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Archive for May, 2010

More Bank-Owned Homes Likely to Hit the Market

By James R. Hagerty           Wall Street Journal

It’s a bit like guessing how many pennies are in a gallon jug at the state fair, but housing analysts keep trying to count how many foreclosed homes banks and mortgage investors own.

Why should we care? Unlike at the state fair, there is no prize for guessing right. Still, if we can track the number of these REO (“real estate owned”) homes, we can get some sense of how banks and others are doing in their efforts to dispose of the properties and how much longer they will be weighing on the housing market.

The good news is that two of the leading contenders in this guesstimating game–Tom Lawler, an independent housing economist and gentleman farmer in Leesburg, Va., and Robert Tayon, an analyst at Barclays Capital in New York–have been comparing their methods recently and learning from each other. Both are in the same ballpark and both say the REO count is on the rise.

Mr. Lawler estimates there were 574,000 one- to four-family REO homes at the end of the first quarter, up from 518,000 at the end of 2009 but well below a peak of 668,000 in the third quarter of 2008. More modest (honest?) than most economists, Mr. Lawler describes his estimates as “crude” and “a work in progress.” He figures his tally is too low–he can’t find good data on all of the thousands of REO owners– but still “indicative” of the trend.

Mr. Tayon of Barclays estimates that REOs totaled 522,000 in March, up from 479,000 at the end of 2009 but below the peak of 688,000 in September 2008.

After soaring in 2008, the REO total shrank for most of 2009 as foreclosure-prevention efforts slowed the flow of defaulted loans toward resolution and investors rushed to buy what they saw as bargains in hard-hit areas such as Phoenix and Las Vegas. Now, as banks and other loan servicers work their way through the backlog of loan-modification applicants and reject many of them, the REO count is rising again. Mr. Tayon expects it to peak at 538,000 in August 2011 before starting to decline gradually.

Fannie Mae and Freddie Mac, two of the biggest holders of REO, both expect their REO inventories to increase in the next few quarters, Mr. Lawler says.

The expected rise in REO supply will “challenge” housing markets in areas with high concentrations of foreclosures, Mr. Lawler adds. But he doesn’t think the effect on prices will be as severe as it was in late 2008 and early 2009, when loan servicers dumped huge amounts of property on the market.

There are still plenty of struggling borrowers at risk of losing their homes. The Mortgage Bankers Association, a trade group, last week reported that 14% of mortgage loans on one-to-four-unit homes were 30 days or more delinquent or in the foreclosure process as of March 31. That represents about 7.3 million households. The rate was 12% a year earlier. At the same time, fewer people have fallen behind in recent months as the economy has improved.

Those who want to guess how many REOs will be in the jug two years from now will have to take a view on whether the economy is going to produce enough jobs to create demand for all those houses.

Getting What you Want in Home Sale Negotiations

Getting What you Want

May 23, 2010|By Lew Sichelman   Los Angeles Times

 When it comes to selling a house, everything from the price to whether the refrigerator stays or goes is negotiable. But negotiating the terms should never be an “I win, you lose” situation. Rather, it should be “I win, you win.”

“The best negotiations end with all parties feeling like they won,” says Scott Friedman, a Linwood, N.J., real estate coach. “Both parties need to feel they came to an amicable agreement and want to move forward.”

To get to that point often involves give and take on both sides. Here are some tips:

- Let your agent do your bidding. That’s what you’ve hired the agent for, so let him or her handle the bargaining.

Hopefully, he or she has had some schooling in the art. Unfortunately, to hear sales trainers such as Friedman and Rich Levin of Rochester, N.Y., tell it, most do not. So it might be wise to hire an agent who has either taken some courses or has lots of experience in getting buyers and sellers to close without incident.

Buyers and sellers may have met when the buyer visited the property. But once the offer is submitted, they should never see each other again if possible.

