“Grinding To A Halt” In Florida
The Palm Beach Post reports from Florida. “Palm Beach County’s existing-home sales took the biggest nosedive in the state in the third quarter, plunging 49 percent compared with the same period last year, the Florida Association of Realtors said Monday. Treasure Coast sales also took a beating, falling 44 percent in the same period.”
“As a result of the third straight quarter of declining home sales, inventory has risen to record levels. A total of 21,428 homes were listed for sale in Palm Beach County in October, compared with 8,333 in October 2005, according to Illustrated Properties Real Estate.”
“The median price of an existing single-family home in Palm Beach County fell 5 percent from July through September, to $380,900 from $399,900 in the third quarter of 2005. Treasure Coast prices fell 6 percent.”
“‘No one can afford to live here,’ said David Levin, principal of David Levin & Associates in Delray Beach. ‘Whether sales are down 30 percent or 50 percent, this part of the world is so out of whack relative to median home prices and median incomes.’”
The Herald Tribune. “The Sarasota-Bradenton market led the state during the third quarter in dropping median sales prices. Sarasota-Bradenton posted an 11 percent decrease in median sales price, from $340,900 during the third quarter of 2005 to $302,900 during the most recent quarter, the Florida Association of Realtors reported.”
“Those data did not include sales for September in Manatee County, a generally less expensive market that might have demonstrated more price erosion. Charlotte County-North Port saw its median sales price drop 5 percent, from $229,100 to $216,500 during the most recent quarter. Naples registered a 9 percent decline while Fort Myers-Cape Coral registered an 8 percent drop year-over-year.”
“Local real estate agents said rather than looking at the quarterly report, they are focused on the big picture: the region’s year-to-date performance. ‘We prefer to focus on the association’s year-to-date numbers, rather than the FAR statistics,’ said Felix Power, president of the Sarasota Association of Realtors.”
“The association said that year-to-date figures show the ‘dramatic run-up in both sales and prices experienced in 2003, 2004 and 2005.’”
The Journal Online. “In the Volusia-Flagler market, Realtors reported that sales of existing homes totaled 2,139 in the third quarter, down 43 percent from 3,730 in the third quarter of 2005. The median price stayed close, though at $213,700, down just 4 percent from $222,200 last year.”
“Stuart Hoffman, chief economist at PNC Financial Services Group, said he thinks the housing market still hasn’t reached its low point. ‘I think the permits numbers point to yet another flight of stairs down on housing before we hit the basement,’ he said.”
From Florida Today. “The Florida Association of Realtors (said) Brevard County housing sales dropped 34 percent in the third quarter. The median sales price dropped 9 percent in that period, to $215,500 from $237,800 a year ago. Brevard’s record-high median sales price was $248,700, set in August 2005, according to FAR.”
“(Broker) Jason Hart said there still is a considerable amount of new-home inventory that must be absorbed. Also, there are more positive comments about the Brevard housing market from out-of-state buyers vs. local sellers. ‘The people coming down to the area are just looking for a good deal,’ Hart said. ‘The locals are awaiting to see what the market conditions are going to do.’”
From TC Palm. “Buyers in the Fort Pierce-Port St. Lucie-Stuart area, which includes Martin County, snapped up 44 percent less than the 2,016 purchased during the same period last year. The median price for an existing home was $252,000, down 6 percent from $267,500 in the same period of 2005.”
“‘The market isn’t going to improve anytime soon, especially on the Treasure Coast and most especially in Port St. Lucie,’ said Jack McCabe, CEO of a real estate consulting firm in Deerfield Beach.”
The St Petersburg Times. “In the Tampa Bay area, third-quarter home sales decreased by a whopping 43 percent. There are lots of houses to choose from. If the median prices seem high, they’re probably being pushed up by big homes, which are still selling well.”
“‘I can tell you this,’ said Bob Memoli, a broker-owner in west Pasco, ‘that every day, I’m getting constant, big price reductions on homes.’”
The Ocala Star Banner. “One of the major engines of economic growth in Sumter County & new home construction has throttled back substantially. ‘It has slowed down significantly,’ said Robbie Rogers, Sumter County’s director of planning and development. ‘From our point of view, it’s the same slowdown that’s being felt nationwide. The bubble has burst.’”
“Data show an 84 percent drop in construction permits for single-family homes in The Villages between January and October. The numbers plunged from 529 permits in January to only 83 in October. ‘They’ve been hit extremely hard,’ said Sumter County Commissioner Jim Roberts. ‘This is a well-oiled machine that is grinding to a halt right now.’”
“‘I think there’s a reaction to the explosive growth that we had last year,’ said real estate agent Tom Grizzard. ‘I’ve heard… how they’ve got quite a few unsold homes on the market, and they’ve cut back on construction.’ The slowdown is countywide, he added.’
The Tampa Tribune. “A waterfront Mediterranean-style home on Treasure Island sat on the market for more than a year listed at $1.1 million. Finally, an offer came along the sellers couldn’t refuse: Someone wanted to pay $1.4 million.”
“But there was an unusual stipulation: $300,000 of the purchase price would go back to the buyers or to third parties, the listing agent said. It took three appraisers, all hired by the buyers, before one came back with an appraisal for $1.4 million. Relieved to finally sell the house, the owners went along with the deal.”
“Such home deals are sweeping the nation. The trend worries lenders, some who say they’ve unknowingly approved loans for inflated prices, and have since discovered they’re on the hook for mortgages worth more than the home. Industry experts say there are hundreds of problem mortgages yet to surface.”
“J.T. Pelt, company president and chief executive for Linsky & Reiber Real Estate and Title Services in south Tampa, said his agency didn’t do anything wrong, and if lenders missed the details it’s because they didn’t pay enough attention. ‘In retrospect, maybe I should have done more due diligence,’ Pelt said. ‘But I’m not the closing police.’”
‘The much-delayed Trump Tower, potentially the tallest skyscraper in West Florida, has been without a lead builder since Turner Construction Co. left the project in March. To help with finances, SimDag also hired DLR Consulting Group to seek state tax breaks for the project. DLR chief executive David Rummell said SimDag has overlooked ‘redevelopment’ money used in such urban renewal projects as Channelside. Though not blighted, the Trump site has been underused to the detriment of the city’s tax base, Rummell said.’
‘Inspired by South Florida’s housing doldrums, Keyes Co. is giving real estate agents extra incentive to show and sell homes. On Nov. 1, the Miami-based firm started the 30K Program in which agents who sell certain homes have the chance to win cash awards totaling $30,000. Are these promotions necessary nowadays or do they give consumers the wrong impression, perpetuating a negative stereotype?’
‘Billy Fine, who recently bought a home in Weston, wonders why a seller would fork over up-front money for added exposure when agents already should be doing their best to market the homes to receive their 5 percent or 6 percent commissions. ‘Whatever makes an agent work harder is fine with me,’ said Inez Fleming of Delray Beach-based Tauriello & Co. ‘But I’m concerned that it might be interpreted as steering” a client to a specific property that means more money for the agent.’
