patrick.net

SimonBart -- Freaking aye ... thats what I want to hear. Good deal my man.

Space:

I'm in Phoenix now, so I'm not within shooting range of those stores.

I did make the switch from LPs to CDs and haven't looked back.

I'm not THAT hi-fi'd out, but I do understand with a high-end turntable, records still sound the best.

As far as Hi-Fi Cents, I'm not sure if they're around anymore. That was more than ten years ago. I've been in Phoenix for eight.

Lucky you , How do you like Phoenix?

Simon, I agree that was a great deal. Sadly since 1998 everyone in BA thinks overbidding is normal. All the past homeowners always low balled their offers and they were accepted. I dont recall ever hearing about other bidders. It was pretty much first come first serve.

@randy
tks for taking some of the heat off of FAB being used as a yardstick

@sry I forget who said this
I will use FAB as a yardstick for buying. When he buys, then we have hit the bottom and I can follow suit

@FAB
when you buy that 18.8 mill home that you linked us the video to that you know you want please please lemme know

cause I will be the bestest ever Butler/Servant you could dream of and give em a price to keep that piano cause yes I play jazz better than most and I know how to swim to test the pool before you get in and most importantly

i own and know how to operate my 9mm to keep others away to protect us-I will shoot and ask no questions later nobody should bother us there-

other pertinent to the job skills :

can order and give del instructions for takeout
can see dirt to notify the cleaning staff to take action
good phone skills to screen your calls
operate dvd for our movie room
remote control savvy on/off ch up/dn vol up/dn
speak some spanish knowledge of swear words 4 gardeners
internet savyy to locate other house maint. problems
ex asst pga pro to caddy you in cart of course
as I'm writing am thinking that I perhaps am over-qualified
but heck who cares if I'm living large in that home

Randy H Says:
I actually never understood why there aren’t more below-market price side-deals. I know it’s probably illegal. Probably very illegal.

That's an interesting point. New home sellers (developers) were offering cash-back in order to get 100%+ loans for people who would ordinarily qualify only for say 80%. Ditto for some of Casey Serin's sweet deals... So why is it legal for a developer to sell new with a cashback side deal, but not a resale? (with 'cash forward'?) I know the banks frown on the cash back deals because they are effectively being defrauded -- they have lost their 20% security margin. Is it only illegal as a civil or contract law problem though? i.e. not disclosing all costs associated with the transaction to the lender. As for the tax arrangement, the IRS might also be very interested/upset. Otherwise, if it was easily done and people benefited, it would be happening all the time, you would think... no transaction would ever be an honest one...

"As for the tax arrangement, the IRS might also be very interested/upset."

Oh I would say this would qualify as "Boot" back to buyer and would qualify
as "constructive rec't of cash" and thus reportable taxable income.

Why doesnt the IRS go after this. They need a case and evidence.

Randy,

the county won't be fooled if you negotiate a "side deal". If the transaction price is not significantly lower than the market price, you don't save much on property tax anyway. If it is significantly lower, the county will find an assessor to come out and inspect and understand why the price was so low.

When it comes to tax, the government's efficiency is at its best.

I bought a condo from a VA auction in 1998. My assessed value was about 10K more than I paid for it. The law is that the taxable assessed value is the market price not the paid price. Normally they are equal but in my case we couldn't find anything that had sold for nearly what I paid for it so I was satisfied and didn't question it further.

I actually never understood why there aren’t more below-market price side-deals. Wouldn’t it be advantageous to the buyer (less property taxes) and potentially the seller (capture part of the tax difference for themselves, avoid capital gains)?

IMO, this is becuase both buyers and sellers have bought into the fear tactics of the NAR and Realtors (TM). Namely, if you don't use a realtor (TM), you might sell for less than you should, or you might pay too much for your purchase.

A lot of sellers discovered that it was true. They would get more by using a realtor. The MLS is a powerful tool. I got the best of both worlds because my friend got his license, and listed for 1%, and I paid seller agents 2%.

Don't underestimate how difficult a realtor's job normally is. They do have their place. If you just look at the last couple of years when agents were basically well paid clerks then you get a bit of a false impression of a normal market.

