Media-Driven Market

By JR Hafer

Those who keep abreast of what’s happening in the world by getting their information from the news media are behind the times. The media brings us dramatic words while describing news. Words like “underwater” to describe the current negative equity situation of homeowners.

Everyone knows that “upside down” indicates that one owes more than something is worth. However, the media in their effort to be more dramatic use the word “underwater”, which indicates to us, that we may need flood insurance.

The media sometimes use data that’s three to six months old and report information  as current. That type of reporting is disgusting and misleading at best, especially to those in the real estate industry who can inform you, in real time, what is currently happening. You may want to talk to a Realtor for current news on the real estate market.

Realtors know there is a time gap in reporting of the news regarding the health and condition of the real estate market. Realtors® are see the data, Realtors® feel it, they live it every day, they understand their marketing area. This world depends on the news media to give correct information. Therefore, it is a media-driven market.

News Flash! There is no flood in Polk county Florida… But there are over 50% of homeowners in a negative equity situation. Not underwater but “upside down”, in other words, they owe more than their homes are worth.

The average individual equity loss, over the last eighteen months, is 60k to 100k for Polk county residents. Their market values dropped almost 8% during the first quarter of 2009 due to short sales and bank-owned properties selling at “fire sale” prices.

Some news media outlets say: “The housing market is in a freefall and will not recover before the end of the year”. The truth is, the house hunters are trying to buy houses now, they are coming in droves, right now, but the banks have tightened their lending criteria so much folks are having a tough time getting loans unless their credit is almost flawless. 

Foreclosures are historically high and unemployment is higher than most report. Much higher, even double digit levels; But when the displaced self-employed is included and counted in the reports. Another flaw of the reporting media.   

The good news is: Buyers are searching for the great deals. Realtors® are seeing, in some cases, bidding situations occur due to multiple offers, which morph into bait and switch tactics and the banks are capitalizing on these situations which are increasing daily.  

Between bank-owned properties, short sales and other desperate situations, appraisals will not support much, if any, increases until those types of sales clear off the books, or thin out substantially.  Like everything else, the real estate market is cyclical and prices will rise again, this is inevitable.  

The media reports there are encouraging signs on the horizon. But, Realtors® will tell you the signs have arrived and contracts are being written. Hopefully, the smoke and mirror politics and the government handout programs are almost over. The American public will soon realize; the government throwing money at problem isn’t the answer.

It’s time for the banks to step up to the plate and stop changing the rules. I challenge the media to ask Realtors what’s going on and report today’s statistics today.

The media have the power to make presidents, control markets and drive an industry. They depend on, politicians and Wall Street statistics, and bank data to report the news. Aren’t they the very ones who got us into this mess in the first place?

But then they would only be reporting the news rather than making it. Indeed, it is truly a media-driven market.

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Chinese Drywall Misery

By JR Hafer 

 During the out of control housing boom of 2005 combined with the rebuilding of annihilated homes and other structures, after nine major hurricanes, the demand created a shortage of concrete, drywall and various building materials setting the stage for a perfect storm.

Have you noticed your jewelry excessively tarnished and your light and plumbing fixtures and door hinges corroding? Do you keep checking the garbage for rotten eggs? It could be your drywall. Yes, your drywall, it could also be making you sick and irritable.    

Drywall is an interior building material that replaced plastered walls in the 50s and 60s. Drywall is gypsum material sandwiched and pressure pressed between two sheets of paper dried in a kiln at 1700 degrees Fahrenheit.

Laboratory tests have identified volatile chemicals in drywall mostly manufactured in China and imported into the United States during 2001 through 2007. The chemicals identified as carbon disulfide, carbonyl sulfide and hydrogen sulfide are emitting sulfurous gases. These emissions have the aroma of rotten eggs.

The chemical gases emitted worsen with higher temperature and humidity. As a result of these emitted gaseous fumes, homeowners have contracted respiratory infections, skin rashes, severe headaches, watering eyes, sinus problems and nostril lesions and bleeding.

The drywall identified as manufactured in China causes copper and silver surfaces to corrode, turn black and have a powdery residue that is indicative of a chemical reaction with hydrogen sulfide.

