Fannie Mae released a new rule in their lender servicing guide published February 24, 2009. Part VII, Section 504.02 states:
“Effective March 1, 2009, closing of preforeclosure sales may not be conditioned upon a reduction of the total commission to be paid to real estate agents to a level below what was negotiated by the listing agent with the borrower, unless the fee exceeds 6 percent of the sales price of the property in aggregate. Servicers are reminded that they must continue to obtain any approvals that may be required by interested third parties in connection with preforeclosure sales.”
While I must point out that in accordance with state law all commissions are negotiable between sellers and brokers individually and in no way set by a fixed standard, it is welcome news that Fannie Mae is requiring servicers to honor our contracts with our clients. I have always found it troubling that lenders feel it is necessary to cut our commissions in a short sale situation. After all, the agents are usually doing a herculean amount of work just to push these things through. Loan servicers should be thanking us, not trying to punish us!
This rule should help put an end to this unreasonable and unnecessary practice. On the other hand, there are certainly a large number of short sales that are not Fannie Mae loans. In those cases, I was thinking about this and struggling with a way to express my thoughts in a way you could use to make lenders understand why this is, in my opinion, an unacceptable practice. I came across a blog posting by Walter Sanford (www.WalterSanford.com/blog) that articulates a suitable response fairly well, so with attributing the following text italicized in quotations to Mr. Sanford, here you go:
“This is the letter that I would send:
Date
Name
Company
Address
City, ST ZIP
Name:
Today, I received your request to lower the commission I require my sellers to pay for my help in determining whether a short sale will solve or mitigate damage toward achieving their goals. I also have presented a marketing plan and determined value. I have made suggestions to enhance value in addition to marketing and showing the property to buyers who I develop from my marketing. My sellers are happy with this arrangement. I will not adjust my commission.
The contract that I have with the sellers is in writing. It has been dated and signed. Substantial monies have been expended by my company to execute my promises.
As you must know, you have no right to interfere in my listing contract, because you are not a party to it. You are the lender, and we have offered you a reduced amount on your payoff in return for a full reconveyance. This has been necessitated due to the market and poor lending practices.
Your interference in my contract in tortuous interference in the relationship that I have with my seller, and I request you cease and desist in any further attempts to modify the existing contract between my seller and me.
After taking into consideration the market indicators that I have sent to you and if you find that you need more money, please request more money. Please do not try to modify a contract with which you have interest.
Sincerely,
Name
Company Name
***As always, this is my opinion. If you want a green light on implementation, go see your attorney.”
So there you go, Walter says it better than I could have. He is correct; the lender has no business sticking their nose into your contract. It is, in my opinion, a suitable response to a ridiculous request. It may work, it may not, but next time I am involved in a short sale I am going to take Mr. Sanford’s advice!
Amidst all the excitement over the end of 2008, the local paper published some articles that you may not have seen. Well, alright, you probably saw them, 2 of them were pretty big headlines, at the top of the page. The morning paper had the headline “Jobless rate here hits 5%, highest since September ’92”. The evening paper ran the headline “Home sales here hit 25 year low”. Buried in the business section of the morning paper was an article titled “Consumer confidence at an all time low”, right beside another titled “It’s time for vacation – unpaid that is”.
Tough stuff. Sounds awful. So, what does it mean for us, in real estate. Let’s take these things one at a time, shall we?
We’ll start with the home sales. It’s true, for the month of November, the number of closed sales posted (281) was down 35% from last year (I saw that one coming from the pending sales forecast, watch for more of that from me in the future, December won’t be any prettier) and that level is probably the lowest single month since 1983. The total number of transactions is overall lower than it has been in at least 8 years. So, we have less people buying homes here, but we also have less home coming on the market, as new listings were also down about 17%. Sometimes we have to remember the right perspective. If we had a ton of new listings coming on the market at the same time activity is going down, we would be in really bad shape, but if the number of new listings keeps falling in conjunction with the number of sales, the lines track each other nicely and add up to a fairly healthy inventory. I did an graph last month to show the trend I am mentioning here, it is interesting how the new listing volume (green) tracks so closely to the sales volume (red).
Prices bear discussing as well and they are fairly stable, partly because we never had the huge run up in prices other areas have seen. Here in Lancaster, the MLS does not yet reflect all the year end closings and probably won’t for another couple of weeks, so expect this to change, but the average residential sales price appears to be $187,449, down about 3 percent from last years average sales price of $194,507. When you compare us against market like California, where prices dropped 25% to 30%, we look pretty darn good. The year will end here in Lancaster with sales volume down about 24%.
To understand this phenomenon, why we have less activity while prices remain stable, interest rates are super low (5%), yet buyers and sellers aren’t jumping in, we need to look at the rest of those articles I mentioned.
