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And for those who are NOT informed they have nobody but themselves to blame.
Mega Dittos.
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Unfortunately, the NON informed get bailed out and they therefore affect the informed.
There is plenty of blame to go around Schousse. In order to completely understand this mess, you need to be very well schooled.
You need to uncover the ethics gaps that are still occurring by politicians, Realtors, mortgage agents, appraisers, banks, individuals, etc. Even buyers.
Pick a player and I will tell you how this "recovery" is as dirty as can be.
For starters, let's pick on Realtors. I'll explain just one sub section of many ethic gaps that I have personally observed. Several short sales are being manipulated. Agents are attempting to get low comps (and succeeding by using semi-dirty appraisers so that the owner can more easily default in the eyes of the bank). Remember: the agent "works" for their client helping them get out of the house (that is how they sleep at night). Before, appraisers were leaned-on to get high values: now they are being leaned on by agents to get low values. Many times it works.
Next, they list low (even if it doesn't sell and help destroy the perceived real value of the neighborhood. SOME will then control what offers are given to the bank (most will present them all) and pull it off the market with their 4 bids. So you were wondering why you didn't get that short sale even though you bid the highest??? Who says it was presented (think double commission)?? If it was really worth more, the bank holding the 1st note will take a crap on the 2nd bank. The 1st mortgage only cares about themselves. When it sells, the neighborhood is destroyed from getting any REAL market appraisals. Because the new market is based off of the what was manipulated. We all blame this situation on the bubble. So now that the there is a low priced home more homes that are for sale are deeper under water. Now the Short Sale expert will "help" a lot of their neighbors too! Evil banks!
Since more people are upside down in that neighborhood because it cannot get it to appraise, when someone offers the neighbor across the street $30K more (the real market), the cautious bank says no-way. Shame on that agent! They should have used their tried and trusty appraiser that was dishonest to get them those high values in 2006. Since defaults follow negative equity, the cycle will happen all over again. In order to break the cycle, you need cash buyers (which is finally happening now).
We are currently in this very cycle. It seems the "best" short sale agents get it done in this fashion.
I am informed. If I want to buy a short sale, I'm going directly to the listing agent. With some prodding, I'll get all kinds of information on how to bid. Even the most "ethical" agents will inkle all kinds of info. You all know you will.
I can go on and on. While I'm not saying this is the rule; it is very common. "Those who are NOT informed they have nobody but themselves to blame."
Should I continue the education so we are all informed??
Last edited by MN-Born-n-Raised; 08-27-2009 at 05:26 AM..
MN
I respect your opinions and agree with you on some points, but as long as this thread has transformed to an education/information topic I would like to clarify a few things about the area I work in....
Where loans are concerned in my area, Banks and realtors have NO control over which appraiser is appraising a property. It is ordered thru a 3rd party from who knows where that doesn't no jack other than the loan type and address. So, as much as some want to think we are picking appraisers to fit the deal it is impossible to do in my area when there is a bank involved.
In regards to short sales in my area - Listing agent has no clue what the banks bottom dollar is or if they will even do one. If the agent inkle's info the only single thing they could do to advantage you is to tell you if you enter a multiple offer situation what the other high offer is, unless this unethical listing agent has an investor buddy then he/she will simply rat your top dollar out since your aren't the preferred client. Banks don't give listing agent crap to inkle to the real estate agents and as far as the seller is concerned it don't matter to them as they are walking with ZERO, hence the term short sale. I have seen banks all but sign up on an agreed upon short sale price, then the offer(s) is sent over only to be rejected by the bank board anyway.
As far as cycles breaking, cash buyers are not needed in my area either - there are enough comps to pull one from the left or the right if the price is not totally out of line, giving the pendulum a chance to swing a tiny bit either way - some weight is taken into the fact that someone came and is willing to pay X dollars today.
Also in my area the agent has no duty to the neighborhood only the seller they represent in that neighborhood, and if there were enough buyers/sellers in a neighborhood one or two short sales wouldn't be enough to drag it down - the lack of buyers most certainly will - and buyers that could buy but don't only because they are waiting for the "rock bottom" are doing nothing different than the agent/seller/bank/appraiser which is dealing with the market as it exists at that moment in time...
I just called a banker. In MN, the mortgage officer USE TO order the appraisal. That changed 3 months ago for obvious reasons. But you are right, on short sales, the appraiser has no knowledge of who the agent is. The bank order it. Thanks for the clarification as I stand corrected.
Re: the inkles. I was referring to competitive bidding situations. The preferred client is the one that gets you double the pay. So it is very helpful to be working with the listing agent on short sales. For that matter, in all competitive situations it is better to work with the listing agent IF you are savvy and knowledgeable. That takes a good understanding about the area and most people don't have the interest to learn the market. In 2000-2006 when I bought and sold several lake homes, I rode one horse and I worked with one agent.
But with my AZ search, I'm only dealing with the listing broker on an individual case by case basis. What I learned is the"ethical" agents still tell me everything I need to know. It just takes a little longer to get 90% of the information. Some agents will out and out tell me everything if they feel or hope an offer is coming that they can win. I've only contacted 4 agents of bank owned properties and I got the info on all 4 (the bid history, what terms will take it etc). They might hesitate initially but it will flow.
MN
...- and buyers that could buy but don't only because they are waiting for the "rock bottom" are doing nothing different than the agent/seller/bank/appraiser which is dealing with the market as it exists at that moment in time...
