Shadow inventory. What? Where? When?

Shadow inventory. We wrote about this 2 months ago. Where is it ? What is it? It is around the corner like the experts say? This is where the banks do not re-list properties that they have foreclosed on, or they just don't foreclose at all. The debate is about if this is the right thing to do. I think it might be one of the only smart things the banks are doing right now. Common sense says why flood the market when that will only drive prices down instead of limit the inventory. Look at the diamond industry, diamonds are not rare stones and I would say they have done a pretty good job at keeping prices high. Is it ethical? I will leave that up to you!

BofA Implements Equator (REOTrans) Platform, as Short Sales Gain Ground

This is good news, because the truth with Bank of America is that you could not get any worse. I have clients that want their Portland home to go to foreclosure, and B of A won't foreclose even though it has been two years since they made a payment. I have over 50 short sales in with B of A and on average it is taking 172 days to get a response. By that time, generally the first buyer is gone, and if you have a new buyer the process starts all over again! It just doesn't make sense.

Full story here: http://www.dsnews.com/articles/bofa-implements-equator-reotrans-platform-as-short-sales-gain-ground-2009-10-22

What do I think about the $8000 tax credit?

My take on the $8,000 tax credit is extend, extend, extend! If the government is giving out money - $700 billion in TARP funds - with no accountability, then by all means give it to the people directly. That's better than some bureaucratic waste machine that gobbles up 70% of the money, and the little that is left over goes to the people.

First time home buyers here in the Portland real estate market have comprised a very large portion of the closed transactions, and they all want an extension of the credit. From my conversations with people around the country, all across the board they agree that this should continue! The key is to have a deadline: 6 months maximum. Otherwise, without it, it will be a very interesting Winter!

http://www.bloomberg.com/apps/news?pid=email_en&sid=aslwB9Jb8FCY

Get your handkerchief because this will make you cry

I am a simple guy trying to work hard and get through this difficult time. I work in a world that I would currently call Bizarro World, and that is because I work with the banking industry. Right now, this is an industry that is making huge profits from free money, aka TARP funds, that our government is giving out under the assumption that the banks will loan money and keep people in their homes. My role is to help people navigate the land mines of loan modifications and short sales. In the real world, if money is given out, there are expectations. In Bizarro World this is just not the case! Let me give you some examples...

Example 1: B of A, the largest recipient of TARP funds (taxpayers’ money). I have worked on hundreds of files with them and I am amazed that even when state laws say there is no way for them to come after homeowners that foreclose, they still insist that if they approve a short sale that nets them more money than a foreclosure, they still will not release the client from the deficiency. Huh? Real World = More money good. This is clearly Bizarro World.

Example 2: Washington Mutual. I had an approved short sale scheduled to close October 16th, purchase price $445k. Washington Mutual foreclosed and sold the property for $305k. The investor called me up and he sold it to the buyer. That's 140k less, why would you do that!?! Real World = Bad for bank. Bizarro World = Good for bank

Example 3 is the worst of all: The FDIC sold IndyMac to a group of Wall Street insider billionaires like George Soros and Michael Dell, and in the Real World the terms for the purchase were unbelievable. Let me put it in terms like this: Let's say I am a gambler and the casino said “Ok Nick, gamble a million with us, and if you win, you keep all the profits, but if you lose this is what we will do: The first $200k you lose we will give all of that money back, the next $100k we will give you back 80% and after that we will give you 95% of your money back if you lose. The worst of it is if you are a homeowner trying to do a loan mod with IndyMac, what would be the incentive for them to approve you? They make more money if you default. Wow!


The FDIC Fact Sheet states:
“The FDIC has agreed to share losses on a portfolio of qualifying loans with New IndyMac assuming the first 20% of losses after which the FDIC will share losses 80/20 for the next 10% of losses and 95/5 thereafter.”


If I read this right…Uncle Sam takes on 100% of the first 20% of loan losses, then takes 80% of the next 10% and finally takes 95% of any and all losses after that.

It’s times like these when I wish to live in the real world again.

Price matters in the 'rebound'

Nationwide, properties under $250,000 have been selling well, but the picture above that price point is still not very pretty. In our Portland real estate market, properties under $300k are competitively sought out by buyers, especially first time buyers who are taking advantage of the current $8,000 tax credit. Lots of Portland short sales and foreclosures have encouraged people to find great deals below market value, but overall there are only so many buyers for mid-priced to luxury homes at this time. If you have bought in the last five years and want to upgrade, chances are there is little or no equity in your home, and that makes it very difficult for most people. So consequently the middle of the market is slow because upgrading is a challenge for those buyers. Financing luxury homes, the expensive top 10% of those listed, is very difficult and the buyers are few. Buyers expect deep discounts right now on these high end properties, so unless you are willing to sell it at a reduced price or your Portland home is unique, it may not sell in a reasonable amount of time.

http://money.cnn.com/magazines/moneymag/moneymag_archive/2009/10/01/105855726/index.htm?postversion=2009092410