Voracious reader Reno Ignoramus spent all last week sending me a ton of good links about the coming sub prime lending implosion… and believe me, I will share them with you shortly. But this little omen is my absolute favorite, and I’ve already used it on my latest far-less-than-full-price-offer on behalf of a savvy buyer. RI, I so owe you lunch! visit
I'm Your Guy!
775-722-4011
BanteringBear
Diane. I am happy to hear you’re not afraid to stick your neck out and submit lowball offers on behalf of your clients. I have heard accounts of realtors hesitant to do so. But, as we move through uncertain times in this market, sellers and their agents should realize the risk buyers are taking by purchasing, and it needs to be reflected in the selling price. I am still seeing far too many unrealistc wishing prices (several hundred thousand too high), and it reflects poorly upon the listing agent, in my opinion. What happened to the Comparative Market Analysis? I know, in this period of adjustment, it takes some time for things to get worked out, but I still see hundreds of homes which are hopelessly overpriced.
Reno Ignoramus
Foreclosure.com is today showing there have been 90 foreclosures in Reno. There are 371 pre-foreclosures.
There are a substantial number of short sales on the market now. There is, however, nowhere to get any info on the exact number as it is essentially impossible to gather.
Short sales, which by definition mean that the house is being sold for less than it was most recently purchased for, result in declining comps in the neighborhood. So also do foreclosures and pre-foreclosures.
With the pendings:inventory ratio at about 10% at best, with YEARS of inventory in most price segments of the market, with accelerating short sales and foreclosures, and with voodoo debtowners facing rate resets, would anybody care to explain how prices are likely to rise over the next year or so? I think the CNN MONEY forecast is right on.
GreenNV
Hi gang. I’ve been lurking around here for a bit, and thought it was about time to chime in. I track a lot of what is happening in 89523, since I have a vested interest (I live here). Two Somersett properties showed up on the MLS today that are sort of interesting to compare. I have never seen these homes, and have no axe to grind, but they seem like pretty good comps.
1895 Graysburg
4/4 4678 SF
Listed at $1,250,000 ($267/SF)
Purchased 4/06 at $801,577 ($171/SF)
1855 Graysburg
5/4 4589 SF
Listed by Builder at $923,975 less $75,000 Incentives, Net $848,975
($201/SF, $185/SF net)
Zillow hasn’t found this street yet, but in general, has been rating the properties in this area 5%-10% under asking price. We will talk about Zillow some other time – of course I think that they are 5% low in my neighborhood!
So if these homes are pretty much comps, what is going on? The seller of 1895 is dilusional thinking that their property has appreciated over 50% during the year they have owned it in a falling market. Even with the incentives, the Builder (Toll) still has about 10% fat in their SF prices over what they were selling at a year ago. And that is before the qualified buyer makes them feel the burn. It makes you wonder what their initial corporate profit margin was!
Anyway, I live here and I love it. And chancing total ridicule, a looking at building a couple spec homes! Go figure.
Reno Ignoramus
Hi GreenNV:
What do you make of 1900 Russell Pointe Ct. in Somersett? This is a 3050 sq. ft. house purchased on 2/26/05 for $1,065,798. It is MLS # 60026271.
Currently listed for $ 839,900.
If the owner were to get a 97% offer today, it appears that after two years of mortgage, taxes, and insurance, plus commissions and seller’s costs, the seller is looking at about $450,000 upside down.
This house has been sitting and sitting on the market for months. Is this house a poster child for Somersett?
Angela DiMauro
Hi there Diane, I have to say that buyers should realize that while they are willing able and ready to make an offer way below asking price they are also lowering value not only for themselves but also for the neighborhood. A good rule of thumb is to try to stay as close to the comps to keep our market values up. Does anyone realize out there the repercussions of offering too little could be? Try to get your house refinanced lately? I know a lot of people who have. Guess what? They couldn’t because the last house that sold in the neighborhood drove down the values. Buyers set the bar for the next person who purchases or refinance. After you buy, you’re not in the driver seat any more regarding your value, the next person is. so think twice before you offer.
Reno Ignoramus
Angela,
Now I’m just an Ignoramus, so help me out here. Are you suggesting that a buyer ought to pay more for a house just to keep the comps up in the neighborhood?
A buyer then perhaps ought to offer more than the asking price to really help out the comps and the neighbor down the street who wants to refinance?
