San Diego Trust And Probate Sales

No new 21-day turnaround requirement for short sale approvals

2009-10-08T08:32:00.000-07:00

By Joel Perisnger,
with information from the California Association of Realtors

Contrary to what many believe, the recently enacted Senate Bill 306 does NOT require lenders to review short sale requests from sellers and their agents within 21 days. The new California law, which addresses certain escrow procedures, has been mischaracterized by some real estate agents as landmark legislation calling for a 21-day turnaround for short sale approvals. Unfortunately, the new law is nothing of the kind.

Basically, the bill inserts a short payoff amount request into the existing payoff demand law which generally requires a lender to respond to a request for a payoff demand statement within 21 days from when it is requested, typically by escrow or a short sale negotiator.

OK... So what is a payoff demand anyway? A payoff demand is simply a document provided by the short sale lender stating exactly how much the borrower would have to pay in order to pay off the loan. This figure will include principle, interest and any late fees or other charges. Payoff demands are requested by escrow officers so that escrow companies can know exactly how much money must be allocated to the short sale lender at close of escrow.

The new law essentially requires that lender respond to a request for a short-pay demand statement within 21 days. Since short payoffs are generally requested AFTER the short sale has already been approved, the law will have little or no effect on the time it takes to actually get an approval. Additionally, the lender’s response to escrow can be a short-pay demand statement or even, depending on the circumstances, a written statement electing not to proceed with the proposed transaction.

There is another provision of SB 306 which has caused some confusion as well. In practice, a lender may approve a short sale subject to its review of a closing statement prepared by escrow, but the lender does not necessarily review that closing statement right away. This can sometimes cause short sales to drag on. Under the new law, if a lender fails to approve the closing statement within four days, the closing statement shall be deemed approved, but only if it is "not clearly contrary to the terms of the short-pay agreement or the short-pay demand statement provided to the escrow holder." In other words, the closing statement will be considered approved after the time has elapsed, but it cannot be substantially different than the deal the lender had earlier approved. So, while the new law may help move the process along, it does NOT bind a lender to a short payoff amount in an offer that the lender has not approved.

Senate Bill 306 contains other technical changes in real estate related laws. This new law comes into effect Jan. 1, 2010. The full text of Senate Bill 306 is available at http://takeaction.realtoractioncenter.com/ct/YdL8hFF1jrqu/.

Borrowing Money Isn’t Getting Easier.

2009-05-11T14:02:00.000-07:00

By Joel Persinger

While it has become obvious that many people have an almost religious reverence for our current president, his attempts to rescue the mortgage industry have brought about anything but a heavenly result. He has thrown hundreds of billions of dollars of taxpayer money at the problem, only to find that the problem is far from going away. The only thing that went away was the taxpayer’s money and he can’t really account for where the money went.

There are very few things that government does well. Spending your money wisely and accounting for where your money went are not among them. Not only does your government really have no idea where your money went, the “solution” you paid for did not end up solving anything. Loans are just as difficult to get after the so called “Stimulus” as they were before, if not more so.

To add insult to injury, the right hand of government seems to be working against the left hand. For every program or law the government creates with the idea of getting the money to flow, another government program or law springs up designed to clog up the financial plumbing all over again. Take HVCC for example. HVCC is the Home Valuation Code of Conduct. It was revised as of May first of this year to included sweeping changes to the way that appraisals of residential property are ordered and performed.

Under the new law, appraisals can no longer be ordered directly by your loan officer. Instead, the loan officer must contact a third party organization that will manage and control the process. Regulation requires that all communication between the appraiser and your loan officer must be carried out through the third party. Your loan officer and your appraiser may no longer communicate with each other directly.

The purpose behind the law is to reduce the amount of corruption in the appraisal process. The idea is to keep the appraiser and the loan officer from conspiring to slip bad loans through the system. But, in actual fact the law creates more problems than it solves. Here are some examples: Your loan officer can no longer select experienced appraisers and weed out the inexperienced ones. Neither can your loan officer speak to the appraiser to get a detailed explanation of any issues that have affected the appraised value. Additionally, the third party organization will derive its fee by taking as much as half of the appraiser’s fee! That means that appraisers will have to do twice the work to make the same amount of money. Quality decreases as work loads increase. So, expect the quality of appraisals to suffer and to see more inexperienced appraisers than ever before. Last, but certainly not least, is the fact that adding this additional layer of management increases the amount of time it takes to get the job done. So, the time it takes to close any given escrow will increase. If you put your house in escrow today, don’t count on closing escrow for at least 60 to 90 days, if you’re lucky.

The HVCC issue is just one of many examples of the government throwing monkey wrenches in the works with one hand while trying to grease the machinery to get it working faster with the other. It’s a counter productive approach to “stimulus.” When added to the fact that banks have continued to tighten their lending rules to make borrowing more difficult in spite of having received a ton of taxpayer money, it becomes clear that the only things the “stimulus” packages have stimulated are greed and controversy. Still, one thing remains uncontroversial. If you’re looking for a home loan in this market, you’d better put your sneakers on and get ready to jump through hoops. It will be more work than you think and will take more time.

Homes Are Selling If The Price Is Right.

2009-04-27T10:51:00.001-07:00

By Joel Persinger

Some years back there was a popular TV game show called, “The Price is Right.” It had nothing to do with real estate, but the name of the show has a ring to it when you think about today’s real estate market. Not long ago homes were sitting on the market for months and months without being sold. That is no longer the case in the San Diego marketplace. If the price is right, as the old TV show title goes, the house will sell and sell quickly!

My office has been busy with buyers lately. Every one of my agents who are working with buyers has had the same experience. We have all selected 5 or 6 homes to show our buyers on any given day, only to find out that all but one or two have multiple offers on them before we even get our buyers in the car. In order to find five houses that our buyers may have a chance of buying, we often have to research around twenty homes. Prices are at rock bottom and interest rates are low, so there is a lot of competition out there. That means that buyers have to be ready to compete for the available homes even in a “depressed” real estate market.

Nevertheless, some houses are still not selling. Some sellers are still hoping to squeeze every cent out of the sale. As a result, they price their homes too high and they sit unsold. The message here is simple. If the price is right the house will sell. Therefore, if the house isn’t selling, then the price isn’t right. There is one additional piece to this puzzle. If the price is right, there will be multiple offers on the house. So, if you have only one offer or you have offers that come in slowly and one at a time, then the price isn’t right. Lower it and the number and frequency of offers will increase. This is important because many of the buyers currently making offers on houses are flakey. Just like a mist, they are here one second and gone the next. Having multiple buyers to buy your house will increase your chances of finding a real buyer among all the flakes.

So, if you’re buying, you should prepare yourself for some competition. If you're selling, think about that old game show and make sure the price is right.

Be Prepared for the Long Haul

2009-04-06T17:13:00.001-07:00

By Joel Persinger

One of my grandfather’s favorite sayings was, “The more bends you put in the plumbing, the easier it is to stop up the drain.” Well, my dear reader let me tell you… the mind boggling number of changes to the real estate and lending market this past few years have put a lot of bends in the plumbing. When you throw in the oddball things that can sometimes happen with real estate purchases, the drain can be stopped up more often than not.

One of my sellers moved out of the area and left her house to be sold while vacant. So, I sold it for her. The buyers were happy and everything was moving along just fine until the buyer’s lender wanted to know if the room addition was completed with the proper permits. When asked about this, the seller said, “Of course there are permits” and directed me to one of the kitchen drawers where she had left the permits and the plans for the room addition. Naturally, I went to the property at once to secure the permits. The problem is the permits weren’t there.

It seems that a potential buyer who had visited the home had absconded with the permits. We found this out surreptitiously when that buyer contacted escrow and asked, “So, when do we get the house?” The escrow officer was naturally confused by this turn of events and said, “Ah… you don’t have an escrow on that house.” As it turned out, this buyer had been under the impression that she was buying the house even though she didn’t have an accepted offer and had never opened escrow. It took me three weeks to get her give us back the permits. In the meantime, I checked with the city and county only to find that they had lost the originals. So, the only copies were those that the confused buyer had taken. By the time I got them back the real buyer had given up and cancelled escrow.

In another instance, an Army veteran and his wife worked with me to find them a home. We found a great house for them at a wonderful price. The escrow appeared to be moving along smoothly and all appeared to be right with the world. It was then that we discovered that his certificate of eligibility for his V.A loan was being held up. It seems that the V.A. records did not show his entire length of service. In fact, the records only indicated that he was in the military for the short time he was stationed in California. Since his discharge papers and other related paperwork did in fact show his entire service record, the V.A. indicated that all he had to do was to send the paperwork to the appropriate V.A. office and they would make the change. The problem was that we were supposed to close escrow in 15 days and nobody on the planet believed that the V.A. would move that fast. Not even the V.A.

In yet another strange situation, a client of mine was in line to buy a home only to find out that his lender would not accept the appraised value of the house. This was in spite of the fact that it was the lender’s appraiser who came up with the value. No matter how clear we were about the fact that the house in question was a custom home on over an acre of land with a 300 degree mountain view, the lender insisted on deriving their opinion of value by comparing the home to the many tract houses that surround the area at the bottom of the hill. It should be mentioned that the tract houses were on small lots and did not have a view. The decision to reject the appraisal was made by a junior underwriter located somewhere in Pennsylvania.

These are just three of the many screwball situations my clients have faced over the past several months. In most cases, the problems were able to be resolved and the escrows went through just fine. But, in every case an extraordinary measure of patience and perseverance was required on the parts of the clients (as well as everyone else). It should also be noted that every one of the escrows we have closed over the past three years has been a challenge, to one degree or another. The days of the easy home purchase, if they ever existed, are gone!

The bright side to this otherwise dismal tale is the opportunity it presents for you as the home buyer. Since we know that the overwhelming majority of home purchases in this current environment are difficult, it is the buyer who is willing to hang in there for the long haul who will succeed. While other buyers are giving up, you will persevere and thereby accomplish your goal of buying a home. So, here’s my advice: hang in there and be prepared for the long haul. Buying a home in this marketplace is challenging. But, those who are up to the challenge can swing some terrific deals.

Buying a Home is a Partnership for Good or Ill.

2009-04-06T17:07:00.000-07:00

By Joel Persinger

Not long ago, I was meeting with a couple who were in the process of losing their home to foreclosure. Their savings was gone and they were suffering emotionally. Neither of them had slept well for quite some time and both were beginning to experience stress related health problems. During our meeting, the husband sat with his eyes closed, brow furrowed and his arms ramrod straight in front of him as he maintained a death-grip on their kitchen table. He looked like a man, afraid of heights, who was being forced at gunpoint to ride his first rollercoaster. After an hour of listening to his wife explain their situation and how they arrived at such a disastrous financial point in their lives, the gentleman finally relaxed and released his grip on the table. Amazingly, his sudden relaxation immediately followed something I said. Since it seemed to work so well for him, I’m going to repeat it for you.

If you own a home and you have a mortgage, then you invested in real estate with a partner. Your partner is the bank that loaned you the money. You invested with the idea that your home would go up in value over time and that you could live there while that investment increased in value. The bank invested in the same way. Just like you, the bank decided to gamble that the investment would go up in value and that money would be made in the form of interest on the existing loan. They also planned to introduce you to new loan programs as your equity increased in the hope of selling you a new loan down the road.

Let’s replace the bank with a friend and see how this actually works. Say, for example, that you want to buy a duplex so that you can live in one unit and rent out the other. You only have enough money to pay for part of the duplex, so you need somebody to go in with you in order to be able to do it. You and your buddy decide to do this together and you both plunk down your money on the property and pay all cash. As part of the agreement, you get to live in the property and you and your buddy split the profit derived from renting the second unit. Since your buddy doesn’t get to live there, you both agree that he will have the right to sell the property and keep the money, if something goes terribly wrong.

Everything seems to be going along fine, but suddenly the hillside in the backyard collapses and destroys the duplex. As a result, you no longer have a place to live and both you and your buddy have lost the income from the rental unit. As if to add insult to injury, your property is now worth less than half of what you paid for it, because the building has been destroyed. In this situation, would you be the only one who loses? I don’t think so. Your buddy would lose too. But, you might actually lose more than your buddy. You have to find a job, a place to live and you lost your property in the process. Your buddy, on the other hand, already has a job and a place to live. In addition, he gets to sell the vacant lot to get some of his money back and he doesn’t have to share a dime with you. This is the way it works with a bank.

You and a bank purchased a property together. You both agreed that the property was worth what you paid for it and you both stood to gain if your investment worked out. But, you both took a risk as well and you both stood to lose if things didn’t work out as planned. So, if you lose, the bank will lose too. That is as it should be. While you bear some responsibility for making a bad investment, you do not bear it all. The bank may have invested more than you, but that’s why the bank gets to keep the property and sell it in an attempt to regain some of its lost money. You don’t get to do that.

Now that you understand that your home was an investment and that you weren’t alone in thinking it was a good one, give yourself a break. Every investor makes mistakes. That’s generally how they learn. So, learn something from it and move on. In the meantime, do the best you can to reduce your losses and when bedtime comes each night, leave that day’s guilt behind you and get some sleep.

Is Spending Money You Don’t Have a Good Plan?

2009-03-23T20:46:00.000-07:00

By Joel Persinger
YourRealEstateDude.com

Over the past few days I have been approached by several clients who expressed concern that the U.S. Government is leading us into disaster by printing trillions of dollars in a vain hope that doing so will save the economy. On thing all of these folks had in common was their belief that the United States Government is spending money that it doesn’t have. Is that true and if so, is it a good plan?

There’s an old joke that goes, “What do you mean I don’t have any money in my account? I still have checks!” We all know that if I write checks without sufficient money in my bank account, the bank will refuse to cover my checks and vendors will eventually stop accepting them. My checks will become worthless. If I want to dig myself out of the hole and get the vendors to accept my checks again, I will have to borrow the money to cover the checks that I’ve already written, along with any I might intend to write in the future. Then, I will have to find a source of income, like a second job, in order to pay the debt on the money I had to borrow.

When the government prints money, it is essentially writing checks even though it has no money in its bank account. Just like my checks, people will eventually stop accepting the government’s money, because its money will have become worthless. The only way for the government to stave off such an eventuality is to borrow enough money from other countries to cover the checks it has already written, along with any it might intend to write in the future. Then the government will have to find a source of income to pay the debt on the money it had to borrow. Unfortunately, the government cannot get a second job. All it can do is raise taxes on generation after generation of Americans.

It may be disturbing to know, but should be point out that the government doesn’t make anything, grow anything, produce anything or sell anything. Basically, the government doesn’t make any money of its own. The Government is like a horribly fat old uncle who sits on your couch all day, eats your food, watches your TV, minds your business and bosses you around without ever pitching in to help pay the bills.

Many of us think that the government is our benefactor, but the reverse is actually the case. We are the government’s benefactors. We design and manufacture products, grow crops, provide services and run profitable business, while old, fat Uncle Sam sits on his behind and sponges off of us in the form of taxes and bosses us around.

But, what does all this have to do with the housing market? First of all, the economy functions as a unit. You cannot easily separate one section from another. Consequently, what affects one sector eventually affects them all. Therefore, when money is devalued, it takes more of it to buy goods, services and real estate. If you’re old enough to remember the late 1970’s, you remember the recession of the Carter years. We faced double-digit inflation back then. Prices of goods and services were sky high. People lost jobs all over the country. You could only buy gas for your car on odd or even days, depending upon whether your license plate ended in an odd or even number. And even when it was your day to buy gas, you had to wait for long periods because cars were lined up for blocks.

Like it or not, what happens with the economy affects everything. Many highly regarded economists and gurus, including those in the Congressional Budget Office, seem to be rightly concerned that printing all this money will send our economy into a tailspin, driving us headlong into a deep recession. If that happens, it may take more money to buy your house, but you may not be able to sell it. People will be too busy trying to scrape together the money to buy bread, eggs and gasoline. No matter how desperate you may be for a cure to present ills, it seems obvious to this real estate broker/investor that writing checks when you have no money and borrowing money that you cannot pay back will only make our current economic problems worse.

Dealing With Your Lender When You Can’t Make Your Payments

2009-03-16T14:19:00.000-07:00

By Joel Persinger

Over the weekend, I received an email from a fellow asking me how to deal with a lender that was threatening foreclosure. In his case, he was not yet behind on payments and the lender had threatened to foreclose when the borrower called to ask for help. The borrower wanted to keep the house and expressed a desire to work with the lender by making partial payments. The question he asked me was, “Does a borrower have a right to keep the house, if he makes a partial payment.” With so many folks facing the same or similar issues, I thought you might like to know my answers to his question.

Not being an attorney, I can’t give you specifics regarding a borrower’s rights to keep the house by making a partial payment. However, it has been my experience that agreements allowing a borrower to remain in a home while making a partial payment are generally made outside the structure of the original lending agreement and are for short periods only. Your loan documents may contain a provision addressing the issue of partial payments. They may also address any rights you might have under such circumstances. Therefore, if you are wondering about your rights under the terms of your loan agreement, a good place to start would be examining those documents.

As for lender responses to telephone calls, you must first understand that banks employ different persons in different departments to do different things. As a result, the Customer Service Department may have a completely different response to a question than the Collections Department, which may have a different response than the Workout Department, and so on. That having been said, there are seven generally accepted “truths” you might wish to consider.

1) Letters generally work better than telephone calls. If you need to work out a payment strategy with your lender, you might try writing a letter. Draft your letter to the bank explaining your financial hardship, how long you feel the hardship will last and any proposed solutions you may have. Prior to sending the letter, you should contact your lender and ask for the “Workout Department” or for a supervisor. One or the other may be able to provide you with the appropriate address to which you should send the letter. You should also try to get an email address. That way you can send the letter by email, as well as by certified postal mail return receive requested. The email will provide you with a record of what you sent, to whom you sent it and when it was sent. Certified postal mail, by comparison, will only prove that you sent something, but will not prove what you sent.

2) Working these things out with banks is like trying to solve a problem with the DMV. It can try even the calmest person’s patience. Therefore, it is import to remember that perseverance and patience are the watchwords of the day.

3) Banks do not generally like partial payments. If you call your lender and say, “I’m having some financial troubles. Can I make a partial payment for a few months?” don’t be surprised if the first answer you receive is, “NO.” The bank is not going to just take your word for it. You will have to provide financial records and documents to prove that you cannot make the payment.

4) Banks don’t want to foreclose on your property. They just want their money back in the form of a payment. However, they will threaten to foreclose in order to motivate the borrower to pay. It should also be noted that they do have the power to foreclose, at some point, if the borrower does not pay. So, it is best to work on the problem sooner rather than later.

5) Collections people at banks tend to use threats as their first response to just about everything. So, don’t be terribly insulted if they threaten you the first, second or even the third time you talk to them.

6) Quite often, banks don’t see the situation as a problem when the borrower is making the payment. After all, the borrower is making the payment! So, what’s the problem? It’s when you completely run out of money and the bank doesn’t receive your payment that the light bulb will go on and the bank will realize that a problem exists. It’s sad, I agree. But, it’s the truth nonetheless. I should clearly point out that I am NOT advising you to stop making your loan payments. You should contact a quailed attorney for advice prior to making any such decision.

7) Dealing with problems like these is not easy. But, the sooner you start working on them the better. The worst thing you can do is to pretend that they will go away on their own.

The Truth about Loan Modifications

2009-03-09T10:25:00.001-07:00

By Joel Persinger

Loan modifications are a relatively new bread of animal. They popped up as a cottage industry in response to the troubled housing market. Real estate companies, having suffered as a result of the slowdown, and attorneys, looking for a quick way to make a buck, began positioning themselves as “Loan Modification Experts.” Not being loan modification experts ourselves, my staff and I embarked on a search for a reputable loan modification provider, to which we could refer our clients. What we found was less than encouraging.

