Wednesday, June 30, 2010

FOR SALE: Elegant Resort Escape 5,000 SQFT

Here is a very cool home in the Wolf Creek area of Eden. Excellent finishes...

If you would like to take a look at this home, give me a call.

Tuesday, June 29, 2010

VIDEO: North Ogden REO

I took this video a few days ago while working in North Ogden:

Monday, June 28, 2010

Bargain: 10,000 SQFT Mountain Resort Fixer-Upper

For those of you looking for an interesting fixer upper and a great value in the resort community of Huntsville, I present:

Call me to take a look in person.  Post-fixup value is around $1M conservatively.

Saturday, June 26, 2010

Photo of the Day: Visions of Grandeur

I was up working in Ogden Valley this weekend and caught this photo.  It should be big enough to make a good desktop background.  Click to enlarge.  Enjoy!

Friday, June 25, 2010

The Case for MLS FSBO Disclosure

Back in January of this year I had a listing that was priced at the very top of its market.  Based on comparable sales, I estimated that our listing could very well be overpriced by about $25,000 which in this market was quite detrimental.  When discussing this problem with the owners, they pointed out that a friend owned a similar home a block away and had sold it for our asking price.  I searched the MLS and could not find this home.

The problem was that even though this comparable sale existed in the real world, nobody that mattered (i.e. appraisers and real estate agents) knew about it because it was not in our MLS system.  To help the marketplace understand the value of our listing and to help us get it appraised when a buyer eventually agreed to our price, I instructed my client to have his friend's real estate agent place that sale on the MLS as a comparable sale.

Surprisingly, I received an email from my client's friend with a copy of the settlement statement and express permission to use the statement to support our valuation.  With that authorization, I placed the home on the MLS as a FSBO comparable.  To make a long story short, the friend of my client, for reasons unknown, did not want the home reported on the MLS and ultimately had it removed.

That leads me to my very interesting chat with an investigator at the Utah Division of Real Estate this week.  The MLS did remove the comparable sale but not before an appraiser was able to use it to support the value of a home close by in the neighborhood.  Apparently, two appraisals were completed for the subject property.  One for $120K and one for $175K!  The higher appraisal cited the comparable I entered in the MLS.  However, because there was such a discrepancy in the values, a complaint was lodged at the Division  (likely because of the low appriasal) and finding a red flag they instead began to question the higher appraisal.

The Division could not see the comparable in the MLS and was very concerned about a fraud being perpetrated by the appraiser.  Ultimately, after a lengthy conversation, I was able to clarify the situation and illustrate that the appraiser was acting honestly.

The irony of this whole situation is that the friend that wanted his comparable sale pulled off the MLS has done so to the detriment of the market.  Any more appraisals conducted on similar homes will likely be lower in value since appraisers can't rely on his sale as a legitimate comp.  This is remarkable because this gentleman has several homes in the same neighborhood for sale.  Go figure.

When market volume is down like it is now, FSBO sales are helpful to appraisers and real estate professionals in establishing market value for other homes.  This is why I make it a practice to report FSBO sales as often as possible on the MLS.  Even though we can't capture market times with FSBO MLS entries, we can capture price points and concessions.  I believe that its better for the market to have more information than less.  The transparency helps everyone in the marketplace.

Thursday, June 24, 2010

Are You On The 7-Year Blacklist?

It looks like "strategic" defaulting on loans is starting to plague Fannie Mae.  Here is an excerpt from a press release yesterday:

Fannie Mae (FNM/NYSE) announced today policy changes designed to encourage borrowers to work with their servicers and pursue alternatives to foreclosure. Defaulting borrowers who walk-away and had the capacity to pay or did not complete a workout alternative in good faith will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure.
 That is some pretty strong medicine from Fannie Mae.  It looks like short sales and deeds in lieu of foreclosure will soon be more agreeable alternatives to Fannie Mae borrowers instead of just abandoning their property to the bank.  

Wednesday, June 23, 2010

Tenant Turnover Sticky

For the first time in my experience as a landlord (6 years), over 57% of my tenants have opted to renew leases for another year.  This is up from a record high of 33% in previous years.   This is surprising to me.  I have some possible theories as to why:

1.  Job Turnover/Volatility is Low - Many people move because of job transfers.  Many of my previous tenants moved because of changes in employment.  Since there is little job growth, this tends to reduce mobility and keep people where they are.

2.  Wage/Earnings Stagnate or Decline - it is possible that my tenants are feeling a pinch in the pocket book.  Moving is expensive and the cost/reward ratio is high if your income is the same or lower than it was before.

3.  Credit Declining - it may be possible that my tenants' credit condition have worsened and therefore they may not qualify for another rental unit.  I hope this is not the case since it puts me in a higher risk position in the event that they damage the units.   

4.  Rent Appreciation - I have held my rents steady for the past year and it is possible that rents have risen for comparable units in the marketplace. 

