Are Housing Values About To Nose-Dive Again?

You can’t throw a stick without finding someone who has an opinion on which direction housing values are headed. Up, down, or maybe we are we are about to skew of into some sort of fifth dimensional paradox?

CNBC posted this interesting article yesterday on the subject; “Housing Prices May Be Heading for a Double Dip“

It seems like a rather simple equation to me; for housing values to go up, existing home sales prices must rise. For existing home sales prices to rise, certain things are going to have to happen, not the least of which is that there will need to be higher sales prices on which to base pricing strategies. 

Here is a typical scenario that I recently dealt with here in Fredericksburg, VA. I was recently assigned a property from a REO servicer. One of our first tasks as an agent is to complete a BPO (Brokers Price Opinion) on the property. A BPO, while not an appraisal, can be described as an opinion of value, by someone other than an appraiser, based on current market data.

This particular property appeared to have been shown very little love by its last occupant. Pretty grungy, dirty, disgusting, and smelly. It needed work, to put it mildly. One of the tasks in a BPO is to provide two different opinions of value, one being a price that the property would sell for “AS IS”, and a second price, one that it would sell for “Repaired.”

So as an example, lets say that after I examine all the market data available, I price this one @ $100,000 for a quick, “AS-IS” sale, and @ $140,000 for a fixed up, “Repaired” sale. These numbers are based on comparable properties (comps) currently for sale in the community, as well as homes that have sold in the last 90-120 days. We take into account the size and condition, as well as some other factors when we come up with our opinion of value.

It is also important to note that the seller is getting more than one opinion of value, and quite often an actual appraisal, so the final list price takes into account all valuations that they receive.

So the seller, the bank, now has a decision to make. Sell it quick for $100,000, or put some money into it and sell it for $140,000. Keep in mind, the seller always sets the price; I am just using these numbers to make a point.

So if we look at it like housing prices are a sailboat on the ocean, then the bank is now the wind. Sell it low, “AS-IS”, and you now have a low comp in the neighborhood. Sell it high, “Repaired” and you now have a high comp in the neighborhood. Whatever decision the bank makes now, the next time an appraiser goes into that neighborhood to do an appraisal, that comp is out there, and will more likely than not have an effect on the appraisal of the next home.

So when we wonder where housing values are headed, which way the wind is blowing?

Kevin McGrath – Broker/Owner
RE/MAX BRAVO
10401 Courthouse Rd
Spotsylvania, VA 22553
540-891-8888
www.fredva.com
kmcgrath@remax.net
Licensed in the Commonwealth of Virginia

The Never Ending Cycle Of Delayed Closings – And The Only Way To Fix It

Delayed closings never cease to amaze me. A buyer and a seller agree to terms and enter into a contract, which as far as I can tell, is supposed to be a legally binding document. There are many terms and conditions, one of which is the agreed upon closing date. In our area (Fredericksburg, Virginia), it has historically been a 30-45 day period from a contract being written to the agreed upon closing date. This closing period is certainly negotiable.

But once that contract is signed, this legally binding document between two parties, one would think that the closing date would mean more than just some squiggly lines on a piece of paper.

Only in my dreams.

I seem to now spend an inordinate amount of time these days doing a lot of last-minute cajoling of lenders and title companies into trying to make that date. Now, don’t get me wrong, there are many very fine lenders and title companies out there; I will call them the “yes we can do it” companies. When I give them a call, they answer me, or call me back, or answer my email. Nice. Common, simple, courtesy. I find it somewhat unfortunate for our industry, and the human race as a whole, that this excites me, but there it is. These “yes I can” companies seem eager to get it done, and they look for a way to make it happen.

Then there are the other guys. I will call them, yep, you guessed it, the “no we can’t” companies. 

These are the ones who don’t call you back, and who don’t answer emails. If I had a nickle for every time I sent a an email to a lender or title company politely asking for an update, and never get a response, well, you know how that saying goes…

I love the part where we are 24 hours from closing, and I get the “the underwriter is now requesting more documentation” line. So, let me get this straight; they have had the file for 30-45 days, and now, on the last day, you open it up and realize you need more paper?

Or “sorry, the foreclosure deed has not been recorded.” So, go record the stupid thing. What are we waiting for? At this point, it seems like all we are doing is giving the underwriter more time to look through the file at the last minute so they can ask for more stuff.

And how come we seem to always ALMOST make it? It can be scheduled for the 25th, but we can close on the 26th, or the 27th; how come we can’t figure out how to make in 40 days, instead of 42? If I had set the closing for 42 days, are we saying that would that have been enough, or would we now need 44 days? I think I know the answer already.

I also wonder how a lender can tell me, a day before closing, “well, we did not really have enough time for this loan.” Really? And how long have you been keeping this gem of information from me? Let me go back through my emails from you and see if I can find where you notified me that there was a problem.

We can have lots of conversations about overworked and understaffed companies, but I just don’t buy it. When did being busy become a license for poor performance? Why do we have to meet some deadlines, but not others? And if you are overworked, why are you taking on more business than you can handle?

We can also add new technologies to streamline the process, and I think this is a great idea, but I just don’t think  technology is going to solve the problem.

At some point, everyone who has a part to play in meeting a contractual deadline are going to have to look at a closing date, and to borrow a phrase from NIKE, just do it.

Kevin McGrath – Broker/Owner
RE/MAX BRAVO
10401 Courthouse Rd
Spotsylvania, VA 22553
540-891-8888
www.fredva.com
kmcgrath@remax.net
Licensed in the State of VA