It is steering a client to a listing where the agent will make more money . The agents will be falling all over each other to show that property .
“The association said that year-to-date figures show the ‘dramatic run-up in both sales and prices experienced in 2003, 2004 and 2005.’”
“Did you know that disco record sales were up 400% for the year ending 1976? If these trends continue… eyyyyyy!”
Okay, that’s pretty funny.
““A waterfront Mediterranean-style home on Treasure Island sat on the market for more than a year listed at $1.1 million. Finally, an offer came along the sellers couldn’t refuse: Someone wanted to pay $1.4 million.”
“But there was an unusual stipulation: $300,000 of the purchase price would go back to the buyers or to third parties, the listing agent said. It took three appraisers, all hired by the buyers, before one came back with an appraisal for $1.4 million. Relieved to finally sell the house, the owners went along with the deal.”
How is that not fraud?
This should be outlawed if it not already. It messes up the comps.
It should be outlawed because this is going to damage the financial system. I doubt a single mortgage payment will be made.
Neil
I want the listing and selling broker to go to jail along with the appraiser in this deal .What appraiser or lender would do the deal where it was listed for a lower price for a long time than when up 300k .
Its clear that these crooks are targeting listings that have been on the market for a long time . More homework for the lenders/appraisers to look at the listing and sales history .
The listing and sales agents know this is illegal . These bastards won’t stop at inflating appraisals and scr-wing up the financial systems of this country .This is a serious problem if a listing agent openly admits that a buyer got a kick-back of 300k and acts like there is nothing wrong with it and keeps going until they get a appraiser/mortgage company to bring it in .
This sort in the real estate industry where also the creeps driving up prices during the mania with their shady deals .
I said it before , now they are paying buyers to buy houses ,never mind a down payment ,in this” Crooks Market “.
Housing Wizard,
Thank you. That is exactly what we have here. A Crook’s Market. This was an obvious and blatant case but I’ve been looking into LV and they seem to have the kick backs and “incentives” down to a fine art. It’s just about everywhere you look these days. In fact with predatory lending, cooked appraisals and everyone sleeping in the same bed I find these issues MORE offensive than the ridiculous prices themselves.
I also believe the Seller is on the hook for a considerable liability in this. After all he knew the money was going back to the buyer.
“I didn’t know it was illegal” will not go over well with a judge.
and odds are because the Buyer knows the score and will never be seen again, the Seller, who’s an idiot, may end up taking the fall for all of it (being a willing and profitting party to the scam).
Housing Wizard,
Well said. Let’s just say I couldn’t type much more on this without cussing. This is criminal. They need to start a few very public cases and let *everyone* know the FBI is looking into this fraud.
Pay to buy a home… (shakes head)…
This market is WORSE than Florida 1925! Or did I miss it getting that crazy?
Neil
Housing Wizard said “I said it before, now they are paying buyers to buy houses”..
You called this one right. The housing market and eveyone involved in it has hit a new low. The audacity that this type of behavior is reported in the general media as a business as usual type of thing is what floors me. Its not like its being reported in the Police Log of the paper where it belongs.
Does anyone know that ratio which should be applied for to determine the total number of cockroaches in a house based on the number that you actually see? I want to say its something like 20:1 but I may be overstating. I wonder what the ratio is for total RE fraud based on the fraud casually reported in the MSM.
Neil I agree with you. The housing industry corruption this time around makes the 1925 shenanigans look like jaywalking!
P’Cola Popper,
Do you think that any of these loan fraud people will be held accountable for their actions by criminal prosecution?
Captain Jack whenever a legal or physical person loses the kind of money that is involved in these frauds someone ends up going to jail.
Up to about about six months ago the appreciation in housing prices was able to “cover” the kickbacks and overstatements so the mortgage fraud did not show its ugly head. Now that appreciation has not only stopped but we are seeing significant reductions in housing prices the mortgage fraud that was always present will be exposed. The last fraud is the one that will get them.
This is so disgusting. Who really cares? Is it up to us at this blog to police this cesspool? I say governments’ blind eye to this proves they approve. DISGUSTING AMERICA at it’s finest.
It is fraud. You can not lie on an application for credit. By definition, the loan app, the appraisal report, the loan package submitted to the secondary market - are all subject to this criteria.
The real estate agent is supposed to disclose all aspects of the transaction; thus the real estate agent has violated state law.
The appraiser is supposed to adjust the sales comparables downward to allow for the kickback. Thus the appraiser has violated state law and federal banking law.
The lender is supposed to review the purchase docs and the appraisal for consistency (this is the underwriter’s job and also the quality control dept’s job before sending loan to secondary market). Thus the lender is at the least negligent in their fiduciary duty to the ultimate buyer of the loan. If the loan had been backed by FNMA/FHLMC, then someone in the lender’s operation should be in jail.
The Tampa FBI office should be notified and many phone calls should be made until someone there actually begins an investigation. Then, and only then, will some of this stop.
So, yes the appraiser has engaged in fraud, the lender has engaged in fraud and the real estate agent has engaged in fraud.
Chrisusc,
Chris I love ya’ like a brother but welcome to the 1970’s! Right now (and for the last SEVERAL years) it’s been “you can get away with what you can get away with”! When I bought my first home my wife and I had to just about provide DNA samples! Now? Pffft, we’re “giving” away Land Rovers at the closing! Again, this facade only had to work long enough for the ink to dry. After that it was every man for him/her self. I hate to say it but I have NO empathy for the lender here.
Hey, you are so right on. I wonder if we will get back to that point again, where all borrowers are scrutinized under a microscope. And lending guidelines matter: like job stability, current job duration, savings, etc.
When a Florida community expects its property prices will increase to California levels, everyone works together to fulfill the prophesy. No one wants to go against the grain of community expectations. It becomes anathema to say it is not worth as much or more than expectations.
In addition to being fraud, there were enough people involved with this scheme that this could hit RICO statues. Fraud may send them to jail, but RICO will leave everyone involved so penniless that those bit players who don’t get jail time will wish they did just for a hot meal.
Old Tyme Lending Standards come back.
And guess what happens? Virtually nobody will have “job stability” or savings except gubermint workers.
It will turn into a ‘advanced’ 3rd world nation like Argentina. A tiny elite of revoltingly rich people, a small beleaguered “middle class” of the 90th percentile of income and up, and a large, cynical working class and functionary. Where the feeling is that only way to get ahead is to cheat, and everybody assumes everybody else is going to cheat them, so they cheat first.
There are virtually no mortgages—maybe at best 1 or 2 years. People pay cash at closing. I mean, “cash” as in hand a suitcase of currency to the seller & agent, and they count it at closing.
Right on Mrktmaven, Great post.
A self fulfilling prophecy. You are so right. It is anathema if you dare disagree with people here in Florida that the prices will not rise forever.
