Are you curious how people spent their HELOCs? I am. Let’s see if anyone will share their experiences.
Since this is turning into HELOC abuse week here at the IHB, I
thought I would share yet another one (They are not difficult to find). It is a high-end property in Turtle Ridge with a WTF asking price.
It doesn’t mean much it doesn’t mean anything at all the life I’ve left behind me is a cold room I’ve crossed the last line from where I can’t return where every step I took in faith betrayed me and led me from my home
The lure of free money led many people astray. They all had faith in
the Gods of market pricing and credit availability. There was an
absolute certainty among most people that real estate could only go up,
and opportunities to serial refinance large debts would always be
there. Each refinancing added to their troubles until they reached a
point of no return where they could not possibly pay back the money
they borrowed. Every step they took down this road was met with
betrayal, and it led them away from their homes. Now these people sit
in their rental pondering the life they left behind wondering if they
will ever see that free-money lifestyle again. They won’t.
One of the great things about an anonymous blog is that people can
tell the truth if they want without fear of embarrassment. I would like
to take advantage of that today and ask people to admit to some of the
items they spent HELOC money on.
Earlier this week in the comments, I mentioned that I have been
contemplating writing another book. I am tentatively titling it House
Spenders: Mortgage Fraud, Predatory Borrowing, Refinance Abuse and
other Cautionary Tales from The Great Housing Bubble. I think the title
and tag line describes what I want to accomplish. I will recycle some
of the material from The Great Housing Bubble, but I plan to add a
discussion on the morality of walking away from debt, an analysis of
personal Ponzi Scheme financing, and up to 100 HELOC abuse posts from
the IHB (I feel I need a lot of them to people do not think it is a
rare and isolated occurrence).
I have been discussing my idea for my next book with my wife, and
she suggested that I get some interviews or comments from people who
really did spend money they got from their house. We speculate a lot on
the blog about what people spent it on, but we have few first-hand
accounts. With that preamble, I ask you,
On what did you spend your HELOC money?
You take me in no questions asked you strip away the ugliness that surrounds me (who are you?)
{book}
Since this is turning into HELOC abuse week here at the IHB, I
thought I would share yet another one (They are not difficult to find).
Romantic, Tuscan villa with panoramic views. Over $500,000 in upgrades.
Best location on quiet cul-de-sac. Gourmet kitchen w. granite counters
and Viking appliances. Dramatic Cathedral beamed ceilings in entry and
formal living room. Master is large with gorgeous marble master bath.
Stunning back yard with more spectacular views, stone bar with BBQ,
refridge, side burner and sink. Great for outdoor entertaining.
Exclusive guard gated Turtle Ridge.
Note the feeble attempt to justify this asking price by pointing out the amount spent on upgrades. Upgrades from what? Did this woman spend over a million to buy the property and then spend $500,000 improving it? You could tear the house down and rebuild it for that.
This property was purchased on 8/27/2004 for $1,025,000. (Does this look like a million dollar property to you?) The owner used a $575,648 first mortgage, a $346,000 second mortgage, and a $103,352 downpayment.
On 12/7/2004, barely two months later, the property was refinanced with a $942,000 first mortgage pulling out about $20,000 of the downpayment money.
On 1/31/2005, the owner opened a HELOC for $228,000. She did not take out much of it.
On 8/24/2005, she refinanced with a $1,000,000 first mortgage.
On 10/3/2006 she opened a HELOC for $440,000. She must have taken out a significant amount because this property is listed as a short sale.
Total property debt is $1,440,000
Total mortgage equity withdrawal is $518,352 including her $103,352 downpayment.
So now we have another Turtle Ridge dreamer thinking her house has appreciated by 10% since 2004. I guess Turtle Ridge is different because the rest of Irvine is at or below 2004 pricing. Wells Fargo is hoping that is the case. This “conservative” lender is the brilliant party behind the $440,000 HELOC on this property. If it sells for its asking price (not a chance), and if a 6% commission is paid, the total loss to Wells Fargo will be $265,000.
As a reminder, our question of the day is:
On what did you spend your HELOC money?
