Destressed Property Training

Came across a press release this morning signifying the importance of working with someone with Certified Distressed Property Expert training. And this is not just any training it is prestigious training! First let's take a look at this press release titled Berkeley Heights NJ Realtor Earns Prestigious CDPE Designation to Help Homeowners Avoid Foreclosure -

James Mulcahy Earns Prestigious Designation to Help Homeowners in Danger of Foreclosure.


James Mulcahy of The RE/Max Classic Group in Berkeley Heights NJ has earned the prestigious Certified Distressed Property Expert (CDPE) designation, having completed extensive training in foreclosure avoidance and short sales. This is invaluable expertise to offer at a time when the area is ravaged by “distressed” homes in the foreclosure process.


Short sales allow the cash-strapped seller to repay the mortgage at the price that the home sells for, even though it is lower than what is owed on the property. With plummeting property values, this can save many people from foreclosure and even bankruptcy. More and more lenders are willing to consider short sales because they are much less costly than foreclosures.


In the NJ/NY Metro area, more than 11% of homes are in danger of foreclosing. It is happening in all price ranges. Local experts say that even high-priced homes are not immune.


“This CDPE designation has been invaluable as I work with sellers and lenders on complicated short sales,” said Mulcahy. “It is so rewarding to be able to help sellers save their homes from foreclosure.”

First - how does he help? He directs homeowners to do short sales instead! He does not help them stay in their homes. Does not help them with their credit. It's so rewarding getting commission.

So what exactly makes this prestigious training? A two-day seminar in King of Prussia, PA and $599 and you too could have this prestigious CDPE training. Or better yet, partake in the distance learning program. Can training get any more extensive than that? Of course not! The probably did not even break for lunches! We are exhausted just thinking about. And what does this training provide? THIS -

Background:

• Entering the Distressed Property Market
• Foreclosure
• Short Sales Explained
• Short Sale Process
• Selling Against and Working with Investors
• Building your Business
• Putting It All Together

Along with the course, you receive the following bonuses:

• The 175 Page CDPE© Field Manual to guide you through an deal you have.
• CDPE© Checklists - of exactly what to do in each situation (right down to don't forget your business cards) ($299 value)
• CDPE© Forms - each document you need to get your from the listing appointment to the closing table. ($99 value)
• CDPE© Flow Charts ($99 value) - of each foreclosure situation so you can quickly see exactly what you need to do.
• A complete sample short sale package that you walk out with and can reference forever. ($99 value)
• A CDPE Resources Disk so you can reprint the forms and checklists as many times as you need. ($129 Value)
• Use of the CDPE© Logo and Designation. (Priceless!)

Priceless and Prestigius!

Note - we think its great that people get extra training to understand their profession - but the press release is too much! Probably be in the local, free Berkeley Heights paper next week!

The Home Tending Trend

A new trend apparently on the west coast is home tending. People with nice things living in vacant, for sale homes. The deal is the temporary occupants must furnish the property and have it show ready. For that they get a very reasonable monthly payment - up until the house sells. It is a free service to the sellers. Here is a clip from CBS Evening News with their story titled The Homeless Help Homeowners -



Watch CBS Videos Online


The organization running the program is Designer Home Tending. We would imagine after the national exposure there will be a flood of applicants. And the screening for such a program is probably difficult. Interesting that in the video clip the mother acts like it is her home - but the single musician seems to acknowledge what a good, temporary deal he has.


Here is a snippet from the accompanying article titled A Unique Solution To The Housing Crisis. Let's take a look -

CBS News correspondent Bill Whitaker reports that when real estate agent Cathy Cardenas saw so many vacant houses for sale or in foreclosure and so many people unable to afford a house in these hard times, she thought, why not put them together?

...

She screens people down on their luck, un- or under- employed, and places them in houses for sale by owners who've had to relocate. In Salt Lake City, Autumn Marler and her family now reside in a 4,000 square-foot house they couldn't otherwise afford.

Says Marler, "My husband lost his job recently and we lost our home for foreclosure. And basically I pay a very small amount of rent to live in a nice house and to furnish it with my things."

Cardenas says in today's cluttered market, empty houses just aren't selling well. That lived-in look has a competitive advantage.

...


The service is absolutely free to home sellers. The home tenders pay a nominal fee, from $500 to $1,000 a month depending on the city, plus utilities. They have to be tidy and prepared to move if the house sells.
...

In two years, Cardenas has gone from a start-up to more than 500 clients, and she's found doing good is good business.

We like the fact that the program allows for very low rents and reduces the number of vacant houses.


Services like this will probably spring up in more places.

