"How is the land, is it fat or lean? Are there trees in it or not? Make an effort then to get some of the fruit of the land." Now the time was the time of the first ripe grapes. Numbers 13:20
This passage from scripture captures the essence of prospective. Moses had sent the spies out to the promised land and he was interested in their report. Only two had a positive report, Caleb and Joshua. During this time of great financial upheaval, I ask myself "how is the land, is it fat or lean?"
My response to this question is going to set my course to either a successful and profitable real estate career, or one of failure and disillusionment. Fear is rampant in the marketplace. Buyers are afraid to get involved in a purchase and sellers are worried they can’t sell. Throw in lenders who are overly cautious, and you have the perfect recipe for inertia.
How is this inertia overcome? By education and understanding. Buyers need to be shown why it’s a good time to buy. Sellers need to be shown how they can have a successful outcome to their sale. Lenders need to be shown the path to profitability.
All of this will take courage, faith and conviction. Those start with me, the real estate agent. If I’m missing just one of those three, I can’t possibly expect a buyer, seller or lender to trust my judgment or advice. So I must constantly ask "where is the opportunity?" People will trust me if I am courageous, faithful and act out of conviction. I believe I can change their lives in a positive way, but they need to see it from my prospective.
In my market, I can’t see lower interest rates or much lower home prices. It’s the best time I’ve ever seen to get into a real estate transaction, but will the buyer and seller have the courage to do it? Will I have the conviction to educate them on it? Will all of us have the faith to move forward and and experience success?
Lately I’ve been doing a lot of home buyer seminars. I enjoy teaching people how the process works and it’s great to give insights to first time home buyers. On the other hand, it makes me think, why don’t more people take the time to get educated on what to expect as a home owner?
How many people would buy a car without first learning how to drive? That would be reckless, yet time and again people will go out and make the single biggest investment of their entire life without any education into what they are doing. Down the road they’ll be wondering "what the heck did I get myself into?"
In this day of internet access, it’s easy to do searches and gather info, but how are you to know what info is correct and what info is incorrect? Because there is so MUCH info out there, it can get confusing and some stuff that is conjecture is passed off as gospel. People "pretend" to be experts all the time.
Misinformation is every bit as dangerous as uneducated. Sometimes more so, because buyers are so sure they know what they are doing. Imagine your neighbor offering to teach you how to drive that new car you just bought.
Neighbor: I saw a movie once where they drove a car. I’ll tell you what I remember them doing and you’ll be fine. Let’s head over to the freeway and practice.
Yikes! That would be nuts.Yet all the time I talk with potential home owners who were "educated" by fellow renters who never once owned a home (or worse, homeowners who are going through foreclosure and they are instructing first time buyers on how to buy in such a way that could lead THEM to end up in foreclosure!)
Not every Realtor or Broker is an expert, but they do have experience and training. Use that. Ask questions, take classes, read books. Take the time to understand what you are doing and how it would benefit you. Trust me, the education you get now will pay off in a big way later on.
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I’ve read that California Governor Schwarzenegger and President Elect Obama want to have a 90 day moratorium on foreclosures. You can hear Arnold’s reasoning here.
http://www.npr.org/templates/story/story.php?storyId=96753445
At face value, that sounds like it could be a good idea. The thought would be that a moratorium would allow the market to stabilize in hard hit areas, home owners would have more time to work out loan modifications and private sellers would get a needed break in competing with bank owned properties.
On the other hand, this could have a devastating effect on the market as well. What makes Obama think that most home owners want or could qualify for loan modifications? Here are the problems I see;
- Many owners are frustrated that their property values have fallen so much. They resent the fact that the new neighbor who just bought next door is paying half the property taxes they are.
- Many owners feel they will need to hold on to the property for a very long time in order for it to rise enough in value to create positive equity.
- Loan modifications will only be allowed if homeowners didn’t commit fraud and “pad” their stated income. The majority of people who purchased a home with an adjustable rate mortgage over a half million dollars certainly did that.
- Distrust of the banks. Many minorities were put in loans that they didn’t need to, with adjustable rates and long pre-payment penalties. They don’t believe that the bank will suddenly become honest and helpful.
- What good would a loan modification do if the homeowner gets behind on their property taxes? When homeowners decide to walk away from a property, they usually stop payiing everything. Unless the bank is going to pay the taxes current, most properties late in the foreclosure process are not going to be redeemable.
The big question I would have is, what happens after 90 days? A flood of foreclosures? The banks and investors certainly shoulder much of the blame for this situation, but what about homeowners who used their house like an ATM? They helped themselves to equity cash, bought that big beautiful Tahoe and loaded up all their appliances on the way out the door. Do they deserve 90 more days of free rent?
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Perhaps I’m the only one who feels this way, but I find Countrywide’s insistence that I get my buyer pre-approved through them BEFORE they’ll even look at my offer to be an unfair negotiation tactic. Other banks and private sellers are content to accept a pre-approval letter from a reputable lender, why not Countrywide?
How fair is it to know EXACTLY how much money the buyer has BEFORE an acceptable price is negotiated? Why not agree on selling price first, THEN insist on looking at financials before going to escrow? Because Countrywide wants to know how much they can counter offer the buyer. That’s not an arms length negotiation, that’s one where one side has an advantage.
Will Countrywide share with the buyer how much net they will accept BEFORE agreeing to purchase price? Of course not, they want the buyer to guess, hoping they will bid over that amount. Will Countrywide share with the buyer what the current "highest and best" offer is? Of course not, they are hoping the buyer will desperately overbid to get the property.
I find it highly ironic that now Countrywide insists that buyers be "properly qualified", when they were the leaders in poorly written mortgage loans. Why didn’t Countrywide check employment history and financials themselves during the sub prime heyday? Chase Manhattan did. Instead they relied on Mortgage Brokers who’s best interest was to see that buyers got approved and bought homes.
Chase Manhattan insisted on underwriting "safe" loans. They certainly didn’t have the profits that Countrywide had, but they also don’t have the number of foreclosures that Countrywide has to liquidate. Countrywide got greedy and paid the price. How interesting that the few foreclosures that Chase Manhattan has to sell don’t require the buyer to get pre-approved by Chase themselves…..
