realtors don't stop finding reasons to buy until buyers have enough. It doesn't matter if the reasons are good or bad, they just needs to be plausible and salable. Today, I want to explore why realtors are responsible for the rubbish they promote. I want to start by saying that there are many good Realtors (deserving of a capital "R"), and they are as dismayed about the practices in their profession as I am. I have the utmost respect for the character of Randy Rector, broker of record for Evergreen Realty, and many other Realtors and brokers have approached me and told me they share many of my frustrations. I am painting bad realtors with a broad brush, and I want to recognize that good Realtors exist, and my exasperation is not a reflection on them.
Archive for January, 2010
Why Trustee Sales?Most buy at Trustee Sales to make or save money. When compared to resale properties, Trustee Sales are generally discounted between 10% and 20% and sometimes the discounts are even greater. The first post in this series featured a property being flipped for a 25% gain, a significant profit for taking risks and trapping cash for a few months. However, flipping for profit is not the only reason to consider this market. My disdain for flippers is apparent, but my ire is not spread evenly. Flippers who buy at auction provide necessary liquidity in a market isolated from lender financing, and flippers who renovate properties (even with pergraniteel) add tangible value; however, the flippers who annoy me are the ones who trade stucco boxes without making improvements or adding value as they merely drive up prices for families. The problem[READ MORE]
Judicial or Non-Judicial ForeclosureForeclosure proceedings in most states are either Judicial or Non-Judicial at lender's discretion. Unlike mortgages, Trust Deeds give the lender the Power of Sale at public auction if the borrower fails to repay the debt. With a Trust Deed, a lender can exercise this right without a court order using the faster and less-expensive non-judicial foreclosure. The lender may sue the borrower for repayment of property debt in a judicial foreclosure and obtain a Deficiency Judgment which they can record as a blanket lien against all borrower property in a given jurisdiction. Lenders often will pursue judicial foreclosure and Delinquency Judgment if the amount is large and the borrower has other liquid assets the lender can take or illiquid assets the lender can encumber (look out[READ MORE]
Ownership is primal. The first two words children learn in any language are "no" and "mine." People have an deep intuition of what is theirs and what is not. Emotionally, It's Mine defines ownership; in the real world, it is not so black and white. When people own real estate, what they really "own" is a bundle of property rights. What rights are the bundle, and how are these rights held? Today, I want to take a step back and review real estate law and outline property rights and vesting title. As I recently took the excellent Broker's review course from Real Estate Trainers, much of the legalese comes from their study manual.
Who or what is an Owner?The Owner of Real Property can be (1) an individual owning in his or her own name; (2) a group owning together either[READ MORE]
Californian's believe house prices go up by magic. Real estate appreciation is religion in California as people blindly accept the Truth of never-ending price increases. Few question current prices or wonder why current pricesgo up as most fool themselves with wishful thinking, cockeyed optimism, and kool aid intoxication. Most people do not understand real estate prices -- they think they do -- every Californian is an expert on real estate, after all, we have about half a million realtors, but few people really understand markets. Motivated by greed, blinded by ignorance and enabled by lenders, borrowers inflated The Great Housing Bubble. A foundational understanding of house prices and housing markets is critical. From 2003 onward, with exception of those who purchased houses with conservative financing, which was rare, most buyers bought in ignorance. Some were undeniably stupid and irresponsible, but most were[READ MORE]
"The system of banking we have both equally and ever reprobated. I contemplate it as a blot left in all our Constitutions, which, if not covered, will end in their destruction, which is already hit by the gamblers in corruption, and is sweeping away in its progress the fortunes and morals of our citizens. Funding I consider as limited, rightfully, to a redemption of the debt within the lives of a majority of the generation contracting it; every generation coming equally, by the laws of the Creator of the world, to the free possession of the earth he made for their subsistence, unincumbered by their predecessors, who, like them, were but tenants for life." Thomas Jefferson California borrowers have created a culture of maximizing and servicing debt that makes them tenants for life. Thomas Jefferson would not recognize the concept we[READ MORE]
Nobody wants to admit or take responsibility. Politicians are masters of deflecting responsibility, and now borrowers are deflecting responsibility in unprecedented numbers. Behaving like children who get to play but refuse to do their homework, borrowers are throwing payment tantrums. When children misbehave, how much responsibility for the child's behavior belongs with the parent? How do you apportion blame between parent and child? You should apportion blame between lender and borrower the same way because the relationship between lender and borrower is very similar to the relationship between parent and child. Ranging from Southern California’s Cultural Pathology to the numerous HELOC abuse stories, many of my posts are critical of the behavior of borrowers because their behavior has been atrocious, but like children who are spoiled by entitlement, borrowers are enabled by their lender parents. Today, I am going to explore the similarities between the parent-child relationship and the lender-borrower relationship[READ MORE]
There is a simple truth about the housing market; people are going to buy and sell homes when is suits their life's circumstances. Unlike many of the readers of this blog, few base their decisions on market dynamics, and even when they do, each sets their own risk parameters. The main factor separating those who benefited from the housing bubble from those who did not was a Simple Twist of Fate; for some it was time to sell or buy, and Fate either enriched or destroyed them. I have often wondered if I had made different decisions during the bubble if I would have been caught up in the frenzy. Although I don't believe I could have fully ingested kool aid, I probably would have behaved like most of my cohorts and increased my loan balance. I consider those who did this with fixed rate financing and still managed to[READ MORE]
Housing bubbles are catastrophes. Like the Hindenburg or the Titanic, house prices had an aura of invincibility that came crashing down and sunk to an (under)watery grave. If a mortgage product were to inflate a housing bubble, the pump and hose that primes the first stages are adjustable rate mortgages. These risky products give the market ability to weather interest rate shocks, but they also provide the air that inflates prices 10% to 15% above stable prices set by using fixed-rate mortgages. Californians pay too much for their houses because many get trapped into adjustable-rate mortgages to borrow as much as possible. It becomes a rite-of-passage that your first purchase requires you to take on a risky loan and stretch to the max so your bank can extract as much money as possible from your working life. Some wise up to the adjustable-rate mortgage[READ MORE]
Recap of Past PredictionsFirst, I wrote Predictions for 2008, and last year I wrote Predictions for 2009. Nothing too bold or surprising either time: "Most of the macroeconomic conditions I made in 2008 are still operative, and several of the predictions I made which came true will likely repeat in 2009. These are:
- 2008 will see the worst single-year decline in the median house price ever recorded
- One or more of our major financial institutions and one or more of our major homebuilders will fail
- A severe local recession
- I predict we will see many more angry homedebtor’s troll the blog