{book}
It doesn’t mean much it doesn’t mean anything at all the life I’ve left behind me is a cold room I’ve crossed the last line from where I can’t return where every step I took in faith betrayed me and led me from my home
And sweet surrender is all that I have to give
You take me in no questions asked you strip away the ugliness that surrounds me (who are you?) are you an angel? am I already that gone? I only hope that I won’t disappoint you when I’m down here on my knees (who are you?) And sweet surrender is all that I have to give
I have written many times on this blog about the upcoming foreclosure problem due to ARM resets.
I have posted the available statistics and presented all the
data-driven arguments about why this is going to be a problem. However,
today I am going to ask you to think about this issue more intuitively.
Based on what you know about human nature, I think you can see how big
this problem is.
Today’s featured property is a median-sized 3/3 condo where the onwer managed to extract almost $300,000 in HELOC money.
Im going to be a happy idiot And struggle for the legal tender Where the ads take aim and lay their claim To the heart and the soul of the spender
I have written many times on this blog about the upcoming foreclosure problem due to ARM resets.
I have posted the available statistics and presented all the
data-driven arguments about why this is going to be a problem. However,
today I am going to ask you to think about this issue more intuitively.
Based on what you know about human nature, I think you can see how big
this problem is.
In the short run, prices in any market are purely driven by supply
and demand. Right now, the available inventory in Irvine is low, so
despite the decline in demand caused by tighter lending standards and
job losses, prices have not dropped as much as they should. Supply and
demand are still in balance. If the inventory were to increase (which
it will) this does not necessarily cause prices to drop. If the sellers
are unmotivated, large inventories will cap any appreciation, but it
does not force prices lower. It is when sellers become very motivated
that prices really start to drop.
Lenders and builders are motivated sellers. They must sell their inventory. The builders have pulled back construction to record low levels,
so this leaves the lenders as the main source of must-sell inventory.
Therefore, the real question for future pricing is how much
lender-owned inventory will we have?
{book}
Lender inventory is created by the foreclosure process. When a house
is auctioned at a foreclosure, the lender will bid the price up to a
pre-determined level according to its loss mitigation procedures. They
hope not to buy the property at auction. Unfortunately, since prices
are so inflated, and since the first mortgages are so large, lenders
end up buying the bulk of foreclosures at auction.
The sources of these foreclosures are borrowers who default on their
mortgages. We have discussed many of the motivating factors behind
borrower defaults, but these mostly boil down to the fact that these
borrowers have more debt than they can either service or pay off. Those
borrowers who are likely to default can be broken down into two
categories: 1. Those who bought at the peak and paid too much. 2. Those
who borrowed at the peak and owe too much. It is this latter category
that gets so much attention at the IHB: HELOC abusers.
I have posted profiles of HELOC abuse day after day here on the IHB.
It has been eye-opening to many that this practice was so widespread.
At first many people were incredulous that anyone would behave that
way. Then many people wrote it off as an extreme example of an isolated
behavior. Now I think most realize that many, many people were doing
this. Based on what I see in the property records, I believe this was
the rule rather than the exception.
This is where I ask you to think about human nature to get a feel
for how large the problem is. Yesterday I wrote about the natural
feelings of jealousy people have when they see others spending so much
money. There is a widespread desire to “keep up with the Jones’s”.
During the bubble when everyone was buying houses and feeling rich,
there was enormous peer pressure to enjoy the good life. This was fed
into by the marketing machine of lenders touting the great lifestyle
one could obtain through HELOCs and refinancing. Couple all these
pressures with the widespread belief that this money was free because
house prices would go up forever, and there is little to stop people
from taking this money.
Think about your own experience and emotions. It takes an iron will and self-discipline to stop from taking this money, and that is only if you believe you shouldn’t.
When you really think about what occurred, it is more surprising that
everyone did not do this. It is not logical to think that only a few
people got caught up in this. It is far more likely that only a few
people did not get caught up in it. Based on what I see in my
daily search for properties to profile, if it is for sale now, there is
an 80% chance that the seller either bought at the peak or added to
their mortgage. I am not exaggerating.
