The Real View

There are very profound fears that our credit markets are crumbling, and that life as we have known it may be in for serious change.

Now, as never before, we as real estate professionals need to help create solutions for our clients and bring sense to the market wherever and whenever we can.  We need to know not only available mortgage programs (and savvy mortgage pros), but also become familiar with creative financing and alternative ways of selling real estate.

One thing lenders could do immediately is to allow existing loans to become assumable.

Many agents are unfamiliar with assumable loans, and might wonder how they work.

Let's use a simple example: Home Seller has an outstanding mortgage balance of $150,000 and is willing to accept a $195,000 sales price. Home Buyer pays $45,000 plus closing fees and assumes the existing financing. Seller exits the transaction with that amount, less closing costs. Future mortgage payments are now made by Home Buyer to the loan servicer.

In some cases, lenders (and sometimes the Seller) might offer secondary financing to help with the difference between asking and sales price--as long as the buyers had a cash stake in the deal. This could be done via a simple second, an all-inclusive trust deed or wrap-around mortgage.

I can't help but wonder why mortgage lenders don't revive the assumable loan, help kick start the real estate market, and save at least a portion of their own and investors' portfolios in the process? Their investors would surely rather have their loans paid off by another borrower, rather than suffer near-certain loss in a foreclosure sale.

In many cases, sellers have no equity. Why not allow them to offer their mortgage debt (or renegotiated debt) as assumable financing for potential buyers? Lenders might be relieved to have mortgage payments brought current--and might even require the new buyer to deposit two or three month's payments with them as insurance against future default.

By allowing assumable financing, lenders would fare much better vis-à-vis short sales and foreclosures--and more homeowners would be able to save their credit and exit their homes with dignity. Most lenders now force homeowners to be in default with their mortgage before they will even consider a short sale or modification of terms.

It just makes sense to get the mortgage debt seamlessly transferred before it ever goes default.

And with the strangled liquidity in financial markets, it makes more sense than ever to transfer debt rather than forcing buyers to secure new financing--which may or may not be available.

Louis Cammarosano at the Home Gain Blog just posted this on Active Rain. The Home Gain Blog is another great site I visit for interesting real estate reading--and for which I sometimes write.

The issue of tightening real estate licensing is critical. Far too many untrained licensees (along with equally foolish folk on Wall Street) have done far too much damage to American homeowners and the real estate market.

 

Last week, I had the opportunity to interview Southern Califoria and Nevada real estate legend Bob Dyson. He has been in real estate for 40 years and has a long track record of success--ranging from owning the master national Red Carpet Real Estate franchise to Dyson & Dyson Real Estate in Southern California and Nevada, to Broker for Sotheby's International Realty in San Diego and Riverside Conties.

But the interview wasn't about Bob Dyson.

It was about a radical proposal that is quickly being embraced by Realtors, lenders and local Real Estate Boards.  We taped a total of four short interviews, but the last two will probably be of most interest to the Active Rain audience--and I am posting them here.

Why resort to radical resolutions?

Because, says Bob Dyson “This is a real estate depression–a serious, serious issue.”

He sees an immediate need to stabilize real estate markets and neighborhood values. He also believes the mortgage lending industry needs to get out of the “asset management” business, and instead focus attention on new loan originations.

So what to do with all those defaulted loans and pre-foreclosures?

That’s where Dyson’s proposed “American Incentive Resolution” saves the day.

How would it work?

1. The American Incentive Resolution Corporation (as a government entity) would buy defaulted loans from lenders at 50 percent of face value.

2. Re-market these homes through Realtors at retail market value.

3. Offer these homes to first time buyers and those whose credit and FICO scores have been damaged by short sales and foreclosures the last couple of years. The initial terms would be a 12-month lease-purchase, with all payments accruing to a down payment as long as payments are made on time. Lease payments would equal what loan principle, interest, taxes and insurance would be under normal loan terms at 5 percent interest. Initial move-in would entail first and last months’ payments.

4. At the end of 12 months, the lease would become a purchase with all payments made under terms of the lease being applied to the full down payment.

Some will argue "Be careful whom you make your protector lest they shall become your jailer." In other words, keep government out!

Bob would likely reply that "Better we oblige the government to offer these properties to the American public, than to spread the spoils among congressional cronies."

The first video below details Bob Dyson’s proposal for restoring neighborhood values and the real estate market, while the second  explains how YOU can involve your local board in helping to create and implement the American Incentive Resolution:

For additional reading: http://sandiegopreviews.com/2008/09/01/a-most-unorthodox-market-bob-dyson/

 

This Carlsbad home sold in less than three weeks back in 2003, and at that time we set a record for the highest price ever paid for this 1720 square-foot model: $446,000.

And what a Carlsbad listing it was–with a great story to boot.

This highly upgraded Poinsettia Heights townhome with views over Carlsbad to ocean was nothing short of what San Diego real estate buyers were seeking in those days. The wife, in decorating this Aviara home, dismissed all costs. She buffed it out with new diagonally-laid tile flooring downstairs, new granite kitchen, marble master bath, and a powder room whose ultimate cost had yet to be revealed to the husband. To appease him and redirect attention, another king’s ransom was spent on the garage with gleaming epoxy flooring, tool cabinets and over-the-top garage storage.

Located adjacent to the Carlsbad community of Aviara, Poinsettia Heights is a gated community near parks, the South Carlsbad State Beach, good schools and shopping.

At this time and as of this writing, there are 3 active listings in Poinsettia Heights, ranging in price from $499,000 to $585,000.

For current availabilities in gated Poinsettia Heights, Aviara, Carlsbad or other North County homes, call Mike or Roberta Murphy at 760-402-9101/9102 or toll free at 877-818-8197.