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From Hi-Fi to Wi-Fi to Re-Fi


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2006 Sep 18, 2:43pm   11,871 views  196 comments

by Peter P   ➕follow (2)   💰tip   ignore  

What have we achieved in the past 25 years? What have we learned?

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1   lex   2006 Sep 18, 4:21pm  

We learned that house prices never go down.

I'm quite courios what we'll achieve and what we'll learn in the next 5 years.

2   astrid   2006 Sep 18, 5:00pm  

The answer is nothing. And we're getting more stupid. But we got a lot more electronic gadgets and "content" to distract us.

3   Different Sean   2006 Sep 18, 5:59pm  

what was that thing that said we keep learning in technology and science, but we seem to be doomed to keep repeating the same emotional and financial mistakes over and over again?

4   Different Sean   2006 Sep 18, 11:27pm  

Every gadget becomes a new thing to repair, and more AA, AAA, C, & D batteries to buy.

there never was a labor-saving device invented yet ;)

5   Randy H   2006 Sep 18, 11:51pm  

We've learned more in the past 25 years than in the previous 250. The problem isn't how fast we're learning. It is how fast we keep reseting our baseline expectations.

6   DinOR   2006 Sep 19, 12:50am  

"From Hi-Fi to Wi-Fi to Re-Fi" LOL!

Well that about sums it up now doesn't it!

Is this what we really wanted? Evidently so. How would we view say the Japanese for instance if they de-emphasized designing and launching communications satellites and autos in favor of making the trinkets and toys that were sold in the Five and Dime stores of my/our youth?

Would we look at them in quizzical disbelief? Probably....... Here you have all this technological leadership yet everyone is allocating nearly every possible resource toward making trinkets? It's so lucrative in fact that many have left their jobs to pursue this maniacal resurgence and those that haven't physically left their jobs have done everything short of turning in their two weeks notice?

How will they get their economy back on track? What will they do with all of the displaced workers that have forgotten how to work?

One of the things that's bothered me the most about all the foaming at the mouth flippers (and there's more of 'em then we'd care to admit) is that above all....... it's embarrassing! It's as if a "cottage industry" has superceded out greater economy?

I'd love for even the most ardent of bulls to explain to me how this doesn't look embarrassing? Even though I took active steps to NOT be a participant in playing "musical houses" (sold primary residence well prior to peak, took up renting and sold every last stitch of clients MBS, HB's and "HD's" and became a bubble disciple) I still can't shake this sense of shame! When I look at the wanton and reckless daily actions of my fellow countrymen (and their outrageous and unrelenting expectations) I feel ashamed.

There, I said it.

7   speedingpullet   2006 Sep 19, 1:24am  

Well, i think one of the most important differences between 1981 and 2006 is, well....this....

Like a lot of true technological advances, the Personal Computer, the World Wide Web, and communication through it, are so embedded in our culture that we no longer 'see' it. Its as if its always been this way.

I remember, when I started using computers in the mid-80's, just how fiddly and difficult it was to use. You needed to have programming skills, a 'fixit' mentality and lot of patience just to send a text message from one terminal to the other via JANET on the Mainframe. Now I feel cut off from humaninty if the Wi-Fi goes down, and have completly forgotten the arcane skills of letter writing...

OK, I'm showing my age (and my inherint nerdiness) by the last statement, but it really hasn't been that long.

And, yes, its way too early in the morning to make coherent comments...zzzz

8   astrid   2006 Sep 19, 1:53am  

I do wonder. Do kids still learn long hand at school? I relied exclusively on hand note taking during college but now my handwriting has retrograded to messy 2nd grade level. My hand start hurting and cramping up if I handwrite for more than two hours at a time.

9   hugel   2006 Sep 19, 2:14am  

Interesting post on SDCIA

http://www.websitetoolbox.com/tool/post/sdcia/vpost?id=1382618
If "they" only spent 1 week in my office...