So when you think about how big the foreclosure problem is going to be (it is currently understated), think about basic human nature. Do you think many people borrowed themselves into oblivion? I do.
Im going to rent myself a house In the shade of the freeway Im going to pack my lunch in the morning And go to work each day And when the evening rolls around Ill go on home and lay my body down And when the morning light comes streaming in Ill get up and do it again Amen Say it again Amen
Super spacious 3 bedrom 2.5 bath unit boasts over 1,700 square feet.
Direct access two car garage with brand new garage door installed.
Inside laundry conveniently located on 2nd Floor. Beautiful marble
flooring throughout first floor. Nicely tiled fireplace. Kitchen is
nice and bright with ceramic tile. Close to great shopping and
Excellent School District!
IMO, this is probably within $50,000 to $75,000 of its bottom value. It would probably rent for $2,500.
As you might have guessed, today’s featured property is a case of HELOC abuse.
The property was purchased on 12/13/200 for $313,000. The owners used a $234,700 first mortage, a $62,550 second mortgage, and a $15,750 downpayment.
On 12/21/2001, they refinanced with a $346,500 first mortgage. I imagine that extra $50,000 made for a Merry Christmas…
On 9/11/2202, they opened a stand-alone second for $45,000.
On 11/15/2002, they refinanced with a $375,000 first mortgage.
On 10/7/2003, they opened a stand-alone second for $20,000 and a HELOC for $50,000.
On 1/10/2005 they opened a HELOC for $25,000.
On 2/11/2005, they refinanced with a $590,000 first mortgage.
Total property debt was $590,000.
Total mortgage equity withdrawal was $292,750 including their tiny downpayment.
These people put $15,750 into a property for about 1 year, and they took out $292,750 over the next 5 years. Pretty good return on investment, wouldn’t you say? It is not hard to see why houses in California are so desirable.
This property was taken back by the lender on 9/24/2008 for $508,500. Three months later, it is now on the market. If this property sells for its asking price, and if a 6% commission is paid, the total loss to the lender will be $120,094. Not to worry though, the borrowers still made almost $300,000 on the deal…
{book}
Im going to rent myself a house In the shade of the freeway Im going to pack my lunch in the morning And go to work each day And when the evening rolls around Ill go on home and lay my body down And when the morning light comes streaming in Ill get up and do it again Amen Say it again Amen
Caught between the longing for love And the struggle for the legal tender Where the sirens sing and the church bells ring And the junk man pounds his fender Where the veterans dream of the fight Fast asleep at the traffic light And the children solemnly wait For the ice cream vendor Out into the cool of the evening Strolls the pretender He knows that all his hopes and dreams Begin and end there
Im going to be a happy idiot And struggle for the legal tender Where the ads take aim and lay their claim To the heart and the soul of the spender And believe in whatever may lie In those things that money can buy Thought true love could have been a contender Are you there? Say a prayer for the pretender Who started out so young and strong Only to surrender
Find a ticket, win a lottery, Scoop the pearls up from the sea Cash them in and buy you all the things you need.
I had a moment of jealousy this weekend, albeit a bit delayed. Let me explain.
On Saturday, my family and I went to the entertainment center on
Crown Valley Parkway and the 5. We were going to have a family lunch
there, but when we went up to El Torrito Grill,
it was a vacant shell. The restaurant had closed its doors. I looked
across the promenade, and the Versace Italian Restaurant was reduced to
a ghostly imprint on the wall where its signage used to be. We walked
past a number of vacant stores on our way out. The signs of the
recession were unmistakable.
Gross Domestic Product with and without the effect of Mortgage Equity Withdrawal
On Sunday, we all went to South Coast Plaza. It was a ghost town. I
had to remind myself that it was a weekend. As I reflected on what I
had seen at these two commercial districts, I thought back to how
crowded these same venues were during the housing bubble. I also
thought about all the HELOC abuse posts I have done on the IHB. The
connection between the borrowed money these people were spending and
the reduced economic activity seemed more tangible. I was witnessing an
economy without mortgage equity withdrawal, and it was not very
vibrant. In fact it was dead.