I agree that this should not be allowed but isn’t it same as what the new home builders are doing with “incentives” that do not add value to the home, e.g. free cars, mortgage rate buy downs, cash back, trips, etc.
You got it , its the same thing unless the loan amount is adjusted down for the drop in appraisal for the incentives .
It screws up sales comps ,inflates taxes and a million other problems that have to do with tax liability .
I’d just like to know the mortgage company’s opinion on this. And, if they’re going to do anything about it.
And the opinion of the purchasers of MBSs which have (mis)stated LTV information.
Since this is the new way to make money in America, could the buyer have a legal document drawn up, with full disclosure of intent, for all parties to sign? This document could absolve the buyer of any fraud since full disclosure of intent to default on the loan is understood and agreed upon by the signatories.
Perhaps the buyer could start an LLC, in order to preserve their personal credit rating, and facilitate in conducting this type of transaction?
“But there was an unusual stipulation: $300,000 of the purchase price would go back to the buyers or to third parties, the listing agent said. It took three appraisers, all hired by the buyers, before one came back with an appraisal for $1.4 million. Relieved to finally sell the house, the owners went along with the deal.”
What an easy way to steal $300,000. This house will probably be in foreclosure before next spring.
I don’t understand how this works. If the $300,000 goes back to the seller, then how does the buyer foreclose and walk off with the $300,000? Are we assuming that there is an additional agreement for the seller to give the $300,000 back to the buyer after closing? How exactly does this work?
The 300K goes back to the buyers as the article states.
Look, I’m not the “closing police”! Maybe I should have done more due diligence but if the lender missed details maybe they should have paid more attention! Details? Details?
Like the little “detail” where you (J.T Pelt and winner of the Scumbag of the Week Award) got your palm greased to look the other way while this little dog and pony show was going on? Let me see here J.T (gotta love a guy that goes by initials, adds a certain element of…….. mystery, don’t you think?) when the buyer was on their THIRD appraisal that didn’t queer with you? If not, what would?
This is fraud on so many levels it will take months if not years to sort out. The other facet to this (and yes I DO realize many posters here are from the Sunshine State) is that it only helps to perpetuate the notion that pretty much everybody in FL can be bought for the “right” price. I know I know, I’m sure it goes on plenty of other places it just seems in FL when crooks are in pursuit of fraud they really do it up in a big way! Apologies in advance to all honest native Floridians!
DinOR,
No apologies needed.
It seems that down here in Florida, we are the grease trap for all criminals east of the MIssissippi who want to move to the sunshine. I believe you are 100 % right with your observation.
I have the same questions, I’m not sure how this works. An agreement outside of escrow is the only thing I can think of–a payment through escrow SHOULD raise gigantic red flags for the bank (not that it always does).
I wonder what the remedy is for the seller breaching the contract to pay back the $300k? Lawsuit? I’d love for a savvy seller to NOT pay the $300k to the buyers, and make the buyers sue him for it… I wonder what a judge would say in those circumstances.
Let’s just say if I pulled that trick I’d then quickly move far, far away.
Sniggle,
Well of course it will be in foreclosure! This entire scam was designed from the very start to focus on the transaction itself (not the property!) With these kind of lax “standards” one doesn’t exactly have to be a genius to pull it off either! This type of scam relies more on being “fleet of foot” than anything else. The appraisals, the dual filing of loan documents, the 300k kick back wasn’t meant to stand the test of time. It only had to work long enough to get the money! Right now it’s so rampant and uncontrolled that these guys are probably going to get away with it, yes even after it’s been made public! Their thinking is that we can’t go after all of them!
This is basically a “smash and grab” for people that have phobias about broken glass.
DinOr,
Great analogy, I love it. Smash and grab. Great stuff.
Its NOT fraud if you hire the Dumbest people or kids right out of college, who are so totally clueless about these things.
That’s what these companies are counting on to Cova dear Azz.
Will it work? That is the Trillion dollar question!
When is a $300,000 for remodeling a legitimate credit? Answer: NEVER in all of the years I have been in real estate. People either have to pay for remodeling as they go, or, if they qualify, take out some type of construction loan, at a higher interest rate than normal and then, if the bank allows it because they qualify financially after the renovation, part or all of that loan is eventually wrapped back into their home mortgage. These “credits” are another name for bank fraud and nothing else. Who is the final arbiter of this? If such a fraudulent deal makes it to the closing table, the title officer should have the legal ability to call bullshit when he is compiling the federal RESPA form and be able to refuse to finalize the transaction. I’m not certain if he does….I’ll check into this.
Susan , I think they are getting the money from the seller after the deal closes pursuant a side agreement so the title company and the escrow and the lender do not know about it .
No question that the listing and selling agent are in on it .
I don’t know if this is considered illegal, but when I was just out of college in 1981 and living in Indiana, it was common for sellers to include a “decorating allowance” with the sale. Most buyers could not afford closing costs, so the sellers put this allowance in the contract in order to give the buyers money at closing to cover their state required portion of the closing costs. Of course, this was in a time where homes were selling for under $100,000, and the “allowance” was usually an amount under $5000. It was also written into the contract and the lender was fully aware of it.
Lenders have allowed closing costs to be paid for and small allowences for carpet and some repairs with the approval of the lender . Some lenders would go out and check and see if the carpet was replace ,some would hold it back in escrow and make sure the allowance was used for the purpose stated ,to improve the property .
Now that long term practice is being twisted into a big scam to move property or get a crook a bunch of money and they walk . Looks like these creeps are targeting higher priced property now ,(300k) so they can get the big money .
Housingwizard is correct. Richard, you are not.
The appraiser must adjust the sales comps for the kickback/decoration allowance. Further, lenders are supposed to require a 442 Inspection Report done by an appraiser (usually the original appraiser) to show that the repairs have been done. Further, there should have been either a second appraisal or a field review appraisal, done by a senior appraiser, to validate the first appraisal.
The problem is that the ultimate buyer of the loan doesn’t have a clue about lending or real estate, so they don’t know what to look for in terms of underwriting the paper they are purchasing. And since this is a jumbo loan, it may not be subject to FNMA/FHLMC guidelines, so therein lies the opportunity for fraud.
I’ll restate my earlier post. It is illegal to lie on an application for credit. All parties involved are subject to this: realtor, lender, buyer, seller, appraiser. If you have knowledge of the fraud taking place and still sign on whatever your respective form is, you are guilty.
Now what will really tick us all off, is when the politicians decide to bail out the idiot pensions, hedge funds, wall street firms, banks, etc. that bought this crap.
Hey,
Now that O.J.’s book promotion is nixed, maybe he’ll be looking to upgrade his residence in Florida via this method.
I’m looking forward to a massive government bailout. This will increase our national debt increase liquidity and will cause the dollar to collapse sooner rather than later. The economic catastrophe that will ensue is just what this country needs to fix the problems.
I don’t see a problem with allowances that permanently improve or repair property such as retaining walls to stop yard wash, installing fence, installing garage door opener, roof repairs, and so on. It is obvious, however, the buyer in this thread has other plans.