After having interviewed dozens of self-proclaimed “Loan Modification Experts”, we came to discover that no such thing really existed. When asked how many loan modifications they had done, most “experts” were deliberately vague in their responses. Some gave us numbers that meant nothing and some refused to give us numbers at all. Most gave us answers that went sort of like this, “Oh… ah… we’ve signed up 300 clients so far!” To which I would ask, “But, how many loan modifications have you actually completed?” The answers I received ranged from, “Well, that’s hard to say…ah… you know… ah… we’re just getting started” to “Ah… I don’t really track those numbers… but, I can check around and get back to you.” They never got back to me.

The truth is that loan modifications are in their infancy and the landscape is constantly changing. As a result, no-one is an expert and no-one really knows how to get them done consistently. The proof of this statement can be found in an email exchange I had with a young “Loan Modification Expert” who was referred to me about two weeks ago. Following a lengthy discussion on the phone and some emails back and forth, I was finally able to clarify my desires by asking, “What I need to know is, what percentage of the time are you successful in negotiating a loan modification with the banks that is acceptable to the homeowners and is successful in keeping the homeowners in their homes?” It took two days to get the response. But it was quite an eye opener when it arrived. The young man came strait to the point in telling me that their success rate was somewhere around 40%. That means that far less than half of all the loan modifications they attempt are successful.

Many companies will tell you that they are successful in negotiating a loan modification 90 percent of the time or more. What they aren’t telling you is the fine detail associated with that percentage. For example; one company we spoke to was successful in getting lenders to make a loan modification offer 90 percent of the time. However, the overwhelming majority of those offers were so bad that the homeowners did not accept the offers, because the modifications that the lenders offered would not have helped them at all. Actually, you can probably call your bank and get them to offer you the same bad offers 90 percent of the time all by yourself and you won’t have to shell out $3,500 to a “Loan Modification Expert” to accomplish it.

All that having been said, for those who actually have succeeded in getting their loans modified through such service providers, the money spent may have been well worth it. The important thing is to understand the genuine odds of success. From this real estate broker’s experience, the chances of success in a loan modification are a crap-shoot at best. Still, there is a chance and if you’re willing to take the gamble, perhaps a loan modification is for you.

Can Obama’s Stimulus Plan Help Homebuyers?

2009-03-04T14:51:00.000-08:00

By Joel Persinger
February 23, 2009

There’s quite a buzz among real estate folks and the media regarding the new Obama stimulus plan and how it might help home buyers. One of the items most talked about around the water cooler in my office, is the $8,000 tax credit. But, before I get into the specifics of how this tax credit is suppose to work, let me remind you that the actual stimulus plan probably weighs ten pounds when printed and won’t be fully understood for many months, if ever! Consequently, anything I tell you now will only paint a small part of the picture.

In basic, the new law says that first time homebuyers who purchase homes anytime from the start of this year until the end of November 2009, may be eligible for a tax credit. The credit could be as much as $8,000, but not more. This is a tax credit, rather than down payment assistance. So you have to come up with your own down payment. Then once you have completed the purchase, you can apply for the credit when you file your tax return at the end of the year.

The benefit of a tax credit is that it is a dollar-for-dollar reduction in the actual taxes you owe, rather than a reduction in your taxable income. Reducing your taxable income by $8,000 might only save you $1,000 to $1,500 in your actual taxes. On the other hand, a credit is real money that goes toward your actual tax bill. So, if you were to owe $8,000 in income taxes and qualified for the $8,000 tax credit, you would owe nothing. Better yet, the tax credit is real money. That means that you can receive a check for all or part of the credit, depending upon your tax liability. For example, if you end up owing $4,000 in taxes, you can offset that $4,000 with half of the tax credit and still receive a check for the other $4,000!

This may sound great, but it doesn’t apply to just anybody. You must either be a first time homebuyer or someone who has NOT owned a home during the past three years. Additionally, the program phases out as your income increases. According to the reports I’ve read so far, the phase out begins when couples make more than $150,000 per year or when single borrowers make more than $75,000 annually. Once you hit either of those income limits, figuring out what credit you are eligible for, if any, may require a degree in either accounting or rocket science. My advice is, speak to your accountant… even if you’re a rocket scientist.

How much this program will actually help home buyers remains to be seen. But, if you’re a first time buyer, it certainly is worth checking out. Just make sure you get good advice from qualified professionals along the way.

What’s Happening with Foreclosures?

2009-03-04T14:48:00.000-08:00

By Joel Persinger
February 17,2009

Not long ago, the question I was most often asked was, “How are the interest rates today.” But now, the burning question on most people’s lips appears to be some version of, “What’s happening with foreclosures?” Unfortunately, a good answer is difficult to come by.

Over the past year or two, healthy banks have been gobbling up sick ones and have been trying to deal with the financial illnesses that the sick banks brought into the deals. A prime example of this is the purchase of Countrywide Home Loans by Bank of America. Since the day the deal was announced, trying to work with Countrywide to resolve the problems of distressed homeowners in “pre-foreclosure” has been a nightmare. In every way, Countrywide has lived out the old saying that, “The right hand doesn’t know what the left hand is doing.” This is not to single out Countrywide. Just about every recent purchase of a distressed bank has yielded a similar result. Nevertheless, this kind of thing can make figuring out the real estate and lending markets quite challenging for both real estate professionals and homeowner.

This past week, ForeclosureRadar.com released its California Foreclosure Report for January 2009. The report states, in part, “January brought an unexpected, across the board drop, in the total Notices of Default, Notices of Trustee Sale, and sales at auction, not only from the prior month, but year over year as well. Even after accounting for the fact that January had two fewer days than December, only properties sold at auction saw a slight increase of 3.4 percent. Analyzing the data at the lender level, it appears these drops can be primarily attributed to the significant changes taking place among the Country’s major lending institutions. Wells Fargo, with its recent acquisition of Wachovia, saw a drop in Notice of Default filings of 46 percent, while JP Morgan, which acquired Washington Mutual, saw a drop of 49 percent. Bank of America, which earlier acquired Countrywide, saw a significant 281 percent increase in filings, though still below the levels Countrywide experienced in the second quarter of 2008”

At first glance this appears to be good news. Hey… foreclosures are down! But, just when you thought it was safe to go back in the water, the report continues by stating, “Given the significant integration issues faced by most major lenders today, it would be irresponsible to draw any conclusions about market direction from current foreclosure numbers.” In plain English this means that since the lending institutions have no idea what their doing and since their proverbial right hands have no idea what their left hands are doing, nobody really knows what direction the market will take and ForeclosureRadar.com’s California Foreclosure Report, while interesting reading, means absolutely nothing.

So where does that leave you and me? Currently, foreclosures are down, but tomorrow they may be up. Who knows? What we do know is this: prices are down and still decreasing. Interest rates are low and loans are available to those who can actually repay them. Sellers are having a tough time and buyers are finding deals. Basically, it continues to be a buyer’s market. If you are a qualified buyer, you should be buying.

Real Estate Prices Have Tumbled… Bad News or Good?

2009-02-03T06:08:00.001-08:00

By Joel Persinger

In every economic shift there are winners and losers. By nature, and with the help of the news media, most of us focus so strongly on the losers that we miss the winners almost entirely. This column is dedicated to those who are winning.

A couple of months ago, an old client of mine called me and said, “Joel, I want you to help my son to find a house he can buy.” Just over a week ago that same young man closed escrow on his first house. The property was a pre-foreclosure and had been left in terrible shape. But, this young fellow and his father work in the construction industry. They have lots of friends and contacts to help whip that house into shape. I’d be willing to bet that inside of a month, that place will look great.

Just yesterday, I had the privilege of having lunch with a fine couple who are looking for their first house. They both have great jobs and good credit and are so excited about the possibilities and their dreams that they can’t stop talking about them. She wants to have a home that she can call her own. He wants to have a garage with a work bench, so he can fix his own car and tinker with his own projects. After doing a little homework on their behalf, one of my loan officers felt very strongly that these folks are more than qualified to buy their own home. You never know, I just might be telling you about their new place in these pages soon.

A good friend of mine has wanted a house with a view and some elbow room for years. He grew up in Montana and likes to have a bit more than ten feet between his house and his neighbors. For some time now he’s been looking up at the house on the hill across from his place. You know the house. It’s the one with the 300 degree view and two acres of land. You probably have one just like it in your neighborhood. My buddy has been wondering what it would be like to live up there for years. Well, it looks like he’s going to find out. With any luck, my friend will own that house in less than a month.

These are just three stories of the millions that are out there. We never hear about them because good news doesn’t sell papers or increase viewership. Sure, people are losing jobs and homes. But, let’s not forget that when unemployment reaches 9 percent, it means that 91 percent of the people are working. Likewise, even if the number of foreclosures reaches 10 percent, it would mean that 90 percent of homeowners are paying their mortgages on time. News organizations and politicians make their livings by focusing on the negative. Here’s my advice: look for the positive. It’s easy to see, there is generally more of it and making it your focus will let you sleep better at night.

Real Estate… It’s a Jungle Out There.

2009-01-27T08:35:00.000-08:00

By Joel Persinger
YourRealEstateDude.com

When I was a kid, my uncle’s favorite saying was “It’s a jungle our there.” It always sounded like a slogan I might read in a newspaper advertisement or see on TV and I never quite understood what he was talking about. Then I got into real estate and his meaning suddenly became crystal clear.

Ask any real estate professional and you’ll find that the current real estate market is indeed a jungle. Just about every transaction reminds me of a journey through a misty rainforest full of pitfalls, booby traps and dangerous critters with big teeth. Just when you think you’ve figured out where the dangers lie, something pops out of the bushes and starts tearing everything apart. That kind of challenging business environment is understandable, once you come to terms with the fact that the market is dominated by foreclosure and pre-foreclosure properties.

In such a market, buying a home is a daunting task, largely due to what I call the “who cares bug.” When properties are facing foreclosure, many sellers move out and leave the properties to fall into disrepair like old, dead animals left out in the sun to rot. If the sellers haven’t stripped the homes of anything and everything, the looters and thieves who break in repeatedly, do it for them.

In the past two months, we’ve had one home broken into four times, another house in which someone tossed a concrete block through the front window and took all the copper wiring out of the house and still another home that the police had to chase people out of who had broken into the place to throw a party! This doesn’t happen all the time, but when it does, selling the house can be difficult. By the time a buyer comes along, the house is in such a state that the buyer’s lender may not want to lend against it.

If it isn’t the sellers with the “who cares bug”, it’s the agents hired to sell the homes. When a bank forecloses on properties, the homes are typically assigned to brokerages that “specialize” in selling such properties. Given the number of foreclosure properties on the market, such agencies quickly become overwhelmed. As a consequence, buyers and their agents can never get a response out of them. It is quite common for buyer’s agents to leave messages, send emails and even send in offers without ever getting a response from the brokerage selling the house. Even if a response does come, it is generally from a clerk or assistant whose previous job, judging by the attitude they project, must have been at the DMV.

As an agent, you begin to realize how common the “who cares bug” has become when you return a call from another agent and he or she can’t stop thanking you for doing so. Just yesterday I called a fellow back who had left me a message about one of our listings. He was absolutely thunderstruck and delighted that I had actually returned his call. He thanked me over and over again for the entire ten minutes we spent on the phone. I almost couldn’t get a word in to tell him about the house. He was too excited about having gotten a call back. It was almost as if he had been locked in a dungeon for thirty years and I was the first person he had talked to in all that time.

Facing these kinds of challenges, buyers can become frustrated almost to the point of giving up entirely. The key to staying in the game and eventually winning is to set your expectations properly in the first place. Since you’ve read this article, you are now well prepared, because now you know what to expect. So, dust off your pith helmet and safari gear, steel yourself for a challenging adventure, use lots of bug repellent to ward off the attacks of the “who cares bug” and remember, house hunting in this market can be a great experience, but you’ve got to be prepared. It’s a jungle out there.

Will Obama Save the Housing Market?

2009-01-20T08:44:00.000-08:00

By Joel Persinger

Whatever your opinion of President Obama might be, it is an undeniable fact that millions upon millions of people worldwide have become convinced that he can cure what ails us. But can he?

As of this writing, President Bush is still in office and President-Elect Obama is about to be sworn in. Interest rates are the lowest I will probably ever see in my lifetime, buyers are busily buying homes, homeowners who have equity in their homes are quickly refinancing and sellers who were hopelessly attempting to sell homes that would not sell a few months ago are now successfully selling their homes in short sales and moving on. The system is far from healthy and there is much left to do. But, in spite of the concerns expressed by many including me, the underlying support for the market that has been provided by the federal government’s purchase of mortgage paper has helped get things moving again.

Those decisions were made during the previous administration and will not be fully implemented until well into the new one. If it goes well, President Obama will get the credit for work done in President Bush’s term and probably won’t bother to mention Bush in the process. If it goes poorly, the new administration will get the blame and shift as much of it to President Bush as can be shifted. That’s just how politics works.

The question now is, what will Obama do to improve the situation? Thus far, other than in broad generalities, he hasn’t really said anything of substance regarding what actions he might take and no-one in his administration seems to be talking either. This leaves us having to guess what he might do based upon his actions thus far. What amazes me, in the absence of any clear articulation of his plans, is that so many people that I talk to are unwaveringly convinced that Obama has a magic bullet in his pocket and is just waiting until after inauguration day to pull it out. Unfortunately, I have never been a good magician’s assistant and must point out that no magic bullet exists and that any hinting to the contrary is just smoke and mirrors. Fixing the housing market and the economy will take wisdom, leadership, fiscal responsibility, hard work, time and patience.

Thus far, President Obama has failed to display many of these traits. The inauguration is an example. Throwing the most expensive and lavish inauguration celebration in the history of this county while in the middle of a national economic crisis demonstrates neither fiscal responsibility nor leadership. In fact, it is an insult to the millions of Americans who are losing their business, jobs and homes. President Obama may be capable of great things. Only time will tell. Still, if he has any hope of restoring the vibrant housing market and economy of the United States, he will have to stop pretending to be a rock star and start being a leader.

Should you fire your agent when he sets boundaries?

2009-01-20T08:43:00.000-08:00

By Joel Persinger

For as long as I can remember, and I started in the real estate business almost 20 years ago, consumers have felt that real estate agents should be available at a moment’s notice, 24 hours per day and 7 days per week. This unfortunate and unrealistic expectation was actually propagated by real estate people. In fact, when I started in the business, my broker at the time admonished me on this very subject just five minutes after I joined his office. “Joel,” he said, “If you’re going to survive in this business, you must make certain that you are always available to your clients at any time of day.” I thought he was insane! But, he was the broker and I was new. So, I made myself available 24 hours a day, seven days a week. It almost killed me.

19 years and at least a thousand gray hairs later, I am the broker and I am routinely caught admonishing my agents NOT to be available 24 hours a day, 7 days a week. Those thumping sounds you hear are all the old school brokers crashing to the carpet having fainted from shock after readying this article. Many of the old school folks believe that a real estate agent must be available to jump every time a client blinks in their direction. Consequently, consumers expect what the agents have been foolish enough to deliver: constant availability.

Not long ago, I ran into an agent who told me that he NEVER turned off his cell phone. Furthermore, he proudly announced that he answered it even if his clients called in the middle of the night. “I had a customer call me at 1AM the other day,” he said, “and I picked it right up.” When I questioned the wisdom of such a policy, his wife, who was also a real estate agent, began to lament the fact that her husband would never consent to going on vacation unless the vacation spot had good cell coverage.” Now, I ask you; would you live like that?

I have an agent who recently joined my office and I quickly found that he suffered from the same backwards point of view. He allowed his clients to control his schedule to the point that he didn’t have a life outside of real estate. I urged him to set some boundaries by establishing business hours during the week, take at least one day off every week and meet with clients in the evenings or on weekends only by prior appointment. No sooner had he begun to follow my advice then one of his clients began to complain. The end result was that the client fired him and started working with another agent who promised to be available 24/7.

I submit to you that anyone who wishes to achieve a level of professionalism in any industry must possess knowledge, patience, honesty, integrity, strength of character and discipline. The practice of real estate is no different. Therefore, if the agent you work with does not have one of these basic qualities, such as the discipline to manage his own schedule, then he may not be the best person to work on your transaction. Likewise, if your agent has let you run him ragged and is now in the process of growing in his character by establishing disciplined boundaries in his business, firing him could be a grave mistake. You might be firing a newly established professional in order to hire an amateur. An agent who is organized and disciplined about his schedule is an agent who will likely be organized and disciplined in his approach to providing for your needs. To me, that sounds like a winning strategy.

Is now the right time to buy?

2009-01-08T10:38:00.000-08:00

By Joel Persinger
YourRealEstateDude.com

I’ve been asked the age old “timing” question over and over again for many years. Lately, the question has been, “Is now the right time to buy.” The general answer is quite simply, “Yes.” However, there are some specific things that buyers should consider before getting started. Here is a short list:

How much money can you spent? This gets into the “B” word that nobody likes. In order to set yourself up for success, you must have a budget. If you don’t have one, get one. If you don’t know how to put together a budget, I strongly suggest that you take a class on budgeting and have a working, functional family budget before you start house shopping.

What kind of loan should you get? Lending is as individual as clothing. One size does not fit all. Each loan must be tailored to the particular needs of the borrower. Therefore, the first consideration is not the loan, but the skill, experience and integrity of the Loan Officer and the lending company. If you use a Loan Officer who is lacking in any of these areas, you may find yourself getting a loan which does not properly fit your needs.

Once you have found a good Loan Officer, you should explore the various loan products that are available to you based upon your credit score, down payment amount, debt to income ratio and other factors. Then you can select a loan which will help you accomplish your goal without putting you at risk of losing everything a few months or years down the road.

What type of property should be your focus? First, you should consider my grandfather’s old rule, “Buy a home that you can own, not a house that will end up owning you.” If buying your dream home is going to leave you with more month than money, put your dream back in your pocket and buy a home that you can afford. If buying that dream home will require you to get a crazy, lunatic, risky loan, then STOP! Some things are best not forced. Remember, it is far better to be content in a small house, than to be miserable in a big one.

Having figured out what you can actually own, you should decide what kinds of homes will be easier for you to buy. In this market, most of the homes that are for sale are either bank owned properties or pre-foreclosure properties (short sales). Bank owned properties will generally close escrow sooner and be less hassle to buy. However, they often have multiple offers on them as a result. Short sales are more difficult to buy and require much more patience.

Either way, the same is true about Realtors as is about lenders. If you start off by selecting the right Realtor, your buying experience will go much more smoothly. In this market, that means hiring a FULL TIME, experienced Realtor who understands the buying process as it applies to a foreclosure marketplace. Such a Realtor must be professional in word and deed and have extraordinary patience.

So, getting back to the question at hand, the answer is, “Yes.” It is the right time to buy. However, in order to succeed, you must first understand your own finances. Then you must put together a team of professionals who can guide you through the process. And finally, you MUST control your own emotions and desires. A very wise man once prayed, “Lord, give me what I need and not just what I want.” If you take this approach, house hunting will be a great experience!

Loan Modifications & the Media

2008-12-18T11:05:00.000-08:00

By Joel Persinger

Earlier this month U.S. Comptroller of the Currency, John C. Dugan, while speaking at a panel discussion with other government big wigs, shared some data from a new government report. Referring to loan modifications, he said, “After three months, nearly 36 percent of the borrowers had re-defaulted by being more than 30 days past due. After six months, the rate was nearly 53 percent, and after eight months, 58 percent." Knowing a good sound bite when they hear one, the media did what the media does best. It beat the drums until people all over began looking at loan modifications as if they were just the latest creative way for crooked real estate agents and lender to rip people off.

