realtors already have a powerful political lobby, but they recently instituted a required member fee to pay for increased lobbying efforts. One more reason I will never join their organization.
Irvine Home Address … 18 GATEWOOD Irvine, CA 92604
Resale Home Price …… $349,999
This is your 5 minute warning
Burn all of your classified documents
And if cooler heads don't prevail
First strike from a political dead man
Megadeth — Blackmail the Universe
California Realtors to Pay Political Assessment
by Bob Hunt — September 7, 2010
When the 2011 dues billing cycle comes around a few months from now, members of the California Association of realtors® (CAr) will see a new assessment of $49 in addition to their regular dues. Labeled the "realtor® Action Assessment" (rAA), its purpose is to raise funds for CAr political activities. The assessment is not optional, although individuals will have a choice as to which way their $49 is to be directed. (1) It can go to CAr political action committees which provide funding support for candidates, or (2) it can go the general fund for political purposes such as "education and mobilizing members on issues of importance to the real estate industry and not to specific candidates."
Lobbyists are supposed to educate legislators about the impacts proposed legislation will have on a certain constituency so the legislator can make a sound decision based on facts… at least that is how it is supposed to work. In the real world, lobbyists most often "educate" candidates on how much money they donated to their campaigns during the last cycle and how much they will likely donate to their political opponents if they act contrary to their constituency's wishes. In short, lobbyists are extortionists.
The California Association of realtors like the National Association of realtors has a political action committee that employs lobbyists to educate politicians at every level of government. Usually, these activities are funded by optional donations to the PAC. Not anymore. Now the CAr is forcing members to pay a fee to fund their lobbying efforts.
Just about every California realtor® is aware of the fact that legislative activity constantly affects the real estate business. Moreover, most know that it is only because of CAr's involvement that the business hasn't been even more negatively affected than has been experienced.
That is not true. The realtor lobby supported the tax credits and other market props that have reduced sales rates by keeping price artificially inflated. This has greatly reduced realtor income and negatively impacted its members.
In the past year alone, CAr has influenced legislation on topics ranging from deficiency judgments to income tax withholding for independent contractors to point-of-sale retrofit requirements that would have drastically increased the cost of selling a home. The list goes on and on.
The Realtors®' legislative agenda is supported in three ways: through direct member involvement, by the lobbying efforts of CAr's legislative staff in Sacramento, and by the election of legislators who are disposed to have a favorable attitude to the business, tax, property rights, and land use issues that realtors® care about. All of these things cost money; and the election of legislators is what costs the most.
realtors pump much money into campaigns of politicians so that these politicians will owe them favorable legislation. If a politician were already favorably disposed to agree with the CAr, this arrangement would be symbiotic, but since most politicians are whores, the political donations are payoffs to buy votes on legislation. 
This is not a partisan issue. At both the national and the (California) state level, realtor® PAC funds are pretty evenly distributed between the parties. Many people have the perception that realtor issues tend to be on the Republican side, but this is not so. In the current state legislative session, 6 CAr-sponsored bills are being carried by Democrats, 2 by Republicans.
It's comforting to know that both Democrats and Republicans are equally corrupt.
It is practically a self-evident truth that CAr needs to raise more political-purpose money than it has currently been able to generate through strictly volunteer programs. The economic toll taken by the market downturn has been evident in this area as well as the more familiar ones. In the past six years voluntary participation in political-purpose fundraising has dropped from 37% of the membership to 20%. The amount of funds raised in 2009 was down approximately 50% from 2006. Once among the top 10 PACs in the state of California, CAr is now ranked number 37.
If donations are down, isn't that a sign that the political action committee is failing? If they were doing good work wouldn't their members be making more money and wouldn't they also be willing to donate money to the cause?
When people donate to charities, they do so because they believe in the work of that charity. If the charity is not doing good work, then donors withhold their money. Isn't that the way it is supposed to work? What makes political action committees any different? Why does the CAr think they have the right to force their members to put money toward something they don't believe in and do not support?
