I have a new REO listing in a newer subdivision in Eugene. Part of my due diligence for the asset manager I was researching the neighborhood. What i found was quite disturbing and I thought I would share it with you.
86 Lots in the subdivision
In the last 9 months 8 homes (10%) have sold
Of those 8 homes, 4 (50%) were fair market
Of those 8 homes, 4 (50%) were short sales or REO
Currently there are 4 homes (5%) on the market
Of those 4 homes 3 (75%) are fair market
Of those 4 homes 1 (25%) are distressed.
With the subject and property next door coming on market it will change to:
6 active listings (7.5%)
3 will be fair market (50%)
3 will be distressed (50%)
For the 4 current active listings: average days on market is 117, average price per square foot is $136
For the 8 sold listings: average days on market is 192, average price per
square foot is $128
What this does not count are the homes which are currently delinquent.
Also, it shows that 50% of the homes currently on the market, or sold
in the last 9 months were distressed in some way, which is very high.
Of these 14 listings 2 were/are short sales. Their average price per square foot is $114.
Of the 14 listings 7 were/are fair market transactions. Their average price per square foot is $139
The remaining 5 were/are foreclosures and sold for $123 per square foot.
What I find the most disturbing is the following summary information:
Average price per square foot for FORECLOSURE properties: $123
Average price per square foot for FAIR MARKET properties: $139
Average price per square foot for SHORT SALE properties: $114
If you are wondering what this means, well, let me tell you. It means, as I have been saying, short sales are KILLING property values. The bank would rather (if it makes sense) take the short sale than foreclose because the costs to foreclose are so much higher. In addition, government programs are giving banks rebates (so to speak) for doing short sales. So if the bank can get all or some of the deficiency between the short sale pay off and the full balance, it works better for them.
So where is the problem? The problem is for the people next door to the short sale transaction. Their property value goes down an additional $9 per square foot based on the averages I presented above. For a home with 1,800 square feet, that means $16,200 in lost equity.
Saturday, September 11, 2010
Monday, August 30, 2010
How Does This Remain Legal?
Let's talk about a home owner in distress. An investor comes along and gets the owner to agree to sell their house to the investor. The investor then opens negotiations with the bank. The "buyer" in the offer is one of the investor's employees. They don't use their company name as the buyer. The bank is then given the buyer's phone number, which is the company's phone number. When a Realtor is called out to do the BPO (broker price opinion), they are only allowed in the property escorted by yet another employee of this investor. The investor's employee then gives the Realtor a packet of information. This generally includes misleading comparable properties they want us to use as well as information regarding the offer on the table. It gets worse. I have even been given copies of letters from junior lien holders with the owner's account numbers.
While the investor is negotiating with the banks, they put the house in MLS at a much higher price. They market it with themselves as the seller. They are looking for an end buyer who will pay more.
They secure the buyer, and then they close escrow on the property. They are now officially the seller, though in MLS they were already representing that they were.
Here is a sticky point. Oregon law only allows Realtors to hold an earnest money check for three days. Prior to the investor taking title, the title company can't open an escrow file for it. They can't have two files open on the same house at the same time. So, they are unable to hold the check. We have checks sitting around for weeks at a time, waiting for a home.
I welcome your thoughts and opinions...
While the investor is negotiating with the banks, they put the house in MLS at a much higher price. They market it with themselves as the seller. They are looking for an end buyer who will pay more.
They secure the buyer, and then they close escrow on the property. They are now officially the seller, though in MLS they were already representing that they were.
Here is a sticky point. Oregon law only allows Realtors to hold an earnest money check for three days. Prior to the investor taking title, the title company can't open an escrow file for it. They can't have two files open on the same house at the same time. So, they are unable to hold the check. We have checks sitting around for weeks at a time, waiting for a home.
I welcome your thoughts and opinions...
Friday, August 13, 2010
The random pricing strategy for short sales.
I just completed a BPO on a really great property and as I was looking at the active and sold comps out there, steam was coming out of my ears.
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The random pricing strategy for short sale properties never ceases to amaze me. The following is mathmatecially accurate, but I have changed the names and numbers to protect the not so innocent. After you read it, tell me how you feel about short sales. I want you to also remember every sale recorded will impact the value of YOUR property. So, if your neighbor decides to no longer care and sell for below value, your value just went down.
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All comparable properties were within a one mile radius of the subject. Our market is fairly stable, we have had a decrease in activity since the end of the tax credit, but activity in April was artificially increased due to the tax credit, so the drops we are seeing are not as drastic as they seem.