5.  Superstar Landlord - It could be that I am such an awesome landlord that my tenants feel compelled to rent from me even though they could move out in a heartbeat and buy the home of their dreams.  On second thought...nah.

I have spoken to other landlords and their situations are a bit different do to the different nature of their units and their business models.  Nevertheless, their experience is likely dictated by what is going on with the first four of these market factors.  If you are a landlord, chime in and let us know your experience lately. 

Tuesday, June 22, 2010

Photo of the Day: Ruins of Righteousness

Yesterday I was showing a home in Porterville, Utah. For those of you unfamiliar with Porterville, it is about six miles south of Morgan on the way to East Canyon State Park. Its a very pretty and pastoral place. While there, I stumbled upon this interesting site:

I did some research and it turns out to be an old LDS chapel built in 1898.  A fire in 2000 gutted the building.
Here is what the gothic structure looked like in 1920:

Monday, June 21, 2010

FOR SALE: Secluded South Ogden Ramber

Give me a call if you are interested in viewing this property.

Thursday, June 17, 2010

FOR SALE: Remodeled Clearfield Starter Home

Cute starter home just listed for $118,500. Call me if you want to see it in person.

Friday, June 11, 2010

Ogden Valley: The Canary In the Coalmine?

Yesterday I was doing some work on the Ogden Valley market and created some historical charts.  What I found was quite interesting (click to enlarge):

This first chart shows sales volume since 1996.  It is very easy to see where the bubble is in this chart.  Notice however, that sales volume peaked in late 2005.  This is much earlier than the sales peak for the rest of Weber County in late 2006.  In this case, the Ogden Valley market served as a leading indicator for the housing bust in the rest of Weber County.

Notice also that recent sales volume has returned to pre-bubble levels.  Although much less than the peak sales, the volume should be sustainable moving forward in my opinion.   

This chart shows how long houses that have sold have sat on the market before closing.  During the 2001-2003 recession we saw market times increase significantly.  The interesting exception is the affect the 2002 Olympics had on housing.  Snowbasin was a major venue for the Winter Olympics.  After peaking at nearly 400 days in 2009, our days on market is beginning to work its way down.  This is encouraging as well.

Finally, we have our valuation chart which gives us a barometer of the value of homes that are selling.  We can clearly see the price bubble in this chart and the following decline.  The selling price of homes has come back into a price range that is more affordable.  However, many of these sales are REO or short sale properties.  Given the dramatic difference between peak values and today's clearing prices, we will likely continue to see REO and short sale properties dominate the sales scene for some time.  It will take a while for sales prices to return to their peak bubble heights. 

The bottom line is that the market is stabilizing in Ogden valley.  I believe we are trending toward a predictable sales and price pattern that will become more consistent as we move forward in time.  Ogden Valley may also serve as a leading indicator for middle income housing in the rest of the county.  If business owners are confident enough to purchase second homes or large personal residences in Ogden Valley, that is a good indicator that economic conditions for their employees will improve and thus improve the housing market they populate in the rest of Weber County. 

Thursday, June 10, 2010

Flopping: Short Sale Businesses Under Scrutiny

There is a new term in the real estate world known as flopping.  We are all familiar with flipping: buying a home to fix and resale at a profit.  Flopping involves purchasing a short sale and quickly wholesaling it to another person at a higher price.

Apparently, this business model is under significant scrutiny as two indicted Realtors in Connecticut have found out.  For your consideration, please read Banks Face Short Sale Fraud as "Flooping" Rises.

Here are some key excerpts:

Sergio Natera and Anna McElaney are scheduled to be sentenced in Hartford’s federal court in August after pleading guilty to fraud. Their crime involved persuading lenders to approve the sale of homes for less than the balance owed --known as a short sale -- without disclosing that there were better offers. They then flipped the houses for a profit. many investors do you know that do this here in Utah?  The article continues:

In addition to banks losing money, “flopping” may hurt homeowners who complete a short sale and face higher deficiency judgments as lenders seek to recover unpaid mortgage balances, Ann Fulmer, vice president of Interthinx, said in an interview today on Bloomberg Television.
Borrowers are “on the hook for larger deficiencies,” she said. “And there are indications that banks are increasingly turning to collection agencies and to civil lawsuits.”

Now, you may be asking "What the heck?! How can a bank dictate what a buyer does with a property?  Why do they care, they approved the short sale right?  The Realtor doesn't represent the bank he represents the seller!  How can the banks acceptance of a low offer be fraudulent if the seller approved even if someone is willing to pay more for the property?"    

Well here is a good explanation:

By allowing broker price opinions, the Treasury exposes taxpayers to short-sale fraud after $49 billion of government bailouts for housing, Barofsky wrote to Congress.

