All In A Day's Work

Before I was in real estate as a full-time broker, I often wondered to myself about how cushy the job must be. 'Drive around in a luxurious car all day, show clients beautiful houses, write up some forms and then cash a check,' I thought. 'Thousands upon thousands of dollars in easy money,' I would muse. I think most people view real estate agents as opportunists - ready to make a quick buck at anyone's expense, self-serving, self-agrandizing. The picture of a Joan Crawford-type wearing a smiling growl and a lapel pin comes to mind. There are some of those. And then there are the other 98%.

Yesterday, the scene in our office played out thusly:

A 25-year-career agent spent several hours back and forth on the phone with some supposed buyer who claimed he had met her when his mother had purchased a home from her more than ten years ago. She had no recollection of him but did not want to be impolite. When he started using terms of endearment with her she became wary. When he insisted that she take him only to vacant properties and only alone she became so spooked she asked him to find another agent. She felt bad, though, and spent the day re-working the conversation in her head (and out loud with the rest of us) hoping she hadn't done him or herself a disservice.

A 15-year-career agent spent the day fretting over a property evaluation she has to do for an older client who's selling her home. She was particularly concerned about having to give the woman bad news - essentially the house isn't worth much more than when she bought it and this is to be the lady's retirement money. She'll likely net less than a middle-income salary, and only then if she's able to sell. Winter is coming. The agent spent the day practicing some upbeat way to tell her.

A 10-year-career agent stopped by my desk to chat. Her husband is dying of organ failure and can't get either of the two transplants he needs. He's on disability. She hasn't had any success in selling real estate so they've fallen far behind on their bills. Their gas was cut off this last week so they no longer have hot water for showers or cooking gas. According to the offices she's contacted, they 'make too much' to qualify for assistance.

A 5-year-career agent contacted me at the end of the day to vent a little frustration. She'd been working with a client for several months, trapsing all over tarnation to find the right property for folks who really hadn't narrowed down their requirements. It had been a long and costly shopping experience. Yesterday, she learned the woman had, on a whim, made an offer on another house with another agent. Capriciously discarded like an out-of-style scarf, the agent learned of the situation via an exuberent email from the client hoping the agent was 'happy' for her. She replied that she was and wished her well.

And me? I spent the day waiting for some contact from an old friend's wife. My husband had sold him a condo in a posh suburb more than ten years ago. He kept it even after he moved out to the west coast, renting it in the hopes of improving his equity position and building up extra money for the future. They've contacted us because the future has arrived. They have two little ones and can only afford to rent due to the astronomical cost of purchasing a home. It fell to me to have 'the talk' that so many agents are having with clients. The condo is not worth as much as they'd hoped and the better strategy would be to keep it and wait for the numbers to improve. If they opt to sell, it'll be a question of how much of their investment are they willing to see float away. In the meantime, I'm trying to figure out a strategy whereby they may not need to use our services, so they can save the extra money.

This is a snapshot of a typical day in real estate. Sure enough, there are the smiling faces and the hands shaking when a deal finally closes. There are the first time homebuyers who cry with relief and joy at the closings. There are babies that gurgle and giggle in the waiting room while their parents sign the documents on the house where the baby will grow up. There are beautiful, lovely, heartwarming moments that make it all worth it, no doubt.

But the image of vapid, over-lipsticked, chanel-drenched gargoyles remains poised over the real picture of who we are. It's unfortunate, but true. And I'm not sure how we fix it.

In the meantime, I'm working on marketing an estate sale for a brother and sister who recently lost their mother. Along with updates on showings and sales strategies, we're providing some hugs when needed as we wait with them for the long goodbye to their family home. Later, we're going to mow the lawn for a neighbor who's mower is broken and can't afford a new one. And tonight we'll work on an evaluation for a friend who's probably going to have to short-sell her home in the hopes of avoiding a foreclosure.

All in a day's work.

The Truth About Truth

We had a meeting today on the new Truth in Lending requirements set forth in the 2009 "Mortgage Disclosure Improvement Act" (MDIA). This act furthers the consumer protections installed in the Truth in Lending Act, which regulates lending practices for any credit secured by a residence. It's a complicated, multi-page, puffy-languaged, 'therefore'-riddled rule that basically says: "If I borrow five bucks and you tell me I have to pay back seven, you can't come back to me on the day I need the money and say 'make it ten'." Fair enough. The problem, as I see it however, is that bankers still have an awful lot of unchecked power to make the process miserable - even if they're honest while they're doing it.