The realtor® Action Assessment was adopted by CAr's Board of Directors at their June meetings in Sacramento. Details about it have been on the web site car.org, and electronic newsletter notification has been sent to the members. No one should be surprised when the dues billing statements go out at the turn of the year. Inevitably, though, some will be.
No just will many members be surprised, many won't pay it, and if push comes to shove, many will chose to leave the organization rather than be forced to donate money to a political action committee that arguably does a poor job at serving the needs of its members and the broader society.
Zero percent down equity stripper in action
The previous owner was a classic Ponzi who extracted whatever the banks were willing to give him. When you look at what this guy did, it is astonishing that lenders allowed and encouraged this.
- This property was purchased for $350,000 on 1/28/2004. The owner used a $280,000 first mortgage, a $70,000 second mortgage, and a $0 down payment.
- On 3/7/2005 he refinanced with a $292,000 first mortgage. It's possible he paid off the second at this point, but it was most likely subordinated.
-
On 1/17/2007 he refinanced with a $366,000 Option ARM first mortgage with a 2.3% teaser rate. He only extracted $16,000, but considering he put nothing down, it was all free money.
- He quit paying in early 2009, but this servicer moved quickly, so he did not get much squatting time.
Foreclosure Record
Recording Date: 11/09/2009
Document Type: Notice of Sale
Foreclosure Record
Recording Date: 08/06/2009
Document Type: Notice of Default
The bank bought the property at auction on 12/7/2009, and they sat on it for almost 10 months before they sold it to our current flipper.
It pays to know the right people
The flipper (who is also the realtor) on this property bought it directly from Deutsche Bank National Trust Company. It was never advertised on the MLS. People with cash and the right connections can get deals like this — assuming you think the the price he paid was good. I don't think he will get this asking price, but his margin is fat enough to lower it plenty and still make money. I wonder if this realtor's political connections helped him get this deal?
Irvine Home Address … 18 GATEWOOD Irvine, CA 92604 
Resale Home Price … $349,999
Home Purchase Price … $262,500
Home Purchase Date …. 8/29/2010
Net Gain (Loss) ………. $66,499
Percent Change ………. 25.3%
Annual Appreciation … 400.0%
Cost of Ownership
————————————————-
$349,999 ………. Asking Price
$70,000 ………. 20% Down Conventional
4.34% …………… Mortgage Interest Rate
$279,999 ………. 30-Year Mortgage
$67,125 ………. Income Requirement
$1,392 ………. Monthly Mortgage Payment
$303 ………. Property Tax
$0 ………. Special Taxes and Levies (Mello Roos)
$29 ………. Homeowners Insurance
$312 ………. Homeowners Association Fees
============================================
$2,037 ………. Monthly Cash Outlays
-$132 ………. Tax Savings (% of Interest and Property Tax)
-$380 ………. Equity Hidden in Payment
$110 ………. Lost Income to Down Payment (net of taxes)
$44 ………. Maintenance and Replacement Reserves
============================================
$1,680 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$3,500 ………. Furnishing and Move In @1%
$3,500 ………. Closing Costs @1%
$2,800 ………… Interest Points @1% of Loan
$70,000 ………. Down Payment
============================================
$79,800 ………. Total Cash Costs
$25,700 ………… Emergency Cash Reserves
============================================
$105,500 ………. Total Savings Needed
Property Details for 18 GATEWOOD Irvine, CA 92604
——————————————————————————
Beds: 2
Baths: 1 full 1 part baths
Home size: 1,110 sq ft
($315 / sq ft)
Lot Size: 1,350 sq ft
Year Built: 1977
Days on Market: 16
Listing Updated: 40422
MLS Number: S629915
Property Type: Condominium, Residential
Community: Woodbridge
Tract: Othr
——————————————————————————
Magnificant Irvine Woodbridge 2 Story Condo. This quietly located condominium features two large bedrooms, a highly upgraded kitchen with stainless steel appliances and contemporary interior finishes. This home is turnkey, distinquished and nice, nice, nice!Seller is Motivated so submitt your best offer!!!
