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Will my house in Lodi sell before my grandkids graduate from high school?


Saturday, November 29, 2008 5:54 AM PST

Comments (27 comment(s))

Every day, I ask myself which will happen first. Will my grandchildren, now ages 11 and nine, graduate from high school, or will I sell my Lodi house? I'm leaning ever so slightly to unloading my house. But my position shifts daily, so check back with me for updates.

I base my cautious optimism — if that's the correct word — on the 100-percent consensus among the so-called experts that financial conditions will continue to hurtle downward for the foreseeable future.

These are the same guys, I remind myself, who just months ago said that everything is fine and the economy is, pardon the pun, "sound as a dollar."

Obviously, they have been trained in the Y2,000 school of analytical thought. Disaster is always right around the corner until it suddenly isn't.

Nevertheless, an endless string of polls indicates the public perceives that the nation is on a collision course with, at best, a deep recession or, at worst, a full-blown depression.

The bleakest outlook focuses on the real estate market. A recent Associated Press-AOL Money and Finance poll found that, "60 percent said they definitely won't buy a home in the next two years, up from 53 percent who said so in an AP-AOL poll in September 2006."

Fear of foreclosure, heightened by the rising number of foreclosure filings, has many afraid of losing their homes.

The AP poll found that "more than a quarter of homeowners worry their home will lose value over the next two years. Fully one in seven mortgage holders fear they won't be able to make their monthly payments on time over the next six months."

Investors looking to sell properties in the coming months should be aware that, according to the poll, only 11 percent are certain or very likely to purchase a home soon.

Well, as my agent keeps telling me, it only takes one buyer.

But let's take a long look at what looser credit standards have wrought. Making it possible for virtually any warm-bodied adult to qualify for a mortgage has morphed into a national catastrophe.

I bought my first home more than 30 years ago. At that time, I had to provide in-depth credit information supplemented by a long list of references from professionals in high places.

After submitting 10 pounds of paperwork to the banker, still deeply skeptical because I was twenty-something and "a firsttime home owner," told me that the committee would get back to me — within 45 to 60 days!

I had to wait two months even though I had cash in hand for the standard 20 percent down and an impeccable financial resume. Now, "instant" credit prevails.

Luckily for me, my story has a happy ending. The bank approved my application, I bought the house and made my monthly payments on time.

Over the years, my house appreciated and the bank earned a small fortune in interest income.

What happened to the good old days?

Abruptly, during Clinton's administration, the White House decided that every American should own a home. And Bush accelerated Clinton's goal when he announced in 2002 his Minority Homeownership plan that included a $2.4 billion tax credit and a $200 million national down payment grant fund to facilitate lower-income first-time buyers home purchases.

Bush's objective was to increase minority home ownership by 5.5 million.

And Bush did a great job of getting more minorities into houses. In one documented case, a man who reported $12,000 income from selling vegetables off a truck bought a $300,000 house in Maywood that he financed initially with interest-only loans.

What never occurred to anyone, except for people like me who have had traditional commercial bank training, is that a house can easily be sold to anyone — specially with no money down and sub-prime borrowing rates — but how would it be paid for?

We all know what happened. None of the unqualified buyers could actually pay for their houses, and after their creative financing options ran out, they walked away.

Ironically, they're not the only ones left holding the bag. Also going down with the ship are millions of Americans who played by the rules but, because of eroding market conditions, are watching their home equity rapidly evaporate.

Because I refuse to end a Thanksgiving weekend column on a sour note, I'll reach back for an old chestnut that I rely on to comfort myself and apply it to the housing market.

As the saying goes, it's darkest before the dawn.

Joe Guzzardi reminds readers that no reasonable offer on his house will be refused. Submit them to him at guzzjoe@yahoo.com.

Reader Feedback

edumacation wrote on Dec 6, 2008 7:27 PM:

" Observer: A friened of friend introduced me to a familt that was facing three of the D's at the same time. It was terrible for the family. I was asked to see if I could help them. This was two years ago when the segment of this part of the market started slowing down. I felt bad for the family and almost broke my rule about emotion. I said no at a "gimme" property in good shape for a $460k quick cash deal. I felt sorry about the situation--its always about business- but stuck to my guns.