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The subject's suggested value is $215,509 which is significantly higher than it's current listing price of $148,500. This is because the property is listed below value. In our area we have an alarming situation of homes being undervalued in short sale situations. The reason is because the seller doesn't care. When it comes to the point that the seller will be receiving no funds from the transaction their motivation to get the highest price possible is removed from the equation.
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In addition, we have listing agents who arbitrarily assign list prices without any thought to the actual value, again because it doesn't matter to them or the seller. Their primary goal is to get as many homes sold as fast as possible.
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The listing agent on this specific property is active in the short sale market and heavily solicits distressed property owners to short sale their homes.
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It is also important to take attention to the listing history. The subject was listed with this agent on June 7 2010 for $180,000. At 13 days on the market they dropped the price to $171,000. At 24 days on the market they dropped the price to $157,5000 and at 37 days on market it was dropped to $148,500, the current listing price. This is a well known strategy, list at a higher price and do frequent reductions. On the surface, Reliable Randy Realtor can then tell the loan servicing company that a higher value was tried and with consistent price reductions, they finally had to drop to such a low price due to lack on interest. The reality is that the property was not given a fair chance to receive an offer. 37 days is not enough time in our current market. In addition, buyers are shying away from short sales as they are tired of the inconsistency and lack of responses from banks. They are much more inclined to buy an REO or a fair market sale.
.
That is all!
.
The random pricing strategy for short sale properties never ceases to amaze me. The following is mathmatecially accurate, but I have changed the names and numbers to protect the not so innocent. After you read it, tell me how you feel about short sales. I want you to also remember every sale recorded will impact the value of YOUR property. So, if your neighbor decides to no longer care and sell for below value, your value just went down.
.
All comparable properties were within a one mile radius of the subject. Our market is fairly stable, we have had a decrease in activity since the end of the tax credit, but activity in April was artificially increased due to the tax credit, so the drops we are seeing are not as drastic as they seem.
.
The subject's suggested value is $215,509 which is significantly higher than it's current listing price of $148,500. This is because the property is listed below value. In our area we have an alarming situation of homes being undervalued in short sale situations. The reason is because the seller doesn't care. When it comes to the point that the seller will be receiving no funds from the transaction their motivation to get the highest price possible is removed from the equation.
.
In addition, we have listing agents who arbitrarily assign list prices without any thought to the actual value, again because it doesn't matter to them or the seller. Their primary goal is to get as many homes sold as fast as possible.
.
The listing agent on this specific property is active in the short sale market and heavily solicits distressed property owners to short sale their homes.
.
It is also important to take attention to the listing history. The subject was listed with this agent on June 7 2010 for $180,000. At 13 days on the market they dropped the price to $171,000. At 24 days on the market they dropped the price to $157,5000 and at 37 days on market it was dropped to $148,500, the current listing price. This is a well known strategy, list at a higher price and do frequent reductions. On the surface, Reliable Randy Realtor can then tell the loan servicing company that a higher value was tried and with consistent price reductions, they finally had to drop to such a low price due to lack on interest. The reality is that the property was not given a fair chance to receive an offer. 37 days is not enough time in our current market. In addition, buyers are shying away from short sales as they are tired of the inconsistency and lack of responses from banks. They are much more inclined to buy an REO or a fair market sale.
.
That is all!
Saturday, April 24, 2010
Why Open Houses are as Popular as Leaded Gasoline
As soon as a house is listed, sellers wonder “when is the first open house?”
Before we get into all the reasons why open houses are not the key to selling your home, let me share with you a statistic I came across:
On average less than 1% of all homes are sold by an open house.
Why are buyers not visiting open houses like they did in the past?
1. The internet. With expanded technology, high resolution digital photos, virtual tours and the like, buyers are able to see more on line than they ever could before.
2. Life, busy life. In our modern society many household have both adults working during the week. This leaves the weekend to run errands, do the shopping, attend and participate in sporting events, and all those kid activities like birthday parties. Buyers have such limited time that they want to schedule all their viewings at one time. Popping into one or two homes on Saturday, maybe one on Sunday and then maybe going out with their agent on Tuesday is just too much time. They want to do it all at once and go quickly.
So if potential buyers are not coming to look at the open house, who is? Well, not many people really. Traffic count at open houses has been decreasing steadily over the last few years. The majority of foot traffic in an open house are nosy neighbors, bored Sunday travelers, those looking for decorating ideas and people who are not serious about buying a home. Serious buyers are looking when the homes come on the market; they are not waiting for the weekend.
Why do some agents still do open houses? There are two reasons, same two reasons they have always had.
1. Because sellers want them and out of fear of losing the listing, they do them.
2. To pick up new buyers as clients.
What about the print ads which go with open houses?
