The Property Pontiffs

Repost from now defunct other blog 2

(also taken from my other now defunct blog posted to the new one to enlighten all!)

October 20^th 2008

Foreclosures are on the rise and what should we do about it?

Well real estate Armageddon is here (well some people want you to believe that), and there are more vacant homes in a neighborhood than occupied.  Can be scary and no the federal government won’t be the direct solution.  I have submitted (since 2006) a program to the city of Riverside that I fee is a very unique and innovative solution to an ever growing crisis. 

The homes need to be available at even lower rates than we have now, and we need to treat them as actual sales.  What I mean by that is, if we help lower to mid income people get into the house it needs to be in good neighborhoods, not low income housing districts.  And we need to have the owner actually on title and not showing the title in HUD or some other government agency.  This way the new owner has pride AND responsibility in the game.  This is not that original, down payment assistance programs have been around for years, they obviously have not solved the problem.

My approach has a twist, of course not divulging everything AND It would take too long on specifics; they have to refinance at market rate in 3 years and the city housing authority carries the paper for 3 years and is paid back in full at the end in order to do it again.  During the three years they make full payments (no options, no adjustable, no interest only) principle, interest, taxes and insurance.  The interest can be 3-4% (not sure), that way it won’t be payment shock at the end.  During the 3 years however they must continue to upkeep the property, they cannot rent it out, they cannot sell, and they cannot further encumber it.   They must have a budget seminar before and every 6 months must show attendance at further education such as home improvement and repair workshops, how to workshops, and finance workshops.  They must be bettering their position somehow or they will never join the rest of us.  If they learn how to take care of their house they take more pride in the house, if they have to make the payment just like everyone else, then they are not on the public housing welfare system and can take pride in that.  The workshops are available now through Lowes, home depot, the county, HUD, Bank Of America etc…. these exist but no one takes advantage of them, here we would require it.

Again, there are elements of ownership, pride and responsibility.  They have skin in the game as we say.  This differs from other programs and the no down interest only crazy loans we had before.  They had no stake and it didn’t matter to them after purchase.  Here they have accountability and continuing education to better themselves and their neighbors. if they fail to pay they get foreclosed on just like everyone else, and the home goes to another on the list. One of the biggest aspects and selling points is the fact that the city gets paid back at the end to do it again and gets the interest on payments to help administer it (my company actually wants to administer it for 1% service fee).  This too differs from the down payment assistance grant programs, once given it is GONE, never to come back again.  Our agency (or another broker) will help select the homes and process the loans and escrows (which is what we do already) NOT the federal government who have no idea how to do it.  The people in the program, would come from the waiting list from the city and the monies come from the feds or the city directly.  THAT way the local governments can control the purchases and what happens to them and where it happens.  Unlike federal programs where the city housing board is not in the loop and neither are the local brokers.

I have submitted this idea with an executive summary to every city council member and many other influential persons since 2006 with very little movement.  So we will see, hopefully the city does see the crisis we are in and responds appropriately.  On the flip side this is probably the greatest buying time of our lives and buyers can get unbelievable deals on homes that EVENUALLY will rise again in value. So in the mean time……to be continued……

reposting from now defunct blog1

(originally posted and written on our other blog oct 3^rd 2008)

Oct 3^rd 2008

Surprise, surprise, surprise the fat cat politicians won again.

Headline: “Gloom and doom, must pass this bill or Lord Voldemort will return to kill us all.”  They crammed this legislation (chock FULL of pork barrel additions) through without thought for what can happen, not what WILL happen, what can happen.  These type of decisions need to be thought through more thoroughly.  I know John McCain wants to be president, Obama wants pork barrel and to show he knows how to fix the economy, but come on!  Have we not learned our lesson here?  If we give these fat cats money, Wall Street will just find a way to exploit it, to take monies when they don’t deserve them, postpone the inevitable bankruptcy and still get their million dollar pay.

We need to look at what may happen, what do I mean by that? Well in business, and in the law decisions need to go through a what can happen filter; what can go wrong, what if scenarios.  We know they want this money, I know the economy looks bad and Barney Frank and Schumer (who were at the helm steering this ship to disaster without taking responsibility) want to make you look the other way.  The politicians SAY that this money is intended to help small business and Main Street.  But it won’t, it won’t help you and me, it won’t get the banks to loosen the loan money for good people, it won’t save the failing businesses it is served on a silver platter to.  What it will do is postpone the inevitable demise of bad business run by greedy executives who will still pay their lavish salaries and give themselves golden parachutes.

