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.600 Is A Pretty Good Batting Average…Unless You’re Talking About Short Sales

Rod Herman — Tue, 15 Mar 2011 03:10:14 +0000

A few days ago, our state association, the California Assn. of Realtors, released the results of a recent survey which claims that only three out of every five attempted short sales in the state actually went through.

A .600 batting average may be great if you’re Barry Bonds, but it’s not so great if you’re talking about the percentage of short sales that were successfully completed.

The report lays blame with the banks for dragging out the process for months and months on end. And to be sure, with some banks, that’s definitely an accurate statement. But others, like Bank of America and Wells Fargo have made great strides in streamlining the process over the past 12 months.

In fact, on all of the short sales I’ve negotiated with Bank of America since last summer, I’ve gotten responses in about 30 days or less. That’s a far, far cry from what was happening a year ago — when their norm was a good 6-8 month wait (if you were lucky).

I don’t dispute CAR’s findings, but based on my own personal experience with representing short sale clients here in Benicia, Vallejo and elsewhere in Solano and Contra Costa counties, I think it’s fair to point out that while many banks are definitely the root of the problem, some of the blame for that 40% failure rate lies with sellers or their agents.

Now, I certainly haven’t had a 100% success rate and anyone who tells you they have isn’t telling the truth.

But by the same token, I’m sure I’m well above the 60% figure that CAR’s survey suggests.

What’s more, I’m sure colleagues of mine who know what it takes to successfully negotiate a short sale would say the same thing.

In my experience, if an agent is only successful on 3 out of every 5 short sales, they’re either not doing something right, are plagued by sellers who aren’t really committed to the short sale process or are in the midst of a run of incredibly bad luck.

Most of the time, the handwriting’s on the wall for all to see, with plenty of tell-tale signs that this particular short sale has little chance of going through.

Here are some signs you may be in for a bumpy short sale road:

The listing agent doesn’t return the buyer’s agent’s phone calls or emails. Remember, this is the same person you’ll be relying on to process the short sale with the seller’s lender. If he or she won’t even respond to inquiries about the property, what are the odds of that person taking control of the short sale process?

The seller makes it very difficult to see the home. If the sellers aren’t motivated to even let a prospective buyer see the property, what are the chances they’ll provide all the necessary short sale documents to their agent? Without that paperwork, there’s no chance of the lender approving the sale.

Uncooperative tenants. If there’s a tenant living there, they may not be thrilled about cooperating with the seller if they’re paying rent while the sellers aren’t making their mortgage payments. If they’re uncooperative in letting the house be shown, what are the odds that they’ll actually move out when escrow closes? Plus, they might even have a long-term lease, which would entitle them to stay there until it expires.

The listing has been on MLS a while, but no photos. If the listing agent is engaged in marketing the property, he or she should have a variety of photos of the house on the MLS. If there are none or perhaps only a few exterior shots, it may be a sign that the listing agent hasn’t even seen the home, which could be another sign that the listing isn’t really a high priority to that agent.

The listing agent is from far, far away. Most serious sellers will list their home with an agent who is familiar with their home and their community. Occasionally, a short sale is listed with an agent from way out of the area. It’s very difficult to adequately represent the seller from 400 miles away. I came across a local property recently where the listing agent was from the Palm Springs area and had it listed only in the PS area’s MLS. It was nowhere to be found in any Bay Area MLS system.

Is it really a hardship? If you see newer vehicles, a lot of high-priced personal items or other signs that give the appearance that the seller has plenty of cash, that could be an indication that the seller may not have a legitimate hardship. And without a real financial, medical or life-event hardship, getting a short sale approved is much more difficult.

A few days ago, I wrote a post about 10 key short sale factors that an agent or seller can directly control. As I pointed out in that post, unless you pay attention to those 10 important short sale elements, your chances of short sale success drops considerably.

That’s why the seller has to be fully engaged and the listing agent really has to know his or her stuff in order to have a realistic chance of getting short sale approval.

Short sales can be complicated and there’s no guarantee the bank will approve them.

But, still, if you’re talking about an experienced short sale agent, 60% seems like an awfully low success rate to me.

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BofA Proves Its Short Sale Mantra Isn’t All Talk

Rod Herman — Tue, 08 Mar 2011 19:27:03 +0000

A year ago, if you’d asked me who were the worst banks to negotiate a short sale with, I would have quickly put Bank of America near the top of that list.

Back then, BofA was notorious for dragging out short sales for months on end, for asking for the same documentation over and over again, and for switching negotiators in mid-stream and starting from scratch. Each time you called, you got a different story. It all depended on who answered the phone.

There was no consistency and certainly no commitment to expediting the short sale process. It was as if the powers that be at BofA just wanted to make the homeowner’s life a little more miserable by dangling the possibility of doing a short sale in front of them before ultimately making a settlement demand so unreasonable that the owner would finally just walk away out of frustration.