As I contemplated the strength of the connection between borrowed
money and our local economic prosperity, I began to think about all the
HELOC abusers who got to spend this free money. They are not paying any
of this money back. They are all walking from their responsibilities or
praying they can pass them off to someone else. It really was a party
on free money: a party I missed because I did not buy a home during the
frenzy.
Something crept in to my awareness. Something dark that I held deep
inside. There was a little voice in me who was crying out, “I WANT MY
FREE MONEY!” At that moment I felt jealousy toward all the HELOC
abusing spenders I had seen during the bubble. It was something that I
did not feel (or did not acknowledge) when the bubble was inflating.
Perhaps it was my ignorance to where the money was coming from, perhaps
it was my own spiritual training to feel joy for another’s good
fortune, or perhaps I simply suppressed my feelings. No matter the
reason for my lack of jealousy at the time, in that one instant on
Sunday, I realized that some part of me wanted that free money too.
Mortgage Equity Withdrawal 1991-2007
The logical adult in me recognizes that this money was not free.
These people are paying with lowered credit scores, the emotional
fallout of losing their homes, and most difficult of all, the
adjustment to a lifestyle not fueled by free-money spending. I
certainly do not envy any of those circumstances, and anyone who took
out this free money and spent it has to deal with these realities.
However, the emotional child in me wants what he wants when he wants
it; he wants free money. I know because I heard this voice clearly on
Sunday.
I certainly have no regrets about not playing the free money game. I
would not trade places with any of those people who were spending
during the bubble who were conspicuously absent from the stores this
weekend. The hangover from their house party is quite debilitating.
{book}
One interesting phenomenon concerning people’s perception of real
estate is this ongoing connection to free money. In my opinion, there
is a widespread belief in our local culture that house prices are
temporarily depressed due to the economy, and as soon as the economy
recovers so will house prices. This is a faulty perception.
The reality is that house prices were temporarily inflated, and the
falling house prices are a return to value. True value was not the
pricing seen at the top of the bubble. We are not experiencing a
downward departure from value. When the economy recovers, it will serve
to stabilize prices at fundamental valuations, but the likelihood of a
quick rally back to bubble levels is pretty low — unless of course
lenders and investors want to give away a trillion dollars again.
That is exactly what people either want to have happen or believe
will happen: lenders and investors are going to give away more free
money.
Psychology does not change overnight. The crashing house prices have
changed the psychology somewhat, but there are still enough kool-aid
intoxicated people out there to absorb the current inventory and keep
prices elevated far above fundamentals. There is only one real reason
anyone is buying right now: they believe prices have bottomed, and they
do not want to miss their chance at ownership — they want to make sure
they get access to that free money coming in the future.
There are always some people who buy because they want to provide
shelter for their family, but these are not the people dominating the
market. The declining prices have kept away the buyers looking for
quick appreciation, but it has not kept away the kool aid intoxicated
with a somewhat longer timeframe for ownership.
The psychology of buyers will change slowly as prices continue to
fall, but the lure of free money is very strong. Until those lingering
memories fade away, people will continue to buy to obtain it. Will the
lenders be willing to give out this free money again? Will the
government allow them to? I believe the answer on both counts is “no”.
Our banking system is insolvent because of this practice, so they will
be hesitant to do the stupid things that lost them so much money, and
now that the US taxpayer is on the hook for much of the losses, it
seems likely that politicians will regulate many of these practices out
of existence.
I have no doubt that California buyers would create a new bubble
full of free money handouts if given the chance. Let’s hope the lenders
and our government prevents it — at least until I buy a house, and I
can get some of that free money…
Today’s featured property was this owner’s personal piggy bank. She
would raid it periodically, and now that the piggy bank is empty, she
is unloading the property.
