Halloween, Halloween, oh what funny things are seen…Witches hats, cold black cats, Fannie and Freddie too…Homes sinking, rates as well, and banks telling buyers to go to hell!

The Buyer’s market is shrinking a little and “traditional Sellers” are still in a ’sufferin’ state. What a dilemma for them, especially those who had (they thought), built up huge equity in their homes, so they could sell about now and use that equity for retirement.  And…what about those that made sizable down payments, kept their noses clean and have to move now, due to job relocation…trapped? It’s scary, this Real Estate market today.

Trick or treat?  Guess it’ll have to be more tricks, (by Fannie, Freddie, the Banks and the FED), but…no treats this year…and…maybe not for many years to come?

While, in my opinion, all the above, along with the Dodd-Frank debacle, are most to blame. And hey, I was there in 2002-2006, when buyers jumped on the “no doc loan” wagon, and bit off more than they knew they could chew…they can be included in the “blame game,” as well.  Take a look at the HARP program that projected four to five million people would refi by now; only 894,000 did…and…70,000 of those are still underwater…what a program hey?  The news media will say; “only 894k took advantage of the program,” a politico bunch of BS. They don’t tell us how many were turned down…and…not one of us know exactly what is required to qualify, do we?  Should we?  Does the media even know?

I read today, in the WSJ, that Obama, has a new program that will provide immense help to the mtge crisis. People whose mtge is insured by Fannie or Freddie (if your mtge is insured by someone else…or..not insured, you will not qualify), and…who have not missed more than one payment over the last year…and…who have not missed a payment in the last six months, will have a shot at this program.

Soooo, let’s look at this big deal.  If the banks are forced to refi a huge number of the loans, reducing them to market value, that will greatly reduce the balance sheet of these banks, making their stock less attractive.  Yes…no?  Then, if they are forced to do all this refi thing, and reduce their balance sheets, how excited will they be to make new loans?   Will we see another pulling back and/or stricter qualifying conditions for potential buyers? I’d bet on it.  The mess is a mess to recon with, and before the govt comes along with any new deals, these should be carefully thought out and wrung out before put into effect.

How do the banks treat people now, regarding refi? I have a client, great young gal, has a key executive position as an Underwriter for a large re-insurer.  Over the past five years, she has corrected her credit rating from a very low number to the high 700’s.  Not bad ‘eh?  She’s paying over 6% on a 200k mtge, on a home that’s probably, at best, worth 150k to as low as 135k.  The bank won’t play!  What?!  The bank won’t play.  They say she makes too much money.  So through the maniacal approach by the banks, back in the 2000 to 2006 era, they inflated the value of her home to a fantasy level, in a greedy play to expand their vaults, they now tell her she doesn’t count…she can keep paying the 6+% rate.  Your call here…is this fair trade, and…America at its’ best?  Huh?

Really, folks, when we read that the govt, or the FED, is doing this or that, do we get any solid, clear details?  Do they think we’re all jerks, dumbbells staggering around?  Why not send your opine to some of these sources…let’s get on their backs…hey media, give us the whole story, without your opinionated BS.

On a more positive note; we have been helping buyers get outstanding deals on distressed and traditional homes.  We have the tools, experience and skills to get you where you want to be with a home purchase.  In any market, but especially this market, you also need good loan, title, and inspection professionals who can help you to your goal; we have that all in place for you too.

We welcome all opinions and stories about your Real Estate results, good or bad.  How ’bout it gang, got anything you care to contribute?

Hope this is a good day for you!

Ed Klein

Investors are waiting in line for the opportunity to buy REO packages they can fix up to sell or rent out…but…Fannie Mae says there are no plans to offer them to these investors.  Put in the hands of investors, to sell or rent out, leads to more jobs.  Isn’t that a good idea?  Homes priced where first time buyers can get in a home, not a worthwhile idea?

And BOFA, with Buffet’s $5 billion infusion, after the enormous bank bail out…what are they up to?  Oh, payback for all the help?  Cutting 30,000 jobs…that’s the pay back?  You OK with that?

