How does this happen in 2019? Hat tip to Peter for sending this in!
The Web site for Fortune 500 real estate title insurance giant First American Financial Corp. leaked hundreds of millions of documents related to mortgage deals going back to 2003, until notified this week by KrebsOnSecurity. The digitized records — including bank account numbers and statements, mortgage and tax records, Social Security numbers, wire transaction receipts, and drivers license images — were available without authentication to anyone with a Web browser.
Santa Ana, Calif.-based First American is a leading provider of title insurance and settlement services to the real estate and mortgage industries. It employs some 18,000 people and brought in more than $5.7 billion in 2018.
Earlier this week, KrebsOnSecurity was contacted by a real estate developer in Washington state who said he’d had little luck getting a response from the company about what he found, which was that a portion of its Web site (firstam.com) was leaking tens if not hundreds of millions of records.
He said anyone who knew the URL for a valid document at the Web site could view other documents just by modifying a single digit in the link. And this would potentially include anyone who’s ever been sent a document link via email by First American.
KrebsOnSecurity confirmed the real estate developer’s findings, which indicate that First American’s Web site exposed approximately 885 million files, the earliest dating back more than 16 years. No authentication was required to read the documents.
Many of the exposed files are records of wire transactions with bank account numbers and other information from home or property buyers and sellers. Ben Shoval, the developer who notified KrebsOnSecurity about the data exposure, said that’s because First American is one of the most widely-used companies for real estate title insurance and for closing real estate deals — where both parties to the sale meet in a room and sign stacks of legal documents.
But as more players jump into the space and markets are saturated with various competing platforms, profit margins that are already paper thin get squeezed even more. Zillow says it’s making $1,723 per home flip at a minuscule 0.6 percent profit, which leads one to wonder if this space is really worth getting into if you don’t have multiple modes of monetization.
That’s where the concept of a one-stop shop for home buying and selling becomes especially attractive. If one company can seamlessly integrate each individual component of the real estate transaction—buying, renovating, insuring, and selling—and optimize operational efficiencies along the way, there’s a path to becoming the truly dominant real estate company.
Being the one-stop shop has been the goal of most large real estate operations, where the owners can make profits on every related service – escrow, title, loans, etc. It’s why these outside companies all jumped in to the ibuyer space – the cumulative profits look very enticing, and making as little as $1,723 per home flip doesn’t look bad as long as they get the other fee income too.
I think they will be able to dominate in the homogenized lower-priced tract neighborhoods where there isn’t much variance in values. They can make their own market too, because a first-time homebuyer won’t balk over paying a few extra thousand in price to get an easy entry into a renovated home. If great salespeople are employed, the ibuyers could make a killing.
It will also enable the ibuyers to dabble in the higher-priced areas, where losses can pile up quicker. No need to risk big money when there is no pressure on them to buy anything. I would expect their purchase quotes in the higher-end areas will be well under retail, to give them plenty of cushion.
How will sellers, buyers, and realtors react?
Sellers usually have a price in mind, and tend to be a little uncomfortable with interviewing several candidates/options. If ibuyers advertise effectively and get the first call, then all they have to do is get close to the seller’s price-in-mind, and convenience will be what decides it.
If a realtor gets the first call, and comes in with seller’s price-in-mind or higher, they will get the listing. Realtors will feel the need to quote higher-than-ever list prices.
Sellers who want quick money and convenience won’t worry about leaving a little money on the table, and take the ibuyer deal. Those sellers who want top dollar will list with a realtor.
With everything being high-priced, buyers will probably gravitate to the homes in top condition, and just pay what it takes. Hopefully we won’t run out of buyers.
Crafty agents might offer third-party reviews of the options. Sellers will already be getting biased opinions from ibuyers and realtors, and they could use a consultant to help sort out the best option. But sellers would have to be deliberate and analytical to resist winging it themselves.
The Big Question? With sellers having more equity than ever, will they mind leaving some on the table?
The successful ibuyers doing volume could smooth out any bumpy markets, because they will be determining the home values to suit their bottom line. If they can’t sell, they can always rent instead.
It looks easy, doesn’t it? With the internet, how hard can it be to buy or sell a home?
There are no shortage of options. Buyers see thousands of homes for sale, and sellers find thousands of agents happy to list a home for fees ranging from $100 to 6%.
Yet the perception remains that the process is stressful and costly. Why, when it looks so easy from the outside looking in?
Here are ten reasons why buyers and sellers should Get Good Help:
Friends and family – Buyers and sellers have friends and family who are happy to critique every move. Most of all, they remind sellers not to give it away, and possible deals get crushed regularly over 1% to 2%.
HGTV – Where consumers learn how the home-selling game works. The fact that HGTV is scripted entertainment doesn’t phase the viewer – the content seems plausible enough that it could be real, and the industry doesn’t provide anything better so by default HGTV has influence.
