Ted Mackel

Ganesh, If the market bottomed out today, it is still not expected to see increases over 5-6% per year. There is still much uncertainty with the foreclosure market and the effects of inflation on the average houshold budget for a short term play.

Would I love to sell you a home? Yes, but selling you a home just to earn a commission is not the right thing to do. If you could find an REO that is under valued and you have money to fix it up, then there could be an opportunity, but you would need to be very careful if you pursue that approach. - Thu Jul 10 2008, 13:55

Get out of the Loan business before you hurt someone. - Tue Jul 8 2008, 11:57

Jay, I think you are partly correct, there are those in the industry that live off hype not all of us.

Nice chart. I bought in 1994 and in 1986 when the market was down and did very well. The difference this time is the explosion between 2002 and 2005.

Check out the Interest Rate and Inflation Chart I created. http://homebuysblog.com/2008/07/03/interest-rates-and-inflat… 2004 housing prices went up almost 30%. That is too much too fast. - Fri Jul 4 2008, 00:52

Judy, I posted my answer on my Youtube Channel.

http://www.youtube.com/watch?v=m5Ux90z1Jek - Tue Jul 1 2008, 21:33

Here are some of the mechanics:

Legally the bank has no say over the property as title to the property still is in the name of the Trustor. The Trustor has the authority to enter into the listing agreement and sell the property. Short Sales create a strange twist, since the property is being sold short now the Trustor has to hope the Beneficiary (the Bank) will agree to take less than what is owed. Keep in mind the Beneficiary has no authority to transfer Title to the property so their influence is limited. The Beneficiary can agree to accept less or refuse to cooperate and force the Trustor to make payments on time or face possible foreclosure (after default) through a Trustee’s sale.

Until the Trustor signs the Purchase agreement there is no contract to enforce. If the Trustor signs the purchase contract and your try to sue in court to enforce the contract, the Beneficiary does not have to accept less than what is owed and you would have to pay the full amount of the Beneficiary’s claim if you were to prevail in a civil proceeding.

Now looking at your situation, the Beneficiary has nothing to gain at this point to move forward on your offer if others are coming in higher or they believe that others may come in higher. The Trustor is not going to sign the purchase agreement without assurances from the Beneficiary that the Beneficiary will accept a short and the Beneficiary is out to cover their asterisk not yours. Thus this creates a situation that the offering price can move upward during the listing period until the property is no longer short or at the time the Beneficiary is comfortable with the amount of their loss.

Ethics really aren’t the issue here, the liens against the property are more than the sale price. There is not an ethical rule that states a lien holder must accept less than they are owed just because there is an attempt to sell short or that an offer has come in and some negotiation has taken place. Short Sales are nebulous from the start, everyone is trying to mitigate their losses so what is happening with you is not a surprise.

Last, Short sales are not easy and can be frustrating. In the beginning of June we had 225 escrows and by June 30th only 93 closings on single family detached. N.A.R. research has shown that only 1 out of 23 short sales are closing escrow.

Scott, this was a fantastic question and I will post a video blog on the topic soon. - Thu Jul 3 2008, 23:33

Sabine,

I could write an epistle on this topic, but I will try to hit the main points. If you use Google Reader or Yahoo reader you can set an RSS feed from my blog. I write about the market a few time each month and my thoughts as to how things are playing out. The market is finding it's bottom. Several factors are different this time and have yet to play out. In the early 90s, very high local unemployment, and the 1994 earthquake hammered east Ventura county. Low inflation during the 1990s fuel the recovery.

This time around now we have inflation, very substantial inflation. Gas, Food, housing. Is it likely that incomes will rise high enough to out pace our current inflation? Lending interest rate controlling by the government will have no influence on oil and everything oil prices impact.

Inflation is killing how much money people have left over to spend, less money for mortgage payments, less money to drive a spending based economy. There is no equity in people's homes to create money to make up the lack of income needed for the spending we saw over the last 10 years.

How all this impact housing......population growth being exponential will keep a constant demand on housing, whether large or small, there will be demand. California is the land of opportunity which will always bring population here. As our current market finds it bottom the rise out will be slow.

The subprime bailout will not fix what was once wrong with the market to start with. 40% of our buyers were buying with 100% financed stated income loans. When you lose a big chunk of buyers and the sloppy loan programs that brought those people to market are no longer available then the market needs to adjust to the fact that fewer buyers qualify to purchase. - Mon Jun 30 2008, 22:58