I don’t know, I guess I just have this Ignoramus idea that the market works best when buyers try to buy for a little as possible and sellers try to sell for as much as possible and we just let supply and demand figure it all out for us. And thus shall comps go up in a rising market and go down in a declining market.
GreenNV
Angela, I think your post might get this thread humming!
First, I agree that an accepted low-ball offer affects the entire neighborhood, not just the subject property. That is about all I can agree with.
Is it smart for a buyer to overpay for a home based on inflated neighborhood comps? Right. Are real estate decisions based on how the neighbors will feel? Not. Can’t refinance the voodoo loan? The buyer misread the market and paid too much. What is the “neighborhood value”? What a comperable house would sell for today, in this market.
A lot of people, either through speculation (greed) or misreading of the market, made some bad real estate decisions. It is not up to the current prudent buyer to subsidize those mistakes, and it is their perogative to profit from them.
Lindie
NOTICE TO ALL FUTURE BUYERS:
It has been called to the attention of this blog that apparently certain holders of nothing down, interest only, negative amortization, suicide Voodoo Supreme mortgages are experiencing difficulty in refinancing into new nothing down, interest only, suicide Voodoo Supreme loans. The impact of this difficulty is threefold: first, the current debtowners are thus unable to access the housing ATM; second, the current debtowners are thus unable to delay the foreclosure of their houses; and third, mortgage brokers are experiencing drastically reduced commissions.
It is therefore incumbent upon all future housebuyers to pay the highest amount possible for their purchases. All future homebuyers are encouraged to pay at least 10% more than the asking price, or more if at all possible. This action on the part of future buyers will assure 1) that current debtowners will be bailed out of the mess they have created for themselves, and 2) mortgage brokers can continue to earn commissions.
BanteringBear
Angela-
Forgive me, but that was quite possibly the most ridiculous rhetoric I have EVER heard from a mortgage broker. Please tell me you were kidding. Unfortunately, I don’t think you were, and, furthermore, I think I see your angle. The refi business is a little tough in a declining market and you need to make a living. And the more expensive the homes, the better you eat. For someone with a “no-nonsense” approach, your comments are, well, nonsensical. Since when is overpaying a better “value” for a homebuyer?? Please explain that to me. The last time I checked, it meant a higher cost basis (ie. higher payments, taxes, insurance, etc.), and LESS value. And what are the repercussions of a lowball offer, other than a declination? It seems to me you might want to rethink your approach just a little bit, as you run the risk of scaring off future clients. People want to believe you are working in their interests, not just your own.
Angela DiMauro
It sure is a catch 22 isn’t it. First off I never suggested that someone pay more than the market price. For example: If the last house in a particular neighborhood sold for $500,000 and you put an offer in at $425,000 for an exact model and it’s accepted…Guess what! You’ve got a GREAT DEAL but at the same time you’ve set the bar. It’s not rocket science. It’s just the way it is. When the market was hot everyone said wait to see what the next offer comes in at. I’m sure the next offer will be higher. The housing market (prices) soared. Now, it’s being driven down because of all the low ball offers and the desperation of the sellers. It is what it is. If I were buying a house of course I’d want the best deal out there but it would and has been driving down the market. This cycle is nothing new. It happens. It will continue to happen its a cycle. It all depends on where you jump in at. Some are luckier than others. Like I said earlier. It’s a catch 22. There are a lot of people who weren’t greedy back in the heyday. They had to pay the inflated prices to get into a house. I was here I saw it. I did loans for some of them. There were no as you say, “voodoo loans” the loan had nothing to do with it. I’m just saying that unfortunately because of the market I know people who wanted to refinance and take cash out for whatever reason and a couple of times I had to be the bearer of bad news because the equity wasn’t there. It’s a hurry up and wait situtation which we all know right now isn’t hurried up at all.
RenoIgnoramus
“the loan had nothing to do with it.”
Angela, your’e joking, right?
Please tell me your’e joking.
The number one reason prices were driven to their currently unsustainable levels was EXACTLY because of the Voodoo loans. Once it became possible for anybody with respiration activity to borrow hundreds of thousands of dollars on a no doc stated income liar loan with no income verification requirements, all market fundamentals were abandoned. Valet parking runners with their $500,000 nothing down, I/O, neg am teaser rate Voodoo Specials went out and bid up prices to absurd levels. Today, the market is only beginning to experience the hangover from that absurdity.
