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Warren Buffett on CNBC: I'd Buy Up 'A Couple Hundred Thousand' Single-Family Homes If I Could

Published: Monday, 27 Feb 2012 | 6:17 AM ET
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By: Alex Crippen
Executive Producer
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Warren Buffett and Becky Quick in Omaha
David Grogan/CNBC

Warren Buffett says along with equities, single-family homes are a very attractive investment right now.

Appearing live on CNBC's Squawk Box, Buffett tells Becky Quick he'd buy up "a couple hundred thousand" single family homes if it were practical to do so.

If held for a long period of time and purchased at low rates, Buffett says houses are even better than stocks.  He advises buyers to take out a 30-year mortgage and refinance if rates go down.

Buffett revealed that he put 175 million euros into each of eight European stocks on behalf of Berkshire Hathaway at the end of 2011, but did not reveal the names of those stocks.

 

He also said Berkshire bought just a "few" shares of IBM [IBM  197.53    -0.23  (-0.12%)   ] this quarter.  He would have bought more but the price went up.  Buffett tells Becky he probably won't buy a tech stock again, but if he understood a company and liked its management and price he wouldn't rule out another tech purchase.

Buffett says if he could only own one bank stock it would be Wells Fargo  [WFC  31.03    0.85  (+2.82%)   ] and Berkshire also added to its position in that stock during the current quarter.

On Bank of America [BAC  8.04    0.16  (+2.03%)   ], Buffett says the bank's deposit base is a "huge asset" and CEO Brian Moynihan has done exactly what he would do.

Buffett also repeated his praise for JPMorgan Chase [JPM  39.06    0.78  (+2.04%)   ] CEO Jamie Dimon and says he owns some of those shares in his personal portfolio.

He does have some criticism for a big Berkshire stake: Johnson & Johnson [JNJ  64.45    -0.01  (-0.02%)   ].  He believes too many mistakes have been made at the recall-prone company and while it is still attractive at its current price, he would sell some shares if he needed to raise capital.  It's "obviously messed up in a lot of ways in the last few years."

Buffett on CEO Succession

Buffett defends Berkshire's decision not to disclose the name of the person the board has chosen to be his successor as CEO, saying he has invested in many companies where he didn't know who would be the next person running the company.

He does say the next CEO is "probably the CEO of some operation" within Berkshire.

Many people had interpreted Saturday's letter to shareholders as saying the board had only decided last year on a CEO successor, but Buffett tells Becky the board has actually known for years who it would go to if Buffett were suddenly unable to continue at the helm.   That person, he says, has remained the same for more than a year and wasn't former Berkshire executive David Sokol.  Answering a viewer's question, Buffett says the successor doesn't know he or she has been chosen by the board, and it isn't a board member.

 

Buffett says Berkshire is required by law to pay Sokol's legal bills, spending $1.4 million so far.  He "assumes" something is happening with the SEC's investigation into whether Sokol was insider trading when he bought shares of Lubrizol before Berkshire announced its acquisition of the company.

Buffett on the Economy

Aside from the housing sector, Buffett says the U.S. economic recovery is healthy and won't be derailed by rising oil prices.  He repeated what he's been saying throughout the recession, that it's always been a "terrible mistake" to be pessimistic on the U.S. over the long term.

Buffett says that except for its housing units, Berkshire's businesses have increased their hiring and that each business will have more employees at the end of this year than they did at the start.

 

But for the nation, he wouldn't be surprised if the unemployment rate returned to nine percent.

Buffett says that in "hindsight," he now thinks the government's bailout of the U.S. automakers was one of the best things to happen to the economy.

Buffett on New Portfolio Managers

Buffett heaped praise on the two Berkshire portfolio managers he's hired, Todd Combs and Ted Weschler.  He says Combs did extremely well with his investment choices in 2011 and has been compensated accordingly.

While he's not actively thinking about hiring a third manager, Buffett says he won't rule it out if a great person comes along.

Buffett on Taxes

On taxes, Buffett says it's a myth that U.S. corporations are paying anything close to a 35 percent tax rate and maintains those taxes are not "strangling" American competitiveness.

 

He dismisses suggestions by critics that if he wants the super-rich to be taxed at a higher rate then he should write a check and make a voluntary donation to the Treasury.  Buffett responds that contributions aren't going to solve the massive debt problem facing the U.S.

He says it is a "travesty" that everyone else is being asked to make sacrifices but not America's most wealthy people.