Magnificant? distinquished? submitt?
I hope you have enjoyed this week, and thank you for reading the Irvine Housing Blog: astutely observing the Irvine home market and combating California Kool-Aid since 2006.
Have a great weekend,
Irvine Renter
I also consider the option-arm as a form of equity withdrawal, as the principal owed increased. It is roughly 10k/yr in extra cash. Not huge in heloc terms, but a 10k/yr post-tax raise/bonus is real money to most people.
This property was bought at an REDC auction this summer. The property was occupied and it was the responsibility of the new owner to evict the tenants.
IR-was this really bought at an REDC auction? That would explain never making it to MLS. Surprised a flipper bought at REDC as those deals are hardly deals. In addition to the price of the home, I believe there are other fees so total outlay is greater.
I attended the auction in downtown LA and bid on this property but I couldn’t stomach going higher than $225,000 including the 5% buyer’s premium. This property sold for $250,000 + 5% buyer’s premium
Exactly, because REDC auctions allow financing and advertise for months in advance, they are rarely deals at all. More often they set the new market value for neighborhoods and trick people into thinking they’re getting a deal because they purchased “at auction”.
Really nice use of the Megadeth video to illustrate this conflict of interest situation.
Anyone knows the answer to this:
when people short selling their homes, are they still paying their mortgage while waiting?
If they’re not paying, then wouldn’t that trigger foreclosure and not a short selling anymore? (unless the bank decides to extend and pretend)
No, people are not paying their mortgages during a short sale. I know a few people who have went through the process and one who is trying to short sale now.
Banks don’t want to foreclose because at this point in time it is cheaper to allow someone else to take care of the property then to force them out and process another loss. Not too mention it would cause the huge correction everyone citizen so longs for, but the government and Wall St. are deathly afraid of.
But this is so mind boggling to me:
How can someone, whether it’s the bank or MBS investors, hold on to a nonperforming loan forever!!!???
WHO is paying or servicing the interest and principal on this loan?
WHERE is the source of money keep coming from to pay the MBS investors???
Greatly appreciate anyone with some insight on this.
…hold on to a nonperforming loan forever!!!???…
In addition, who pays property taxes, HOA
dues and maintenance?
If the county of Orange puts a lien on a
property for non-payment of taxes, where
is the point of inflection at which the
(2st TD) note holder cries Uncle?
My understanding is that a property tax
lien is superior even to the first trust deed?
Unclear about the HOA dues. Maybe someone
can clarify.
Is my understanding correct?
correction
I meant “1st TD” not “2st TD”
John,
It is mind boggling that this is going on.
The bank or the MBS investors can hold the asset as long as they wish. If the loan is non-performing, the bank is supposed to take a write down, but the FASB is allowing them to maintain the fantasy on their books that these loans will somehow get repaid. It is a sham.
Nobody is paying the interest and principal on the loan. The servicers are paying this money, but they are holding it against the MBS accounts, so in essence the MBS holders are paying themselves. Eventually, these MBS holders will be forced to recognize some massive write downs.
Sorry for keep belaboring the point but i’m so itching for the truth:
“FASB is allowing them to maintain the fantasy”
OK, so they use fancy accounting. but don’t you think at some point, the real money has to show up from somewhere? I guess the banks will not be exposed of their insolvency until there’s a bank run.
“The servicers are paying this money, but they are holding it against the MBS accounts, so in essence the MBS holders are paying themselves.”
But where is the money the servicers use to pay the MBS investors coming from? From their other source of revenue? (if so why are they still so profitable? Are they getting a loan?
One thing that amazes me is that this type of information are such well kept secrets. After all these years, there’s no leak, no tell all from disgruntle/fired employees?
John:
As I commented earlier this week, the banks get money at 0% interest from the Fed and the squatter becomes a free caretaker. The squatter is also most responsible for property taxes and HOA fees before the foreclosure is finalized.
I’ve been saying this for a long time now, and the blogger disagreed only to now change his tune.