A year ago, I wondered whether the acronoym BofA really stood for “Bank of Anxiety,” for that’s the state of mind most short sellers found themselves in for months and month on end.

Fast forward to the present

Well, as they say, that was then and this is now.

Last Spring, Matt Vernon, one of the top execs at BofA and the man charged with overseeing its short sale department at the time, presented a webinar to real estate agents. He acknowledged that BofA had done a very poor job with virtually every aspect of its short sale process.

He pledged to fix the process, upgrade the response times and create an avenue for “good” deals that were about to go south to be escalated to a senior level manager who could intervene and make sensible financial decision.

It all sounded great in theory.

But those of us who had worked on enough short sales with BofA borrowers took Mr. Vernon’s words with a big grain of salt.

We’d believe it when we saw it.

Well, over the last 12 months, BofA has made one of the quickest and most impressive turnarounds I’ve ever seen. Just like the Amazing Mets of 1969, who went from last to first, almost overnight, BofA has gone from one of the worst short sale banks to one of the best.

In my opinion, BofA and Wells Fargo are probably the top two banks to process a short sale through right now. Both banks give you a fairly quick response — usually within 30-45 days, which is about half as long as it takes with most other banks’ short sale departments right now.

But the most impressive part of BofA’s turnaround is that now there really are people in high places where a savvy real estate can go when a deal that shouldn’t be turned down is about to self-destruct.

Earlier this year, Kimberly Dawson, another high-level BofA short sale executive appeared on an industry webinar and echoed many of the same comments Matt Vernon had made a year ago. She reiterated BofA’s commitment to preventing foreclosures and said that they consider short sales the “top of the waterfall.” Preventing a future foreclosure by completing a short sale benefits everyone, she said.

Well, last week, I put that mantra to the test. Without going into too many specifics, let me say that BofA had been presented with a top-of-the-market offer on a home here in Solano County that would net the bank’s investor at least $40,000 more than if the property went to foreclosure.

Yet, BofA’s assigned negotiator had stalled the deal over $3,000. I couldn’t get the negotiator to budge. His parting comment was “if the seller wants to walk and let the home foreclose, that’s their decision.”

This was exactly the type of deal that Mr. Vernon and Ms. Dawson had talked about when they said they didn’t want to create a future foreclosure when a far better short sale alternative was out there.

So I climbed the BofA corporate ladder and within a matter of hours got several people in really, really high places to intervene. An absolutely terrific senior negotiator stepped in and in about 5-10 minutes was able to override the original negotiator and approve the sale. She saved BofA’s investor a good $40,000-plus.

AND, she prevented an unnecessary foreclosure from further gumming up our sputtering economic recovery.

A year ago, there’s no way that would’ve happened. The file would have been declined, the home would’ve sat vacant for 3-4 months (and probably fallen into disrepair) and this home ultimately would have driven home values in this neighborhood even lower.

So kudos to Bank of America. For a year now, they’ve talked the talk. But they’re one bank that also walks the walk.

At least they did this time around.

Now, if only other banks (names like US Bank, PNC, Chase quickly come to mind…) would follow BofA’s lead, we might just be able to turn the tide and work through these upside-down properties faster and with less chance of neighborhood values dropping any further.

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Obama’s Mortgage Reform Plan: A Bitter Pill

Rod Herman — Sat, 19 Feb 2011 16:25:42 +0000

Many years ago, another agent in my office shared a great little saying with me.

It was one that really cut to the chase with a seller who wanted to hold out for a better offer when the one they had in front of them was clearly the best they were ever going to get.

She would say: I know it’s a bitter pill to swallow…but do you want that pill now or do you want it later?

And that little saying of hers resonated with me the moment I heard about the White House’s proposed mortgage reform plan, which was announced just over a week ago.

I wrote about that plan a few days ago. In a nutshell, the Obama administration has proposed sweeping mortgage policy changes that would:

Require higher down payments
Drop the maximum loan amounts for conventional loans in many areas
Raise loan fees to borrowers
Do away with mortgage giants Freddie Mac & Fannie Mae

Making all these changes would definitely be a very bitter pill for the mortgage and housing markets to swallow right now. But if we really want to make sure we don’t have a repeat of the recent mortgage meltdown, there’s no doubt some changes have to take place.

Mortgage Reform Is Needed…But Now or Later?

We have to make sure the riskiest borrowers really have the means to own a home before letting them slip through the cracks and buy something they clearly can’t afford. And we need to get back to where the private sector is fueling the money supply machine rather than government.

Maybe not exactly as Obama’s plan proposes, but some changes definitely are in order to make sure we prevent careless live-only-for-today lenders and home buyers from again bringing the rest of us into their Den of Doom.

Whether we do it the way the White House plan suggests or another way, no one can quarrel that mortgage reform is just what the doctor ordered. And it will be a bitter pill. The big question, though, is Do We Swallow It Now Or Later?

