Sunday Stats (again on Monday)

photo credit to MiamiAmia,  via StockExchange

Again with the Sunday entry posted on Monday! Sorry, pressed for time.

Click here for the entire Sunday Stats series

Bailout

photo courtesy of I Can Has Cheezeburger

I Can’t Pay the Mortgage, Help!

If you’re facing troubles paying your mortgage, act quickly. Don’t wait. Don’t hope it goes away. Don’t avoid your lender’s collection phone calls and letters. The bad news is you’re in a pickle and it’ll take some work and sacrifice to get out. The good news is that since so many Americans are in the same (leaking) boat with you, there are an ever-growing number of programs and plans to help you.

One of the most important things to know is that you do not need to pay anyone to help you out of your financial distress. Anyone who asks for an up-front fee is probably a scam artist.

Similarly, I personally am very skeptical of foreclosure “experts” who have slick marketing materials and a professional sounding plan, and want you to start by signing  a transfer deed changing ownership of the home to them. If you transfer ownership of your home by signing a Deed of any kind, you do not transfer responsibility for paying the mortgage. Essentially it’s like giving away your car and agreeing to continue making the car payments. Not a great idea. If a foreclosure expert approaches you with a “program” that includes signing a transfer deed, warranty deed, or quit claim deed as the first step, call an attorney for advice. Fast.

The second important thing to know is that I am not an attorney. I am not giving legal advice. I’m jotting down some of the advice I give my own clients, after hearing about their entire situation and after I tell them to consult a tax professional and an attorney. Please do not consider the advice below as perfect for your situation. Consult an attorney, a knowledgeable Realtor, and your tax preparer.

Now some resources.

• You can check out Hope Now
• Get HUD’s list of ways to avoid foreclosure
• Or check out HUD’s list of Do’s and Don’ts for facing foreclosure or HUD’s list of helpful companies and nonprofits
• The Neighborhood Assistance Corp of America is a 20-year old, Boston-based nonprofit with $10 billion in funding from Bank of America to help homeowners refinance into more affordable loans

Next up, understand the timing related to a Notice of Trustee’s Sale (this applies only in metro Phoenix where I work). The Notice is simply a formal letter to you, from your lender stating that they know you’re behind on your payments, and if you do nothing they will sell your house at a foreclosure auction in 90 days. That’s 90 calendar days, not 90 business days.

A Notice of Trustee’s Sale is not a foreclosure; you still own your home. You can try to work with your mortgage lender to create a payment plan you can afford. You can try to sell your home before the foreclosure happens. You can hire a Realtor or a foreclosure expert to help you with these actions.

Whoever you choose to work with, check them out! Distressed markets like we’re in create room for a lot of really sleazy, smarmy people to scam innocent folks. Ask for references and call those references.

If you choose to work with a Realtor or a foreclosure expert, call their prior clients. Ask those folks how recently the Realtor helped them, what happened, and whether they were happy with the work done for them. Ask them if there was anything they were unhappy about too. If you choose to work with a company, check them out with the Better Business Bureau and/or the local Chamber of Commerce. You can see a list of various state’s Chambers here.

This is a list of online spots you can trust to give you free, unbiased and scam-less information:

• Fannie Mae
• Freddie Mac (don’t let the recent “government takeover” news scare you off. There’s a new set of faces in upper management at each company, but they’re still doing business)

• Home Loan Learning Center
• Home Ownership Preservation Foundation
• Neighbor Works America

Of course, if you’re ready to list your house for sale as a short sale, feel free to call me. I’ve successfully sold several short sales this year, and helped a few buyers make offers on short sales too. My goal and daily practice is providing pressure-free truthful information. If I can help you, I’ll say so and tell you about my commission fee structure right at the beginning. If I can’t help you, I’ll tell you that honestly too, and help you find someone who can get you out of your pickle. You can start getting to know me better online by reading this series of articles I wrote for buyers considering short sales.

More info soon in Part 2, including getting a loan modification, a workout, and/or listing your home for sale as a Short Sale.