The suggestion that “loans had nothing to do with it” is, quite frankly, either disingenuous or naive.
“t
jbunniii
I’ve never set foot in Reno, but someone kindly alerted me to Angela DiMauro’s advice that buyers should intentionally overpay in order to avoid harming sales comps for the neighborhood. Congratulations, this has to be the most ludicrous idea I’ve ever heard. Did you advocate that buyers “stay as close as possible to comps” when prices were still going UP?
By your logic, pets.com stock should still be selling for hundreds of dollars per share, after all, who wants to ruin the comps?
T
Angela,
You’ve got to be sh!tting me. The housing prices are being driven down not because of low ball offer or seller desperation because they were over inflated and non-sustainable and because the buyer pool has shrunk and every idiot who wanted a house (or 8) has already done so. The rest of us would not buy into this ponzi scheme and are waiting for affordability to take hold before we jump in.
Brace yourself… it’s going to get much worse before it gets better.
This “buy now or be priced out forever” frenzy had to end. And the people you tried to refinance and/or get HELOC’s for but couldn’t perhaps should never have paid these over-inflated prices in the first place.
Just because someone WANTS something does not mean they should pull the trigger. It’s called self-control, running the numbers, and living within your means.
It’s extremely obvious that you’re simply trying to prop up these over-inflated prices with your NAR rhetoric but the thing is… no one is buying it.
simishag
First, it’s not a “catch 22” at all. “Catch 22” is another way of saying “deadlock” (or “the chicken or the egg”). How is that logical premise relevant here?
Second, BB is right on. This is definitely the most ridiculous thing I’ve heard today. Pay more for your house to keep comps up so that you can refinance if necessary? Doesn’t it make more sense to pay less and thus be less likely to NEED to refi? Isn’t it smarter to base your home buying decision on the idea that you won’t be able to refi for a few years, until, you know, you build up some equity?
Obviously the seller, the RE agent, the mortgage broker and the taxman feel differently. They LOVE to see the buyer spend more. But that’s to be expected since they all have a financial interest in the transaction.
Amazing to me that people who control major financial decisions have so little grasp of economics and spoken language. Lighten up on the cliches.
Angela DiMauro
How I have been conducting business is asking the sellers to pay all the closing costs, so instead of reducing the price and lowering the market value, I’ve hopefully been able to contribute to keeping the housing market value up.
Angela DiMauro
T
Angela said…
“I’ve hopefully been able to contribute to keeping the housing market value up.”
For your own benefit, yes? Larger commission, right?
Surely anyone with half a brain can figure out that housing is unaffordable. You keep doing your best to keep market value up and you’ll soon realize the buyer pool has dried up and you’ll be eating top ramen because these houses are extremely over priced.
People are finally beginning to realize that exotic loans are dangerous. I suppose you could keep doing what you’re doing, Angela. But then the houses you’re trying to sell won’t move.
Chris
Had a solicitation today for a 1% mortgage for 4 years and then adjustable with a 9.95% cap, what the hell has happened to the loaning industry?
Whatever happened to 20% down and a 30 Year Fixed Mortgage? Oh that’s right, it meant people had to live within their means and only buy what they could afford.
Angela DiMauro
The market has improved, and prices have come down. There are other ways to get a good value, not only by offering less, but to utilize seller money by getting them to pay closing costs. Anyone who questions my integrity should come by my office and meet me in person, or better yet, talk to one of my very satisfied customers. I don’t get referrals by putting people into bad loans. I never had and I never will.
My last client not only got a $15,000 dollar reduction on the house he bought, the sellers also paid ALL of his closing costs. He walked into about $25,000 worth of equity, and it didn’t cost him a dime. The Realtor in this transaction saw the value in offering $15,000 less (instead of $25,000 less), and the seller paid $10,000 in closing costs. So, in reality, the buyer did get his $25,000, it was just structured differently. It worked for the buyer and obviously worked for the seller.
Diane Cohn
Everyone, Angie’s prior comments did not come across the way she intended. Her point is not to artificially inflate market values so that she can eat filet mignon. Her goal is to get her clients into good loans that they can afford under accepted guidelines, sometimes getting the seller to pay closing costs. Such concessions don’t show in the comps, a bonus to neighbors concerned about price declines.
Angie is a good loan officer. She shops aggressively for the best deals, she rides the transaction to close, she delivers the money on time, and she tends to walk away with very happy customers.
This thread is done.