While he would accept Joe Kernen's suggestion for a tax on a person's total wealth, he says he doesn't think that's the best way to go, in part because it's hard to value assets like farms.

He also says he would accept taxing dividends at the higher ordinary income tax rate, depending on what that rate would be.

In response to a emailed question from a viewer suggesting he owes it to Berkshire shareholders not to antagonize people by pushing his controversial views on taxes, Buffett says he doesn't think a CEO needs to put his or her political beliefs into a "blind trust."

He's also calling on Congress to vote this year on the Bowles-Simpson fiscal reform proposals.  Buffett dismisses the idea that Congress can't get anything done in a presidential election year, saying they shouldn't be paid for the year if they're not going to do some work.

It's Time for Sellers to Join the Party!

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Real Estate Market: It’s Time for Sellers to Join the Party!

San Francisco sunriseMarket dynamics are setting the stage for an amazing post-Super Bowl selling season, but there is one ingredient missing: sellers!

It’s a great time for sellers to join the party. While this may not be the “perfect storm” we’re all waiting for, which would include accelerating appreciation, there is an opportunity now to take advantage of our current market – the likes of which we haven’t seen since before 2005.

Consider this: In all six counties served by PUI, listing inventory is significantly down compared to six months ago – but by contrast, properties under contract are growing at accelerating and exciting rates. Just take a look at these numbers (click on the county name to get more detailed market condition information from our Bay Area counties):

County

All Listings: % Change 8/29/11 – 2/12/12

Under Contract Increase Since 01-02-2012

Alameda

-26.5%

+57.8%

Contra Costa

-27.1%

+60.2%

Marin

-34.1%

+82.1%

Napa

-21.6%

+37.5%

San Francisco

-33.7%

+97.5%

Sonoma

-28.7%

+65.1%

Many of our listings are receiving multiple offers, tight terms, ultra-competitive closing timelines, pre-approved mortgage commitments with rates at 4.0 to 4.5 percent, and an ample supply of “all cash” transactions.

Buyers are more confident than we have seen in the past 20 months and the Bay Area economic forecast and job markets seem stable, if not downright encouraging.

If you’re thinking about selling, the time is ripe to dip your toe back into the market. Come on in – the water feels fine!

Mark A. McLaughlin is Chief Executive Officer of Pacific Union International, Inc.

(Photo courtesy of Tom Hilton via Flickr)

 

Accuracy, Trust, and the Listing Syndicators

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Yesterday on PUI’s blog, we talked about the debate that’s been sparked by Abbot Realty Group’s decision to pull its listings from syndicators like Trulia, Zillow, and Realtor.com  — a trio I called the TZRs.

Representatives from Zillow and Trulia commented on our post yesterday. We are excited they have joined the conversation, and I wanted to make some additional observations on the issue — with these thoughts focused on the issues of accuracy and trust.

Real estate professionals establish relationships with people based on trust, accuracy of information, full disclosure, and decision support (e.g., by offering advice and recommendations). Trust must be established first before a client will value decision support, advice, or recommendations.

If the TZRs set similar standards for their offerings, the information presented would clearly need to be precisely and consistently accurate nearly all the time. But it isn’t.

And being accurate only “some” or even “most” of the time destroys trust.

Let me give you an example. If FedEx delivered 90% of its overnight packages on time, they would be on time “most” of the time. They would also be out of business. FedEx’s clients trust and expect they will make the delivery on time, every time. They trust the company so much that they rarely need to use the online package-tracking service. In other words, FedEx delivers on its brand promise every day.

Screen capture of Zillow page

How would a Zillow visitor feel if accuracy estimates were displayed prominently next to featured photos of homes? We can’t know — because they’re not.

Instead, those accuracy estimates are downplayed to the point of near-invisibility.

Suppose you’re on a listing page and you’re wondering how accurate that Zillow estimate (“Zestimate”) might be. First, you need to click on a tiny question-mark icon next to the word “Zestimate” about halfway down the page (see image on the right).

That brings you a pop-up box that tells you, in part, that a Zestimate is a “starting point to determine a home’s value.” If you click “Learn More,” you arrive at the “What is a Zestimate?” page.  You’ll scroll nearly to the bottom of this long page before you see the question, “How accurate is the Zestimate overall?”

Another click will take you to the Data Coverage and Zestimate Accuracy Table, which shows estimate accuracy by top metro areas.

