Despite the best intentions at assisting distressed homeowners, bad mortgage debt continues to rise with little hope of reigning it in.  The tough job market and high unemployment rates serve to add fuel to the economic firestorm.  After all, it’s difficult to pay the mortgage without any income.

The current shadow inventory estimate is about half of the entire market of homes for sale, according to Housing Watch.  Additionally, there are many other homeowners who have hesitated putting their home on the market due to market uncertainty.  In essence, this only clouds the housing market’s supply and demand picture.  Our local Fredericksburg, Virginia area isn’t any different than the rest of the nation.  We’ve got plenty of foreclosures on the market, and many others waiting for the market to turn.

Current estimates indicate that existing foreclosures , and the additional shadow inventory, will take nearly three years to sell at normal market absorption rates.  Can you imagine what will happen to home prices once the shadow inventory, and other would be sellers put their homes on the market?  Normally, I’m not an advocate of predicting the future.  But, in this case, with an overabundance of homes, and current economic conditions, something has to give.

When that time comes, do you think the sound we’ll hear is the shattering of the price floor for homes?  If so, let’s hope we’re not caught unawares.  We’ve certainly had plenty of warnings.

As part of the American Recovery and Reinvestment Act of 2009 (ARRA), the Department of Defense (DoD) expanded the Housing Assistance Program (HAP) to provide benefits to service members who are moving (in military jargon, PCSing – Permanent Change of Station), among others.

To be eligible for HAP, military members must have, 1) Purchased their home prior to 1 Jul, 2006, and 2) Have PCS orders dated 1 Feb 2006 thru 30 Sep 2012.

Have you heard of HAP?  Many service members have, but few homeowners understand just what it takes to sell their home using their Housing Assistance Program entitlement.  To educate service members, DoD and the Army Corps of Engineers have provided specific, informative guidance on their HAP website.

The website explains, among other things:

1.  Who Is Eligible

2.  How to Apply

3.  The Benefits HAP Provides

4.  Where HAP is Implemented

In addition, applicants are able to download the necessary application package  to be sent in for eligibility.  Their FAQ (Frequently Asked Questions) section, not only responds to the questions most of us have about applying and how the process works, but also provides updates on the Expanded program.

HAP is providing other ways for eligible members to get answers to their questions.  Coverage is handled by the three regional offices in Savannah, Fort Worth & Sacramento.  They do answer their phones and are ready to reply to questions about the program.  As well, representatives from the National Program Office will provide informational briefings if requested.

In the Fredericksburg and Stafford area, C21 AdVenture has been fortunate enough to host HAP’s Assistant Program Manager (PM), Mr. Donald Chapman, for an informational briefing last month for local Realtors.  While his presentation answered some of our HAP questions, the opportunity to ask questions was the perfect opportunity for him to dispel some of the misconceptions held about the program by those in attendance.   As a follow up, he’s returning in March to speak to a much larger audience of local military homeowners.

HAP leadership is pedaling as fast as they can in their attempt to inform military and civilian home owners who qualify, how to apply and participate in this timely offering.  To make this program work, all involved need to know what the requirements and expectations are.  Most endeavors take a little time to get off the ground, and this one is no exception.  They’ll certainly be bumps in the road for sellers and buyers who participate in this process.  Preparing yourself, by using the resources HAP is providing, may go a long way in making those bumps a bit more tolerable.

Does a home sell itself, or is smart marketing the key?  Or, is it a little of both? 

While most of us realize that targeted marketing is a sound sales strategy, it is tough to sell a lemon in any market.  But most would agree, rarely is a buyer willing to pay more than an item is worth, unless of course, there’s more to the item than meets the eye.  But, that is seldom, if ever the case.  Wouldn’t you agree?

Attempting to accurately price homes requires consideration of various factors including:

1.  Home Inventory

2.  Current Market Conditions

3.  Recent Comparable Property Sales

4.  Condition of the Property

As many who provide valuations of property will tell you, any good Comparative Market Analysis (CMA) will provide a property owner with an accurate price window for his/her property.  If we’re comparing like properties, it is hard to go wrong with a CMA.  But, if you’re expecting an apple to be the same as an orange, you could be in trouble!  So, where do those inflated listing prices come from?  The owner?  Yes, at times.  But, unfortunately, often, the blame lies with the Realtor.

