario is already playing itself out in Aliso and many other market in OC. Dont kid yourselves folks, its very difficult to time a market, but its foolish to think that after 1.5 years or stable to declining prices, all is well from here on out. These things take a long time to unwind. This is just the beginning. Soon, everyone will know someone, who lost money in OC real estate. Perpetuating more fear and continuing the slide in prices. Thats when you will know. If you have a good chunk of cash and a solid income, and can get approved for a fixed rate loan (which will be tough), at least you wont take a bath after you buy. Dont be foolish by chasing all the “dumb” money right now, unless of course, you have 10-20% cash down, with income to afford a 30 year fixed, and a time horizon of 15 years, then it wont really matter, and you can consider it forced savings. Remember, its a home, not an investment. Good luck to all.
January 22nd, 2007 18:32
Thank you OC Appraiser for your detailed response!
I really hope you guys are right cause my wife has been kicking my behind to get a house for some time now.
Her nesting instincts are strong. I’ve told her about 2007 a long time ago and she feels I’m living in a bubble fantasy world.
January 22nd, 2007 20:13
Bang-Up Job, OC!
If anyone was here from south FL, I’d be able to single out a couple of markets as you have - but we are all too in denial still, here. Plus, we have No End to the bogus brokers and appraisers who Will inflate sale prices and give away the world in Cash-Bach, for Resales!
I’m the last to be biased ethnically, having been raised in Central America - but when you come from where the gov’t fears the cartel, what’s a little fraud to “help someone” get a home? Come to think of it, maybe that’s America I’m describing, huh? lol - yeah, big Pharm, NAR, all cartels the govt appears to fear - I mean, whatever they say, goes….
Here’s the Other Thing: Like OC said in a previous post, “compromise the industry and well being of our financial markets” Absolutely! The Trickle Down will be Hell, and Further damage things, in my humble opinion. Has to - Look how many people, directly or indirectly benefit from the boom/bubble/hype/frenzy. Jobs and whole Industries depend on it. How many people do we know with a license to practice RE sales or mortgages? How many support staff for those? With rentals all over, property managers? Maintenance companies, Construction workers? Decorating/Home Design, Painters, Remodelers? Furniture stores, luxury cars, travel, bling? Don’t kid yourself, people have been blowing their Equity on all that, as they flipped themselves right out of responsible homeownership and the market out of affordable homes….
What is the Real unemployment rate, with so many only marginally employed, under-employed, delivering pizza or waiting tables part-time til the next deal closes? How much of the run-up covered organized crime activity? I could go on, but it always makes me ill, and I sound like a harbinger of doom. Suffice to say that entire neighborhoods will without a doubt go down. We can’t let that happen, so some level of gov’t will bail them out with guess whose money?
Real estate will be more regulated than ever. NAR has fought to keep banks from “limiting consumer choice” by selling their own foreclosures, renting them, to work out of the mess. They called “foul!” very loudly. But Now I see ALL over FL, One-stop Realtor/Mtg Broker/Title companies. OK for Them but not for banks? Do as I Say, not as I do…. ok
What about flat-fee listings? I’ve talked about them for a month now, and at Least one person Daily Never Knew they Existed. Check it out on Google, there are 10 companies doing this. Eliminating the 3% for typing in a listing. Which may help someone Just able to sell, from walking instead, with ruined credit. They can then Afford to sell a tad lower, so they will sell Sooner, Before going broke. Can make a difference. FBs, take note - it’s small but a little bit to work with, for some.
I miss SoCal! Anyone heard from him lately?
Doreen
January 23rd, 2007 08:15
Doreen, OC , et al,
Great posts and information. I have a slight issue with one of OC’s posts where in his opinion he advised to tank the appraiser if they ask “what do you think its worth?”. While I do not formulate the question that way and rather more like “are there any homes recently sold in your neighborhood that you think are comparable and applicable to yours?”, I find the question helps keep the scumbag loan officers from hosing the borrower and throwing you (appraiser) under the bus.