As recently as 2003 I had a $4k allowance for a new roof and they kept the money in escrow and made me submit receipts to get it. Things sure changed fast.
That’s exactly how it should work — verifiable repairs and improvements.
I’m guessing that money could be used for payments until the market “recovers”. If so, that’s an interesting wrinkle. And this:
“J.T. Pelt, company president and chief executive for Linsky & Reiber Real Estate and Title Services in south Tampa, said his agency didn’t do anything wrong, and if lenders missed the details it’s because they didn’t pay enough attention.”
Usually it is the buyers missing the details, ending up on the hook for a bogus loan. In this case, apparently, the lenders are being gamed. Nice switch! Someone is out-scumbagging the lenders.
I always know something stinks when my young son says “I didn’t do anything wrong. It was my sister.”
Lenders are not being gamed. They are just playing a different game, plausible deniability.
Hear, hear. It’s probably suspect that the lender didn’t commission its own appraisal.
The game will work until it stops working. Then everyone lawyers up and the new game is “Bagholder, bagholder, who’s the bagholder.”
‘In retrospect, maybe I should have done more due diligence,’ Pelt said. ‘But I’m not the closing police.’
This is exactly why you cannot rely on industry to regulate itself…
‘In retrospect, maybe I should have done more due diligence,’ Cain said. I know: not the closing police. Am I my brother’s keeper?
Annata,
I don’t know what everyone is getting so upset about. This is just BUSINESS o.k! So a prudent and sharp investor was able to pocket $300,000 for basically doing nothing. This is AMERICA! We get money for doing nothing all the time! You people are all just jealous bitter renters b/c the boom is passing you by. Anyone here could have put together a deal like this and spent 2007 in FL getting some rays and kicking back by the pool. After all, isn’t this what real states is all about?
I guess from the looks of it, any of us probably could put together such a deal, and maybe a better one than that due to our knowledge. Im not advocating that we do so, however.
Captain Jack,
I lost a post there somewhere but there really wasn’t a great deal of sophistication here. How hard could it be to find an overpriced listing that’s been on the market for a year with a desperate seller in FL? Like I say, this was more about “guts” than cunning.
Regarding: “prudent and sharp”
like I said, the rat smells the cheese:
Hey,
Now that O.J.’s book promotion is nixed, maybe he’ll be looking to upgrade his residence in Florida via this method.
DinOR, I’m not sure if you’re being sarcastic. I hope so.
weinerdog43,
I sure was. Sad thing is, a lot of people I talk to aren’t! I have known of SO MANY people over the last few years have that stretched the limits so far it’s laughable. People get cash-out re-fi’s and not ONE DIME of it makes it back into their home and they see absolutely nothing wrong with tacking that on to their asking price! It’s just so accepted these days. I mean everyone’s doing it so it must be o.k, right? NO! It’s not “o.k”! They’re literally stealing from the next buyer b/c they plundered the home’s equity, squandered the money on personal stuff that had nothing to do with the home they are now selling and will do some quicky clean-up/trading spaces b.s to get it sold. No thanks!
Hey, there’s nothing wrong with adding any sum of money that you want to the asking price. However, people are just starting to realize that asking isn’t getting. Nobody is forcing buyers to pay these prices and now, they’re not.
Hey, there’s nothing wrong with adding any sum of money that you want to the asking price.
Ummm… actually, yes, there is. It’s called mortgage fraud.
When the lender is told a house is worth X dollars, and it turns out later that the appraisal was deliberately inflated (for some cash-out scam) and it’s really only worth X - 30%, the ultimate bagholder (MBS buyers/taxpayers) takes it up the rear.
This is not a victimless crime. Aside from the cost of MBS/lender bailouts,which may eventually cost hundreds of $Billions, you and I get to watch as the cost of housing soars beyond the reach of ordinary mortals. Oh, and people who had nothing to do with these scams also lose their jobs during the ensuing recession, as the equity-ATM shuts down and takes the macro economy with it.
Mortgage and appraisal fraud are NOT victimless crimes, either on the individual level, and especially not on the macro level.
I think what Jim A meant was, that you can set the asking price as high as you like, even if you did not improve the property. And eventually the market wakes up and does not pay the higher price. I don’t think he was addressing the kickback issue.
Regardless , a good post by HARM ….
It’s funny because back in 2003 my friend told me to buy right away here in Florida or I’d be priced out forever. Well now I am priced out. Unless I use a stupid ARM or interest only loan, and buy a highly overpriced POS.
He was right about that. He just wasnt right about the forever part. The knives they are a fallin’.
The cool thing is now that I have learned so much here on this blog, I got to share the information with my friend, and now he understands also.
That is a great feeling when you actually can find a friend who is willing to learn and accept the wisdom we discuss here. As we all know for every 10 people we tell who are in denial and wont listen to us once in a while we find someone who will listen.
Priced out temporarily, but not forever.
Since this is the new way to make money in America, could the buyer have a legal document drawn up, with full disclosure of intent, for all parties to sign? This document could absolve the buyer of any fraud since full disclosure of intent to default on the loan is understood and agreed upon by the signatories.
Perhaps the buyer could start an LLC, in order to preserve their personal credit rating, and facilitate in conducting this type of transaction?
“This is exactly why you cannot rely on [the REIC] industry to regulate itself…”
Exactly! This sleazebag appraiser is so corrupt he does not even understand his role. Is he not suppose to be a ‘check’ in the system? Lenders rely on appraisers to value roperty. How can this scumbag say he is not the closing police?
I thought they stopped saying this crap! “Let’s look at the big picture” is a classic Real Estate Professional, sheer Marketing Genius quote.
Yes, Felix, take a step back, take a look, and see it all coming down.
I would love to be in the “real estate huddles” these mornings. I wonder what’s on the agenda for today?
I have to share this with everyone. I woke up this morning and read this article here on Ben’s Blog.
“Local real estate agents said rather than looking at the quarterly report, they are focused on the big picture: the region’s year-to-date performance. ‘We prefer to focus on the association’s year-to-date numbers, rather than the FAR statistics,’ said Felix Power, president of the Sarasota Association of Realtors.”
I live here in Sarasota and then after reading the blog I went out to pick up the paper and there was the article in the Sarasota Herald Tribune. That was the irony of all ironies. It was great.
I just moved to St. Pete, Florida and still can’t believe the price of housing down here. I managed to insult a seller yesterday by putting an offer in for a housr that was a full 40k below asking price (they wanted 250, I offered 200).
They were described as “motivated.” I guess I’ll let them sit on the offer through the holidays and see if they become more “motivated.”
Martin, If you follow posters like Imploder, Get Stucco and the others lead you wouldnt even possibly consider buying right now.
Run away from this deal. It will be a falling knife you are trying to catch.
Do what the others say and wait until bottom to buy so you don’t ultimately lose your shirt.
