The good news:
Every agent I talk to is selling more homes. The April numbers from GLVAR (Greater Las Vegas Association Of Realtors showed for the first time since 2005 an increase of same month compared to a year ago sales for April ‘08 over April ‘07.
Foreclosure filings fell in April compared to previous months. New Bank Owned Listings also fell.
The doom and gloom and end of the world headlines and news reports seemed to have slowed to a trickle. They were a sunammi during the last half of 2007 and the first 2 months of 2008.
One major bank just took off the “declining market” down payment premium that applied to Fannie and Freddie loans. The rest of the banks are expected to follow suite this week.
FHA slightly lowered the upfront mortgage insurance rate for borrowers with excellent credit scores.
The ever optimistic, and in the recent past overly optimistic National Association of Realtors now says:
Realtors Expect Home Sales And Prices To Pick Up
The BAD NEWS?
It’s a buyer’s market IF YOU CAN GET A LOAN.
It’s still the lending industry that’s the problem. The guidelines and loan programs are still changing EVERY day. The underwriters are NIT PICKING the loans. A good example is a loan officer got asked to have the buyer document a 120. deposit into their checking account. It was just loose change, and cash and a 100. win on a video poker machine at the 7–11. How do you document that kind of triviality?
Here’s another good example of the silliness of going “absolutely” by the book. I’m involved in this particular sale. FHA requires 2 years of rent history. The buyer will have been in the same apartment for 2 years NEXT MONTH. His old apartment complex got sold, and the new company doesn’t have any records of the old company. We’ve only got 1 year and 11 months of documentation. The Underwriter refuses to make an exception, so the whole deal is suspended for another month until the current apartment’s 2 years can be documented.
Now that we’re selling homes again, especially the “NOT BANK OWNED” homes, we’re struggling with the appraisals. For example, we got the appraisal to come in on one of my deals. I was expecting to get loan docs today. Instead we got notice from the underwriter that she’s QUESTIONING the appraisal! She sent a note back that says she wants to see:
“Comparable properties sold within ONE HALF MILE and No more than 3 months old”
Six months and 1 mile are the generally accepted rule. But sales have been so sparse for the last 6 months that there’s hardly anything to work with.
This issue will relieve itself in a month or two once we get some of these new sales closed, but in the meanwhile, it’s a trap that we have to watch for. The sale price is 21% less than the home would have sold for 2 years ago. The deal makes sense to the seller, the buyer, the agents and the loan officer. But the underwriter holds all the cards.
My broker reminded me the other day that the definition of an “ARMS LENGTH TRANSACTION” has now been modified. It used to be “what a willing buyer and seller agree to”. Now it’s “what a willing buyer and seller agree to, AND the bank will loan on”. In this case we’re already negotiating between the buyer and seller on the “what if” the appraisal review” cuts the value. Everyone’s packed and ready to move at the end of the month. We’ll see how it plays out.
A friend of mine is in contract to buy a bank owned repo. By definition, the bank should have clean title since everything else got wiped out in the trustee sale. I don’t know the exact details, but somehow, 2 different title companies can’t provide title insurance as there’s still a cloud on the title that the previous owner has to clear. Another trap that shouldn’t be there. (BTW, if she cancels, there’s a terrific deal in Paradise Palms begging for someone who can wait out the cleaning up of the title work).
The Bottom Line:
We’re writing all those new deals with 45 to 60 day escrows instead of the normal 30. Why? So that we have plenty of time for appraisal reviews and rewrites, stupid trivial documentation requests and all the other now inevitable delays.
So, we’re at the bottom of the market now. It’ll probably be flat for awhile, so the “we’re waiting for the bottom” buyers will be out in force. And most importantly, we’ll now be able to start telling sellers what their home is REALLY worth.