Now is a Good Time to Buy a House (Ha Ha)

Yet another story about the deals people can get right now. Especially those wanting to move up tot bigger houses. And while the property you are selling may take a hit a bigger property will take a bigger hit - see that is how you are saving money. The illusion of bubble equity is what people are saving. Never mind that we may not be anywhere near the bottom yet - you are saving money from the peak prices so it HAS to be a good deal. This info comes from an MSNBC article titled Math smiles on move up buyers. Let's take a look -

After two years of married life in a 680-square-foot, one-bedroom Seattle condo, Lori and Chris Kirsten were ready to spread out in a real house with room for a home theater and a yard where the Labrador retriever they had always wanted could roam.

The Kirstens prepared to list their condo for sale and go house-hunting, banking on equity in the unit, which Lori had brought in 2003 for $130,000, to help with the transition to a larger place. Seattle’s hot real estate market had pushed the condo’s value to $215,000 or more at its peak in 2007.

But their home search lost some steam when their agent told them Western Washington real estate prices, although not in the freefall experienced elsewhere, had still declined to the point that their unit might now fetch $25,000 or $30,000 less than two years ago. When they saw condos comparable to theirs selling for as little as $170,000, “I thought, ‘I just can’t do it,’” Lori recalled.

Their mood brightened when they began shopping in the spacious neighborhoods of this suburb northeast of Seattle and found a 3,000-square-foot, four-bedroom split-level on a half-acre of towering fir trees that they wound up buying for $425,000. That’s $86,000 less than the $511,000 peak value placed on the home by real estate Web site Zillow.com, $64,000 below the original asking price of $489,000 and even well below the final asking price of $438,000.

...

“Do the math,” said agent Mark Zawideh, who has been selling homes in the suburbs west of Detroit, where prices have declined 18 percent in the last year alone. “If you’re in a $200,000 house (the median price in the area) and you lost 18 percent, that means you lost $36,000,” Zawideh said. “But if you’re moving up and buying a $500,000 house, that person just took a $90,000 loss, so you can see you’re making 54,000.”

See its a good time to buy a house if you do the math by peak price reductions. If you do the math accordingly, you are not taking on more debt rather you are making money. Since peak prices are the real prices if we do everything from peak (other than refinance and take our HELOCs) we see we are shrewd investors.

Remember only to use real estate math when buying a home - look at the money you are saving and only calculate your monthly payments - and it is a good time to buy. If you do any other type of financial planning you may find that you may not be saving money, those monthly payments are not fixed, you may not be able to afford the property.

Guess it's all just how one looks at the situation...

Which Bottom Will We Hit First?

There are two bottoms to the housing crisis - the bottom for prices and the bottom for sales (in number of sales). Each month we hope that we have reached bottom, and the next months number roll in showing us an even lower bottom. In some areas of the country the only reason the number of sales has bounced back up from bottom is due to the record number of foreclosures at bargain basement prices. But hey, they increase on set of numbers. In an article from The Record titled Where's the bottom? shows how much things have fallen. First lets take a look at the chart they put together of current median prices in municipalities that had at least 30 sales in the 4th quarter of 2008 -

	Highest-ever median	Quarter	4th quarter 2008 median	Percent change
Bergen
Englewood	$425,000	3rd, 2006	$364,000	-14
Fort Lee	$599,500	4th, 2005	$453,000	-24
Hackensack	$345,000	2nd, 2006	$307,500	-11
Mahwah	$494,000	4th, 2006	$379,000	-23
Paramus	$635,000	2nd, 2007	$606,000	-5
Ridgewood	$791,000	3rd, 2006	$631,000	-20
Passaic
Clifton	$400,000	2nd, 2006	$320,000	-20
Wanaque	$371,500	3rd, 2005	$325,900	-12
West Milford	$331,000	4th, 2005	$300,000	-9

Pretty mixed results - big hits in Fort Lee, Clifton, Mahwah and Ridgewood, but just moderate declines in Paramus and West Milford.

Now lets take a look at the accompanying article -

Mounting economic woes worsened conditions in North Jersey's stumbling housing market at the end of 2008, sending prices down another 8 percent and the number of sales down to levels not seen in nearly 20 years.

Amid a deepening recession and a banking crisis that squeezed the flow of mortgage money, the median price for a single-family home in Bergen and Passaic counties slipped to $390,000 in the fourth quarter, from $425,000 in the same period of 2007.

...

An analysis by The Record of data obtained from county and state agencies found that:

* The median price for single-family homes in Bergen County sank from $455,000 in the fourth quarter of 2007 to $425,000 in the fourth quarter of 2008. In Passaic County, the decline was steeper, from a median of $370,000 to $335,000.