Adjust the display to show you states, and then click on your state to get to the information that applies to your county. And voila, at last, you get this screen:

View of the Zestimate accuracy page for California counties

What’s the point? The point is this:

It takes five clicks to discover how big a margin of error a property Zestimate might have.

And that’s likely not an accident. Those median error numbers aren’t something to crow about.  The home I live in is in Marin County, and except for the sale price recorded, none of the estimated values for sale or rent are anywhere near reality. And the last update was over two months ago.

We suspect this information is downplayed because full, prominent disclosure regarding accuracy ratings on the TZRs’s sites would fracture clients’ trust – and then those clients would seek a new source of information.

The TZRs can clearly deflect responsibility. After all, the disclaimers are all there, if you look hard enough.

But as licensed real estate professionals we adhere to performance standards, codes of ethics, and California state laws requiring accuracy of information and full disclosure.

Wouldn’t it be wonderful if the TZRs had to walk the same walk?

Mark A. McLaughlin is Chief Executive Officer of Pacific Union International, Inc.

  • User Gravatar Eric Robbins
    February 3rd, 2012

    Eric with MoveVideos here:

    Interesting data…my intuition says that luxury homes have a greater discrepancy than starters or track homes. Did your data support this? Over time, were there any trends among the metro areas that suggested the Zestimates were consistently high or low?

  • User Gravatar Informed Agent
    February 9th, 2012

    Great article – and a great debate!

    [Rant On]

    I’m a real estate agent. I’ve always loved technology and taken a liberal stance on the free-flow of information. However, Jim Abbott’s observations about listing syndicators could not be more on point. The syndicators are driven by their own personal profits — not accuracy or service to the public.

    So, the question is, who profits the most in the online world? It isn’t the sites with the most accurate data — it’s the sites with the most traffic. Traffic on the Internet = Money. Unfortunately what this means is that the sites containing the most ‘false’ listings and the most ‘inventory’ continually get the most traffic. Why? Because they have more content (whether accurate or not) and search engines just LOOOVE content. Their algorithms are attuned to sites with the most information and continually drive traffic to those places. The algorithm doesn’t know any better — it’s just doing its job. But the Zillows and Trulias know and they’re having a field day manipulating the search engines. It’s gotten out of control.

    With these companies successfully playing the search engine optimization game, accuracy and good will to the public falls by the wayside. This creates all the problems Jim mentioned in his video. What is especially infuriating is how they steal agents’ IP. Let’s use myself as an example: How much do I pay for a photo shoot at one of my average listings? $1500. How much time do I spend prepping the home for the market? Usually 1-3 months but in many cases more. Who stays up into the wee hours writing copy for my listings battling writer’s block and trying to come up with words other than “stunning”? That would be ME. And who gets credit for it all on Zillow or Trulia? Some schmuck who’s paying for an advertising spot there. Most consumers don’t understand what is going on. It’s very frustrating. The syndicators live on our info then use it against us. Talk about biting the hand that feeds you!!

    The trick is that some of our clients fully expect their listings to be on these sites. And rightfully so — they do get a ton of traffic. What would be nice is if we could gain a critical mass with many other brokerages nationwide and then all pull out at the same time. It wouldn’t take long for the consumer to realize they will have to go to their local MLS site to get relevant info. We, as agents, would be able to explain at listing presentations the reason we are not participating in syndicators is a generally accepted practice amongst competent brokers nationwide. It’s a big undertaking as the syndicators have lots of momentum. But I’d like to see a stop to it — they are abusing the search engine system, biting the hands that feed them, stealing IP, spreading misinformation, inflating inventories, directing leads to the wrong places, and giving consumers “tools” that often leave the real estate agent out of the equation.

    [Rant Off]

    -Informed Agent

 

Trulia, Zillow, and Realtor.com – Friend or Foe?

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A fascinating debate is raging in our industry about the value proposition and industry role of listing syndicators like Trulia, Zillow, and Realtor.com (hereafter referred to as the TZRs). I want to make sure you are aware of the debate, and I encourage you to respond and voice your opinions, concerns, and recommendations.

For the past decade, we real estate companies and professionals have embraced the marketing concept that the syndication and broad distribution of our property listings, content, and photography provided maximum exposure for our sellers as a means of maximizing value (price). A key part of this momentum and exposure was ensuring that the listing’s assets, our Pacific Union International brand, and our real estate professionals’ contact information were properly displayed for potential buyers to review at their leisure.