There have been reports that some imported drywall could be radioactive as well.  This could very well be another nail in the coffin of our national economy and free wheeling lenders who have been collecting foreclosures like others collect antiques and artifacts.     

The problem of American drywall shortage was exacerbated by the rebuilding demands of nine hurricanes that hit Florida in 2004 and 2005. Over 550 million pounds of Chinese manufactured drywall was imported affecting over 100,000 homes.

Not all drywall manufactured in China is tainted and not all tainted drywall is marked as manufactured in China either. Some toxic drywall bears U. S. Company’s names too. It is not known if those were re-branded here but also made in China or not.  

Common sense would indicate that thousands of foreclosed houses that have been abandoned probably have Chinese drywall issues. If this is the case, then the toxic drywall issue could become another broadside hit to the lenders who have foreclosed on property and are trying to re-sell them on the market. The Department of Housing and Urban Development (HUD) is currently studying the problem.  

Meanwhile, scam artists have already started preying on the fears of homeowners and potential buyers with bogus remedies including test kits, ozone generators and chemical cleaners. It is important to note: there is no home test kit, chemical sprays nor air filters that can test or rectify the atmospheric problems caused by Chinese manufactured drywall.

Be cautious of anyone offering testing or remediation services for toxic drywall issues. At this time there are no tests, short of tearing out sections for testing by government agency laboratories. Contact local authorities and building code offices for advise regarding toxic drywall.

The noxious odor combined with corroded wires and health issues are signs of possible toxic drywall materials present in your home. A warning has been issued by the U.S. Consumer Protection Safety Commission, stating it is not safe to wash the walls or steam clean your floors and carpets if you suspect your home has the unsafe drywall.  

As of yet, there are no known deaths directly attributed to Chinese drywall and the long-term effects are unknown. However, there are factors to consider when investigating health problems that may be suspect and concurrent with moving into a newly constructed home during 2001 through 2008.

There are no easy remedies if you suspect that you have this toxic drywall problem in your house. If you are experiencing any physical ailments, including coughing, wheezing, excessive sneezing, eye irritation, sore throat, bloody nose dizziness, headaches and nausea which ease or cease upon leaving your home, you need to seek help. You should contact your physician right away.  

Every homeowner of houses constructed within the specified time period and having the symptoms mentioned should be aware of other potential problems as well, such as power outages, hot electrical switches, flickering lights, and unusual sounds. Odors and mild tingles should also cause you concern.   

If you have gas service in your home and you have these problems and gas odors, the possibilities of gas line corrosion is a serious concern. Contact your gas supplier immediately and vacate the premises. If you cannot contact the gas supplier’s office, call the fire department right away.

The toxic drywall problem is real and to this point has been downplayed but it is a dangerous brewing storm on the horizon one we shall all remember. We all should take note of this savage storm looming over us. The government doesn’t know what to do and right now there is nothing short of partial demolition, re-wiring and re-plumbing to cure the problem. It will affect us all in one way or the other, just wait and see.  Do we smell another bail out down the road maybe? It smells like something is rotten doesn’t it?

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  Short Sale Options

May Taint Realtors^®

 By JR Hafer 

 Over the years real estate agents have often been compared to used car salesmen. The comparison has naturally been resented, and on occasion given Realtorsâ reason to fiercely protect their professional reputations.

 One of these occasions is happening within today’s trend of “short sales”.

Admittedly, the potential homebuyers can get a fantastic deal on houses tendered as short sales, if the transactions are straight short sales, that is. Offers that are actually negotiated directly by the realtor with the mortgage holder, for a discounted rate.

Where the process gets contaminated and starts to stink is when an investor steps in with an option contract. Although it is not yet illegal for these investor “flippers” to get involved and make large profits on the deal, it sure does give a perception of a “shady deal”… which, in turn, seemingly taints the reputation of Realtor®.

When a homeowner gives an option and a power of attorney to an investor authorizing the investor to negotiate with the mortgage holder in order to settle for a low payoff, the investor offers the same house to the public for a higher price. This cuts out the homeowner and seems somewhat shady. The desperate homeowner gives up his equity in order to get free of the encumbrance and allows someone else to profit on his hard luck, thinking it is his only hope. The investor can walk away from the deal without penalty if it doesn’t close leaving the homeowner holding a bag of hopes in sinking sand. This just doesn’t feel right.

