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Rates In the Mid-3s

Mortgage rates took a tumble yesterday:

Mortgage rates were already in great shape on Friday after having fallen to the lowest levels since November 2016.  Rather than draw inspiration from the week’s big ticket events (Fed announcement and jobs report), the biggest source of inspiration was a flare-up in trade tensions following Trump’s announcement of new tariffs on Chinese imports.  Trade war drama flared over the weekend as China’s central bank set the country’s currency at the weakest levels in more than a decade.

What does Chinese currency have to do with US mortgage rates?  Quite a lot, really!  The outright level of Chinese Yuan versus the US dollar is not what’s important here.  Rather, it was the fact that such a move was directed by the Chinese government in an obvious retaliation to Trump’s trade war escalation.  In other words, if the US is going to raise tariffs, then China is going to cheapen its currency so the US will be able to keep buying Chinese goods.  Simply put, this is another major escalation of the trade war.   That’s clearly negative for the global economy and economic weakness helps rates move lower.

While 30-yr jumbo rates at 3.68% (with no points) might only be mildly interesting to those who have been around (mortgage rates have been in the threes and fours for the last eight years), the segment of the market that might be energized are the move-up-or-down buyers who have felt locked in because of their low rate.

Those who purchased/refinanced with a 3-something rate can now move and get the same rate, or better!

Open Bidding

Realtors are fighting the idea of open bids? Agents prefer no rules:

Ontario real estate agents are lobbying the province against the mandatory disclosure of offers among competing home buyers in transactions involving multiple bids.

The Ontario Real Estate Association (OREA) sent a bulletin to its 78,000 members this week urging them to contact their MPPs to oppose the compulsory sharing of offer prices and conditions among competing buyers. That’s something the province has said it is considering as part of its planned update to the 2002 Real Estate Business Brokers Act (REBBA).

“Buyers and sellers should have the choice of using an open, transparent process,” said the OREA email.

It says that sharing information about competing bids could lead to the disclosure of personal financial information to any interested parties.

“The government should not force consumers to gamble their life savings in an experimental, mandated open offer process,” said the OREA email signed by association president Karen Cox.

“Hard working realtors like you would face increased red tape,” it warned.

Under the current rules, a real estate agent can only share the details of offers with the property seller.

But consumers should have a choice if all the buyers and the seller agree, said OREA CEO Tim Hudak.

Making the disclosure of offers mandatory “would be a radical change in the real estate market that does not exist anywhere else in North America,” he said.

“This would invoke a brand new process for every real estate transaction where brokers would have to distribute offers to all the other buyers,” said Hudak and that means sharing prices, deposit and closing information, right down to who gets the fridge.

The buyers’ addresses would be included in each of the offer documents, as well as conditions around the need to sell another home or the amount of cash that buyer has on hand for a deposit.

Some sellers would agree to share offer information based on their ideas of fairness for buyers, said Hudak. But all sellers should seek the advice of their realtor, he added.

At least one Toronto agent says his advice would depend on whether he was representing a buyer or seller.

“If I were representing my seller I’d say, ‘no.’ Unless I was mandated to do it, I wouldn’t do it. It’s our job to protect our clients,” said Royal LePage’s Desmond Brown. “If I had a buyer I would want to know as much information as possible.”

Among its 28 recommendations for modernizing the real estate act, OREA is proposing that the government eliminate bully bids — offers that pre-empt the time the seller has set to look at bids on their home. It is also recommends the elimination of escalation clauses, offers that specify the buyer will exceed the best bid by a certain amount.

The Toronto Real Estate Board (TREB) said it understands, “the fairness angle,” of disclosing competing offer details. “But this will also be a tricky area for the government to attempt to legislate,” said a statement attributed to board CEO John DiMichele.

“Disclosing bids puts realtors in conflict with their seller clients,” he said.

In regard to bully bids, the government would need to either require sellers to look at all offers as they come in or not accept any until a certain date.

“We prefer less government intervention in the marketplace,” said the statement.

Link to Article

The ‘Rancho’ Effect

People are feeling a ‘change’ in the market, and wonder what will happen. The rapid escalation of prices has turned real estate into a rich man’s game – and you need serious horsepower to participate!

As the rest of North San Diego County’s coastal housing market feels the ‘Rancho’ effect, we will see more listings coming to market, listings taking longer to sell, and bigger gaps between list prices and sales prices.

In the surrounding lower-priced areas, the action has been much faster – we’re used to the quality homes selling in the first week or two. Let’s compare RSF to Encinitas to demonstrate what we can expect from now on:

Category
Encinitas
Rancho Santa Fe
Population
63,184
3,117
Active Listings
134
172
October Solds
48
23
Actives/Solds
2.8
7.5
Oct Average DOM
40
73
Oct Average SP:LP
95%
87%

We’ll have more homes on the market, slower market times, and bigger gaps between the list prices and sales prices. It’s how they do it in the Ranch!