That house has dropped over $200,000 in two years. The family sold it in afew months, and the new buyer now has insurmountable pain. I wouldn't touch that house for another 100k cut in price. I make my own luck. You have to know when to foldem or holdem. Now is an EXCELLENT time to take equity out of a house that has plenty, but only as a private FSBO deal. It all depends on your total portfolio. How much can you afford to lose. "

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edumacation wrote on Dec 6, 2008 7:14 PM:

" Observer: Thanks! I have been getting these for a month or so. It looks like a meeting of the National Association of Realtors, or maybe even the C.A.R. or L.A.R.


HOUSE PRICES ONLY GO UP MY FUHRER?? "

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Observer wrote on Dec 6, 2008 12:24 PM:

" Hey Joe (and Edumacation). Check this out on You Tube. Make sure you watch it until the end: http://uk.youtube.com/watch?v=bNmcf4Y3lGM "

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edumacation wrote on Dec 4, 2008 4:29 PM:

" commonsense1: Try this. Count the number of licensees at the same listed address, uno, dos, tres, quatro, etc etc. Now check the DRE for the name of BROKER they work for. Is that at the same address? You can count anyway you want. It adds up. I don't care. The point is liek Warre Buffet said YOU don't ask a barber if you need a haircut. If that concept is too difficult try this quote from Upton Sinclair:

"It is difficult to get a man to understand something when his salary depends on his not understanding it "

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edumacation wrote on Dec 4, 2008 3:44 PM:

" commonsense1: I look for FSBO's and people who want to sell their house quickly without a lot of razzle dazzle promises. I will make a maximum of three visits before I walk. I can close very quickly. My fastest close was in three days. Most complex sales contracts are written to protect ONE person, the salesman.

Do you want to rip the bandaid off quickly or prolong the pain over weeks? It looks like many sellers like the slow painful way? Sellers- FSBO at the right price, and it will sell and you can forget about it and go on about your business. If you want to wait around for prices to increase, list it and keep it on the market for years while the "Looky Lou's" march through your house. Its a choice.

Be careful when the next circus comes to town selling the promise of millions in riches through real estate.

http://bubbleblowers.com/music/Music.html

~~ sing ~~
"Fortune's always hiding,
I've looked everywhere,
I'm forever blowing bubbles,
Pretty bubbles in the air...? POOF! "

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commonsense1 wrote on Dec 4, 2008 2:53 PM:

" edumacation, I understand your business is to take advantage of other peoples problems (Opportunity) and fortunately most people to have to talk to you. Do you think your rambling response to Joe's column will be helpful or are you roosting on the fence post waiting for the "Opportunity" to assist him? "

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edumacation wrote on Dec 4, 2008 2:24 PM:

" Is he an agent? Where is the DRE required notice on the website?

Is someone else "..in the organization.." an agent? Hhmm.

I look at it the same way. If I can help a seller, ON MY TERMS---BUT if you want it fast---its my price.

It's as simple as that. If I want to trade my money for someone elses "money pit", it has to be worth my time. The buyer TAKES ALL THE RISK! Its called "BUY LOW and SELL HIGHER". You can call it what you will, but thats capitalism. I forgot, I don't charge a 6% "tax" when I buy. That can also lower the price substantially. It's called FSBO, the word of the future. "

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edumacation wrote on Dec 4, 2008 2:14 PM:

" Can you read? Go read the links.
Do salesmen sell over priced houses to un-qualified borrowers and then turn around and buy the foreclosed house at a huge discount? IT's ALL LEGAL under current law? This must change? Buying and selling houses is not a hobby? It requires strict discipline. Maybe I should ALSO put up a website to buy "distressed" properties from down on the luck sellers? GO TO THE WEBSITE? See any familiar names? What is at that physical street address? HHmm? The website says it ALL? Guess who had a say "...an organization...".