Related Posts

1. I Can’t Pay the Mortgage, Part 2
2. I Got a Notice of Trustee’s Sale, Now What?
3. REO, short sale, foreclosure – What Do They All Mean?
4. I’m Quoted In USA Today Talking About Foreclosures

WaMu Goes Under

Washington Mutual is no more. According to multiple sources, federal regulators seized WaMu’s assets late Thursday night, and immediately sold most of the nation’s largest bank to JP Morgan Chase in a $1.9 billion deal. Usually bank shutdowns are conducted late in the afternoon or evening on a Friday, to give the FDIC time to go through the books and re-open for normal business on the following Monday.

The fed’s Thursday night shutdown of the troubled bank was not unexpected however. On September 15 Standard & Poor’s downgraded it’s rating on WaMu to junk status, and depositors subsequently rushed to withdraw over $17.6 billion in assets from the troubled Seattle-based lender. Rumors were swirling through the industry that a takeover was coming, and FDIC spokesperson Sheila Bair confirms there were plans to seize WaMu’s assets on Friday evening, September 26.

Bair said that rumors and media coverage of the leaked takeover news caused the earlier than expected seizure. “This was an eroding situation,” confirmed Bair.

What’s this mean to middle America? There’s some actual good news in this bank failure story. Purchaser JP Morgan Chase agreed to make good on WaMu’s debts, leaving the FDIC off the hook for covering lost deposits. In short, the US taxpayer doesn’t owe anything extra because of the fed’s shutdown.

The purchase temporarily makes JP Morgan Chase the nation’s second-largest bank with deposits of $2.1 trillion and over 5400 branch banks in 23 US states. Once Bank of America completes it’s purchase of the remains of investment bank Merrill Lynch, it will regain the position as the nation’s biggest bank.

Related Posts

1. Will My Bank Fail?
2. FDIC Shuts Down IndyMac
3. First National Bank of Arizona Fails

Pet Safe Pesticides

photo credit to eravariel at Stock Exchange

I have been suffering for a few days with a mob of home-invading ants. I blame myself, actually. Unknowingly, I’d brought them into the house in a recyclable shopping bag.  After hanging on a door handle for about a week, I took  the bag down and set it on the floor, getting ready to take it back to the car and shop.

The bag tipped over and instantly, I had a gazillion little black ants swarming over the floor!!

Luckily they were swarming on blond hardwood so I could see all the little beasties pretty easily. It turns out that flip-flops are a very effective weapon of mass destruction when applied with strategic precision. “Strategic precision” means wildly slapping the floor with said flip-flops while shrieking at the top of one’s lungs.

However, the collateral damage for this particular WMD is the wind shear that sends a few dozen beasties flying for every shoe swing.

And here’s where I (finally!) get to the post point. I have cats. Cats tend to eat off the floor. It’s like having perpetual toddlers in the house – anything the cats find even mildly interesting is instantly eaten or licked. So….. traditional pesticides are out of the question.

After much internet research I discovered that there are several non-toxic ways to eradicate ants.  Boiling water poured on the anthill is supposed to be effective. Diatomaceous Earth (DE) is also said to be effective because it gets into the ants’ little joints and dehydrates them from the inside out. I did find some online articles that seemed to prefer DE from plant stores over the pool-grade DE that’s often used in the desert southwest for filtering pools. Pyrethrin is supposed to be a plant-based pesticide safe for use with pets. Except that  I found an online chat room where one member claimed the pyrethrin poisoned her cat and it took over $200 at the vet’s office to restore the cat.

My problem with all the advice I found online is that I didn’t feel I could trust the sources. The information I found came from websites with names like EcoChem.com, 4TheBirds.org, ThePetShrink.info, OccultCorpus.com, ArticlesBase.com and FreePatentsOnline.com.   I’ve never heard of these! I’m just not sure that I’m going to trust my feline babies’ health to those sources. If I’d found something from Cat Fancy magazine or even a single vet’s office, I’d have felt more reassured.

