News from the National Real Estate conference

 

As always, if you have any questions, don’t hesitate to contact me.

This past week  I had the privilege of attending a National Real Estate conference in Denver.  I heard from Jim Gillespie, the Presidents of Coldwell Banker, Larry Linger, President of Remix, Earl Lee, President of Prudential and Gary Keller, Keller Williams.  They spoke of the market and what will possibly happen in the future.  They all agreed that the market  pricing was likely to continue  down as a result of the continuing and upcoming mortgage defaults.  The Chart below is a report provided by Credit Swiss which shows this activity. 
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 They spoke of the fact we are in a 24 hour news cycle, however, it has been historically a 10 year market cycle.  I want to make sure all of you are capitalizing on today’s market pricing, as I’m sure some of you wish you had sold last year. If you are a buyer, there are some incredible buys out there.
 
Also, below is an article from the Star Tribune, July 26, Money section, which outlines the challenges Seller’s face with appraisals.  Please read it in its entirety as it clearly is what we are facing in today’s market.   
 
We have to battle this together to be successful.
 
New Rules Hamper Home Sales 

New rules hamper home sales

by SUZANNE ZIEGLER, Star Tribune

Bill and Sheri Wallace had already moved out of their Rosemount home and were two days away from closing on it when an appraisal came in $215,000 less than the agreed-to sale price of $645,000.

The would-be buyers backed out. Now, the Wallaces, who were downsizing to a smaller house now that two of their three children are off to college, are paying two mortgages on top of costs to stage the house, a nearly 5,000-square-foot Craftsman-style with a pool that’s back on the market for $650,000.

Their real estate agent blames a new federal mandate meant to tighten up a faulty appraisal process that has been criticized for inflating home values and contributing to the housing meltdown.

Supporters say the new rules are a much-needed firewall between lenders and appraisers who often felt pressured to meet the sale price. But critics say it’s making it harder to buy, sell and refinance at a time when sales are already dismal, undercutting the recovery of the housing market.

“Before it was the wild, wild west with no guidelines. Now there’s nothing but guidelines,” said Steve Havig, president of the Minneapolis Area Association of Realtors and owner of Lakes Area Realty of Minneapolis. “It’s now almost starting to choke off business.”

Compounding the problem for the Wallaces: So few houses have sold in their upscale Evermoor development that the appraiser used “comps” — comparable sale prices of other nearby homes — from a nearby, less expensive neighborhood, dragging down the appraised value, said their agent, Scott Wollmering of ReMax Results in Apple Valley.

“It’s become a disaster,” he said. “In its defense, it’s there so they don’t get the pressure to hit a number. But this isn’t the way that they need to go about doing it.”

In his 10 years as an agent, Wollmering said until now he has had one property come in with a too-low appraisal. In the past six weeks, he’s had five.

Protecting appraisers

In part, the Home Valuation Code of Conduct, imposed May 1 by the regulator of federal mortgage companies Fannie Mae and Freddie Mac, bans anyone on the loan production staff who is on commission from selecting appraisers. This includes real estate brokers, who originate a substantial share of new mortgages nationwide. It also restricts contact and conversations between the loan production staff and the appraiser.

With brokers no longer ordering appraisals, many lenders are outsourcing the work to the appraisal management companies.

Realtors and trade groups representing appraisers — the very group the code is meant to protect — contend that the shift to increased use of the appraisal management companies has prompted many qualified appraisers to leave the business, led to low or delayed appraisals and means appraisers who don’t know the area are brought in from distant management companies.

The issue has created such a brouhaha in the industry that the Federal Housing Finance Agency issued a clarification last week disputing many of the criticisms, saying “some have tried to cite the code as the source of unrelated market dislocations.”

“Market participants should appreciate the difficulty facing appraisers when valuing properties in a declining market, especially when sharply dropping home prices and foreclosures are prevalent,” the agency said. “The challenges of appraising properties exist with or without the code.”

From the appraisers’ standpoint, the new code is “working wonderfully” as far as maintaining appraiser independence, but there are kinks to be worked out, said Alan Hummel, senior vice president and chief appraiser for Forsythe Appraisals, a national appraisal firm based in St. Paul.

“When the appraisers are being contacted, they’re being contacted by people who understand the risk rather than being contacted by someone who may have other motives to get the deal through, such as a commission on the line,” he said. “The appraiser truly is really the only independent person in the process.”

Hummel said appraisers have been pressured in the past to inflate their numbers, most often by agents or loan originators saying they would withhold business if the numbers weren’t right. But he said the problem was limited.

“Unfortunately, a few bad actors created this whole system,” he said.

He said the code couldn’t cause low appraisals because it does not change the way appraisers analyze properties.

“Whenever there are changes in a decades-old process, there are going to be people who feel that their role is adversely impacted,” he said. “The system will even itself out.”

In addition to the new code, a law aimed at preventing improper pressure from being placed on appraisers that was signed into law in May and goes into effect in Minnesota on Aug. 1. The law prohibits blacklisting, boycotting, intimidation or coercion.

Distance matters

Appraisers and Realtors say it’s vital for the appraiser to be familiar with the area, which often doesn’t happen now.