You might find a REO or Short Sale for less, but you will not find a
home as meticulously maintained and with as many upgrades as this home
-at this price!! Some of the upgrades done within the last two and half
years are: Paint and carpet, energy efficient plantation shutters,
porcelain tile in the kitchen and bathroom, dishwasher and faucet in
kitchen, sinks and faucets in the bathroom, ac/heat unit and 50 gal.
water heater. You’ll also be happy to have a garden window in the
kitchen, washer/dryer hookup in closet, ceiling fan in dining area,
smooth ceilings, professionally installed alarm and fire system and a
garage. Off the master bedroom you will find a separate sink and vanity
in addition to the one full bath. All this plus a ‘pet friendly’
community. Who could ask for anything more?
At least they didn’t call this a gourmet kitchen. It looks more like an airplane galley.
Notice the $900 greed indicator in the asking price.
Redfin calls this a short sale, but based on what I see in the property records it isn’t. After years of HELOC abuse, it is close, and it may yet be a short sale, but as of today, it doesn’t appear to be one.
This property was purchased in the last bubble on 11/20/1989 for $161,000. The owner’s financing details on the original purchase are not available.
On 11/9/1999, there was a first mortgage for $158,150. This was probably a refinance once the property was no longer underwater from the first bubble.
On 4/8/2003, the first mortgage was refinanced for $216,000.
On 8/27/2004, the first mortgage was refinanced for $235,000.
On 8/2/2006, the first mortgage was refinanced for $280,000.
On 12/27/2006, the first mortgage was refinanced for $314,500.
On 1/22/2008, the first mortgage was refinanced for $317,500.
We can all speculate as to why this person needed the money or what she spent it on. Perhaps she developed a chronic illness as prices began to rise that required periodic visits to the housing ATM. Who knows? The fact is she took out the money because she could. It was made available to her, and she did not see any downside to spending it. Worst case scenario, she would just sell the property — which is what she is doing now. Hopefully, for her, someone will come along and pay her asking price and pay off her debts. It is too bad the ATM has shut off for her. I imagine her buyer thinks the ATM will start working for them soon enough.
{book}
Every night before I go to sleep Find a ticket, win a lottery, Scoop the pearls up from the sea Cash them in and buy you all the things you need.
Every night before I rest my head See those dollar bills go swirling ’round my bed. I know they’re stolen, but I don’t feel bad. I take that money, buy you things you never had.
Oh, baby, it would mean so much to me, Oh, baby, to buy you all the things you need for free. I’ll buy you a jet plane, baby, Get you on a higher plane to a jet stream And take you through the stratosphere And check out the planets there and then take you down Deep where it’s hot, hot in Arabia, babia, then cool, cold fields of snow And we’ll roll, dream, roll, dream, roll, roll, dream, dream. When we dream it, when we dream it, when we dream it, We’ll dream it, dream it for free, free money, Free money, free money, free money, free money, free money, free money.
Every night before I go to sleep Find a ticket, win a lottery. Every night before I rest my head See those dollar bills go swirling ’round my bed.
Oh, baby, it would mean so much to me, Baby, I know our troubles will be gone. Oh, I know our troubles will be gone, goin’ gone If we dream, dream, dream for free. And when we dream it, when we dream it, when we dream it, Let’s dream it, we’ll dream it for free, free money, Free money, free money, free money, Free money, free money, free money, free. Free Money — Patti Smith
The current business model for selling real estate needs to change. The collapse of the housing bubble may be what causes a major shift in the way real estate is sold in the United States.
Today’s featured property was purchased by us at auction. IndyMac,
which is now owned by the US taxpayer, bought this property, and now
they are trying to get some of their money back.
Of our elaborate plans, the end Of everything that stands, the end
I got out my crystal ball this weekend and gazed into the future of
the residential real estate sales business. I foresee the end of the 6%
sales commission model.
The 6% Business Model
When a seller signs a listing agreement with a realtor, the
commission is typically 6%. This commission is split between the
buyer’s broker and the listing broker. Each one gets 3%. This
commission is often further split between the broker and the
salesperson. Each one gets 1.5%. Each real estate commission could
potentially get split into 4 pieces each representing 1.5% of the sales
price. This structure supports a great many people — too many.