As the business model of the listing syndicators matured and they realized revenues fell well short of expenses, the TZRs moved to increase profit from listings and content in every way possible. Today, the most popular monetization approach seems to be a combination of minimizing the original broker/agent contact information coupled with selling random agents advertising, which would then be prominently placed adjacent to listing displays.

In many if not most cases, the agents advertised near the listing displays are neither the listing agents nor experts in that particular neighborhood.

There is significant momentum in our industry by some leading firms to withdraw listings from the TZRs as a means of ensuring our clients receive the proper exposure and representation for buyer interest. The train of thought seems to be when a buyer wants information on a specific property and they contact a real estate professional, they actually want the most knowledgeable professional available, likely the listing agent.

When the potential buyer is redirected or referred to a real estate professional who was simply willing to pay for the exposure, has never seen the home, and doesn’t know the local market, the value proposition collapses – both for us and our listing clients.

Karen Fairty, PUI Marin County, forwarded the following video to Brent Thomson, SVP of PUI Marin County, and me this past weekend. Last Thursday, Jim Abbott, President/Managing Broker of the Abbott Realty Group in San Diego, announced that his 25-agent firm will no longer share its listings with syndicators. And he makes the argument against them extremely well.

It would take me three more pages of writing to articulate what Jim defines in seven minutes, but some of his key points:

> He claims that bogus postings, redundant advertising, and inflated inventories are a hallmark of listing syndicators
> He argues that the syndicators do not safeguard sellers’ privacy
> He characterizes the use of listing syndicators as a “failed approach to property marketing” and “meaningless hits in cyberspace”
> Finally, he accuses the syndicators of slowing the recovery of the housing market

Abbott isn’t the first to pull his listings; last fall, Milwaukee brokerage Shorewest and Minneapolis-area firm did the same, and there have been rumors that 75 big brokers might create a national MLS to exclude the TZRs. But the move is once again highlighting the question about whether we are best serving our brands, our real estate professionals, and our clients by providing the TZRs with our data.

I encourage you to watch the video and voice your opinion. What do you think?

Mark A. McLaughlin is Chief Executive Officer of Pacific Union International, Inc.

  • User Gravatar Debra J. Dryden
    February 1st, 2012

    Good Morning Mark,
    Valuable message from you as usual. Thank you so much for bringing your agents in the field up to speed on this.
    Two things come to mind after reading your letter that I would like to share.
    Recently, I discovered that another agent had actually claimed my listing in Piedmont as her own.
    I called her on it and she said she was sorry and corrected it. She was not even an agent that was active in the area. It peeved me off but I let it go. She had listed other properties as her own listings as well and I just checked on three and of course they are all listed with another company.
    Yesterday, I received a call my “my account manager” at Trulia who was trying to sell me advertising exposure for zip codes. He said that whenever anyone searched for property in those zip codes my information would be shown on the same page and it would appear as if I am the listing agent. When I asked him how many spots were available in Piedmont 94611, 94618 and 94610 he said those were sold out. When I asked to whom, he said to a local real estate company. The company is essentially “buying the love.” Why not, if you can get away with it? There seem to be no rules against it. It has got to bring more buyers into their fold. Smart if you can get away with it and you don’t think the public is savvy enough to understand what is going on. There is always a danger when someone underestimates the intelligence of their audience. Did I mention greed?
    Then there is Trulia of course who is not providing the consumer with choices or contributing to healthy competition within the real estate industry, they are just raking in the dough. I can’t help but draw similarities to the financing fiasco we are still trying to dig ourselves out from under. The lenders, loan brokers wanted their fee and qualifying requirements over time became so loose that if your breath fogged a mirror you could get a loan. Buyers are at fault too for not being more responsible about how much debt they really could afford.
    The point I would like to make is that, I agree, we have to pull in the reins on these syndications as their current structure is not doing a service to our clients and is very damaging to the real estate industry and our standard of care. We need to offer the public rich content, raise the bar for our industry and protect the public from opportunists who are just concerned about making money. I am so happy that you invested your time to expose this issue and are actively working on trying to find a solution.
    Your leadership is phenomenal and I am so proud to be associated with Pacific Union International.
    As you know, I have over 33 years of experience selling real estate in Piedmont, Oakland and Berkeley
    and this is certainly a very challenging but also exciting time in our industry.
    Debra Dryden

  • User Gravatar Brad Andersohn
    February 1st, 2012

    Hi Mark – Brad from Zillow here.