Jobs. Will your job be there next week? That’s what many of you are wondering. Lancaster County has lost some jobs recently, some larger employers have closed down or downsized and while we aren’t anywhere near the tough times people in the midwest are seeing, if you lose your job it hurts. Our unemployment rate is at 5% because of those changes, but it’s still the third lowest in the state. There is a growing trend in the business world of furloughing employees, just telling them to take a few unpaid weeks off until business picks up. So, while you still have your job, you just lost those weeks of pay. We also have a number of workers whose hours get cut back on a regular basis, from 40 to 30, or overtime just disappeared, many people in Central PA are having to do more with less.
Is it different here than anywhere else? Actually yes, it is, it’s better. Despite all of the bad news, it is better here than most of the country, numerous financial publications have consistently ranked Lancaster County as one of the best economies and housing markets in the nation. Cold comfort if you are one of the ones hurting but we should be happy with what we have.
So, if we are better off, if our unemployment rate is among the lowest in the state, if our economy is relatively stable, why the lack of action. Well, in a word, it’s fear. Consumer confidence is at an all time low. People have been bombarded with negativity, so it’s no wonder. How many giant headlines about lost jobs and tough times can you read before it becomes a self perpetuating cycle of fear? It’s not just the headlines, it is the reality, the staggering arrogance and greed of finance leaders and CEO’s who bet your savings on their own profits, who mismanaged your money and then when their actions pushed your nest egg down by thousands of dollars, went to the government and said that without a hand out they would go under. So, they get the handout, the market tanks anyway and they have the audacity to say the “decline to disclose what they are doing with the bailout money”! It’s no wonder people are angry, frustrated and scared!
Fear is keeping people from moving forward. The 2008 National Association of Realtors Survey of Buyers and Sellers listed some interesting statistics. I thought the most interesting of all was that out of the 10,000+ responses they received, 62% of the buyers bought because it was “the right time” to buy. Not because of interest rates, not because of the right home being available, but because it was the “right time”.
If you needed any more proof that humans make buying decisions, especially big ones like buying home, based more on emotion than logic, I don’t know where to find it. Fear is why no one is moving in Lancaster County. It keeps sellers from listing their homes, buyers from buying, it makes people want to hide in their living rooms until “things get better”. Don’t believe me? Next time you meet someone who talks about buying or selling in the future, ask them why they aren’t doing it now. The answer will most likely be because they are waiting until things “get better”.
I for one am looking forward to 2009, a year where fear does not rule people any longer. Things are changing, changing for the better. I’ll leave you with two thoughts, one from Nobel peace prize winner Aung San Suu Kyi who said “Fear is not the natural state of civilized people”. We cannot exist in a state of fear forever. I am not downplaying the realities here, but if it is fear, fear of making a mistake, fear of doing the wrong thing, fear of change that prevents you doing what you want in life, then ask yourself how long fear is going to rule your life, how long will fear hold you back, delaying the inevitable?
The last thought is a piece from Shel Silverstein:
“The hens they all cackle, the roosters all beg,
But I will not hatch, I will not hatch.
For I hear all the talk of pollution and war
As the people all shout and the airplane roar,
So I’m staying in here where it’s safe and it’s warm,
And I WILL NOT HATCH!”
No matter how much the chick wants to wait, hatching is inevitable. As always, if you are ready to hatch, you can call me Direct at 717-371-0557 or at the Office 717-490-8999, email me at Jason@JasonsHomes.com or send me a text message using the tool to the right of this post! Happy 2009!
Your Friend in Real Estate,
Jason
Search for Lancaster County Homes for sale by clicking here!
Here at Weichert, we have been at the forefront of open house marketing for a long time. Our websites [ www.JasonsHomes.com , www.WeichertEH.com & www.Weichert.com ] have always featured all of our open houses information online, with photos, customizable tours, printable brochures, mortgage info, you name it.
Unfortunately, while consumers benefited from this, if they wanted to see open house listings from other brokers, they had to wait until Sunday to look at the paper. Oh, sure, we have listings from all the brokers on our sites, you can search that info anytime, but due to the nature of the technology we simply couldn’t host all the open houses.
Well, that is all changing now. On January 1st there will be a new website for consumers to search open houses in real time, “24/7”! Consumers can go online and search for upcoming open houses by any member of the Lancaster Association of Realtors (LCAR). Any home that is listed in the MLS and being held open on any day of the week will be here. Consumers can search by price, by area, by date, they can get maps and directions, see multiple photos, it’s all there!
The new site is www.LancasterOpenHouses.com and LCAR is beginning a multimedia campaign in the next week or so featuring signs, billboards, print and online ads. So, when you are planning your open house visits for this week, stop by the website and check this easy to use resource for buyers and sellers in Lancaster County! If you don’t want to shop open houses and want to visit homes for sale on your schedule, you can always call me, I’ll be happy to help!