The housing market and our overall economy are both still VERY fragile. So if we implement too much too soon, we run the risk of undoing all the progress we’ve made over the past 2 years.

The Patient Is Still Healing

The housing market is kind of like the patient who just had major surgery. It’s starting to heal, but if we take out the stitches too soon, we could undue everything and be right back in surgery tomorrow.

So while the premise of Obama’s plan makes sense — reducing the housing market’s dependency on the government and safeguarding the mortgage industry from a repeat of the recent mortgage market meltdown — introducing major mortgage changes like these could take a lot of the steam out of a still fragile housing market and cause yet another downward spiral.

I think we need to make sure the patient’s incision is fully healed before we making big sweeping changes like these. And lord knows, the economy still has plenty of healing to do.

Too Much Too Soon?

Premature policy changes will likely cause the housing market to sputter, which likely would curtail our economic recovery and renew cries for more government assistance — the very thing Obama’s plan is trying to curtail.

In my mind, the sensible approach is to wait until the housing market and overall economy is convincingly in a robust recovery mode before making sweeping changes. Over the past few years, underwriting and appraisal rules have tightened, which already has helped prevent the riskiest borrowers and shady investors from buying.

I’m not saying the job is finished. We need reform, but not in one big gulp and certainly not while the economy and housing market are both still so weak and fragile.

The right dose of medicine can can work wonders, but as we all know, an overdose can be lethal.

So let’s not swallow that bitter pill just yet.

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What Obama’s Plan Means For Solano Home Buyers & Sellers

Haven’t We Learned Anything?

Rod Herman — Wed, 21 Apr 2010 03:30:00 +0000

I just got the following email in my spam folder, from a mortgage lender out of Southern California:

Even though we’re not even close to getting out of our nation’s worst financial mess since the Great Depression, we’re already beginning to see a smattering of snake oil salesman peddling loans that look and feel just like their subprime cousins that started this whole economic tailspin.

I guess I was naive to think that those flim-flam men and women who pushed people into homes they clearly couldn’t afford had left our industry for good.

No, it looks like they’ve just been laying low for the last few years.

Yet here they come, even as traditional, institutional lenders are still tightening guidelines to ensure that the only ones who get a loan are those who truly qualify. And as the government government continues to unveil programs to help borrowers caught in the cross-fire of the recent subprime meltdown.

It didn’t take long for these sharks to start peddling their smelly wares again, did it?

Call me naive, but shouldn’t a lender or investor know a little bit about the borrower’s financial ability to repay before giving them hundreds of thousands of dollars?

Yet, according to this email, all this lender wants is a verification of employment (VOE). That’s right, as long as your boss says “yep, Charlie works here” you’ve got yourself a loan.

So as long as I put 20% down, I don’t need to show any paystubs, W-2’s nor tax returns. And with a score of 720, I can borrow almost three-quarters of a million dollars. Plus, I can close escrow in 10 days?

Do the words “too good to be true” come to mind? And you know what they say: if it smells like a rat, it MUST be a rat.

Now let me ask you — isn’t this exactly the type of lending that got us into the economic cesspool we’re in right now?

I wondered how long it would take before the predators would reappear. I was pretty optimistic, I guess, for I figured it might take another 3-4 years before we started to see a rebirth of these smell-like-a-rat loan programs.

Yet, in the last 4-6 weeks, I’ve started to notice a few emails like the one above hitting my spam folder.

Hopefully most of my fellow real estate agents will do just what I did and trash the email right away. And hopefully any borrower who comes in contact with someone peddling one of these loans will run like the wind.

I really thought we’d learned from what’s happened over the past 3-4 years.

Obviously not!

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Fraud & Deceit — It’s Just Business As Normal For Some Short Sale Lenders

Rod Herman — Wed, 27 Jan 2010 06:32:17 +0000

Thankfully, Someone’s Finally Blowing The Whistle

We’ve all heard the banks moan and complain about how they were duped into making bad loans to unscrupulous borrowers in the subprime era.

Or how homes were appraised at values clearly tens of thousands more than the property was really worth.

Well, these banks certainly had a right to be angry.

But now, it seems, the shoe’s on the other foot.

For, these same banks who have positioned themselves as the innocent victims in the mortgage meltdown are now aggressively and openly trying to defraud each other with short sale side-deals in a manner that essentially holds the down-and-out homeowner — who’s trying to make the best of a bad situation — hostage.

Click here to view the embedded video.

What’s A Short Sale?

For those who don’t know how or what a short sale is, it’s usually the only way a borrower who owes more money than the home is currently worth can sell their home.

They sell the home at market value and ask the lender to agree to a reduced loan payoff so they can do so. It saves both the lender and the borrower from what otherwise would be a costly and more damaging foreclosure.

Before escrow can close, the title company requires a copy of the short sale approval letter, which includes a minimum payoff amount as well any other conditions the lender wants to impose (things like “escrow must close by such-and-such date” or “seller to receive no funds at close of escrow”).