The 6% sales commission business model only survives for two
reasons: 1. The National Association of Realtors (NAR) lobbies every
level of government to maintain their advantage, and 2. The NAR
controls market data through the Multiple Listing Service (MLS).
It is hard to say what the future is for the NAR lobbying efforts.
I, for one, have been suggesting that the NAR be regulated by the
Securities and Exchange Commission (SEC) due to their propensity to
routinely make false statements regarding the financial performance of
housing as an investment class. When people stop to examine the role of
the NAR in the inflation of the housing bubble, the power of their
lobby may be pushed back by public opinion. Of course, they were just
as responsible for helping inflate the coastal bubble of the late 80s,
and they managed to convince people the deflation of the bubble was due
to the economy. The realtors were blameless, of course. Perhaps they
will get lucky and avoid responsibility again in the eyes of the public.
The big problem for the NAR and their business model is the
free-flow of information on the internet. The internet is taking away
the exclusivity of their information. Eventually, this factor alone
would lead to the death of this sales model. Competition for
commissions among all those with data access who are not subject to the
cartel arrangement of the NAR would cause commissions to fall.
We already see this among the buyer’s brokerages like Redfin who are
offering 1% buy-side sales commissions instead of the usual 3%. Redfin
and other discount, buy-side brokerages like them have already chipped
away at half the commission structure. The only thing missing is a new
business model to chip away at the sell-side of the equation. That is
where today’s post comes in.
Problems with the Current Model
In the 6% business model, the realtor is totally responsible for the
sales and marketing effort. Any staging, photography, advertising or
other resources devoted to the marketing effort comes out of the
realtor’s pocket. If there is no transaction, the realtor does not get
paid, and any sums spent in marketing efforts is gone. There is no risk
to the seller in this business model as the risk of a sale resulting in
a commission is entirely on the realtor.
This creates a number of incentives that do not work very well.
Since all the financial risk is on the realtor, their incentive is
to do as little as possible. Even though there is a fiduciary
responsibility to market the property, realtors often do nothing that
requires an outlay of money. They will take their own poorly-staged
photographs and write the awful descriptions I lampoon on a daily
basis. They will sign up for whatever free marketing is available, and
do little else that costs them money.
Realtors are not entirely to blame for this behavior. Since owners
have no risk, and since they are not personally invested in the
process, they often behave in ways that inhibit a transaction from
taking place.
Owners will list their homes for sale purely for vanity. They put a
WTF asking price on the property so they can brag about how much it is
worth.
Owners are sometimes very greedy. They put a WTF asking price on the
property to make sure they extract every last penny from the sale.
Prices outside the realm of possibility simply waste everyone’s time —
and the realtor’s marketing dollars.
Owners do not always stage the property well or keep it clean for
showings. If a realtor has to show a pigsty, it does not help
facilitate a sale.
Owners are not always emotionally ready to sell their property. This
often causes them to behave in ways that prevent a sale without their
even realizing it. Owners may know they need to sell, so they list a
property, but unless they want to sell, it will not happen.
The Pay for Marketing Model
The business model I propose changes these incentives. It would have the following characteristics:
Sellers contract with realtors for marketing services.
A 1% commission is paid to the listing agent if there is a sale.
The buy-side commission is set by the seller ranging from 1% on up.
Contracting between the potential seller and the listing agent takes
the risk away from realtors and compensates them for their marketing
efforts, whether or not a sale occurs. It changes the mindset
of sellers. Once a seller starts spending money to sell their house,
they are far more motivated and committed to completing the transaction.
There is a 1% sell-side commission to provide additional incentive
for the realtor to perform their marketing and sales duties well. It is
nice to know they are making enough to cover their expenses and make a
few bucks through the marketing program, but the commission structure
is still necessary to motivate them properly.
The seller also gets to determine the buy-side commission. A typical
commission would be 1% similar to what Redfin makes on its buy-side
activities. However, if the seller is particularly motivated, they can
increase the buy-side commission to attract more attention to their
listing.