Inexperienced and unethical agents – Agent blunders can cost you a sale. But whether they were accidental (inexperienced) or on-purpose (unethical), they also cast a pall over the industry that causes participants to be frustrated and leery. You need to get good help to endure and triumph over these agents.
Escrow, title, and lenders – These folks have been over-worked since the beginning of time, and they make mistakes. Consumers need good help on their side just to minimize the impact.
Appraisals – A bottle of scotch doesn’t work any more – appraisers are independent and untouchable now, which means they can kill any deal. They are like baseball umpires – they can strike you out, even if the pitch was a ball, because it’s just their opinion.
Shoddy Repairs – Whether it’s to fix any historical work or corrections done to satisfy today’s repair requests, the house needs to be in decent shape to close escrow – or the sellers need to be willing to take a sizable discount. Having vendors who can quickly make impressive repairs for a reasonable fee is critical.
Packing and Moving – A great agent has ways to prevent your move from turning into an evacuation.
Gimmicks – This business has always been notorious for its deceitful gimmickry, and these days you need a supercharged BS-detector to get the truth.
Correctly Interpreting Market Conditions – Get the right answers to: Are we in a bubble? Should I wait? How much is this home really worth? Are there two birds in the bush?
Consumer Inexperience – This might be the biggest hurdle of all, and what causes buyers and sellers to rush a decision before doing enough investigation. Having proper guidance throughout the process is what relieves the stress and costly experiences you hear about!
Get Good Help – it’s never been so important. These are the highest home prices ever!
Thanks to reader Just Some Guy for sending in this article from last week – and who wondered why more people don’t live here and commute to the Bay Area?
Buyers like off-market listings because it lessens the competition. All agents have to do is convince sellers.
After five-plus years of aggressively putting money away in savings, Jason Baker and his wife recently accomplished the seemingly impossible and purchased a four-bedroom house in a high-performing school district in the Bay Area.
The process to find a home base for their growing family took three months. They considered both the East Bay and North Bay and quickly learned the competition is tough in communities with desirable schools such as Lafayette and Mill Valley.
The couple made offers on four houses that they didn’t get, before finally uncovering an unlisted home in Marin County and making an offer that was accepted.
“The three months when we were looking was the most stressful time of our life,” said Baker, 38, who works as an engineering manager. “It was more stressful than the wedding, more stressful than the first month at home with a newborn.”
Open houses at properties that were affordable by the Bay Area’s crazy standards were mob scenes.
“When you went to a house and there was a crowd, you just set your expectations to know you’re not going to get the house,” Baker said. “When there were a lot of people, you knew the odds were high someone is going to make a really high offer.”
Through this ordeal, Baker got an inside look at the buyer’s side of the Bay Area’s real estate market and below he shares what he learned.
1. Listing prices are just “marketing” prices. In a region where homes frequently sell for well over asking and agents often list homes with low prices to encourage bidding wars, you can’t trust that a listing price reflects a home’s value. Buyers can find the true value of a home by looking at recent comps, said Baker. “Redfin and Zillow do an OK job of estimating these,” he says. “One of the problems is there is so little turnover in good school districts that there may only be two or three comps in the last one or two years.”
2. Money wins over everything. Love letters to the sellers are nice, but moot within the Bay Area’s market of high price points. “Unless your bid is significantly higher than the second place bid (more than $50,000), expect the seller to ask you to go into a bidding war,” he shared.
3. Forget about contingencies. “We lost a bid on a house that had no inspection report in its disclosures packet, very rare for the Bay Area,” said Baker. “The seller was not willing to accept any offers with an inspection contingency, and there was water in the basement.”
4. All-cash offers win. If you want the slight edge of all-cash, and you don’t have it, Baker suggested a service called Flyhomes that makes all-cash offers on your behalf. “They buy the house, then sell it to you immediately after closing with a traditional mortgage,” he said. “Ultimately we did not end up buying with them, because they don’t have knowledge of Marin like they do San Francisco and the East Bay, but I would recommend them if you were looking there.” They act as the buyers agent, and their fee is paid by the seller.
6. The price point where the crowds thin out at open houses is about $1.5 million. Priced below that, hordes of people will go to the open house. Above that, it’s more like one or two dozen families.
7. Look for unlisted homes. Try to find a well-connected agent who has knowledge of upcoming listings, and use sites like aaltohomes.com to find unlisted properties, advised Baker. “Some sellers don’t want to deal with listing on the MLS or open houses,” he said. “The house we bought was unlisted, and there was only one family bidding against us instead of six.”
8. Get fully underwritten by your lender, not just pre-approved. “Many houses go on/off the market in a matter of days, so you’ll want a letter ready to go in your offer packet with the bank saying ‘Yes, we are prepared to loan them the money,'” Baker shared.