Don’t forget that the insurance and property tax situation is far from stable in Florida at the moment. Rent for a while and get the lay of the land. There are a number of good rental deals which are on average 50% cheaper than owning.
delete “that”–bad habit. Also tend to use double prepositions due to dodgy editing skills. Patience is appreciated as I brush up on my English grammar and writing skills (long time expat).
IMO the sentence is “more” correct with the “that” in it
Having lived in the Tampa Bay area for 20+ years, I can honestly say that one would be a fool to buy a place down here right now.
Also, in your case, being new to the area, I would rent and take some time to “get the lay of the land” in and around St. Pete.
St. Pete is nice, but it has it’s bad parts of town. We had BIG race riots here a couple of times over the last 6-8 years….and the violence spilled into some of the more gentrified parts of St. Pete as well….
Find a nice 1-2 year rental deal and wait it out. You will be rewarded for your patience and diligence if you remain shrewd, keep your powder dry, and don’t buy into the hype.
Provide some information about the location, etc….I am in North St. Pete and want to hear the details.
Let the foreclosure and auction markets work their magic in the next year. You will see the true value of the property you’re interested in, selling for closer to 100k.
I think the cry over the next few years will be Carrying Costs and not necessarily the cost of the home. The free market will take care of the home prices, but taxes, utilities and insurance aren’t so easy to lower. Now, if the foreigners pull out of buying US Notes and thus causing a spike in mortgage rates, watch out below. Remember all this weakness in the housing industry is happening with more or less historic lows in rates. Or at least on the low side of average.
I just got a bill for my insurance for 2007 for $4,000, up from $1,600 this year. All the increase was related to wind insurance. Now since I live and a new home and I’m 12 miles inland from the gulf, I told the insurance company to cancel my wind insurance. They said sorry we can’t do that, it’s all or nothing. I told them that their company is bitching in the media all the time about how they are losing money in FL. because of Hurricanes and don’t even want to take on any more policies. So why aren’t they jumping at the chance to take my policy without hurricane coverage. Answer was, hey that’s the way it is.
So, I said fine, I’ll self insure. I figure that my home can get a direct hit once every 10 years and I’d still be even. Since this area has not had a direct hit in over 100 years I think it’s a good bet (touch wood..lol). I would still like fire insurance, but I guess I’ll just have to take that risk also.
Now, that happens to be my situation and I can only do it because I have no mortgage. Most people have a mortgage and therefore will be required to spend an extra few thousand dollars on insurance this year. That will drive some out of the housing market. Again, carrying costs,carrying costs,carrying costs
That’s $ 333.00 / month for windstorm insurance here in FL.
OUCH.
That’s half my rent on a nice lakeview 950 ft2 2bdr/2ba triplex in a calm, modest neighborhood within 1,000 ft of an A grade elementary school. That’s here in Winter Haven, a few more miles inland. My renters insurance on $36,000 contents and loss of use with a $ 500.00 deductable is $ 12.00 a month and includes windstorm. And I don’t even have to cut the grass at my triplex.
And they say that “renting is throwing money away”. What a crock of $hit.
I am stashing away a cool $1000.00 a month on my modest income and have more ca$h in my checking account than my “landed gentry” coworkers and friends.
you are a smart person Les Pendens. You and I are doing exactly the same thing, my friend.
Good luck! And I mean that sincerely, since I am on your side there. I wonder if the insurers cannot exclude wind coverage because of various rate/coverage regulations. Since those regs vary wildly from state to state, maybe in FL they are required to include it and can’t just give you fire insurance. Bummer.
All I can say, though, is to take those foregone premiums and put them in the bank. You do not want to end up like a friend of mine in Miami who went almost two decades without flood insurance. His argument? It was too expensive. (He lived one house away from the water.) Every year, he’d ponder getting it, then procrastinate, and justify it, saying he’d “save the money one more year”.
Well, one year a hurricane did arrive. Oh no! Half his house was wrecked. Within a couple of weeks, some people at work were organising a “Let’s Help Jerry” donation drive. WTF? I was right behind the blunt and straightforward lady who cam right out and asked “I’ve been paying insurance for years and telling him to buy it, too. Where the hel1 did all that money go that *he* saved? Get outta my office.”
Fortunately, you’re not looking at as obvious and as high a risk as that guy looked at (and ignored).
Such is life in today’s Florida. We’re all faced with very difficult choices. To insure or not to insure. It’s a bloody shame.
Yeah, we dropped our insurance last year the same way.
“I think the cry over the next few years will be Carrying Costs ..”
No question about it.
Here in Orange County, Ca., I believe that even if builders
gave away new, overpriced homes for free, the average
median income family still couldn’t afford the house
because of carry costs. (property taxes, insurance, association
dues, routine maintenance, long term maintenance, etc).
The cost of living in OC is very high, and wages are not
keeping up.
It’s going to be very interesting to observer how this all
plays out.
“But there was an unusual stipulation: $300,000 of the purchase price would go back to the buyers or to third parties, the listing agent said. It took three appraisers, all hired by the buyers, before one came back with an appraisal for $1.4 million. Relieved to finally sell the house, the owners went along with the deal.”
Don’t mortgage companies get a copy of the sales agrement?
Sure they get a copy of the sales contract and escrow instructions, but usually they do these bogus kickback sales by side agreement . The sellers that agree to engage in this sort of buyer-kickback sometimes do not realize that they will get in trouble also once a investigation is done on the deal .
In fact, the way these creeps talk the seller into doing it is by saying that the buyer wants the house but it needs remodeling and thats what the money is going to go for , than they walk .
Sellers can’t claim that they didn’t know it was fraud to the lender when they engage in side agreement kickbacks of this nature .
Yes, mortgage companies get a copy of the sales agreement. The question is which sales agreement? The one that reflects the $300K disbursement from seller to buyer outside of escrow or the one that leaves that information out.
Sadly the regulators are sitting on the fence too long. Down the road they will express outrage at this sort of activity as purchasers of these loans on the secondary market cry “foul.” Truth is those loan purchasers and regulators are turning a blind eye towards this activity in hopes that appreciation will again return to the real estate market providing a cure (by masking the symptoms) for this situation.
So what actually binds the seller to give them the money? Why not keep it and say so long sucker? Does the buyer have any recourse here? Sounds like it is not an above board transaction so i dont see why the seller couldnt keep the money and walk.
One time when I was in the lending business I got a call from a buyer that got screwed in a kickback deal . It got turned over to the proper agencies . Now I believe that you got a criminal and identity thief element in alot of these deals so a seller refusing to pay could find themselves with a gun at their throat .
BUt as I mentioned earlier, even if the lender got a bogus copy of the sales agreement or the agent didn’t disclose the facts, which normally happens, in the case we are dealing with, the info was int he newspaper. So where in the h*ll is the FBI and banking regulators. AND WHY IS NO ONE IN JAIL?
Treasure Island, 1.4 million, J.T.Pelt
If I am a lender, how hard is it for me to find out that I am the lender?