“As constituted now, the program permits home valuation, the key vulnerability point for a flopping scheme, without a true appraisal,” he wrote. “No program of this type and scale can be considered well designed without robust protections of taxpayer funds against the predation of criminals, particularly given the inconsistent treatment of home valuation.” 

Uh oh!  After sticking his fingers in a very hot pie, Uncle Sam's fingers are getting burned and he doesn't like it.  Bank of America is responding:

We have language in our short sale approval letter that prohibits the flipping of a property and after closing we will audit transactions to identify ‘flips’ or ‘flops’.  It’s not in the best interest of our investors or communities at large to encourage or allow flipping.”

Short sale flipping businesses have been around forever.  Until now, the market has been able to operate to everyone's benefit...buyers, sellers, and lenders.  I believe the only reason lenders are even interested in restricting sales now is that Uncle Sam is calling the shots and politicizing the daily business of mortgage lenders and investors.  Expect to see yet more scrutiny and restrictions on the free operation of our real estate market.  Any heavy clampdown will stifle short sales and force the banks to eat greater losses at the auction steps instead.  I am fine with that.  It will mean better bargains for my clients.

Wednesday, June 9, 2010

Sales Volume: Whip Saw Wackiness

I put a new chart together showing what has happened with sales volume since the bubble popped in 2007.  Here is the chart (click to enlarge):

When the line is above zero, sales volume is increasing, when it is below zero, it is shrinking when compared to the same month the year previous.  What we see is the subprime meldown followed by job losses.  The job losses have stabilized (see below chart) so sales are leveling out.  However, government induced mania has caused two massive surges in sales in the last year.  First with the head-fake tax-credit expiration in December 2009 and then with the final expiration in April 2010.  It's important to note that the tax-credit rule said that buyers had to be under contract by the end of April which would have put their sales reported in May.  However, our May sales were only 6% above last year.  It appears that most of the folks that purchased homes did it in March and April.  I think June closings will be lackluster.   

Also, since real estate prices are income driven, I wanted to see how unemployment was holding up in Weber County.  We appear to be peaking right now:

What this peaking in unemployment means (unless there is an apocalyptic loss of jobs) is that real estate values have corrected and are likely bottoming.  There are a couple other factors that may affect prices like mortgage rates and wage growth/shrinkage, but for the most part employment is the biggest factor affecting price.  So, barring some wild swing in rates (not likely) and/or huge swings in wages (also unlikely) then prices have stabilized and will likely improve along side job numbers improving.

Thus, this stability makes for a good flipping environment since entry price points and exit price points are fairly predictable now.     

Monday, June 7, 2010

Photo of the Day: Carpet Calamity

I was previewing bank owned homes this week and stumbled upon this. Have you ever been sitting there in your living room watching TV and then knock your can of motor oil off the couch onto the floor? I hate it when I do that!

Thursday, June 3, 2010

FOR SALE: Elegant Victorian Cottage

WOW! You must see this superb renovation with granite countertops, travertine floors, stainless steel appliances and more. Cute floorplan with 3 Beds and 1 Bath. Just listed for $113,885.

Call me if you want to see inside this gem.

Tuesday, June 1, 2010

JUST SOLD! Historic Eccles Mansion

I recently closed with a client on this beautiful mansion on Eccles Ave. in Downtown Ogden.  This home was a bargain for my client who purchased it at a significant discount below market value. The home came up for sale in March and was property of the State of Utah.  It previously was used as a group home for women in distress.  The home boasts original woodwork, fireplaces, and all the fine craftsman features in these types of historic homes. 

The home sold for $250,000.  At over 4700 SQFT that makes this home a great value. 

We did have some issues getting this home to close since we used an FHA loan.  The appraiser cited flaking paint that needed to be repaired prior to closing.  Unfortunately, we had two hurdles to cross.  First, the home is a Historic Landmark in Ogden city and required approval by the Landmarks Commission to get paint done.  I was able to get that handled in an amazing 30 minutes at the Municipal Building.  The second hurdle came from the State.  They didn't want to do the work until they realized that it was required to close.  Then their contractor bid came in at $6,000 for three hours of work of scraping and painting.  Our bid came in at $250.  We asked them if we could do it ourselves and they refused citing liability concerns.  Finally, the State authorized our contractor to do the work and we closed.  It was a lot of fun jumping through government hoops.  I would say they added an additional 10 days to our contract time.

Proposed Riverwalk Park

The Standard Examiner reported this morning that the city is floating the idea of creating a new city park on the north side of the Ogden River between Lincoln Ave. and Grant Ave..  The proposed location is currently gas pipeline right of way, boarded up housing, and a couple existing homes in use.  Apparently, the creation of the park would involve land being gifted from the current owner to the city as compensation for the owner not tearing down boarded up existing homes on many of his other properties. 

Here is a map of the proposed park:

It if happens it could help lift the surrounding neighborhood.