And Barney and the boys want to make the banks more accountable, offering them more ‘Regs’ that slow the whole process down and increase the cost to do business, screwing up the economy more yet…what the hay?  Barney wanted to “roll the dice a little longer,” back in 2003.  Apparently, the Fed and other powers did too?  A 30 page paper written by analyst, Josh Rosner, after his research of nearly a decade and after he read the study by Graham Fisher & Co., pointed out that the reckless underwriting at that time, would lead to a catastrophe of enormous proportion in the years ahead.  He wrote that this would lead to run-away prices in the housing market that would then lead to negative equity, most folks would not be able to withstand.  Did Barney and his cohorts take heed?  How about Fannie Mae, did anyone there take this seriously?  Well, at least one person read it.  But, then, she made an angry call to Graham Fisher & Company, harping that they were messed up and that they should have called her at Fannie (she is Jayne Shontell, and was head of investor relations at Fannie), before it got around.  She’s probably since then, made an apology call to them and commended them on their insight?  Yeah, right!

Care to know more? Read pages 219 - 237 of “Reckless Endangerment,” in fact, read the whole book, you’ll be glad you did!  Get the names of many of the other “Playa’s,” Playa’s that played with our money, not theirs, Playa;s that made big time money in the game, and it was a game!

I just read in the WSJ, that 500,000 foreclosures are sitting on the bank’s books now…and…it’s estimated that 4 to 5 million home owners are now more than 90 days delinquent.  What’s your best guess…how many of these home owners will pull it out, survive this financial dilemma? My best guess is 5% to 10%.  Ask any bank auditor what they think.

Have they learned from past mistakes?  FHA will now go as high as 52% for the debt to income ratio, used to underwrite a mortgage, provided, the applicant has good credit. You OK with that?  Let’s look at a scenario.  Take a couple with two kids, making a combined income of $75k/yr.  52% of that = $39k/yr.  But that’s on gross wages.  If they pay just 10% for Fed and State income taxes, they have $5,625/mo, less $2,925/mo for their mortgage payment and all other debt = $2,700 left over for all other living costs.  If their health and life Ins. is no more than $1k/mo, utilities no more than $200/mo, food for four no more than $800/mo (USDA moderate budget), $125/mo for auto Ins., they still have $575/mo left for; auto and home upkeep, clothes, school supplies and or tuition, entertainment, savings, vacation, emergencies…get the picture?

So, the game is still on…what were they thinking then, what are they thinking now?

There is some good news though; if you can buy real estate now, there is a huge inventory of “Super Deals” out there today, and will be for years to come.

What do you think?  We’d love to hear from you.

Ed

So much has been written about the housing market problem; who’s to blame, why’d it happen, on and on.  What we haven’t seen much of is the fact that during the “bubble,” mtge lenders were allowing a buyer to have a 61% debt to income ratio.  All their debts, added to the new mtge they were contemplating (mtge payment, interest, taxes and insurance), could be 61% of their gross income.

So, take a family of four, one spouse earning $15k and the other $45k, buying a home with a 61% ratio.

Total income is $60k, and with the new mtge, they have $36,600 of annual debt.  Well, they still have $23,400 left, right?  Oh no, the 61% is of gross income.  If they were lucky enough to have to pay only 10% of the gross income for Fed and State taxes ($6,000), that still leaves them with $17,400, or $1,450 per month, for everything else they need.

Let’s help them budget?  I mean, if the lender felt this approach was OK, who are we to question?

We need money for: utilities, trash service, hlth/life/auto insurance, food, clothes, school supplies, vacation and entertainment (?) and for emergencies.

Let’s use a conservative amount for all the insurance needed…say $650 per month, and use a utility number of $150 per month.  OK, we’ve still got $650 left for the rest of our budget.  Let ‘r snap, c’mon you financial guru’s out there, budget up now!

What you didn’t know is that the couple had a few grand in the bank, a little cushion, in case things got tight.  They have this money because they were provided with a “nothing down” mtge.  They were even allowed to roll the closing costs into the mtge.  No skin in the game here…just monthly mtge payments.