Due diligence requires lenders to read this blog. (assuming they can)
I saw a grubby looking guy at an intersection with a sign that read:
Homeowner…Please Help…God Bless
No Way! You ARE kidding……..right?
DinOr, Sorry I was just kidding…Just my sick humor!!
Will HELOC for food!
“Homeowner…Please Help…God Bless”
LOL… That’s just too funny.
“Data show an 84 percent drop in construction permits for single-family homes in The Villages between January and October.”
You’d have to be an Idiot to want to live in The Villages.
Sorry, couldn’t help myself…
LOL!…that was good stuff Bill.
Man you are right on.
The Villages is like some sort of bland retirement-ville stuck out in the middle of Nowhere, FL.
It is close to NOTHING. Its like they developed the entire community out of a box and put it in an old cow pasture.
Not an very eclectic, exciting or cultural place to live.
YUCH
Well, but these north central Fla communities started out with houses around $100,000 for 3BR/2BA, sounds good to people from northeast, and they get the sunshine, and usually tennis courts, swimming pools, all that. Sure, one could get bored fairly quickly, but some older people like to slow down, no? One problem that has occurred in these areas is that there was a rush to buy, which allowed builders AND re-sellers to raise the prices dramatically. Now OOPS - some older people actually DIE and their places have to be resold at a moment when new buyers have realized they are in the driver’s seat. Last week I was down that way and saw a whole lot of Tom Grizzard for sale signs (realtor mentioned in Ben’s post). Quote from Tom above sounds so innocent, like who? me? duh?
Call me stupid, but….
How does the sales rate drop 49% year over year, but the median price drop only 5%?
And, by the way, the referenced article from the Post wasn’t in the business section this time. It was front page.
The median price is probably being manipulated by the REIC. Just like the inflation figures are being manipulated by the govt.
Who the fark is till buying? How can anyone not be aware of the recent news about housing? Even though sales are down 49% from a RECORD year, that is still a large amount of sales for a normal year or especially for one where the housing outlook is to polluted.
I posted a story from the PBP about 5-6 weeks ago about people camping out in front of a new development down there of “affordable” new houses. Affordable meant 300-400K. The groupthink is so screwed up, it will take years of negative reinforcement to change it.
The above poster Martin Burke is apparently still buying.
Yes, people are still buying. I keep running across acquaintances who have no idea where things are going — and pretty much don’t want to know, since to know that is to delay your dreams of owning a bigger McMansion.
All they hear and acknowledge is that there might be some dicey loan programs out there, and they think housing is “in a pause” with slow sales, but they basically have the blinders on and are as ready to buy a ever.
A friend of mine is just in the process of having a house built up in Maryland. I spoke to him this last weekend, and he hasn’t sold his current house, and he says he doesn’t want to because he is waiting on his delayed new one to finish. He won’t have a problem selling, he says, because his neighborhood “is special”. Oh my gawd. I guess he’ll be popping up in next year’s anecdotes as he struggles with two house payments.
Being a friendly gathering, and seeing his lack of interest in the topic, I didn’t dwell on it. Not to mention, some of the other people in the circle were housing bulls, still looking for second homes. Arrrghhhhh!! These were all, by the way, high-earning people who lost big, very big, in the 2000 tech market disaster. I guess they never learn.
“All they hear and acknowledge”
NOVA? Was I at that very same party? Sure seems like it.
We all run into that. Be it Maryland or Oregon. All these GF’s seem to believe that if there IS a market correction going on they will be able to go on about their merry way without so much as a scratch b/c a market crash doesn’t fit in well with what they are attempting to accomplish right now.
Traders that work the stock market know only too well that the rest of the market isn’t going to stand around with their thumb up their ass and NOT take profits just b/c it doesn’t fit “your” agenda! Gosh I’m sorry Mr. Piker-Boot Camp Trader, next time you have a 9 % profit for the week I’ll make sure and call you first so you can take YOUR profit and not get trampled in the stampede to the exit, o.k?
Why do home owners/flippers/specuvestors think it’s someone else’s responsibility to cue them in when the market is about to make a turn? Pffft, only in real estate!
Maybe it was the same party! I had to trek over to Rockville for that on Saturday. But more than likely we’re just looking at parallel situations, of which there are probably tens of thousands (or more) here in the DC Metro area.
And I don’t think they’re actually expecting it’s someone else’s responsibility to cue them when the market is gong to turn; they simply don’t believe that the market is really going to take a nasty turn — for them, anyway.
By the way, I specifically avoided mentioning parallels between the 2000 tech stock debacle and the debacle awaiting overleveraged homebuyers right now. Last time I did that, one guy’s wife started ranting about all the money he lost betting on tech stocks he knew nothing about, and it went downhill from there. Oh my, don’t need that at a fun social gathering.
This same couple, by the way, has since recovered financially, and now they are out on weekends looking for some “investment property”. Oh yikes. Maybe I can tell them to just buy the first friend’s house as an “investment” when he finds he can’t sell it on the open market in a few months! After all, it’s in a special neighborhood!
By the way, referring to SFer (below), I’ve found that it is FAR easier to convince new first-time buyers that the market is tumbling. They have no skin in the game like current owners, and they’re up to date on rental market prices. They can see first hand the comparison of rent vs. mortgage, and all they need is for me to fill in the details on insurance, taxes, and maintenance. Even if they are skeptical at first, they are soon convinced — perhaps also because I point them here.
NoVa Sideliner,
Excellent points! I’ve made a pretty good living steering people away from things they should know better! What’s incredible is that for all of my “persuasiveness” I’ve only been able to “convert” about 3 people in the last 3 years! The whole idea of selling anyone that there’s a bubble out there takes an enormous amount of conviction. For me, this crap was obvious so when friends didn’t see it (or want to see it) I became frustrated with them and half way started hoping they would take it in the shorts just to shut them up! Of course now that they’re “b@lls deep in it” it’s my fault for not having been more adamant about it! Really? Remember that time we started talking about it at 9:00pm and at mid-night I STILL hadn’t told you every thing I knew about the bubble? Oh yeah! If you had to rely on that to make a living you’d starve to death.
That’s yet another aspect of the bubble I’ve grown to hate. It’s made everyone in the damn country a “player” or a hustler. Overnight RE experts. Sheesh.
Went out with the sig. other the other night - she wanted to hear my take on why renting is not wasting money. So here we sit, her with her anecdotal evidence of having seen people make 20k a year on their house and me with economic charts and mathematical models of supply and demand. And guess what? I am wrong. Of course I am, it doesn’t matter what history suggests, it doesn’t matter what the equilibrium equation suggests, the newspapers and every economist in the country is wrong because this person knew someone who made a little cash by buying when someone else told them to wait.
DinOR,
I’ve been preaching the housing bubble gospel also, but as I posted above it sure is hard to convince people of it.
I wonder If religious groups, who are trying to convert people, get as frustrated as I do when I try to explain this stuff to people who just “dont get it.”