National TV news programs have aired investigative stories, newspapers have published damning articles and radio talk show hosts, including a very popular fellow here in San Diego, have launched into tirades bemoaning the evils of loan modifications and why they don’t work. Are all these media “know it alls” right? I hate to burst their inflated egos, but the answer is, “NO.”

Loan modifications are exactly what their name implies. They modify the terms of a borrower’s loan. That is the limit of what they do. They do not modify that borrower’s spending habits or alter that borrower’s understanding of how money works. Those changes in behavior are left to the borrower to undertake on his or her own. Borrowers who make changes to their lifestyle and adjust their spending do just fine once their loan terms have been modified. Others, and apparently the number is upwards of 58%, continue to live as they did when they got themselves in trouble in the first place. So, within a few months they find themselves in trouble again. What amazes me is that anyone is actually surprised by this fact.

Have you every met anyone who got themselves into deep credit card debt and decided to refinance their home to pay off the credit cards? Did you know that most of those folks charge the credit cards back up within months of being bailed out? Refinancing to pay off the cards only addresses the symptoms and leaves the disease of poor financial habits to rage on. Loan modifications are no different. Therefore, if you have your loan terms modified, you must understand that some lifestyle changes may be required in order for you to make the payments. If you simply continue spending as you always have, you will likely be in trouble again in just a few months. It’s that simple.

If you think I’m wrong, just go to a financial seminar sometime. You will quickly learn that the overwhelming majority of Americans wouldn’t know a family budget if it hit them in the face. We may teach reading, writing and arithmetic in school, but we don’t teach how money works or how to be successful using it. Those lessons are taught by parents, most of whom have no idea what they’re doing either. So, here’s the bottom line on loan modifications: If you want to keep your house rather than sell it or lose it to foreclosure, a loan modification may be just the ticket for you. However, you MUST address the spending habits that got you into trouble in the first place by putting in place a family budget and sticking to it.

Can You Get Your Loan Modified Yourself?

2008-12-08T11:27:00.001-08:00

By Joel Persinger

Loan Modification is a hot topic among folks who are struggling financially and hoping to find some way to afford rising house payments. Not surprisingly, a cottage industry has come to life for the purpose of negotiating loan modifications for those who need them. But, what exactly is a loan modification and why would you need someone else to get it done for you?

When lenders are faced with situations in which borrowers are either unable to make their payments or soon will be, only three choices present themselves: foreclose on the property, allow the homeowner to sell the property for less that what is owed (a short sale) or modify the terms of the loan so that the homeowner can make the payments. In both a foreclosure and a short sale it is a certainty that the lender will take a significant loss. However, by modifying the terms of the loan, the lender can preserve the amount of principle owed by altering terms such as the interest rate charged or the length of the loan. The lender wins by minimizing losses and the homeowner wins by avoiding the loss of the home and the financial devastation resulting from a foreclosure.

Over the past week I have been asked about loan modifications by a number of people. Each one told me that such things were not possible. When asked how they came to such conclusions, each one said, “I’ve already tried to get my lender to do that and they won’t help me.” The point they were missing is that some things simply do not lend themselves to the idea of doing them yourself and negotiating a loan modification is among them.

Approaching a lender to modify the terms of a loan is like standing in line at the airport to board a flight. Homeowners fly coach and must wait in long lines and deal with grumpy airline employees when they finally reach the service counter. Real estate and mortgage brokers fly business class. The lines are shorter and the airline employees are nicer, but the service is still marginal, at best. Attorneys, on the other hand, fly first class. They await their flight in the first class lounge, board the plain first and sit in the cushy seats being served by their own personal flight attendants.

As the analogy above illustrates, attorneys enter the negotiation with your lender through a completely different door and deal with completely different people than you do. This is because lenders are afraid of attorneys and you don’t frighten the lender at all. When you call asking lenders to modify your terms, they feel like you’re asking for a favor that they don’t owe you. An attorney approaches the problem differently. The attorney reviews your entire file looking for any mistakes the lender made in the process of selling you the loan. Then the mistakes are bundled into a legal club, which the attorney begins beating the lender over the head with until the lender finally says, “Uncle” and agrees to the modification. This is why my office employs attorneys to negotiate loan modifications for our clients.

So, can you get your loan modified successfully by yourself? Probably not, and if you do manage it, you will likely have gotten less of a modification than you might have gotten if you had used a qualified attorney. Remember, the lender’s employees are looking after the lender, not you. You will need someone who is trained and knowledgeable in your corner if you are going to have any chance of winning.

Being Thankful in Difficult Times

2008-11-24T15:28:00.000-08:00

By Joel Persinger

Like almost every morning at the Persinger home, this morning was a study in chaos. The phone was ringing, the kitchen was bustling, my daughter couldn’t finder her favorite jacket, my son was rushing around the house with his backpack hung over his shoulder, his basketball gear in one hand and a half-eaten “something” that nobody could identify in the other. My wife was threading in and out between the children trying to get ready for work and I was just doing my best to stay out of the way. When all was said and done, the house was quiet once again. My wife was on her way to work, my kids were both in school and I had settled into my office with a hot cup of tea and a chance to check out the financial news before starting, what was certain to be, a very fast and furious day.

Two cups of tea and two hours later, the day was beginning to take shape. I had accomplished a few key tasks, put out three small fires and taken a look at the financial news. As usual, the financial news was bad. Citigroup was going down the tubes, like so many other financial institutions, a government bailout using your taxes and mine was in the works, and home sales were down again by about 3.1%. When you consider that news of that sort is a daily occurrence at present and that the majority of our clients are folks who are forced to sell their homes because of financial woes, the weight of the economic news can be almost too much to bear at times.

I was thinking about that fact and working on my third cup of tea when the phone rang. It was one of our clients who had just been informed that her house had finally closed escrow. She and her husband had been forced to sell for less than what they owed and it had taken nearly four months for the lender to approve the sale. The lady had just lost her home and did not receive a dime from the sale of the property, yet she thanked me for getting it sold and spoke of how grateful she was that she and her family would be moved into their rented home before Christmas.

That conversation reminded me that we live in the greatest country on the face of the Earth. Sure, people are losing their homes to foreclosure. No matter how you slice it, that is a sad thing. But, in my office alone, we have sold or are currently in the processes of selling a great many pre-foreclosure properties and not one of our clients has missed a meal or been forced to sleep on the street. Every one of them is simply moving from one house to another.

As I write this, Thanksgiving is only a few days away and I cannot escape the feeling that the client who just called me has set a shining example of what it means to be thankful. She is thankful for what she has, even though it may not be what she wants. Here’s hoping that you and I will do as well. Happy Thanksgiving!

Frustrated With The Short Sale Process?

2008-11-17T17:38:00.001-08:00

By Joel Persinger

A large percentage of the homes currently sold in San Diego County are either pre-foreclosures (also called “Short Sales”) or foreclosures (also know as REOs). That being the case, the average buyer will run into a ton of these properties and likely make offers on many. While the REOs can be frustrating because the banks that own them are difficult to deal with, the short sales can be challenging because of the length of time it takes to negotiate them to a successful conclusion.

When a property is being sold for less than what is owed to the lender, the term that is used to describe it is, “short sale.” Short sales require that the lenders agree to take a loss on the sale of the properties. Consequently, homeowners do not have much control over whether their properties actually sell. The control is in the hands of the short sale lenders. Some lenders are easier to deal with than others. But, it is fair to say that all lenders hope to mitigate their losses by selling the properties for as much as possible.

Buyers approach short sales because they want to get a deal and lenders sell properties short because they want to get as much money out of the house as possible. They know that if they foreclose, they will receive far less. The parties often do not agree. So, the negotiations go on and on until the two parties come to some agreement that meets both of their goals. This process can take months and many buyers simply do not want to wait.

I checked with one of our clients the other day to see how her search for a new home was going. She is working with one of my agents in North County. When I spoke with her my first question was, “How is my agent treating you.” She said, “We’re doing great. I’m just frustrated with the short sale process.” A few questions later and I discovered that she was mostly frustrated by the length of time it takes to get a short sale transaction to close escrow. Still, she is hanging in there because it is very likely that she will get a terrific deal on the house.

If you are thinking about buying a short sale property, you must be prepared for the fact that the process is confusing, lengthy and challenging. You should also prepare yourself for the reality that you may work on a short sale purchase for months only to have it fall apart and never get the house. I have one client currently who has been attempting to buy the same house for about a year. It should be noted that in that particular case the house and lot are one of a kind! Still, long negotiations and long escrows are the norm for short sales. You need to know that before you get involved in one.

On a positive note, some of the best deals you will find are short sales. This is because many buyers don’t try to buy them because they’re difficult. That leaves you to take advantage of the situation by being one of the few buyers who will hold out long enough to succeed. As my grandfather used to say, if you want to be successful, find out what everyone else is doing and then do the opposite.

How does loan modification work?

2008-11-13T17:56:00.000-08:00

By Joel Persinger

The problems in the housing and lending markets have caused the births of several new “industries” designed to help struggling homeowners address their financial woes. One such approach is called, “Loan Modification.” This is a process by which a negotiation is undertaken with the lender, usually by an attorney, for the purpose of renegotiating the terms of the loan. It should be clearly stated that the overwhelming majority of successful loan modifications DO NOT include a reduction in the amount of principle owed. The figures I have been quoted from a number of experts indicate that less that 2% of loan modifications include a principle reduction.

The loan terms are generally what are modified. For example: the lender may agree to reduce the interest rate, change the loan from an adjustable to a fixed rate of interest, lengthen the overall life of the loan (from 15 years to 30 years, for example), wave any late fees, tack the amount of late payments owed onto the end of the loan and so on. But, the one thing the lenders are least likely to do is reduce the total amount of principle you owe.

I’ve mentioned the principle reduction a couple of times because this is precisely what scam artists promise. The crooks understand that distressed homeowners are looking for a way to owe less on their homes. So, they promise to get the lenders to reduce the principle in order to entice the homeowners into the scam. As I was writing this column, I received a call from a homeowner who had been referred to me for a loan modification. She was shocked when I told her the truth about principle reduction. “I just spoke to some guy who told me he could get my loan amount down by half,” she said. “He told me to write him a check and he would get it done, guarantied,” she told me. After she had calmed down, she expressed her utter amazement that people take advantage of struggling families in that way. Unfortunately, I was not amazed.

On November 3rd, the California Attorney General announced the arrests of three members of a fraud ring who preyed on desperate Southern California homeowners by falsely promising to renegotiate their home loans. Instead these scam artists ripped them off for thousands of dollars while their homes fell into foreclosure. Among the other things these folks are accused of, is telling their victims that their mortgage loans had been renegotiated when they had not been. They told the homeowner that the lenders needed a “good faith” payment to secure the new accounts. Homeowners made payments to accounts under business names such as “Reinstatement Department” or “Resolution Department” that made it appear as if the payment had been applied toward the loan. According to the California Association of Realtors who reported the story, Bank records indicate that more than $700,000 was stolen from homeowners who fell victim to this scheme.

Loan modification can be a wonderful opportunity and it should be explored by struggling homeowners who wish to remain in their homes and avoid a short sale or foreclosure. Still, it is important to do your homework. There are some wolves in sheep’s clothing out there and the last thing I want you to be is their victim.

Home Sales are Picking Up!

2008-11-13T17:55:00.000-08:00

November 3, 2008

By Joel Persinger

Just because the media is all up in arms over the economy, doesn’t mean that everything is going badly. The economy is having a tough time, but in the real estate world, things are beginning to look up.

The California Association of Realtors recently reported home sales figures for the month of September. According to the Association, “Home sales increased 96.7 percent in September in California compared with the same period a year ago, while the median price of an existing home fell 40.9 percent. Statewide sales in September edged past the 500,000 threshold for the first time in more than two years, rising 2.3 percent compared with August and 96.7 percent compared with a year ago.”

C.A.R. President William E. Brown said, “This dramatic increase in sales owes as much to market weakness a year ago in the early stages of the credit crunch, as it does to the growth of sales in September this year. Similar increases occurred in the early 1980s when the market was climbing out of a comparatively steep downturn in sales.

It is true, that much of the increase is due to the terrible condition of the market the previous year, but we should not forget that this year’s market could be just as bad as the previous year’s, but its not! On the contrary, real estate sales are showing the kind of gradual improvement that can be expected when recovering from the damage done by the disintegration of the mortgage market. It may not be anything worth throwing a party over, but its one solid step in the right direction and some believe it is a harbinger of things to come. Association President Brown said, “We expect the market to register significant year-to-year percentage gains in the coming months as current sales are compared against extremely low numbers that prevailed during the fourth quarter of last year.”

Nobody can state definitively that the housing market is on the rebound. There simply is not enough data available to tell. Still, a year over year increase in sales of almost 100 percent in September is unquestionably good news. If nothing else, it tells us that sales are increasing and that the San Diego real estate market, while injured, is not dead!

Fixing the Housing Market

2008-11-13T17:54:00.000-08:00

October 27, 2008

By Joel Persinger

There is an old saying that goes like this, “Lord help us when the day comes that a politician can outthink an entrepreneur.” Over the last seven or eight weeks I have given this saying a great deal of thought. Bank after bank has failed, the stock market has been riding a rollercoaster that has frightened most everyone and politicians everywhere have been promising to fix everything, even though in large part, they helped create the problems in the first place.

All of this turmoil has given rise to an election year in which throngs of people seem to be gravitating toward more and bigger government. But, can the government really fix things? Are politicians truly adept at solving the very problems they bring about? The simple and direct answer to these questions is, “No.” The actions taken by politicians are in direct proportion to the number of votes they feel might be gained or lost as a result. Thus, such actions are generally calculated to make voters happy rather than to offer real solutions. After all, the problem being solved is political damage control.

By contrast, entrepreneurs are always looking for ways to provide solutions to problems in order to make a living by doing so. This means that the solution MUST address a real problem and provide a real, workable solution in order to be a success. This is precisely why there has never been and will never be a politician who can outthink an entrepreneur, and this is precisely what is great about this country. We are a country of inventors, a nation of entrepreneurial thinkers, a people who love a good puzzle and have the talent and skill to solve it. Our forefathers new this and had the good sense to stay out of the way. They knew we needed a government, but they also understood how oppressive governments can be. So, they rebelled against the tyranny of the English aristocracy and created a governmental structure meant to support free thinking and the free flow of the inventive and entrepreneurial spirit that is America.

So, if we fast forward to 2008 and compare the solutions to the problems in our current real estate market, we find that government solutions don’t work any better now than they did when the country was formed. Government, at all levels, has floundered in its attempt to address the issues affecting the real estate market. In fact, while more than one “government bail-out” has been implemented, none have accomplished the goals set out for them. Worse yet, none of these government solutions are self-supporting. They all spend money that the government doesn’t have.

In the meantime, free thinking business folks have hammered out real solutions that work, make money and create jobs. Here are just two examples:

Loan modification: One new company with a mission to negotiate the restructuring of home loans on behalf of homeowners who cannot make their mortgage payments is Debt Advisory Alliance. They are a private company which, by all reports, is having significant success in helping their clients stay in their homes by negotiating a modification of the terms of their home loan directly with the lender. My staff and I attended a meeting with this company last week and we were very impressed!

Short sales: Some enterprising real estate brokers have made a science out of helping people by negotiating directly with the lender in order to get their homes sold for less than what is owed. The key is that some brokers have become experts at this and are quite successful at negotiation away much of the bad consequences that would normally afflict the homeowner after the sale. Such things include, negotiating away the lender’s option to chase the homeowner for the balance of the money owed. Since we work with an investor who buys short sales, this is a good chunk of the business that we do in my office. So, I know that it works.

While nobody has a perfect solution for the problems that face the real estate industry, it has been my experience that quick thinking entrepreneurs will end up providing the answers, while quick talking politicians will only manage to get elected or re-elected. Keeping that in mind when you’re looking for someone to help you or when you’re heading to the ballot box could make finding real help a whole lot easier.

FHA’s New “Hope for Homeowners” Program

2008-11-13T17:52:00.000-08:00

October 14, 2008

By Joel Persinger

With all the news about the recent Wall Street bail-out, you may have forgotten the Federal Housing and Economic Recovery Act that was signed into law by President Bush earlier this year. As a quick reminder, this Act was designed to provide ways for struggling homeowners to stay in their homes and avoid foreclosure. One of the key components, which became available this month, is the FHA Hope for Homeowners program.

Hope for Homeowners is a program designed to provide homeowners a way to: reduce the amount they owe on their homes, refinance their existing loans into FHA-insured mortgages, stay in their homes and avoid foreclosure. For lenders, the hope is that this program will provide another viable option for mortgage lenders wishing to avoid costly foreclosures. But, make no mistake, the lenders will take a hit.

Among other things, the program requires mortgage lenders to write off a portion of what is owed to them. This amount could be significant since the program requires the property to be re-appraised. The original lender is then required to “write down” the current loan to a maximum of 90% of the home’s new appraised value. For example, if a lender is owed $500,000 on a home which has been dropped in value to $400,000, the lender would be required to accept 90% of the $400,000 (or $360,000) as full satisfaction for the debt. That means the lender would have to agree to take a $140,000 loss in this example. This may sound ridiculous, but given the losses lenders are currently taking in foreclosure, participating in this program may make good business sense.

At the end of the day the lender at least receives some payment, foreclosure is avoided and the homeowner gets a new, FHA-insured mortgage for around 90% of the home’s current value. Many homeowners may find that this program will work for them and allow them to stay in their homes while reworking their home loan into a much more manageable payment. However, this program will not work for everyone and it does have other requirements and drawbacks.

Among the things homeowners should know are these: only 30-year fixed rate mortgages are offered, the home loan the borrower wishes to replace must have been originated on or before January 1, 2008, the home must be owner-occupied and the original lender must agree to take the loss. In addition, the homeowner must agree to share any current or future equity in the home with the federal government. That means, when the homeowner sells, Uncle Sam is going to take his cut.

For more information on this program, homeowners can call the Hope Now Alliance at 888-995-HOPE or visit the U.S. Department of Housing and Urban Development website at www.HUD.gov.

The Bail-Out Passed! Are The Problems Fixed?

2008-11-13T17:51:00.000-08:00

October 6, 2008

By Joel Persinger

By late morning on Monday San Diego time, I had received three telephone calls from folks lamenting the fact that the stock market had taken an almost 800 point dive. This, in spite of the fact that the much touted government bail-out plan had actually passed both Houses of Congress just days before. Although I desperately wanted to say, “I told you so,” I decided to wait a bit longer to find out if the markets would level out by the end of the trading day. All things considered, it was worth the wait. By the end of the day the Dow had climbed back up a bit, but still closed down some 328 points and below the 10,000 level for the first time since October 2004.

What this means for real estate in San Diego County remains to be seen. But, what it teaches us about government bail-outs and market reactions would fill volumes. The financial markets react to most things one way or the other and overreact to just about everything. Many thought that passing the bail-out plan would spur Wall Street to new heights based upon a new found confidence in the American and worldwide economies. No such result has materialized. Some seemed to feel that government intervention was a panacea that would cure the ills of suffering homeowners across the nation. I suspect that this will fail to come to pass as a direct result of the bail-out as well.

The unfortunate fact is that government, in most cases, is not the answer to what ails us. Even in the rare instances in which government is the answer, any effect government action such as the bail-out may have doesn’t typically materialize for quite some time. However, there are three things that are fairly certain to come out of such government intervention: Politicians can brag about having done something, money will be skimmed off by the wrong people and probably not get to the right people, and the very practices which got us into this mess in the first place will remain unchanged and unaffected.