An article in a recent Business Week reviewed William Poundstone’s new book, Priceless: The Myth of Fair Value (and How to Take Advantage of It).   In it, Poundstone examines both the psychology of buyers and sellers, and the logic used when placing a value on a product or service.  The author argues that pricing is anything but an exact science.  In his words, ”In the new psychology of price, values are slippery and contingent….”  According to the article, many “clueless” consumers are vulnerable to the marketing or sales practice of anchoring.  Anchoring, in its purest form, is the act of using of a high priced item that may never sell, in order to make a lesser priced similar item much more attractive.  Often, the same manufacturer may sell two like products, one tagged with a designer name and price, the other, a “great deal” at almost half price.  The “cheap” one sells like gangbusters!

Since it’s hard to ask twice as much for a similar home, overpricing occurs far too frequently.  The good news is, that high price tag makes all the rest of the homes look lots better!  The bad news is, the anchor model is probably going nowhere.  

While pricing or valuing a home isn’t quite as easy as 1-2-3, accuracy is a result of using the proper comparable properties when determining the listing price of a home.  But, if instead, you believe your property to be priceless, and list it accordingly, don’t be disappointed if you find the price you’re offered is only what the educated buyer thinks it is worth.

The change to appraisal periods involved decreasing the validity time for FHA appraisals from six to four months for both existing homes and those under construction.  Since the first of this calendar year, 2010, the new standard has been in effect.  Why does the change matter?

For those of us that have faced selling properties, only to encounter difficulties with the appraisal, this reduced turn around time, or reduction of validity time, couldn’t have come sooner.  Because, no matter the soundness of an agent’s estimation of a property’s value, it is the appraiser’s that matters most.

Did you see the news?  Yesterday’s New York Times carried an article detailing the results of recent federal mandated licensing exams for loan officers around the country.  The results thus far are anything but encouraging.  According the Times article,  ”31 percent of the roughly 10,000 people who took the national test from July 30 to Nov 30 failed it, and about 27 percent did not pass the state-specific component.” 

While there are those (you can trust that the dissenters aren’t those depending on the expertise of their lender) who question the industry’s testing, many others appreciate the attempt at accountability.  Is it odd to expect those who provide you a service, especially one you pay for, to know what they’re doing?  One would hope not.

In the effort to clean up the mortgage industry and answer critics’ claims of of its ”poorly qualified” loans officers, the testing mandate includes both a federal and state national exam that covers federal laws, general mortgage knowledge, the loan-origination process and ethics.  While I have to applaud the “after the fact” efforts to ”fix” a disfunctional mortgage loan process, why did it take a crisis to prompt such measures?

The question that leadership in any industry or profession needs to ask itself, is, what are the minimal acceptable standards required by those licensed to perform or practice?  Would I want them (the practitioner) to provide that service for me?  What if had to pay them for their service?  Would I trust them to provide me, or a relative or friend, advice?  As we’ve all heard, “many people will only do what’s required.”  Let’s hope, when it comes to your trusted advisor, you’re getting at least what you’ve paid for.  And, if not, who will pay for their neglect?

So, what is your latest Christmas wish?  Somehow, I doubt that it’s A Christmas Story’s Red Ryder BB gun.  But, who doesn’t look forward to opening what’s under the tree?  For many, Christmas is a time of celebration and renewal.  Both, spiritual and personal.  A wonderful opportunity for family to get back in touch with one another.  For cards from distant friends.   And, for others, the focus of the holiday is on giving. 

What if we all were more like George Bailey?  You know, Jimmy Stewart’s role in the Christmas favorite, It’s a Wonderful Life.  The movie’s main character, whose dream was to travel the world, but never quite got there.  Instead, he was continually helping others less fortunate than he.  With money, and time, and his tireless efforts.  He certainly gave more than he got.  Wouldn’t you agree?  Of course, George Bailey was a movie character, not a “real” person.  But, if he was, who would he be?  Do you know someone who fits his description?  What about you? 

As this year draws to a close, I’m reminded during this Christmas season of giving, that whether fulfilling our duties as professionals, as Realtors, we have a responsibility to give more than we’ll get.   And while there are those transactions that make us all wonder why we ever chose this profession, looking back, it’s easy to realize the benefits clearly outweigh the challenges faced.  Let’s hope that the case for many of us. 