Take, for instance, the current stance on downpayments. In order to buy a 2-4 unit building, even if you are going to owner-occupy the property, the bank automatically suspects a fraud case waiting to happen. So banks are requiring buyers to have 25% down before they'll even consider giving out a loan on a small multi-unit building. (More money equals less chance of deceit? Have these guys been watching the news?)

If the average 2-flat in our market is going for $250,000 (and, my fellow two-flat owners, I feel your pain) that means $62,500. Are you kidding me? In this economy?

Next order of business is checking credit. It better be tip-top. No hint of trouble coping with the worldwide stranglehold reality has on our economy better appear on that credit report. Nations may crumble, industries tumble, but your buyer better have a 620 minimum.

Then the lender, with downpayment money laid out like rose petals before him and a client credit score so tight he could bounce a penny off of it, goes to work finding the right loan 'product'. When he does, he sets about getting an appraisal. This process has become the inside joke in real estate. Even appraisers themselves know it is a joke.

Think of it this way: You go to your friend to borrow twenty bucks to buy a pair of shoes. Your friend responds with something along the lines of "I'll loan you the twenty bucks, but first, I need to see what the shoes are worth in case you don't pay me. My buddy Vito is going to check out your shoes, and then look at how shoes have been selling over the past six months. If the numbers jive, we're good." That was fine in those heady days of yore when footwear was practically laced with 18k gold.

But now? There are no comparable sales numbers to analyze and offering the bank a property to keep as an asset is like offering that friend of yours a pair of sole-less, strap-less, moth-eaten, more-hole-than-leather shoes. At a barefoot convention. And Vito? He doesn't have feet. Never worn shoes in his life.

If we get past that, it's off to the closing. We're practically there and all signs are that we are T minus three days. But, then. Wait. What's this?

At the beginning of the process, the Truth in Lending (TIL) law required the lender to give you a Good Faith Estimate (GFE) of all the numbers involved in your transaction - fees, charges, expenses of involved parties, credits, debits, etc. That's to protect you. The consumer. But now, as it turns out, some of those estimates were off and the numbers have changed.

Enter our friend MDIA. A new GFE has to be prepared and the MDIA ammendment to the TIL requires you to get WTF'd into postponing your closing for another seven days while you wait for yourself to be protected from the truth about the numbers you're spending.

But the real truth is this: the banks still have more power than they should.

In my opinion, the MDIA, while a valuable and worthwhile enactment, is futile not because it doesn't address the issues it regulates, but because the greater truth remains untouched. The consumer remains vulnerable. Banks control the loan products they wish to offer, the down payments they're willing to accept, the rates they're willing to offer, and the time they're willing to take to process loans.

The consumer is the skinny little kid with wispy hair and thick glasses holding a contract in one hand and his courage in the other, facing a bigger kid wearing a 'green is for money' tshirt and greed-drool as an accessory. Our little guy's only protection is his friend from the math club - a smart kid with some knowledge of the system and a line on the big kid's weakness. Our prince valiant needs his buddy to look out for him, support him, encourage him, stand between him and the big green monster and keep the whole thing civil. But where to find this kid? The honest one with the good face and the knee-high socks? Funny you should ask.

You can't see my socks - but they're there - and I'm here to help whenever you need it. Call and learn more about how the services of a professional real estate agent can give you the confidence and security you need to brave the market and make your dreams a reality. 773-457-2495