Whenever you have a client that wants to make a decision or someone who wants to plan their estate, you have to ask the decision’s result, or document, what if?  What can happen and how do we, in advance, protect against a problem, or better improve the results?  On a will or trust you need to look to the document and go through the scenario of what if they just passed away and we now need to enact the trust. How does what we have in front of us work and how would it play out?  Did it do what we wanted?  How could someone attack it or get what they weren’t supposed to?  Then you fix it and rest easier that at least you tested it.  Not that you can prepare for everything, but you took your time and made the best decision at the time with what you had.  Another service we provide is business formations, sounds easy right?  Why you can do them online, or go to one of those pay us and you help yourselves type unservices. However, you have to go through an elaborate process to form an agreement and working policy everyone can be happy with, allow the most flexibility, and in the event of a tragedy, or split up and liquidation of the company, a PLAN. That plan has to be tested early on and many what ifs asked.  If you don’t and something happens your client will be on the raw end of something that could have been avoided. 

Many times with estate plans for non-traditional relationships for example you can have relatives who did not support nor like the deceased come out of the woodwork and thus deny the trust and will;s ultimate goals.  In that case a do it yourself will and trust will not work and you have to design a document and test what could happen.

To get back to the crammed legislation at hand, the politicians need to stop and look at what could happen with this plan in place. How could someone take advantage of it? Will it do what we want?  What is the accountability?  Who will answer if something goes wrong? None of these things are happening and Barney Frank and his Pelosi gang will shove this down our throats with an all to willing disappointment of a president.  It will NOT do what we need and it WILL be a disaster mark my words.  we dont HAVE to act now, and so what if they fail? lets slow down and think before we pony up so much money to greedy executives who made the bad decisions in the first place. So call your congressman and tell them your thoughts, and better yet, post your response to us here!  Good luck and see you again!

Shouldn't our markets be allowed to fail?

    Well,no need to recap what is happening in the equity markets right now. Failure after failure of banks, investment companies, and even semi-government agencies have us running to Uncle Sam to bail us out again. But should we? These failures although damaging to many of us, are needed. These CEO’s need to be left holding the bag and be held accountable for their own misgivings. No, I do not mean jail in most instances, but really hurting those who ran these companies financially would be a good thing. Make them suffer the financial consequences and I bet you it would not happen again.     

    Instead, we have many companies lining up for what they believe is there “right” to a free government bailout all the while paying top CEOs millions in severance packages…

    “After imposing wage cuts of up to 50 percent and other concessions on hourly workers, executives at bankrupt auto parts supplier Delphi, are seeking permission to hand themselves a multi-million dollar payout. Delphi is seeking court approval to pay 560 of its executives some $216 million in bonuses and incentives after the company comes out of bankruptcy.”

And another….both are Obama campaign consultants…

    ”Specifically, Dan Mudd, the CEO of Fannie Mae, is getting $9.3 million of severance for destroying his company. Richard Syron, the CEO of Freddie Mac, is getting $14.1 million--in part because of a clause he added to his employment contract two months ago, when it was clear the company was headed for disaster.” (From the Business Sheet, Blog Sept 7th)

    Makes you sick doesn’t it? Well that is because they have never been forced to reap the so-called benefits of failing. They risk it all for the glory and walk away with top salaries when it fails. Both candidates stumble and feel their way around polling data to find out what to say. When what really needs to be said would be political suicide…..

    ”Ceo you who donate to our campaigns, take it on the chin, tough luck, you lost, now try again…..American people, when you take out a loan you cannot afford you lose….period”

    Amusing, and is something that needs to be said, but NO ONE in today’s politics would say that. Ahh…I long for the days of Teddy Roosevelt, oh well.

    Congress (who by the way was supposed to be watching this) has done nothing up until now except blame the other party, (who is in control is to blame has been a regular practice for some party but WAIT not when it applies to THEM!!!) What is going on? Where we all these people when the crisis was looming? Where was congress, oh yeah congress, where were all these smart people when this was a growing problem? They were watching and hoping SOMEONE else (insert, another party) could take the blame.

    Yes as accusations fly from both sides of the aisles, we the people hold the bag and hold our breath. Really we should be holding our nose. Our markets, whether unregulated or over regulated were broken a long time ago.

    Our market valuation system never accounted for adjustments but rewarded greed and over leveraging. Why not leverage? By leveraging you can make more money without using much of your own. This is a great investment theory and it works too, but NOT without limitations. You cannot leverage $50 for every $1 you invest without putting yourself at such risk you lose $100. In real estate clients would buy a piece of land start to build a home on it, take a loan out (because they would have 70% equity) then use that equity loan to start the next process of buying land starting to build and leveraging that project to start the next one. That is all well and good if you can sell the first to pay off the second and then sell the second to reap all the rewards. But that is just it, our wall street markets were not waiting to start the next project when the sold the previous leveraged asset and paid it off. They just kept on leveraging hoping that sooner or later it would all work itself out. And in Wall Street’s situation it will, by a trillion dollar payout to rescue them from overleveraging themselves when they knew what they were doing was risky.