Never negotiate directly, says Levin, who had a 15-year career in real estate sales before turning to coaching. By remaining apart and unseen, there’s no chance your words or body language can be misinterpreted. You want the other side to focus on the deal, not you.

The only time you may want to break this rule is as a last resort in an effort to keep the transaction from going south. “If the deal is near death, then a face to face may be the only way to breathe life back into it,” Levin says.

- This is no time for vanity. It’s not about defending your position or outwitting the other side, Friedman says. It’s about both sides coming together amicably until all the papers are signed and the keys change hands. So put your ego aside and get out of the way.

“If the seller feels beat up so badly, how willing is he going to be to cough up some extra money to make repairs?” Friedman asks. “And it’s the same for the buyer. All of a sudden, stupid little things like nail pops become stupid big things.”

- “Get it in writing” is a universal truth in any business arrangement. And it’s a fundamental rule here, too: Do not negotiate orally.

Oral negotiations are “fraught with potential problems, misunderstandings, misinterpretations, omissions, as well as simple changing of minds,” Levin warns. “Put every step of the negotiation in writing.”

If the seller agrees to leave the lawn furniture, put it in the contract. If the buyer agrees to allow the seller to remain in the house for a month after the closing, put it in the contract. Otherwise, memories fade and the sale could fall apart when one side or the other says, “I don’t remember agreeing to that.”

- Don’t go back and forth more than twice. If there is a third round of counteroffers, Levin says, the chance of both parties coming together falls dramatically.

When the buyer makes his initial offer, he’s thinking about the house and the seller is thinking about his impending move. “They’re both focused on what they must do next,” Levin says.

When the seller makes a counteroffer, both sides start to lose their focus, he says. “They stop thinking about the house and start thinking about the money. ‘Am I paying too much?’ ‘Am I getting enough?’ And if there is a third round, they lose sight of both the house and the money. They begin to make it personal and focus on each other, and that’s when the deal breaks down.”

Consequently, try to take your best shot early in the negotiations. Don’t hold back. Play your hand no later than the second round. Otherwise, you could wind up blowing the deal.

- If you are asked to give something — say, the buyer doesn’t want to close for 60 days but you would rather do so ASAP — then ask for something in return. You may not get it, but according to Levin, this ploy effectively mutes the other side’s impulse to ask for more.

Otherwise, if you concede on one point — “Yeah, I’ll throw in the washer and dryer” — the buyer might sense weakness and ask for the kitchen sink, too, at least metaphorically.

- If you reach an impasse on an item, don’t dwell on it. Rather, skip it, get an agreement on everything else and then come back to it. That way, Levin advises, you will build momentum toward a done deal. Otherwise, you may never get past a sticking point.

“If you get all hot and bothered about something, it often influences the rest of the conversation,” he explains. “But if you isolate the points of disagreement, the negotiations go much easier.”

- The state of the market will dictate which side has the upper hand in negotiations. Given the current state of things, this may be the only offer a seller has seen for months, so the would-be buyer can remain steadfast on price, terms and conditions. But if you’re in an area that is picking up steam — or never lost it — the seller may be in the driver’s seat. The buyer could be competing with other potential buyers, so the seller can stick to his guns.

But that doesn’t mean you shouldn’t bend, at least a little. Remember, this is not a war of wills, it’s a business transaction that should be devoid of emotion. “Wars have casualties,” Friedman says, “not good outcomes.”

lsichelman@aol.com

 

Images: An Interesting Week in Los Angeles Traffic, Protests, A New LA Football Stadium, Hotel Hollywood Sign?

www.LAOBSERVED.COM

Couple the Road Work: Expanding the 405 on the North Side with the

Protests at the Veterans Administration,

Us on the Westside have had a tough week getting around!!

Below is a shot from my cell phone exiting the ramp heading West. 

The police are on the left side as they do crowd control. 

Curious why they could not get them onto the VA property? Traffice was impossible the entire day!

 

 

 

 

 

 

 

 Hotel Hollywood Sign