Some borrowers have only one loan on their property. But many have both a first and a second mortgage.

And it’s on those 2-loan properties where many banks are now openly demanding that the seller and their real estate agent deceive the other bank and close escrow, even if it means defrauding the other lender.

When There Are 2 Loans

When there are two lenders, the first mortgage holder often will often agree to reduce its payoff marginally so that the bank holding the second mortgage can have a few thousand dollars in exchange for releasing its lien.

The premise is that the holder of the second will be wiped out entirely if the home forecloses, so they should be happy with a token $3,000.

But in agreeing to leave that $3,000 for the 2nd, the “1st” also usually will insist that that’s all the 2nd gets and that any contributions from any other party (seller, buyer, real estate agent, whoever) are to be remitted to the 1st.

To make sure that all monies that come in and out of the escrow are fully disclosed, the title company is required by law to prepare a form created by the Dept. Of Housing & Urban Development. The form is known as a HUD-1 or more commonly, simply a “HUD.”

But what’s frequently happening with many short sales is the lender on the 2nd is asking the seller (or anyone else the seller can convince to pay) to come up with an amount over and above what the 1st has offered them.

That part is okay. But here’s where it goes from legal to illegal.

Cutting A Side Deal

Instead of going back to the 1st and saying Bank B needs another $5,000 or it won’t release its lien, the bank with the 2nd is simply instructing agents and their sellers to give it them on the side — in a manner where the holder of the 1st will never know about it.

So you have Lender A, the holder of the 1st, which has instructed all parties — seller, agent, title company — to pay Lender B (the 2nd) not a dime more than $3,000 with explicit instructions that any overage goes directly to the 1st.

But Lender B tells the seller and the agent to send them another $5,000 in a cashier’s check outside of the escrow. That way they get their money and when the 1st gets their HUD at close of escrow, it looks like all the 2nd got was the $3,000 that the 1st had authorized.

That’s Fraud with a BIG Capital F.

The Banks Don’t Care

So what happens when the agent or the seller says “no can do, that’s illegal?” The 2nd simply says, do it or we won’t release the lien and you can let the 1st foreclose.

Yes, these same people who chastised the American public for duping them into loaning out so much money to so many under-qualified borrowers are now openly trying to coerce agents and sellers to defraud another lender.

And worse yet, Lender B does it to Lender A without any hesitation, but when the roles are reversed and Lender B is now the 1st and Lender A is 2nd, guess who cries foul? You got it — the same lender who was willing to stab the other lender in the back on the previous short sale.

Yes, that’s the seedy under-belly of our nation’s banking system. At least that’s what seems to be happening more and more with many of our country’s largest institutions.

I’ve never directly had a lender on a 2nd ask me to do this. If they did, I’d try like heck to get the lender to see why what it was asking us to do was fraud. But in the end, if I couldn’t convince them to remove their lien without forcing my client to break the law, I’d walk away from the deal. And I’d encourage my client to do so, too.

And then I’d blow the whistle loud and clear.

Someone FINALLY Blew The Whistle

And that’s just what several real estate agents in other parts of the country recently did — and loudly enough, that it caught the attention of CNBC and even HUD itself.

Jeremy Brandt, the CEO of a real estate lead-generation company, put CNBC reporter Diana Olick in touch with several agents who talked openly about the blatant coercion they had experienced from various well-known national lenders.

Brandt’s web site has a transcript and actual recording of a conversation between a lender a real estate agent, where the lender repeatedly instructs the agent to break the law, going as far as telling her that if she’s not comfortable doing it, she should just assign it to a colleague who will.

And, CNBC reporter Olick’s original story and her follow-up a few days later tells more of the gory details. In her initial report, she says that HUD was not aware of this practice when she first contacted them.

Will The Banks Keep Doing This Anyway?

So hopefully this recent whistle-blowing will make its way to Capital Hill and we’ll see some major crackdowns on lenders who advocate fraud and deceit.

Going through a short sale can be emotionally and physically exhausting for the borrower, not to mention very humbling.

Those who opt to try for a short sale rather than taking the easy way out and simply walking away from the home are for the most part trying to make the best of a very unfortunate situation — both for themselves and for the lender.

In most cases, the lender will usually come out far ahead by agreeing to a short sale instead of foreclosing and re-selling the home.

Yet, instead of working with the borrower in a cooperative spirit, they instead kick these unfortunate buyers at their weakest moment…and then try to coerce them into doing something they know is against the law.

And the banks wonder why their image has become so tarnished with the American public…

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Have The Banks Created An Artificial Market?

Rod Herman — Fri, 21 Aug 2009 05:24:06 +0000

This is the second and final part of this post. To read Part 1, click here.

In yesterday’s article, I talked about our expectations earlier this spring that hundreds of new bank-owned properties would come on the market shortly after the foreclosure moratoriums were lifted in early spring.