    What is the POINT of calling it risky of you eliminate failure? Bottom line, our markets need to fail, once and a while. We need these over leveraged companies and fat cat ceos to be held accountable and be open to monetary failure. The problem comes in when by doing this we harm a lot of people who DIDN’T do these things….who may you ask….the middle class. How can we let these people fail and yet still protect the average investor? That will be the great debate.

    I think regulation is required, but this regulation MUST adapt to the ever changing and over complicated markets. Don’t allow these companies to leverage to such an extent, clearer books, and if a company goes into bankruptcy, disallow any ceo payouts from a year to the day filing for bankruptcy. Financial insolvency must start from the top down.

    I am for capitalism with common sense and responsibility BUT also with the RISK of failure. After all with failure comes the realization of mistakes. Mistakes lead to fixing the mistakes or not repeating them. Think about it, isn’t failure the single most important element to success? With failure you learn and never do that again, and next time around you have the memory of that mistake to correct you in the future. Or is it the FEAR of failure that drives some people to never accept less than success.

    I think this starts as children, our schools have created such an atmosphere of “don’t worry no one fails here”. “Trying something is as good as not trying something and way better than failing someone.” This creates thee atmosphere that someone will always be along to rescue them and make things right. NO, that does not always work.

    I believe the government serves a purpose, that purpose is limited and should be used in extreme cases. Here in this market we do have an extreme case, but only because we allowed these investors to think that there was no possibility of failure, the government would always step in and save them, thus….NO REAL RISK. No, in life we need ups and downs, we need failures and we need success. Although, believe me that easier said than done in your own life isn’t it?

    Basic economics tell us that with high prices come low demand and with low demand comes lower prices, this is the cycle we need. With investment comes risk with risk comes profit, not bailouts. So we need it, but what we DON'T need is the extreme swing this has brought on, we need educated buyers, who understand what they are doing. We need CEOs who are held financially liable for their mistakes, investors who not only understand their risk but prepare for it. And if they don't, they take the financial hit and the responsibility.

    What makes our country great is at the end of the day we all will be able to breathe again and one day remember this day and smile that we NEVER made that mistake again. We failed but yet we move on, making things better and learning from feeling our mistakes first hand. So please businesses, learn to embrace failure, live with the fear of failing, it just might bring about the next best business model.

Hey just for fun check out the Socialists idea of a solution…I KNOW you see the faults in this one……hahaha have fun and breathe a sigh of relief that these extremist will never have more power than ordering a coffee from a local coffee shop. Ryan S. Carrigan

 *********************************************

“From the American Socialist Movement website------ American capitalism has become the global leader in the creation of personal wealth for the ruling elite entirely separated from the creation of real value in the process of production. The current economic breakdown, which threatens the world’s people with catastrophe, is the inevitable result. The alternative to the naked dictatorship of capital and the impoverishment of the working people is socialism. The Socialist Equality Party insists that if the resources of the American people must be mobilized to avert an economic catastrophe, then the American working people should assume control of the financial institutions and use them for the common good, not corporate profit and personal enrichment. We propose that the major banks and financial institutions be nationalized and turned into public utilities, operated under the democratic control of the working population. The vast financial resources that they control must be used to provide decent education, housing, health care, retirement benefits and good-paying jobs for all. This should be carried out without compensation to their former owners, while securing the deposits and savings of working people and small business owners. The billions of dollars in social wealth diverted into the private accounts of speculators and bankers must be recovered, to be used for the expansion of social programs that benefit the masses. There must be a public accounting of the fraud and corruption that have fueled the crisis, and those responsible must be held accountable, including by means of criminal prosecution. The books of the major banks, financial firms, insurance companies and hedge funds must be opened to public examination, to lay bare illegal and socially destructive activity. The Socialist Equality Party and its candidates for president and vice president, Jerome White and Bill Van Auken, advocate the creation of a workers’ government—a government of, by and for the working class—to carry out emergency measures to resolve the crisis in the interests of working people, including a halt to all foreclosures and repossession of homes, the creation of millions of public works jobs, a ban on wage-cutting and layoffs, and an enormous expansion in public services. We issue an urgent appeal to all those who oppose the bankrupting of society for the benefit of the financial elite, who wish to defend the interests of working people, and who see the need for a socialist alternative to the two parties of big business: Support the SEP election campaign and its candidates, Jerome White and Bill Van Auken. Join the Socialist Equality Party.

*****************************************

WOW, now that is a misguided perception of reality….Good luck in 2008 guys.

Rally My Troops

Here is a letter I am drafting to send to all my agents concerning the current state of affairs in this market.  I know I may sound all general Schwarzkopf-ish but hey I believe it needs to be said.  I did take my inspiration and plagiarized a bit from Marc Davison, so thank you for the inspiration.  Although most if not all is my own words and my own feelings.  Yes it is a draft and some changes may be occurring. I wanted to put it up here to get some comments.