How’s the budget coming?  Did you have to pull out vacation and entertainment money?  Is there enough left after that?

Let’s take this family out a few years and see how they’re doing.  Whoops, the $15k earner lost their job.  Monthly income is now only $1,087 vs the $1,450 they had three yrs ago.  And geez, the savings are depleted as well.

So, the brain jobs that set this program up, the lenders, what did they do wrong?  I mean, let’s just go with basic math, let’s not bother the Actuaries, let’s go back to 6th grade math and try it again.

Today, as in the years before the “bubble,” the ratio used is 31% of gross income.  Whew, they’re on the right track now, ‘eh?  What a joke!  Unfortuneately, the joke is on “Joe the plumber.”  The lenders received bail out money for the errors they made.  Should they have? 

All these homes, homes that have 100% mortgages on them, homes that the buyers can’t pay for, or, realize their home is worth less than it was in 2000, all these (26%) of all US homes, what does it all mean…where and when will it all shake out?

Do you wonder how the banks represent these underwater monuments on their balance sheets?  Would their stock go right down the drain if they held them on their balance sheets at actual value?

I mean…if the bank holds a $600k mtge on a home that is now listed as a short sale, at $200k, is that what’s on the balance sheet?  Or, is it still there at $600k?  How about it bankers, send us the answer.

Well, there is some really good news to go with all this; if you can buy real estate now, you chance to be one of those people who can one day say: “I made my money in real estate!”  The bargains are super!  We’ve been putting our buyers into homes at huge savings.  Just got a single mom into a T/H that sold for over $200k a few yrs ago, for $105k.  A home that had  $925k against it just sold for $510k.  Another that has $4.5m against it, looks like it will get sold for $1.7m; the list goes on.

Today, as I write this post, in the four counties comprising the core Twin City area, there are 1,188 homes for sale for less than $100k, and 3,326 homes for sale in the $101k to $200k range.  If you can buy now, do it!  Rates are so low, we may not see anything like this again…ever.  Buy now and you’ll have bragging rights in 7 to 10 years.

And, if you’re one of the unfortunate home owners who have to sell, give us a call so we can tell you how a “Short Sale,” may help you…or…how to sell and get your equity out.

Do you have an opinion or story to share?  Please do, we love to hear from you even if your opinions differ from ours.

Ed

Boy ‘O Boy ‘O Boy…They think you should pay through the nose….and…for what?

Care to read about a sad, sad story, a story about greed and misery for both the sellers and buyers?  Take note; don’t let something like this happen to you!

When a home is sold, especially in this deranged and busted up market these days, the buyers often request that the seller pay a % of the buyers closing costs…generally 3%.

For example, say the home is sold for $300k and the buyers want the seller to pay 3% ($9,000.00) for their closing costs.  If the sellers go along, that means the sellers are actually getting only $291k for the home.

Now…the selling agent is getting the predetermined commission of 2.7% of the selling price , and the listing agent is getting 3.3%, if the listing agent is charging the norm of 6%.  (Obviously not a MetroHomesMarket.com listing…our top end is just 5%.)

So, you tell me, should the listing agent charge his sellers 3.3% of the sale price…or…3.3% of the gross net to his sellers, the $291k they’re actually getting.  Should the listing agent charge a commission for money the sellers don’t get?  Should the selling agent expect to get paid a commission for the $9k the sellers aren’t getting?  what’s reasonable, what’s fair, your call here.

Whadja decide?  

Here’s what we think; commissions should be based on the gross net to the seller, the $291k. But, I can tell you, 99.9% of the Realtors out there expect to be paid a commission for the money the seller doesn’t get.  When we list and sell a home, our fee is based on gross net to the sellers.  We can’t imagine the audacity of Realtors taking their clients down, for money their sellers don’t get.  We can’t imagine a selling agent expecting commission on money the sellers gave up.  When representing a buyer, we don’t expect the seller to pay us commission on money they’re giving up.

Know what?  They pull this greedy act all the time. 