To date, those expectations haven’t come to fruition, which is bewildering, especially when most bank-owned homes continue to attract multiple-offers — sometimes with as many as 30+ offers on one house.

So the obvious question: have the banks really foreclosed on as many homes as we all suspect or have they refrained from foreclosing on all those who had stopped making their payments?

Well, I did a little research through our public records database and, as the above chart illustrates, the answer to that question is that the banks indeed have been foreclosing with a fervor.

Right now, over 6,500 homes in Benicia, Vallejo, Fairfield, Suisun and Vacaville are somewhere in the foreclosure process.

That means the lender has either:

1. Recorded a Notice of Default — the clock starts ticking once the NOD is recorded, but it still takes almost 4 months before the bank can actually foreclose.

2. Recorded a Notice of Trustee’s Sale — these are what you see advertised under Public Notices in the newspaper. They’re recorded at least 3 weeks before the foreclosure occurs.

3. Already Foreclosed on the property — if so, the bank owns it and it’s now part of their “REO” (Real Estate Owned) inventory.

So let me repeat what I said a moment ago: over 6,500 homes in the five-city Solano County area we serve are somewhere in the foreclosure process.

What’s more, 2,000 of those homes have already been foreclosed. Yet almost 60% of those (1,163) that are already bank-owned have never come on the market.

If you look at the chart, you’ll see that in Vallejo alone — where the inventory has dropped from 899 active listings in January to less than 225 today — even though there are only 82 active REO listings, another 566 existing REOs have never come on the market.

The complete city-by-city numbers:

Benicia — 86 Actives (17 REOs) / 37 unlisted REOs
Vallejo — 223 Actives (82 REOs) / 566 unlisted REOs
Fairfield — 213 Actives (46 REOs) / 316 unlisted REOs
Suisun — 58 Actives (12 REOs) / 99 unlisted REOs
Vacaville — 214 Actives (63 REOs) / 145 unlisted REOs

And keep in mind, that these figures ONLY INCLUDE those which are ALREADY bank-owned.

When you add in the other 4,500 homes which haven’t yet been foreclosed upon but are now heading down that path (with a recorded NOD or NOTS against the property), the current supply vs. demand situaiton just doesn’t make sense.

So then that begs the second obvious question: If there are so many unlisted REOs and such a demand for them in the marketplace, why aren’t the banks releasing them for sale?

And that’s a question that’s been puzzling most of us for the past three months. Once the banks resumed foreclosure proceedings after the moratoriums were lifted, we figured it might take a month or two before we’d start to see an influx of new REO listings.

Back in April, several REO listing agents told me that their asset managers prepared them to brace for a huge flood of listings come June. Well June is long-gone (as well as July and most of August), and to date, the flood that was expected has been nothing more than a slow trickle.

I’ve spoken to listing agents who devote their time exclusively to representing banks on their REO properties and even they are somewhat perplexed.

And so all of this leads me to conclude that the banks may be purposely manipulating this market to keep demand at a frenzied pace and to prevent prices from dropping again.

A year ago, if you were looking for a home, you had plenty of choices. And the banks who were selling REO properties were generally willing to credit the buyer for closing costs. Most buyers could generally expect to negotiate a price lower than the asking price as well.

The banks remember those days all too well. So now that they’re in a market where they’re getting 10, 20 or even 30+ offers just a few days after coming on the market, they’re feeling a sense of renewed power.

They’re probably also figuring that if they ride this bus a little longer, values will start to appreciate and they’ll eventually be able to reduce some of their losses on those homes they’ve already foreclosed on but haven’t yet put on the market.

A year ago, a bank might have waited three or four months to sell an REO listing and might have dropped the price $30,000-$50,000 along the way. They no doubt don’t want to return to those days.

So by keeping the inventory artificially low, they ensure that buyers will continue to compete with each other for those precious few REOs listings.

The big unknown, of course, is whether this is really all intentional. I suspect that it is, for the reasons I outlined.

The other unknown is: what would REALLY happen if the banks were to open up the floodgates and let the inventory climb?

Interest rates are low, first-time buyers all want to buy right away to take advantage of the tax credit that expires at the end of November, and many all-cash investors remain in the market. In other words, there are certainly plenty of eager buyers to eat up a healthy supply right now.

So I would think that the banks could unleash a decent supply of their current REO inventory and still keep the demand high.

If the inventory were to rise back to where it was three or four months ago, I’m sure there would still be plenty of buyers to lap up most of these attractively priced homes.

And even if the supply doubled in places like Fairfield, Vallejo and Suisun, my guess is that there would still be multiple offers on most properties. Maybe not 25 offers, but perhaps four or five.

That would help the banks reduce their inventory, satisfy a greater number of eager home buyers and still provide a market where prices could begin to appreciate at a reasonable pace.