I’ve personally had too many borrowers calling me after the fact whining and crying that “I killed their deal”. After some questioning I find out that the loan skell had promised them x and delivered z on signing day. Of course x was predicated on the “estimated” (I call it imagined) value for the house that was sent over on the appraisal order. While we cannot do comp checks as it is equivalent to “contingent” work, I will tell these used loan salesmen that the value of the home is no where near what they have on the appraisal request without giving the value range. Their response is either “go ahead and do it” or “thanks” at which point they try to get another appraiser to hit their number. When they say to “go ahead”, remember that they have promised the borrower certain things - “x”. They don’t care about value as they are so desperate for their commission on each deal, they will just try to shoehorn the borrower in to “z” at closing to get their cut. Then I inevitably get the phone call from the borrower after the loan skell tells them the appraiser “didn’t hit value”.
So that is why I will question homeowners / debtors as to the value of similar homes in their neighborhood. For a lot of these borrowers the $350 they handed over to me for the appraisal represents a lot of hard work or a lot of groceries for their families. Although its not my responsibility, if I can save them $350 on an appraisal report that they will not be able to use, I do. Maybe its my background, but I do not feel good about taking a check from a guy with car grease in his fingernails meeting me on his lunch break and knowing my report will be worthless to him. Conversely, when a homeowner / debtor without grease in their nails, that has a pinky ring, Humvee and SL in the driveway, and is knowingly trying to pull a fast one - I will take that check all day long.
As OC said in his posts, my business has also suffered considerably compared to the cherry picking appraisers that seemingly have little consequences. That said, I sleep well and hope that the coming avalanche in housing will shake out a lot of the jokers.
January 23rd, 2007 10:53
Hey So Cal, I meant no offense to you in my previous post. Just remember that when you call a broker before you even see the property, to tell them that the “value” aint there, you are not doing anyone a favor. You are a professional appraiser are you not? You make a living analyzing market data to form value opinions. When you tell the broker that the “value” aint there, not only are you giving away your services, but you are giving your broker (client) the opportunity to call the next guy on the list, until he gets the number he wants. When you collect a fee from a borrower, you are not wasting anyone’s money. Your client (bank/broker) is paying for a report that will tell them if the collateral will cover the loan amount. They base the decision on YOUR analysis. That is what you get paid for. There is this misconception amoung many appraiser and clients, that if they cant hit the number, then its a waste of everyone’s time and money. No, its not. Your appraisal report is a legal document that enables a lender to determine risk. If a borrower does not have the value in his house, he should know about it, and pay for the services rendered. That is what makes this business real tough. You cant make everyone happy all of the time. But you must stand as a professional and stop giving away your “predetermined” value opinion for free. One more thing: when you tell a client that “the value aint there” this is a violaton of USPAP: Please refer to the Conduct and Management Sections as well as Advisory Opinion #19. Like I said, this is a tough business and certainly not for the faint at heart.
Socal, I’m sure your intentions are good and you are an ethical appraiser, but you cant pick and choose what rules to follow in this business. Look at it this way, by you accepting an assignment and completing it in a professional manner for your stated fee, in compliance with USPAP, you are not only doing your job as an INDEPENDENT appraiser, but you might also be keeping a borrower from some day loosing their house. Better to spend $350.00 to find out that your house is NOT worth enough to qualify for a loan, than loose your house because your broker shopped appraisers until he got one to say YES over the phone. It is a violation of USPAP to be an Advocate for anyone or any cause. These are the rules, and are in place for a reason. They keep us appraisers from loosing credibility as INDEPENDENT analysis, without BIAS.
I only wish more appraisers actually knew the rules and followed them. But yet again, thats another story all together. Good luck to you and your business SoCal.
Please do not take offense to my post, I’m only trying to help.
January 23rd, 2007 12:07
OC,
The guidelines and USPAP as you state them are indeed correct. I do not take offense to any of what you have said and appreciate your knowledge and help. You are preaching to the choir and I try to remind all that we are independent fee appraisers not “free” appraisers. My posts are intended to be truthful and show some real world examples.
