The Wall Street Journal recently reported that the oprices of houses are Up, and Down. Depending on where.

Seems like everyone jusst wants to ad their own shpin on a story that has no right, wrong, left or middle.

“With the National Association of Realtors reporting that home prices rose in about half of U.S. metropolitan areas in the last three months of 2010, it’s easy to think that that the housing market is showing some signs of recovery. “Home sales clearly recovered in the latter part of 2010,” Lawrence Yun, the NAR’s ever-optimistic economist says in a statement.

But the proverbial grain of salt is in order, given many other sources report prices continue falling. The Journal recently reported that home values declined in all of the 28 major metropolitan areas tracked during the fourth quarter when compared to a year earlier, and repeat-sales indexes such as the S&P/Case Shiller index have shown that prices declined in October and November.

The Realtors are looking at a different measure, median prices, which show that prices for home resales rose in about half of the nation’s 152 metro areas during the October-December quarter. Prices rose in 78 cities, fell in 71 and were unchanged in three. The group says the national median price for single-family homes was $170,600 in the fourth quarter of 2010, up 0.2% from $170,300 a year earlier.
The Washington, DC, area gained 8.1%. There were decliners: Portland, Ore., came in down 3.8% and Seattle dipped 3.9%.
Data from Zillow, however, show bigger declines in those three markets. Washington fell 5.8%, Portland declined 12.1% and Seattle tumbled 11.9%.

Why the difference? When comparing the fourth quarter of 2010 to the prior-year period, the Realtors use median price, the point where half of sales fall above and half fall below. Last year’s data still include buyers tapping a tax credit of up to $8,000. Many of those sales were first-time buyers, who typically buy lower-priced houses. The expired credit isn’t in this year’s numbers, so median prices in some markets could be higher from a year ago because the more higher-priced sales were added to the “mix” of sales.

Most industry watchers agree that the housing market must endure more pain before it can fully recover. Lending standards are tight, preventing would-be buyers from inking deals. The foreclosure crisis, meanwhile, continues with no end in sight. Many economists and housing analysts expect home prices to fall an additional 5% to 10% before prices hit the long-awaited bottom later this year or early next year.

By Alan Zibel, WSJ.com; Dawn Wotapka and Nick Timiraos contributed to this article.

…and were made privy to the offerings of 2 dozen or so vendors (like HLF).

What I found encouraging is that – even in the face of one of the most difficult markets in my career life (35 years — how did that happen?) – the level of enthusiasm remained high.

Sure, we’re all working twice as hard for half the money. But that’s what separates a professional from a wanna-be.

Keeping on top of your game, keeping informed of what’s going on. That’s the key to success in this, and in every, market.

Here’s the link to register for listings from BofA.
Who knows…

https://realestateagent.bankofamerica.com/baapp.aspx

This last weekend, the New Your Times published a story that, quite frankly, shows why the financial markets are so f*$#%’d up.

You’ve got to love the FDIC “investigator” who got a bug up his butt, and sought out, and sent a secret investigator (posing as a hot chick trolling for a guy) to dupe a borrower into “confessing” he’d lied on a “liar loan” (what we in the biz refer to as a “stated income” loan).

Really?

Really!

This is absolutely ridiculous.

Why the hell aren’t these precious Federal Resoutrces spend tracking down and throwing the Financial Executives that perpetrated this fraud, in jail?

Read on, and be astounded!

http://www.nytimes.com/2011/03/26/business/26nocera.html

The Wall Street Journal reports:

“Sales of previously occupied homes in the U.S. sank by 9.6% in February and prices fell to the lowest level in nearly nine years, indications that the market remains depressed.

Existing-home sales decreased from a month earlier to a seasonally adjusted annual rate of 4.88 million, the lowest level since November, the National Association of Realtors said Monday.

The results were worse than forecast. Economists surveyed by Dow Jones Newswires had expected home sales to decline by 3.9% to an annual rate of 5.15 million.

The results called into question whether the U.S. housing market is recovering or falling further.”

Geez, we could have told them that. That’s why, in part, C.A.R. published its “open letter” to the lenders urging them to get off the dime and get short sales approved more quickly. Hmmm. I wonder if anyone out there is listening?

According to Fair Issac Company (My FICO) a company that provides analytic, decision making, and credit scoring services for financial service companies a credit score will go down by 40 to 110 points after being 30 days late. Further, the scoring drop will increase to 70 to 135 points after 90 days late on a mortgage payment.