9. You will most likely lose your first offer, and it will crush you. “It will be sadness on the level of a pet dying,” he said. “Try to remember the family that just outbid you is no longer in the market, and you just moved up a spot.”
Those who already own a home aren’t going to sell just because they have fewer deductions – where do you move?
Renters in high-priced areas are still motivated to buy so they get write-offs beyond the standard deduction.
Biggest impact? The sliver of the buy-up market who already has a mortgage between $750,000-$1,000,000 and now gets fewer write-offs while paying more for their next house. Besides, how can you measure the exact impact – there are too many other variables to consider.
More than a year after the 2017 Tax Cuts and Jobs Act reduced tax breaks for homeowners, only the wealthiest Americans are suffering, according to a new report.
The real estate industry was concerned about the impact of two items in the 186-page law: limiting the mortgage-interest deduction to $750,000, down from $1 million, and capping the deductibility of property taxes to $10,000. So far, the only casualty has been the priciest end of the luxury market in some of the wealthiest U.S. towns, according to a report Monday from First American.
“At a macro-level, the tax changes have had virtually no impact to the housing market,” Deputy Chief Economist Odeta Kushi wrote in the report. “What we know 16 months into the change is that the highest price points of some of the highest-priced housing markets may suffer as real estate is re-priced to reflect the change in the cost of owning.”
The cap on state and local taxes, known as SALT, has not impacted the housing market nationally because it’s high enough that most homeowners are not affected, the report said. Median house prices have increased by about 5% since the law was enacted, according to First American data.
Economists expected to see the biggest impact in states such as California, New York and Connecticut, where both house prices and property taxes are high. However, statewide measures “have yet to see the anticipated impacts of the tax law materialize,” the report said.
“We must zoom in further geographically to see any meaningful impact on housing from the change in the tax law,” the report said. “Only once we zoomed in to the town level did signs emerge of any impact from the tax law change.”
In Eastchester, New York, about 20 miles north of Manhattan, the list price of homes in the highest-priced third of the market declined 12% in the year following the tax cuts while homes in the town’s bottom third increased 30% in the same period. There was a similar pattern in house prices in the Hamptons, on the eastern tip of New York’s Long Island, and other wealthy towns, the report said.
“The tax law may have reduced demand at the highest price points of high-cost markets, causing prices to fall,” the report said.
Those who bought at the high-end of the last cycle are, well, doing it again:
After Teresa & Mark Taunton short sold their $535,000 four-bedroom home in Celebration, Florida, at the end of the real estate meltdown in 2011, buying another house was the last thing on their minds.
“It makes you feel you could somehow end up in the same position,” says Teresa, 57, describing the anxiety the couple experienced after selling their house for less than what they owed the bank. “We were just so leery of everything.”
But in late February, five years after they were officially allowed to make another home purchase, they closed on a modest ranch house for less than half the price of their former Orlando-area unit and just minutes away.
“We were really tired of renting,” Teresa says. Of their new house, she adds, “It’s comfortable. It’s home.”
With rent, “You’re looking at (shelling out) $20,000 to $30,000 a year and you have nothing in return,” Mark adds.
There are signs that a growing number of Americans who lost homes to foreclosure or a short sale during the housing crisis are emerging from their post-crisis bunkers and buying again or planning to do so in the near future.
From 2006 to 2014, there were 7.3 million housing foreclosures and 1.9 million short sales, according to CoreLogic, a housing research firm. After a foreclosure, a prospective buyer must typically wait seven years to qualify for a mortgage guaranteed by Fannie Mae or Freddie Mac. The wait can be three years in certain circumstances, or for a Federal Housing Administration loan, but people who wait seven years generally benefit from higher credit scores and lower interest rates.
A short seller generally must wait three years to buy again.
Of 2.8 million former homeowners whose foreclosures, short sales or bankruptcies dropped off their credit reports from January 2016 to November 2018, 11.5% have obtained a new mortgage, according to a study by credit rating agency Experian for USA Today.
Hey, we had our first monthly increase since June!
Last year the index readings topped out in July, and if that pattern repeats, it will mean that today’s home prices will be the highest of the year.
San Diego Non-Seasonally-Adjusted CSI changes:
Over the last week, we’ve seen soundbites on how home prices declined in Southern California and San Francisco for the first time in seven years, but they are talking about the median sales price – which declined a measly 0.1%. Expect the talking heads to focus on up or down only.
We’re going to be lucky to keep pace with last year’s monthly increases:
Last year the February month-over-month increase was 1.1%, and this year it was only 0.1%. But because the focus is so binary (up or down only), we might escape further scrutiny as long as we can hit a +0.1% each month.
But it’s pretty likely that our local year-over-year readings are going to go negative next month – right as the selling season wraps up. Winter might start early this year!
This interactive graph shows how our monthly sales this year may be less than they were in 2018, but look great compared to previous years. June has been the peak month for sales in each of the last five years – it’s go time right now!
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