Ryan Sean Carrigan, J.D., and Edward Bankston Carrigan

President, Senior Vice President The Carrigan Group, CG Funding, Earras Corporation

Dear Agents and Staff:

As you know, we are in the midst of a storm raining down on many Americans. Foreclosures are skyrocketing, many banks are closing their doors, many loan originators, and real estate agents are out of a job. Many people are waking up today to the fact that they believe they have no other hope or options available to them and they must pack up all they have accumulated in their home and leave...somewhere else, not in the home they felt was their dream home, the home they would retire in and build wealth with.

Many of you of course, are all too painfully aware of this type of situation. You may have former clients in this situation; you may have neighbors, friends, and even family members that are going through this.

Despite the efforts of the Federal Reserve and some banks, the loan market has not quite stabilized and escrows and deals continue to fall away. Even some of our well intentioned, and what we use to think were strong buyers, have been struggling to get their loans approved. Many times you will feel the pressure of sellers who want or desperately NEED to get a specific price for their home, and sadly are unrealistic in those goals.  Many of you will bear the brunt of the anger of consumers and sellers as if this is somehow your fault.

So starting today, we -- you and me, together -- will begin to rehabilitate our company into a stronger leaner company that still believes in the client and all that is good about Real Estate.  Together we as a small army must attempt to revive an industry that has over the last 10 years become fat, lazy, greedy, bloated with agents who don’t care, and spoiled brokers and agents who were used to selling homes within hours and getting clients into loans they should not have afforded. If you join the struggle, in time we will emerge healthier, stronger and more prosperous. If you shirk, dig in, do nothing, wait for something to fall in your lap, and cling to the past, then I ask you now to take your real estate license elsewhere. There may be a place for you in this industry (although not a strong one or one who cares about you and your future), but it is not within our family of The Carrigan Group.

To begin, I want you to be reintroduced to our company, to who it is we are and if you stay who you are. That name that appears on our signs, on your business cards, on the letterhead, and on your yard signs is a name that has meaning and history. The people that built this firm did so on a handshake, goodwill, a belief that through thick OR thin we will always be there WITH our client for their good not our own bottom line.  We have always strived to go that extra mile for our clients and they have always believed in us and put their trust in us. We have given our clients our word, and on deeds performed within the community. All of these in the past have paid dividends. Beginning now, I expect you to carry that history faithfully forward.

We will have to work hard to gain the confidence and trust of the public. From now on, every human being we touch will no longer wonder if we have their interest at heart. They will know it. They will know it in the way you speak, in your actions, and your attempt to educate everyone you come into contact with, that WE are different and WE are making a difference.  Yes it is difficult right now, yes we must struggle to make it, but we will, we will not only survive but we will begin to truly prosper.  With your help and the support of the many people we will help along the way.

Starting today, we will begin an audit of every program, practice, application, vendor relationship and product we have. What doesn't fully honor and respect our customers will be discarded. We will begin to diversify, offer products and services that others don’t and in a way others have not thought about before. We must produce products and services that truly HELP people, clients, consumers, our environment, our economy, and our communities.  We must not shirk OUR responsibility to roll our sleeves up and get ready to work hard, for if we do this now, we will all prosper in the future.  We will be as a company build a future that is more stable and built more solidly and more ready to weather whatever the lord may bring our way.

Beginning now, everything that communicates our mutual message to the community must be unified and spoken with a passion that belies the fact that you truly believe in what you are saying. You will say it with Your email signature file, your business cards, your personal letters, your websites, your communications with others, your advertisements, your open houses, your fliers, and your listings, your listing and sales presentations, everything must convey this message.

The story you tell and the actions you convey will reflect on your peers within this company and throughout the entire industry. As professional men and women who handle the most important financial transaction in our customers' lives, we will present ourselves accordingly. We must earn their trust and safeguard that trust with everything we have.  It is then and only then that we may show them that we are here for the long haul, not just for the hot markets where we can make a fast buck and move on.  I know it is tough out there; it is tough for everyone, INCLUDING your clients.  Show your empathy by educating them and providing them with service that goes above and beyond the call of the norm.  Stick with it, think outside the box, pray hard, and really put yourself out there for others, they will come, and we will prosper.

Stay connected to people, LISTEN to people, and offer our services to them, what we have to offer is truly unique and will help them and in the long run help you.  Yes you will earn less, and yes you will have a lot of deals fall through, but in the end we will rise up and become a beacon for all others to emulate. The products we offer such as the credit repair and budget analysis is like none other, the ray of sunshine in a gloomy world program, the expert analysis and education we can provide current, future, and past clients are unparallel.  Believe in them and your clients will too. Believe in yourself because we believe in you.

Finally, as a member of this (family) firm, remind yourself everyday of your commitment to be the best. If you're not the best, then you are nothing. Look around you. This building, our executive team, your peers, our past clients, and our history -- it's a foundation we expect you to add to, not take from. Honor it and you have our word that it will honor you.