What are YOU saying about that smiley faced guy on the site? They even use the word "D-divorce and D- default" ? Pretty grim business--real estate? Its called "OPPPORTUNITY" on the Real estate infomercials? Life is about risk and OPPORTUNITY? "

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commonsense1 wrote on Dec 4, 2008 1:58 PM:

" edumacation....After visiting the norcalforclosure site I found one local agent (not several), Tom Underhill who is offering to purchase "problem" properties. His offer would be based on a number that would take into consideration the costs of repair/maintenance, marketing, carrying costs, etc. What persective buyer/investor would not consider those factors? He never states he will buy it only at a wholesale price. "

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commonsense1 wrote on Dec 4, 2008 1:13 PM:

" edumcation......You proved my point. You're a "bottom-feeder" and you have no interest in paying a fair price for his property. You know why Joe wants to sell and he never used your "D" words to describe his situation. You're one of those folks that swoops in like a vulture and trys to take advantage of other people's misery. One more time...You said there are "several local Realtors" that have websites offering to pay cash for houses sold at wholesale prices. Who are these Realtors? "

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edumacation wrote on Dec 4, 2008 12:43 PM:

" To coomonsense1

I almost fell off my chair! Hurry while the site is still up, look at this link:

http://www.norcalforeclosure.com/testimonials.htm

Now visit this site:http://www.lodirealtors.org/officers.htm

Do you see a familiar face? Maybe he has a twin brother? "

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edumacation wrote on Dec 4, 2008 12:20 PM:

" To prove my point, visit the website in my earlier post: Look at the drop down inquiry form.

http://www.norcalforeclosure.com/sell.htm

Look at the item that says REASON FOR SELLING: This is KEY. If its a compelling life/death reason you have a MOTIVATED seller. If they have equity, you can prune the tree to the roots, and give them ONLY what they need to satisfy their need for money.

In the real estate business they have a saying: Its the FIVE D's that force a person to sell a house: DEATH, DEBT, DIVORCE, DESTITUTION, DISASTER.

These five D's are the engine that keeps the real estate business running during non-bubbles. Sellers going through tough times want to see happy smiling faces to make them feel that they are "okay". Buyers, who usually can't afford to buy a house, also want to see happy smiling faces that say YES. The Salesmans biggest job has little to do with the house. Its finding motivated sellers or buyers who will take a financial risk without questioning it. How long can you afford to pay PITI with no offset? "

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edumacation wrote on Dec 4, 2008 12:01 PM:

" To Joe and commonsense1: To a qualified buyer, the ONE most important factor to consider in EVALUATING the price of a house is to learn the answer to ONE QUESTION: WHY ARE YOU HONESTLY SELLING THE HOUSE? Most people don't casually decide to sell, they sell because of reason which important to them. If I learn the REAL reason for selling, it helps me in negotiating the price.

All money transactions distill to this simple fact. Party A wants to trade money for something that Party B wants to sell. Its very simple. The buyer wants the house MORE than the money, or the seller wants the money MORE than the house. If people don't want the house, for whatever reason, the price drops. This speaks nothing about the house, but only the money transaction.
House prices are highly variable. Salesman do everything they can to tie emotion to the experience. At the height of the bubble, some sellers required "love letters" from buyers or they wouldn't sell to them. Where are the "love letters" from sellers-giving me a reason to buy their problems? "

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edumacation wrote on Dec 4, 2008 11:32 AM:

" M2CW: I agree with most of what you said but one item: What if house prices drop precipitously between now and Spring 2009? If you were a financial advisor, that could be perilous advice. So, if you REALLY think that house prices will stay the same for the next 8-9 months, your recommendation makes sense. But, if you look at the trends, the bankers, loan companies, and government agencies debate whether the bottom is Winter of 2009 or winter of 2012. Many believe prices won't stabilize because of the "boomer effect". Many boomers have been using their homes as the main source of "savings". In order to get out cash, they must HELOC, sell, or do a reverse mortgage. When the amount of houses for sale increases it will put an additional downward pressure on house prices. There are not enough illegal aliens to buy all these houses, and the next bubble will require proof of a job and assets. No more warm body?--You are qualified for a million dollar loan. "

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edumacation wrote on Dec 4, 2008 11:18 AM:

" commonsense1:
1) Here is a website that you might wanty to visit:
http://www.norcalforeclosure.com/how.htm

Look at the email domain name. Who is it registered to? Business address is?

