The Best and Worst of 2009

(reprinted from my Newsletter of January 2010)

Here's my recap of the best and worst that happened in our real estate market in 2009:

The WORST...

- Short sales
Numero Uno in the list of 'bad' things to happen to real estate. For those who still may not know, a short sale is when the owner owes more than the current market price of the property and tries to convince his lender to take less than the mortgage payoff amount. This type of sale isn't for everyone and it's just problematic from start to finish. It's one step before foreclosure and doesn't always work. In fact, I think the average success with short sale is only about 50%. They are normally a nightmare for all involved with long waits and little information forthcoming and then frantic activity trying to meet the lenders often impossible demands, be it an unrealistic timetable or more money. The government should have instructed the banks that received bail-out funds to renegotiate existing mortgages at fair market value. More people could then have stayed in their homes or sold the properties at a loss and moved on without personal financial collapse. The banks got us into this mess with subprime lending practices and loans for anyone who could fog a mirror. They should have been forced to get us out of it, too.
- FHA approved seller 'contribution'
As if things aren't bad enough, FHA loans have become the norm and with them comes the allowance of a seller contribution to cover buyer's closing costs and pre-paids. The word is 'allowed' but in this market it is often a 'demand'. More buyers without sufficient funds for a down payment and closing costs are shopping for homes and making offers which include that 6% 'give-back' from the seller. Most sellers are already hanging on a financial cliff and can't negotiate more loss into the low market prices. It's just torture for everyone. There are lots of reasons why FHA is so popular, but the bottom line for me is ...if you can't afford it, don't buy it. If you need that extra 6%, save up and buy later. And seller's beware: if you accept an FHA offer, even without any request for concessions, and the property appraiser assigned by the buyer's lender doesn't appraise it high enough to meet that contract sale price, you are stuck with that 'determination of market value' for 6 months! I witnessed firsthand how a poorly constructed appraisal, missing sales that were clearly in the county records but not the MLS, and a demand for a 6% seller contribution, can ruin deals and even lives. That particular deal collapsed and the seller was forced into foreclosure. Sellers should weigh the options when presented with an FHA-based offer.
- Lenders here today, gone tomorrow
With the drop-out rate of banks, it's difficult for all buyers and loan officers to keep the mortgage application process together. Bank A gets swallowed up by Bank B and the process begins again. Maybe not starting from scratch, but still an unwanted snag in the procedural quagmire. And, with banks already known for selling off mortgages in the sub-prime market, it is often nearly impossible for the borrower to learn who is now holding the loan papers. Only the original mortgage is recorded in the county records and subsequent sales of that loan aren't easy to find. It took one of my clients over 6 months to find the right people to talk to regarding his mortgage. And that was only after he wrote to his state legislators.
- Foreclosure lists
Most often those properties aren't even still available. Most agents who work exclusively with foreclosed properties have the homes sold before they ever get advertised. Their are plenty of investors with cash who snap up foreclosures, often in total disrepair, and work them up to be rentals or resales. These lists and websites for foreclosed properties have been a complete waste of time for my interested clients who have tried making multiple offers only to be rebuffed time and again.
- Chinese drywall
As if there wasn't enough to worry about, now home sellers and buyers have to be concerned about the possibility of defective drywall that can cost tens of thousands of dollars to replace. Worse yet, there is no 'protocol' for the repair...no proper procedure to follow to insure the toxic effects are entirely removed even if the drywall is replaced. The government is working on it. (Practice holding your breath). Sellers, be cautious and always get a second detailed opinion. It's important to have information and services provided by those without a self interest.

And the BEST...

- $8000 First time Homebuyer Credit
This stimulated the market at a time when prices are low and brought buyers to real estate while there are a lot of choices.
- Extension of Homebuyer credit expanded to include those who already own a home
The rules are a bit different and the credit is less ($6500) but this change brings even more activity to the real estate market and allows interested homeowners to consider buying something different. Maybe newer, maybe smaller, maybe larger. With the promise of a tax break, many current homeowners will feel 'unstuck'.
- Leveling of homes prices
This isn't to say that prices won't go a tad bit lower, but it really looks as though existing home prices have leveled off. That gives more stability to the market and allows both buyers and sellers to make better decisions. Buyers can 'get off the fence' and sellers will have to get realistinc to make the sale. They both now have a more realistic point ot reference.
- Return of the condo market
Condos are selling again after a few years as the 'hot potatoes' of real estate. Cash buyers looking for deals have been attracted to the lower prices of condos with amenities for their pleasure and that of their snow-bird tenants when the places are rented for 'season'. It's still important to check the financial health of a condo community before making a purchase, but many are all spiffed and polished and good deals now.

Notice I couldn't think of an equal number of bests vs. worsts. I don't know about you, but I bid a not-so-fond farewell to 2009...and welcome the new decade. 2010 just has to be better!

Wishing all the best to you and yours for peace and prosperity in 2010....Bon