Sincerely,

Ryan Sean Carrigan, J.D.                            Edward Bankston Carrigan                                          

President/ Senior Vice President, The Carrigan Group, CG Funding, Earras Corporation

so there you go, in a nutshell, this too shall pass. 

Ryan

why credit means so much Pt 1

Credit myths and misunderstandings

In this market the banks are ratcheting up what they consider to be good borrowers.  What use to suffice at a 630 credit score now they want a 700 minimum?  With this development we need to look at the issue of credit and what you need to do about it.

We Pontiffs at The Carrigan Group deemed it necessary to come to the aid of our clients and the industry.  We have designed a system and a package that will help you analyze your credit and help repair your credit so that you are in a better position in this ever changing market.

Why do you need to fix your credit and why do you need credit at all.  Here are just some of the myths and misunderstandings of credit.

1.       Hey I paid that card off, why is it still showing a 30 day late on my report?

The credit reporters job is to report to the industry when a creditor reports you late, it does not matter if you pay the credit card off, if you were late three months ago you still are late.  They will not take that off unless it is a mistake and the creditor agrees.

2.       I have credit matter of fact I have LOTS of credit many of t hem are empty too.

Having too much credit can be the same negative as having not enough. Also you don’t always want to close all your accounts but we can advise you on that.

3.       I use my credit wisely and have no lates but my cards are not completely maxed out but close, why is it a negative?

Coming close to the maximum balance is a real no-no. Don’t max out your cards they carry negative effect too

4.       Credit numbers don’t matter if I am not buying a house.

It matters for EVERYTHING getting a car, getting a good rate on your credit cards, the limits on your credit cards, GETTING or KEEPING a JOB! Even getting a cell phone, or even opening a gas account for your home or apartment.

As you can see there are many things that affect you if you have bad credit, but on the flipside good credit can help you even more.  So in this market it is crucial you fix your credit.  Don’t fall for the scams who really don’t fix your credit, free credit report isn’t real free and not a real credit report.  Contact us we can help and were nice people too, after all we are Pontiffs! 

WHAT IS GOING ON HERE???$#*&%#$(&%)

Where should we go from here?  What should we all do?

WOW we Pontiffs foresaw a slowed market and a price drop but not this.  We spoke about the drop in the market, but we did not expect the out of the box OTHER variable….The banks dropping out of site!  Normally you have what all of us in junior high learned; when supply increases prices drop and then demand may eventually go up then prices increase.  Here we have a market with lots of supply and actually a good demand however when the buyers cannot come through with the financing to actually buy it nullifies their demand.  This puts undue strain on the market and sends everyone into panic and inaction.  In the market with foreclosures at an all time high and short sales not understood by all, serious instability reigns supreme. 

American Brokers Conduit closed, Agire mortgage gone, New Century gone, First NLC no longer operating on west coast, Wells Fargo not wholesaling alt-a, Express Capital not accepting submissions, and the biggie COUNTRYWIDE having problems.  For some of these banks I say good riddance, WHAT????, yes I said good riddance, when the market was good and interest rates were okay some of these banks were gouging customers to make incredible profits.  Ethics should always play a part in doing business, and we at the Carrigan Group have always striven to do what is right by the customer NOT just what is good for business.

So what do we do?  Hang on, do what is right by the customer, and DIVERSIFY.  We as a company started because we wanted to help people, and we did not start this company to operate ONLY in a great market.  We expect to be here for the long haul, and in doing so we as a company will see probably MANY sagging markets.  We have to think and adapt to whatever market there is.  So what do we do now?

Well here we go:

1.       Don’t panic and educate ourselves AND our clients. 

We have been studying the market and looking to past markets, we have been open and honest with our current and past clients about what is going on.  We have this blog to update everyone who wants to hear us pontificate.  We have been praying and meditating daily (and nightly) to make it through.  We have fielded calls by some of our past clients concerned about what they should do.  We read blogs, newspapers, newsletters, watch news reports and industry interviews in order to stay abreast of the situation.  We can look to the past to see signs that coincide with this market and try our best to predict what we should do.

2.       Try to gain new products and services that will continue to help our clients.

We at CG Funding now offer reverse mortgages, this is a great product for those clients who fit the needs required. We continually search out those banks that are still offering good products for our clients needs.  We are in constant contact with our current banks to see what they have.  We have been scouring the market for good buys for our clients and yes they are still out there.  We have developed new strategies for our clients that best suit their needs.  We have been one of the few firms who have been dealing with Short sales since the beginning. Many people and Realtors have not understood them fully and still don’t.  We hold informational sessions with clients to let them know what we can do.  We offer short sale and foreclosure packages that include attempts and information that may SAVE your home.  We continue to use the latest techniques and innovative ideas to help our clients in this difficult atmosphere. 