“A lot of appraisers are driving two and three hours away to make up in volume what they’re losing in income and don’t take the time to do what’s necessary to do a good job,” said Leslie P. Sellers, president of the Appraisal Institute, a Chicago-based trade organization. “If you’re an appraiser from two hours away, you don’t understand why Neighborhood A is better than Neighborhood B.”

And that new middle man, the appraisal management companies, can mean higher costs for the consumer. “The consumer ends up paying for less than what they were getting before in quality,” Sellers said.

Many experienced appraisers are leaving the business because their fees have been cut, said Bill Garber, director of government and external relations at the institute.

With management companies looking to save money and qualified appraisers leaving, “People are looking to get it fast and cheap and hardly anyone is caring about quality,” he said.

Price goes down, down, down

The Wallaces put their house on the market in October 2008 for $689,000, then lowered it to $675,000 in January. The buyers who ended up backing out initially offered $620,000 in March. “We countered back and forth and came to a final price of $645,000, which included about $3,000 of personal property,” such as a ping-pong table and some electronics, Bill Wallace said.

“They put 30 percent down, they were a strong buyer,” he said, but two days before the closing in May, the house was appraised because the buyers needed a second mortgage of about $20,000 on top of their first mortgage.

“The appraiser looked at it briefly. He was from Zimmerman, he wasn’t even from our area. He was a part-time appraiser and came in at $430,000,” he said. “That totally blew up our whole deal.”

Adding to the problem, said Sheri Wallace, were mistakes in the appraisal. “It had the square footage wrong, the number of bedrooms and didn’t take into account the lot size of nearly an acre.”

Other side of town

Dave Long of Edina Realty in Champlin saw a deal fall through on him earlier this summer when an appraisal came in at $170,000 on an agreed-to sale price of $197,500. The house, on West River Parkway, had been originally listed at $199,000 and sold in two weeks.

“This [the appraisal] happened three days before closing, and the sellers had already moved all their stuff out,” he said.

Long said the comparable sales used by the appraiser were all lender-owned homes in a high-rental area, not the same area as the house. Now, with the sellers moved out, he expects it will be even tougher to sell.

Sheri Wallace said she hopes that efforts to place a moratorium on the code or change it will be successful. In the meantime, there’s only frustration.

“If this is happening all over, it’s not doing what it’s supposed to do,” she said. “[President] Obama’s [stimulus plan] incentives were meant to get the housing market going. If we’re throwing this kink out there — not allowing people to sell or buy — it’s baffling.”

Cooling Your Home Naturally

Keeping cool indoors when it is hot outdoors is a problem. The sun beating down on our homes causes indoor temperatures to rise to uncomfortable levels. Air conditioning provides some relief. But the initial costs of installing an air conditioner and the electricity costs to run it can be high. In addition, conventional air conditioners use refrigerants made of chlorine compounds, suspected contributors to the depletion of the ozone layer and global warming.

But there are alternatives to air conditioning. This publication provides some common sense suggestions and low-cost retrofit options to help you “keep your cool”—and save electricity.

Staying Cool

An alternative way to maintain a cool house or reduce air-conditioning use is natural (or passive) cooling. Passive cooling uses nonmechanical methods to maintain a comfortable indoor temperature.

The most effective method to cool your home is to keep the heat from building up in the first place. The primary source of heat buildup (i.e., heat gain) is sunlight absorbed by your house through the roof, walls, and windows. Secondary sources are heat-generating appliances in the home and air leakage.

Specific methods to prevent heat gain include reflecting heat (i.e., sunlight) away from your house, blocking the heat, removing built-up heat, and reducing or eliminating heat-generating sources in your home.

Saving Energy

Using any or all of these strategies will help keep you cool. Even if you use air conditioning, many of these strategies, particularly reflecting heat and shading, will help reduce the energy costs of running an air conditioner.

However, adopting all of these strategies may not be enough. Sometimes you need to supplement natural cooling with mechanical devices. Fans and evaporative coolers can supplement your cooling strategies and cost less to install and run than air conditioners.

Ceiling fans make you feel cooler. Their effect is equivalent to lowering the air temperature by about 4° F (2° C). Evaporative coolers use about one-fourth the energy of conventional air conditioners but are effective only in dry climates.

Many utility companies offer rebates and other cost incentives when you purchase or install energy-saving products, such as insulation and energy-efficient lighting and appliances. Contact your local utility company to see what it offers in the way of incentives.

Super Real Estate Agent 2009

Super Real Estate Agents 2009

Super Real Estate Agents 2009Scrimgeour named again to the Super Real Estate Agent Designation for 2009.   Super Real Estate Agents is a valuable resource assembled by Mpls.St.Paul Magazine and Twin Cities Business to assist in finding  great real estate agent. Sally Scrimgeour has been a licensed real estate agent for over 10 years. Her success stems from her considerable knowledge and expertise in the real estate  industry. Sally has a local familiarity and a savvy determination to get things done. She has earned her reputation as one of the Twin Cities most respected realtors. She understands the importance of integrity and trust in developing and maintaining relationships with clients as well as other agents in the industry. Call Sally today.

The 2009 list of Super Real Estate Agents appears in the November issues of both magazines and is also available online. For more information on how Super Real Estate Agents are selected go to How our Process Works.