1. Print ads are declining in popularity and soon will be as popular as leaded gasoline. Newspapers all over the country are closing their doors. Why? The internet (AGAIN). News is delivered to our Smart Phones, email, and web browsers in real time. Waiting until the next day to read the paper is just not done.
2. With declining readership, those ads are not read like they once were.
So, if open houses aren’t the thing, then what?
Instead of asking your real estate agent to hold your home open on Sunday, instead ask them to spend a few hours marketing your home online. If they don't know how or what else to do besides putting it on the MLS, you have a problem. It's probably time to interview a new agent. Internet marketing is number one in today's real estate market. Open houses were number one in yesterday's real estate market.
Before we get into all the reasons why open houses are not the key to selling your home, let me share with you a statistic I came across:
On average less than 1% of all homes are sold by an open house.
Why are buyers not visiting open houses like they did in the past?
1. The internet. With expanded technology, high resolution digital photos, virtual tours and the like, buyers are able to see more on line than they ever could before.
2. Life, busy life. In our modern society many household have both adults working during the week. This leaves the weekend to run errands, do the shopping, attend and participate in sporting events, and all those kid activities like birthday parties. Buyers have such limited time that they want to schedule all their viewings at one time. Popping into one or two homes on Saturday, maybe one on Sunday and then maybe going out with their agent on Tuesday is just too much time. They want to do it all at once and go quickly.
So if potential buyers are not coming to look at the open house, who is? Well, not many people really. Traffic count at open houses has been decreasing steadily over the last few years. The majority of foot traffic in an open house are nosy neighbors, bored Sunday travelers, those looking for decorating ideas and people who are not serious about buying a home. Serious buyers are looking when the homes come on the market; they are not waiting for the weekend.
Why do some agents still do open houses? There are two reasons, same two reasons they have always had.
1. Because sellers want them and out of fear of losing the listing, they do them.
2. To pick up new buyers as clients.
What about the print ads which go with open houses?
1. Print ads are declining in popularity and soon will be as popular as leaded gasoline. Newspapers all over the country are closing their doors. Why? The internet (AGAIN). News is delivered to our Smart Phones, email, and web browsers in real time. Waiting until the next day to read the paper is just not done.
2. With declining readership, those ads are not read like they once were.
So, if open houses aren’t the thing, then what?
Instead of asking your real estate agent to hold your home open on Sunday, instead ask them to spend a few hours marketing your home online. If they don't know how or what else to do besides putting it on the MLS, you have a problem. It's probably time to interview a new agent. Internet marketing is number one in today's real estate market. Open houses were number one in yesterday's real estate market.
Wednesday, March 24, 2010
Truly Simple Explanation
I copied this from an email I received, but I think it is very very insightful.
Economics 101
An Easily Understandable Explanation of Derivative Markets
Heidi is the proprietor of a bar in Detroit . She realizes that
virtually all of her customers are unemployed alcoholics and, as
such, can no longer afford to patronize her bar.
To solve this problem, she comes up with new marketing plan that
allows her customers to drink now, but pay later.
She keeps track of the drinks consumed on a ledger (thereby granting
the customers loans).
Word gets around about Heidi's "drink now, pay later" marketing
strategy and, as a result, increasing numbers of customers flood
into Heidi's bar. Soon she has the largest sales volume for any bar
in Detroit By providing her customers' freedom from immediate
payment demands, Heidi gets no resistance when, at regular
intervals, she substantially increases her prices for wine and beer,
the most consumed beverages. Consequently, Heidi's gross sales
volume increases massively.
A young and dynamic vice-president at the local bank recognizes that
these customer debts constitute valuable future assets and increases
Heidi's borrowing limit. He sees no reason for any undue concern,
since he has the debts of the unemployed alcoholics as collateral.
At the bank's corporate headquarters, expert traders transform these
customer loans into DRINKBONDS, ALKIBONDS and PUKEBONDS. These
securities are then bundled and traded on international security
markets. Naive investors don't really understand that the securities
being sold to them as AAA secured bonds
are really the debts of unemployed alcoholics. Nevertheless, the
bond prices continuously climb, and the securities soon become the
hottest-selling items for some of the nation's leading brokerage
houses.
One day, even though the bond prices are still climbing, a risk
manager at the original local bank decides that the time has come to
demand payment on the debts incurred by the drinkers at Heidi's bar.
He so informs Heidi.
Heidi then demands payment from her alcoholic patrons, but being
unemployed alcoholics they cannot pay back their drinking debts.
Since, Heidi cannot fulfill her loan obligations she is forced into
bankruptcy.