As always, you can call me Direct at 717-371-0557 or at the Office 717-490-8999, email me at Jason@JasonsHomes.com or send me a text message using the tool to the right of this post!
Your Friend in Real Estate,
Jason
Search for Lancaster County Homes for sale by clicking here!
Check out the press release from the Department of Banking I posted below. Great changes, putting things into law that should always have been there, hopefully this puts an end to the predatory lending practices that the recent licensing law changes may have missed.
If you’d like to read the complete Code Changes, check out this PDF
PA Bulletin Rules & Regulations
If you’d like to read the correspondence from the Secretary of Banking to the Mortgage Lenders explaining these changes, check out this PDF
As I have said before, there is no substitute for an educated second opinion, so before you get a mortgage or refinance, call me at 717-371-0557, I’ll be happy to review your mortgage terms with you to make sure you are protected!
FOR IMMEDIATE RELEASE COMMONWEALTH OF PENNSYLVANIA
Dec. 22, 2008
Department of Banking
Commonwealth News Bureau
Room 308, Main Capitol Building
Harrisburg, PA 17120
BANKING DEPARTMENT ISSUES NEW REGULATION TO PROTECT HOMEBUYERS
Defines Proper Conduct for Mortgage Lenders, Brokers
HARRISBURG – Secretary of Banking Steve Kaplan today announced that new rules for the mortgage industry will help to ensure that Pennsylvania borrowers receive affordable loans with clear, up-front terms. The regulation was published in the Pennsylvania Bulletinon Dec. 20. “The major thrust of the regulation is two-fold: to restore sound underwriting practices to the licensed mortgage industry and improve disclosures,” said Kaplan. “The lax lending standards and increasingly complex loans that were commonplace during the housing boom helped to create the wave of foreclosures we are facing today.”
Under the new regulation, mortgage lenders and brokers must document and verify a borrower’s income, fixed expenses and other relevant factors in order to reasonably determine whether the borrower will be able to pay back an offered loan. This requirement will restrict low- and no-documentation mortgages in which applicants do not have to provide proof of income, employment and other information.
The regulation also requires mortgage companies to clearly disclose in a one-page summary whether a loan has any of the following features:
• Variable interest rate,
• Prepayment penalty or balloon payment,
• Property taxes and hazard insurance included in the monthly payment, or
• Negative amortization feature in which the payments are set so low they do not cover the interest, let alone principal, of the loan.
The new disclosure form will also note whether the lender has the ability to directly lock-in an interest rate. The form will be available to mortgage companies early next year.
The ability to repay and disclosure requirements will go into effect March 20. The regulation also contains new rules regarding loan funding, payoff statements, advertising and advice to borrowers, all of which take effect immediately.
“There is ample evidence that many borrowers do not understand the disclosures currently provided to them under federal law and that these disclosures have failed to keep up with product innovation in the marketplace,” said Kaplan. “The form developed by the department for use in Pennsylvania will go a long way towards bridging these gaps.”
The regulation is based on recommendations from the Department of Banking’s 2005 study, “Losing the American Dream: A Report on Residential Mortgage Foreclosures and Abusive Lending Practices,” which documented foreclosure trends and lending practices that are abusive to consumers.
The study also provided the blueprint for the five-bill mortgage reform package Governor Edward G. Rendell signed into law in July. The new laws require loan salespeople working for mortgage companies to be licensed by the Department of Banking and allow the department to share information on enforcement actions against licensees with the public sooner. The laws also prohibit prepayment penalties on loans of $217,823 or less, require lenders to notify the state when they intend to foreclose on homeowners, and increase penalties for misconduct by real estate appraisers.
###
As always, you can call me Direct at 717-371-0557 or at the Office 717-490-8999, email me at Jason@JasonsHomes.com or send me a text message using the tool to the right of this post!
Your Friend in Real Estate,
Jason
Search for Lancaster County Homes for sale by clicking here!
I came across some interesting info the other day on realtor.com. They republished some info from Zillow that showed the Top Ten Areas where home prices have either Decreased or Increased. Here is the break down:
Top 10 Increases
Ithaca, NY +5.6%
State College, PA +4%
Jacksonville, NC +3.9%
Winston-Salem, NC +3.4%
Bay City, MI +3.2%
Rochester, NY +3.1%
Greenville, SC +2.8%
Anderson, SC +2.7%
Burlington, NC +2.6%
Spartanburg, SC +2.0%
So, overall our top ten areas of growth are posting small single digit appreciation rates. Pretty typical stuff. Interesting that 9 of them are in or pretty close to the Mid Atlantic region.