When you list with a Broker, other than MetroHomesMarket.com, tell them that when you sell, you will not pay commission on any “seller paid concessions.”  Not to the listing nor to the selling Broker.  Get it in writing!

I had  a deal recently, where the sellers’ gave all they had or could give in the transaction, and the buyers’ did the same.  But the selling agent insisted they get paid on the $10,050 that the sellers’ contributed for the buyers’ closing costs = 2.7% x $10,050 (the sellers were contributing for the buyers’ closing costs) = $271.35  Wow!  Wow!  How did they earn this?

Let us know what you think…drop us a line below.

One more thing…your call again: When the market was really swinging and prices were inflated, many agents still charged 7% to list a home, even though they were knockin down big commissions for “Bubble” prices.  So, here we are today, with deflated prices, and guess what…many of them are now charging 7% because, as they say, “deflated prices have reduced our commissions, so we have to charge more.”  Does that work for you?  We’d like to know, shoot us your take on all this stuff.

We’re here to help both buyers and sellers win.  Our Fee-For-Service approach will help you save thousands, whether you’re buying or selling.  Give us a call, can’t hurt to talk?

Ed Klein (651-770-5000)

Tell me what you know about the housing market…are things getting better? Worse? The same?  If you don’t know, who does? 

We read about Fannie and Freddie coming to the rescue but we’re still rescuing both of them…with Freddie asking for another $10.6 billion the other day.  Sure Freddie, no problem, where should we send the check…and…let us know when you need some more.  We’ll be sending a check to Fannie too.

Perhaps you’ve read some of what I’ve been reading lately…that over 4.6 million homeowners are more than 60 days behind on their mtges.  Oh no, wait, another source says the number is over 6 million.  Maybe it’s worse than we’ve been told…think?  Most of these mortgages are backed by these two giant bunglers…what does that mean…we’ll need to write more checks?  But hey, I’m running short myself…are you?

And get this, in July, a new program will be kicked off by these two - to help homeowners who have to give up their homes in a short-sale, come back to the table in two years and buy again.  Huh…What?  Is anyone checking the checkbook?

Funny story in MoneyNews.com…a big guy at JP Morgan Chase, David Lowman, when at a congressional hearing not long ago, says to the question - who could mortgage borrowers turn to if they felt his bank’s employees were not helping them hold on to their homes - “Come to me!”  Well, 50 borrowers came forward from the audience, at this invitation, presenting him with a document alleging his bank reneged on a pledge to help struggling homeowners.  So what did our hero do?  “He ran like a dog with its tail between its legs,” said Bruce Marks of the Neighborhood Assistance Corporation of America (NACA), which helps homeowners avoid foreclosure.  Didja know about this organization?  I didn’t.  If you know someone who should know about them, please pass this along!

Not all banks are equal though and some are loosening up on the lending side.  The majority are still pretty tight though.  The Fed Reserve’s senior loan officer survey recently showed most banks kept credit tight in the first quarter and residential mortgages saw continued tightening in terms.  This according to an article by Sudeep Reddy in the WSJ.

Now you need a minimum credit score of 640 and 5% down for conventional or 3.5% down for FHA mortgage qualification.  Terms are getting tougher so if you’re in the market to buy a home, get busy before terms get even tougher and rates (rates that are still terrific today) go up.  You do know that rates will definitely go up…?

Where the short-sales and foreclosures will take home prices is still a guess but if you’re putting money on it, I’d go with continued price drops and amazing deals for the next 18 months or so.  If you can buy…buy now!

If you need cash to fix up a short-sale or foreclosure purchase, we have sources and programs that you can use to get it done…roofing, siding, windows, floors, even new appliances!  So call us today and we’ll fill you in.  Take advantage of the greatest buyer’s market in the history of Real Estate!

The amount of inventory leading to outstanding deals is enormous. 

We’ll e-mail a list to you today.  Just tell us where and what you’re looking for.

If you need help selling or buying, call us for more info today!

Can’t hurt to talk ‘eh?

Ed

http://www.dailywealth.com/1338/Another-Way-to-Profit-from-the-Coming-Plague-of-Busted-Banks