How It Works
Can you picture what will be So limitless and free
The business model of a consultant is fairly simple: you write a
scope of work detailing what will be done, and you list the deliverable
products you will produce. The purchaser of these services agrees to
pay for these services as work proceeds and deliverables are produced.
If sell-side realtors embrace a marketing consultant business model,
with a 1% sales commission incentive bonus, they would have limited
risk of spending money without getting paid (every consultant has this
risk), they would not be starving to death in the lean times, and they
have some upside potential if they do the marketing job well enough to
make a sale happen. The advantage to sellers is obvious: a 1%
commission plus direct marketing expenses is much less expensive than
paying a full 3% on the listing side of the commission structure. It is
truly a win-win.
A good realtor or property marketing company can devise a number of
marketing plans to suit any budget. The minimum plan would contain
whatever services the realtor felt was essential to facilitate a home
sale. It is a waste of time to do less than this. Each realtor or
marketing company can devise their own plans and cost structure. They
could even keep track on statistics on each plan’s success (did it
sell, and how fast). Since the focus is on tasks and deliverables, the
seller of the property who is contracting for these services can easily
verify if the services are actually being performed. As stated
previously, the seller pays for these services whether or not a sale
occurs.
For instance, a realtor may have a minimum package that is one step
above a for-sale-by-owner effort. The property can be photographed by
the realtor who also writes the description and loads it into the MLS.
For an extra $1,000 the property can be professionally staged and
photographed, and a professional copywriter can write a description.
For more money, the property can be included in various real estate
advertising publications. I think you get the idea. A full menu of
possible marketing possibilities can be put together into packages or
sold to the property seller a-la-carte.
The savings for the seller would be enormous. For example, the
typical 6% commission on a $500,000 property is $30,000. This comes
right out of the seller’s pocket at the closing table. If the seller
were to contract with a realtor for $2,500 in direct marketing (which
would buy a lot of marketing), a 1% sell-side commission, and a 1%
buy-side commission, the seller would be spending $2,500 trying to
facilitate the sale (a motivating risk to the seller) and $10,000 in
commissions ($5,000 to the listing, sell-side broker, and $5,000 to the
buy-side broker). Instead of costing $30,000, the sale costs the seller
$12,500. That is a 59% reduction in cost to the seller.
{book}
There will be resistance to this plan on the part of some realtors
who would prefer to continue to get 3%-6% for doing little or nothing.
Those that have been enjoying the free ride will have the most to lose.
However, this has not stopped Redfin from taking 2/3 of the commission
out of the buy-side of the transaction. If a person or organization
with vision, good marketing skills, and a basic understanding of the
consulting business model were to go after the sell-side, I don’t think
there is much that would stop them.
I am not a marketing expert, so I am not the one to do it, but
perhaps one of the readers of this blog is. I hope someone does this —
at least by the time I am a seller again…
This is the end Beautiful friend This is the end
Today’s featured property was purchased by us at auction. IndyMac,
which is now owned by the US taxpayer, bought this property, and now
they are trying to get some of their money back.
Great price for this townhome. Needs TLC. It has 4 bedrooms and 2.5
bathrooms. tile and carpet flooring. Good size living room with
fireplace. Oak kitchen cabinets. Huge master bedroom with fireplace.
Enclosed den. Direct garage access. Subject property is being sold in
its as is condition without any warranties expressed or implied.
Lately, I have been trying to look at properties as if their prices were approaching reality. Even with the big discount, this property is still grossly overpriced. I might become interested at $420,000, but at $631,000… not.
This property was purchased on 12/20/2006 for $870,000. The owner used a $696,000 first mortgage, a $130,500 second mortgage, and a $43,500 downpayment. The owner went into default, and the property was purchased by INDYMAC FEDERAL BANK FSB on 12/10/2008 for $552,758. That sale represents a 37% drop from the peak.
If this property sells for its asking price, and if a 6% commission is paid, the total loss on the property will be $276,014. I, you and every US taxpayer will lose $232,514. The original owner lost $43,500.