If you disagree with my thinking, consider this; the same Congressional leaders who legislated and leveraged us into a high risk system in which borrowers who could not pay the money back were given loans, are still in power today. If that isn’t enough, those same leaders have just been given almost a trillion dollars more to waste. Still, they are only half of the problem. The same average Americans who took out crazy loans so they could use their homes like ATM machines or who lived off of the equity in homes they should never have been able to buy in the first place, are going to have their actions validated and be officially dubbed “victims” by a political process all too eager to buy a vote. Thus, they will not only be allowed to repeat their actions, but will most likely be encouraged to do so once more.

So, if you want a prediction from a fellow who knows real estate, here it is. If you were thinking about buying because prices are low and there are hundreds of distressed homes for sale, have at it. The situation is not likely to change any time soon.

Why the Bail-Out May Not Matter

2008-09-29T15:38:00.000-07:00

By Joel Persinger

As of this writing, the House of Representatives, under pressure from constituents who vehemently opposed the 700 billion dollar bail-out of the country’s financial system, defeated the measure on a vote of 226 to 207. Both Democrats and Republicans opposed the measure in large numbers. Stocks tumbled on the news with the Dow losing nearly 800 points. But, what does this mean for the real estate market?

To answer this question, let me take you back in time. In spite of what you may have heard, the U.S. Congress has been pressuring Fannie Mae and Freddie Mac to increase the availability of home loans to low income families for many years. That is how the “sub-prime” market was born. Many high ranking members of government argued against the expanding of such lending practices without success. Most notably, then Treasury Secretary Snow made such arguments and urged Congress to change its ways and further regulate Fannie and Freddie back in 2001. Former Fed Chairman Greenspan did the same some time later. In fact, for the past seven years, members of the current administration have been warning Congress that the financial system might well collapse under the strain if Fannie and Freddie were not reigned in. Congress did nothing. Thus, if we are honest about it, we can clearly see that Congress’s effort at forcing our financial system to provide loans to those who have no way to pay them back was a recipe for disaster.

Now that we’ve figured that out, we must ask why the same Congress which refused to address the coming train wreck, even after having been warned repeatedly, is now attempting to use the White House’s proposed bail-out for the purpose of rescuing the failed system they refused to correct. Instead of allowing the marketplace to replace homeowners who cannot pay their mortgages with new homeowners who are financially sound, many in Congress would like to keep those who cannot pay in their houses by passing the cost along to the taxpayers. In order to accomplish this, the news has spread the notion that nobody can get loans because lenders aren’t lending and banks are collapsing all over the place. Nothing could be further from the truth!

The truth is that homebuyers are buying! Prices are low, interest rates are great and the banks which are strong because they did not get involved with the sub-prime market are happily lending to qualified buyers. In addition, the banks which are failing are being gobbled up by banks which are financially strong. I had money in Washington Mutual and guess what… my money is still there because a strong bank purchased WAMU when it failed.

Our financial system is working, but it isn’t pain free. People who acted wisely are winning and those who acted foolishly are losing. That is how life works and if the government stays out of it, the market will heal itself. The problem is, you don’t win an election by letting people experience the natural consequences of their choices.

Does the bail-out really matter? The answer is both yes and no. If you are trying to win an election, then perhaps the answer is yes. If you are concerned about the health of the market and the future of our country, then the answer is a resounding no. If left alone, the real estate and financial markets will take care of themselves.

Is The Proposed Market Bail-Out a Good Thing?

2008-09-29T15:33:00.000-07:00

By Joel Persinger
Sept 22, 2008

A few days ago the Secretary of the United States Treasury proposed a massive bail-out of U.S. (and foreign) financial institutions. The details of the plan are sketchy at best, but the initial price tag was estimated at around 700 billion dollars at the time it was announced. This is in addition to the already astronomical costs associated with bailing out insurance giant A.I.G and financial hulks Fannie Mae and Freddie Mac.

Apparently, the idea is for the government to buy up all the bad mortgages out there and use tax-payer money to do it. That way the banks, which made the foolish decisions to provide shaky loans in the first place, won’t have to suffer the consequences of their foolishness. The U.S. tax-payer will simply pick up the tab and along with it, the risk of failure. According to the Secretary of the Treasury, this is a good thing.

Some members of Congress want to provide a bail-out plan for homeowners as part of the package. If John and Jane Doe can’t make their house payments, the Congress believes that its only fair that the tax-payer step up to the plate and make sure that John and Jane don’t have to suffer the consequences either. Never mind the fact that, in many cases, John and Jane are not victims at all, but rather, folks who made foolish decisions and dug themselves into a financial hole. But, we can’t let them fail! That would be un-American… wouldn’t it?

There was a time when Americans held the deep and abiding belief that the opportunity to succeed also included the opportunity to fail. Immigrants came to this country from all over the world in search of the very opportunity provided by that strong belief. Only in America did every person have the right to embark upon the dream of owning a business, buying a home and enjoying prosperity without government interference in the form of unfair taxation and crushing regulation. However, it was implicit in the design that having an opportunity to take a crack at success came with the very real risk of ending in failure.

That is not today’s America. In today’s America, people are not supposed to succeed too much, lest they be taxed and their money distributed to those who have failed. In today’s America, people are not supposed to fail. If they do, they can count on the government to give them some of the money it has taken forcefully from those who have succeeded. Dear reader, this is the essence of socialism and it bares no resemblance to the freedom upon which this nation was built. While it may serve to prop up the real estate and financial markets in the short term by controlling what happens at the top, it has every possibility of eliminating opportunity and freedom by destroying the foundations at the bottom.

Should the Government Bail-Out Lehman Brothers?

2008-09-29T15:31:00.000-07:00

By Joel Persinger
Sept 15, 2008

If you’ve been follow the business news, you must be amazed at the number of historic events that have occurred in 2008. Bear Stearns collapsed only to be rescued by the U.S. Government, Countrywide Home Loans was saved by Bank of America, Fannie and Freddie were bailed out by Uncle Sam last week and this past weekend, Lehman Brothers filed for bankruptcy and Merrill Lynch decided to sell out to Bank of America. Wow, what a year!

With what the presidential candidates have both dubbed a “financial crisis” upon us, the news is full of talking heads on every side of the issue. Some say the Government should come to the rescue of Lehman Brothers just as it has for other companies. Others say, “Let the free market system heal itself.” Meanwhile, the stock market is going nuts and the news media is circling the story in a feeding frenzy like so many ravenous sharks smelling blood.

To figure out what should be done to fix this mess, we need only think about what kind of financial system we have in this country. It’s called capitalism. In a free market, capitalistic system companies rise and fall depending upon their financial success or failure. The strong survive and the weak do not. When failing companies collapse, they are absorbed by stronger companies, which often provide the same services in a more effective and successful way then did the failing companies they purchased.

Take Bank of America for example. Obviously, Bank of America is in a better financial position than both Countrywide and Merrill Lynch. Otherwise, how could Bank of America buy the two failed firms? Somehow I suspect that if Bank of America actually ends up with both of these companies, home loans and investment products will still be offered to its customers. Even if nobody rescues Lehman Brothers and it goes down the tubes after 158 years, investors will still be able to invest and homebuyers will still be able to secure a loan. So, what exactly have we lost with the collapse of theses poorly run, failed companies? That’s right… we’ve lost a few poorly run, failed companies. Maybe I’m crazy, but that’s a good thing, isn’t it?

My Grandfather always said, “Joel, if you want to be successful, find out what everyone else is doing and do the opposite.” Grandpa was right. If you want to see the opportunities in today’s marketplace, you must turn away from the idiot box and look at what is positive in the financial world. Remember, the news media does not exist to inform you. It exists to make money, period. It sells more advertising and makes more money by pushing sensational stories. Where do you think the old saying, “If it bleeds, it leads”, came from? I spent 18 years in the broadcasting business. Believe me, I know.

There is a lot of great economic news that you should know about. Here are some examples from today’s news: the price of oil is down under $100 per barrel, investors are putting their money into bonds, mortgage rates are down because investors are buying bonds, home prices are very low, home buyers are buying all over town, the home loan business is picking up and real estate sales are improving.

The economy is not collapsing, the sky is not falling and if Lehman Brothers goes out of business it’s because it should! As tax payers, we should not; we must not continue to bail out poorly run, failing companies. Let the market do what it is meant to do. The strong will survive and the weak will be absorbed by the strong. That is called a free market. That is called capitalism, and it works.

U.S. Government Takeover of Fannie & Freddie

2008-09-29T15:29:00.000-07:00

By Joel Persinger
Sept 8, 2008

As a card carrying tax payer who dreads the ever increasing involvement of government in our day to day lives, I must admit to having a feeling of foreboding as a result of Sunday’s government takeover of Fannie Mae and Freddie Mac. Uncle Sam raced in with a pot full of money (yours and mine) to prop up the ailing companies which have experience record losses. I should also mention that the CEOs of both companies are being bounced out the door.

The U.S. Government (that means you and I) will purchase some $1 billion of preferred shares in each company in an effort to make this deal work. You and I have apparently also pledged to provide as much as an additional $200 billion to help Fannie and Freddie deal with the heavy losses they’ve already suffered as a result of defaulting mortgages. When asked how much you and I, as tax payers, will eventually have to pay for this deal everyone says, “I don’t know.”

The “plan” places both companies into a conservatorship. What does that mean? Well, it means that the management of the companies will be controlled by the Federal Housing Finance Agency, also known as the FHFA. It also means that the U.S. Congress will now have its fingers in the Fannie and Freddie cookie jar to a much greater degree than ever before. This is the same Congress that can’t agree on where to have lunch on any given day let alone how to effectively manage the tax payer’s money.

While my knee jerk reaction is to slam the whole thing as just another unwanted intrusion by the government into affairs that it neither understands nor has the capability of addressing, it appears that the financial markets are rather keen on the idea, at least for the moment. Financial markets around the world surged this morning as a result of the news and just about every talking head on the planet is predicting lower interest rates for home buyers and greater stability in the lending market. Even the loan officers and loan manager in my office seem to be feeling rather positive about it.

Who knows, it may provide some needed breathing room for the financial markets in the short term. Just the same, I will reserve judgment for a while. In my experience, markets which are allowed to heal themselves come back stronger and healthier as a result. However, when the government inserts itself and takes on the mantle of, “Lord of the Marketplace” rather than allowing a holistic healing to take place, a new and greater set of problems are not far behind.

A Matter of Perspective

2008-08-26T14:54:00.001-07:00

By Joel Persinger

My wife can testify to the fact that she is not a Monday Night Football widow and she generally does not have to fight me for the remote in order to watch something other than sports. I must admit to being a basketball fan. But that is mostly due to the fact that our son plays basketball and we enjoy watching his team play. Still, once every four years, I turn into a sports nut. I find myself glued to the Olympic Games just as if I were a die-hard sports fan all year long.

Over the last two weeks I have enjoyed watching many Americans stand on the podiums and receive their medals. I could not resist standing every time our national anthem was played and I was so proud of each and every athlete. But, in spite of the grandness of the Olympics, the one event which touched me most did not happen in China. It was not the result of a hard won race or the spectacular flips and spins of gymnastics. It didn’t involve a swimming pool, a diving board or a track meet. In fact, it was a simple passing of the keys rather than the spectacular awarding of the medals. It was the quiet reading of the Scriptures rather than the triumphant playing of the anthem. There was no fan-fair and there were no fireworks. No records were broken and no international stars were born. And I suppose it should be noted that it happened in Mexico, not in China. No, this was a simple event that involved three families and three small houses.

It seems that there are poor people just to the south of us who do not watch the Olympics. A stalwart group of folks from our church discovered this some years back and decided to make a trip to Mexico each year to build houses. They built three while the Olympics were taking place. Frankly, the houses they built would be little more than tool sheds to you and me. But, to the families who had no home before those little houses were built those homes might as well have been mansions.

When the builders returned they brought video with them. They told the stories of the people and we watched as they cleared the land, laid the foundations and built the three little one room houses. When the houses were finished and painted so beautifully, one red and two yellow, the leaders of each home building team held a little ceremony. They prayed over the new houses, gave the heads of the families each a Bible and handed them the keys to their new homes. To see the looks on the faces of those families, you might have thought they had just been given gold medals. Somehow, I just could not resist standing.

Sometimes I look around and I feel like I’m missing out on things. The fellow down the street has a nicer car and one of the folks in my office has a bigger house. Why did that guy win a gold medal when I had hopes of doing so when I was young? But, then I have the chance to hear the stories of people who are so grateful for so little and I find myself realizing just how selfish I can be. Sure, the real estate market is down and people are having a tough go of it. But, I live in one of the richest cities in the richest state in the richest country in the world. Perhaps it’s time for me to take stock of just how blessed I really am. How about you?

More on the Foreclosure Rescue Bill

2008-08-12T08:54:00.000-07:00

By Joel Persinger

While the world is focused on the Olympic Games and parents are focused on getting their kid back into school, many families are focusing on the Housing and Economic Recovery Act of 2008 and whether it might help them keep their homes. Real estate and lending professional are also scrambling to figure the thing out and are only getting it piece by piece.

That said, here are some new pieces to the already complicated puzzle. According to a number of reports, homeowners must meet the following criteria in order to have a chance of being helped by the new law: the loan must be on their primary residence, the loan must have been originated between January 2005 and June of 2007 and the payment must add up to 31% or more of the homeowners gross monthly income.

There are additional FHA requirements as well. For example: the borrower must pay an annual fee to FHA in the amount of 1.5% of the loan amount as an insurance premium. If the homeowner sells the property within on year of making the deal, FHA keeps 100% of the profits realized from the sale. If they sell after one year FHA gets 90%. The percentage keeps dropping in increments of 10% until it reaches a 50% split after five years. The bottom line is, the government may help you to keep your house, but it won’t be for free. You’re going to have to pay up sooner or later.

Just like the problems it’s trying to solve, this law is complicated. Real estate and lending professionals are learning more about it every day and so far, it looks like it may be helpful for some folks. But, it won’t help everyone. Many of the people who are currently in trouble with their mortgage or whose mortgage interest rate is soon going to adjust, will not be helped by this legislation. This is particularly true when the property in question is a rental or a second home. Another sticking point is that all of the fixes require the lenders to agree to take hefty losses. As a result, it’s not surprising that many prognosticators are predicting that short sales and foreclosures are going to continue for some time to come.

While it’s not a perfect fix, it is a fix and it will help many people. In fact, for the right people in the right situation this new “bail out” plan could be a dream come true. So, if you think it might help you or someone you know, the best place to start is with your lender or your Realtor. Just don’t forget that there are other available options in case this one doesn’t work for you.

What does the new housing bailout bill do?

2008-08-04T14:47:00.000-07:00

By Joel Persinger

The recent signing of the Housing and Economic Recovery Act of 2008 by President Bush has a great many distressed homeowners clambering to find out how much help the new law might actually provide. Many of these folks are desperate to find some way to keep their homes and are hopeful that this new law might provide some new options to help them do it.

Like most laws passed these days, this new housing act makes changes in many areas. Among other thing; it raises the conforming loan limits, increases regulation of Fannie Mae and Freddie Mac, modernizes some FHA programs, creates some tax incentives, establishes new licensing requirements and gives birth to something the House of Representatives called the “Hope for Homeowners Program.”

During the run up to the signing of this bill, just about every news story that I saw focused more on the possible bailout for distressed homeowners than on any other part of the bill. This is precisely because the law provides an opportunity for some distressed homeowners to refinance their existing high interest rate loans into new, affordable FHA-insured loans based upon the current market value of their homes. That’s right… current market value. If the home was worth $600,000 when you purchased it and it’s only worth $400,000 now, the new loan would be based upon the $400,000 current value. It sounds like a miracle! Still, there are some limitations that you should know about.

While the program appears to be a good one, there are some hitches that borrowers should be aware of before they dive in. First of all, this program is not available to everyone. In order to be eligible, borrowers must have taken out their current loan on or before January 1, 2008. They must also certify that they did not intentionally default on their original mortgage or any other debts as well as declare that they did not provide false information in order to obtain the loan. If the borrower has been convicted of fraud or has previously defaulted on a government loan that borrower is not eligible. The borrower must also meet other standards established by the program’s governing board, including documenting income by use of the borrower’s two most recent tax returns. But, the biggest obstacles for the homeowner to overcome are these: the borrower’s current lender has to agree to take the loss and the borrower has to agree to share any future equity they may gain the home with the government on a 50/50 split. Like my grandfather used to say, “There’s no such thing as a free lunch.”

Still, if you’re trying to save your home, this new law and the program it provides may just be the ticket. But, be careful, get lots of advice and remember that this is new to those in the real estate industry too, and it may take a while before we “experts” have a full grasp of all the possibilities.

A Good Alternative to Foreclosure

2008-08-04T14:46:00.000-07:00

By Joel Persinger

With all the talk of increasing foreclosures, and fears of banking failures such as that which occurred with Indymac Bank and the worries surrounding the general stability of the lending market, more and more people I meet are asking probing questions about possible alternatives to foreclosure. One such alternative is the “Short Sale.”

Short sales were last used extensively during the market down-turn of the 1990s. A short sale occurs when property values have declined to the point that homeowners owe more on their properties than the properties themselves are worth. When that happens and a homeowner can no longer make the required payments, the two most common results are foreclosure or selling the home for less than what is owed on it with the permission of the lender. The latter is called a short sale.

If you are keeping your eye on the market in San Diego, you have probably noticed that a significant percentage of the homes currently for sale in the county are distress sales. Many are foreclosures, but a large number are short sales. This may be due to the fact that a short sale can do far less damage to your credit rating than simply going through a foreclosure.

According to an article published on the CBS News website in June of 2007,

“While in both cases, short sale and foreclosure, the delinquent mortgage will negatively affect (the seller’s) credit rating, at least short sellers avoid having a “debt discharged due to foreclosure” on their credit reports. Mortgage and credit experts say that, after bankruptcy, having a foreclosure on your credit report is the worst result and will reduce your credit score by over 250 points. You could also have to wait up to three years to qualify for a mortgage at a reasonable rate.

The article goes on to state that a short sale will generally be report as, “a pre-foreclosure in redemption… and can result in a credit score reduction of 100 points or less.” According to CBS News, “People who successfully complete a short sale may also qualify for a mortgage at a reasonable interest rate in as little as 18 months.”

Given the current market and the large number of distressed sellers in San Diego County, many real estate offices, including my own, have focused on helping sellers in financial distress complete short sales. This is simply because a short sale is often a far better alternative than a foreclosure. So, if you or someone you know is in financial distress and facing foreclosure, a short sale may be a better way to go. A qualified, experienced real estate professional should be able to help.

Can Congress Fix The Problems With The Housing Market?

2008-08-04T14:45:00.000-07:00

By Joel Persinger

Everywhere I go these days people ask me what I think will happen if Congress passes all the “Fixes” and “Reforms” it is promising in order to “help struggling homeowners” in the current housing crunch. Since so many folks have asked, I thought it might be nice for me to give the question some consideration.

So far, Congress has proposed relief for struggling home owners, a tightening of regulations for mortgage lenders, punishing the lending industry in one form or another, making it more difficult for high risk borrowers to get loans in the first place, saving Freddie & Fannie as was done a week or so ago and so on, and so on. Among the most recent proposals is a plan to bail out those homeowners who can’t pay their mortgages. Of course, nobody seems eager to mention that the money to bail these folks out must come from somewhere. So, who do you think is going to pay for it? It’s not a trick question. The answer is, you. The tax payer is going to pony up the coin for any such deal that becomes law.