"Let me tell you about just one borrower from today:

* Husband and wife
* Husband on fixed income military retirement $1800/mo
* Wife makes $9500/mo as a registered nurse
* 5 properties with $3,400,000 in mortgages
* All mortgages currently have prepays
* 8 interest-only mortgages
* 1 option ARM deferring $3500/mo
* 3 in Chula Vista and 2 in Escondido
* No more than $75,000 equity in any of the homes (verified by comp checks with 3 appraisers)
* All properties with front end LTV over 90%
* $65,000 credit card debt $672 Mercedes payment
* One property had 3 mortgages, one of them hard money
* 621 mid FICO
* 2x30 in the past 12 months
* Not a dime in the bank

They have been making mortgage payments with their credit cards and refinancing to pay off the credit cards. They are at the end of their rope, but refuse to throw in the towel."

10   Sylvie   2006 Sep 19, 2:34am  

RECESSION

11   DinOR   2006 Sep 19, 2:39am  

Anthony,

Again, how is this NOT embarrassing! If (as Robert C suggests) this is a one time fluke then it would be no big deal. Since we all now know that debt=wealth we've become so de-sensitized to this type of personal financial conduct it hardly raises an eyebrow any more!

My guess is that with proper "coaching" from realtors and MB's folks like these were able to submit loan apps. concurrently so the DTI/FICO issues were not showing up yet on their credit reports! To make matters worse it's as if the properties were purchased almost indiscriminatley! Just buy any place, it only goes up yada yada! There wasn't even really any reasonable attempt to attain geographic diversification (not that it would've helped all that much) it is still what we would expect from a REIT manager.

I'm sure these people consider themselves "investors" and look down upon flippers and specuvestors! (If the shoe fits, wear it).

12   DinOR   2006 Sep 19, 2:48am  

SQT,

So, it's worse than you'd initially thought. I was in a lobby at one of the big casinos in Vegas and I saw this really interesting vase (or vah...ze if you prefer). It came up to my chin and I thought it must have taken a forklift to get them in here. Well when I touched it, seemed hollow! I tapped on it with my thumb and it became immediately obvious (like so many things in Vegas) that it was fiberglass, a facade.

Don't they have "fiberglass" statuettes down at the garden center?

Remember, I'm laughing with you, not AT you!

13   DinOR   2006 Sep 19, 3:00am  

"RICO for Realtors" LOL!

These guys have got to be pretty "crafty" so I'm sure prosecuting will be difficult at best. There doesn't seem to be the equivalent of a "Chinese Wall" when it comes to lenders. It seems that most MB's in a given proximity know one another or have worked together in the past.

"I've got these investor clients and they're buying up houses left and right". If I handle all the loans myself it'll look fishy so I'll send some your way and you send me half the commissions o.k? (Off the books of course)!

14   DinOR   2006 Sep 19, 3:04am  

SQT,

Being that I'm not proud, (I'm Polish) I would have gotten one at the garden center and TOLD everyone it's from the 16th Century! If found out, I would say "I'm sure you misunderstood me, I SAID I got on 16th STREET!"

15   HeadSet   2006 Sep 19, 3:08am  

DinOr says,

"Even though I took active steps to NOT be a participant in playing “musical houses” (sold primary residence well prior to peak, took up renting....."

Then speaks of being in a casino in Vegas

Hope you still got all that equity money!

16   DinOR   2006 Sep 19, 3:16am  

Headset,

Oh that's exactly what I mean! I was a debt slave/home debtor for years. Now that we are empty nesters (without a nest to look after) it's like this whole new world opening up before me!

Actually I'm the guy playing penny slots that's running out of room to set his...... "empties"? I'd love to spend part of our drab OR winter there but my clients (and our daughters) are here so a permanent move is out of the question. I like HB Crash Vegas style though! A 255% increase in foreclosures, which in essence is more a reflection on specuvestors from SoCal then anything.

17   skibum   2006 Sep 19, 3:23am  

New Housing starts sink for August:

http://money.cnn.com/2006/09/19/news/economy/housingstarts/index.htm?postversion=2006091911

"Housing starts tumble; Builders pull back on new projects, permits as latest reading shows real estate market even weaker than forecast."