{book}
This is the end Beautiful friend This is the end My only friend, the end
Of our elaborate plans, the end Of everything that stands, the end No safety or surprise, the end Ill never look into your eyes…again
Can you picture what will be So limitless and free Desperately in need…of some…strangers hand In a…desperate land
Lost in a roman…wilderness of pain And all the children are insane All the children are insane Waiting for the summer rain, yeah
Theres danger on the edge of town Ride the kings highway, baby Weird scenes inside the gold mine Ride the highway west, baby
You’re face to face With the Man who Sold the World
I have been working on expanding the reach of The Great Housing Bubble, and I would like to tell you more about what is going on. As many of you have probably noticed, we have a new eCourse offering in the sidebar of the IHB. This is a no-cost eCourse that you may opt out of at any time. If you choose to sign up, you will receive the entire text of The Great Housing Bubble over the course of 16 emails. There is nothing to lose.
Like all free offers, there is a catch. There are some emails asking you to buy the book, and there is an ad at the bottom of each email. The emails come frequently at first, but then they slow down to one per week. It takes 3 full months to obtain all the text emails. However, if you are patient, and if you want to read the whole book in small, bursts to help you get through it, this is a good way to do it. And of course the best part is that it is totally free.
I am still offering the full-text eBook for $4.95. It is a great way to review the whole text of The Great Housing Bubble without spending much money. However, this ebook cannot be printed, so to complete the book, you will be reading 250 pages of text from a computer screen.
The new offering I am most excited about is the self-taught eCourse. This is the format best suited to really learning about the housing bubble. When you sign up, you will receive a link to a printable version of the eBook. You can print this out to read and review at your leisure. Then over the course of 16 days, you will receive the full text of The Great Housing Bubble in email form. This will remind you to read the material and it breaks it down into small pieces you can easily get through. Also, the emails contain the useful end notes where I provide more depth on the subject matter.
Of course, everyone who wants an attractive reference on the subject should obtain the book itself. Amazon now has the book on sale for $13.57, a full 32% discount off the $19.95 retail price.
Free Offers
The Great Housing Bubble has the answers!
See for yourself with our great FREE offers…
Free eCourse!
Sign up for our free 16-part eCourse. A series of emails will be
delivered to you with the complete text of The Great Housing Bubble.
There is no charge, and you can stop the emails at any time. You have
nothing to lose and everything to gain. Sign up now!
Free PDFs!
These PDFs are completely free. Each one contains a different
section of The Great Housing Bubble. They are a great way to preview
the work.
Do you want the book, but you are unsure if you want to spend $19.95? What if I told you there was a way to get the complete text for much, much less? Well, there is. You can download the ebook.
Get this full-text eBook for the amazingly low price of just $4.95!
Self-Taught eCourse
Have you ever purchased a book or an ebook but failed to read it? We
have designed a program to help. Our self-taught eCourse combines the
full-text ebook with regular full-text emails. The eBook version with
the self-taught course is printable so you can obtain a hard copy to
facilitate easy reading. Also, when you sign up for the eCourse, you
will receive our 16-part eCourse emailed to you once a day for 16 days.
This breaks down the work into small sections which are easy to read
and retain. If you are serious about learning about The Great Housing
Bubble, this eCourse is the way to go.
Get this self-taught eCourse for only $9.95!
Paperback on Amazon.com
The paperback version of this book is available for sale at
Amazon.com. This book is destined to become the authoritative reference
for one of the most dramatic events of our times.
This book is available for only $19.95! $13.57!
Amazon has gone crazy.
Buy now!
This price will not last.
We passed upon the stair, we spoke in was and when Although I wasn’t there, he said I was his friend Which came as a surprise, I spoke into his eyes I thought you died alone, a long long time ago
Oh no, not me We never lost control You’re face to face With The Man Who Sold The World
I laughed and shook his hand, and made my way back home I searched for a foreign land, for years and years I roamed I gazed a gazeless stair, we walked a million hills I must have died alone, a long long time ago
Who knows? Not me I never lost control You’re face to face With the Man who Sold the World The Man Who Sold the World — Nirvana
Fixer-upper