I’ve been sitting back quietly watching those in government wrestle with the problems of the housing and lending market for a while now and since I have been asked so often lately about my thoughts on the issue, I have come to three inescapable conclusions:

While it could be debated whether the government had any part in getting the housing market into its current troubles, it appears to be an absolute certainty that no-one in the government has the vaguest idea how to fix them.
The old political axiom, “When in doubt, grand stand” has never gone out of style. Only in politics can so many supposedly grown men and women madly scurry around in a frantic attempt to look good while actually knowing and accomplishing nothing and still manage to get paid for it.
The use of smoke and mirrors is not exclusive to flashy Las Vegas magicians. Government types know that if they keep the public off balance by proposing useless “Fixes” long enough, the market will eventually correct itself. The sad truth is that nobody in government is actually trying to fix anything. They’re just trying to rack up the highest number of “Fixes” so they can take credit for fixing it when it finally gets around to fixing itself. Never in my 50 years of life have I ever seen government actually attempt to fix anything without making things much worse in the process.

So, what are we left with? First, government is not going to fix this. It will fix itself if we just let it. Second, if government actually tries to fix it, it will get worse. Third, the market is supposed to do what it is doing. It spiked upward and needed to correct downward. So, it went down and it will continue to do so until it is done correcting for the spike. Like the old saying goes, “What goes up must come down.” And lastly, there is no painless way out of this. Uncle Sam is not really our long, lost, rich Uncle and he can’t bail us out every time we blow it. Some times we just have to fend for ourselves.

Do you own your house or does it own you?

2008-08-04T14:43:00.000-07:00

By Joel Persinger

When I was a kid my mother used to caution me not to put more food on my plate than I could eat. If I didn’t listen and ended up sitting at the table, stuffed to the gills and unable to finish my supper, she would look at me with a disapproving scowl and remark, “Your eyes are too big for your stomach, young man.” These were words I heard many times growing up and they taught me more than the obvious lesson they were meant to teach. Among other things, I learned that gluttony and bad consequences go hand-in-hand.

In today’s American society, many of us have failed to learn that our eyes are often bigger than our stomachs, or in many cases, our bank accounts. Even if we did learn it as kids, every aspect of our culture rails against that lesson and entices us to have more and bigger regardless of the consequences. As Brian Buffini (a popular business coach) is fond of putting it, we are driven to “…spend money we don’t have buying things we don’t need to impress people we don’t even know.”

Just yesterday I had the opportunity to talk to an old friend at church. He was brimming with excitement as he announced to me that he and his wife had finally purchased a home. I have seldom seen him so excited. He told me all about the house itself, how excited he and his family were and then finally, about the deal. To his credit, he had really done his homework. He had established a family budget, investigated the current real estate market, determined exactly what his family could afford, and then and only then gone shopping for a home. As a result, he made a fabulous purchase. His new home is just what they need as a family, exactly what they can afford and best of all, they own it. It doesn’t own them. Many other folks cannot say the same.

As I write this column, Realtors, attorneys and credit experts all around the country are working to help thousands and thousands of families who are upside-down on their homes. How did so many people end up in such a mess? I submit that it is a result of never having learned the simple lesson my mother used to preach, “Only take what you can eat, Son. Remember, your eyes are often bigger than your stomach.”

Is the market picking up?

2008-06-23T12:57:00.000-07:00

By Joel Persinger

It seems that the burning question on everyone’s lips this past week has been, “Is the market picking up?” I don’t know if you have been asking that question, but it certainly has been asked of me at least once per day for the last week or so. As a consequence, I started asking other people and here is what I heard.

An agent I spoke to who works at another office told me that he was thrilled that his clients had the opportunity to buy homes at lower prices. But, he was finding that the prices were being “bid up” because every property that his clients expressed an interest in had received multiple offers. Consequently, by the time the properties sold, the discounts were gone.

Even non-agents reported similar opinions regarding the current market’s trend. When I stopped by the office and spoke to our Transaction Coordinator, she seemed genuinely excited to report that things were picking up and the number of escrows being closed seemed to be increasing. One fellow at church began telling me that his offers on short sales were not moving foreword as rapidly as he would have liked. So, he and his wife began looking at bank owned properties only to find that a bidding war was underway at any they seemed to find interesting.

Obviously, my poll was not conducted in any scientific way and certainly the sample of people polled was tiny by any measure. Just the same, I found it fascinating that everyone I asked expressed an optimism regarding the real estate market that I have not heard for quite some time. Buyers seemed to feel that the time to buy had arrived and agents expressed a guarded optimism associated with the fact that they actually had clients to work with and properties for their buyers to buy.

All that having been said, available statistics do not appear to agree with the optimism expressed by my sampling. I wouldn’t let that dampen the prospects though. The available statistics are forever and always several months old. Therefore, what is really happening in the marketplace happens before anyone can conclusively prove that it is actually happening. That’s why we have talking heads on the news and guys like me who write columns like this one.

The bottom line is this. No one knows definitively if the market is picking up. But, it sure seems like it and we can all hope that what appears to be happening really is.

Checking Credentials Can Keep You Out of Trouble.

2008-06-23T12:55:00.000-07:00

By Joel Persinger

Having eaten in parts of the world where the origin of the food and the cleanliness with which it was prepared were questionable at best, I have gotten into the habit of looking for the big blue and white health department placard whenever I stop at a restaurant to eat. If that placard has anything but an “A” on it, I’m out of there! Something tells me that if you looked up and saw a “C”, you’d be gone too.

Checking credentials, whether you’re looking for that “A” at your favorite eatery or checking the licensing history of a prospective Realtor, is one step you can take to avoid giving yourself and your wallet a bellyache.

Just last week one of my agents asked me to attend a meeting with an agent from another office who had expressed a desire to work with us in our efforts to help people who are financially upside down on their mortgage payments. It was the first time any of us had ever met the agent in question or visited his office and the meeting did not go quite as planned. The agent was pleasant enough, but there was just something about the gentleman that didn’t seem right.

As we walked through the parking lot after the meeting my agents and I went over our concerns. None of us could quite put a finger on what was wrong, but one said, “I just don’t trust that guy.” Later that afternoon I received an email from one of my agents who had attended the meeting. She had followed up on the concerns and checked the fellow’s licensing history. As it turns out, his license had previously been revoked! In the strongest words possible, she suggested that we decline to work with that agent and that brokerage. The emails that followed made me very proud of my agents. It was unanimous. We would not work with that agent or that office.

But, what if we had? What if my agent hadn’t checked the licensing? What if we hadn’t followed up on our concerns when the little voices in our heads were telling us that something wasn’t right? We could have started to work with a potentially unethical or even criminal real estate agent. Worse yet, what if one of our clients was hurt as a result?

This may sound like fear-mongering to you, but let’s be honest, there are bad people out there. Fortunately, for every dishonest real estate person there are thousands of good, honest agents who care about their clients. The trick is making sure you end up with one of them and not with the bad guy. One step you should include in your vetting of Realtors is to check their licensing by visiting www.dre.cahwnet.gov. It’s not a foolproof way of weeding out the stinkers, but it sure helps.

The Real Estate Game is a Team Sport

2008-06-23T12:53:00.000-07:00

By Joel Persinger

There is something about human nature which drives many of us to be independent. As a result, the spirit of the “do it yourselfer” is strong in each of us. I ought to know. I spent half of this past weekend working on our house and the other half working on our car. But, while this spirit of independence can be a good thing, it can also hold us back when we apply it to a process that is as complex as buying, selling or investing in real estate. Over the years I have seen many example of this, but one fellow whom I met recently brings the whole idea of independence gone wrong into sharp focus.

This fellow had decided to get into the real estate market when things were booming. So, he went to a seminar, learned enough to be dangerous and proceeded to purchase all or part of thirty homes over the following year. He rented out all thirty of the properties and both he and his wife thought they were on the road to riches. Along the way they told many of their friends about their new found success and enticed several of them to follow in their footsteps. They, in turn told others and so it went until some dozen or so families had joined in the game without any idea of how to play it. By the time I met this gentleman he had lost all thirty properties as well as his family home and the other dozen or so families who had followed his example had lost everything as well.

The list of mistakes he made was lengthy to be sure. Here is a short list: None of the properties had a positive cash flow, the tax dodge he tried to use didn’t work, the “trust” in which he placed the properties did not accomplish its intended goal, the properties were purchased at full market value, he used all of the equity from his personal residence to fund his enterprise, the loan structures he used were extremely risky, etc, etc. In short, his entire approach was a ticking time bomb waiting to go off. At no time did he consult an attorney, CPA, real estate broker or anyone else.

Real estate is no place for the “do it yourselfer.” My grandfather was one of the most successful people I have ever known and his favorite saying was, “You don’t have to be smart, just hang around smart people.” He surrounded himself with those whom he knew would look after his best interest and had the knowledge and expertise with which to do so. So, if you are going to play in real estate you will need a good lawyer, CPA and real estate broker at a minimum. You will also need a deep understanding and acceptance of the fact that the real estate game is a team sport.

Patience is Your Best Tool in a Real Estate Transaction

2008-06-23T12:52:00.000-07:00

By Joel Persinger

The one trait which causes more trouble in a real estate transaction than any other human trait is that of impatience. Over the years I have seen many clients, both buyers and sellers, shoot themselves in the feet simply because they could not be patient. Some unforeseen little thing causes escrow to be late in closing and the next thing you know the buyer or the seller gets his knickers in a knot and the entire transaction, on which everyone has worked tirelessly for weeks or even months, starts to fall apart.

Pitching a fit over little things is a common practice among real estate buyers and sellers. In fact, this type of childish behavior is one of the greatest contributors to the failure of real estate professionals to communicate properly with their clients. Most of us don’t like being yelled at. If we know that a client is prone to throwing fits, we naturally tend to avoid sharing bad or even potentially bad news with that client. Of course, this only postpones the inevitable. The news eventually must be shared and the resulting explosion of attitude on the part of the client often has the effect of killing an otherwise healthy transaction.

To make matters worse, some real estate agents are just as guilty of losing their patience. In the almost twenty years since I began my practice of real estate I have seen more real estate “professionals” throw the equivalent of kicking and screaming fits then my wife has seen among children in her almost twenty years as an elementary school teacher. Some agents have actually adopted, “I’m going to scream and yell and throw an obnoxious fit” as their main style of negotiating. This approach is both unprofessional and unproductive.

In today’s market, which is flooded with foreclosure and pre-foreclosure properties, impatience can be even more deadly to a real estate deal than ever before. Because a great many of the properties currently being sold require the approval of the lender involved, buyers are being forced to deal with large institutional bureaucracies rather than with individual sellers. Negotiating with the loss mitigation department of a national or international banking firm can be somewhat like trying to get a quick, favorable and accurate response from your least favorite branch of the government. Such negotiations require herculean efforts, flexibility, a multitude or repeated attempts and yes, plenty of patience.

When a client understands the ups and downs of the process and can exercise patience the transaction goes much more smoothly and the chances of successfully closing escrow are greatly increased. This is in no small part due to the fact that the Realtor is then able to focus on getting the job done rather than acting as arbiter, counselor, psychologist and whipping post while trying at the same time to negotiate a favorable outcome. So remember, patience is not only a virtue it is also the best tool you can employ to increase your chances of success in a real estate transaction. When challenges arise, as they most certainly will, take a deep breath, count to ten, think about what I’ve written here and be patient.

The Reality of Buying Bank Owned Properties

2008-05-26T10:28:00.000-07:00

By Joel Persinger

When I started in the real estate business, I worked with a guy who was often quoted as saying, “People are funny” before continuing on to describe what particular act of “people” had prompted him to express dismay at their actions once again. Almost twenty years later, I have come to realize that he was right all along. About some things, “people are funny.”

Take buying foreclosed upon properties for example. With the market having changed significantly, foreclosures have now become REOs (Real Estate Owned). For reasons which I do not have space to explain here, banks sell REOs directly through real estate agents rather than through the more traditional real estate auction. Most people call them, “Bank owned properties.”

What causes me to lament that, “People are funny” is the unbelievable fact that buyers expect these properties to be both cheep and in top notch shape. Such expectations are unreasonable and, frankly, unrealistic. When homeowners can no longer make their payments and find themselves facing foreclosure, it is quite common for them to stay in the home as long as possible without making a payment. Along the way, they often strip the house of anything valuable. Even if they are generous enough not to trash the place, they certainly do not maintain it. Thus, at a minimum the home has been lived in for six months to a year without any maintenance or care before the lender manages to foreclose. By the time the bank actually gets the property, it is generally in serious need of attention.

We all seem to understand that homeowners don’t want to throw good money after bad by taking care of a house that the bank is going to foreclose upon, but we forget that the banks have lost money on these homes as well and are not particularly keen to dump more money into them. Consequently, banks often put these properties on the market just as they are. Some are just dirty. Others will require considerable work to get them into a livable condition. Either way, the vast majority will NOT look like model homes when you see them.

So, what’s a buyer to do when he wants a deal? As my son would say, “Get real.” Remember that you get what you pay for. If you buy a house cheep, you will probably have to put some work and money into the property. Therefore, it is of vital importance that you have someone knowledgeable about home repair and rehabilitation to help you. You also must have the money set aside with which to get the job done. If you are fortunate enough to find a bank owned property in great shape, don’t expect to get a deal. Everyone else is going to want that one too. You will probably have to pay more if you want to have a prayer of buying it.

Choosing the Right Advisers

2008-05-12T09:54:00.000-07:00

By Joel Persinger

There is an old proverb that says, “Plans fail for lack of counsel, but with many advisers they succeed.” This little bit of wisdom, penned by King Solomon, is quite invaluable. However, problems can arise when we choose the wrong advisers or forget that Solomon wrote “many”, and instead seek advice about everything from only one person.

Not long ago I attended a meeting with some clients who were being served by one of the Realtors in my office. These folks were having some financial difficulties and needed to sell their home for less than what they owed on it. The process is called a, “Short Sale.” We are working on a great many short sales and have developed an expertise in that area. This is precisely why the clients in question had been referred to us.

During our meeting, it became apparent that these folks had done little homework regarding their situation. While we are experts in the field of real estate, we are not experts in the law or regarding taxes. So, my agent and I strongly urged these nice people to speak to an attorney regarding other possible options and an accountant to determine to what degree there would be any tax liability associated with their short sale. They agreed and promptly made appointments with both an attorney and a CPA.

Following their meeting with their attorney they called my agent to tell him of their decision to move forward with the sale. He asked if they had consulted with a tax professional. They replied that they had not, but that they had an appointment with one coming up in a day or so. A few days later my agent followed up. The clients informed him that they would indeed have some tax consequences, but that they were prepared for them. The real problem, they said, was that the CPA had told them that short sales don’t work and that the lender probably won’t accept a short sale anyway. Not surprisingly, we later learned that the CPA had never been involved in a short sale.

So, let’s look at the concept of “many advisers.” It goes back thousands of years to a time when an ancient King ruled a powerful kingdom. Just as with our President today this King, named Solomon, surrounded himself with advisers. Some advised him regarding domestic issues and others on matters of war and relationships with other nations. I’m sure you will agree that he probably didn’t ask his generals how to address the problem of traffic congestion within his cities or defer to his domestic advisers on matters of war. Neither should we ask a CPA for advice regarding the practice of real estate nor a real estate broker to counsel us regarding our taxes.

Each professional has the potential to provide valuable insight upon which you can base well informed decisions, provided they each understand their limitations and confine their advice to what they really know. When they step outside of those boundaries, you may wish to reevaluate your choice of advisers.

Buying a Bank Owned Property

2008-05-12T09:53:00.000-07:00

By Joel Persinger

Now that home prices have been down for a while, many are the folks who call my office asking about the possibility of purchasing foreclosures. It seems that some seminar gurus have been making the rounds again and people are starting to get excited about investing in real estate.

That’s all fine and good except that buying foreclosures in today’s market is a bit different from what it might have been a decade ago. Today, many, if not most foreclosed upon properties are NOT sold at auction. This is because many of the properties have more owed against them than they’re worth. As a result, the bids at auctions are often far too low to even come close to covering what is owed on the properties. Lenders safeguard themselves against such eventualities by establishing the bidding high from the start. Thus, nobody will bid above what the lenders will bid and so, the lenders often take the properties back and simply list them for sale with a real estate broker. Such a property is called a REO (Real Estate Owned) and they are listed by the hundreds with brokerages that specialize in selling REOs. They are sold in, “As is” condition, just as they would have been if sold at auction and, they are often sold at a discount.

Since these properties are available through real estate brokers, you don’t need to have a specialized approach in order to buy them. You simply call your agent and have him show you the properties just as you normally would. Then you make an offer, begin negotiations and away you go.

Still, there are some differences you should be aware of. Unlike, a homeowner who is selling his home, banks are exempt from certain disclosure requirements. In fact, some banks simply will not make some disclosures even though they are required to do so. This is why you will need to do a little investigating of your own. For example: you should always have the property inspected by a professional, qualified home inspector and you should spend some time talking with neighbors about the neighborhood and the history of the house.

Negotiating with banks and many REO brokers can be difficult. You will almost never get to speak to the bank directly. You must deal with the REO broker. Unfortunately, they’re not much better. Quite often, they won’t return phone calls, almost never answer the phone, hide behind three levels of assistants and often adopt a, “My way or the highway” style of negotiating. In most cases, you’re not going to buy a REO property for fifty cents on the dollar, but you can get a very good deal if you simply take your time and do your homework. And don’t forget, a good real estate agent can help you a ton.

Truth or Consequences

2008-04-22T17:35:00.001-07:00

By Joel Persinger

When I was a kid, one of the game shows my parents most liked to watch was called, “Truth or Consequences.” As far as I know, that show has been gone for decades. But, what is still with us is the idea that lies can bring about terrible consequences.

On a daily basis, my staff and I work with homeowners who are in terrible fixes. In most cases they either purchased their homes using risky loans or were not entirely truthful when filling out their loan applications, or both. While it might be considered foolish, there is nothing illegal or immoral about taking out a risky loan. However, telling bald faced lies on a loan application is a crime. It’s called, “Fraud.” Some lies are as simple as indicating that the buyer is going to live in the home, when he is actually going to rent it. Others are more serious, such as the buyer telling the lender he makes more money than he actually does. Regardless of the severity of the lie, it is still a lie and can carry serious consequences when (and I say when, not if) the lender becomes aware of it.

The other notable area in which folks often get themselves into hot water is during the sales of their properties. I was reminded of this yesterday as I talked with a friend from church who had expressed a desire to purchase my car. As he marveled at the car’s excellent condition, I felt it prudent to also point out its faults. People can get excited about cars, particularly a convertible when summer is just around the bend. As evidence of this I could mention the fact that he gleefully put the top up and down several times. But, the moment I mentioned that the air conditioning needed to be charged and that the sound system was on the blink he began to take a much more serious look at the vehicle.

This is precisely the kind of behavioral shift that home sellers want to avoid. They know that home buying is an emotional process and they don’t want to chase a hot buyer away by telling him things about the house that might be bad. I’ve actually had sellers tell me, “It’s not a lie if I just don’t tell them.” Actually, it is a lie. It’s called, “a lie of omission.”

So, to illustrate how important the truth really is, it is an indisputable fact that the real estate and lending markets would not be in the pickle they are in if people had simply told the truth. Here are the facts, like them or not. Some lender’s lied when they neglected to tell their clients about the dangers of risky loans. Some buyers lied when they told lenders that their incomes were greater than they really were. Some sellers lied when they failed to mention that their homes were in worse shape than advertised. And yes, I hate to admit it, but some real estate people lied too. Even the politicians have gotten into the act by telling lies about what happened and who is responsible. Perhaps we all should have watched that old game show a little more often. As you may remember, it was called, “Truth or Consequences.”