18   DinOR   2006 Sep 19, 3:33am  

Tucson Man,

Most of my family lives in Sierra Vista now and have been on board with the bubble up until recently. I mean over the last several years what wasn't to like? We've heard that both Phoenix and Tucson are now in dire straights. What's your observation? Oh and Welcome Aboard!

19   HeadSet   2006 Sep 19, 3:36am  

Tucson Man,

Were you ever able to convince an applicant to stay within his means?

Or would that kinda talk be "insulting" and cause him to find a new load officer?

20   DinOR   2006 Sep 19, 3:37am  

Headset,

My retired friend down there has a buddy we'll just call "Eddy". Anyway, Eddy makes his living gambling, lives in a hotel and keeps some pretty weird hours o.k?

So Eddy wins a Hummer at a poker tournament and sells it the next day for 25K. Yeah, it's probably worth what 40 or 50? So the guy he sells it to totals it out the same day he bought it! Vegas Baby!

21   DinOR   2006 Sep 19, 4:05am  

LILLL,

I too find myself wondering where all of these thousands upon thousands of buyers are going to come from? They've absolutely tapped out their book of potential clients for first time/illegal/homeless/wino buyers and anyone else will have to be a seller FIRST!

That's why so much (if not all) of the language we're getting from REIC is geared to igniting sales from the "sell side". Most people when say trading in a car will do so if the don't have too big of a "dead horse" on trade-in. Given the HELOC/MEW/ATM withdrawals of the last 5 years everyone needs to get pretty close to what they owe before they can move on.

Even if Headset* were right and I blew all of my money at a craps table at least I wouldn't have the negative equity situation to contend with. (Actually a lot of it went into college for 2 and a wedding for 1) but all the "regulars" here know I DO like to tip!

22   DinOR   2006 Sep 19, 4:22am  

Tucson Man,

I've often commented here as to why the average American male would be in the least bit concerned (or impressed) with 18" tile, granite counter tops or up-grade shower heads?

Aren't we supposed to be out in the garage?

23   DinOR   2006 Sep 19, 4:47am  

"how professional their 'For Sale' sign looked"

Well that's it then right? BAM!

Housing Bubble problem solved!

All that's needed to alleviate the swelling and unrelenting inventory growth (and get out from under a ton of debt) is a really cool sign! Pffft! Why didn't I think of that?

Look, the reason so many people are going FSBO is b/c they couldn't afford to pay the 6% comm. and walk away with anything!

24   skibum   2006 Sep 19, 4:59am  

CB Says:

This past weekend we went out for a walk and almost tripped over by all the open house signs on the sidewalk, my wife said there is no need for all these signs, you drive on any streets in my neighborhood, you will find open houses.

Maybe now that there are so many homes for sale, what should happen is towns will pass ordinances: only those homes NOT for sale have signs up, saying they aren't available. Otherwise, assume it's for sale.

25   skibum   2006 Sep 19, 5:01am  

DinOR Says:

Look, the reason so many people are going FSBO is b/c they couldn’t afford to pay the 6% comm. and walk away with anything!

Exactly. There are likely many, many FB's, or at least semi-FB's who will have to bring money to the table if they pay a commission. Otherwise, they will break even. Given flat or (-) appreciation over the past year in many places, anyone with less than 10% down who bought in the last year or two is in this situation. Add on top a neg-am loan, and it's a big problem for them.

26   Glen   2006 Sep 19, 5:07am  

Don't knock the FSBOs. In recent years, the "ask" price for a house included enough of a cushion for the seller to pay his broker and still make a profit. Now, if a seller has a choice between trying to sell his house for $400K and watching it (in the hopes of pocketing $376K ex broker fees), or just listing it for $380K FSBO and selling it sooner, they will go the FSBO route. Buyer saves $20K.

This is good news for home buyers. If everyone went the FSBO route, homes, overall, would be cheaper.

Of course there are some people who are trying to go the FSBO route in the hopes of getting top dollar, but they will eventually (a) buy into the realtor hype that they just need to find the "right" broker to get the house sold at their unrealistic price (then watch the home sit until they are forced to lower the price or until their broker drops them); or (b) continue with the FSBO, but at a lowered price.