My fear is that the banks will try to ride this out too long and that eventually, as the economy finally looks like it’s moving north for good, interest rates will rise and force many buyers out of the market. Or, stocks will soar causing many of today’s hungry investors to abandon real estate in favor of Wall Street.

And if that were to happen by the time the banks finally opened the REO inventory floodgates, we could find ourselves right back to where we were a year ago, with too many listings and too few buyers.

I’m hopeful that the banks will soon realize what a good thing they have going and bring many more homes to the marketplace.

But for the time being, my sense is that we may be living in an artificially manipulated boom market.

Further Reading

Are We In An Artificial Boom Market?

Rod Herman — Thu, 20 Aug 2009 06:03:51 +0000

With Hundreds Of REOs Being Held Off The Market, Is The Current Market Boom Just A Temporary Thing?

For months now, the local real estate market here in Solano County as well as throughout the entire Bay Area has been getting stronger and hotter.

But nowhere has it been stronger than in places like Vallejo, Fairfield and Suisun, which rank among THE most affordable cities in the entire Bay Area.

It’s a classic supply and demand situation.

On the supply side, if you follow my Weekly Real Estate Report, you know that the inventory has plummeted by about 75% throughout these cities since the first of the year.

And on the demand side, as prices became incredibly affordable, homes in these areas became instantly attractive to an eager cross-section of first-time buyers, investors, and move-up buyers.

Demand remains at a fever-pitch, with multiple-offers on most affordably-priced homes in the region. And with the shrinking supply, it’s not uncommon for a well-priced listing to generate perhaps several dozen offers.

Back in April, my sense was that the market had reached bottom a month earlier, in March.

I still stand by that call, but recently I began to wonder: is this market for real…or are we actually just in the midst of an Artificial Market?

Let me explain.

As I mentioned a moment ago, the current boom market is classic case of supply and demand. Lower prices with fewer homes to choose from creates a frenzied market.

The lion’s share of home sales in cities like Fairfield, Vallejo, Suisun, and to a lesser extent Vacaville and Benicia, have been on distressed properties (bank-owned or short sales).

Even though short sales are usually very attractively priced, because of the length of time a short sale escrow can take (often 3-6 months), the real hot commodity since the first of the year has been bank-owned homes (aka foreclosures/REOs).

Between last November and the end of this past March, most of the big banks temporarily stopped processing foreclosures as part of a voluntary moratorium that started during the holidays and was later extended to allow the Obama Administration time to come up with its economic recovery plan.

Once the moratorium ended, everyone braced for the inevitable flood of new listings that was bound to occur once the banks resumed foreclosure proceedings and brought all these new REOs to market.

Well, so far that flood hasn’t happened. We’ve seen a small trickle here and there, but nothing like what everyone expected.

So what happened?

Did all those people who were temporarily spared from foreclosure between November and March figure out a way to avoid losing their homes?

Did the banks all decide to instead modify the loans for most of these under-water homeowners?

Or did they simply decide to postpone foreclosure proceedings indefinitely for most of their upside-down borrowers?

Well, the answer to all three questions is No, No and No!

In April, the banks picked right up where they left off in November and foreclosure proceedings resumed. So the expectation was that within a month or two, the first new batch of foreclosures would hit the market.

But the big wave would come shortly thereafter — once all the loans that were in default back in November worked their way through the foreclosure pipeline. And that didn’t even take into account all those new mortgage defaults that would have occurred in the meantime.

So we all figured that it might take a month or two for the first post-moratorium foreclosures to actually hit the market. And in the weeks to come, as more and more foreclosures came on the market, we expected the inventory would grow, thus satisfying the appetite of a hungry group of anxious home buyers, all of whom were eagerly waiting for this next flood of foreclosures.

Well, here it is late August, and we’re still waiting.

Tomorrow, Part 2: Have The Banks Created An Artificial Market?

Further Reading

Did Benicia Act Too Soon When It Closed Mills Elementary School?

Rod Herman — Sat, 24 Jan 2009 22:25:15 +0000

It’s been several years since Benicia Unified School District closed Mills Elementary, the oldest of its five elementary schools and the only one located downtown.

Back then, it seemed like the sensible thing to do. The population base was maturing and as a by-product of that, school enrollment, particularly at the elementary school level was declining. The district couldn’t justify keeping five schools open when four offered plenty of capacity for Benicia’s youth population.

But now that property values have declined — back to about 2002 or 2003’s levels here in Benicia, we’re again seeing more and more first-time and young-family home buyers.

That’s a stark contrast to what occurred during the earlier part of this decade, when rapidly rising home prices essentially slammed the door shut on most first-time buyers. With even a modest single family home priced well into the $500,000’s as recently as 2006, most homebuyers who were in their early adult lives were effectively priced out of Benicia housing market.

Today, though, with some single family homes priced as low as the $300,000’s, doors which had previously been closed to many young families wanting to live in Benicia have opened again — and in a big way, thanks too to record-low mortgage rates.