Anyway, for me, my violation of USPAP by telling some joker broker that he / she is “nowhere near value” is easier than dealing with complaints the idiots at OREA (state regulators for appraisers) get against me from said upset home debtors for not hitting their value. While none of the complaints had a leg to stand on they were time consuming and unnerving as this is my livelihood. The monkeys at OREA spent all their time telling me about how it was difficult for them to read my reports as they are all in UPPER CASE and no time telling me sorry that they took up my time for what was a baseless, victicrat accusation. Also, when I brought up to OREA about brokers, re agents, appraisal management companies, etc., placing right on their orders “not to proceed with inspection unless estimated value is supported” and this being “contingent work” and a USPAP violation, they replied that they are not the regulatory body for them and could do nothing. Believe me, I do not get too many of these joker appraisal requests anymore as they know who they are dealing with.
While I may be “picking and choosing” as you say in regard to AO 19, there is the fact that all the regulation is there to “ensure the public trust.” I am not acting as an advocate for anyone but myself and my license based upon the real world realities. If I do go out, take the money, & deliver them my opinion of reality, will that stop them from shopping and getting a no fees joker broker that has an appraiser willing to forgo C.O.D. and hit the number? You & I know that it will not. To be fully compliant with USPAP I should just refuse the order but I find it not to try to tell these schmucks that they are whacked.
As Doreen pointed out in her post, I have been having some success with desktop appraisals. At least they indicate to everyone involved the proper comparables that will need to be shown (and explained away or not) in a full appraisal report. They are superior to CMA’s from agents as price per sq ft is not a measure of value in the residential appraisal world and superior to BPO’s as most of these are done to secure a listing opportunity and not provide realistic value.
Well, I actually have a real order to go inspect so keep up the good fight and continued success!
January 24th, 2007 16:53
Yo Yo,
Youz whacked about real estate nig. Right now iz da PERFECT tyme ta be buyin. Don’t ya recognize uh bottom when ya see one? You gots low rates, prices at rock bottom an’ motivated sellers. This iz it! Take it from me, Darnell da professional realuhter! don’t make me shank ya!
January 24th, 2007 23:59
there is no such thing as an independent appraisal. and appraisals are a joke for the most part. i mean, i still see people buying properties which are way overvalued. so if the appraiser takes 4 to 7 comps where 4 to 7 other idiots overpaid, it just shows how many stupid people there are out there. it doesn’t prove the value of the house. the true value is what YOU decide it’s worth. a fool and his money are soon parted. and right not, too many fools are parting with money and their homes.
January 25th, 2007 02:30
Jeff,
Appraisers are reporters, its that simple. For most of the work we do the value desired is “market value” (the most probable price a property should bring in an open and competitve market between an informed buyer and seller in which neither is under diress).
You said, “the value is what you decide its worth”, and while that may be somewhat true you are usually trying to do it with the bank’s money. That’s where market value comes in. The bank wants to be assured that if you sh*t the bed they can recover most of their dough. When a strong buyer puts down 20%, they are a co-investor. When a straw buyer, scumbag used house salesmen, skell loan officer and cherry picking appraiser meet up for a 0% down purchase, multiplied by thousands you have the bubble we are about to see pop, deflate, etc.
All the whining, crying and fingerpointing will and has started. Those that are caught, tried and convicted need to:
1. be sent to the hardest penitentiary in the system
2. have a documentary made about them so all can see them being purchased and sold as Bubba’s boy toy.
That would clean up the REIC in double time.
As far as the 4 to 7 idiots, they do not make a market and any appraiser with some degree of competence can sniff out shady sales, straw buyer transactions, etc. As this blog has pointed out there is too many appraisers willing to go along to survive. Thanks to liberal licensing with little threat of consequence over 10,000 licenses have been issued in the last 5 years in CA. What used to be a profession where the cream came to the top is now part time work for a lot of individuals that are really qualified to say “can I super size that for you”.
Check out Housing Panic and there is a great summary post of how we got to this point in the Bubble today by the blogger. Its probably 5 or 6 posts down now.
January 25th, 2007 18:53
socalappraiser, OCappraiser, and DoreenC,
I have learned a lot from your postings. Thanks for sharing.
Now, my question: With the real estate market tanking, what is the career/job prospect for an entry-level RE Appraiser? What does it take for one to start a career as an RE Appraiser?
Thanks very much.
January 25th, 2007 20:26
Career/Job prospects are not very good in the near term.