So in the end I decided to try the two easiest and least harmful sounding options – white vinegar and powdered cinnamon. I knew the ants were drawn to the cat food crumbs on the floor, so first I baited the little buggers.

• I put the cats into a locked bedroom away from the action. Then I laid out a trail of cat food across the floor of the ant infested room and waited about a half-hour. Sure enough, an ant swarm. I followed it to the source at the patio sliding door in the master bedroom and poured a little powdered traditional pesticide on the entry point.
• I walked back the line of ants to the food crumbs, killing them with the flip-flop WMD method noted above with a speed adjustment to minimize the wind shear factor.
• Next up, a vinegar water wash down for every floor and baseboard surface in the two rooms affected. Websites recommended a mixture of half-and-half white vinegar and water. Whew, what a smell!
• Finally, a border of powdered cinnamon (from the spice rack) on all window ledges, sliding door tracks and around the baseboards. I vacuumed up the poison powder from earlier and covered over the ant’s entry spot with a generous mound of cinnamon.

The whole process took two hours and it was midnight before I was done. Exhausted, I added a ring of cinnamon around my bed because the entry point was in my bedroom. Thoughts of little ants crawling onto my bed in the night was enough to send me screaming out the door to a hotel that accepts cats! (By the way, Motel 6 is pet friendly, should you ever travel with your beloved furry family members.)

The result? Success. Apparently ants really don’t like cinnamon. Nary an ant in sight since I broke open the spice rack. Hope you find my ant saga helpful if you ever get infested yourselves!

When’s The Money Due?

Like a lot of metro Phoenix Realtors, lately I’ve been working with lots of out of town buyers (especially Canadians). These buyers are often used to the way purchase transactions are handled in their hometowns, but somewhat baffled by the way we do things in metro Phoenix.

From the standard AAR contract, line 13, “Close of Escrow (“COE”) shall occur when the deed is recorded at the appropriate county recorder’s office.”

Notice it doesn’t say anything about the buyers and sellers being present. Recordation is handled by the folks at the escrow office who record the sale documents online with the Maricopa County Recorder’s Office.

Many buyers from the East Coast, the Midwest and even Canada are used to “closing” describing a giant conference table with the Buyer, the Buyer’s Realtor, the Buyer’s attorney, the Seller, the Seller’s Realtor, the Seller’s attorney a notary public and a title officer. Oh, and donuts too.

Buyers and Sellers in metro Phoenix don’t have to hire lawyers to represent them. They can, but don’t have to. Documents can be handled via express mail and email/fax. Money can be wired. No need to come to Arizona for your Arizona closing.

If buyers do plan to come to town for their closing, it could be helpful to arrive about 2 or 3 days before closing and plan to stay for 2 to 3 days afterwards too. That way you can sign the documents in person, pick up the keys in person, and then spend a few fun days moving stuff in and decorating.

Now, down to brass tacks. When’s the money due?

Earnest money is due immediately upon contract acceptance. Usually the buyer’s Realtor delivers it to the escrow officer in person or through a messenger. The escrow officer issues a receipt for the money received. Personal checks are acceptable unless negotiated otherwise by the parties. Buyers should note that their earnest money is cashed right away, so it must be liquid funds.

Any cash down payment is due on closing day. (Buyers paying all cash should apply this paragraph to their situation.) Arizona is a good funds state, which means that money for closing real estate deals must be “immediately available.” Cashier’s checks and wire transfers are acceptable. Contrary to logic, cash is not acceptable. Buyers who send a wire transfer should note that the USA Patriot Act slowed down the US wire system significantly. Expect your wire to take an entire day to transit the system. It will probably take less than 8 hours, but if it takes the whole day, at least you’ve planned ahead and not delayed your own closing. Got insomnia? You can read all 132 pages of the actual Patriot Act here. By the way, if you read the entire Act (and especially if you actually understand it) you should run for Congress immediately.