A perfect case in point is our daughter’s young family. Still in their 20’s, they moved back to Benicia and rented a townhome in 2005. At the time, the prospects of she and her husband ever being able to buy a home in Benicia were daunting. They were just starting out in their respective fields and watched as home prices continued to climb — on just about a weekly basis.

Last year, now well established in their career paths, a combination of falling home prices and interest rates enabled them to buy a home that two years earlier would have felt like a pipe dream.

The home previously was owned by a single lady, whose children had long ago graduated from Benicia’s schools. Our daughter and son-in-law have a two-year old and another on the way.

So a home that had once contributed to Benicia’s school population and later contributed to its declining enrollment will, within a few years, again be contributing to the school population.

And with more and more Benicia home buyers in that 25-35 age group, it’s very likely that we could see the school district’s recent declining enrollment pattern quickly reversed.

I haven’t heard or read anything locally indicating that the schools are poised to see enrollments increase once more. So this is merely an observation on my part. But it makes sense: with so many more young families now able to afford Benicia’s home prices, it just seems to follow that we should again start to see an increase in school enrollments.

When we moved to Benicia in the mid-1980s, it was well within the price range of many first-time buyers. So the school population increased dramatically, to the point where two new elementary schools were built beween the mid-1980s and early 1990s to accommodate all the new construction.

Today, there aren’t very many un-built lots left in town, so I don’t think we have to worry about the remaining vacant lots in the Water’s End ever creating a large enough housing impact to warrant a new school.

However, depending on how long prices and mortgage rates remain as low as they are right now, if enough buyers with school age children continue to buy in Benicia, it’s possible that in time, our four remaining schools could again be bursting at the seams.

Which begs the question: Did we close Mills Elementary too soon?

Time will tell. Hopefully the folks running our school district are putting two and two together and keeping a close eye on things.

I Got My Country Back Today!

Rod Herman — Wed, 21 Jan 2009 04:58:38 +0000

I’m not usually one to write politically slanted articles, but today’s post really has nothing to do with politics. Rather, it has to do with reclaiming something I lost eight long years ago. I hope you’ll take it in the positive, uplifting spirit that’s intended.

For eight L-O-N-G years, I was a man without a country. Today I got my country back.

Oh I’ve always been a resident of the U.S. and never stopped believing in it. Throughout the last eight years, I followed and believed in the laws, principles and rights upon which our great nation was founded. But even though I believed and supported my country, the people who ran it didn’t believe in me. Or at least that’s how it felt.

Even though I always remained a part of my country, sadly, from 2001-2008, my country didn’t really seem to want to be a part of me. Until today.

They believed in doing things the way they wanted to do it. They believed in ignoring the wishes of the people they were chosen to serve. They believed a quick wink or a sarcastic smile was the way you got things done.

They turned their backs on many of our long-time friends throughout the world. They justified a war based on unreliable information and then tried to spin their failed logic to make it seem like it was still a worthwhile endeavor.

After four long years, I thought help was on the way. It was close, but in the end not enough of my fellow countrymen were ready to throw in the towel. Things here at home were pretty prosperous, they reasoned. And they didn’t really seem to care what the rest of the world thought about us.

Their voice was heard and I was forced to resign myself to another four years of the same old thing. I took solace in the fact that no matter what, four years later change would come. But whether that change would be modest or sweeping in nature would remain to be seen.

First we had to get through the next four years.

I’d been this close to the change I was looking for twice before — first with a man named Al and later with a man named John. But both times, a man simply known as “W” dashed those hopes and took my country away.

As 2008 grew near, Dubya’s bad act finally caught up with him. No longer would a wink, a shrug or a thin-lipped smile do the trick. The rest of the world had been onto him for years. Now the rest of his country was onto him as well.

Once more I felt a sense of hope. But those hopes had been dashed before and I had serious doubts whether I could count on my fellow countrymen come November. From August through October, the experts tallied their numbers and made bold predictions which helped boost my spirits.

But memories of how those gleeful early predictions quickly turned sour on that first Tuesday in November back in 2000 were still fresh in my mind. I also remembered all too well how a man named Kerry went into that Tuesday back in ‘04 with a lot of promise but ultimately missed by just a whisker.

Heading into this past November, I was hopeful, but it was a cautious type of optimism. Could I count on my “friends” in places like Florida, Indiana and Ohio? Or Pennsylvania, North Carolina and Virginia?

I hoped that by now they’d seen what more than half the country saw in 2000. And what almost half the country saw again in 2004. Yet, even though I was as optimistic as can be, by November the fourth, I still had plenty of skepticism.

I knew that no matter what, Dubya’s days were numbered. And that alone was a very good thing. But would things be largely the same, save for a different face on the 6 o’clock news everyday? Or would real change, sweeping change, a reclamation of the country I’d lost back in 2000 finally be at our doorstep.