A Solid Strategy And Great Tactics Are Vital to Your Success.

2008-04-14T10:57:00.000-07:00

By Joel Persinger

I am often asked the “Should I…” questions that are on most people’s lips the moment they run into a real estate professional. Lately the questions have come in the form of, “Should I buy now or wait until later.” In case you have been looking for a real estate agent to ask just that question, I thought I might answer it for you here.

It’s probably a safe bet to say that everyone knows the real estate market is experiencing a serious downturn. The press has been shouting the news of the sad and frightening aspects of the bursting “real estate bubble” for quite a while now. But, they haven’t talked about the good part. This is the part that honest to goodness investors capitalize on. Now, I’m not talking about the folks who call themselves investors because they jumped on the bandwagon when things were so good that it was almost impossible to fall off. I’m talking about real investors, folks who have taken the time to learn the ropes, develop winning strategies for success and tactics with which to implement those strategies along the way.

Real investors, like my grandfather when he was still around and like some of the clients we serve in my office, see great opportunity when everyone else is wringing their hands lamenting disaster. When the press is shouting, “Foreclosures are up, the end is near” investors are thinking, “Foreclosures are up, what a great opportunity!” The difference between the two is nothing more than understanding how things work and having a solid strategy and good, nuts and bolts tactics with which to succeed.

At this point, you’re probably thinking, “That’s all fine for you, Joel. But, how does that help me? I’m not an investor. I just want to buy a home.” The answer comes when you think about association. When I was a kid my mother, looking at the boys I knew from school, would say, “Don’t hang around those boys… they’ll get you into trouble.” By the time I was five years old I had learned that bad character corrupts good morals. Then my grandfather started to teach me one of the most valuable lessons I have ever learned in life. Over and over as I grew up he would tell me, “You don’t have to be smart, just hang around smart people.” And so, I learned that foolish people who do stupid things would bring me to harm and wise people who do smart things could help me succeed.

Following these simple lessons can help you succeed as well. In order to be successful as a buyer or seller in this market, you have to work with people who know what they’re doing. The way you find them, is to look for agents who work with REAL investors. Those agents know the ropes, because real investors won’t work with them if they don’t. Once you find one; be respectful of his time, don’t be afraid to pay him well and put on your thinking cap… you’re on your way to success.

Is a Deed in Lieu of Foreclosure The Best Solution?

2008-04-07T10:47:00.001-07:00

By Joel Persinger

With so many folks owing more on their homes than the properties are worth, many have elected to sell their houses in short-sales (sales in which the lender accepts less than what is owed). However, some people are opting for what is called a, “deed in lieu of foreclosure” (signing the property over to the bank to prevent a foreclosure from occurring). But, is this the best solution?

At a recent “broker’s breakfast” hosted by the San Diego Association of Realtors, real estate brokers and managers gathered from around San Diego County. The subject was foreclosures and the attendees heard attorneys representing both the California Association of Realtors and the San Diego Association discuss the problems and issues presented as a result of the large number of foreclosures flooding the market. Among the subjects discussed, was the practice of lenders offering a “Deed in Lieu” as an alternative solution to foreclosure or short-sale.

As a general rule, when homeowners are facing foreclosure they fear three major consequences: damage to their credit rating, the lender chasing them for the difference between what they owe and what their home is worth (the deficiency) and the possibility of having to pay taxes on that difference. The overriding reason why many homeowners elect to sell their homes in short-sales rather than allowing them to be foreclosed upon is in order to minimize the damage in all three of those areas. The question at hand was, “Does a deed in lieu of foreclosure accomplish the same goals?” Unfortunately, the answer is not simple.

The problems with accepting a deed in lieu of foreclosure as your chosen solution can be summed up in a four word quote by one of the attorney’s who was presenting at the morning breakfast. He said, “Deed in lieu? Careful!” While it may be tempting to just give the property back to the lender and wash your hands of the whole mess, the truth is that many lenders won’t let you do that so easily. According to this attorney, some lenders have adopted the practice of offering a deed in lieu of foreclosure while reserving their right to come after you for any deficiency after the home is eventually sold.

This does not mean that a deed in lieu is not the best solution. It simply illustrates the need to check with qualified professionals who have your best interest at heart before agreeing to anything. A short list of those professionals should include an experienced real estate broker, a qualified attorney and a Certified Public Accountant or tax attorney. Most importantly, do not sign anything without fully understanding what it says.

Are home loan programs changing?

2008-03-24T10:07:00.001-07:00

By Joel Persinger

Although we have relatively constant weather in San Diego County, that is not the case in many other parts of the country where there is an old saying, “If you don’t like the weather, wait five minutes.” Where my younger sister lives in Florida, this is most certainly true. One minute it’s raining and five minutes later there isn’t a cloud in the sky.

While you might think it far-fetched to use a weather analogy to describe the current home lending market, given our current market dynamics, we could easily adopt a similar saying such as, “If you don’t like the current loan market, wait five minutes.”

Just last Wednesday, my entire staff was present at a meeting presented by an expert in government loans such as those offered by VA, FHA and CalHFA. It was quite an eye-opener for an old real estate dude like me. Government loans have been out of the picture in San Diego County for more than a decade simply because there were better options to choose from. The government loans were available during that time. They just weren’t as attractive as the many non-government programs that were around. However, with the recent tightening of the non-government lending market, “Govi” loans have begun to shine a little brighter.

As the meeting progressed you could have read the shock on everyone’s faces as we discovered that 100% financing was still available using government loans such as CalHFA. For all practical purposes, 100% loans had become a thing of the past among non-government lenders. As a result, we couldn’t get over the fact that they were still possible using government loans. Well… that was on Wednesday. By Saturday CalHFA had announced that the rules had changed. “If you don’t like the weather…”

While many people like to watch the stock market, it is the bond market which has the most immediate effect upon home loan interest rates. Every day my email is jammed with hundreds of messages about the lending market in general: at least six or seven of which are short messages about the bond market which read like this, “The bond market is up by ___ basis points”, followed later in the day by, “The bond market is currently down by ____ basis points”, and so on. Each one of these six or seven daily shifts in the market effects the mortgage rates for that day. What a roller coaster. “You say you don’t like the weather? Just wait.”

So, with loan programs and interest rates that are moving targets at best, how is a borrower supposed to count on anything? It isn’t easy. One thing’s for sure, borrowers who chose to work with knowledgeable, experienced loan officers who have their ears to the ground and their noses to the grindstone are far better off. Now is not the time to be working with amateurs.

Whom does your real estate agent represent?

2008-03-24T10:06:00.000-07:00

By Joel Persinger

With the rapid expansion of the foreclosure and pre-foreclosure markets, many real estate professionals have forgotten whom they represent, particularly when the agent represents a seller who is in the throws of a foreclosure. While that agent would most likely have been hired by the seller, he or she would also be required to deal with the lender. The lender would have a financial interest in the home and could stand to lose money if the home was sold for less than what was owed on it. It has been my experience that many agents in this situation cannot seem to figure out whether they represent the seller or the lender. Indeed, I have found that some brokerage firms have no more clue as to whom they represent in these cases.

Just recently, I wrote an offer for a client who wanted to purchase a property which was in pre-foreclosure. The seller had missed some payments. But, the lender had not yet begun the full process of foreclosing on the property. My client was a sophisticated buyer and understood the process of buying such properties. I called the seller’s agent and explained the situation, outlined my client’s intended approach and asked if the agent and the seller were willing to move forward. The agent got back to me later that same day and told me that he had explained the situation to his client and that the client wanted to move forward with the deal. The next day my client tendered an offer. As previously agreed, the offer was low, but only for the purpose of beginning the negotiation with the lender.

Four days went by without a call from the seller’s agent acknowledging that he had received the offer. So, I called him to follow up. He told me that he had not presented the offer and did not intent to. I asked why. He said he did not feel that he was doing what was right by the lender. I asked him whom he represented. With an incredulous tone he replied, “The seller.” I answered, “Then why are you worried about the lender? Shouldn’t you be more concerned with getting your client out from under that house?” He scoffed at me, and ended the conversation. My client did not buy the house. In fact, he has elected to wait until it goes into foreclosure and buy it directly from the lender. In the meantime, it’s still on the market, unsold. The lender has begun the foreclosure process and the seller is in more hot water than ever before. This seller’s agent did not understand whom he represented. Does yours? My advice is, make sure your agent is looking after you before you hire him. Otherwise, you could end up in the same boat as the gentleman in this story.

Is now a good time to buy?

2008-03-01T12:18:00.000-08:00

By Joel Persinger

This past Friday I had lunch with an investor friend of mine who regularly buys distressed properties. We were having a meeting to discuss the work my agents are doing in finding such properties so that his investment group can buy them, thereby helping our clients get out of there financial binds. During our conversation some interesting subjects came up. I thought you might find one of them interesting.

The investor was telling me about some of the networking groups he had been part of over the years. He was helping me identify some potential business opportunities. Right in the middle of a sentence he paused, looked at me with a puzzled expression on his face and said, “I can’t believe how much some of these groups have shrunk in the last couple of years. All those people who were so excited about buying and selling a few years ago are gone.” I asked, “What about you?” He said, “I’m still in. I’m glad their gone. It makes things easier for me.”

When I was a boy my grandfather, a long time real estate investor and broker, asked me what I thought would happen if my grandmother’s favorite department store had a sale. I replied, “She’d be there all day.” Then he asked me what I thought would happen if that same store raised its prices by half. I said, “She’d never go.” With a giant smile upon his face, he exclaimed, “Exactly! And yet, people do precisely the opposite when it comes to real estate. Remember that, Joel. That little fact about human nature will serve you well some day.”

My investor friend was expressing amazement at witnessing the same phenomenon that my grandfather had taught me about forty years earlier. When prices go up, people scratch and fight for the chance to buy real estate. When prices go down, they all sit back, holding tightly to their wallets and wait for prices to start going up again so they will feel safe enough to buy. If you take a moment to apply that way of thinking to the supermarket or department store as my grandfather did, you will quickly recognize the insanity of that approach.

Whenever I point this out, many people say, “But, you can’t find any deals in this market!” You should know that I’ve been hearing that same statement for my entire career. Indeed, I heard it a number of times from those who were watching my grandfather make money in troubled times forty years ago, while at the same time denying that it was possible for him to do so. Even my investor friend said it at lunch the other day. But, unlike many others he didn’t forget the most important part of the statement. He said, “You can’t find any deals in this market, unless you know how.”

This brings me back to another lesson my grandfather drilled into my head from the time I was six years old. Over and over he would remind me, “Joel, you don’t have to be smart. Just hang around smart people.” So, if people are telling you that finding a deal in today’s real estate market can’t be done, you are hanging around the wrong people. I encourage you to take steps toward meeting people who know where the deals can be found and how to find them. Because, the fact is that now is the time to buy!

When Will The Market Get Better?

2008-02-28T19:08:00.001-08:00

By Joel Persinger

At least three or for times a week someone will take me aside and ask me, “When will the market get better?” Of course I always find myself asking, “What do you mean by better?” and the answer is almost always equivalent to, “Back the way it was when things were good.” “Good” is the buzz word for the time a few years ago when prices were sky rocking upward and houses were selling so fast that real estate professionals could hardly hang up the “For Sale” signs before the properties were sold. Unfortunately, these good times were not normal and, as anyone who reads the paper can tell you, the prognosticators predict that such a market is not likely to return any time soon.

This very fact has brought about a burning in the bellies of many homeowners which is stoked by worry over declining home values and when, or even if those values will ever climb back to their previous highs. Real estate values, having experienced an unbelievably rapid increase over a short period of years, have dipped dramatically as the market has adjusted to that unprecedented, unrealistic and meteoric rise. As news persists of ever declining prices with no end in sight, more and more homeowners are starting to sweat.

Like any other market, real estate ebbs and flows. The tide comes in and the tide goes out. History has proven that it never comes in without later going out and it never goes out with later coming back in. The tide came in and stayed in for quite a while. Many people enjoyed swimming in the warm water and some, overcome by the euphoria of the times, foolishly braved those good days without sunscreen. Somehow, the tide staying in as long as it did protected them from getting burned. But once the tide went out, those who could no longer stay in the water started getting pretty hot and many have gotten themselves a might bad burn. It will take quite a long time for the pain caused by the changing tide to pass. But, pass it will and the tide will come in again. However, in the meantime this tide has left thousands of foreclosures and soon to be foreclosures behind on the sand.

When a market is flooded with distressed properties such as foreclosures, the owners of those properties sell them at a discount in order to move them quickly and thereby cut their losses. The result is that the values of surrounding properties which are not distressed are driven down as well. It will take many months for all those properties to be foreclosed upon and resold. In that time, banks will price them very low and continue to reduce the asking prices in order to get them sold fast. That will cause home values to continue their decline as this bloated inventory of distressed properties are reintroduced to the market.

So, how long will it take? Truthfully, no one really knows for sure. Most predictions I have heard have estimated that our current market will stick around for another year or two and that it may take eight to ten years until prices reach their previous highs. The only thing I know for certain is what anyone who has ever watched the tide at the sea shore can tell you. When the tide stays in a long time, it tends to stay out a long time as well. But, give it time. It will be back!

The Era of Assigned Responsibility

2008-02-19T07:52:00.001-08:00

By Joel Persinger

Like most of us, I never thought I would end up sounding like my parents or grandparents when I grew up. Well… as the old saying goes, “Never say never.” My grandparents were born at the turn of the last century. When I was a young boy they would subject me to long lectures about how much different life was during their time and how much people in my time seemed to have lost their moral and ethical compasses. “Be careful not to grow up like that, Joel,” my grandmother would say.

Admittedly, that was a long time ago and things were quite different then. No one in my family ever locked their cars or even bothered to take the keys out of the ignition. My Aunt Peggy, who was born in 1888 in Indian Territory Oklahoma, didn’t even own a key to her house. Even if she did, it wouldn’t have made a difference since none of the locks worked. Like most of the men of that time, my Great Grandpa Jim, the local barber for decades, carried a revolver everywhere he went. Those old folks, God bless them every one, had this crazy notion that people were responsible for taking care of themselves as well as for their own choices and actions. When I made good choices, I got the benefit. But, when I made poor ones, I was taught to stand up like a man, admit that I had messed up and “take my lumps.” As a result, I grew up understanding all too well that this is a world which functions on the principle of natural consequences.

Human beings learn best by failure. It is the pain of falling off the bicycle which motivates us to learn how to stay on it. It is the shock of discovering gravity the hard way following our first baby steps which motivates us to keep putting those shaky little feet in front of us in an attempt to avoid hitting the floor again. This is why my grandfather and mentor always told me, “You win or you learn.”

When we refuse to take responsibility for our actions and failures, we deprive ourselves of the opportunity to learn. This is why so many people today seem to repeat the same mistakes. Instead of owning up to their failures and learning the lessons that they teach, it has become all too common for today’s “learners” to shift the blame to others and thereby assign their responsibility to someone else.

All this past week I have met with clients who have lamented the painful position in which they have found themselves after having made poor decisions in the financing of their homes. Most of them are about to lose their houses and are beyond the help that might have been available had they acted sooner. In each and every case, they told me how wronged they had been by the lender or real estate agent with whom they had worked to purchase or refinance their property. None of them took any responsibility upon themselves.

I am not here to excuse the predatory practices of unethical and unscrupulous loan officers and real estate agents. Thousands of folks have been badly hurt by such people. But, that does not release us as individuals from the responsibility we each bear for our own welfare. Each homeowner who has been hurt chose the loan program they used. It’s their signatures on the bottom lines. They are the ones who elected to buy more house than they knew they could afford at the time. Let us not forget our own involvement in selecting the unpleasant paths we are on.

It’s a hard thing to hear if you are in that position and I will probably get myself into trouble for saying it. But, if we refuse to take responsibility for our actions, then we cannot and will not learn from our mistakes. As someone once said, “those who refuse to learn from history are destined to repeat it.” So, here’s a little of the hard medicine my Grandpa Charlie gave me as a kid. “You win or you learn. There is no losing. You only lose when you refuse to learn from your mistakes.”

What are interest rates today?

2008-02-14T12:19:00.000-08:00

By Joel Persinger

It is an inescapable reality that the easiest questions to ask are often the most difficult to answer. The most common question of this type in real estate lending is, “What are interest rates today?” At first glance the question seems quite simple and most people who ask it expect a hard number which they can be assured will apply to them if they chose to get a loan. The problem is that providing an accurate answer off the cuff is impossible, to say the least.

Every borrower has a different financial picture from every other borrower, and the specific pieces of information required to fit a specific borrower to a specific loan are numerous and complex. By way of example, the process of determining what interest rate a particular borrower will be quoted for a home loan depends upon the type of loan, the amount borrowed, the borrower’s credit score, the ratio between the value of the property and the amount borrowed, the ratio between the borrower’s income and current debt, the type of property purchased, the borrower’s intended use of the property and so on.

As simple as we might like it to be, there is no such thing as a one size fits all interest rate for home loans. Just as a clothier must work hard to help a customer select a business suit which is of the correct style, color and fit to help that customer look his best, so must a lender work hard to fit a loan to the specifics of a borrower and that borrower’s needs. For example: a borrower purchasing a $450,000 house as a personal residence with a 20% down payment, using a 30-year fixed rate loan with a credit score of 780 is going to pay a completely different interest rate than a borrower purchasing the same house as a rental with 30% down using an interest only loan with a credit score of 680. Since each customer and each situation is different, each loan and corresponding interest rate will be different as well. This is why good loan officers when asked the “what are interest rates today?” question will often respond by asking for more specifics about the borrower’s situation.

The problem is further exacerbated by the rapid tide changes within the current lending market. The days in which my grandfather went to the local bank to talk with the bank manager to discuss a loan are gone. In those days the bank loaned only the money it had on deposit from its customers. My grandfather could get a loan in the blink of an eye simply because the bank manager knew him personally and knew that he was a good credit risk. It was a relationship. It should also be noted that, because the banks only loaned the money they had on deposit, interest rates were determined by that bank and were often the same for long periods. They were much easier to predict and count on.

Today, the mortgage market is like a giant, interconnected spider web reaching across the world. It involves not only the bank on the corner, but banks across the world as well as the stock and bond markets in every nation. As the saying goes “When one part of the world’s financial market sneezes, the rest of the world catches cold”. Markets ebb and flow depending upon the actions or inactions of people, companies and governments all across the globe. Consequently, the interest rate that is quoted at noon on Monday may be completely different than the rate which will be quoted just one hour later. Adding this level of volatility to the already complicated process of fitting a specific loan to a specific borrower can make quoting rates off the cuff like predicting how many times a specific gambler at a specific craps table will throw a seven on any specific day.

So, the next time you ask your mortgage loan professional about current interest rates, perhaps you’ll better understand why that question always seems to be answered by more questions. Without the specifics, any interest rate you’re quoted is useless.

Does paying your agent less really save you money?

2008-02-06T14:10:00.000-08:00

By Joel Persinger

Just about everybody loves a bargain. That’s why retail stores are packed with bargain hunters each year on the day after Christmas. But, some folks hunt for bargains in the wrong places and find that saving pennies often causes them to come up short when the dollars are counted. Such is the case when it comes to skimping on paying your real estate agent.

This past week one of my agents came to me with an often heard lament regarding a client who wanted to cut the amount of commission my agent would receive. My agent tried to explain the situation to the client. But, in the end the client would not budge and the agent moved on. Out of curiosity, I asked my agent why she didn’t take the job. She said, “I didn’t want to lie.”