Don't you think buyers want to pay the SAME as this real estate business? Why not? The REAL message is "DON'T LIST ---let "me" buy it from you- AT A MUCH LOWER PRICE ie the price we honestly think its worth. I am also a cash buyer.

2) I want the exact same deal that the Realtors want? Much of the MLS consists of junk or career listing's that brokers don't want, or THEY would buy it.

3) If you see bread on sale do you add up three prices and pay the middle price? No! You buy value, AT THE LOWEST PRICE. That is capitalism 101.

Do markets have sales? Yes! Is it wrong to be a value buyer? NO, its the American way. As supply increases and demand goes down, prices will drop, unless there is interference by a monopoly (NAR-- FBI/ US DOJ lawsuit) or a government agency(FHA, FNMA,FDIC,FHFB, HUD, etc) "

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M2CW wrote on Dec 2, 2008 11:15 AM:

" Joe, price your home a little BELOW current market value and you will get multiple offers, which is exactly what the bank owned properties are doing right now. You will end up getting current market value for your property with the highest and best offer on the table. Remember, what you think it's worth and what someone is willing to buy it for are NOT the same. Your home is only worth what someone is willing to pay for it. If you can, wait until spring, this is the worst time to list a house, especially since the banks are trying to get rid of their inventory and you don't want to have to compete with them. "

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commonsense1 wrote on Dec 1, 2008 11:22 AM:

" edumacation....Just curious. Which local realtors have web sites offering to pay cash for homes? Are you going to pay Joe the fair market value for his home or do you want to steal it? How about having 3 appraisals done on "like-kind" property and you pay Joe the average price and close in 5 days? "

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edumacation wrote on Nov 30, 2008 11:30 AM:

" t jefferson. I penciled in your numbers from your estimate. Every house I sold in 1998, would be a "STEAL" at those estimated prices today. Guess what---prices have a long way to go down. You also forgot that houses are made of wood, nails, brick and conceret. They need work and money to keep them from falling apart. You can't use a HELOC for those expenses and make money over the long haul. Thats what flippers try to do--mostly unsuccessfully today. "

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edumacation wrote on Nov 30, 2008 11:07 AM:

" I don't like two story houses (they have less living area per advertised sq ft), but I can make you a cash offer- for the right price. It would be an advantage for you to let the listing expire before I look at it, that will save you at least 6%. I can close in 5 days depending on how backed up the County Recorders office is. Several local Realtors have websites--the other sides of their businesses- that advertise they will buy your house for CASH--at wholesale prices. They don't want ANY more listings- they are buried in them! It comes down to supply and demand. Demand is based on ability to qualify for a loan + interest in buying. Over half your of market is not qualified to buy. Even if you cut a deal, the loan appraisal by the mortgage company may/WILL BE LESS. You are lucky that you are not selling short. Don't count on the cash that you would have made if you sold in the summer of 2005. Those days are OVER! The people who are hurting today bought last year. "

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edumacation wrote on Nov 30, 2008 10:46 AM:

" contd: Today, you can buy NEW HOUSES in Detroit, for much less than building and development costs which are about 1/3-1/4 selling prices in California. but who wants to move to Detroit, unless you are retired or wealthy and don't need a job? You can buy a 1300 sq ft house today for ONE dollar, as long as you pay the property taxes on it, which are high due to high local government expenses on government and welfare. You won't find illegals buying up these houses. There are no giveaway welfare programs or pretend government jobs for them, plus the "hood" wouldn't like it. "

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edumacation wrote on Nov 30, 2008 10:40 AM:

" t jefferson: your suggestion could be accurate over a short period, but it comes down to a long term evaluation over many years. Case, Shiller and others have studied housing prices in several countries over 300 years. House prices over the long term only increase 0.2-1.2% maximum annually adjusted for inflation. Most people don't realize that buying a house doesn't guarantee an increase in value. Its the mortgage leverage they are buying. Once you factor in costs such as repairs, interest, insurance and boat loads of fees such as Realtor fees, it can easily be a losing proposition. A big issue is liquidity. You can't trade your house for cash, UNLESS THE PRICE IS RIGHT and you have equity. All others must try to sell it for more than they paid for it. You can let inflation make you feel "rich" or get lucky and buy low and sell high. Many mortgage holders (some homeowners), think that house prices will always go up. WRONG! Look around. If the USA economy goes into an economic deflation, house prices will keep dropping and may not stabilize for tens of years. "