Moman,
And guess what? I am wrong. Of course I am, it doesn’t matter what history suggests, it doesn’t matter what the equilibrium equation suggests, the newspapers and every economist in the country is wrong because this person knew someone who made a little cash by buying when someone else told them to wait.
Of course she is right . ( sarcasm off)
She doesn’t want to let your facts get in the way of her story, so she conveniently chooses to ignore the facts, and decalre herself the winner of the debate.
It’s true. I’ve been able to recruit a few friends (potential buyers) to our camp over the last year or so. It’s easier when the prices actually start to fall and you can show them hard stats. But many people still believe that this is a temporary glitch and some magical event in spring will revive the markets.
Yes, which is precisely *why* the correction will NOT be over in 12, or 18 or even 24 months. It takes at least a few years of negative news, anecdotes from friends & neighbors, and personal experience to finally convince these delusional Donald Trumps that they are NOT all genius RE tycoons. It’s very difficult to change the mass psychology of “it always goes up”, especially when most of people’s net worth (and egos) is tied to the nominal value of their houses.
The median can be set by a lot of transactions or just a few….whether on the way up in price or down. Consequently, it can be skewed very easily and be totally misleading for a long period of time. Everyone pegs the value of their house at the last, highest, transaction of which they are aware. Of course, the moment supply and demand get a little out of balance the illiquidity of real estate becomes horribly obvious and the search for the “right” price (with so few examples available) becomes a big test for both buyers and sellers.
What I think people don’t realize is that, once an imbalance occurs, those on the “wrong” side of the imbalance are in a pretty heated competition with their peers. Right now, sellers are in a dire competition with other sellers yet most don’t aggressively drop their price. Why? Because they are conditioned to the expectation that the last, highest, price they IMAGINED for their property is somehow the immutable benchmark going forward.
We all know that’s not how it works when the market turns but reversing this psychology will take a big, big event for most sellers. Until it reverses sellers will hang on to what they “know” and simply pray to ST Joseph for that one buyer to come along and fall in love (as well as pay for) their precious property.
Unfortunately, not all prayers are answered on a timely basis.
Here is how I think that happens. If you are looking to buy, you usually shop in a price range. For example, say your price range is around $200,000. As prices fall, you will probably still be shopping in the $200K range, but now you can get a lot more home for the same money. Prices could fall 50%, but the “average sales price” may stay the same or fall a much smaller amount.
Send a bot through the previous threads on this blog, and you will find this theory posted several hundred times.
All those posts were quite correct. So are you.
“‘No one can afford to live here,’ said David Levin, principal of David Levin & Associates in Delray Beach. ‘Whether sales are down 30 percent or 50 percent, this part of the world is so out of whack relative to median home prices and median incomes.’”
This is the problem in a nutshell. People who bought recently in that area are just dying but it’s still far too expensive for most buyers.
Price discovery on a larger scale is much much lower.
Hope the poster over at Mish’s blog doesn’t mind me quoting him here - but here is an interesting letter from a looker to a wishing seller in Florida that covers all the bases:
Bob,
Thank you for showing my wife and I your home on Sunday afternoon. It is a beautiful home and I appreciate the quality of the upgrades and maintenance.
Bob, you strike me as an honest and direct man. You have the same motto on your front door as I have hanging on the wall in my home, “Live well, laugh often, love much”. I appreciate the fact that you are an older and wiser man than myself, and I would expect that you could teach me a thing or two about a thing or two. It is with all due respect that I am going to share my opinions with you. I receive no pleasure in disagreeing with you, and I am simply sharing this information with you because I decided I liked you during our brief encounter.
A man of your means would probably agree that 6% is a pretty conservative rate of return for an investment. If a person were to give you $800,000 for your home they would immediately lose $48,000 the first year if they could have made 6% on that money as an investment. Taxes are over $12,000 a year and a reasonable estimate of insurance is $10,000 a year. That’s about $70,000 a person would lose in the first year by purchasing your home, and I believe you would agree that this is a conservative estimate.
I think you would probably also agree that it is a pretty liberal estimate to say that you could receive $35,000 a year by renting your property. Bob, I’m not going to pay twice the going rate to live in a property just to “own” it, especially in a declining market. I submit to you that your home is not worth $800,000 due in part to my reasoning above but more importantly due to the fact that your house has not sold. For the last 90 years property has appreciated at a rate of 1% over inflation. You home was worth $400,000 3 or 4 years ago and you honestly believe it is worth twice that today because of what you have seen the market do over the last few years. I respectfully disagree with you, and I believe prices should have never gone as high as they have in the last few years. It’s nothing personal, it’s just math.
Conversely, if you were to sell that home for $500,000 it would be easy for you to receive a 6% return on that money or $30,000 a year whereas if you could rent it for $35,000 a year your property tax would increase from $4,000 a year to $12,000 a year and you would have annual expenses in excess of $22,000 a year and have a net profit of less than $13,000 a year. I am not saying that your home is only worth $500,000, but you get my point. It’s just so much the better for you if you could sell it for $600,000 or $700,000 and get more than a 6% return. I understand you don’t have to sell that home, but other people do and/or are realizing the math is such that they should sell it for whatever they can get. The real estate market/pyramid scheme of the last few years is over. The St. Pete Times didn’t create this situation, and they are not responsible for the decline or the math. The math won’t look any better in 1 or 2 years without significant price reductions or major inflation, and even if you could sell it for $800,000 in two years the math says if you don’t need the house then you are better off selling it for $700,000 today and investing those monies. Incidentally, in my humble opinion you won’t be able to sell it for $800,000 in two years anyway. I am putting my money where my mouth is, and I will continue to rent as long as it makes sense, although I would very much prefer to buy a home I could live in for 30 years and raise a family.
I realize not everyone is as logical as I am, and it wouldn’t surprise me if you came across someone willing to overpay for that house. It is a fine house, and some people have more money than they need or know what to do with, but not all of us.
Bob, I understand that you don’t know me. Let me assure you that is not in my nature to lecture or berate people for some warped sense of self-satisfaction. It is my assumption that a successful man such as yourself already knows these things I’ve put to paper even if you have not articulated them or shared them with others. It is my hope that when I am your age I have raised a family and that I am as successful as you are, and I wouldn’t mind having the “problem” of selling a home like that.
I do, sincerely wish you the best of luck in the sale of your home.
Sincerely and respectfully
audet,
I’m verklempt.
Buyer still willing to pay too much. Seller delusional.
Discuss.
Current America cannot do the math to see why this is so bad.
Discuss.
Excellent post — thanks for this demonstration of buyer rationality.
Right, but it sounds like you could sell this guy the house for 500K. I wouldn’t even pay that.
I presume this was a fictitious Florida situation, but if it is real, I simply would have told Bob that I have no interest in buying his house for that price. Period and end of discussion; call me when the space shuttle lands. The time for ego-stroking has gone the way of feeding the squirrels.
Very good scenario/letter.
On Nov. 1, the Miami-based firm started the 30K Program in which agents who sell certain homes have the chance to win cash awards totaling $30,000.
