Archive for July, 2008

The Housing Bill has passed in the Senate with some Republicans grousing that it is an unfair bailout at the taxpayer’s expense.

Some highlights:

Increase the Federal Housing Administration’s role.

Establish a stronger regulator for the GSEs.

Permanently increase “conforming loan” limits.

Create home-buyer credit.

Bar down-payment assistance for FHA loans.

Create an affordable housing trust fund. Give grants to states to buy foreclosed properties.

Bolster Fannie and Freddie
All of these moves are good moves. We need a stronger and more vital FHA; the FHA rotting on the shelf is precisely what created the vacuum filled by the sub prime niche. The aid to Fannie Mae and Freddie Mac are controversial, but I support them. I am a free market guy, but the government has to act in some cases, and this is one of them. Unlike the S & L scandals and subsequent bailouts in the late 80’s, aid to F & F is not rewarding bad lending. As a matter of fact, if more people went conventional, the magnitude of the problem would be diminished. Fannie and Freddie sustained collateral damage from sub prime; they were not part of it. We all should remember that.

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Our local paper, the Westchester Journal News, ran a story yesterday on how housing sales in Westchester have plummeted. Nothing new or earth-shattering here, except for a curious plug of one of the subject’s homes currently on the market. I have had my own clients featured in the paper, but the photographers were always unwilling to take a photo with my sign in it. This is the opposite, and the accompanying video is literally a commercial for these peoples’ home.

My only other thought on the story is that the sooner sellers lower their expectations and price, the sooner the market will stabilize.

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Interesting video commentary from Richard Bitner, author of Confessions of a Subprime Lender.

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US News is hosting a debate of sorts on the value of using an agent. The person on the side of not needing agents is a VP of forsalebyowner.com, a site whose point of view should be obvious. I have a skin in both games. I will repost my comment here:

Ah, if all agents were good for is to be the database of homes for sale like forsalebyowner.com. Then, buyers could all yell “I saw the house first” and save themselves (or the owner, we never know which) 6%. Too bad it never works out that way except in anecdotal examples and grossly flawed studies like Freakonomics author Steven Levitt ‘s hack job at Northwestern.

A few facts which you don’t need a study to grasp:
1. Most people simply stink at selling anything, especially their own home.
2. For Sale By Owner sites have never been able to specify exactly who saves the 6% when you cut out the agents. Is it the buyer or seller? Answer: whichever one they are addressing.
3. Even though the internet and other innovations have utterly devastated the livelihoods of travel agents, stock brokers and others, Mr Healy himself admits that commissions have risen over 50% since 2000. The market is efficient, Mr. Healy.
4.If selling homes is so easy, and presumably foreclosures are even more popular among buyers than regular homes, why do banks list their REO’s with a a broker? Because they know what works and what doesn’t. And a title firm and attorney can’t sell an REO without brokerage.
5. As a matter of fact, every successful title company and real estate law firm (and mortgage company) has strong relationships with brokers and agents.
6. Every discount and gimmick “business model” like Foxtons and Iggy’s house has flopped.

I have a skin in both games because I run a full service firm and a FSBO assistance firm. I have a front row seat to plenty of FSBOs who sabotage their own deals left and right. Who is right for FSBO? About 5-10% of the market. The rest need a broker.

The Levitt study I allude to is economist Steven Levitt’s conclusion based on his study of the Chicago MLS data for several years that agents sell their own homes for more money because they take more time to wait for a higher offer. Anyone with half a brain knows that correlation doesn’t equal causation and that, all things being equal, older, stale listings will sell for less. I have corresponded with Mr. Levitt and he has admitted to me that the study never truly accounted for distress sales, loss of jobs, divorces, estates, or other conditions which suppress price and shorten time on the market. He only passively acknowledged that agents would likely be better at staging, pricing right to begin with, being flexible with showings and taking delays and extensions with more tolerance than the average Joe.

But beyond that, for every anecdotal example I have ever heard on a successful for sale by owner, I have heard another where someone goofed big time on the buying or selling end and got hurt financially.  My question as to who really saves money with in a for sale by owner will never be answered, because there is no answer. If the buyer saves the commission, then what good was it for the seller? If the seller saves the commission, how did the buyer benefit?

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Aside from safety and blight, they seem to be attracting orgies…which include Catholic school principals.

A man named “Jim” arranged the backyard group-sex romp that ensnared a former Catholic school principal from Ossining, police say, and he may live near the home where the tryst took place.

“I think we’re going to grab grab ‘Jim’ very soon,” Greenburgh Police Chief John Kapica said yesterday.

Greenburgh police said they found three naked men having sex with one another on Sunday night in the backyard of 70 Abbeyville Lane in the Orchard Hill section of town.

Kapica said the three men met on a Web site called Manhunt.net and arranged to meet on Abbeyville Lane. A neighbor who called 911 that night said he saw two men get out of a car, meet a third man and go behind the vacant house.

The home has been vacant for 2 years.

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My business takes me through 6 counties and I drive over 40,000 miles a year. All the talk of lowering the speed limit to 55 vexes me. Setting me back 10 minutes per hour driven is not a patriotic sacrifice, it is a costly homage to an already debunked nanny state idea that I always hoped would remain in the ash heap.

If you want to drive 55, by all means do so. Just keep to the right and allow me to pass. I have to get somewhere, and my most precious resource isn’t gas, it is time.

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US News and World Report lists 6 warning signs. I could list 7-20 for them but the first six should suffice in weeding out plenty of those who hurt the profession. Sign number one is also my pet peeve:

If the communication isn’t there, the relationship won’t work. So if your agent doesn’t return your phone calls in a timely fashion or disappears without warning for weeks at a time, you should probably find someone else. Some real estate agents will block out a single window of time—say, between 4 and 5 p.m.—in which to return all of their phone calls for that day, says Jay Thompson of Thompson’s Realty in Arizona. “I’ve never really understood that,” Thompson says. “That’s not necessarily good if your seller or buyer wants to talk to you at 8 o’clock in the morning—they end up waiting a whole day.”

Sometimes the call later in the day can’t be avoided. That said, I have been waiting days to hear from the other side on deals I have going right now. Days.

The most common excuse I get once we finally catch up is that they don’t have anything new. That don’t hold water. Sometimes the update is there is no update. So you take 30 seconds and say “nothing new. I’ll keep you posted if that changes.” In this age of text messaging, no communication is inexcusable. The great thing about texting is that you do not have to be held hostage in a protracted conversation.

We chose this profession, so, inconvenient as it may be, an 8pm phone call is part of the deal. Not only that, most agents in this market simply do not have the volume of pending business to claim they are too busy. US News was right to put this at the top of the list.

I added my own hypothetical #7 to the list in the comment section:

Very good list. My personal suggestion for a hypothetical number 7 is the carrier pigeon agent. This is a “professional” who shuttles messages between their woefully underadvised client and the other side in negotiations, without ever actually coaching their client as to the absurdity of their demands. They could work for the buyer who thinks that everything should be discounted 30%, or represent the seller whose house (with the harvest yellow, formica-laden 1978 kitchen) is overpriced by $100,000. In either case they display a remarkable lack of backbone in coaching with their own client.

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