The rules governing appraisal licensure vary by state. If you were in California and were just starting out and wanted to be an honest and ethical appraiser, it would probably take you 3 years just to get your license (you need to find someone honest to train you, and the honest appraisers are pretty slow right now). Also, you might make 15-20k per year for each of those 3 years. So, you better have a spouse who makes good money with benefits. Requirements are changing at the end of this year that require more classroom education and a college degree in some instances. Also, appraiser supervisors are limited to the number of trainees they can have at one time. While these changes and rules may seem rigid and impossible to overcome, it is about time they make it tougher. They are trying to weed out the “get rich quick crooks”, and those that think its easy money. You REALLY gotta want it if you are to spend time getting educated and trained, all the while making virtually no money at all. These are all good things, believe it or not.
A good source of reference for anyone considering the trade is www.appraisersforum.com
Check out the “newbies” section and read through the whole thing. If you still want to be an appraiser after that, then be ready for much sacrifice and very little reward for the first many years. Thats if you want to be an honest and ethical professional appraiser. One who actually knows how to appraise houses and doesnt just fill out the form with the “magic” number. I’ve always said that there are many people out there with appraiser licenses, but very few actual appraisers. Those that actually know what they are doing and are respected by major lenders and professional peers, who practice honesty and integrity day in and day out. Those folks appear to be a dying breed. The rule changes are trying to stop that. That is a good thing for everyone.
January 25th, 2007 22:14
OCAppraiser,
Thanks very much. I appreciate your honest response, very informative and more realistic than what Money Magazine reports. They rank RE Appraiser 8th in their 50 best jobs in the US with $66,216 average pay per annum. Check it out here:
http://money.cnn.com/magazines/moneymag/bestjobs/snapshots/8.html
Your response sounds more realistic.
Thanks again.
February 24th, 2007 09:32
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July 30th, 2007 10:26
Anyone facing foreclosure should be aware that there is one very important alternative to avoid the foreclosure and that is the Short Sale. A short sale is a proven way for a homeowner who owes more than the house is worth to avoid a foreclosure and the subsequent credit hit.
I would advise anyone facing foreclosure to discuss their situation with an experienced Realtor. Short sales are not a part of real estate basic training but there are a number of educational seminars a Realtor can take to get up to speed. Lenders will pay a reasonable commission, usually 5%, and even a Loss Mitigation fee of $1,500 to whoever completes the required paperwork, so Realtors have an incentive to get involved in Short Sale situations.
The basic requirements for a Short Sale are a Listing Agreement with a Realtor and a Sales Contract from a Buyer which are submitted to the Lender along with a Hardship letter from the Seller explaining why they cannot continue to pay the mortgage and supporting documents such as tax returns, bank statements, information and photos of the home and the Comps, or comparative home prices supporting the offer. The way mortgages are sold, the lender can be anywhere in the country and certainly not aware of local real estate conditions.
If the package is complete, the Lender will order a BPO, or Broker’s Price Opinion, from an independent Realtor. Ths BPO is the key to the whole process. If it is too high, the Lender will not accept a low offer. Your Realtor can meet with the Agent doing the BPO and offer information supporting the offer, such as the average time on market of comparable homes, recent selling prices and point out any defects in the home. Most Lenders will accept an offer lower than the BPO, but usually not much more than 10% lower, though that will vary depending on the company.
The sales contract should specifically state that the offer is contingent on the Lender accepting the purchase price in full and forgiving the Seller the deficiency on the mortgage. There can be tax consequences but if the Seller is truly in a difficult financial situation they can be avoided - an accountant should certainly be involved in that question.
This does all take time and Lenders are swamped, expect at least 2-3 months before a sale can be finalized, even if the Lender accepts the first offer. If they do not, the price can be negotiated, though it can be difficult to get hold of anyone at the Mortgage Company to talk about it.
I am a Realtor, a Broker Associate in South Florida and am involved in short sales. It is a detailed but fairly straightforward process that can work to benefit Buyer, Seller and even the Lender. The Buyer gets a good price on a home, the Seller gets to avoid the disruption and credit hit of a foreclosure and the Lender avoids the delay and expense of foreclosing on a property they don’t want to own and that would negatively impact their ability to make more loans.
All this information is available on the web site www.ForeclosuresFloridaForeclosures.com Posted by: Brian Holden at July 30, 2007 2:26 PM
February 17th, 2008 00:49
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