27   Claire   2006 Sep 19, 5:20am  

So, if you deal with a FSBO, should you make sure that you have a buyer agent in order to make sure everything is done correctly? I was wondering about how to ensure (or buy) a buyer agents loyalty to me and not any comission he is being offered by the seller's agent or bias he/she may have towards FSBO's

28   skibum   2006 Sep 19, 5:27am  

Glen,
The current problem with your scenario is that there is data (sorry, can't recall the reference) that FSBO's are more likely to list their homes at too high a price given comps. This may very well change in a falling market, but it remains to be seen. Still, with enough due diligence, a FSBO should be able to price their home appropriately without an agent, imo. This is especially true with the internet. In fact, in a falling market, recent sales comps may be too high compared with current listings and future (declining price) listings anyway.

Claire, re: buyers agent for a FSBO, the downside is that of course, the agent will want his/her commission, probably 3%. One would have to ensure that the seller is willing to do this. On the other end, many unscrupulous agents will steer you away from FSBO's. I don't know if that's an issue of protecting the realtor commission in a larger sense (evil), or merely not wanting to deal with often difficult FSBO's (benign).

29   astrid   2006 Sep 19, 5:33am  

Not home buying advice - If I deal with a FSBO I would go without a buyer's agent but with a RE attorney and a good home inspector. They'll probably tell you more about the house than a buyer's agent could, for much less money. FSBO is interested in saving every penny of commission possible, that means they'll be a lot happier to see a buyer with an agent.

It goes without saying that I do not recommend buying a house in any form. Unless you have a desperate need for owning a home, have worked through the contingencies of a forced sale at 30-50% below current selling price and the house is very special in some way (layout, location, price), staying on the sidelines for the next year or two will be more fun than being in the middle of the vortex.

30   Claire   2006 Sep 19, 5:33am  

I was thinking along the lines of paying the buyer agent a set fee and having a clause that 1) they can't tell the other side that we are paying them and 2) the comission handed over by the seller and/or seller's agent would then be given to us. Obviously, you would probably have to pay them a bit more than if it was just the comission, but it would certainly be an incentive for them to get the price down as low as possible as it will not be cutting into their comission - if you see what I mean?

31   astrid   2006 Sep 19, 5:34am  

ughh, I'm truly hopeless

"that means they’ll be a lot happier to see a buyer with an agent."

should be

that means they’ll be a lot happier to see a buyer WITHOUT an agent.

32   DinOR   2006 Sep 19, 5:35am  

Glen,

Agreed. FSBO doesn't have to necessarily spell bad deal. What's frustrating though is when the assign some kind of "blue sky" pricing model like it seems be standard on C/L.

FSBO's that know what they're doing let the price sell the home. Typically if I'm going to look at one I'd prefer to see something a little older in a more mature neighborhood where the owners can entertain lesser offers.

When I see a home built in 2004/5 and the "owners" want to go FSBO it's usually a dead give away. Now, I could be wrong and they could have put 20-50% down and actually have some "wiggle room". With the way though that homes have been marketed over the last several years I'm willing to cast a healthy amount of doubt on it and move on. Besides, most "Bubble Built" (TM) homes were so hastily constructed I can't see anything but problems for the new owners.

33   Claire   2006 Sep 19, 5:38am  

Astrid,

I am not planning to buy yet, I was just trying to get all the info I can, so I can have a master plan of what I want to do when the time is right!

Perhaps, if we offered buyer's agents a % of the total price reduction they achieve? It's just that the current system seems to encourage them to get the buyer to pay the highest possible price, rather than the lowest.

34   skibum   2006 Sep 19, 5:49am  

Claire,

Having been through both the buy and sell side, I can tell you personally the buyer's agent adds very little to the transaction, as long as you are halfway intelligent (I know you are - you post here!), and you have a good RE attorney.