If i were an agent, this house would be the first one i would show. Screw the buyers interests, we are on to something here.
Maybe we can employ this strategy elsewhere…. the prosecuting attorney’s in criminal cases can offer a reward to the defense attorney for a plea bargain.
If I were selling, I think I’d pay the realtor association to get me on that list.
Hey, anyone down Florida way have any info on that house that Trump renovated down in Florida and was going to put back on the market for mega millions? Haven’t seen any new shows from him lately either.Gee, maybe things are getting hot for him outside NY city.
When prices are so out of whack with reality, the more prices fall the more overvalued they will appear. During the bubble “overvaluation” is irrelevant because there is always someone to sell to at a higher price. Only when prices fall does overvaluation come into view, and the painful light of overvaluation will shine more and more brightly the more prices fall, more at 20% lower than the current (say)10%, and more at 30% lower than 20%.
Yup, and if you go to the FAR website and copy the Q3 sales info into Excel and create a scatter plot with median price vs. % change in sales volume Y-o-Y you will see a linear relationship between price and volume. As you would expect, the cities with the highest prices had the biggest volume declines. The interesting part is that the price change Y-o-Y does not have any correlation to the volume change, only the actual price.
It’s not about interest rates, and it’s not about price points either. It’s about MARKET PSYCHOLOGY. Finally, someone in the MSM is starting to make the same argument I was trying to make on a thread here last night. (Kellner must be smart — he agrees with me. ;>0)
http://www.marketwatch.com/news/story/commentary-psychology-favors-buyers-housing/story.aspx?guid=%7B49CC3F2B%2D9AB7%2D413F%2D809D%2D1E59F6E65CF3%7D&siteId=
Martin Burke,
If you rent for year, you’ll probably save $50-75K. Worth it, yes?
The 300K provided to the buyer by the seller should be taxable income. The IRS might find this situation very interesting.
Intersting point : Al Capon got put into the Klink on tax evasion.
Wouldn’t it be considered a loan?
Exactly. Proceeds of a loan are not taxable in an event like this because the intent is that the loan will be paid back. If, however, the loan is forgiven (that is, written off) at a later date, then at that time the amount could be considered taxable income, depending on various solvency rules.
Now if you are a conniving foreign buyer (or heading overseas for good) then this is a very convenient opportunity to take the money and run. Too convenient.
This is certainly my position. Since the buyer “got their profit UP FRONT” this is a short term cap. gain and I don’t care how the buyer wants to spin it. I’ll be taking 35% of that thankyouverymuch! (Especially given the “buyer” will never re-pay a dime!)
Some people might wonder why I’m so hostle toward the real estate industry and lenders regarding this run up in prices . What follows is a list of some of the reasons for the run-up in prices .
(1) Lender allowance of short term speculation sitting prices .
(2) Lenders qualifying people on mortgages that don’t qualify for a long term loan ,or would not qualify once the payment adjusts up resulting in raising demand ,thus raising prices .
(3) Real estate agents buying property and double-escrowing them at a higher price and the industry/lenders allowing this .
(4) Straw buyers buying over-inflated appraisals ,getting kickbacks and taking the money and running ,(real estate agents in on it ,and real estate agents not exposing it to authorties ).
(5) Lenders allowing 0 down payments while not caring if it was a speculation buy or a real owner-occupied purchase because they could pass it off to the secondary market bagholder .
(6) Real estate agents total disregard for the known rules that resulted in simply taking advantage of a easy money low down lending environment without regards to buyers really qualifying .
(7) Real estate agents and mortgage agents promising future gains and resorting to scare tatics of, “buy now or you will be priced out forever .”
(8) Builders in bed with lenders on questionable deals . Also Builders and their “special lenders’ selling entire tracts to speculators under a owner-occupied basis in violation of their own CCR’s for that tract . Builder have a conflict of interest in that they own /have part interest in some of these mortgage companies .
(9) Real estate agents referring borrowers to creep mortgage brokers and appraisers just because they will do any deal .
(10) Real Estate agents steering borrowers to creep mortage agents with creeps loans ,with creep kickbacks for the real estate agent for referring the borrower to the creep mortage company with the creepy appraisers.
(11) Agents sitting up or engaging in kickbacks for the buyer in order to get a property sold or getting kickbacks themselves .
(12) The media not offering counter-data to the big NAR/real estate campaign for real estate price appreciation because of the advertising dollars .
(13) Total disregard for good lending practice because of selling off loans to secondary market that created excess demand for housing which created excess building and inflated prices .
(14) In short ,the real estate industry/lenders created/supported a false market of price appreciation ,not grounded in fundamentals, turning real estate into a short term investment with a great potential for a crash along the lines of the 1929 margin buying of stocks .
No question that the greed/fear of buyers and sellers played a part in the run-up ,but should of been tempered by the industry .
I feel the same way for the exact reasons. Good summary!!
Wizard, you make fine points and I agree with all of them. Especially the lenders not giving a rip because they immediately dump the loans to the secondary market. I think the lenders are the worst of all because without them there would be no transactions. Qualifying someone on the I/O payment without regard for ability to make the inevitable PITI? Oh yeah, that’s right, they can just flip it before the I/O period ends and the pyramid can keep on growing! Soon everyone’s house will be worth $1M and we’ll all live on easy street! WTF has happened to this country, and more importantly, why would investors buy these crap loans? I’m not looking forward to the congressional hearings and debates when this fairytale economy finally stops.
HW you have put up some really golden posts lately. I especially appreciate you insight and comments on today’s Florida thread. We really need someone of your calibre of insight and directness to straighten out this REIC nightmare.
Housing Wizard for Attorny General!!
Thanks Pcola Popper . Guess I have always hated crime .
Amen. This IS a big deal. The collapse of the housing bubble will affect the entire country, even those of us that sat out the mania.
Good to see guys who are handling our money are doing this. Great.
I announced a couple of weeks ago that there was a large auction (62 properties) here in Vero Beach scheduled for 11/18. I was unable to attend, but the local paper - The Press Journal - (otherwise known as the mullet wrapper) stated in Sunday’s paper that the auction was a success as properties were being sold. However, the article also said that an exact count of properties sold was not available, which naturally made me suspicious. Anwyway, below is one response out of many that was sent to the paper regarding its article:
“I was distressed to read the article on the Real Estate Auction yesterday. If the reporter had actually been at the auction then she should have been able to report the facts. Per my notes, there were 6 properties that actually sold at the auction, 15 properties that had bids that are subject to the owner’s approval, 38 properties passed on because the bid was not within 25% of the suggested asking price, 1 property withdrawn, and 2 “Buy It Now” properties. The 15 properties that are subject to owners approval will be negotiated between the buyer and seller just as any traditional offer to purchase would be. I also belive that sellers may be mislead by the article and believe that auction is the only way to sell a property in todays market. With the quick change in the real estate market, correct pricing from the start would help facilitate a quicker sale in the real estate market using traditional Realtors.”