The average scoring drop in a short sale, foreclosure or deed in lieu is 85 to 160 points. You need to keep in mind that in both short sales and foreclosure it is possible that the credit score drop could be closer to 200-300 points.

Credit scoring factors vary from individual to individual. The scoring change is heavily dependent on where the credit score was before the negative event took place. Both a short sale and foreclosure are considered a loan that was not paid as agreed.

March 10, 2011

An important message from the CALIFORNIA ASSOCIATION OF REALTORS®:

I write on behalf of the CALIFORNIA ASSOCIATION OF REALTORS®, whose 170,000 members continue to witness the devastating consequences the home foreclosure crisis is having on California’s families, neighborhoods, and communities on a daily basis.

The number of families affected by foreclosure is staggering. During the past three years, more than 640,000 Californians have lost their homes. With the number of homeowners who owe more than their home is worth hovering at 30 percent, experts predict there will be many more foreclosures in 2011 and 2012. Unless we take immediate, aggressive action to assist these homeowners, any meaningful recovery in the housing market and overall economy will continue to be delayed.

Tragically, only a fraction of those who face foreclosure will remain in their homes when all is said and done. Those whose incomes and financial circumstances meet strict guidelines may qualify for a loan modification that will reduce their monthly payment to more affordable levels. Yet the federal Home Affordable Modification Program (HAMP) is expected to prevent only 700,000 to 800,000 foreclosures nationwide before it expires at the end of 2012, and the program does little to help those homeowners who are unemployed or otherwise no longer able to meet their financial commitments. Their last hope is to sell their home, which often means convincing their lender or the investor who “owns” the loan (and, in many cases, the holder of a second mortgage lien and the mortgage insurer) to accept a “short sale.”

With a short sale, homeowners with a proven hardship negotiate an agreement to sell their home for less than the balance owed. Although not every homeowner or mortgage is eligible, those who are able to finalize a short sale avoid a foreclosure on their credit record and can move on with their lives. Last year, 20 percent of home sales in our state involved short sales.

Short sales can play an important role in our state’s economic recovery by accelerating the pace of home sales and reducing the inventory of bank-owned homes on the market. There are other benefits as well. Homebuyers who can qualify for a mortgage at today’s low interest rates also are able to purchase a home at below-market prices. Banks get a nonperforming asset off their books and avoid the headaches associated with disposing of assets they don’t want to own in the first place. Neighborhoods have fewer abandoned homes, and local businesses have more customers with money to spend.

Unfortunately, many homeowners are unable to successfully negotiate a short sale. According to a recent survey of 2,150 California REALTORS® who have assisted clients with a short sale, only three out of five transactions closed – even when there was an interested and qualified buyer.

What’s the problem? For one, no two mortgage agreements are the same, so it can be difficult to standardize short sale processes and procedures. Many homeowners have second mortgages, which further complicate matters. Then there’s the challenge of convincing multiple parties to take a financial loss or, in the case of loan servicers, to forego fees they otherwise might earn during the course of the foreclosure process. Poor and slow service by many banks and servicers has only exacerbated the problem. Horror stories abound from potential homebuyers and REALTORS® forced to wait 90 or more days for a response to a purchase offer or being required to fax short sale applications or other paperwork as many as 50 times. These delays discourage potential homebuyers from considering a short sale purchase and undermine the process for those who short sales are intended to benefit – the hundreds of thousands of families facing foreclosure.

Increasing the number of closed short sales by speeding up and streamlining the short sale process is one important way we can help California families avoid foreclosure and move our economy closer to recovery. That’s why the California Association of REALTORS® is taking steps to enable more families to arrange a short sale. Recently, we advocated for improvements to short sale guidelines established under the federal Home Affordable Foreclosure Alternative (HAFA) program. We’re meeting with major banks, U.S. Treasury officials, government-sponsored entities (including Fannie Mae and Freddie Mac), and others to urge them to standardize processes, comply with federal guidelines, improve communication with other stakeholders and increase staffing with the goal of eliminating service issues. We’ve also offered our members training in every aspect of the short sale process so they can assist their clients.

But we can’t do it alone. That’s why we’re focusing the spotlight on short sales and calling on regulators, elected officials, nonprofits, business organizations, companies, and individuals with a stake in California’s economic future to resolve this issue and others that get in the way of a recovery. It won’t be easy, and some compromises will be required. The important thing is that we need to act today. Our families and our communities can’t wait any longer.

