San Diego Housing Bubble News and Analysis

I know you did not ask me but I must point out that we don´t know what the contingent price is.

It could be higher than asking.

I don´t have inside info.

Also, the seller probably does not care what price it sells for as long as the seller´s lender accepts it.

One of my last short listings had an offer accepted within 2 hrs of going live.

The problem with the angry taxpayer argument is that we have not had the relevant strings attached to the money we give them.

As an agent, I don´t read the bailout package notices when I list a property. My client is the seller, not the bank or uncle sam.

"One of my last short listings had an offer accepted within 2 hrs of going live."

Did the lender accept the deal?

Probably the agent trying to slip their own buyer in on it but it is not fraud. The lender has the choice of accepting, rejecting or countering the offer. It is not the sellers obligation to bring them the highest offer and sometimes it is not in the sellers best interest to do so (i.e. someone submits an offer well beyond what a house could appraise with financing they will never get).

BTW, if you would pay more for that house than what it is listed there is no way you can ever expect to win our wager.

Sort of.

They came back asking for 20k more and the comps did not support that.

The buyer came back offering 10 more and the lender was good with it.

There is room for slippage here.

ubranrealtor wrote:

As an agent, I don´t read the bailout package notices when I list a property. My client is the seller, not the bank or uncle sam.
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And herein lies the problem, IMHO.

If the taxpayers are bailing out the financial industry (and there is NO doubt that we are), then it is the **lender** who should see all offers and accept the highest/best offer that reduces the liability for the taxpayers.

I'm not talking about what current law dictates; I'm talking about common sense -- the fact that it is the BANK taking the loss, so what the over-encumbered "seller" wants is irrelevant.

This stinks of an inside deal, and our representatives have got to put a stop to this garbage!

I keep on saying that if short sales were so easy to obtain, then why wouldn't everyone want to go do one?

Sell to your best friend/relative, split the difference, then buy back the house later.

I'm willing to pay a bit extra now in order to get settled (the proverbial "I'm willing to take a loss"). ;)

Not too much more, mind you, but a bit, if everything else falls into place.

We'd prefer a 4/2 (or more), single-story home with a pool in our desired area. If that house came up without the contingent status, we'd be willing to offer more than $450K to be done with it. I imagine this would have gone for around $300K-$380K in the 2000/2001 timeframe (what I consider to be "pre-bubble" and think we'll see again).

This really is what's going on in some cases -- inside deals where the seller knows the buyer, and short-sells it for way below market price. Then, they flip it for a nice profit, or keep it at its new, low price...all at the bank's (read: taxpayers') expense.

Yep I called the listing agent. A husband and wife team from my favorite agency. Anyways she confirmed that the offer was accepted and no the buyer sent in the offer without even looking at the home. I asked her if it was an "in house" offer. After she made me repeat the question 4 times she finally said yes it is.

The banks are incapable of seeing all offers and reviewing them. They only want to see one. What you view as common sense is unrealistic. They dont understand what makes one better than the next and it is not always what you might consider the highest/best. It is very subjective and thus best left up to the seller to decide with the assistance of their agent. Ultimately the lender will choose whether that is good enough. Its not a perfect system but what in this world is.

CA R
If it makes you feel any better the lender is Wells Fargo which makes always buyer, seller, buyers agent and sellers agent all sign an Addendum stating that it is an arms length transaction between unrelated parties. If their lying they could end up in jail.

sdr

PS I am confused as to why you would be willing to pay $100K more than you think it would go for in a couple years

Quite frankly, I couldn't care less about their addendums. To enforce those is much more cumbersome than to simply have all the listings submitted directly to them (could use the **government run and regulated** on-line auction system I suggested some time ago, which would be extremely efficient and eliminate much of the fraud).
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NEW YORK, June 18 (Reuters) - Wells Fargo & Co (WFC.N) Chief Executive John Stumpf said in a newspaper interview he would like the bank to repay the $25 billion it took from the Troubled Asset Relief Program as soon as practical, but he gave no time frame.

"We have not yet applied to pay it back," Stumpf said in the interview, reported on the newspaper's website. "We will be talking with the (Federal Reserve). The first thing we did was get through the stress test. The stress test said that we had enough capital. The Fed said Wells should have more common capital, so a different composition of capital."

http://www.reuters.com/article/rbssFinan...

Must be nice not having to care about your losses because "someone else" (that's us) is covering them for you.
If they keep up this kind of chicanery, they will never pay back the money, and we will end up absorbing more losses through the various guarantees...and how much of this is Wells Fargo's?

Last fall, the Federal Reserve declined to identify the recipients of about $2 trillion in emergency loans from U.S. taxpayers or the assets the central bank is accepting as collateral.

http://www.bloomberg.com/apps/news?pid=2...

Yeah, like such statements ever stopped anyone from lying.... And like lying on loan applications has ever sent anyone to jail...

If that were the case, then pretty much everyone who's near foreclosure now should be sitting in the slammer.