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t jefferson wrote on Nov 30, 2008 10:10 AM:

" Lower your price 5K per week until it sells. Don't look to 2005 pricing, look instead to 1998 brought forward at 3.5%. So 100k in 1998 is worth 141K now not the 250K it was getting in 2005. If you house was 170k in 1998 it is worth 239K now. "

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edumacation wrote on Nov 30, 2008 9:33 AM:

" Price your house to sell within 90 days or whatever date you have decided. Never speculate that house prices will increase over the short term. If you listed your house three monhs ago correctly it would have been sold by now! The truth hurts. Do you want to list and hope ie career listing----or make a choice and control the sale today? Look at all the houses that have recently SOLD (last 30 days only). Price your house within the bottom 20% of price of these houses. Don't get emotional. If you wait, around you only throw away PITI and more money as the house DEPRECIATES. price it correctly---for your intended buyer, and sell quickly. Is it likely that a surgeon will buy your house? Who lives in your neighborhood, thats who your bueyers are. Motivate your Realtor to start working for you. The old days of armchair selling are over. Make them work for the commission, that your buyer will pay. "

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edumacation wrote on Nov 30, 2008 9:26 AM:

" contd: Look at CLOSE comparables in your neighborhood (perceived value determines asking price and selling price- IT IS NOT EQUITY). Look at the listings of houses that have SOLD within 30 Days, and be honest. The house may have a perceived value, but if qualified prospective buyers can't get a loan, or the loan takes too long to close (ie 90 day escrow), you are losing 3 months of PITI + expenses every 90 days, you can not sell the house. Here is what you do, visit EACH house that sells (closed) . Did the buyers buy the house or a mortgage? Important question. During the bubble, people were buying mortgages (low interest) not houses. Don't include investor purchases those throw off your values--some are high (flippers) and some are low (institutional investors).

Have your house appraised by an INDEPENDENT APPRAISER, never a "friend" of a Realtor or loan company.

Look at the cold hard truth and accept it. Determine today when you want to know that the house has been sold. Select a date in the future. There are "looky lou" buyers and "looky lou" sellers. "

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edumacation wrote on Nov 30, 2008 9:17 AM:

" Your situation can be easily solved. But lets look at the facts: You bought years ago and therefore have equity from down payment and accumulated principal mortgage payments. That equity is what you brought to the table on the deal. Everything else is dependent on the housing market on the day you sell. Now you can use the tax system to figure out your basis and deduct for the property taxes and improvements and upkeep. But that does NOT count when selling. Generally if you bought before 1998, and you have NO HELOCS seconds, thirds or liens AND if your immediate neighborhood is still desireable for the market of potential buyers, you are in good shape. Here are some strategies. Add up the amount you must pay for monthly PITI, lawn service, utilities, upkeep, fees. How much is this costing you per year? "

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edumacation wrote on Nov 30, 2008 9:06 AM:

" "Over the years, my house appreciated and the bank earned a small fortune in interest income."

Lets define some of your terms. your houses didn't do anything. REALITY: The house just sat there depreciating (as a mechanical system).

There are only four types of equity in your scenario: 1) Principal from down payment 2) Accumulated principal from all mortgage payments--if they included principal. 3) Equity due to inflation 4) Equity due to speculation. Add these four values up and that determines your equity. Any or more of these values can be a negative number, or a positive number.

A house doesn't just appreciate--in can look like at times, but that is a dangerous fantasy that bankers, mortgage companies and Realtors love to cultivate.

If you bought a house only one year ago with 30% down you could easily owe more than the house is worth today.

The "its not fair" attitude rises its head. Why me? Its because of one simple word- leverage. If you leverage an investment "up", that same leverage plus fees leverages down which cam end in catastrophic loss. "

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Patricia wrote on Nov 29, 2008 9:41 AM:

" Well said, Joe. Ever the optimist, I'm waiting for the dawn. "

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