In order to gather some perspective, it may help to understand how a real estate profession gets paid when he or she sells a home. In the case of the agent who represents a seller, the seller agrees to pay the agent a fee which is generally a percentage of the sales price. That fee is then split with the agent who represents the buyer. Most of the time, they split the fee in half with each of them receiving half of the fee. For example: a seller may agree to pay his agent 6 percent of the sales price with his agent sharing half of that fee with the agent who represents the buyer. Thus, in this example both the seller’s agent and the buyer’s agent receive 3 percent of the sales price as their fees. From time to time, the seller’s agent might find the buyer himself. In this case, the entire fee of 6 percent would be paid to the seller’s agent since he represented both the seller and the buyer in the transaction.

Since these percentages can represent a significant fee, some sellers insist upon paying their agents less. What they don’t realize is that such fee cuts do nothing to help them reach their goal of selling the property. In many cases, fee cuts accomplish the opposite by motivating agents to sell other properties instead.

My agent was negotiating with a client who insisted upon paying her less if, in the process of marketing the home, the agent found the buyer herself and represented both the seller and the buyer in the transaction. The seller was willing to pay 6 percent as long as the buyer was represented by another agent and the fee was split between the two agents. But, if my agent, who was going to represent the seller, also found the buyer, the client was only willing to pay 4 percent. The seller told my agent that another agent whom the seller was also interviewing was happy with this arrangement. My agent tried to explain that what seemed like a deal was really nothing but smoke and mirrors. But, the client could not see the truth.

The seller was hunting for a bargain that she was never going to get and the other agent was not going to tell her. Given the simple fact that there are thousands of real estate agents actively attempting to sell property, the odds are against the seller’s agent actually finding the buyer. The seller’s agent is one person and there are thousands of buyer’s agents out there. Situations in which the agent represents both seller and buyer are very rare. Therefore, the discount the seller was trying to get was meaningless. Even if the odd chance for my agent to sell one of her client’s properties came along, she would naturally work harder to sell one of the properties that paid a full commission. Consequently, it is almost a guarantee that my agent’s seller will never pay only 4 percents since her agent will never work to find a buyer for her house. It was just a way to make the seller feel like she was going to get something so that the other agent could get the deal. Perhaps now you understand why my agent said, “I didn’t want to lie.”

The bottom line is this. Some bargains are not bargains at all. When it comes to real estate professionals, the old adage is often true, “you get what you pay for.”

The dirty little secrets of real estate

2008-02-04T11:05:00.001-08:00

By Joel Persinger
YourRealEstateDude.com

Just about every industry has its dirty little secrets that only the insiders know and that are almost never revealed to those outside and certainly never explained to the customer. Real estate is no different.

Just the other day, a friend of mine told me about a lady who had been referred to him by one of his other clients. Apparently, she contacted him to talk about selling her home and was quite concerned about the declining market we are currently experiencing. During the conversation, she quizzed him regarding the level of marketing he would use to sell her home. Apparently, she had spoken to another real estate agent prior to talking with him. As the story goes, she was thinking about hiring the first agent because he had promised to place her home on hundreds of websites and to do much more advertising than any other agent might. To prove his worth, this first agent had claimed to have a track record of selling homes faster than any other agent due to his fabulous advertising strategy.

The dirty little secret is that the first agent’s promises amounted to nothing more than smoke and mirrors. He really hadn’t promised to do anything that most other agents don’t do. Any time a real estate agent places a property for sale in the Multiple Listings Service, hundreds, if not thousands of websites all around the country pick it up and place it on their pages. Claiming the unique ability to place a client’s home on “Hundreds of websites” is disingenuous to say the least.

While it is true that some websites offer additional services by subscription, such as the ability to post additional photos, the simple fact is that the property will appear on the site in most cases anyway, just because it has been posted in the Multiple Listings Service. Therefore, in most cases, the additional marketing that is promised is a fallacy and provides no additional benefit to the client whatsoever.

To illustrate this, let’s take a look at the first agent’s claim that he can sell homes faster because of his advanced marketing strategy. When I asked my friend what his response was to this claim, he said he explained the advertising fakery to the client and helped her understand that price is really what will get a home sold. If a seller prices a property low enough, it will sell quickly. At that, the client told him that she was somewhat disappointed in the first agent because he wanted to list the property for sale at about $50,000 below the latest comparable sale price. It appears that the first agent’s record of selling homes quickly is due to his ability to convince his clients to sell their homes for less, rather than results obtained through his terrific marketing.

Basically, the advertising was a hook. The agent was pulling clients in with promises of advertising while pricing the homes low to get them to sell fast. He told his clients that the homes sold because he did more marketing. But, in truth they sold fast because he priced them well. My grandfather would have called such a person a “snake oil salesman.” So, here’s the truth without the snake oil. If you want to sell your home in this market, you will need to price it low. Hopefully, now that you know that you can avoid the flimflam man and hire an agent who will tell you the truth.

There Is No Substitute For Good Advice

2008-01-21T17:32:00.000-08:00

By Joel Persinger

King Solomon once wrote that “plans fail for lack of council, but with many advisors they succeed”. In the constantly changing environment of today’s economy and real estate market, a truer statement could not be found. Just when it seems that some new tax law, relief bill, lending product or government action has solved all the problems that the real estate market is facing, some expert sifts through the details and finds that the fix doesn’t apply to everyone. Often times the "everyone" it doesn’t apply to includes you and me. Hence the reason for getting lots of advice.

The problem I have run into recently is that some folks unwittingly seek advice from people who are not qualified to give it. This is one of the issues that King Solomon was trying to deal with when he suggested the use of “many” advisors. In the past, my wife and I have gotten excellent financial advice from people whose kids (we couldn’t help noticing) were disasters looking for places to happen. While we were grateful for the terrific financial advice, there was not the chance of an ant on a New York City sidewalk during rush hour that we would ever have asked those same people for advice about raising our children.

Keeping this in mind, it should be noted that real estate agents have a limited ability to give quality advice when it comes to… well… real estate. For example: in most cases, real estate agents are not attorneys, tax professionals, CPAs or builders. Therefore, although they may be great sources for advice about the process of selling or buying a home, the vast majority of real estate professionals are not the best people to ask about legal, tax or construction issues. In fact, it has been my experience, particularly where legal and tax issues are concerned, that most real estate agents know just about enough to be dangerous and not one bit more. Frankly, I can’t say that I’m much different. Even though I started in real estate in 1990, am the CEO of my firm, manage several agents and pride myself on keeping up with what’s happening in the real estate industry, I am by no means qualified to give legal or tax advice.

In a market in which many folks are facing the loss of their homes through foreclosures or having to sell their homes in other than ideal circumstances, it is of vital importance that they know where to get the advice they need. When it comes to determining the risks of legal action, estimating potential damage to credit ratings or preparing for the possible tax consequences of losing a home, your real estate agent, no matter how much you may like and trust that person, is most likely not qualified to offer advice. So, as your real estate dude, the best advice I can give you about getting advice is this: first, make sure the person from whom you are soliciting advice is qualified to give it, and second, make sure you have selected an advisor who will tell you the truth, not just tell you what you want to hear. If you follow these simple rules, the advice you receive is more likely to be the advice that you need.

B of A buys Countrywide Home Loans. Is that good?

2008-01-14T10:37:00.001-08:00

By Joel Persinger

It has long been suspected among those in the housing and mortgage industry that Countrywide Home Loans has had one foot in the grave and the other on a banana peal. As far as many were concerned, it was only a matter of time before the company slipped and fell into its tomb, never to be seen or heard from again. In fact, it was only about a week ago that there was wide spread speculation that Countrywide was on the verge of filing bankruptcy.

It all began when the sub-prime lending market started going to pot. The company was quickly overwhelmed by the sudden influx of home-loan delinquencies and foreclosures followed by a loss of investor funds. Money which had previously been available from government agencies and investment firms through the secondary money market began to dry up. This meant that Countrywide did not have money with which to fund new loans and had to incur additional debt in order to stay in business. According to MarketWatch.com, “The company borrowed more than $10 billion from banks and started funding a lot of its loans with retail deposits from its thrift unit, Countrywide Bank. It also borrowed a lot of money from the government through the Federal Home Loan Bank of Atlanta… But those lifelines began dwindling in recent months.” This left Countrywide stripped of support from investors. Stock prices came crashing down by over 80% in the last year, leaving many investors wondering why they had ever chosen to invest in the company in the first place. The only answer seemed to be some sort of “bail-out.”

This past week, Bank of America came to the rescue by purchasing Countrywide Home Loans for an estimated $4 billion in stock. That is less than one third of Countrywide’s estimated book value. It appears to be quite a deal for B of A. But, it is important to remember that along with Countrywide’s assets come its liabilities. Among the baggage that B of A will have to contend with are the many Countrywide loans which have gone bad as well as the tsunami of sub-prime mortgage litigation which may be heading Countrywide’s way.

All that having been said, this seems to be the right acquisition at precisely the right time. B of A swooped in and purchased Countrywide for a song and can easily solve the company’s funding problems. Bank of America’s retail deposit base is the largest in the United States. There will obviously be some bumps in the road for Bank of American, but all in all, this should bode well for all of the parties involved, particularly homeowners and the mortgage and housing industry as a whole. Countrywide is a huge player in the home lending industry. When huge players go down in flames just about everybody gets burned to one degree or another. Keeping the company viable by selling it to a giant like B of A can be nothing but positive.

Forecasts for real estate in ‘08

2007-12-31T09:40:00.002-08:00

By Joel Persinger

One of the many interesting things that happened in the real estate business this December was the “Eighth Annual Residential Real Estate Conference” presented at the Burnham-Moores Center for Real Estate at the University of San Diego. This year it was billed as “Outlook 2008.”

Several hundred industry leaders representing mortgage banking firms, banks, credit unions, real estate brokerages, home builders, developers and the like, attended this early morning symposium to hear the forecasts and fortune-telling of various economists and other industry leaders. This was followed by regional predictions offered by the current graduate students and a round table question and answer period involving a panel of experts. The end result was a rather fascinating examination of the previous year’s business statistics and a host of expert predictions regarding the coming year, not one of which seemed to agree with any of the others to any great extent. This is hardly surprising. Any time you get twenty “experts” to come together and opine, you are certain to get at least twenty different opinions. As my grandfather used to say, “A camel is nothing but a horse that was designed by a committee.”

All the same, there were some general agreements and not just a few interesting little tidbits of information that came out of it. Among them was the consensus that the recent downturn in the San Diego real estate market is quite different than that which occurred in the early 1990’s. Deputy Chief Economist for the California Association of Realtors Doctor Robert Kleinhenz, Ph.D. was most eloquent in his defense of this assertion when he clarified the differences in the basic economies of the two periods and the underlining causes of the downturns. According to Dr. Kleinhenz, the housing slump of the 1990’s was chiefly the result of high paying jobs leaving the County as the companies which offered them moved to other states. I was practicing real estate at the time and vividly remember the mass migration of aerospace jobs from San Diego to Denver, Colorado during that period. Aerospace was one of many industries that left town. The result was a staggering drop in home prices during a time when interest rates were quite high. The real estate market simply came to a halt.

By contrast, today’s San Diego economy is far more vibrant and the causes of today’s real estate slump are quite different. Unlike previous real estate downturns which were caused by other forces in the economy, Dr. Kleinhenz demonstrated that, for the first time that he could discover, our current downturn has actually come about in reverse. In the past, the real estate market has slowed as a result of other disruptions in the economy. This was the case in the 1990’s. However, for the first time according to Dr. Kleinhenz, the real estate market was driven to its knees by itself. There was universal agreement between the presenters at the conference that the current sharp decline in housing sales was most radically affected by the lending industries decision to tighten underwriting standards in the second quarter of 2007, making it much more difficult for borrowers to acquire loans.

This general consensus was that lenders may loosen their underwriting standards somewhat this coming year and that changes in the law will have some positive affect on lending as well. The economists’ predictions were that prices will continue to decline slightly for the first half of 2008 and that the market, while still remaining slow, will begin to turn around in the second half of the year. It should be noted that the students who presented agreed. This is perhaps the most important piece of information, since from year to year the students appear to have been more accurate in their forecasts than anyone else. Either way, this is not nearly the gloomy picture of the coming year that many have painted. If 2008 turns out to spell the end of real estate’s downward slide and begin its recovery, it could be a happy new year after all.

New Tax Law Helps Distressed Homeowners

2007-12-31T09:40:00.001-08:00

By Joel Persinger

One of the many wonderful things about Christmas is the fact that our leaders in both the Congress and the Whitehouse would like to be able to go home for the holidays. But, they have to get their work done before they can go. Consequently, they actually put their noses to their respective grindstones and get some things done. There’s nothing like a deadline to spur someone on to greatness. This Christmas season is no different.

As reported by the California Association of Realtors, on December 20th, just in time for Christmas, President Bush signed into law a measure that gives tax breaks to homeowners who have mortgage debt forgiven. This is a fabulous Christmas present for all those who are forced to sell their homes because of financial hardship, yet owe more on their homes than the houses are presently worth.

Under preexisting law, when a homeowner sold a home for less than the balance owed on the loan, the lender would send that homeowner a 1099 for the difference between the amount the lender received as a result of the sale and the balance due on the loan. If the homeowner had a loan balance due of $500,000 and was only able to sell the home for $400,000 the lender would likely receive somewhere in the neighborhood of $375,000 after all the costs of sale were subtracted. Preexisting law required the lender to send the homeowner a 1099 for the difference; in this case $125,000. The homeowner would then be required to pay taxes on the $125,000 as if they had actually received that money. Many such folks are already bailing like mad to keep their financial ships afloat to begin with. A tax liability of this magnitude would likely put a hole in their boats that would sink them financially for years.

As of the signing of Mortgage Forgiveness Debt Relief Act of 2007, the problems created by the “phantom tax” have been effectively eliminated for many distressed homeowners. This paves the way for many more sales to be completed without the need for lenders to foreclose. Previously, the main obstacle preventing homeowners from selling prior to foreclosure has been the fear that they will end up swamped in tax liability. As a result, many have chosen to simply walk away from their homes in the hope that the non-judicial foreclosure process might prevent their lender from sending them the 1099. It has been a choice of the lesser of two evils; sell the home for less than what is owed and suffer the tax consequences or allow the lender to foreclose and suffer the greater damage to the homeowner’s credit score. The change in the law will allow the homeowner to sell the home without the income tax consequences, rescue some of their credit rating by doing so and walk away rightfully feeling that they have done their level best to do what is right. It may also stem the tide of foreclosures which have been predicted this coming year.

As with any new law, there are rules that must be followed and limitations as to its application. For example: the law applies to loans secured by a qualified principle residence (qualified principal residence indebtedness is that which was incurred in acquiring, constructing, or substantially improving a residence), so your rental property is not going to be covered. There are other restrictions as well. So, getting good tax advice is a must. Still, for those who will be helped by the new law, it is most likely the best gift they will find under their tree this year.

Does the congress have the “Big Fix?”

2007-12-31T09:35:00.001-08:00

By Joel Persinger

This past week the U.S. Senate passed S. 2338, the FHA Modernization Act. It did so to great fanfare. The California Association of Realtors even sent out a broadcast email to all of its members boldly stating, “Senate Passes FHA Loan Limit Increase! Big Win for California REALTORS!” This was supposed to be the panacea, the cure-all pill for what ails the housing and mortgage markets. Since the bill passed, my phone has been ringing off the hook with people calling to pump me with questions about what this is going to accomplish and how soon the market will turn around as a result of the Senate’s amazing achievement.

Politicians are a funny breed, and when you put a bunch of them together and ask them to solve a problem they have a very strange way of going at it. Committees are formed, hearings are held, talking points are issued, blustery speeches are given and promises are made all in the name of fixing the problem, which quite often was created by the politicians in the first place. Take the current state of the housing and mortgage industry, for example. Some years back, the congress decided that everyone in this country was entitled to own a home regardless of whether they could actually pay for it. So, the political folk put pressure on the mortgage industry to find ways to lend money to people who otherwise would never have a prayer of getting a loan. Thus, the sub-prime lending market was born.

Many years later we have a collapsed sub-prime market and a great many politicians who have been making blustery speeches expressing their shock and dismay at the fact that the evil mortgage industry has put so many people’s lives in unbelievable turmoil. Those greedy lenders have been making ridiculous loans to low income people who had no way of paying them back; never mind the fact that lenders would never have done it if congress hadn’t pushed them to do so. So, they march into the hallowed halls of congress, form committees, hold hearings, issue talking points, make blustery speeches and promise to fix the problem that the evil mortgage companies have caused.

I realize that by pointing out the classic role reversal on the part of congress I may appear to have become a cynic in my middle age, but there are some things that government simply doesn’t do well and fixing the problems it creates is one of them. By way of illustrating my point, let’s look at just one of the many issues plaguing the FHA Modernization Act which the Senate just passed. On the one hand, the Senate has expressed its concern that so many borrowers with no money were previously able to get loans. But, according to Shanne Sleder at Clarion Mortgage the bill that the Senate just passed by an overwhelming majority vote would reduce the amount of down payment that a borrower is required to have in order to get an FHA loan from 3% to 1.5%. This directly contradicts the Senate’s stated intent by lowing the bar, effectively allowing people with less money to get a loan. As Albert Einstein once said, “The problems that exist in the world today cannot be solved by the level of thinking that created them.”

Hope for the best. Prepare for the worst.

2007-12-10T12:36:00.000-08:00

By Joel Persinger

The holidays have seen the government begin to wrestle with the on-going problems in the lending and housing market. Congress has been working on several bills, the President has proposed fixes for the mortgage industry and talking heads on television have thrown opinions around like snow balls in Julian. Even the Presidential candidates have started weighing in, promising the moon and the stars and anything else that might help their campaigns garner increases in the polls.

The most recent attempt to save the struggling housing market is the plan announced last week by President Bush. After meeting with mortgage industry leaders, the President announced a plan that would potentially save sub-prime borrowers whose loan rates are about to adjust upward from the “teaser” rates they currently enjoy to much higher interest rate. Without such relief, many people’s mortgage payments could almost double, potentially placing them in the position of having to walk away from their homes. Foreclosures would rise and the housing market would slide deeper into a slump.

In case you haven’t read the news about it, here are the basics. According to the Whitehouse, the plan is meant to help some 1.2 million distressed homeowners by freezing the current low interest rates for some distressed homeowners for a period of five years. There are some limitations: anyone who is 30 days late on their payment or has ever been 60 days late is excluded. Likewise, anyone whose loan adjusts prior to January 1, 2008 or is judged by the lender to be capable of paying the loan at the higher rates is also out of luck. Still in all, it appears to be a decent plan, at least in theory.

The issue at hand is the secondary mortgage market. After they have lent money to homeowners, lenders sell the loans to investors by packaging them into mortgage-backed securities. This means that anyone who has mortgage-backed securities as part of their investment portfolio (401K, money market fund, retirement fund, etc.) quite possibly owns part of these loans. So, how do you solve the problem presented by the fact that big wigs in the mortgage industry have apparently agreed to accept less interest on investments, which in many cases, they no longer own? It seems logical to me that the folks who own these loans just might not agree with the idea of getting less return on their investment, particularly when the big mortgage companies made their money when the sold the loans in the first place. Many in the industry are expecting a number of law suits to be file surrounding this issue which could delay the implementation of the plan.

How this will all flesh out nobody really knows, so the bottom line question in my mind is, “What can you and I do about it?” The simple answer is, if you are in some financial trouble or about to be when your loan adjusts, the only advice I can give you is to hope for the best. Things just might turn out all right. But, just in case the result is not quite what we’ve hoped for, it’s always best to plan for the worst by getting solid advice from professionals you trust. That way you won’t be caught sleeping.