When a buyer agrees to purchase the house, the investor closes at the lower price with the mortgage holder, and at the same time sells to the new purchaser, at the higher figure, thus making a profit without actually holding the title for any time at all. This is called a double closing; from A to B to C type of closing.

In the best-case scenario these double closing transaction are difficult. Only 10% of these option deals ever close without complications. These complications give the new purchaser the perception of Realtors® having questionable ethics and lacking competency. The perception of the Realtors® ability to close the deal is naturally in question when the transaction sours and goes bad regardless of fault… That stinks!

Several years ago the Federal Housing Administration (FHA) made a ruling that investors must actually own a property for 90 days before they could sell it. This is called “seasoning the deed”. This was directly due to some unscrupulous investors buying up distress properties at a very low rate and without much improvement, turning right around selling it at a big profit.  

There is sometimes a very vague line between good old capitalism and opportunistic profiteers taking advantage of unknowing consumers who depend upon professional Realtors® to advise and guide them.  

The option contracts and double closings cannot be done with FHA financing. The Federal Housing Administration has deemed it unacceptable for a reason. That reason is assumed to be due to the perception and appearance of impropriety.

Realtors® must contend with short sales due to the amount of impending foreclosures. This can be a helpful thing for those who face foreclosure. However, with due diligence we can ascertain the ones that have the aroma of road kill and option contracts and give these shady deals a wide berth so we don’t get the stench on us that will taint our professional reputation.

Realtors® have the responsibility to serve the public and to remain above reproach and fiercely protect themselves from those who would skirt legality and gray areas in the name of greed, under the guise of helping the “poor unfortunate homeowner” who is on the cusp of losing their home.  

All Realtors® have a fiduciary responsibility to fully disclose all the factors of a short sale. This includes the option investor and the probable problems contained within these transactions.

Short Sales, by nature, are difficult without other mitigating factors. It is not a breach of the “steering” rule in making it clear to potential buyers why these types of transactions seldom work and some are a waste of time and effort in pursuing these deals.  

According to Webster’s New World Dictionary, the definition of taint is: 1- spoil, rot; 2- make morally corrupt, contamination.  

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 Our efforts endeavor to provide Realtors, potential buyers and sellers  the ability to keep a finger on the pulse beat of the local real estate market. Where other market watch reports are reported in generalities and seldom actually consider ”lag time” in their reporting, (which can be as much as three to six months).  This report is always current and relevant because of our participation in the central Florida real estate market.  Therefore, buyers and sellers can evaluate the trends and evaluate the tide of the current real estate movement, in order to make an educated decision whether to buy now or wait. Sellers on the other hand can be advised when the best time to sell might be indicated.

Unless potential sellers are very motivated by financial requirements or other urgent matters, now is not the time to sell. There is a “Glut” of houses on the market at present, in other words it is most definitely a “Buyer’s market” and the purchase prices are lower. If you (the potential seller) can wait until the market stabilizes and the inventory has thinned out, the market values will return. Those of us who have lost a lot of equity in our homes should keep one thing in mind: The market values will come back eventually and when it does you will recover your equity. It may take several years but it will all come back.

Buyers, now is the time to buy. There are some fantastic buys on the market at present. The pre-foreclosures have caused a great many “Short Sales” ( Short sales are when the owner owes more than the property is actually worth and the bank agrees to take less than what is owed on the property just to clear their books. It usually is around 80% of the mortgage). Bank owned properties ( foreclosures) are sold at bargain prices for two reasons. First, the banks are competing with other sellers and they want to move the houses rather than own and maintain them; second, the banks want to sell the foreclosed homes in a hurry and are willing to take less than the market value. I continue to see fantastic buys all around central Florida right now.

The market values drop when so many buyers make “lowball” offers and due to the desperation of the sellers these offers are accepted. This purchase (along with all the other accepted lowball purchases) becomes a comparable for the appraisers to set market values. Until the inventory of foreclosures and desperate sellers have been thinned out, the market values will not start to return until at least a year later, because of the criteria of comparables for appraisers need to be current and within a year. Now is indeed a great time to buy. The market has bottomed out and prices are about as low as they are going to go.

All comments and suggestions are welcomed.

Your input regarding these issues are important and I value your opinion.

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