* Since the all-time peaks of $495,000 in Bergen County and $390,000 in Passaic County, medians in the two counties both are down 14 percent. While substantial, those drops are nowhere near the dips of 30 percent or more felt in other parts of the country.

* An estimated 1,600 to 1,700 homes sold in Bergen and Passaic counties from October through December. That is down nearly two-thirds since the all-time fourth-quarter high of 4,713 in 2004 and the first time since 1990 that fewer than 2,000 homes sold in any fourth-quarter period. The Record used past years' trends to reach this estimate; the available data did not include all sales through the end of 2008 because of a lag in deed recordings.

* The downturn not only cut into potential profits for people who bought before the real estate boom of the 2000s, but it forced losses onto sellers who bought when prices were at their highest. Among the 185 homes that sold during the peak of the real estate boom and sold again in 2008, two-thirds lost value.

...

"Is it turning around tomorrow? No. But will it turn around? Absolutely," said Karen Lampiasi, manager of Coldwell Banker Residential Brokerage in Mahwah. "When it will happen is hard for anybody to predict."

The Coldwell Banker may be right that is will someday turn around, but where the numbers end is as important question for many of us as well as the when. How low can the number of sales go down before things turn around? How much below peak prices before the prices bottom out? In some parts of the country areas have are less than 50% of peak price. We have seen a local foreclosure sell for 80% off peak price. Those foreclosures are helping drive down prices in other areas of the country, but they are helping the number of sales increase. Perhaps that is not the model we should look to follow.

Realtor Math and Logic

We are very leery about taking financial advice from realtors. And often, we are proven correct. Realtors are good at selling properties. Bu the financial advice from realtors should be limited to what the monthly payments will be. So when the nationally known realtor Barbara Corcoran advises that buying a more expensive house will put money in one's pocket we find ourselves scratching our heads. From the Real Estate Channel's Q & A with Barbara Corcoran we get the following -

Q1 - My husband and I have our house on the market in South Florida. We want to buy a larger home and take advantage of the lower house prices. Is it a good idea to take that loss now and be able to buy a larger home, or should we wait until prices come up so we make money on the sale of our house but have to pay a higher price to buy a home?


A - You're in a perfect position to make some money here, and making money in real estate doesn't happen much these days. If you unload your smaller house at a steep discount, let's say 30%, you'll be able to buy a larger house at the same 30% discount. And as the price will be considerably higher on your new house, the same 30% discount puts more money in your pocket!

See the house prices are discounted - like a sale. Not like the 30% off peak price may still fall, and prices that will take decades to rebound. No. It is a discounted, sale, price. Buy the bigger property now and save yourself some money! Keep the money in your pocket! (Funny that it sounds alot like the home equity logic about equity is using your own money.)

So let put some money into these percentages and discounts to see how we save. First, suppose the current house appraised at peak for $500,000 - they possibly could sell it for $350,000. And second, the house they are interested in had a peak price of $750,000 - now "discounted" to $525,000. Since we do not know what is owed on the current house it is hard to say, but it sounds like they will not lose money selling at the current price of $350,000. So the next house will put them approximately $175,000 more in debt - but that extra debt is putting money in their pocket. (Funny, but it sounds like the realtors handling the transaction will be the only ones having any real money flowing in their pockets.)

In the midst of The Great Recession it is a great idea to go further into debt because a more expensive property. Florida has been hit really hard with the recession. Lets take a look at how out of historical whack the housing bubble has been (since buying a more expensive house is just a temporary discount) -



Or this other one that puts from the Wiki housing bubble page that puts the home prices perspective in relation with population -


It is evident that this 30% or an adjustment is not a discount. It is merely putting housing prices back to their true values. So telling the potential buyer to jump in the market (during the recession) to get a bargain and that this supposed discount "puts more money in your pocket!" (complete with an exclamation point to emphasis the savings!!!) only works that that special math we call "real estate math!"

If Ms. Corcoran advised Q1 that if their incomes were recession proof and stable, and if they are able to sell their properties first they it may be a good time to move up, that would be one story. But advising someone to buy a bigger, more expensive property because it will put money in their pockets does not really make any sense - even during the bubble. But it does show us realtor math and logic at its finest!