The banks can hold on forever, why? Because they can, it’s their most lucrative option to stay in business and invest 0% money with make believe assets. They would be idiotic to do otherwise.
0% money invested in tbills, the longer this occurs the lower the risk premium on MBS and the lower mortgage rates go all backed by the tax payer.
Eventually inflation kicks in, and so does wage inflation. But wage inflation won’t happen for everyone, and unemployment goes up. Wage inflation only happens for the upper half which tends to be the majority of premium market buyers. And wage inflation is concentrated at the top eating level.
What is the end game 50 years from now? Who knows, civil war? The next 10 years should be pretty obvious for Irvine. Rates will decline and wage inflation will happen for the jobs
In demand. Sorry, not real estate related.
We are all paying. The Fed loans money to the banks at close to zero percent, and the banks turn around and deposit that at the Fed or in T-bills and collect interest. This free money pays the bank’s obligations. Meanwhile, those counting in interest get a pathetic interest rate. So, basically those who saved and hold cash are paying for it
http://www.nytimes.com/2010/09/09/business/economy/09rates.html
http://www.nytimes.com/2010/09/09/business/economy/09rates.html
Link keeps being cut. Go to nytimes.com and search for
“Falling Rates Aid Debtors, but Hamper Savers”
By GRAHAM BOWLEY
Published: September 8, 2010
It’s pretty sad that a flipper bought it for $267,000 just a few days ago and inflated his price so much, well it’s good for the flipper if he gets his asking price, but bad for a potential buyer who really likes the place but has to pay a $80K premium.
Regarding the down payment and income requirements, I don’t know a single person who has one year of their salary saved outside of their 401(k), especially Californians in the $70K household income bracket. That’s about $4K a month after taxes. It’s possible to save up a lot if you’re careful, but I’d wager that most people aren’t.
It’s more likely the flipper will take a steep hit. This is an ugly place. How long was it on the market before the last sale at $267K? It’s not likely someone will soon pay a premium over that, even if wanted the place that badly, which is doubtful.
I hope this flipper gets creamed.
A year’s salary in cash is a high hurdle. Just a couple years ago people would call you crazy for leaving a year’s salary in cash/savings and not “putting it to work” in some more “productive” asset. I think that attitude’s changed a bit now considering the importance of liquidity.
The Mrs. and I have 9+ months of expenses in cash/savings and I’m still not comfortable with that. We’re aggressively building the reserves for two reasons. The first is like everyone else – we want a greater feeling of security. The second is that we may consider refinancing within the next year or so and would need to bring a sizable check to the closing.
Yeah, during the boom no one cared what people paid before them because they were sure they would be getting a piece of the housing appreciation. Now I wonder if the mentality has changed. Why would anyone pay $349K if someone just paid $267K so recently, baring some major renovations/improvements?! Me, I wouldn’t. And I’d rather not help a flipper out.
IR:
That’s a good idea for a post: in a squat, foreclosure and/or auction, what ranking do property taxes and HOA fees get compared to noteholders?
And what strategies are those parties using to squeeze the most blood out of the turnip? 🙂
My understanding for CA is the RE taxes must be paid off by the “new buyer” at FC. In really bad areas, the property may be abandoned and sold to pay off RE taxes. For back due HOA, the HOA paying owner must bit it and pay for the FCed property. If a regular sale, the old owner should, but …. For condo with lots of back due bills, the new owner may be stuck with non-paying members. Some other states allow a lein on the FC purchasers, but that only in some states. You need to consult a local knowledgable professional. Some judges can rule otherwise and the cost goes way up to correct the judgement. Best to avoid those situations if possible.
Banks are delaying FC if:
1. Borrower is way under water as some NB property — 3 plus year of squatting when owing two or more million dollars above the FMV.
2. if the owner has a chance to refinance a defective loan or by a sale.
3. if FC will make their books look bad.
4. if the FC will lower their reserve to be insolvent.
5. if the loan is non-recourse or single action.