Buyers getting a home loan should be aware that by signing the standard AAR purchase contract you’ve agreed to sign all loan documents “no later than three (3) days prior to COE” (line 69). This language has been in place for 3 years, but I still sometimes encounter lenders who aren’t aware of the requirement. Buyers should also note that lines 68 of the standard AAR purchase contract binds them to two further responsibilities: (1) making diligent and timely efforts to provide their lender with all the documentation requested, and (2) ensuring that their lender provides status updates to both agents. This means that the seller’s Realtor is approved to talk to the buyer’s lender about the progress towards getting a loan approval.

That should cover all the angles on getting money to the table in a metro Phoenix residential real estate purchase. Got more questions? See the FAQ files or related posts below.

• Cash Buyers Should Prove Liquidity When Offering
• Buyers’ Info on the Valley of the Sun

The Mother of All Bailouts

Of course the federal bailout is all anyone’s talking about today. I’m a smart cookie, but I don’t pretend to be smart enough to understand (much less explain) all the in’s and out’s of what’s cooking in Washington’s financial stewpot.

No matter how the details shake out I think the bailout is a positive thing in the short term for regular folks. Once the bailout deal is hammered out people will at least know what they’re getting. For sure, many people won’t like the deal. It’s impossible to craft a deal that would satisfy everybody. But in general I think fear of the unknown is worse for the local housing market (which is of course what I blog about, after all) than potential future dislike for a federal government program.

More Bad MLS Photos

This text:

OWNER HAS TWO DOG! MUST ARRANGE WITH OWNER WHEN SHOW. OWNER DID A OUTSTANDING JOB ON THE REMODELING. KITCHEN REMODELED WITH GRANITE COUNTER TOPS, STAINLESS STEEL APPLIANCES AND CUSTOM MAPLE CABINETS. BOTH BATHS HAVE BEEN UPGRADED AND REMODELED. THE WHOLE HOUSE HAS BEEN REPLUMBED WITH COPPER PLUMBING AND UPGRADED 1/4′ DUAL PANE WINDOWS. THERE ARE BLOCK-OUT WINDOW BLINDS IN THE BEDROOM. NORTH/SOUTH EXSPOSER. LARGER IRRIGATED LOT WITH SPARKLING RESUFACED POOL WITH ORANGE TREES AND POSTINOS. BACKYARD IS GREAT WITH PLENTY OF ROOM WITH CHILDREN’S PLAY AREA AND LARGE COVERED PATIO.

is accompanied by this photo (and only this photo):

The owner may have done an outstanding job remodeling, but the Realtor didn’t do such an outstanding job photographing. In this age of digital cameras barely larger than a credit card, this is just unacceptable.

By the way, only certain Phoenicians would know that “postinos” isn’t an architectural feature. It’s a local wine bar. Don’t even get me started on the awkward sentence construction. Was the pool resurfaced with  plaster or with actual orange trees?

I’m shaking my head, and heading off to the next meeting of the Professional Organization of English Majors. (Fans of Garrison Keillors weekly radio show and it’s fake commercials will get that reference; others can see here but I warn you that old GK has a distinctly Midwestern sense of humor.)

Take The Offer

I’ve been meaning for a long while to write a post explaining why sellers are better off taking today’s lowball offer rather than “waiting for a better one”. Turns out I don’t have to write it; my partner Chris Butterworth did.

Sellers, have you received what seems like an insultingly low offer on your home for sale? First, read this. Then read this. Then decide what your goal really is – sell or hang on for many more years.

Once you’ve gone through these steps, your answer is easy. Take the offer or take it off the market.

Related Posts

1. Your Neighbor’s List Price is Wrong
2. Price It So You Don’t Lose Money
3. Things That Do Not Influence Your Asking Price
4. Are You In Denial?

Feds Bailout AIG

In a somewhat surprising move, it was announced late this afternoon that the Federal Reserve and Treasury Departments negotiated a federal bailout/buyout of AIG insurance.