    Just wanted to take a moment to stop by and comment regarding your article and this topic. I can’t speak for the other companies that you’re bundling together and referring to as TZR’s but I can and will speak for Zillow if you don’t mind.

    In all fairness and with all due respect, I don’t think it’s really fair to combine these 3 sites and companies because each online media site has a different business model, has different variations of content to attract viewers, gets different amounts of traffic (or levels of exposure for listings), and has different paid and free agent promotion opportunities on the site.

    “In many if not most cases, the agents advertised near the listing displays are neither the listing agents nor experts in that particular neighborhood.”

    For the record and for your readers, It is free for any listing agent to receive prominent placement and leads from their listings as long as they’ve created a free profile on our site.  If the listing agent has never taken this step, their contact information is still located on the page. Once a listing agent creates a free profile on Zillow, their profile picture, contact link and rating, if applicable, appear at the top of the buyer’s agent list on the sidebar. So, in addition to appearing as the listing agent, the agent now receives four free placements on the page instead of one.

    I think it confuses the issue when people make broad comments about the selling of leads across all real estate sites. With Zillow, leads are free for any agent who creates a profile and wants to get contacts from their listings.

    I’m located right here in the Bay Area so if you ever have any questions or need any assistance, please don’t hesitate to call or reach out. Thanks.

    Regards,

    Brad Andersohn
    Zillow-Yahoo! Real Estate Network
    Industry Outreach Manager

  • User Gravatar Ginger Wilcox
    February 2nd, 2012

    Hi Mark,

    Ginger Wilcox from Trulia. While I respect ARG’s position, there are a number of inaccuracies in the video and I question if they are they really doing the best thing for their customers. Results of a recent poll taken by the San Diego Union Tribune indicate that most believe ARG’s decision to be a bad one, and the comments from consumers indicate that they would be disinclined to use ARG or a real estate broker that follows their lead. (http://www.utsandiego.com/news.....s-zillows/)

    With that said, we recognize that he touched on issues that are important to a lot of brokers and agents, particularly around data accuracy, which is a complex, industry wide problem and a huge priority for Trulia. During Inman NYC, Trulia released a Data Pledge for Listing Syndication and Display to clear up misconceptions about how we handle data. While agents and brokers can pay to enhance their listings on our site or for banner advertising to gain more exposure in their markets, we always offer agents a free option to receive leads on their listings. More specific to Debra’s comment, agents who purchase banner advertising on listing pages are not in any way indicated to be the listing agent of said properties.

    We believe consumers, agents and brokers all benefit from open, accessible listing data on quality consumer sites like Trulia who are committed to providing the best search experience possible for our visitors.

    -Ginger

  • User Gravatar Eric Robbins
    February 2nd, 2012

    Mark, you make a solid argument for why listing syndicators actually harm the home buyer experience. Here’s a couple of counterpoints to chew on:

    1. While listing agents are best positioned to provide accurate information, they are also well-positioned and obligated to represent the best interests of the sellers. When the seller’s agent is a dual agent, the buyer’s interests take second seat. And as anyone who has worked in the real estate business knows, many agents WANT the dual agency commission and some agents will, at times, leverage their information and relationship advantage to secure that 2-for-1 commission. Plus, if I remember correctly, the majority of real estate lawsuits involve a dual agency situation. Nobody wants lots of lawsuits, right?;)

    2. Buyers and sellers no longer have to consume real estate information from just one source (Realtor.com). This competition has led to great advancements in the technology tools available to information consumers (e.g. heat maps using data sets relevant to the real estate decision-making process). This, in turn, has forced Realtor.com to improve its delivery system. Without competition, there is no incentive for the monopoly to improve its technology and consumers lose.

    3. But for me, here is the biggest reason of all – if you don’t syndicate your listings, you are missing buyers. Some buyers like to consume their property information on Zillow, some Realtor.com and still others on YouTube. Everyone has a favorite place to go and not one real estate website is visited by all the buyers qualified to purchase any one home. By removing these syndicators from your marketing plans, you are doing your client a disservice. If I were a seller using ARG, I would insist that my agent syndicate my property data against the wishes of her company or else cancel my contract and let me choose an agent who is going to reach more buyers and better represent MY BEST INTERESTS.

    I should reveal the fact that my business relies on a form of syndication to video-sharing sites and, on behalf of my real estate clients, I also use syndication services like Agency Logic and Listing Producer to make sure their listing data is reaching as many buyers as possible.