MLS is an extremely powerful information source, and it has affected millions of transactions. That is exactly why it needs to be federally regulated under existing antitrust collusion laws, and the NAR needs to be spanked like a cartel.

RE: Taxes, I thought that when people buy new construction and get shit like a free Mercedes, vacations, pools, upgrades, etc. they are very clearly told they are liable for declaring that on their taxes at closing. I've only known 2 couples who've bought new construction in the past couple years, but they both were warned they had a tax liability. Whether they declared it or not, I do not know. I'd guess not.

The homebuilder has all kinds of accounting options at their disposal, and I highly doubt the public ones are intentionally breaking any FASB or IRS rules at this point in the regulatory cycle. They're just trying to keep the SEC out of their orifices over stock options at the moment.

This is a generally accepted point of view that I don't agree with. Why should the MLS be made public? Why in a free market would we force a tradegroup to open a proprietary database? I believe people have the right to sell homes without an agent but that implies doing your own marketing. Buyers should be more open minded to buying direct, they can save money and most of the details are fill in the blank type issues which escrow officers can help with. That being said, buyers should look at more than just MLS listings. We have become such poor consumers in this country, we won't even do the legwork to look for sale properties. We don't want to pay for the costs of the tradegroup MLS, we just seem to want the benefit of it for free.

Space Ace Says:
“As for the tax arrangement, the IRS might also be very interested/upset.”
Oh I would say this would qualify as “Boot” back to buyer and would qualify
as “constructive rec’t of cash” and thus reportable taxable income.

hmm, I just realised that there are sufficient differences between tax regimes between countries that you could pay MORE tax with a cash forward, particularly on sale of a principal place of residence. ajh would normally jump on this ;) In Oz, there is no capital gains tax at all to pay on ppl place of residence, only on investments, and that in turn was halved in 1999 (which led to even more property speculation). Hence, a cash fwd would be seen as taxable income at your top marginal rate, which would be a whole lot worse, especially for PPOR, so the vendor would be insane to do it. Plus the council assesses you separately once in a while for rates, as does the state govt valuer for land tax (on investment properties only, once again could be different).

Is this ACORN program a big scam or something?

http://acornhousing.org/TEXT/homebuying1.php

ACORN claims this:

With AHC you get:

* Lower down payments and closing costs.
* No Private Mortage Insurance.
* Banks generally require 3 months of mortgage payments in the bank at settlement.
* With our program, they don't, which allows you to buy a home sooner.
* Most banks won't count public assistance or voluntarily child support in determining if you'll qualify for a mortgage.
* With our program, all steady income counts.

Are they just an evil mortgage broker (that's very well organized) in disguise? Or could they actually help people get a good rate?

Honestly, I want to know what kind of parents he has after reading about this killer Cho. His parents are clearly at fault, to say the least, they are negligent. Their son was so obviously, seriously disturbed, they should have sent him to a mental institute.

There was a piece on KQED last summer (fall) about a father who tried to have his psychotic 18+ yo son committed because he was a danger to himself and possibly society. Apparently, it's really hard.

It kind of makes sense if you think about it. You can't really imprison some one who hasn't done anything wrong. (Well... unless the person is charged with something terrorism related these days I guess...) And after 18, a person is basically independent under the eyes of the law.

Randy H said:

It’s to be expected in a group like this that there will be a strong resistance to anyone “defecting”, no matter how much sense it might make for their personal situation. The very choice of the word “capitulation” tells me more about the speaker’s biases than the object of that term. I would hope that each and every person here would ultimately make a decision to buy or not to buy entirely independent of any cheering or cajoling from Patrick.net’ers.

Shit, Randy, I already apologized for using the term --what more do you want, self flagellation? After reviewing the specifics of Mr. X's offer, it clearly doesn't apply.

Jon said:

Agree. I think also that there is a perception that a “fair” deal is impossible in this current environment so anyone that buys is giving in and aggreeing to be a mortgage slave.

Bingo. I just want to find out more about how Mr. X pulled off this minor miracle so I can replicate his results for myself. Most everything in my neighborhood is still going for near-peak wishing price. Maybe I need to move to Cote Country too.