Pundits and talking heads will debate the issue into the ground, but I thought Congressman Barney Frank’s comments bore repeating. Not that I necessarily agree or disagree with Frank. I’m just at the point where I’m throwing up my hands, shaking my head and saying to myself, “well, there’s nothing little old me can do about it, so I might as well laugh.”

Congressman Barney Frank: “I mean this is one more affirmation that the lack of regulation has caused serious problems. That the private market screwed itself up and they need the government to come help them unscrew it.”

AIG stories in the New York Times, BBC News, the Financial Times, the LA Times, and finally, the Arizona Repulsive Republic.

Interestingly, my adopted hometown of Philadelphia apparently doesn’t update their Philadelphia Inquirer website overnight, because when I visited at 11:58pm Philly time, they had no mention of the AIG deal on their homepage. Their homepage carried a picture and story about the Philadelphia Phillies’ win against  the Mets. Who knows what’ll be up by the time readers visit, but it struck me that Philly’s hometown paper is not running a story about a huge new bailout “above the fold”.

Down Payment Assistance Coming Back?

Longtime readers will know that I’m a big supporter of and believer in the Down Payment Assistance programs (“DPAs”) like AmeriDream and Nehemiah, which were effectively killed by the housing stimulus package passed by Congress back in July 2008.

Below is a quote from a press release sent out today by AmeriDream, talking about the effort to re-instate DPAs which is making it’s way through Congress right now. Known as H.R. 6994, it’s a bill designed to reauthorize and reform Down Payment Assistance programs nationwide. The bill got a particularly important Thumb’s Up today from the vitally important House Financial Services Committee.

Ann Ashburn, President of AmeriDream, said today: “Today’s committee vote was a positive step toward preserving downpayment assistance, but our work is far from over. Now more than ever, members of Congress need to know that Americans are watching their vote on H.R. 6994. I encourage members of the public the tell their representatives in the House and the U.S. Senate that a vote for H.R. 6994 is a vote for the next generation of homeowners.”

Related Posts

• AmeriDream’s End
• HUD Continues Efforts to Shut Down DPAs
• AmeriDream Gets Judicial Reprieve
• How DPAs Work

Or Visit SupportHomeOwnership.com

Not What It Seems

FDA warning: Short sales aren’t always what they seem. (Of course that’s not really courtesy of the FDA, but you get the idea.)

I’ve been thinking for about 2 weeks about how to write a post explaining the epiphany I had recently regarding short sales. Today’s graphic finally gave me the inspiration I needed. It’s courtesy of GiggleSugar.com; you can see the brief post accompanying this fabulous graphic here.

I’ve been showing homes to investors seeking “a great deal” and of course we looked at a lot of short sales because they’re often priced so darn low. We put offers in on short sales. Sellers accepted our offers and sent our offers to their lenders. Then we waited.

And waited.

And waited. Five months passed without the bank accepting our offer.

Just like the graphic for this post, short sales aren’t always exactly what they seem.

Short sales can seem like an outstanding deal! But the reality is that you, as a buyer, are negotiating a price now for a home that you don’t  know when you’ll actually own.

You’re making a stab in the dark, trying to predict the future price of an asset but you don’t know exactly when “future” is.

If the market were going up this would be a great opportunity for buyers! Buyers would be crowing about their investing brilliance, like they were in 2005 and early 2006. “We bought a home in May that was worth $40,000 more than we paid by the time we moved in on July 1st!”

Sadly, the market (at least in my corner of the world which is North Central Phoenix) is still drifting down. What’s worth $200,000 in September might be worth only $180,000 by next spring depending on which corner of the vast Valley you’re in. Or things could stabilize and it’ll be worth $197,000 next spring. Nobody knows. Like many blogging Realtors, I keep a careful eye on the MLS stats and I’ll be able to call the recovery when it happens, but I can’t predict the future. No one can.

If you’re looking at short sales as a marvelous investing opportunity, you must factor in the time value of your money. At least factor it in the best you can, given that you don’t know exactly when you’ll be able to say “I bought it.”