Short on Smart

Somebody's got to tell the bankers that this business of rampant incompetence in the short sale process is reprehensible. And then somebody's got to make them fix it. Here's how it currently works, and when I say works, I mean it doesn't work: A seller with a property at risk for foreclosure lists the property with an agent at a price that seems reasonable for the product and the market. The agent, we hope, knows the product and the market so this is a responsible and well-thought-out listing. The agent pursues a marketing strategy geared to the product and the neighborhood to draw in the target buyer. A buyer, however cautiously, eventually makes an offer - usually a lowball because 'getting a deal' is the name of the game right now. The agent works with his/her seller to determine whether or not this will be a viable offer from the lender's perspective. This process is conducted in pitch-dark, because banks won't provide concrete guidelines for what they will and won't find acceptable, values are constantly in flux, and most of these at-risk sellers also have 2nd tier loans on their properties that complicate the whole mess... but I digress. The seller finally accepts an offer he/she thinks will work, and sends the offer, along with a sordid financial history and documents to prove hardship, to the bank.The bank then sucks that packet of documents into the vacuum they like to call 'loss mitigation', where it sits collecting dust and the frustration of all interested parties. In the meantime, the average short sale seller doesn't get more capable of paying his/her debts, but less. Often during this time, the bank, unbeknownst to itself, initiates foreclosure. The seller panics. The agent makes a call. At which point, the bank - like a dad taking credit for remembering his wife's birthday when it was really the kids - has a moment of clarity. The short sale might prevent the need for foreclosure. With this mantra temporarily installed the bank sets out on a course of institutional schizophrenia which would be funny if it weren't near-criminal in stupidity: it pauses its own foreclosure in favor of allowing itself time to further delay the short sale. By the time the bank assigns the short sale file to a caseworker, who will likely admit he/she received little or no training except being burned by the long-line of on-fire files he/she has to work on, the buyer has grown weary. We're usually four months into it at this point.The caseworker does little or no work to establish the validity of the short sale claim - hardship is pretty easy to prove these days - so he/she goes straight to the ordering of a BPO (Broker Price Opinion). Remember way back when - at the beginning of this process - when an experienced agent reviewed the market statistics with some actual knowledge of the area and the product and came to a conclusion on a reasonable list price? Well, now this BPO is going to drive by the house - which is usually some 40 minutes away from his/her area of expertise - and completely eradicate the validity of the listing process by telling the bank that they could get way more for the property. The bank believes this drivel and counters the buyer with some absurd number. Everyone's supposed to be grateful that they're still willing to 'play ball'. The seller's agent wrings hands together with the seller and, in a later call, with the buyer's agent until finally, the buyer is approached with the new number.If you're working one of those miracle sales, the buyer still wants it and is willing to up his number.The bank is notified and sends the package with the alacrity of a dead-tulip race to the holder of the 2nd mortgage. If it's with the same bank, the speed dials down a notch or two. The 2nd mortgage lender receives and assigns the file, using the same dust-collecting method of the first lender. Like minds and all that jazz. As luck would have it, the 2nd mortgage company is willing to approve the short sale! But wait - the approval is conditioned on receipt of a promissory note from the current owner, indicating that - sight unseen - he/she will promise to pay an amount three times greater than his/her current income (which is often zero at this point). Not to belabor a pretty obvious element in our story but - the seller is broke! The banks know this - they're the ones that broke him! So making him promise to pay is like making your dog promise not to pee. Meet "Stupid". Your seller, worn and withered at this point, agrees. What's another promise he can't keep? The bank accepts with smug satisfaction and orders that everyone now remember the 'time is of the essence' clause in the contract, requiring everyone to complete all the remaining work in less than three weeks. Meet "Irony".All parties lurch into action; the buyer spends on an inspection, has his attorney review the contract, the buyer's lender sends out an appraiser and then.... screech... STOP right there mister! The buyer's lender finds that the property isn't worth as much as the buyer is willing to pay. For those of you still hanging on for the anti-climatic conclusion, this is the part where Stupidity and Irony meet, fall in love and have a baby.Further hand-wringing ensues, with some bad language and a few glasses of wine thrown in. Through a bible-worthy act of God, let's say the buyer is willing to make up the difference in cash and wants to keep at it. The seller's lender is notified and away we go. Naaaht. Because at this point in the primer on 'How Incompetent Can We Get?' the bank re-assigns the person who's been working your file and the documents get transferred to a new person. This person's got about the same level of short sale processing experience as a Malaysian goat, but proffers the attitude of that babe who ran the magazine in "The Devil Wears Prada". Ultimately, the outcome of this scenario is irrelevant. The seller is already ruined, the buyer is already disgusted, and the agents on both sides have spent more money on cell phone minutes than they'll make in the transaction. This is the bank's contribution to recovery. Really?This is not how we're going to resolve this problem. Banks need to apply the same level of zeal to short-sale processing that they did to looping all these hapless, unqualified buyers into buying these homes in the first place. The faster and more efficiently these properties change hands from the overwrought to the eager the sooner we can all return to a stable and healthy market. Don't kid yourself - that market is a long way off - no doubt. But the rampant incompetence in the short sale process is equivalent to poking a hole in your gas tank right before you take off on a long and arduous road trip. Smell that?Somebody does need to take notice of this and somebody does need to fix it. We do. We, as real estate professionals, must demand a more competent and effective partner in our recovery. We as community members, must cooperate with one another in controlling and managing the property inventory. And we, as citizens, must require our elected officials to do the jobs they were hired to do: regulate, oversee, make accountable. Otherwise we, as Americans, will all suffer the consequences.