3.       Offer credit analysis and repair

Yes, we offer for a moderate fee REAL analysis and repair.  We have in recent months seen more and more of our clients being taken advantage of by unscrupulous rip-off artists claiming to do credit repair, only to find out they have done nothing, and charged our clients a fortune!  We offer our services with full disclosure and with your interaction so you learn AND get the help you need.  We sit down with the clients, and actually help them!  It is something we have been able to do before with our education and experience but now more than ever our clients need it. There is even a way to get most of the fees refunded in escrow.

4.       Aggressively pursue frauds and scams to help our clients and our industry.

We have begun to alert the appropriate licensing departments anytime we see fraud or someone perpetrating a scam.  We have also been actively notifying our clients of these scams and how to avoid them (one way is to go through us!).  We have contacted banks about squatters on REO properties and let the banks know when REO brokers are neglecting the properties.

These are just some of the products and services we offer to help everyone in these trying and confusing times.  Remember that the real estate market is here to stay and we pontiffs at The Carrigan Group will continue to pontificate and ride it out WITH you!  Now is the time to prepare yourselves and if you want to buy than GREAT, guess what?  EVERYTHING IS ON SALE NOW!

big bad wolf of a market

Oh me oh my…what a big bad market we have….

Country wide announcing no more 100% loans, Argent, ACC, WAMU laying off thousands.

New century no longer accepting loan submissions then files bankruptcy, rumors about WMC ge capital keep resurfacing.  Everyone tightening up the requirements for loans (dti, reserves, credit score, cltv etc)

80/20’s harder to do, hard to find neg ams at all.

The nothing down late night tv ads of the flipping craze will go away

Gone are the days of 106% financing, no money down strange loan contraptions.

First of all shame on all those lenders who allowed them for so long….the stated, stated, stated, stated here put your name here and here is your 670,000 dollar loan for 400.00 a month.  But then again how dumb do you have to be to believe that the bank was giving you a free lunch (and an apple pie to boot) consumer.   Many of the banks, brokers, and realtors did not care, many thought this gravy train would never run dry; well they were wrong, and now many banks are reconfiguring their standards.  It was stated recently that with some of the new rules coming out it will definitely change the market, AND, that if these standards were in place a year ago, 50% of the subprime loans would have never been approved.

Well I know it looks bad (and it is) but soon, think about it (insert profession) we will only have qualified buyers with actual money down and great credit not expecting the world of the bank and unrealistic loan rates.  Then you will have sellers who understand the plight of the buyer and will have a more realistic sales price.  Plus those homeowners will no longer see their home as an atm machine. 

Right now it is difficult to say the least, we have inventory, and buyers who want to buy even at the prices offered, but the banks will not lend to them.  This creates an awful dynamic within your normal supply and demand curve.  What is the buyer to do? What is the seller to do? What are the banks to do?  Well I am not entirely sure right now but the feds have some very bright people working for them and sooner or later they will have this figured out.   When they do they may have a solid market again but this time slowly rising and homeowners more secure in their position with their mortgages. 

Many banks and their loss mitigation departments have been reeling from the sudden influx of borrowers late and defaulting.  Many are starting to see that forbearance might help to stave off the rising tidal wave.  Some are also looking at recasting loans more favorable to the buyers.  Many banks will have to hold on to their loans and portfolio more rather than sell them off in the secondary market.  All parties need to have a more realistic viewpoint on all of this and slow down a bit. 

Many realtors are getting out, many loan brokers are getting out, many rookie flippers are getting out, and many banks don’t have a choice but are shutting down.

Our banking system is stronger than most countries and our fed is quicker in response then they use to be as well.  Something will happen that will slow this down, maybe not fix it entirely soon but something will happen.

Meanwhile what do we do?  We need to educate the public; we need to get rid of the department of corporation finance lenders!!! (I will always say this), go to a license required brokering system, and allow temporarily for down payment assistance for more people than just the low income.  Brokers need to educate their sellers as to what are their options.  Short sales are a way to go but the sellers do not always understand the ramifications to doing this.  Banks need to settle down and standardize their requirements, and compete on rate not how complex a loan w can give for as little documentation as we can.  Realtors have to pre-qualify their buyers not necessarily like a lender but simply finding out how they intend to pay and how much do they have down.  Many people will be hurt, many companies will go out of business, many people will not be able to get a home, and many will probably profit from this as well.  All we can do is sit back, hold on, and wonder where we will be in a year from now.