The Professionals Only Market

2007-12-03T21:36:00.001-08:00

By Joel Persinger
YourRealEstateDude.com

This past week I had occasion to bump into a few Realtors I know. Without exception each one asked me, “How’s business”. One fellow went on for quite some time about his single client who has, according to him, been quite a challenge. He expressed his frustration at having no choice but to work with a client who is a stinker simply because she’s the only client he has. Then he finished his lament with, “I keep wondering if this is only happening to me.” What I found most interesting was that each and every one of these folks expressed the same lament in almost exactly the same words, “It’s not that I don’t have any business, I just don’t have any business that will close escrow.”

So, why do so many real estate people have plenty of clients who want to sell or want to buy, but few, if any who can actually achieve it? The answer is simple. This has become a “Professionals Only” market.

In the terminology of “business” TV news shows, the current real estate climate is called a “down market” or “slump”, etc. Lenders have experienced serious losses due to loans going bad and have tightened the requirements that borrowers must meet in order to get a loan as a result. Sellers have to compete with thousand of “foreclosure” properties being sold by banks. Banks price these properties low so that they will sell fast. This drives prices down, often to the point that the average seller can no longer afford to sell. Thus, fewer people can buy and fewer people can sell. The situation gets worse when we consider the number of distressed sellers in the marketplace who owe more on their home than the property is currently worth. There are also those folks who are frozen in place because they can’t sell their current home in order to move up to a larger one or downsize into a smaller one. No matter how you look at it, the bottom line is that it is much harder to buy or sell in this market than it was before.

When times are good and properties are selling like hot cakes everybody who has a desire for fast cash races down to the Department of Real Estate to get a real estate license. Suddenly the market is flooded with thousands of new real estate agents, most of whom have no idea what they’re doing. Real estate firms, anxious to get their piece of the fast market pie, lower their hiring qualifications so much that just about anyone who can fog a mirror and has a real estate license can hire on. The result is a market full of inexperienced, opportunistic agents.

By contrast, our current market is agonizingly slow. Inexperienced, opportunistic agents don’t thrive in such markets because there is no easy money to be had. They have never actually established a business or built lasting relationships with their clients. Instead, they simply grabbed the business that fell into their laps during the good times. Neither do they know what to do in order to help any clients they may have now. Thing have become more difficult and complicated. Some of these opportunistic folks may hang on for a while, but most will leave the business before long leaving only the career minded, professional agents behind to serve.

So, if you are one of the clients hoping to sell or buy, where does this leave you? In my humble opinion, it’s time for you to leave the amateurs behind and look for a seasoned agent who has lived through times like these before. This is a “Professionals Only” market. Hire a professional. There are plenty of them out there.

Making the choice between “Short Sale” & Foreclosure

2007-11-26T17:22:00.000-08:00

By Joel Persinger

As the prices of San Diego County homes have come down and low introductory interest rates on many home loans have gone up, some San Diegans have found themselves owing more on their homes than the properties are worth. This has given rise to a sharp increase in foreclosures as home owners find it difficult to cope with the increase in their mortgage payments and see little incentive in holding on to homes that aren’t worth what’s owed on them. In addition to foreclosures, this has also brought about a rash of what are called, “Short sales”, and with them the age old question posed by sellers, “Should I try to sell it or just walk away?” While there is often no clear answer, the question did spark a debate among my agents during the weekly training meeting at my office this past week. But, before I share the highlights of that discussion, a short explanation of foreclosures and short sales is in order.

Foreclosure is the more commonly understood of the two terms. Essentially, it refers to the process by which a lender reclaims a property when a borrower has failed to make the required payments on the loan. The lender goes through “foreclosure” in order to sell the property for the purpose of recouping the money lent to the borrower.

By contrast, a short sale is an action taken by the borrower in order to avoid foreclosure. In this case, the borrower (or homeowner) attempts to sell the home in order to satisfy the loan. However, the value of the home has decreased to the point that the value is no longer sufficient to pay off the loan. If the homeowner places the property on the market and succeeds in finding a buyer at the home’s current market value, the lender will lose money on the deal. In this case, the lender would have to agree to take a loss for the difference between the amount of proceeds from the sale and the loan balance. If the lender accepts the deal, the property will have been sold “short” of the amount owed. Thus, it is called a “Short sale.”

The individual situation often dictates which option a homeowner will elect to take. It should be noted that there are pros and cons to each. In the case of short sales, while I have no way of confirming the assertion, I have heard many people claim that a short sale will not cause quite as great a ding on your credit report as will a foreclosure. This is often why homeowners will choose this path. However, a short sale requires a great deal of effort and significant disclosure of information. Among other things, the lender will require that the homeowner provide tax and financial records, draft a “hardship letter” explaining why the payments cannot be made and demonstrated a diligent effort to sell the property for the highest possible amount. By contrast, foreclosure is somewhat easier, in that you simply stop making payments and walk away from the property. Additionally, a foreclosure may not have the income tax ramifications of a short sale. In the case of a short sale, it is quite common for lenders to send the homeowner an IRS form 1099 for the amount of the lender’s loss. No such form is issued in the case of a foreclosure. However, as mentioned before, foreclosure may have a much worse effect upon the borrower’s credit rating.

If you find yourself in the unenviable position of having to choose between foreclosure and selling your home in a short sale, the best advice I can give is that you seek competent professional counsel prior to making any decision. At minimum, you should speak to both a tax advisor and an attorney. And make sure that both are knowledgeable and experienced.

Being thankful, even when it’s tough

2007-11-26T17:21:00.000-08:00

By Joel Persinger

Now that the holiday season has arrived, the traditional “slow season” for real estate has begun. Folks are starting to focus on travel plans, family gatherings and last minute shopping sprees. Not many people want to move during this time of year, so sales of homes slow down considerably. As you’re reading this, you may be thinking, “What planet are you from, Joel? How could real estate possibly slow down any more than it already has?”

Indeed, this year has been a tough one for the real estate business and for anyone whose business is somehow connected to it. The crazy rise in prices of a few years ago, the collapse of the sub-prime lending market and the resulting credit crunch have all taken their toll on San Diego’s real estate marketplace and, more importantly, on San Diegans. Sales of both new and existing homes have been down dramatically, mortgage loans are more difficult to get even though interest rates are at historic lows, home prices have gone down to the point that many sellers simply cannot sell or even refinance and many real estate and lending professionals have either left the business or are on their way out and just don’t know it yet. Support industries have also suffered. Residential construction is a prime example. As you drive around San Diego County you don’t see all that many homes being built anymore. This means leaner times for contractors and the companies and workers they hire.

Tough times like these make being thankful during the season for “being thankful” that much more challenging. That is, unless we chose to focus on the positive. Your home may not be worth as much as it was before, but if you have one to live in, you are ahead of many millions of people around the planet who cannot say the same. We live in one of the richest cities in the richest state in the richest county in the world. Your bills may not get paid on time and maybe they won’t get paid at all, but you probably ate this morning. So did I. We’ll both probably eat well tonight too. In this city we have good, clean, running water, electricity that works well over 99% of the time, we can go where we please when we please and unlike the Middle East, where many of us have family or friends in harm’s way over the holidays, nobody blows up marketplaces, weddings or schools. We even have it better than our counterparts on the East Coast. We have no snow drifts or blizzards. If we want snow, we go to Julian and play in it for a few hours before taking the short drive back to weather that is the envy of the world. Let’s face it, here the sun shines bright and the skies are clear almost every minute of every day.

Yes, times are tough financially for many of us, but when you really, honestly think about it, the blessings outweigh the curses in almost every case. So, as the year winds down and the holidays begin, I urge you to think about the good things, focus on the positive and have a blessed and happy holiday.

Is a Reverse Mortgage Right For You?

2007-11-26T17:19:00.000-08:00

By Joel Persinger

I received an email from a friend the other day inquiring about the viability of a reverse mortgage for his parents. It was one of several I have received recently and the tone of each and every one of them has been the same. The kids are worried that their parents are making a horrible mistake by opting for a reverse mortgage. So, what exactly is a “reverse” mortgage anyway?

A reverse mortgage is nothing but a tool to help older folks improve their lifestyles by accessing the equity in their personal homes without having to make a mortgage payment. While a normal home loan comes with a monthly payment which includes the interest on the loan, a reverse mortgage simply adds the interest due each month to the loan amount. The loan and the interest are paid back when the borrower moves or passes away. Thus, a senior with a reverse mortgage can borrow against his equity without having to make a payment.

The scary part for most people is the idea that the loan amount will get bigger each month because the interest is being added to the balance due. In other words, if you borrowed $100,000 against the equity in your home by using a home equity line of credit at an interest rate of 8.75 percent, you would have to write a check each month to make an interest only payment of $729.17. However, if you borrowed the same $100,000 at the same 8.75 percent interest using a reverse mortgage, the monthly $729.17 interest would simply be added to the amount you owe. You would never make a monthly payment.

This is an almost magical concept for many seniors. When a senior is barely making ends meet, eliminating the mortgage payment can do wonders for their financial picture. Likewise, many seniors who have small or perhaps no mortgage payments are struggling to survive on the fixed income of social security. A reverse mortgage allows them to use some of the equity from their home to supplement their income without risking the loss of their home. Yes, you read correctly. A reverse mortgage does not place a senior at risk of losing his or her home. In fact, the very concept of a reverse mortgage is designed around the idea of allowing seniors to live at home as long as they wish.

There are many misconceptions about reverse mortgages, so here are some of the basics. Everyone who is on the title to the home must be at least 62 years of age, there must be sufficient equity in the home, the home must be the borrowers personal residence, there are no mortgage payments, there is no income qualification and no required credit score, the loan does not need to be paid back until the last borrower sells, moves or passes away and neither the borrowers or their heirs will ever owe more than the value of the home at the time that the loan comes due.

While this all sounds great, there are some negative points as well. The loans are expensive compared to other types of home loans. This is due in part to the fact that the lender is insuring against you or your heirs ever having to pay back more than the home is worth. There may also be some hiccups for those who have gotten remarried to a younger spouse. As I mentioned earlier, everyone involved must be at least 62 years of age.

But, for most folks who have equity in their homes and who need to supplement their retirement incomes or would just like to improve their lifestyles, reverse mortgages could be just what the doctor ordered.

San Diego Real Estate Will Bounce Back

2007-10-29T10:50:00.001-07:00

By Joel Persinger

As with congregations all over town, my church got together this past Sunday and held a service in which the minister addressed the tragedy caused by wildfires throughout our beloved San Diego County. Following the service, I had time to visit with some friends, and the subject of the fires and their effect upon the real estate market came up.

This is not my first exposure to devastating wild fires. That came in September of 1970 when I stood on the porch of my parent’s home in Harbison Canyon and watched as the fires, which would eventually kill six people and destroy 175,000 acres, raced threateningly down the mountains some two miles on the other side of the valley toward us. The fire reached our land in less than ten minutes.

We were foolish in the extreme back then. My stepfather and a few of the neighbors decided not to evacuate, choosing to stay and try to save their homes instead. With little knowledge or understanding of wildfires, they tried to clear brush around the houses as my mother and my brothers and I watched helplessly through the picture window from our living room. By all rights, the fire should have burned up the house and the rest of us with it. Miraculously, both my family and our home survived. 382 other homeowners were not so lucky.

Over the almost forty years since that day, I have seen many wildfires in San Diego County. Obviously, none of them have risen to the severity of the Cedar fires of 2003 or the firestorm of last week. But in each case one bit of similarity has held true. Rather than shrink back from the challenge or adopt a “that’s their problem” mindset, the people of San Diego County, as well as many companies and corporations, have rallied around the victims with just about every kind of support. And, in each case, while the real estate market was effected in the short term to one degree or another, it has bounced right back.

I spoke with several clients and business associates on Thursday and Friday of last week. It may be the parent in me, but I just wanted to make sure they were in one piece. During my conversations I was told of the many plans to help the families who have lost their homes or whose homes have been severely damaged. A senior executive at one lending institution told me how frantically her company wanted to help the victims of the fires. I must admit that this response came as a complete surprise to me. It lifted my spirits to see the hearts of those with whom I work day after day and their earnest desire to help following such a tragedy.

There is a lot of bad news out there and we all know that the home loan and real estate markets have slowed to a crawl. It may well be that this past week’s events will slow things down further. But, have faith. The people of San Diego County are resilient and so is the Southern California real estate market.

Will This Week’s Fires Effect Real Estate?

2007-10-29T10:48:00.000-07:00

By Joel Persinger, GRI

With San Diego County experiencing the worst fire storm since the Cedar Fires just a few years back, it seems almost mercenary to talk about real estate. A much better thing to be thinking about at present is how to make certain our families are safe and what we might do to support our first responders and those who have lost their homes. Nevertheless, it is important to understand how this tragic event might affect the market for those whose homes are for sale and survive the fire.

As we all know, bad news for the real estate market has been all over the place this past week or two. Just two weeks ago the California Association of Realtors released its California Housing Market Forecast for 2008. In it, the association detailed its prediction that home prices and sales will continue to decline in the coming year, although to a lesser degree that in 2007. In addition, frightening front page articles appeared in both the San Diego Union and the Los Angeles Times detailing this year’s drop in home values and the agonizingly slow speed of the current market.

It is true that the real estate market is not doing well in San Diego and that next year, while expected to be slightly better, is still likely to be quite challenging. The fires probably won’t help matters and are sure to have some effect. Exactly how they will affect the market and to what degree nobody knows for sure.

Loans may be more difficult to cash in on in the short term. For example: I received a call from a mortgage banker this afternoon urging me to take any money I might need from my equity line as soon as possible. I asked why and he said, “Because lenders are freezing equity lines as fast as they can because of the fires.” It seems the lenders don’t want you to take money out since there is a chance that your house might burn down.

Homes sales and prices may decline further. Many folks are put off by natural disasters. Buyers may hold off from moving into an effected area immediately after such an event. People who live in the effected area may move away out of fear or as a result of emotional trauma. Homes may be more difficult to buy. Following the Cedar fire, some insurance companies refused to issue home owner’s insurance in San Diego. If the buyer can’t get insurance, the lender won’t lend and the buyer can’t buy the house.

On the other hand, homes which have been damaged or destroyed are going to need to be repaired or rebuilt, debris will need to be cleared and Infrastructure (such as power and telephone lines, roads, fences and so on) will need to be replaced. This means business for contractors and jobs for their employees. Insurance companies (and perhaps the government) are going to be spending quite a bit of money putting San Diego County back together.

Folks whose homes have been damaged or destroyed will need places to stay. Rentals may be easier to rent and some folks may just buy another house and be done with it, rather than move back to a fire hazard area.

The only thing we know for sure is that, while many of these short term effects may hurt, the real estate market will march on. We are in a down cycle in the market for sure, but, sooner or later it will come back up.

Everything is negotiable

2007-10-17T13:07:00.000-07:00

By Joel Persinger

Many years ago a friend of mine performed what I believed was a minor miracle. He went into a retail store and made a deal. I was looking for a portable keyboard stand at the local music store and had gone in with him to check prices. I had been to the swap meet many times and knew how to haggle, but I was firmly of the belief that such deal making was not possible with firmly established stores. My buddy, on the other hand, was not held back by such belief. Knowing that my birthday was coming up, he went back to the store later that day and purchased the stand as a gift for less than half the asking price. When he told me about the deal I asked how he did it. He said, “Come on, Dude! Everything’s negotiable.”

In the same way that I once believed that haggling with a retail chain was taboo, it is a common misconception in real estate that everything is standard. In fact, almost everything about a real estate transaction is negotiable. Negotiable items include commission paid to the realtors, the price paid for the property and the terms of the agreement. Many sellers seek to negotiate the commission paid to the agent and most everyone haggles over the purchase price of the property, but few buyers or sellers negotiate the terms of the agreement. This is due to the misconception among buyers, sellers and real estate professionals that a real estate transaction is a standardized process and therefore most parts are non-negotiable. Nothing could be further from the truth. The timing of taking a property off the market is one example.

In a standard real estate transaction an offer is made on a home that is for sale. When the offer is accepted or an agreement on price and terms is reached, the home is placed in escrow and taken off the market. The seller’s agent marks the property as “pending” in the multiple listings and all advertising stops. When the property closes escrow and the sale is completed, the sellers move out, the buyers move in and “Everyone lives happily ever after.” But what happens when the escrow doesn’t close?

In a market such as this one, it is common for escrows to “fall out”. In other words, the buyer can’t or won’t continue with the purchase and the escrow doesn’t close. Generally, there are no back up offers because the property was taken off the market when it entered escrow. As a result, the property would be placed back on the market and advertising would have to ramp up all over again. This is less than ideal for the seller since the process of selling the property must start back at square one. One way to avoid this situation is to negotiate non-standard terms.

I recently had a client who received an offer on his property from a buyer who had a large down payment and appeared to be ready to buy. I advised my seller to insist upon terms that would allow him to keep the property on the market to obtain backup offers until such time as the buyer had demonstrated that the loan was firmly in place and that she was ready, willing and able to purchase the home. The buyer agreed to the terms, we placed the home in escrow and the property remained on the market. About a week later the buyer cancelled. But, in this case, the marketing of the property had never skipped a beat. The seller was in a much better position to continue marketing the property because we took the approach that everything is negotiable and in every market there are ways to hedge your bet. This is only one example of many. So, keep an open mind and start haggling.

Avoiding the sharks in real estate waters

2007-10-17T13:04:00.000-07:00

By Joel Persinger

My grandfather used to call them, “Snake oil salesman.” My dad’s term of choice was, “Ambulance chasers.” But, the common term that I most often hear applied to such folks is, “Sharks.” They are the opportunists who prey upon those in trouble. They pop up at every disaster or financial downturn. So, it’s not surprising to see them circling the waters of the San Diego real estate market.

I have said many times that the current real estate market in San Diego is not bad; it’s just different. We found ourselves in an unusual market of double digit appreciation for a few years and those of us with short memories took that to be “normal” when it was not. The market we have currently is “normal.”

That having been said, the previous market spurred people to new heights of greed and unrealistic expectations, for which many are now paying the price. Homeowners and buyers leveraged just about every once of equity because money was cheep and easy to get. But that is no longer the case and many “homeowners” owe more on their property than it is worth. They are upside down, frightened and desperately looking for an escape, like shipwrecked sailors clinging to the last vestiges of their sinking vessel. Can you see the sharks circling? I can.

Every day I see the little signs posted on the side of the road here and there offering to help those who are in this unenviable position. In bold letters they announce, “Save yourself from foreclosure” or question, “Owe more on your home than it’s worth?” While some of these outfits might be legitimate, I’d bet my first dollar that most of them are simply opportunists looking for a quick buck from desperate people. In my humble opinion, you’d be wise not to jump into the water with any of them lest you get bit!

So, where do you turn when you’re upside down on your home and feeling like your taking your last ride on a ship called the Titanic? After all, these little signs on the side of the road are offering you a life boat and I’ve just told you not to climb in. The simple answer is to educate yourself by seeking lots of advice and doing your homework.

The first thing to remember is that there are no magic solutions, no matter what the “sharks” may claim. You probably didn’t get yourself into a financial mess without working at it and, like it or not, you’re going to have to work to get yourself out. The second thing is to get advice. If you owe more on your home than it’s worth, you should seek advice from a qualified attorney, a CPA who has direct experience helping people in your situation and a real estate broker whom you know well and trust to be honest and to tell you the hard truth.

As you pull these professionals together to work on your behalf, it is important to remember that, while it is helpful to delegate to people with greater experience and knowledge, it is never a good idea to abdicate your responsibility of taking care of your own affairs. It has been my experience that nobody cares more about your finances than you. My advice is to roll up your sleeves and stay actively involved. When it’s “sink or swim”, the only way to keep your head above water is to keep treading and the only way to keep from being eaten is to avoid the sharks.