It wouldn't be hard to catch those "criminals" either. Just compare the tax returns to the stated incomes.

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BTW, that arms-length statement is just a declaration between the parties. It's not part of any loan documents and thus not regulated by law. I don't believe there's any criminal penalty for such lies.

Lying to your fiancee to induce her into marriage is not a crime; nor is lying to anyone else unless there is a law against it.

The bank could sue for damages for being mislead into a transaction but that would be their only remedy.

CAR to be honest I think that the fraud is more of the exception then the rule. I am always skeptical of everything and yes I have seen cases of fraud. I think that in most of the questionable transactions the agent is double ending it. That in and of itself is not ethical and I am by no means condoning it. I think that alot of listing agents become lazy when it comes to short sales because they are so much work. With all that said, yes I do believe there are cases of fraud and non ethical behavior going on. By the same token I think the average short sale is done by the book more often then not.

I wish some MSM journalists would start blowing the top off this kind of behavior. As others have pointed out, this is just picking the pockets of taxpayers. I am getting tired of people saying that it's fine because it's legal, and screw the ethics. I'd like to live in a country that was more ethical.

ditto SD R,
I dont see much in the way of fraud attempts either. Mostly greedy agents.

sdr

There does seem to be more of this than ever.

So how do we fix it? I'm not in favor of making more laws -- more litigation is not a good thing either. Plus the laws that do exist aren't being enforced anyway.

Perhaps there should be a professional organization that has a Code of Ethics? The organization would not tolerate members that do not abide by the code. Let's create such an organization, give it a clever name (perhaps a pun!), and trademark the name, so that the public would know that anyone working in this named profession is ethical. That would fix it, right?

If the listing agent is claiming that it's the "highest and best" offer to the bank, yet is failing to market the property or even accept any market-based offers, I call that fraud.

They are defrauding the banks -- which just so happen to be propped up by the taxpayers right now, and that makes it more egregious than ever.

Sorry, sdr, but it does not require a rocket scientist to determine what the "highest and best" offer is.

A bank is just as capable of determining market-based pricing, if not more capable. They did just fine with their appraisals before the growth of the mortgage brokerage industry. I'd like to see more accountability in the process.

The banks just aren't set up to look at all the offers, let alone analyze all of them. They can't even deal with the single offers they're receiving now.

Anyway, what is "highest and best"? I'm currently in escrow on a short sale. Our offer was $8-10k lower than the highest dollar offer--sale price is around $240k, so it's a significant percentage. But the "higher" offers included some combination of FHA, non-"as is" clauses, etc., which the listing agent and the seller had to sort through. Our offer had almost no strings beyond a loan contingency, and we convinced them (with high FICO scores and verified down payment funds) that we would be able to perform if our offer was accepted. Again, the seller had to weigh all of this and keep in mind that the bank might reject the offer if the price was too low. This last item is what helps keep the seller honest: they want the short sale to go through.

Would a bank be able to sort all this out without incurring a huge cost? I doubt it, and why should they if they are getting the service for free? Unless there is a huge amount of fraud, the banks are better off with the status quo.

Exactly, drboom.

CA Renter you are very naive. The lenders have enough problems analyzing a single offer. Each of their neogtiators is overwhelemed with about 500 files or more. I cant imagine if we had to present all offers. They would have to increase their staff at least 5 times to handle that and that is being very conservative. From what I can see the lenders are barely capable of tying their own shoes. You give them far too much credit. Additionally, I have never seen a single thing requiring "highest and best" offers on short sales. An offer is presented to the bank and that is that. I have had banks ask for more money but have never heard them ask how many offers there or to go back get highest and best offers. They just say what they will accept.

The level of fraud is far below what would justify increasing their staffing costs by 500%.

CA R
The one place where we do see the highest and best coming from the banks is on REO's. I went and looked at about a dozen agents that have done at least 20 REO's sales. I compared how many times one of the properties they sold in a traditional sale in the last 2 years had both ends in their brokerage with how many times their brokerage had both ends of an REO transaction. IN EVERY SINGLE CASE, they or someone that worked for them seemed to get both sides of the REO transactions at a far greater percentage. I'm sure they could explain every single case but the statisitics do not lie. I want to be clear. IT WAS IN EVERY SINGLE CASE including agents you would likely far beyond reproach if you know what I am getting at.

The REO agents are sitting in the garden of eden and the temptation to take a bite of the apple occassionally must be too great even for the best of them.

PS I have been closed a few dozen short sale transactions and could have taken both sides many times. I have had both sides only once in a closed sale. The buyer was the family of the disabled tenant that resided in the who knowingly paid above market to make sure the tenant would never get displaced. No one else would have paid what they paid. I did have one more in escrow with what was the clearly the best buyer that came to the table after a few months on the market but that buyer ultimately walked.

If I'm naive, it's only about the lack of competence among the lenders' employees.

Again, this is NOT rocket science, and dr boom's example does not negate what I'm saying. If the lenders don't have employees who are capable of determining the "highest and best" offers, then they should fire their existing staff and hire more competent people.