Update - This map (also from the Wiki link above) shows just how much Florida prices rose during the bubble -

Warning - Realtors Giving Financial Advice

Our previous post warned about getting financial advice from a Realtor. We noted that to be a realtor in New Jersey you did not need much other than an high school diploma (or GED), taking a 75 hour course, passing an exam, and to find a sponsor to hire you. Many places offer the course in a 12 day program. Pretty scary when you realize that this is all the requirement needed. From the NJ Reatlor's themselves, less than 1 in 2 reatlors has a Bachelors Degree! Directly from them -

The report found that the typical REALTOR ® has been in business for 10 years, compared to the national median of eight years. Nearly half of all REALTORS® in New Jersey have a bachelor's degree or higher (45 percent).

If all Realtor were doing was selling properties that would be one thing. But thinking this background is strong enough to give out financial advice about one of the biggest financial decisions most people make in their lifetimes is scary. Although we are not anti-realtor, we are against real estate agents giving financial advice when they have no background or qualifications to do so! This ought to be against the law! Losing one's license at the very least. Being able to sell a product does not give one the understanding or knowledge to dispense financial advice! We wonder how many realtors even understand half of the mortgage products out there? We have talked to post-graduate degree professionals that get confused about some of the products out there.

Finally, aside from "Real Estate Math" portion of the class what other financial tools are taught in the 75 course? And what is real estate math anyways? Learning how to compute commissions? Or other real estate math, like the wonderful financial advice "don't look at the full purchase price, just look at what your monthly payments will be." How did that work for the ARM and Option ARM holders? Not so good...

When is a good time to buy?

There will always be buyers wondering if now is the time to jump in. The interest rates are still low and house prices have fallen pretty dramatically already. The pool of real buyers is a lot smaller since a down payment and good credit are now requirements. People have to juggle the unknowns of how much more the housing market will still fall against when interest rates will go up. This uncertainty is explored in this Bloomberg article titled Mortgage Seekers Find Rates Are Down, Credit Standards Tighter. Lets take a look -

Existing home prices have fallen 7.7 percent since their July 2006 high and rates dropped below 6 percent last week for the first time in more than three months. The obstacle for people ready to buy is finding a willing lender, said Suzanne Bach, senior vice president of New York-based Guardhill Financial Corp., and an 18-year home lending veteran.

...
About 75 percent of U.S. banks tightened standards on mortgage lending to the most credit-worthy borrowers in the three months ended in July, according to the Federal Reserve's quarterly Senior Loan Officer Survey released Aug. 11.

...
Around the country, homebuyers looking to purchase property for more than $417,000 are facing some of the toughest scrutiny, said Marve Stockert, executive director of the Illinois Association of Mortgage Professionals and a 38-year veteran of the industry.

``The most difficult thing now is the appraisals are being scrutinized so much more than they have ever been,'' Stockert said. ``The higher the sale price, the more scrutiny that is happening. We're talking two or three appraisals on the same property."

The purse strings are being tightened. Lenders have no choice. The big gamble is to jump on a low interest now but risk paying too much for the property versus waiting for the house prices to fall more but risk paying a higher rate. Another risk is finding a lender as time goes on. The pool of lenders, like the pool of buyers, is also continuing to shrink.

But then there is this paragraph that stands out on its own. Its too good and too out there to be part of the rest of the story -

The credit squeeze is contributing to falling home sales. In July, the National Association of Realtors' index of pending home resales fell 3.2 percent, a decline NAR Chief Economist Lawrence Yun blamed on ``overly stringent lending criteria.'' The index is down 6.8 percent since July 2007.

The plunging housing market, record foreclosures on bad loans that are making financial giants tumble like dominoes and the National Association of Realtors are complaining that the criteria is" overly stringent"? Spin is one thing but this is not even reality.

Maybe Lawrence Yun should start up his own mortgage firm and teach us how to do it right this time. The wonder of no doc loans, pick-a-payment, and piggyback mortgages to anyone who had a pulse - and probably sometimes to those that did not. Requiring any down payment is too stringent! Requiring good credit is too stringent! Requiring an honest appraisal is too stringent! 1

NJAR Survey Results

Now this is funny. This NJAR survey press release is getting alot of publicity in local papers. The title is NJAR survey reveals REALTORS commitment to professionalism. Would you really expect any less? How about NJAR does some spinning? Reading the article it sure sounds like it. The first part is about the results - local REALTORS sound very impressive. Then at the end the release reveals the methodology - which basically makes the survey meaningless. Let's take a look at the press release article as published in the Brick Times -

The report found that the typical REALTOR ® has been in business for 10 years, compared to the national median of eight years. Nearly half of all REALTORS® in New Jersey have a bachelor's degree or higher (45 percent). It also shows that 30 percent of New Jersey REALTORS® hold a professional designation, and 16 percent received specialized certifications.