SW Carlsbad

My buyers offered full price for this house on the first day, and we were fifth out of five offers. One buyer included the escalation clause, which meant he was willing to pay $1,000 over the highest bid.

It’s not a great way to determine the winner if you look at it logically – wouldn’t any buyer pay $1,000 over?  Instead, the sellers decided to sign a $1,230,000 offer the first night, which was literally $51,000 over list price.

These sold in the high-$400,000s when new in 1998.

“You Do Whatever It Takes”

It’s one thing to offer above the list price, but would you waive all contingencies too? 

I think a judge would be reluctant to have a buyer lose a deposit.  Listing agents who might keep a deposit should do a pre-listing home inspection, and give a copy to anyone making an offer with no contingencies, just in case.

LINK

Homes are selling fast in Seattle, spending about 25 days on the market, down from 65 in March 2012. It can be hard to find parking at open houses and some are so crowded that it’s hard to move around to see the home.

Sellers are seeing some of the biggest price gains in almost a decade, and they know they’re in the driver’s seat.

“You put a house on the market you will have 100 people through the open house on the weekend and maybe 15-20 offers,” said Patti Hill, a real estate agent who has worked in the Seattle market for more than 17 years.

To win a home, buyers are putting in aggressive offers.

“Some of them are kind of scary because they’re waiving contingencies that puts earnest money in jeopardy if something happens,” said Hill. It’s common for Seattle buyers to waive inspections and appraisals and go above list price.

When Harris and his partner found their soon-to-be new home, they did everything they could to come up with the winning bid. They waived all contingencies, went above the asking price and had an escalation clause.

“Buyers are totally at the mercy of whatever the sellers wants,” he said. “If you want the house, you do whatever it takes.”

The pair also talked to the listing agent to find out about any special circumstances about the owner and incorporated that into a personalized letter and also offered a 30-day rent-back-to-owner for free.

Their winning bid was $425,000 — $60,000 over the asking price and above their original budget.

Re-Calibration

Ken compared some of today’s tactics to those used at the peak:

They’re back after barely a decade: escalation clauses in real estate contracts, “naked” contingency-free offers and low-ball-priced listings designed to pull in dozens of bidders and turn routine sales transactions into auctions.

http://articles.latimes.com/2013/apr/12/business/la-fi-harney-20130414

buyinghouseI hope listing agents put their foot down about the escalation clause.  Every buyer would pay an extra $1,000 if that is all it took to win, so it isn’t a fair way to determine the winner.  Listing agents should demand that each buyer commit to a specific price, because those deals are more likely to stick.

No-contingency offers are great for the buyers with loads of money and guts, but wouldn’t you offer less than your maximum to compensate?  To encourage more buyers to go this route, it would be smart for sellers to provide a home inspection report at time of listing.  The goal is to sell the house, not to collect deposits from failed escrows.

You don’t have to list your home below market today to attract a crowd, just pricing it at the comps will put you ahead of other seller nearby.  Either way, make sure your listing agent has specific and adequate strategies on how to conduct a bidding war.

Here are other ideas – for sellers:

1. Provide unlimited access to the property immediately.

On the Manzanita listing, I told the sellers to leave town on Friday, and come back on Monday prepared to make a decision.  We communicated over the weekend in case there was a reason to change course, but the strategy worked great.  We reviewed offers by email as they came in, and asked all eight to make their highest and best offer.  By the time the sellers got back on Monday, we had the H&Bs and picked a winner.

2. Make sure your agent is ready, willing, and able to field inquiries.

The buyer-agents start calling, emailing, and texting within an hour of hot new listings hitting the MLS, if your agent is out to lunch they will burn the most precious first few hours and days of peak urgency.

3.  Put an attractive price on it.

Buyers have no problem over-bidding, so resist the urge to tack on a few extra bucks.  Chances are good that you added some icing to your cake already, so avoid the pricing overdose!  You want/need max bidders so your bidding-war strategy can work effectively – there is nothing worse than having only two low offers, and when you try to get them to bid up, instead they bail.  An attractive price will bring 5-10 bidders, and put more heat on them, not you.

Here are other ideas – for buyers:

1.  You need a teflon memory.

If you keep remembering comps from last year, you won’t be buying a house anytime soon.  I regularly see houses selling for 20% to 40% more than last year’s comps – it is a new day, and you can accept it, or wait.

2.  Flash your cash.

The listing agents are telling the sellers to take the strongest offers, determined by who has the most cash.  Prepare to provide a bank statement to substantiate your strength, and get fully pre-approved in advance if you want to utilize paragraph 3k.