The bar closes and the eleven employees lose their jobs. Overnight,
DRINKBONDS, ALKIBONDS and PUKEBONDS drop in price by 90%. The
collapsed bond asset value destroys the banks liquidity and prevents
it from issuing new loans, thus freezing credit and economic
activity in the community.
The suppliers of Heidi's bar had granted her generous payment
extensions and had invested their firms' pension funds in the
various BOND securities. They find they are now faced with having to
write off her bad debt and with losing over 90% of the presumed
value of the bonds.
Her wine supplier also claims bankruptcy, closing the doors on a
family business that had endured for three generations, her beer
supplier is taken over by a competitor, who immediately closes the
local plant and lays off 150 workers.
Fortunately though, the bank, the brokerage houses and their
respective executives are saved and bailed out by a multi-billion
dollar no-strings attached cash infusion from their cronies in
Government.
The funds required for this bailout are obtained by new taxes levied
on employed, middle-class, non-drinkers who have never been in
Heidi's bar.
Economics 101
An Easily Understandable Explanation of Derivative Markets
Heidi is the proprietor of a bar in Detroit . She realizes that
virtually all of her customers are unemployed alcoholics and, as
such, can no longer afford to patronize her bar.
To solve this problem, she comes up with new marketing plan that
allows her customers to drink now, but pay later.
She keeps track of the drinks consumed on a ledger (thereby granting
the customers loans).
Word gets around about Heidi's "drink now, pay later" marketing
strategy and, as a result, increasing numbers of customers flood
into Heidi's bar. Soon she has the largest sales volume for any bar
in Detroit By providing her customers' freedom from immediate
payment demands, Heidi gets no resistance when, at regular
intervals, she substantially increases her prices for wine and beer,
the most consumed beverages. Consequently, Heidi's gross sales
volume increases massively.
A young and dynamic vice-president at the local bank recognizes that
these customer debts constitute valuable future assets and increases
Heidi's borrowing limit. He sees no reason for any undue concern,
since he has the debts of the unemployed alcoholics as collateral.
At the bank's corporate headquarters, expert traders transform these
customer loans into DRINKBONDS, ALKIBONDS and PUKEBONDS. These
securities are then bundled and traded on international security
markets. Naive investors don't really understand that the securities
being sold to them as AAA secured bonds
are really the debts of unemployed alcoholics. Nevertheless, the
bond prices continuously climb, and the securities soon become the
hottest-selling items for some of the nation's leading brokerage
houses.
One day, even though the bond prices are still climbing, a risk
manager at the original local bank decides that the time has come to
demand payment on the debts incurred by the drinkers at Heidi's bar.
He so informs Heidi.
Heidi then demands payment from her alcoholic patrons, but being
unemployed alcoholics they cannot pay back their drinking debts.
Since, Heidi cannot fulfill her loan obligations she is forced into
bankruptcy.
The bar closes and the eleven employees lose their jobs. Overnight,
DRINKBONDS, ALKIBONDS and PUKEBONDS drop in price by 90%. The
collapsed bond asset value destroys the banks liquidity and prevents
it from issuing new loans, thus freezing credit and economic
activity in the community.
The suppliers of Heidi's bar had granted her generous payment
extensions and had invested their firms' pension funds in the
various BOND securities. They find they are now faced with having to
write off her bad debt and with losing over 90% of the presumed
value of the bonds.
Her wine supplier also claims bankruptcy, closing the doors on a
family business that had endured for three generations, her beer
supplier is taken over by a competitor, who immediately closes the
local plant and lays off 150 workers.
Fortunately though, the bank, the brokerage houses and their
respective executives are saved and bailed out by a multi-billion
dollar no-strings attached cash infusion from their cronies in
Government.
The funds required for this bailout are obtained by new taxes levied
on employed, middle-class, non-drinkers who have never been in
Heidi's bar.
Monday, March 15, 2010
Your opinion is desired~
The tax credit for home buyers is coming to an end. I would love to get your opinion on the impact this will have on the economy in general. Please weigh in.
Tuesday, March 9, 2010
Will you come visit me at the home show?
Thursday marks the first day of the Lane County Home Show! Emerald Valley Real Estate will be there and so will I. Well, actually, I alone will be there as nobody else from the office was up for participating. It is going to be one long weekend. I do have a mortgage broker coming over to keep me company as much as possible, but mostly I will be alone. Just think of all those buyers and sellers I get to be with.
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So...........if you are going to the home show, please stop by and see me. We will have a fabulous drawing or two.
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So...........if you are going to the home show, please stop by and see me. We will have a fabulous drawing or two.
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