For my dollar, lender owned homes are a much better deal. Lenders usually respond to purchase offers within a few days or a week. Once the buyer and lender have agreed to price and terms, the sale usually closes within 30 days. It’s vastly easier to predict the value of a home 30 days into the future than 4 to 6 months into the future. Considering a short sale? Consider lender owned homes instead.

• Short Sales, Lender Owned, REO – What’s the Difference?
• Search Phoenix area lender owned homes

Sunday Stats

Sunday Stats are a day late this week. Sorry ’bout that. I was under the weather.

Lots of red this week.

I looked back one month (below) and found that our numbers have actually gotten worse in that time interval. Interesting. Only time will tell if this week’s wash of red is a fluke or a trend.

.

.

This is the chart approximately 1 month ago.

This chart tracks the entire MLS (not specific ZIPs like the two charts above) and goes back to October 2007. This is “the big picture”, which shows that while our overall inventory of homes for sale hasn’t dropped significantly, we’re selling inventory at a steadily increasing rate.

Most experts and forecasters agree that a 6 month inventory supply is about average. That means that if no additional homes were listed for sale, and home sales continued at the same pace, it would take 6 months to sell every single home for sale.

As you can see from The Big Picture chart, we’ve spent the last quarter of 2007 and all of 2008 to date approaching that magic number. How much longer will it take? That’s anyone’s guess, and lots of folks have guesses they’re tossing into the ring. My take? There are a lot more foreclosure properties yet to hit the market. With many 3/1 ARM loans adjusting in summer 2008, I expect the largest bump of foreclosure properties is yet to come. We’ll probably continue selling that excess inventory, because the investor class is back in the marketplace. (Anecdotally – I’ve got about a half dozen buyers I’m working with right now., some want to buy now and some want to buy “in the next few months.” Only 1 is not an investor.)

My best guess (and it IS just a guess, nobody can predict the future) is that we’ll stall at 9 months inventory for the rest of this year, and things will break loose in a noticeable way next spring after the presidential election and Inaguration.

Lehman Bros Files Bankruptcy

Updating my last post, Lehman Brothers couldn’t find a buyout/bailout partner and the US government held firm in their “No”, so the 158 year old firm filed for bankruptcy this morning. Lehman was the fourth largest US investment bank and had lost billions in the US mortgage market.

World stock markets reacted by dropping sharply. The Dow Jones dropped a little over 300 points in the first 10 minutes of trading. The S&P fell 1.9%. The FTSE 100 in London was down 5% by early afternoon trading and Paris and Berlin saw similar drops in the first hours of trading. Lehman’s stock was down 90% in the first few minutes after the announcement.

In somewhat related events, Merrill Lynch brokered a $50 billion all-stock takeover by Bank of America. Merrill’s website already has a press release up, linked from a huge headline on the landing page. According to Merrill, the decision has been approved by directors of both companies and is subject to shareholder votes and the standard regulatory process. The deal is expected to close in early 2009.

Resources:

1. The BBC News Online
2. New York Times
3. Financial Times US

Hank’s Busy Sunday

Hank Paulson works weekends. Our Treasury Secretary is hard at it again this weekend, negotiating the sale of Lehman Brothers. Barclay’s Bank of London is the suspected purchaser of the ‘good bank’ side of Lehman’s business, or the performing side.

A group of 10 to 15 Wall Street firms would buy the ‘bad bank’ side of Lehman, or the nonperforming side with all the bad loan debts. Each firm would provide a portion of the estimated $30 billion to underwrite Lehman’s mortgage related losses. That’s the same amount guaranteed by the US government in their bailout of Bear Stearns, by the way.

Expect an announcement some time today, before the US markets open Monday morning.

Update, 12:43pm Phoenix time – Barclays pulled out of the talks. Lehman needs a new buyer by Monday’s market opening bell or they’ll probably be declaring Chapter 11 bankruptcy. Yikers!