Unlike that depressing November back in 2000 when the country I knew was taken from my grasp and unlike that equally woeful November in 2004 when my hopes were dashed once more, finally, in 2008, my enduring faith in this great land was at last rewarded.

After Obama was declared the winner, everything felt surreal. Would I awaken the following day and realize that what had happened the night before was just a dream? I hoped not. It sure felt real. My emotions ran the gamut. I was excited, hopeful, elated, encouraged, energized and even a bit melancholy…all at the same time.

Sadly, the backdrop of our nation’s state of affairs was at an all-time low. People were mad, hurting, fearful, anxious and depressed by what was happening in the world. Nevertheless, it looked like at long last, as Obama himself so calmly said, help indeed was on the way.

In my mind, January couldn’t come soon enough. But after eight long years, I could certainly wait another 77 days. It didn’t seem possible, but I was about to get my country back.

The holidays came and went and every day the press kept us up to date on the upcoming transition of power. No longer did I have to wake up and pinch myself. This wasn’t a dream. It was really going to happen. Help was really on the way.

Although this would be a historic first in many different ways, the man who made history remained calm, dignified and conciliatory. He gave of an air of quiet confidence, instilling a sense that he REALLY was the right man for the job. No matter where you lived, what you did for a living or what you believed, if you lived anywhere in America, you finally had someone on your side — someone with a commitment to make things better.

And even if you lived abroad, he instilled confidence that he’d do everything he could to heal old wounds and make the entire planet a better place for all of us. He never talked down about the man he was replacing. He reached across the aisle in our nation’s hallowed halls and asked for cooperation and cohesiveness.

He didn’t have an old-boy network to fall back upon. Nor decades of favors to repay. He brought with him a respectful, engaging can-do spirit. He didn’t make outlandish promises. Never put down those who created the current mess. He called not for blame, but for action. He displayed empathy and encouragement. He showed compassion and pragmatism.

He seemed to speak from the heart. He respected tradition but embraced progressiveness. He quickly pointed out that he didn’t have all the answers. But he pledged to do everything within his power to find them.

For the first time in eight years, it would no longer be all about Me — it would be about Us. It would be about surrounding himself with the greatest minds and latest information. But it would also be about calling on all of his countrymen to collectively do their part, too.

No longer would one man call the shots without regard for what was best for the country he was leading. Things were about to change. The country would at long last have a say in its destiny. Or at least that’s how it feels.

Some may call it blind faith or wishful thinking, but I have a feeling that we’re on the doorstep of a paradigm shift. I think we’re about to be led by a man who one day will be lauded for leading his country out of some of its darkest hours and into a period of worldwide stability and fellowship.

I don’t think he’ll wave his magic wand and make things happen overnight. Nor will he do this by himself. Rather, I think he’ll LEAD each and every one of us into doing our own small part so that we can collectively help restore this great land’s health, prosperity, world image, and philanthropic spirit.

He knows he can’t do it alone. He knows there clearly is strength in numbers. Whereas his predecessor often seemed blind to reality, this man seems to have an ability to keep things in perspective. To look at the big picture without overlooking all the little pieces that contribute to it.

When I woke up today, it felt different than most days. It felt like one of those dozen or so days in your life when the world stands still.

I hadn’t planned to watch too much of the inaugural proceedings. I wanted to see the actual swearing-in ceremony and figured I’d watch a little bit before and after. But as soon as I started watching, I was captivated.

This wasn’t just a historic day because the nation’s first African-American had assumed our highest post.

It was much more than that. A rebirth. A new beginning. I wasn’t around when FDR called for his New Deal. But I imagine it felt a lot like today.

Last night I went to sleep with high hopes and dreams. A feeling that better times were on the horizon. That Obama’s lofty agenda would resonate throughout the land and all across the globe. I felt hopeful and confident.

Today, I feel an energetic sense of excitement. Last night’s hope today feels very real and very achievable. It feels like the dawn of a new era. It feels like we’ve been on an eight year journey and finally reached our destination.

We’ve reach that elusive crossroad — where we finally get to say goodbye to eight years of heartache and exclusion and welcome the beginning of an era of inclusion, cooperation and dignified accountability.

From a humanitarian standpoint, I wish “W” all the best and hope the rest of his years are filled with contentment and happiness. I’m just glad that from this day forward, his goals and ambitions will remain only his own and no longer be forced on the rest of us.

I’ve always been proud to be an American, proud of our nation’s ideals, our values, our history, our tolerance and our spirit.

But over the past eight years I often felt misrepresented by our leaders. And yes, embarrassed by some of their actions. And by their indifference to matters that demanded their immediate attention.

When I saw the former Air Force One jetliner gently ease off the ground, with Dubya and his family all aboard and Texas-bound, I felt yet another sense of renewal and freedom.

The right man was now in charge. The wrong man was on his way home.

After eight long years, I finally got my country back!