March 14 2007

Don't dance with the devil

Oh sure NOW you want to cooperate……

This quick rant is concerning these large home developers and the many, many, many flyers, ads, and emails I get on a daily basis begging for broker participation.  Listen when the market was hot and it was a seller’s market these same home developers were gouging consumers, making consumers wait months and even up to a year on a waiting list and when the house you wanted came around it may cost you even more.  In addition, they were tacking on outrageous home owner’s association fees and other junk costs (like OHHHH you wanted actual lights on the outside of your house and not a bunch of wires).  Also when I brought a client to see the home these same developers said “we don’t PAY realtors to sell our home, and if your buyers wants this home they have to use OUR lender and NOT another realtor.” 

This happened again and again, I saw many clients end up buying the new homes with extravagant loan costs and upgrades and I KNEW it was an overpriced rip-off then.  And to add insult to injury I still showed the homes and did not get paid.  But NOW the tables have turned and these same developers are desperate, now wooing agents like I have never seen before.  Oh NOW they will pay and NOW they offer buyers incentives.  Many agents should not be duped into thinking that there is a gradual change of heart.  Developers should have known that they always needed the participation of a good realtor and not now just because it’s a different market.  Now they are paying 3%-5% commissions to sell these overpriced homes, and again who pays the price…the consumer.  And we agents are to play along and get paid until the market changes again and the developers don’t need us anymore.  Well I think it was unfair then and I think it is unfair now.  Unfortunately, many agents have not seen the light.  They see dollar signs and are willing to do anything for a commission, even if it is to dance with the devil. 

These developers pay a commission but so far as I have first hand seen it, they do not negotiate anything, the price is the price, and the terms are their terms.  They simply pay a realtor for handing them the buyer.  Well, we will have to see how this plays out and if and when the market starts an upswing will they still be so generous and cooperating?

Ps. Here is a peek at my next article I am working on.  This author does a good job and gets it started and I am going to summarize and elaborate.   http://news.yahoo.com/s/bw/20060901/bs_bw/b4000001

Real adjustment to realty

Real estate boom bust or mere adjustment to reality?

Every year and every increase in the fed rates causes a stir and 1000 analysts say its going to bust and we will see the second great depression and 1000 analysts say we will have a slow growing but steady increase in home values with no end in sight. Who is right? And is it that easy to say both? Well no it is not that easy to say both, and you would only be half right. As my law professors use to answer every generalized question we gave them: Well it depends. That’s right it depends, it depends on what market you are talking about, which area, which segment of the pricing, and which industry (residential or commercial). Also who is doing the asking? I use to hear all the time people who would buy stocks for a long-term investment and the next week see their prices go down and whine….Oh no I have lost money in the stock market! Well no you haven’t, if you haven’t sold you haven’t lost any money yet. Yes one can argue the VALUE has gone down but they have not lost MONEY. If they weren’t planning on selling that week they should sit tight, they bough the stock for long term purposes.

This anecdote one could also argue does not match well with real estate either, except when you talk about peoples motives. If they are looking to flip then yes price adjustments could indeed make you lose money. But if you are selling a home that had equity (even artificial equity), and moving to a market that the housing prices are lower than you can definitely show added value AND positive monetary outcomes.

I argue that unless you are selling now or unless you see your home as an ATM machine you are fine. Additionally if you take a cue from the stock market and wait a bit you can actually get some big bargains.  People are supposed to buy low and sell high, however when visceral emotions, and buyer psychology comes into the mix that adage is flipped. People saw the real estate prices rising and decided to jump in, make some money, and then realized it could not last forever so what did they do? They told everyone else to get in too and sold seminars, books, and late night tv ads to continue cashing in on the artificial high of over hyped demand. If you look at the masses and how they react to stock for example you will notice that most people sit and watch the stocks rise in price and in the last minute or so they decide to buy, and then what happens? Oh sure the price may rise for a little bit but then eventually it falls and once it falls below a certain price what do they do then? They scream and yell, sell everything the own, demand congress investigate, and tell all their neighborhood buddies how they lost a fortune in the stock market and that they should sell all they have and get out quick too. Thus “creating” a steady stream of sheep reacting to what their neighbor told them.

In real estate we saw this so many times during the hot sellers market. People would get a current market analysis done on their home and say……well that’s good but my neighbor sold his for X and I KNOW I could get more than that. An sure enough they did.

I say now the market is adjusting and it will continue to adjust until everyone who should never have been practicing real estate, or investing in real estate get out. Many in the industry saw a major potential for profit by continuing the artificial high in real estate, from banks, independent lenders, appraisers, investors, developers, you, me, our neighbors, and yes even Real Estate Brokers! And certain areas in southern California rose higher and quicker than others, which drove some to go to other markets thus increasing demand there and we all know kids what demand does to economics right? Then speculators starting looking for the next best thing and hyping it…like Pahrump or even buckeye Arizona.  At one point some agents were flying hundreds of potential suckers out to Arizona, schlepping them around in busses to show then the great deals they would have to compete for with the other 100 suckers in the bus with them.  There is good evidence that some of the hot markets saw 12% or more increases within months in 2005 and 2004, so these markets will definitely see a dramatic price adjustment but some of the cooler markets of 2004 and 2005 will still see slow but steady increase in prices.  This is simply because they have a long way to go up to meet the prices of those areas, and as people leave the former hot markets will cool off, that is simple economics.

