Something stinks in LA REO brokering.

After another night of licking my wounds from trying to get my buyers houses, I took a look backward to see where all of these ludicrous bidding wars are ending up settling at. I became more than a bit disheartened when I saw a particular listin on 4674 Toland Way 90041. I have special affection for this property because I wanted it and made a very attractive offer for it. It is a beautiful 3+2 with a massive yard in a great section of Highland Park. It was listed for $319,000 on 7.20.09. We offered $355,000 with a 25% down payment on 7.24.09. We were told that our offer "met all of the seller's criteria" and was in the running. Like so many other offers, this one was never consumated into an escrow. We were told on 8.4.09 that the seller had taken another offer. We later discovered that the seller had taken an offer for $340,000 with only 20% down payment. Why would any seller take a lower offer with less of a downpayment? It just does not make sense, but it is on track with the summer of 2009 wild west real estate market in Los Angeles. I for one think that something illegal is going on with the listing broker. It seems that every time an REO comes for sale in our area that is over bidded on and one or more of my buyers is involved, the final selling price ends up being lower than what my buyers bid. What is happening over there in Glendale?

A brief pep talk to buyers.

As a real estate broker in one of the affordable and rapidly gentrifying neighborhoods of Los Angeles, I have the duty to be the truthsayer to my newbies about what to expect from buying a property in this day and age. I was just emailing this tidbit off to a buyer, and I thought it was too good to omit from the public eye.

The real estate market is hyper-competitive right now. (It usually is in LA). The only way to even have a shot in the lower price ranges is to get there right away when something becomes available. That's our job as Realtors, to bring you the top properties. But if you want to actually get one, you're going to have to get there right away and write a strong offer (i.e. over asking price with a good down payment). We can lead a horse to water, but we can't make them drink.

We know the homebuying process can be daunting, but the reward for going through this gauntlet of heartbreak and frustration is that prices are finally reasonable and within reach. For everyone who qualifies for a $300,000 mortgage, it becomes a question of if they will ever to be able to afford a home in LA if they don't get it now. Everyone who qualifies for only around $300000 in mortgage should strike while the iron is hot.

So don't give up, and when things come to you do go take a look. You'll be happy you did.

Is America finally coming down from it's decades-long materialistic binge?

I have always thought that Americans are simply crazy about consuming. As a country, we buy so much crap that we don't need. I have been rallying about this for decades but no one really paid attention until the last two years and our collective national belt-tightening began. Now it seems my country has a ray of hope! We are finally saving our money again! Granted we'll still have a long way to go until we reach Japanese levels of personal saving but at least it's not a negative rate any more!!! This paragraph is from a mortgage broker blog that I read for my home buyers and it makes me smile.

Are big price cuts "artificially" bumping up Retail Sales? Studies have shown that consumers are shopping at second-hand stores in growing numbers, cutting back on luxuries and putting money in the bank - resulting in the highest saving rate in 16 years. We appear to be putting off visits to the doctor, not grooming our pets, choosing store brands over big-name brands and turning to do-it-yourself manicures and pedicures. And we are shedding the things we've accumulated over the years: garage-sale listings on Craigslist shot up 60% in the last year, either because we're less materialistic or we need the money.

Hopefully option A! I tell everyone who asks me if they can buy that they'll need at least $20000 for a down payment and closing costs and it's shocking to see who has that amount and who does not. This goes into "Millionaire Next Door" Territory, so I'll save that for another blog. In conclusion, it's good to see us pinching pennies like everyone else in the world has to do!

AHSMI blows a deal out of the water.

loss mitigator Samantha Mai has just cost her company AHMSI $89000.

I have a contract on a property in the Valley that was a short sale. The contract price was $319000. The bank agreed to sell it to them. Samantha Mai was the assigned loss mitigator. She does not return emails or faxes and will return 1 voicemail for every 12 calls, always calling from a blocked number to shield herself and her company from being exposed for their nefarious and ultimately stupid decesions. Nonetheless AHMSI agrees to sell it for 319.

AHMSI had a change of heart and renigged on their offer and took the house to auction. To reiterate, they had an offer at 319 from a buyer for it. They sold it at auction for $230000. That is an $89000 discount on the amount that I had in on it!!!

Why the heck would any employee or company follow such abhorrent and backwards business plans?

The answer of course is because AHMSI, who used to be Option One (subprime mortgage lender) has made pure profit off that loan!. They initally funded $550000, sold that note to some other investor for $565000 and got their 1% annual servicing fee too. When the poop hit the fan, Option One folded and AHMSI was started to protect Option Ones' assets from all those pesky creditors and investors who wanted their money back. All of the loans that Option One had were transferred over to AHMSI, who resumed servicing. When the payments on this particular note stopped coming in, AHMSI sells it and everything they make is pure profit, because they've already sold the original mortgage immediately after originating it. All icing on the cake. Oh, and let's not forget something here: AHMSI GOT BILLIONS IN BAILOUT MONEY-that means they made money three times here. First, originating and selling the loan. Second when they foreclosed on the house and made money in attny fees, etc that they charged to the loan's owner and third sucking on the gov't tit for all it's worth.