A lot of the advice and perspectives here are what makes the concept of real estate 'agency' dangerous for the average consumer. The realtor ALWAYS has a financial stake in their clients action, and furthermore, realtors have very little in the way of education to be doling out market advice. The advice is most often what they read from biased industry publications, or heard around the office, and is regurgitated to the consumer as fact.
Let me give you a dose of reality.
First, lets make an assumption. That assumption s that buying real estate, for everyone except those very lucky few who can spend money on a house and who can then lose that money without significant financial pain, is ALWAYS an investment. Ok. So all of that "buy and sell when its right for you" garbage is out the window. A persons financial well being is almost always a primary factor that determines buying and selling behavior.
Assuming that real estate almost always qualifies as an investment for anyone in the market, then the primary rule of investing applies.
The number one rule of investing is to not invest in anything in which you do not, or can not, possess full information about its true value. If you can not truly and accurately value an asset, then you do not know what it is worth. Therefore, you cannot make a sane decision to invest in it at any particular price.
Can anyone here tell me, with reasonable certainty, where real estate values will be in 5 years. Really? Taking into account not only intrinsic land value but also where the currency value might go?
Didn't think so.
There is currently much too little information available about the true value of these assets to invest. In a normal economy and market, highly skilled investors can gain a higher degree of information about true value than can Joe public, giving them their market and price advantage. However, in this market, it would take a psychic to see where values will go, especially when you take the currency and economy into consideration.
Convincing consumers that it is OK to buy is understandable given your profession, but you should not in clear conscience do this to anyone with whom you are contracted as an 'agent', in my opinion.
I know it sounds basic but the # 1 factor in the housing mkt is jobs.
More decent and well paying jobs people will want to live in an area and have the money to buy or rent.
Lots of jobs and limited housing and the prices rise.
What did make prices rise IMHO was the lowering of interest rates.
Now that rates are already very low that trick can't work again.
How about the agent who is showing this "investor" homes. Can we put any blame on them? I'm guessing most agents are asked if it is a good idea. There are so many newbie "investors" buying single family homes to rent without a clue. The "investor" might ask the agent if it makes sense. Generally speaking, buying a single family home as an "investment" is a net loss once you roll up all of the numbers including depreciation, etc.
The funny thing about real estate investing is so few "investors" even know how to properly calculate a basic profit/loss model to determine if a property will cash flow. I mean, it is really easy, compared to doing a DCF (discounted cash flow) on a corporation to calculate a stock price. Many people put the blame on real estate agents. They just get paid to make transactions happen - it's the fault of the investors (both the real estate investors and the mortgage investors who allowed the loans to happen).
In general though, I think people put too much trust in real estate agents for "investment" advice. A typical realtor advising a newbie "investor" is like the blind leading the blind. I would venture a guess if I asked 100 real estate agents to tell me how to properly calculate a simple cash flow model on a SFR or a duplex or some small properly only a couple would have any idea how to do it. But at the same time it's not the job of a realtor to know how to do that kind of stuff - they don't get paid to be investment advisors - they are paid to execute transactions and sell properties and broker and close deals.
The funny thing about real estate investing is so few "investors" even know how to properly calculate a basic profit/loss model to determine if a property will cash flow. I mean, it is really easy, compared to doing a DCF (discounted cash flow) on a corporation to calculate a stock price. Many people put the blame on real estate agents. They just get paid to make transactions happen - it's the fault of the investors (both the real estate investors and the mortgage investors who allowed the loans to happen).
In general though, I think people put too much trust in real estate agents for "investment" advice. A typical realtor advising a newbie "investor" is like the blind leading the blind. I would venture a guess if I asked 100 real estate agents to tell me how to properly calculate a simple cash flow model on a SFR or a duplex or some small properly only a couple would have any idea how to do it. But at the same time it's not the job of a realtor to know how to do that kind of stuff - they don't get paid to be investment advisors - they are paid to execute transactions and sell properties and broker and close deals.
I've heard some individuals explain how their real estate investment "cash flows". They assume that the money they put down somehow doesn't count. It's call the opportunity cost newbie and it has to be part of the totals. Others won't put in the cost of depreciation. They only calculate repair costs. So in 15 years when the ceramic and kitchen is outdated how much was that "investment" worth now on your single family home??
I have talked with several agents different parts of the country looking at ocean front properties to see if they cash flow. I have not found even ONE that gets it. They just tell me how it pays for the mortgage and the monthly fees. Idiots. And I'm searching for the rental experts mind you.
I guess I don't think it is too much to ask for an agent to be able to understand the basics. It would take an hour to understand the basics (tops).
As far as Ocean Front properties cash flowing I have never seen it.
The most prime properties tend to cash flow the least and appreciate the most.(Ocean Front)
The best cash flowing properties tend to appreciate the least.
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Several short sales are being manipulated. Agents are attempting to get low comps (and succeeding by using semi-dirty appraisers so that the owner can more easily default in the eyes of the bank). Remember: the agent "works" for their client helping them get out of the house (that is how they sleep at night). Before, appraisers were leaned-on to get high values: now they are being leaned on by agents to get low values. Many times it works.
So now that the there is a low priced home more homes that are for sale are deeper under water. Now the Short Sale expert will "help" a lot of their neighbors too! Evil banks!
Since defaults follow negative equity, the cycle will happen all over again. In order to break the cycle, you need cash buyers (which is finally happening now).
If I want to buy a short sale, I'm going directly to the listing agent. With some prodding, I'll get all kinds of information on how to bid. Even the most "ethical" agents will inkle all kinds of info. You all know you will.
