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Subprime loans - Should Palo Altans care?

March 29th, 2007 · 5 Comments

If you are a reader of The San Jose Mercury News, or any other paper or media outlet, you know that there is a growing issue associated with home buyers who purchased their homes using subprime loans and are now facing foreclosure as they are unable to keep up with their payments when their rates adjust.

On Sunday, March 17, the San Jose Mercury News ran an article describing how an agent and lender with Century 21 Su Casa Realty violated a number of lending laws and ethical guidelines to get people to purchase homes which are now in foreclosure, in some case because the buyers couldn’t even afford the first payment.

While it is a stain on the already tarnished image of Realtors, it is easy for us in Palo Alto to say ‘what a shame, it won’t happen here’, or words to that effect. But, what is the effect of this issue on homebuyers in Palo Alto and the surrounding communities?

Rachel Van Emon with OPES Advisors, a financial services firm with offices in Palo Alto and San Mateo, recently sent me an article that discusses the effects of impending legislation and revised lending guidelines that will affect the ability of buyers to qualify for products like the interest only loans that so many of us use to buy our million dollar teardowns in Palo Alto and surrounding communities.

The highlights are:

  • The Department of the Treasury has issued a Guidance on Guidance on “Nontraditional Mortgage Product Risks.”
  • The Guidance specifies “nontraditional” as those loans allowing the deferment of principal and/or interest payments – not just sub-prime loans.
  • The Guidance states that borrowers for these products are to be qualified at the “fully amortizing and fully indexed payments.” This means that qualifying payments will be bigger, and it will take more income to qualify.
  • The new guidelines are to be in effect by 9/07. Some lenders have already adopted them, and many more will do so in the coming months.
  • Virtually all lenders have cancelled their programs allowing 100% financing on a Stated Income basis.
  • Guidelines have tightened around lending when other “risk factors” are present such as 100% financing, low reserves, high debt-to-income ratios and condo properties.

In short, it’s going to be harder to pay for that million dollar teardown in Palo Alto starting now, and especially in September.

The big question is whether these changes in lending laws will cool the red hot housing market we are currently enjoying, or if the Valley’s amazing ability to generate disposable incomes and wealth will overcome another hurdle to home ownership. Stay tuned . . .

The entire article is posted for your reading pleasure. Click here to view it.

Tags: , , , , , Financing-Process, Loan Application, , , Negative Amortization, , , , , , , , , , , ,

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Tags: Bad Realtors · Crooked realtors · Financing Process · Loan Application · Mortgages · Negative Amortization · No Documentation (ND) · No Income No Assets (NINA) · No Ratio (NR) · Option ARMs · Real estate · Realtors who give the business a bad name · Stated Income Stated Assets (SISA)

Shady agent tricks competition…win a $10 Starbucks card!

December 4th, 2006 · 12 Comments

At a social event over the weekend, I got into a conversation about real estate with another guest (not difficult, since it’s on everybody’s minds!), and the discussion unfortunately turned to dirty tricks played by some agents. Even more unfortunately, both the other guest and myself had seen quite a few such tricks, me from within the industry, and he as an interested observer.

creepy_realtor.GIFSo…I‘ve decided to sponsor a “Shady Agent Tricks” competition! The rules are pretty simple: In the comments to this post, submit your entry for something shady that you’ve seen an agent do. It can be something illegal, unethical, or something that’s technically neither but still smells funny. You may not name any agent or mention the agency for which he/she works, or describe them in a way that could identify the person (e.g. here’s something that is regularly done by the agent who dominates the XYZ neighborhood). The competition ends this Saturday at midnight PST, and the judging panel (that would be me) will select the winner, who will be awarded a $10 Starbucks card. The four runners-up will be honored with the glory of being mentioned on my blog plus a linkback to their own (if they have one.) The competition is open to both Realtors and civilians.

Why, you might ask, would a professional Realtor want to expose some of these tricks on his own blog? Isn’t that just bad publicity? I think of it differently. More publicity about shady agent practices is good for consumers, and by extension is therefore good for all consumer-friendly practicing agents. I certainly expect some objections to airing our industry’s dirty laundry.

Here are my entries for the competition…

1) Difficult to show double-dipping trick — Listing agent makes the property nearly impossible to preview or show: open house lasts only an hour; property never gets shown on broker tour; agent convinces seller not to use a lockbox; property only available to show with 24 hours’ notice. Result: Property languishes on the market for several months and then — whowuddathunkit!! — the listing agent comes in with his own buyer. He convinces the seller to take the deal, and pockets the full commission. The listing agent definitely wins, and the seller is left scratching his head about why so few showings happened on the property.

2) Late-to-the-MLS double-dipping trick — Listing agent takes the listing on Monday and markets the hell out of it in the weekend papers plus Craigslist. Mysteriously, the listing doesn’t make it to the MLS by the deadline that week for it to make the local broker tour (where dozens of local brokers will see it and make recommendations to their clients about it), and in fact the listing is still not on the MLS by the following Monday. Due to the intensive marketing, and a dozen street signs, the first open house weekend is flooded (mostly by unattached buyers, since the ones with agents who for the most part rely on the MLS to tell them about new properties weren’t aware of this one) and — voila!! –
the listing agent presents an offer from one of these unattached buyers to the seller on Monday, who accepts it. Again, the listing agent pockets both sides of the commission.

Image courtesy of creepylawyer.com

Tags: , , , , , , Sleazy-realtors

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Tags: Bad Realtors · Crooked realtors · Deceptive realtors · Dirty agent tricks · Real estate · Realtors who give the business a bad name · Sleazy realtors

Wow! Here’s a Realtor who works for free!

October 17th, 2006 · No Comments

Am I missing something? How does this guy make a living if he doesn’t charge his clients a commission?

Oh, wait a minute…he doesn’t charge his buying clients a commission…as in, “If you hire me to represent you in buying a house, I will not directly send you a bill.”
This is the kind of sleaze that gives our business a bad name…caveat emptor. Better hope the Freakonomists don’t see this ad, or it’ll become the frontispiece of yet another Realtor-bashing spree.

The above link may be gone in a day or two; here’s a screenshot:


Tags: , , , , , , Sleazy-realtors

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Tags: Bad Realtors · Crooked realtors · Deceptive realtors · Freakonomics · Real estate · Realtors who give the business a bad name · Sleazy realtors