@speedingpullet,

Loved that "Kevin" post from Ben's. That guy has some super-sized cojones --wish he were here in SCAL.

"Even those with double-oh designations?"

Yes, Peter P. Licensed to Shill!

http://en.wikipedia.org/wiki/Shill

Interesting. I had always thought it was just misspelled "shrill"

1- A 30%-50% drop in prices will leave the vast majority of homeowners (who will become so much underwater) with no choices but to default or mail back the keys. So would you feel comfortable buying at a 50% discount in neighborhoods where the majority of houses are foreclosed/boarded or reposed or abandoned, like the worst ghettos in places like ‘downtown Detroit’? And would that 50% discount be a *good* deal given the new nature of the neighborhoods?

2- CA will have to experience a major recession for prices to fall by 30%-50% and most sectors of the economy would be affected. So, except if you work for the federal government, your job would most likely be gone. Moreover, the outflow of people out of CA would be substantial, like what you see in the worst parts of the Midwest. Under such a scenario, would that 50% discount be a *good* deal given the new nature of the CA economy?

More straw man arguments from TOS.

For point 1: the "vast majority" are not living on the finanical edge. They are living their lives as usual, paying their mortgages and what not. If prices dropped even 50% and they aren't planning to move, they shouldn't care. I would feel sorry for those having to move due to life situtations (job, divorce, death, all that kind of stuff). So how would that make the Bay Area like current-day Detroit?

For point 2: This is the typical "threat" argument from the REIC - be careful what you wish for (a real estate crash), because it may come true, but it will mean the economy will go down in flames with it. I personally think an economic recession is in order. There has been a continued propping of loose credit and free money ever since the dot bomb, and the longer it goes on unchecked, the harder the eventual crash is likely to be. Moreover, HARM pointed this out earlier, but this indeed may be a historical first - the first housing crash not associated with an overal recession, given the crazy-a$$ lending practices going on over the past few years finally coming home to roost.

Here's the latest on the potential Federal bailout of subprimes.

http://money.cnn.com/2007/04/18/real_estate/foreclosure_bailouts_/index.htm?postversion=2007041810

A series of speakers at a Congressional hearing of the House Financial Services Committee on Tuesday called for restructuring adjustable rate mortgage (ARM) loans to help solve the subprime mortgage crisis...

Doreen Woo Ho, president of Wells Fargo Bank's Consumer Credit Group, says, "You can pretty much figure an OREO (other real estate owned by the bank, basically, foreclosed properties) will automatically cost 6 percent commission to sell, plus the cost of carrying it on the books for the six months or more it takes to sell and the cost of deferred maintenance. Right away 10 to 15 percent of the value is already eaten by the costs."

I have two naive questions:
-Who the hell would want to purchase these bond funds for these bailouts?
-Doreen Woo Ho's complaint about transaction costs: aren't these costs what you take on when you "own" a home anyway? Is it that much of a shock that owning a home has carrying costs and selling has transaction costs? What - buying and selling real estate isn't a guarantee of free money? That's news to me!

OO said

"if you have gone through the early 90s when housing bottomed, you would not have said with such sarcasm, because unless you have a big down payment, you wouldn’t be able to take advantage of the bottom pricing at all."

I did buy houses in 95 and 96, which I was able to do because of a "soft" market. At that time, down payments were required to buy investment property (unless you assumed a VA loan, or committed fraud). I believe that the more sane lending policies of that time kept houses affordable. For example, two of the houses I bought were 1500 sq ft 3 bed 2 bath 2 car that were less than $110,000 each, and were only about 2 years old at the time in a newer desireable neighborhood in Newport News (coastal Virginia). Interest rate was 7.5%. I rented the houses out for less than the payments with the idea that these were long term investments, and by using the rent receipts and kicking in some extra I could have paid for rental properties as income for retirement. Not only did I have a negative cash flow, I had to deal with tenants and toilets.