Appraisers were GIVING prices because they knew it would hold, at least for a little while. Many unregulated independent loan brokers (insert “Licensed by the department of corporations” I’ll talk more about that joke in another segment), were giving programs such as interest only, to the ludicrous Option ARM (insert I’m an idiot to think I can pay $400 dollars a month for a $600,000.00 mortgage and not have negative consequences), thus encouraging people to buy who have no financial reason to be buying those size homes and mortgages. People were than able to spin a tale of turning ZERO down into millions in profit over night on TV ads played from midnight to 4 am to all the insomniacs not able to critically think about the correct decision.

So yes the market was driven by emotion and greed and the prices grew way out of hand, fast and furiously. Does that mean because the prices are going down slowly in some places that we have hit a bubble that popped? No, I say it is about time that prices adjust to reality and level off the playing field so that consumers can make the right decisions financially that will serve them in the LONG RUN NOT the short term fixation on increasing real estate prices. Besides, in housing markets someone always wants to buy, and someone always has to sell. It also means people have to be smarter about what they are doing and cannot rely on dumb luck anymore. A proper market needs to have educated buyers and sellers, in the past few years we REALLLY have not had a proper market, uneducated buyers and sellers, along with greedy 3^rd party members made the market what it is today. Many people became real estate agents that really should not have. No I am not just being pompous here, really there were people in this market that had NO IDEA what they were doing and sold homes just by dumb luck. They didn’t have to do ANYTHING. No as the market changes those type realtors will have to get out and the real agents with expertise that spans markets not just capitalizes on them will survive. And that is a GOOD thing.

We always run in cycles, we have a boon, then we slow down until prices catch up with incomes and reality, then we see a boon again. It is not a bad market or good market it is what it is in the cycle.  But recently we saw prices skyrocket to levels in Los Angeles and Orange County to levels they should not have been in the first place! So a price drop is really getting back to the price it should have been in the first place. There are always experts who think they know for sure what will happen, but really don’t.  For example, in 2003 articles were talking like this:

“Low interest rates have also kept real estate bubbling. Cheap mortgages enable entry level buyers to get into the market and wealthier ones to afford more expensive houses.
That means higher demand and higher prices at all market levels.
Many say that low rates "have extended the cycle."

Many consider real estate "very risky right now." And because the price run up has been so high he expects the adjustment period – where home prices stagnate as income catches up -- to take a very long time. Before they purchase a home, buyers better figure on scenario of many years of little or slow home-price appreciation. Counting on home price increases could be a big mistake.

The boom has already gone on longer than many thought it would. "Bubbles do tend to last longer than most people expect," he says, "and end quicker."  (names have been changed to MANY to protect the stupid)

That was in 2003 three and the real estate boom continued until 2005 and started to slow down in the beginning of 2006. So who is right? Well when prices decline and interest rates rise, less people will be buying. Then the banks, developers, and sellers lower their prices, banks lower interest rates, you will then see an increase in sales again.

So pontiff what do we do now? Well look at your outlook, what do you want to do in the next year or two? Do you NEED to move? Do you NEED to sell? Also, get back to letting professionals help you, become more educated about the process. Understand that buying, selling, or investing in real estate can be risky and make the decision accordingly. Do what most smart women do, wait till it goes on sale! Which is happening now. You can position yourself just right and be ready for the next boon in real estate. Also keep reading or listening to The Property Pontification!

The pontiff says so, and so it is!

AUG 18, 2006: New Blog Launch

Hello, thanks for reading our humble yet proud blogspot! At this blog we as a company (The Carrigan Group, CG Funding, CG development) will from time to time pontificate on all matters concerning or involving real estate.

I know our Blog name is quite a tongue twister, and is complex, well so are all things real estate! We want to be here to help untwist and make less complex these issues revolving around real estate. We will have different topics and discussions and from time to time interviews about real estate, be it development, sales, financing, or investments.

We have been in the business for some time now, and some of us here actually teach this stuff at the local college. We have inside info that can help our clients and even potential clients navigate the difficult course that is real estate. In any market, hot or cold you are only as good as your information, and understanding that information and utilizing it is important.

I would not say any market is bad or good, it is only different. When prices are low you buy when they are high you sell, easy right????? Not always, what about when do you hold and when do you flip? When do you buy existing and when do you develop? If residential is not hot what about commercial? What about alternative construction (pre-fab, modular, manufactured?) What about in other markets? Not just local, but maybe international real estate is good.

I cannot always guarantee great grammar, but I can always guarantee a great opinion. Also, I would like to hear from you about you ideas and your questions. So lets all pontificate!