Monthly Archives: January 2010

Mr. HomeBuyer, we are working for you…

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Like many Realtors these days, we have quite a number of buyers we are working with.  Several months ago we started making sure that we always meet with each one before we start working together to make sure they understand the process.  We also make sure they’re qualified and that we’re a good “fit” for one another.Even so, we occasionally end up with the very eager buyer who thinks he can help us out by riding around his preferred neighborhoods and call us with addresses to look up for him.

Inevitably, there is always a reason why we haven’t sent him this particular home to review online.  It’s not because we missed it.  We want to sell him a house as much as he wants to buy one.  Really!

If you are working with a real estate agent who is looking for homes for you, here is a list of possible reasons a home may not be suitable for you and won’t make it to the emails we send you:

  • The property is priced over your range – in every neighborhood there are homes priced well above what their market value is.  Homes priced over your maximum don’t get sent to you.  If your max is $450K, a house that is listed at $575K is not going to be sent to you for review.
  • The property is not listed -  this includes homes you may see that look vacant and may even have a lockbox on the door.  A foreclosure can take a long time to prepare to list.  The listing agent will get it listed as soon as it is possible to do so.  Sometimes it has issues with the title that need to be cleared up. If it is not in the MLS and there is a lockbox on the door, there is no way to know who is going to have it listed.  We simply have to wait until it is.  The good news is that the automatic search that is set up for you will pick it up immediately once it’s listed.  Lucky you.
  • The property is a short sale that has not been approved – and you specifically let me know that you don’t want to waste your time on unapproved short sales.  Only approved short sales are being sent your way.
  • The property needs extensive repairs – and you are buying with an FHA loan.  Yes, there is an FHA loan that takes repairs into account.  It’s called an FHA 203K loan.  But if you’re approved for $100K FHA, the house is listed for $100K and needs $25K in repairs, there’s no point in looking at that house.  You are not qualified for $125K (the amount of the loan including the repairs).  So this particular house will be filtered out by your agent when she reviews homes to show you.
  • The seller has specified CASH offers only – Sellers usually do this because of the condition.  This is usually seen with bank-owned homes.  It’s not that they want to arbitrarily exclude a huge portion of buyers.  They’re just being realistic when they say that the house won’t qualify for financing.  It may need repairs well beyond the limit on an FHA 203K.  Or the seller may simply want a quick sale due to the horrible conditions of the house.  If it’s priced incredibly low, there’s always a reason.
  • The house is pending sale – this means the seller has accepted an offer.  The sign will stay in front of the house until the property closes.  But they have changed the status to Pending Sale in the MLS and they are no longer looking for offers on this one.

The above is not meant to be an exhaustive list.  There may very well be other reasons why a home isn’t sent to you for your review.

But please do know that we are working really hard to find you one that you can call home.

Closing Attorney Commits Mortgage Fraud

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Everybody sit down to read this one. You are going to be surprised. It has come to my attention that a local (Rhode Island) real estate attorney has been charged with mortgage fraud, in a large number of instances. What he did was this: for closings he did, he accepted the mortgage deposit from the buyers lender, and filed the proper documents with the town. In those documents, he also cleared the previous liens on the properties. All good so far, right?

What he did next will knock your socks off.

The guy then intentionally failed to pay of the previous liens, instead using the monies from the transaction to pay the previous mortgages monthly, as if the property had never been sold! Do you get that? He filed the documents that said that the previous lien holder had been cleared, and added the new lien(s) to the property. He then never paid off the previous liens, and instead PAID THE MONTHLY PAYMENTS. He never informed the seller’s lien holders that the property had been sold. So for each of these properties, there were two sets of lien holders, the previous owners mortgage holders, and the current owners mortgage holders, although he did cancel the previous ones at the town hall. So in effect, he stole the difference between the sale price and what had to be paid to the seller, if anything.

Of course, this has now come back to bite this guy, with the Sheriff showing up at his office and arresting him, charging mortgage fraud. This was only discovered because one of the properties he did this on was resold recently, and the lien holder from the previous seller was the same as the one financing the purchase to this second buyer of that property.

Are you amazed at this guy yet?

People, not only should you choose your Realtor carefully, but you should also choose the closing attorney just as carefully… I am not sure how one could know that this had been done since the town hall records would show only your current lien holders. Anyone have any ideas on this?

Sellers, be sure to check with your mortgage company to ensure that your loan has been cleared after the sale of your property. In instances like this, you are still on record for owing the money on your debt. You may of course discover this if you go to buy another house, but this guy got away with this for several years.

Now he will go to jail, very likely.

Has housing reached a turning point or a point of no return?

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While the pundits and politicians discuss the housing crisis and the various ways to effect a recovery, the question to consider is: Has housing reached a turning point or a point of no return? It appears that housing is unlikely to return to its most recent glory days. But that’s not necessarily a negative interpretation; it just means that the housing market of the future will look dramatically different from that of the past decade.

graph trending upwards

We now know that the housing boom of 2004 – 2006 was temporary and artificial. It wasn’t an indication of forever escalating prices; though many seemed to believe so. The boom market was a bubble of inflated prices and irrational expectations of outlandish profits. Just as the stock market bubble that preceded the Great Depression created investors of doormen, maids, construction laborers, bartenders, and others seeking to capitalize on skyrocketing stock prices; the housing bubble created a wild frenzy of speculation and inflated home prices that was impossible to sustain.

Homeowners who purchased anticipating great profit, as well as investors, flippers, real estate agents, mortgage brokers, and those who bought early enough to borrow against their profits, have seen their dreams of easy cash and growing equities vanish. More than two million of those homes have fallen to foreclosure, and millions more are doomed to follow.

Hindsight is great, and shows the error of such paths. We should have known better, but we didn’t want to miss what appeared the opportunity of a lifetime. Homes, however, are not a commodity to be traded like soybeans, pork bellies, or precious metals. Homes are just that, a place to live, raise a family, create memories, and find solace at the end of day.

So, has housing reached a turning point or a point of no return? Perhaps it’s done both. Perhaps we’ve learned a valuable lesson—some of our most important ones come at a great price—and though the cost for many has been unbearable, the lessons remain. The bursting of the housing bubble may ultimately restore order to both housing and the financial markets; and the artificial market is doubtful to return until some future time when its memory has been erased.

roasting marshmallows

With that in mind, should anyone buy a home today? Of course, those who need one. However, some of those motivated solely by profit may find disappointment. Will home prices increase? Without question. But there is a question of time, and how  much will be required before prices increase. History tells us that the prices of those homes bought with careful consideration of both location and value will increase at a rate above the rate of inflation. If we do better, that’s great. If we don’t, we mustn’t lament, for we bought a home; and that can be worth far more than money in the end.