You mention the "% of the total price reduction they achieve..." Most likely, the agent would then be paying you, since their motivation is strictly get the deal done, despite anything they tell you otherwise. They had no small hand in the run up in prices, encouraging overbidding and what not during the bubble run up, in order to bag their commission. Our buyer's agent at the time (I'll never use one again) pushed and pushed to come up in price towards the seller's price during the negotiations. We did fine (didn't listen to him), but he was annoying as hell. I don't think this scenario is out of the ordinary.

35   DinOR   2006 Sep 19, 5:51am  

Don't get me wrong, I'm GLAD to see the explosion of FSBO's throwing their hat in the ring! In order for me to be consistent I can't bad mouth the REIC AND FSBO's! Hopefully as time goes by they will get better at it.

Right now? It's just adding to the "sloppy" pricing and confusion. We (or should I say "I") just don't know what to think?

Two homes, across the street from one another, identical floor plans, same sq. ft. snout house w/pool. Realt-whore (TM) listed home? 485K. FSBO home? 515K! WTH?

36   astrid   2006 Sep 19, 5:53am  

Claire,

I guess you're looking for buyer agent to get a fee from FSBO and get a kickback from the agent. I don't think that'll be necessary. I think you can personally extract just as a good deal without an agent. You need to know the market cold and maybe even do some oppo research on the seller. You and the FSBO seller both know that you going in without an agent saves them 3%, so you should feel confident about wrangling for a lower price without fear of being rejected.

Furthermore, even an agent that you pay personally still have an incentive to get a deal done with minimal time expenditure. They're more likely to grab for the quick deal that you and the seller would both accept, than to drive the hardest possible bargain for you the buyer. You're just a unit they got in stock and now they want to sell you out ASAP so they can jot down another transaction on their ledger.

It's possible that an exceptional agent will know stuff about the neighborhood or about the seller that you do not know, and end up doing you a real service by finding just the right home. However, those agents seem to be extremely rare and you're unlikely to find one that'll work with your terms.

37   skibum   2006 Sep 19, 5:53am  

Claire Says:

I was thinking along the lines of paying the buyer agent a set fee and having a clause that 1) they can’t tell the other side that we are paying them and 2) the comission handed over by the seller and/or seller’s agent would then be given to us. Obviously, you would probably have to pay them a bit more than if it was just the comission, but it would certainly be an incentive for them to get the price down as low as possible as it will not be cutting into their comission - if you see what I mean?

A couple more things to add to your scenario. First, most "exclusive right to sell" contracts spell out that if a buyer is brought to the table without a buyer's agent - say, if the seller mentions to coworkers he's selling, or decides on his own to put up a CL ad, the seller's agent pockets the ENTIRE commission. We negotiated to eliminate this clause (seller's agent agreed), but it didn't matter, as it didn't come to this scenario.

Second, I'm not sure the above tactic is considered "legal" from the Realtor (tm) code of ethics, the joke that it is, anyway. Maybe George can comment, although I understand these rules may vary from state-to-state.

38   DinOR   2006 Sep 19, 6:03am  

"FSBO in 2008 means dealing with the bank"

Robert, absolutely. I don't want to get on a negative here but I fear you're quite right. I'll do anything to help kick the chair out from under the "sacred 6% comm. cow" but most FSBO's are NOT coming from a position of strength. It's being done out of fear and desperation.

We've said here before that most people won't change (until they're forced to). Can you imagine just how much disgust/desperation it takes for the avg. guy who's life consists of the people in the adjacent cubes to take this kind of plunge!

39   Claire   2006 Sep 19, 6:07am  

There's a difference between legal and ethical though - which one is it?

40   astrid   2006 Sep 19, 6:09am  

M. Cote,

Wow! I'm totally in awe.

Claire,

My parents knew a people who were trying to sell houses (SFH, middle class to upper middle class area, comparable to other houses in the neighborhood) between 1990 and 1996. Those people describe the experience as humiliating and an endless effort to woo buyers and dealing with buyer demands. When the market slows down enough, a seller will entertain any contract, as long as they can afford to do so. Home ownership become millstones when you're trying to sell into a hostile market.

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