I did not mean to be sarcastic. The point I want to make is that I see no reason why people cannot save up a down payment. If one does not have the discipline to save while renting, they are probrably better off continuing to rent. Before you get annoyed, I know that this philosophy only works in a market that has not been inflated by easy credit. I believe that when sane lending practices are re-introduced, the home prices will come down to a level where it is practical to save a down payment. The problem will be the pain that existing homeowner's will feel, along with the short sighted politically expedient measures State and Federal gov may do to releive this pain, such as bailouts or forced rate cuts. If the current home prices are propped up by such measures, how will future generations afford houses? I do not think preserving the equity "wealth " of current homeowners is worth the price of indenturing future homebuyers with 100 year loans or other misbegotten creative instruments.

surfer x,

We simply don't have enough of a data base (in rural OR) for Zillow to be of much value. There are so few closings and they can be lengthy periods of ownership so AFAIK they look at your initial cost basis, track what you sold for and just carry that appreciation model forward. All other metrics be damned.

There was a link *edog had above where the AZ Appraise-Whores Assoc. is effectively banning Zillow from operating in AZ. BIG step backwards.

My wife would argue (and has) that we coulda/shoulda/woulda bought yet another home in early '04 and STILL had time to sell (or do yet another cash-out re-fi) to have paid for kids college and a wedding. I (after years in the back seat where household finances were concerned) finally had to draw the line! Sure, paying for college and weddings out of pocket sucks. I mean it REALLY sucks!

This has been a HUGE part of my reluctance. Sellers expecting that even though we DO suspect much of this is nothing more than a Ponzi, continue to palm OUR costs and expenses on to the next schmuck. Oh and btw you'll be paying for that wedding/diploma for the next 15-30 years but at least YOU didn't have any immediate financial discomfort?

As Randy H suggests, each of us have our own "utility" factor. Since I'm on the other end of raising children (and congrats! btw) my "utility" is about ZERO. We don't have any pets, I hate yard work and I'm hoping I don't get stuck w/mom. I spent 9 years of my life on a boat or in a barracks so as long as I get the bottom bunk I'm cool. The Mrs. is despondent that we don't have a sprawling McAlbatross to entertain the many guests that surely will arrive for the wedding. Of course 60% of this space will be under utilized to say the least the day after w/29 years and 11 months left on the payments!

I Don't WANT to be "Stanley Johnson"!

Malcolm

My comment about lowballing and the evil dance had a bit of the flavor of the "Evil Buyers" thread title.

I am not really going to gross lowball, or send in any framers. What I did in 95 and 96 when I bought houses was look at the houses, sometimes repeatedly, and wait. After sitting empty for months, the sellers would lower the prices. After that, I would make an offer that was a good deal for me, but not a terrible lowball. The one time I was turned down, I was able to get the same house 6 months later for the same price. Of course this will not work if you have a specific house in mind to use as a personal residence.

HeadSet Says:
The point I want to make is that I see no reason why people cannot save up a down payment. If one does not have the discipline to save while renting, they are probrably better off continuing to rent.

There's something called the 'rental trap', where the cost of rent is such that the would-be buyer can never save a deposit.

skibum,

You are all over it today Sir!

Doreen Woo Ho has the misfortune of being the "point man" in the lender's effort to spin these "thinking outside the box solutions" in a way that's at least digestible to the public.

Patrick's first link today from "The Dept. of Homeland Stupidity" explains all.

"There’s something called the ‘rental trap’, where the cost of rent is such that the would-be buyer can never save a deposit."

I do not know apartments, so I'll only speak on single family homes.

If someone wants a 2500 sq ft house, they rent a 1500 sq ft house for a few years. The savings on renting verses mortgage, plus savings by having no bills for maint, taxes, or insurance would go for the down payment. As a previous poster noted, anyone who thinks a landlord can pass maint, insurance, and taxes on to the tenants has not been a landlord.

People who can afford payments on the large home should certainly be able to save a down payment by renting a smaller home. And by forgoing the matching SUVs. Again, I am talking about a market with prices corresponding with sane lending practices.

from the financial times april 17
"Real concern over virtual under-age sex
Virtual worlds are raising some new areas of concern"
says special agent Flint Waters,leading officer for the Wyoming Internet Crimes Against Children Taskforce.
"there are a growing number of virtual brothels,for example,
where it is possible to have sex with an avatar that appears to be a child. This raises difficult questions for us a a society"
he says

It is not just individuals that inhabit these worlds: companies from IBM to Reuters have set up offices, hold meetings or advertise on Second Life.