Banks will FC quickly if:
1. Borrower was responsible and has equity, especially if borrower lacks clout to put us a fuss.
2. The loan is not defective and owed by someone else — bank is just the servicer.
3. If the loan is recourse and judical recovery is possible.
IMHO.
The HOA and paying members get squeezed the most (no bailout), the future taxpayers will be squeezed, RE taxes will evenually get paid, banks are getting bailed out, the squatters are getting free housing.
A humorous take on the topic of lobbyists:
http://images.ucomics.com/comics/nq/2010/nq100902.gif
Includes irvine unified
Published: Sept. 10, 2010
Updated: 4:59 p.m.
ACLU suit: 6 O.C. school districts charge illegal fees
By FERMIN LEAL
THE ORANGE COUNTY REGISTER
http://www.ocregister.com/news/aclu-265945-unified-fees.html
NAR policies are a joke! Will Agents Stop Contributing to the Problem and Become Part of the Solution?
Both the federal home buyer tax credit and the California home buyer tax credit were bad policy. Moreover, any legislation meant to artificially delay price depreciation or support the market only delays recovery and is bad policy for agents, their clients, and the American public. During the first time homebuyer tax credit I told my clients that prices would fall by at least $8000 soon after the tax credit went away. In many areas I told them that people were paying $30,000- $40,000 more to save $8,000 in taxes, this proved correct when demand dropped and prices are now following since the tax credit went away.
Unfortunately for good agents, this policy was not only bad for America and their clients it will serve as more fuel for anti-agent sentiment. Despicably, many agents have become masters at creating an artificial sense of urgency to get their clients to buy. I saw numerous articles on active rain and in other places by agents describing to other agents how to use this tax credit to manipulate their clients. While if an agent is properly educating their client on rental parity, the importance of obtaining 15 or 30 year fixed financing, and the necessity to plan on a long term hold, ideally for the term of the loan, if the agent is in an area that the tax credit did not push the price up because of artificially low supply and shadow inventory, and the buyer is set on buying in the next 30-60 days regardless, there may be a reason for a buyer to take action this was probably not the case for 99% of agents that used this false sense of urgency.
Moreover, this is not the first time NAR was tricked into supporting policies that hurt the general public, agents, and their clients, with the only benefit going to big banks. NARs continued support of loan modification programs that make loan owners indentured servants for at least the next 10+ years, limits loan owners mobility and economic opportunities, and if it accomplishes it’s goal will reduce transaction volume, it’s a lose-lose for everyone except for the banks.
Moreover, the tax credit, is now hurting realtors that did not retire because there is an uncertainty in the market and many buyers are waiting for the next government incentive. If they come out with another incentive they will start a dangerous cycle. It’s also hurting flippers because demand was pushed forward and many flippers did not realize how much extra people would be willing to pay to save $8000 in taxes so they were buying in August use comparable sales from the tax incentive period and there’s less demand and more realistic buyers out there.
In reality, buyers will buy a home based upon their income. If prices drop, new buyers will be able to buy a bigger home or in nicer areas that they deserve for responsibly saving and waiting. Moreover, responsible sellers that are looking to re-trade will also be able to have more selection if they are moving up. Furthermore, although if an agents has an area that they farm and focus on and only lists properties it may affect their listing fee, however, there will likely be more transactions and the market will eventually normalize instead of stagnate.
Americans in general are undereducated economically and financially. Instead of taking advantage of this or being ignorant and part of the problem, if agents want to be considered professionals they need to create a higher standard. Requirements to become an agent should be made tougher, no agent living month to month should be allowed to work on commission, CAR and NAR need to stop creating and supporting policies that artificially support market prices at the expense of everyone except the big banks, and most of all agents and their organizations need to take a long look in the mirror and start putting their clients first. The average American does not understand mortgages, amortization, credit cards, compound interest, or many of the most important principles that are key to economic success. If real estate agents want to stay viable, they need to understand and educate their clients rather than manipulate them. Unless something changes realtors will be left wondering why they are not longer needed and we are going to have a massive issue when the generations of American’s that live on credit cards and pay option ARM loans hit retirement age.