3.  If you want to sell your old house concurrently, you have a problem.

If your agent can do some fancy dancing, you might be able to pull it off.  But it is so competitive, it would be a shame to miss the perfect house because you didn’t have this part handled in advance.

Admittedly, it is a quandry – if you sell first and rent, you have to move twice, and you could get priced out if you can’t find a replacement quickly and the market keeps moving.

The other options:

A. If you list your home for sale with an open-ended seller contingency to find suitable housing, you might lose some buyers and sell for less – and if you didn’t find a house to buy, you would have burned up your precious first-time-on-market urgency.

B. Have your house ready to sell, and when you find a suitable replacement, list your house for sale in the same hour and hope your agent is lucky!

C. Make an offer-to-purchase, contingent on selling your existing house – but don’t be surprised if most sellers send you to the back of the line.

Your agent should be able to address the options and offer some advice on the best choices.

Get good help!

More on August’s NOD Blip

Hat tip to SM for sending this along, from Yahoo.com:

It’s no secret that Bank of America wants to put its mortgage-related woes behind it. But it appears that a key $8.5 billion settlement with large investors is playing a role in pushing many more people into foreclosures.

The number of homes across the country that received an initial default notice — the first step in the foreclosure process — jumped 33 percent in August from July, the foreclosure listing firm RealtyTrac reported last week. It was the largest monthly increase since August 2007, right after the housing bubble had burst.

Now a preliminary analysis reveals the largest escalation of foreclosures came from Bank of America. Just in California, default notices sent by Bank of America soared 96 percent in August from the previous month.

The dramatic rise is particularly evident in certain California towns and cities. For instance, notices surged 95 percent in Fresno and 76 percent in Sacramento.

Bank of America says that taking action on its foreclosure pipeline will set the stage for a housing market recovery. However, consumer advocates say Bank of America and the other lenders are ramping up foreclosures without cleaning up shoddy paperwork practices, which led to a moratorium in foreclosures last October.

“Bank of America has a ticking time bomb in its books and it needs to show investors that it is moving,” said Ira Rheingold, an attorney and executive director of the National Association of Consumer Advocates.

“‘Does that mean it has improved its practices?’ No. But Bank of America is in a desperate place,” said Rheingold.

On June 29, the Charlotte, N.C. bank struck an $8.5 billion settlement with a group of large investors– including Pimco, the New York Fed and Blackrock– who claimed the bank had sold them poor quality investments based on faulty mortgages. The settlement is still subject to court approval; a decision is expected in November. Several other investors and homeowners have also filed objections with the court to block the settlement.

Bank of America spokesman Richard Simon said the bank’s increased foreclosure actions had nothing to do with the settlement. Instead it stems mainly from a return to more timely filings on new defaults. He also noted that the bank has improved quality controls and was moving homes into foreclosure “only after all other options with homeowners have been exhausted.”

Clearing the backlog of foreclosures and defaulted loans is a key part of the terms of the settlement. Bank of America has to reduce the number of risky mortgage loans and find third-party companies that can help speed up the process. This includes helping homeowners modify loans or herding defaulted loans into foreclosure sales.

The bank’s actions to start clearing the backlog started from the date the settlement was signed, said Scott Humphries, a partner at law firm Gibbs & Bruns, which represented investors in the settlement. “It does not have to wait for court approval,” he said.

Bank of America is hopeful that the settlement will be approved, as it’s a key part of the process to enable management to focus on other issues.

The bank’s stock has been decimated this year — falling more than 50 percent since January. That’s because Bank of America has been hit by a spate of lawsuits from large investors, the government and corporations who say the bank should either buy back the billions of dollars of faulty mortgages or pay damages. Most of the mortgages were written by Countrywide Financial Corp., the country’s largest mortgage lender which Bank of America bought in 2008.

On the national level, there wasn’t any immediate reason, other than the Bank of America settlement, to explain the spike of defaults in such places as Tallahassee, Fla., where an additional 81 percent of homeowners received default notices. In Carson City, Nev., default notices rose by 185 percent.

Consumer advocates say there aren’t any signs that the shoddy paperwork practices have been cleaned up even as foreclosures are being sped up.

“Bank of America will do the exact same thing now, except faster,” said Don Barrett, partner at the Barrett Law Group, which is representing homeowners who seek to block the settlement. Barrett is a former tobacco lawyer who represented cases for attorneys general of several states against the tobacco industry.

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Is BofA continuing to surge? Here are the monthly counts of NODs in SD County and statewide (September’s count is month-to-date):

Month SD NODs SD BofA NODs CA NODs CA BofA NODs
July
1,327
219
18,308
2,989
Aug
2,213
957
31,977
13,064
Sept
853
352
11,751
4,536

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