HARM

I wasn't specifically targeting you. Sorry if I sounded lecturing. My personality is one which is particularly sensitive to any kind of group-think self enforcement. I probably overreacted.

Justme Says
"The reason MLS should be made public and open is that it constitutes a de-facto monopoly. Another part of the monopoly is the “standard” contracts that realtors use, which are not freely available."

First, it is not a monopoly, and second even if it were, monopolies are not automatically illegal. In this country we don't smash proprietary barriers simply because we think it didn't cost that much or because we want access. That is something that goes on in parts of the world that we are trying to liberate.

BTW, a contract can be written on a napkin. To say their forms are a monopoly is just not cogent. Stop throwing around hot button words like monopoly. You sound like some news person throwing around terms like victim, or forced into this or that.

Why should MLS be open?

The current manner in which MLS is operated constitutes a de facto collusive monopoly. Monopolies are fine. Collusion to the end of stifling competition is not, and is supposed to be illegal in the US. Unless the trade groups representing the integrated MLS system are placed under specifically regulated monopoly protection, ala the telecoms or energy companies prior to 1980s, then they are in violation of US antitrust rules.

The only reason no one has prosecuted this successfully yet is that every time the Justice Department starts an action -- and they have one underway right now I might add -- Congress steps in and derails it. But Congress also refuses to establish any meaningful regulatory regime for real estate either.

The MLS "agreement" which members are forced to accept to participate in the system is itself a case study in anti-competitive behaviors.

Is the MLS cartel responsible for the fact that real estate transaction costs have failed to narrow over a period when all other financial transaction costs have dropped by an order of magnitude? The MLS reduces one of the larger cost components of the real estate transaction -- economic search costs. With those costs removed, were real estate competitive, transaction costs would have shrunk significantly. Instead we see the MLS used as a barrier allowing the real estate industry to capture economic benefit away from the consumer. That type of action is illegal in the US if it involves collusion, or various other anti competitive behaviors.

Finally, arguments appealing to "free markets" supporting the MLS status quo are nefarious. Free markets do not mean that companies and their trade organizations are free to manipulate and control markets to their own benefit. Free markets mean companies and their trade organizations are free to compete within markets. By this logic at&t should be allowed to tell half the country which web sites they can go to, and they should be allowed to force companies wishing to participate on their web to sign big nasty agreements to become "members" of their club in order to have a chance to sell their services to consumers.

Monopolies are not illegal in the US. They are legal so long as they are:

a) regulated.
b) natural and do not use their market power to the detriment of consumers.

The current MLS cartel fails both points.

*either a or b

Malcom,

Oh I CAN and I WILL use the term "monopoly" (as applied to the REIC) all I WANT!

If you don't think it's a monopoly, just try setting up shop as a "discount" RE firm and tell me about all the love you're gettin'!

I object to their "cartel" practices as much if not MORE than the prices that result from "agents", brokers, appraise-whores, lenders (and the title companies that sell your name) ALL sleeping in the same bed! You from this planet, or just visiting?

Person,

Hopefully the savings flow, not just the interest earned, would get one out of the rental trap.

What is low yield? 12 week Treasuries are around 5%. Is this what you consider low?

How does the MLS collude to keep you from reading Home Trader, or opening your newspaper? It is a tool, and most all of your points are unsupported. Again, you throw around terms like collusive monopoly or a cartel for the emotional aspect and don't support it. You then let you argument completely slide off the scale when you assert that they control the market, and have prevented discount brokers. Discount brokers like Ipay1 have literally entrenched themselves as a new standard, and if you think the MLS players can 'control' the market, then why are prices falling?

Randy H,

GREAT post. Your post should be included as evidence for these congressional hearings. I'd only add that the probable reason Congress has derailed any MLS cartel-breaking plans is that the NAR is one of the largest political donors in the US.