How long will we tolerate this?

Man these REO's are going fast.

It seems to me that the East Side market is heating up in proportion with the weather. I've written 8 offers in the last 10 days for 8 different buyers on 8 different properties and not one of them has yet been countered or denied or even responded to. WTF are you loss mitigator/asset manager types doing all day long??.

Some of these banks are getting the hint that to sell a property quickly you need to underprice it and let it get bid up. When writing offers over asking price as is necessary on nearly all of these underpriced REO's, the question becomes how high to go. No one wants to drop more than necessary even for a great value. The way it seems to be occuring is that the bank will take a certain number of offers and let them all put in a highest and best offer in a silent auction for the property. This is a fiendishly clever strategy because no one knows where the bid is at, buyers can be made to bid against themselves blindly. A rich man once told me that auctions are a great way to sell something, not so good for buying something. Food for thought.

The price of real estate in most areas (sorry, Silverlake) is about what it was in 2001. I'll see all you bargain hunters out there...

Why I detest REO.

Fricking REO really chaps my hide. My buyers put in offers over the asking price, wait three weeks to hear something from the Asset Managers, then are asked for their highest bid, made to wait for another month and then told "sorry, we went with another offer that was 25% lower but all cash". I swear I want to wring the neck of these non-call returning, non-email returning, totally on their own schedule asset managers. It's almost to the point where I don't want to show any REO any more because of the nightmare of dealing with banks.

Let's take a step back and observe how disgusting this situation is.
Countrywide, Wamu, etc. all ventured into subprime lending, got greedy then got served with a hot, fresh plate of foreclosed houses. They come crying to the U.S. govt which writes them a blank check to cover their losses, then they turn around and resell the REO for PURE PROFIT!!! (remember, their initial mortgage losses were either totally paid off when they sold the crap paper to the next guy in line or were repaid with our ingenious Bush regime TARP plan.) In most cases, these lenders are out NOTHING on their foreclosures!!! Wait, someone has to foot this trillion dollar tab. Oh right, it's us taxpayers. And furthermore, the banks that sucked up all the TARP money are the ones buying the cream of the crop from the banks that can't stay solvent enough to pay their utility bills that month. These properties aren't getting sold to the general public, they are being sucked up by the heinously corrupt banks that are laughing all the way to the...er...bank with your and my money. I feel sick.

Rent-versus-own balance shifting

As home prices continue to drop, the rent versus buy equation keeps changing. From "Renters lose edge on homeowners" Wednesday in the Wall St. Journal:

Now, after two years of rapid home-price depreciation, the relationship between the cost of rental payments versus after-tax mortgage payments is tilting toward ownership in a number of metropolitan areas.

Over the past 18 years, after-tax mortgage payments have averaged 26% more than rent payments, according to Green Street Advisors, a real-estate consultancy based in Newport Beach, Calif. In 2006, at the height of the housing bubble, mortgage payments reached as high as 66% more than rent payments. But by the end of 2008, average monthly rent for the largest 50 metropolitan areas was $1,045, compared with after-tax mortgage payments of $1,300, assuming a rate of 5.5% on a 30-year fixed mortgage. That means mortgage payments averaged just 24% more than rent payments, the narrowest gap since 2001. ...

In Los Angeles, for example, mortgage payments averaged 60% more than rent payments between 1990 and 2008. Now, those payments average 30% more than rent.

"We're not saying on an absolute basis that it's cheaper to own a home, but on a relative basis ... owning is looking much more attractive than it has in a long time," said Andrew McCulloch, a Green Street analyst. While the shift doesn't mean that renters will rush to buy homes soon, "it's not a 'no-brainer' anymore if they're going to rent versus own," he said....

Carla Zeineh, 22, and her husband recently began shopping for a home in Irvine, Calif., and discovered that with a 5% mortgage rate, her monthly payment on a $350,000 two-bedroom home with 20% down could be less than the $1,800 month that they pay in rent on their two-bedroom condo.

Between the $8,000 first-time home buyer tax credit from the stimulus package and the $10,000 incentive for Californians to buy newly built homes, the rent-versus-own tipping point may not be far off for some.

I've got two properties for buyers right now that will both cost less than $1400 monthly including tax and insurance. Both are within 10 minutes of Downtown L.A. and 15 minutes from Silverlake or Hollywood. The time to buy is here.