But even more interesting is where the values have gone down:
Las-Vegas-Paradise, NV -24.6%
Bakersfield, CA -24.9%
Madera, CA -26.2%
Gainesville, GA -26.4%
Riverside/San Benardino, CA -30.4%
Modesto, CA -31.0%
Salinas, CA -32.4%
Merced, CA -32.5%
Vallejo-Fairfield, CA -33.2%
Stockton, CA -35.5%
8 out of 10 of the biggest decreases in the country are in California, which coincidentally had the most over-inflated markets. I have a message for the great State of California. Stop screwing it up for the rest of us! It is no wonder people are confused about the real estate market when California, the state where many people live in a constant state of excess, isn’t just keeping the roller coaster going but I are extending the track to make new highs and lows every day. Most of the negative media coverage of the real estate market is negative because in places like California it really is bad. Who can argue with declines of 25% to 35%?
But that isn’t Lancaster County. In Lancaster, our average sales price as of the end of October is down about 3.5%, not bad considering that for the most part we were holding steady this year. We never had an over-inflated market though like California did. Much of our recent decrease is attributable more to the economic uncertainty than market conditions. Our prices are declining slightly because the activity is down 9units closed is down in the neighborhood of 25% to 29% depending on how you look at the data), many buyers are sitting on the sidelines waiting to buy because they aren’t sure if their jobs will be there next year. That has nothing to do with home prices and I can’t fix it here.
All I can do is spread the word. Here in Lancaster, activity levels are pretty normal (historically), rates are low and there are deals to be had. If you are waiting on the side of the pool trying to decide whether to jump in, all I can say is come on in, the water’s fine!
As always, you can call me Direct at 717-371-0557 or at the Office 717-490-8999, email me at Jason@JasonsHomes.com or send me a text message using the tool to the right of this post!
Your Friend in Real Estate,
Jason
Search for Lancaster County Homes for sale by clicking here!
We are also the 21st Most SecureMetro area of any size in the US!
According to www.bestplaces.net “Health, prosperity, safety and security are all desirable aspects when it comes to seeking a place to live, work or raise a family…..The rankings took into consideration crime statistics, extreme weather, risk of natural disasters, environmental hazards, terrorism threats, air quality, life expectancy and job loss numbers in 379 U.S. municipalities. The study divided the communities into three groups: large metropolitan areas, mid-size cities and small towns.
Here is the breakdown for Mid Sized Cities:
Mid-Size Cities (150,000 – 500,000 residents)
For more infomation, visit www.bestplaces .net and search recent studies!
As always, you can call me Direct at 717-371-0557 or at the Office 717-490-8999, email me at Jason@JasonsHomes.com or send me a text message using the tool to the right of this post!
Your Friend in Real Estate,
Jason
Search for Lancaster County Homes for sale by clicking here!
Every week a new report is released that talks about the national housing market. It’s up, it’s down, predictions of doom and gloom. These indexes measure housing statistics using a number of indicators and interestingly enough, sometimes the people publishing the reports have agendas of their own. For example, the folks publishing the Case Shiller index are making a living ……. managing hedge funds! That’s right, the same type people who pushed the sale of all those bad mortgages (the Subprime Crisis sound familiar) in the last few years also make money on the back end, by discouraging real estate investment in favor of investment in the stock market! After all, investors have to put their money somewhere and if the hedge fund managers discourage investment in real estate then they end up putting their money into accounts managed by the hedge funds. A weird, twisted loop to be sure. So, who do you trust?
While you can see how well those stock market investments have done recently and can probably guess my opinion of the value of real estate advice from hedge fund managers, I guess it is all a matter of perspective. You could say I am biased, because after all I do make a living selling real estate. In the end, you the consumer are left making an individual decision, based on your individual needs.
The truth of the matter is, real estate trends only matter to the average homeowner on a local level. That’s right, if you are buying or selling a home in Central Pennsylvania, all you should care about relating to home sale performance is the market here in Central Pennsylvania. Major metro areas of other states do not impact you, nor do trends in those markets.
The National Association of Realtors recently released a study comparing the four major price indexes. They are the National Association of REALTORS® Median Sales Price, the Case‐Shiller Index group, and two Conventional Mortgage Home Price Indices, one by the Office of Federal Housing Enterprise Oversight (OFHEO) and one by Freddie Mac. You can view the complete study information here in the link below:
NAR Home Price Index Comparison
The study clearly illustrates just how subjective these number are. So remember, local decisions don’t require the latest info from CNN, Fox, PBS or MSNBC. They require knowledge of the LOCAL market, so you the consumer can make the right decision for YOU.
For information on the local market and how it may or may not apply to your specific needs, call me. We’ll figure it out how it applies to you together.
As always, you can call me Direct at 717-371-0557 or at the Office 717-490-8999 or email me at Jason@JasonsHomes.com!
Your Friend in Real Estate,
Jason
Search for Lancaster County Homes for sale by clicking here!