I stand by my suggestion regarding a **government run and regulated** auction system. Any financial firm that is getting government money/guarantees of any sort should be forced to use the auction site for the sale or purchase of any and all assets. All buyers and sellers would be pre-qualifed and thoroughly screened before they can participate. All transactions would be completely transparent, and every buyer's/seller's transactions could be tracked.

Every sale would require that the asset be listed for a minimum number of days (30?), and all of the buyers' terms would be noted with every bid. At the end of the auction period, the highest and best offer would be submitted -- a computer model could offer different ways of calculating a "best offer" (mix of: best price, fewest contingencies, shortest escrow, highest down payment, etc.), and the buyers/sellers would be obligated to complete the transaction.

Almost everything could be automated, and it could be done in an extremely efficient manner, in addition to minimizing the potential for fraud.

Please explain why this would not work.

I wish it would.

I can think of a couple of practical difficulties:

- Who determines the model that determines "highest and best"? Politicians would get involved, and you'd have all kinds of idiocy baked into the model that favored one group over the other. You can bet that "highest and best" would have little to do with "what gets the most money".

- If there's one thing I know about big software projects, it's that they get delivered late and seldom do what they're supposed to. By the time a decent system came online, we'd be well into the next housing boom.

I see where you're coming from, but building a whole new infrastructure around a temporary problem doesn't make a lot of sense. Things will eventually return to business as usual.

Amen!

I'd still like to try it. :)

Any unemployed, very well-qualified techies want to take a stab at it?

CA, I feel your pain. Unfortunately, there are only so many deals like this to go around. If everyone had a stab at this one it would likely sell for more than you want to pay anyway. Unlike a year ago, people are all over short sales now because as unlikely as they are to get the house it is still better than waiting around to get into a bidding war on a REO or worse yet deal with a delusional seller.

Yes, someone may end up with a below market price here but then again the bank might end up saying no anyway. There is always going to be someone out there that gets a better deal than you do.

I'm frustrated with how the market has turned right now as well. Even my agent is telling me to wait until the fall now! Problem is a lot of people seem to have the same idea.

The rest of your post was appropriate, informative, and complete without the jab, but part of you had to make it hurt just a bit. Do you ever go a single day without belittling someone? I'm honestly curious. It seems strange to me that a person who apparently despises everyone would be in your line of work. You must put on a friendly mask in person, or you wouldn't have many clients.

Pemeliza
Spot on post.

CA R
Here is the part of your comment I was addressing:

"If I'm naive, it's only about the lack of competence among the lenders' employees.

Again, this is NOT rocket science, and dr boom's example does not negate what I'm saying. If the lenders don't have employees who are capable of determining the "highest and best" offers, then they should fire their existing staff and hire more competent people."

Firing, hiring and training takes time. Lots of it. They are incapable of running efficient, well run organizations and the quality of employees they have access to is underwhelming. Its like most large corporations. What may seem simple to a single intelligent person is fraught with challenges when one tries to operationalize something across a large spectrum.

One question back at you. Are you frustrated because the house sold sold cheaply or because you didnt get it at that price?

Ren
I dont think pointing out naivity is mean spirited. Give me a better word for it and I'll use it. FYI, The tone I use online is calculated. Its the only way to be heard consistently in a forum like this. Particularly as a realtor. If I wasnt abrupt I would have gotten eaten alive a very long time ago.

sdr

My point is that you didn't have to use any word at all. The rest of your post said everything you needed to say. Adding the naive comment changed an informative post into a malicious one.

I disagree that you would be eaten alive simply for being relatively pleasant. There are several friendly realtors here who earn respect by posting intelligently. If someone gives you crap for your opinion, then by all means you should get nasty and use your knowledge to back it up. Otherwise, it's just counterproductive.

In my experience, vitriol is a lot like cussing. It should be used sparingly not because it's bad, but so that it has more impact when you finally do use it. The idea is to have people fear what's under the surface while still valuing your opinion - not to have them avoid you completely.

Ren,

Thank you very much for your kind post! :) It's admirable for you to point these things out, and stick up for other people. Thank you!

I have to admit that when I first read sdr's post, it got my hackles up, but I tried to read it in a different way so that the personal jab was diminshed somewhat and I focused more on what he was trying to say. He probably knows that I'm not naive when it comes to business and real estate; if he doesn't know this, it's because he's not paying attention.

In many years of posting on bubble blogs, I've always tried my best to debate the **topics** and leave personalities and emotion out of it. I've never felt "unheard" or felt that people didn't pay attention to what I was saying...quite the opposite, as a matter of fact.

sdr, if you have good points to make, I've seen no evidence that shows being vitriolic improves one's standing in an internet community. The most respected posters are those who leave their emotions at the door and discuss/debate facts with other well-informed people. You and I have had some back-and-forth on this before when you've gotten into it with other posters.

Can't we all just get along? ;)

p.s.: I even invited you over for BBQ the other day! :)