REALTORS® earn professional designations through the National Association of REALTORS® (NAR®) and its affiliated institutes, societies and councils in order to enhance their knowledge about a specific real estate sector. To earn a designation, REALTORS® must complete required courses, which are designed to prepare them to better serve clients and consumers in a particular field of the real estate industry.

The survey indicated that real estate is the only occupation of 74 percent of New Jersey REALTORS®. A majority (96 percent) said they are certain they will remain active as real estate professionals during the next two years.

"This survey indicates that New Jersey REALTORS® are committed to their profession," added [2008 NJAR® President Drew] Fishman. "The fact that an overwhelming majority of NJAR®'s members are certain they will remain in real estate as a profession shows their confidence in the housing market."

Additionally, the 2008 New Jersey Member Profile found that REALTORS ® worked a median of 40 hours a week in 2007. The report also revealed that in New Jersey 62 percent of REALTORS ® are female compared to 60 percent nationally, and the median age of REALTOR®s is 51. A majority (81 percent) of REALTORS® specialize in residential brokerage.

The first paragraph make REALTORS sound pretty great. Very different from the profile we see on other housing bubble blogs. However less than half (that actually answered the survey) even have a college diploma. In addition, the special designation also sounds great upon first read - but seeing how the designation is just given to those that complete courses or sit through lectures this probably does not mean much. My guess would be some of these designation are given to people who sit through a few hour lecture at the Tropicana or some other have seen awards given to regional conference.

This survey reflects characteristics of NJAR® members. The term REALTOR® identifies a real estate professional, who is a member of NAR and pledges to uphold a stringent code of ethics.

The survey was conducted by the National Association of REALTORS® on behalf of NJAR®. In February 2008, NAR mailed an 89-page questionnaire survey to a random sample of 72,000 REALTORS ®. An identical questionnaire was also distributed to another group of 89,400 members via a Web-based online survey. A total of 9,997 responses were received. There were 344 unweighted responses from New Jersey, yielding a response rate of 4.3 percent, which form the basis of the report. For more information or to view a summary of the 2008 New Jersey Member Profile, visit http://www.NJAR.com/research_statistics/pdf/2008NJMemberProfileSummary. pdf.

So NJAR is publishing these statistics from a very low response rate that is not weighted. A survey from a trade group about the trade group should already be taken with a grain of salt. Add to the low levels of response and this is nothing more than a press release.

But lets just turn the headlines around - less than half of the people working to sell the biggest investment most will make in life did not even complete college. That itself is a scary thought and headline. And how many people believe what their realtor tells them about financing and mortgage issues. Very scary indeed.

Spinning the Numbers

It seems every few months the National Realtor Association changes the methodology to show things are great. When the number suit them they change the whole game. Anytime there is a slight uptick in month-over-month numbers it seems NAR changes the equation. These numbers are reported and analyzed as year-over-year not month-over-month. The same thing happened this spring with an uptick in February numbers over January (see here). Here is a snippet from Seeking Alpha's great March explanation -

"Changes from [May] to [June] are measuring seasonal differences, not actual improvements in house sales." Can you imagine what it would be like if we reported retail sales from December to January this way? Headlines would misleadingly state: "Retail sales plummet 65%!" That is why with highly seasonal data series, the preferred methodology is to report year-over-year data -- not month-to-month variations.

Now to the Los Angeles Times article which makes the monthly uptick as a good news. The headline to the article screams Pending sales of homes climbed in June. Let's take a look -

Pending sales of previously owned homes unexpectedly rose in June as buyers swept up foreclosed and lower-priced properties.

The index of pending home resales rose 5.3% after a revised 4.9% decline in May, the National Assn. of Realtors said Thursday in Washington. A separate report showed that claims for jobless benefits jumped last week to a six-year high.

The record number of foreclosures has forced property values down enough to stir interest among buyers, helping to stabilize the market. Still, repossessions may keep mounting as stricter lending rules make it harder for owners to refinance, economists said.

...
The measure increased in all four regions of the country from May, led by a 9.3% gain in the South. Purchase contracts also rose 4.6% in the West, 3.4% in the Northeast and 1.3% in the Midwest.

Compared with a year ago, contract signings remained down in all regions.

Buried at the end of the article is that contract signings are still down in year-over-year analysis. The real way to analyze and understand the data. But instead of acknowledging normal seasonal fluctuations they are being spun to illustrate a narrative. The narrative is the NAR line that "Now is a great time to buy a home." Great for Realtors that keep that 6% commission regardless if the buyer keeps their house or not. Not so great for potential knife catchers.