    Mark, I agree with you and Jim that the practices of some of these sites are deplorable – like inflating inventory and redirecting prospects to unqualified agents. But shouldn’t the responsibility to keep these sites honest and working in he best interests of the consumer fall upon the Department of Real Estate, private watchdogs like Consumer Reports and the consumers themselves? For me, I stop visiting a website once it develops a habit of delivering ghost listings or inaccurate information. But I will defend the notion that even low quality competition is still better than monopoly. And as for unqualified agents who claim to be experts in a market, I just remember my Missouri roots and say, “Show Me!”

  • User Gravatar Brad Andersohn
    February 3rd, 2012

    Hi Mark – it’s me again, I wanted to let you and your readers know that Greg Schwartz just posted an article regarding how Zillow works with Listing agents. I’m pretty sure that others will be interested in this too: http://www.zillow.com/blog/201.....ng-agents/ Thanks.

  • User Gravatar Jim Fraser
    February 11th, 2012

    Who suffers as a result of misinformation, inaccurate or meaningless comparables, and data that is not always properly updated, everyone. Buyers believe what they read and sellers are “thrown under the bus”. If the aggregators of real estate information took the time to investigate properties they advertise, research the markets they review, and the data they publish, they would soon realize that many times there is little truth of fact in what they communicate. However, since there appears to be little or no vetting of their information, or with no licensing requirements, they continue to throw out data that many believe is based on factual research and / or “on the ground” knowledge. Buyers and sellers beware!

    Jim Fraser

 

Your Mortgage Settlement Cheat Sheet

by Ken J. Gendemann

Image illustration of banks

The big news this week was the $26 billion mortgage settlement, in which five banks (Wells Fargo, Bank of America, Ally, Citi, and JPMorgan Chase) came to a deal with state and federal authorities to give relief to millions of homeowners.

It’s news that’s likely to spur plenty of conversation and debate, especially from people who are considering buying or selling property or who are in that unfortunate majority – the underwater owners who are current on their payments but stuck with a house worth less than what they owe on it.

Here’s what you need to know.

What Is This Settlement?
It’s the culmination of a long series of legal actions by government authorities to hold banks accountable for a variety of mortgage-related concerns, including faulty foreclosures, so-called “robo signings,” and paperwork snafus.

The settlement provides for financial relief for American harmed by these practices in return for securing guarantees to the banks involved that they wouldn’t face lawsuits from federal agencies and 49 state attorneys general (Oklahoma was the sole holdout in the agreement).

According to the New York Times, the bulk of the settlement would go to one million American homeowners who would have their mortgage debts reduced or their loans refinanced at a lower interest rate. It also includes $1.5 billion for roughly 750,000 people who lost their homes to foreclosure between 2008 and 2011, with each receiving between $1,500 and $2,000.

But about half of residential mortgage holders will be left out of the equation because their loans are owned by the government’s housing finance agencies, Fannie Mae and Freddie Mac, and are not covered under the deal.

There’s a lot yet to be ironed out about the settlement, and scant information to be found on the official website set up to answer questions (www.nationalmortgagesettlement.com).  But here’s a summary of what we know so far.

Who Will Get the Money?
There are three main categories of people who’ll benefit from the agreement, either with direct financial assistance or with the opportunity to rework or refinance loans:

• Underwater homeowners, who are current on payments but owe more than their homes are worth, may
be able to refinance older, high-rate loans at the current, rock-bottom rates
• Delinquent borrowers or those at risk of defaulting may get a reduction in loan principal or other modifications
• Borrowers who lost their homes to foreclosure between Jan. 1, 2008, and Dec. 31, 2011, will receive
cash payments of around $2,000

Unemployed borrowers and those in the military may also receive assistance.

How Will California Benefit?
California stands to receive at least $12 billion and up to $18 billion in the settlement, a reflection of the disproportionate number of loans that are delinquent or exceed the value of the underlying property here.

Attorney General Kamala D. Harris obtained separate, enforceable guarantees to ensure that banks will be accountable for their commitments to California. These guarantees also create  important incentives to ensure that banks will reduce the principal mortgage balance of underwater homeowners in California’s hardest-hit counties and that the principal reductions in these communities will occur within the first year of the settlement.

In our area, the counties who took the brunt of the hit were Contra Costa, Napa, and Sonoma. Regionally, Solano, San Joaquin, Santa Clara, Sacramento, and Stanislaus – the ill-fated “S” counties – were pummeled.