Sincerely,

Beth L. Peerce
President
CALIFORNIA ASSOCIATION OF REALTORS®

While there will always be opportunities for the knowledgeable and dilligent to make money flipping properties, declining prices and increasing loan costs will shrink the profit margins available as flippers find it harder to re-sell.

First it was the (unreasonable) restriction on the number of loans an investor could get, then it was the (reasonable) restriction of Uncle Fluffy purchases. The Fed only wants you to flip so many, you see.

In contrast, those who buy for their home or for rental investment could benefit from 1) locking in the profit margin between current prices and actual value (I know, whatever THAT is?); and 2) potentially higher rental values as the ranks of renters swell with people who cannot obtain a loan to buy their own home.

So, “right now” may be the ideal time to buy real estate, not for quick profit but for the long-term stability and financial growth that real estate has historically provided as a part of an overall financial plan.

Arbitration is arbitrary.

Originally conceived as an instrument of community empowerment, arbitration quickly degenerated into a travesty of the American judicial system.

The framers of arbitration were the progenitors of the modern legal apparatus — lawyers, judges and politicians who restructured the fundamental concepts of the judiciary and placed the power of adjudication into the hands of every citizen who desired to contract for an alternative to litigation. Thus, arbitration promises the justice provided by the American legal system but is all too often a risky and uncertain venture — a crapshoot.

Although arbitration in America originated in the colonies as the preferred form of non-legal dispute resolution, arbitration as we know it today is an effort to circumvent jury awards by the dominant organized trade groups and corporate enterprises, which began during the industrial revolution and reached near ubiquity in the late 1970s. Today, arbitration is losing favor among the rank and file of the California real estate trade union, and for good reason.

The concept of alternative dispute resolution (ADR) arose due to society’s general dissatisfaction with the complex and often costly judicial system. If parties agreed to arbitrate their disputes, they avoided court entirely by giving a “neutral” third party the authority to make a final and binding decision for them.

However, it quickly became evident that the absence of judicial accountability in an arbitrator’s decision was not worth the binding arbitration bargain they contracted for when arbitrators misinterpreted the law or gave erroneous awards — leaving disputants with an unpredictable and arbitrary decision with no chance of remedy.

Discretion outside the law.

One of the primary avenues for introducing arbitration into the mainstream real estate market was the widespread use and acceptance of ADR imposed on members of the predominant California real estate trade union. Arbitration became their favored method of ADR in real estate transaction disputes as it provided trade union members recourse for resolving disputes among themselves without the need to squander their resources on costly litigation.

More importantly, the advent of arbitration allowed trade union leaders to maintain control over their constituents by requiring all disputes be settled internally without the influence and involvement of state or federal governments, and outside the influence of the law. [The People v. National Association of Realtors (1984) 155 CA4th 578]

Thus, members of the trade union are required to settle disputes amongst each other via arbitration. Since what’s good for the goose is good for the gander, arbitration has also crept into the real estate forms published by the trade unions and now the unlicensed, ordinary citizens looking to buy or sell real estate have become subsumed into the arbitration machinery.

Editor’s note — As a matter of policy, first tuesday’s [and HANSON LAW FIRM'S] purchase agreements and addenda have never contained an arbitration provision or an attorney fee provision in an effort to reduce the risk of litigation to brokers and agents by making litigation less economically feasible for sellers and buyers along with their attorneys, and to better protect buyers and sellers from the perils of arbitration.
The real estate market has since been flooded with agents and brokers trained to reassure their buyers and sellers that initialing the arbitration provision is a “standard” practice, a custom that bears multiple benefits with no risks — that is, if any guidance is given at all. [For more information regarding erroneous real estate customs, see the November 2010 first tuesday article, Holmes v. Summer: dilatory disclosures and the damage done.]

Most homebuyers (and misguided real estate agents) know little about arbitration beyond its guise of being less costly and more efficient than litigation. Arbitration has become one of the sacred cows of real estate transactions. The myth of arbitration’s benefits has become so ingrained that it is no longer questioned — buyers and sellers do not know enough to inquire and agents are not equipped with sufficient knowledge and awareness by their brokers to advise. Thus, the virtuous view of arbitration is passed down as tradition, while widespread ignorance of its risks persists among agents.

What follows is a rigorous review and analysis of recent case decisions and common scenarios in real estate transactions that bear out the full extent of the inherently flawed and ultimately irredeemable approach to arbitration as an appropriate method of dispute resolution.