Merry Christmas!     

And, as I’ve said previously in this blog, when there’s any show on the ground in Northern Virginia, driving on our roads is akin to bumper cars lite!  While that might be a bit of an exaggeration, it’s not far off.  From what the local weather channel says, yesterday’s snowfall surpassed the record level that occurred in 1932.

Of course, for many of us, being house bound isn’t something we’re used to.  Most Realtors, after all, are out with clients on the weekends.  So, the forced confinement is probably what I needed!  Life’s like that sometimes, don ‘t you think?  Forcing us to do things we otherwise wouldn’t.  Perhaps there is something to an overall design to this life.  Hmmm, I wonder if….on second thought, perhaps we’d better not start down that road.

So, are you going to be lucky enough to have a white Christmas too?  We’ll, while the snow’s here, I might as well head outside and have some fun!

During the past year or so, I’ve had the opportunity to teach a reoccurring Real Estate Technology class.  The class briefly reviews the shift we’ve seen in the methods, tools and practices in our profession during the past few years, and examines how Realtors, by leveraging these recent tools, and social media platforms, can improve productivity and their business.  One point of emphasis we touch on during the class is the use of Real Estate blogs as a means of learning the business.  Blogs, and their collaborative structure, are a free classroom.  And an interactive one at that.  And there are loads of them.  Whether it’s foreclosures, luxury homes, mortgage issues, best ways to showcase a property, or just about any other subject related to the business of real estate, or homes, there’s a blog for it.  Best of all, as I say again and again during class, they are FREE.  Classes we used to pay for are now on the web, and at our fingertips, for FREE.  So, we really have no excuse for being uninformed, right?  But, having said that, what about the content?  How much substance is there in the information we’re taking in.  What credibility does the particular author, and real estate subject “expert” have?

When absorbing information, it’s a good idea to check your sources, don’t you think?  Have you ever wondered why the Federal Drug Administration (FDA) requires certain labels or notices on food and drug containers?  Do you think it’s important to know a drug is poisonous BEFORE you take it?  Have you ever looked on the label to see what’s in that jar of jelly you’re about to open?  Well, what about Real Estate information you’re consuming?  Is that article on Short Sales written by a practitioner who is a qualified expert in that transaction?  Does that individual teaching you Ethics actually have any background in the practice, or is their “expertise” a matter of having been convicted in court of lying or something worse?  Who knew? 

One the painful truths of growing up is that most of us have to learn from our own mistakes since we fail to learn from the mistakes of others.  Another is that, the older we get, the smarter our parents seem to be.  I don’t know about you, but my parents tugged on my ear a few times in my youth telling me not to believe everything I hear.  And, you know what, they were right.  With today’s abundance of online information, let’s try and be as discriminating with what we read, as well.

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This morning’s Boston Globe ran a story of a real estate investment venture gone bad.  Sound familiar?

In this case, a young Virginia Beach couple, among others, were sold “a bill of goods”, left high and dry, broke, and are facing a lengthy legal battle to simply try and reclaim their good name.   If there ever was a real estate swindle that exemplifies the worst aspects of the buying and selling of real estate, for profit or not, it’s this one.  It has all the necessary elements:

1.  The Promise of Easy Money

2.  The Smooth Talker

3.  Fraudulent Loans

4.  Fabricated Appraisal Figures

5.  A Gross Lack of Due Diligence

This is but one of the many tragedies left as a result of the housing market run amok.  Kind of like teenage boy on steriods driving a school bus without a governor (you know, the device that restricts their speed).  Before you invest your time, effort, and your money into any venture – especially one that sounds too good to be true – please take the time to do a risk analysis, and ensure that the road ahead isn’t full of quicksand!  

What about you?  Any snow in your part of the country?  If not, how are the temperatures?  Years ago, while stationed in Tucson, we spent Thanksgiving evening on the community swimming pool.  That was….different, and enjoyable.

There’s certainly the Christmas spirit in the air.  And, the snow helps complete the holiday setting.  In the days leading to this special time of year, enjoy the sights and sounds, and be careful on the roads!