Specifically for California, here’s how these guarantees look today, according to the Central Valley Business Times:

Amount

# of Homeowners Affected

Purpose

  $12 billion 250,000 Principal reduction or short sales for those underwater on loans and behind or almost behind on payments
  $859 million 28,000 Refinancing for those underwater but current on their loans
  $279 million 140,000 Restitution to those foreclosed upon between 2008 and 2011
  $3.5 billion 32,000 To relieve homeowners of unpaid balances remaining when their homes are foreclosed
  $1.1 billion 16,000 To provide unemployed payment forbearance
and transition assistance

Who Isn’t Eligible?
Anyone whose loans are held outside the five banks listed above. If Fannie Mae or Freddie Mac, a private investor, or a bank not included in the settlement holds a homeowner’s loan, he’s not eligible for relief from this deal.

When Will This Happen?
Probably not in the immediate future, and you won’t know if you’re eligible for a while either. The servicers who are part of the settlement will be working over the next six to nine months to determine which borrowers are eligible for relief; the settlement rules require payments and relief to happen sometime within the next three years, although the banks have incentives to do it earlier.

What does the mortgage settlement mean for the market?
That is a bigger question, and the jury is still out. I plan to blog about this question, as well as what might happen to people who hold mortgages above $750,000, next week – so stay tuned!

The Up-To-The Minute CMA

by Ken J. Gendemann

What’s better than a well-researched comparative market analysis? One that never gets outdated.

Welcome to the world of the dynamic comparative market analysis, or DCMA for short — sometimes also called a digital comparative market analysis. Pacific Union is pioneering its use and finding that clients are thrilled with the immediacy, control, and insight the DCMA offers.

The DCMA is a digitally generated companion to a traditional comparative market analysis created by a PUI real estate professional. This powerful tool, which allows a client to keep tabs on the most current market activity around his home, is housed on a dedicated web space and is updated automatically every night by the MLS.

Four tabs allow clients to view homes in the area; their own home’s value; their estimated proceeds; and market conditions. The “Homes in Your Area” tab can be customized to show just a map with icons, or a listing of property details alongside the map that includes addresses, bedrooms and bathrooms, square footage, and list prices. A client can click on any of those properties to get full information.

Screenshot of a DCMA

The DCMA automatically calculates a market-value range for a client home based on the price-per-square-foot of comparable properties. For the client, it’s easy to fine-tune the analysis — it’s a matter of a simple click to remove a comparable property from the mix. So if you don’t think that fixer-upper down the road is a fair comparison to your home, you don’t need to factor it into the valuation.

“It’s incredibly helpful if someone is starting to think about selling or refinancing, or needs to check data for a property tax reassessment request,” says a Pacific Union branch executive. “It’s an easy way to watch value change right in front of your eyes.”

Want to learn more — or get a DCMA of your own? Contact me today!

A screenshot of the home value tab of the DCMA

 

Should I Buy a Home Now?

by Ken Gendemann

I'm often asked if this is a good time to buy a home. Some clients are concerned that home prices may fall further than they have already. They are assuming that the best course of action is to wait for the bottom in the market and then buy. The problem with this approach is that you don't know where the bottom is until you see it in the rear view mirror, meaning until you've missed it!

Home prices are one factor in determining your cost of ownership, but so are interest rates and financing availability. Interest rates have continued to contract in the last six months, and are at historic 50 year lows. Since your monthly mortgage payment is a combination of paying down your principal and paying the interest owed, if home prices come down a little further but interest rates go up, it could cost you even more to service a mortgage on an identical home!

While a home is a major investment, it is also the center of your personal life. It's important to live in a home that reflects your taste and values, yet is within your financial "comfort zone." To that end, it may be more important to lock in today's extremely low interest rates and low home prices, rather than to hope for a further reduction in future pricing.

Please give me a call if I can be of any assistance in determining how much home you can afford in today's market.

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Contact Information

Photo of Ken J. Gendemann Real Estate
Ken J. Gendemann
Pacific Union International
1699 Van Ness Avenue
San Francisco CA 94109
Cell: (415) 828-4063

Ken J. Gendemann, CPA
Pacific Union & Christie's International Real Estate
1699 Van Ness Avenue, San Francisco, CA 94109

Cell: 415-828-4063, Office: 415-345-3083
 License #: 01884446