Lost right to correct a decision gone awry

The chief flaw of arbitration lies in the loss of the disputants’ right to judicial review. Parties involved in arbitration often enter this action with hopes for all the benefits offered by the American justice system and none of the costs. Rather, these naïve disputants all too often invest as much time and money as they would have in litigation, only to be scorned by a misinterpretation of the law or a host of other fatal flaws.

The chief flaw of arbitration lies in the loss of the disputants’ right to judicial review.Consider a seller who enters into a listing agreement with a real estate broker, negotiated by the broker’s listing agent. The listing agreement contains a provision calling for disputes to be submitted to binding arbitration — no judicial oversight permitted.

A buyer is located and a purchase agreement offer is submitted by another agent employed by the same broker, called a selling agent. Both the agents and the broker are aware the buyer is financially unstable and may encounter difficulties closing the transaction.

However, confirmation of the buyer’s creditworthiness and net worth are not made the subject of a contingency provision by the selling agent who prepared his buyer’s offer. More importantly, the listing agent does not include a further approval contingency provision in a counteroffer. The clearing of such a contingency would have put the seller on notice that the buyer’s financial status needed his further approval (or cancellation of the purchase agreement), if the buyer’s creditworthiness proved unsatisfactory.

When the listing agent, acting alone, submits the buyer’s offer to the seller, the buyer’s financial status is not discussed even though the listing agent was duty-bound to the seller to disclose it. The supervising broker fails to catch or correct the oversight. The seller accepts the purchase agreement offer.

Later, the buyer fails to close the transaction due to his disabling financial condition, resulting in the seller losing money on a resale. The seller discovers that the listing agent, broker and selling agent all knew of the buyer’s financial condition and failed to advise him of this fact.

The seller makes a demand on the broker and both agents for his losses resulting from the failed transaction. The seller claims the buyer’s financial condition interfered with the buyer’s ability to perform and thus was a material fact in the transaction known by the agents and broker who failed to disclose it at the time of acceptance.

The dispute is submitted to binding arbitration. The arbitrator awards money damages to the seller based on the professional misconduct of the listing agent and employing broker for failure to disclose their knowledge of the buyer’s unstable financial status on acceptance.

Further, the arbitrator erroneously issues the seller a money award against the selling agent, ruling the selling agent and the listing agent were “partners” since they shared in the fee the broker received on the transaction. Thus, the selling agent is improperly held liable as a partner of the listing agent for the seller’s money losses resulting from the misconduct of the listing agent and the broker.

The selling agent then seeks to vacate the portion of the arbitration award holding him liable as a “partner” of the listing agent, claiming the arbitrator incorrectly applied partnership law to a real estate agency and employment relationship.

Can the award against the selling agent be corrected by a court due to the arbitrator’s erroneous application of partnership and agency law?

No! An arbitrator’s award, based on an erroneous application of law, is not subject to judicial review. The requirement for judicial review of the arbitrator’s award was not included in the wording of the arbitration provision. The arbitrator acted within his powers granted by the arbitration provision, even though he applied the wrong law and produced an erroneous result.

A court of law confronted with a binding arbitration agreement without a provision for judicial review cannot review the arbitrator’s award for errors of fact or law even if the error is obvious to the court and causes substantial injustice when the court enters judgment for collection of the award. [Hall v. Superior Court (1993) 18 CA4th 427]

Unless the arbitration provision states an arbitration award is “subject to judicial review,” as in all fairness it must, the award resulting from arbitration brought under the clause is binding and final. Without judicial review of an award in an arbitration action, the parties cannot be assured the award will be either fair or correct. Currently, the prevailing arbitration provision used in purportedly “standard” purchase agreements has not yet evolved to include language allowing for judicial review.

Copyright © 2010 by first tuesday Realty Publications, Inc. Readers are encouraged to reprint or distribute this information with credit given to the first tuesday Journal Online — P.O. Box 20069, Riverside, CA 92516.

We recently EZined about an October 2010 case where the court found liability for a listing broker for failure to disclose the transaction was a short sale.  We disagreed with the court – which found liability.

Not everyone agrees with us.

For instance, Peter D from Ventura says:

Quote:  ”You are full of shit!  Fraud is fraud!!

“Any property that is under water MUST be disclosed to buyer as a short sale!  Failure of a realtor or broker to disclose that the home is under water any may be subject to short sale is wrong!!!!!!!!!

You cannot agree to sell you home for less than it’s worth….only a lender can do that!  Realtor and broker should be sued!!!!!!!!!!!

“The court ruled correctly!!!!

GO F yourself and get me off this &^%$# mailing list right now!!!!!!!!!=”       End Quote