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Author Archive: Irvine Renter

Lenders are supposed to be the adults in lending transactions. They have superior knowledge and experience, and it's their money at risk; therefore, they should bear more responsibility when things go wrong. People of good conscious must apportion blame for the housing bubble appropriately to craft public policy to prevent a recurrence or provide financial relief. As with any public policy issue, activists on both sides polarized the issue based on their world view. Activists on the Left portray the evil banks as taking advantage of hapless borrowers thus entitling these borrowers mortgage relief or absolution for strategic default. Self-serving borrowers side with the political left because they want free money in the form of debt relief. Activists on the…[READ MORE]

realtors are supposed to be experts and marketing. Sellers pay them 6% of the value of their homes for this expertise -- or lack thereof. Although many realtors are upstanding business people with strong ethics and empathy for their clients, many others are not. Collectively, the association that represents realtors is a dysfunctional, highly-manipulative group. Since I began writing about real estate matters nearly 10 years ago, I refused to capitalize the letter "r" in realtor. Such capitalization would be a sign of respect I don't believe the association warrants. In short, I think realtor associations suck. The association in Orange County sued me once, so perhaps that biases my judgement. (See: OC realtors seek to silence free speech by…[READ MORE]

Full-service brokerage may be the worst way to sell real estate, except for all the others. The Internet obliterated travel agents. It was easy to ordinary people to disintermediate travel agents, and as it turned out, obtaining advice on travel from someone who's been there isn't very valuable. So do real estate agents continue to thrive? What value do they provide beyond the functions people can perform on the Internet? Some people — many people — can benefit from having an agent as a leader and guide them to a closing. Yesterday, we explored the for-sale-by-owner option and today we are going to look at utilizing a full-commission broker. The pros of using a full-service brokerage Once an owner has…[READ MORE]

Cash listing services provide sellers the ability to lower their commission costs while still obtaining MLS exposure, but sellers must still do most of the work. Sellers who eschew real estate agents must overcome a lack of exposure. Putting a sign in the front yard is generally not sufficient exposure to ensure a seller obtained the highest and best offer for their property. Many will post on Craigslist or other classified ad services, but many buyers don't look there, so these methods often come up short. In order to obtain the best exposure for any potential sale, the owner must show the property where buyers actually look: that means listing on the MLS. Cash Listing Services I still consider Cash…[READ MORE]

Homeowners can save the 6% commission and sell their homes on their own, but it's more difficult than most people think. realtors commissions are too high. Does the work they do really warrant 6% of the sales price? On a $1,000,000 home, which is increasingly common in Coastal California, the commission is $60,000! Many ordinary people don't make that in an whole year. It's very tempting to look for lower-cost alternatives -- or the lowest cost alternative off all: selling a house without a realtor. While this is tempting, it's not as easy as just refusing to pay real estate agents. One of the first problems would-be sellers face is valuing their home. Sellers almost universally believe their properties are…[READ MORE]

US lenders completed 6,324,545 foreclosures over the last ten years, and it should have been worse. The mortgage and foreclosure debacle of 2008 was cut short by government intervention. Is the mortgage and foreclosure crisis resolved or merely delayed? Most people believe the mortgage and foreclosure crisis of 2008 is completely resolved, a misperception fostered by a financial media eager to disseminate good news. Most people believe an improving economy created jobs for struggling borrowers, and those hard-working Americans cured their loans of past-due payments: all is well. While the image of the noble American borrower recovering from the perils of the Great Recession appeals to our sense of collective pride, reality is somewhat less noble. Most borrowers were hopelessly overextended before the…[READ MORE]

Republican Jeb Hensarling, an industry shill who funds his campaigns from too-big-too-fail banks, is the Capitol Hill voice of the financial services industry in Washington. Now that the US taxpayer directly insures over 80% of the loans in the housing market, the ultimate financial coup for the too-big-too-fail banks would be a relaxation of lending standards allowing them to underwrite profitable, high-risk loans at taxpayer expense. The financial services industry spends millions lobbying Washington to remove the taxpayer protections in place that prevent unsound lending with taxpayer backing. If they were to succeed, they would inflate another massive housing bubble, profit from the origination and servicing fees, and when it implodes, they would leave taxpayers holding the bag. Through their…[READ MORE]

Many people truly don't understand by helping "struggling borrowers" was a bad idea. It was. It encourages even more risk taking. Many issues compete for our attention in the wake of the housing bust. However, the importance of these issues is not equal. Underlying most of them is the central problem of the housing bust: moral hazard. Every decision we make in life has consequences. If we save regularly and invest wisely, the consequences are wealth and peace of mind. If we spend foolishly and speculate wildly, the consequences are periods of feast and famine, delusions of grandeur, enormous entitlements, and when times are tough, unbearable stress. Positive results come from good decisions and visa versa. That’s how people distinguish…[READ MORE]

Other necessary costs of ownership consume a quarter to half the amount borrowers could potentially put toward loan payments. When lenders calculate how much they are willing to loan to any particular borrower, they measure the borrowers income from wages and other sources and calculate how much of that monthly income is available to pay the debt. One limitation on borrowing is the front-end ratio, generally 31% of verifiable gross income. Lenders assume that a borrower can afford to spend 31% of their gross income on all housing related expenses and still have enough money left over to pay all other obligations and have a life. This 31% is called PITI, or principal, interest, taxes, and insurance. The lender is primarily…[READ MORE]

Low or falling mortgage interest rates are better for housing costs than high or rising rates. From a consumers point of view, higher interest rates are bad because borrowing money becomes more expensive. All things being equal, higher mortgage interest rates make for a higher cost of ownership and visa versa. When potential homebuyers actively look to purchase a home, shopping around for the lowest rate can save them thousands of dollars over the life of the loan. The Consumer Financial Protection Bureau launched a Rate Checker to help consumers verify if the rate they are quoted is good or not. Since rising mortgage interest rates raises borrowing costs, it's also detrimental to home prices, so nobody in real estate…[READ MORE]


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In Memoriam: Tony Bliss 1966-2012