About Dan Krell

November 28, 2009June 27, 2019

Can you know your real estate agent by the car they drive?

Want to know a little about your agent, check out their car- right? When the market was hot earlier this decade, it seemed as if many real estate agents were driving some sort of Mercedes, BMW, and Lexus. So, at that time it was interesting to see what type of Mercedes or BMW being driven. Many of my colleagues drove the “S” class sedan, while some drove the less expensive “C” class. Of course, most of the cars were black, but I remember a few white and silver ones too. Of course, there were also agents who drove Hummers, land rovers and an assortment of SUVs. And of course, many drove and still drive their Camry’s.

According to Kathleen McCleary (The Car You Drive: USA Weekend Edition; 10/20/2002), a car says a lot about person’s personality (www.usaweekend.com)

The problem with ascribing a personality trait to a real estate agent because of the car they drive is that just like the clothes they wear and smile they put on when they leave their home, many agents want their car to personify a successful personality they may want to express to the public (sometimes making up for what they lack). Whether or not your agent is successful, if they drive a luxury car they want to let you know that they are successful (or at least they want to be). Of course, whether or not they can afford a luxury car, many agents opt to drive more practical cars- probably because they are sensible about money.

What does a car say about your agent? Success? Power? Assertiveness? Maybe and maybe not. Your agent’s car may tell you more about their station in life or personal aspirations than their ability and inter-personal skills. The agent’s car may scream practical, yet they’re a negotiating bull dog; or they may drive the latest Mercedes, yet not be a very effective agent. Judging a book by its cover may not yield you an accurate picture of your agent; you may not get a true picture of your agent until you see them in action!

So, what does your agent drive?

November 27, 2009October 5, 2019

Is this a valid offer or a scam?

These signs are all over the Silver Spring area. The sign reads: “Learn to make $$ in real estate in today’s market…” Given that these signs are handmade, written on poster board with marker on a wood tacking strip- you have to wonder how much money these guys are actually making in real estate!?

Is it a scam? I haven’t called the number on the sign, so I don’t have enough information to make a judgement on the offer. But, given the amateurish signs and unlisted phone number make me wonder about the validity of the money making claim and business. In general, the fact that many people are drawn to offers to make money will most likely make scam artists busy.

Before embarking on such endeavors, it is probably a good idea to call Montgomery County Office of Consumer Protection (240.777.3636), or the Maryland Attorney General-Consumer Protection Division (www.oag.state.md.us/consumer) to ask about such “money making” offers or businesses.

I’m curious, has anyone else seen these signs (in MD or elsewhere?) What do you think?

November 24, 2009October 5, 2019

The link between employment and home ownership

It became very clear this past summer that rising unemployment was inhibiting attempts in stabilizing the real estate market. Efforts in reducing rising mortgage defaults through government interventions seemed to be a reactionary response rather a forward looking model. Ruth Simon and James R. Hagerty were to the point in their Wall Street Journal article entitled, “Unemployment Vexes Foreclosure Plan” (June 26, 2009), saying that government foreclosure programs were a response to the poor lending practices which led to the sub-prime crisis. Until recently, foreclosure prevention programs were primarily focused on modifying payments, lowering interest rates, or a combination of the two.

As unemployment has crept higher through the third quarter of 2009, foreclosures rates continue to climb. The U.S. Bureau of Labor and Statics (bls.gov) reported that the unemployment rate for October rose to 10.2% (the highest since 1983). Although Maryland’s unemployment rate rose to 7.3%, the unemployment rate in Montgomery County was reported in September to be 5.3% (dllr.state.md.us).

Meanwhile, the Mortgage Bankers Association (mbaa.org) reported on November 19th that delinquencies and foreclosures increased in the third quarter of 2009. The MBA press release reported that the increase in delinquencies and foreclosures are not in sub-prime mortgages, but rather driven by prime fixed-rate loans and FHA mortgages.

Although many economists predicted unemployment to continue long after the recession was declared technically “ended” in September, MBA’s Chief Economist, Jay Brinkmann, stated in the MBA November 19th press release, “Job losses continue to increase and drive up delinquencies and foreclosures because mortgages are paid with paychecks, not percentage point increases in GDP. Over the last year, we have seen the ranks of the unemployed increase by about 5.5 million people, increasing the number of seriously delinquent loans by almost 2 million loans and increasing the rate of new foreclosures from 1.07 percent to 1.42 percent…”; essentially, the foreclosure rate increased by about 24%.

To his credit, Massachusetts Congressman, Barney Frank, has recognized the link between unemployment and foreclosure. His attempt to throw a life preserver to unemployed homeowners, possibly in the form of government loans to help preserve their homes, began in June. As reported in the Boston Globe (“As jobs remain elusive, foreclosures rise again” by Jenifer B. McKim, November 20, 2009), Congressman Frank will attempt to push through the measure to possibly offer loans to come from the $2 billion fund that was created with repaid TARP funds.

Employment and housing data continue to show glimmers of hope, only to be countered by further declines. This instability may be the reason why the Maryland Department of Labor, Licensing, and Regulation placed the statement, “…should be viewed with cautious optimism…” after the report of an addition of 1,500 jobs to the state in October (at a time when the state’s unemployment rate went from 7.2% to 7.3%).

Some experts look towards the second half of 2010 for employment to stabilize; others are not certain. However, the good news is that recession and growth periods are cyclical; so although we are enduring difficult times now, we are sure to encounter prosperous times again. Is it ironic that residential housing loosely mimicking the “boom-bust” cycles of the economy, often experiencing a positive bump after a major recession? No, because employment and home ownership are closely linked.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of November 23, 2009. Copyright © 2009 Dan Krell

November 20, 2009January 26, 2020

Real Estate Wakeup Call

If the real estate industry is waiting for a wakeup call, it may be coming in May 2010. Three events that are expected to either end or peak next May include: the Fed’s discontinued purchases of mortgage backed securities, end of home buyer credit, and expected foreclosure increases.

In a November 19th press release, the Mortgage Bankers Association (mbaa.org) reported that delinquencies on residential mortgages have increased to 9.64% for the third quarter of 2009, which is a 40 (basis) point increase from the second quarter of 2009 and a 265 (basis) point increase from the same time last year; the overall foreclosure rate is up 35 (basis) points from the third quarter of 2008. The report claims that FHA and “prime” mortgages make up the bulk of the delinquencies. MBAA Chief Economist Jay Brinkman stated in the press release that “because mortgages are paid with paychecks” increased unemployment will “drive up delinquencies and foreclosures” [increases].

As delinquencies and foreclosures are expected to peak next year, both the home buyer credit and Federal Reserve purchases of mortgage backed securities are expected to end in April 2010. What? Yes, not only is the home buyer credit is to end, Steve Cook of the Real Estate Economy Watch reported that the National Association of Realtors agreed to not ask for another extension of the home buyer credit (www.realestateeconomywatch.com/2009/11/the-last-days-of-the-homebuyer-tax-credit).

The Fed has been buying mortgaged backed securities to ease the market and keep mortgage interest rates low. The program, that began earlier this year, is expected to end as the Fed slowly eases up on the mortgaged backed securities (also reported by Steve Cook).

We are anticipating seeing if the programs to forestall a real estate disaster have done what they were supposed to do. So, we may wake up to a gentle alarm clock next spring or a trumpet blasting in our ear.

November 19, 2009October 5, 2019

Is there a duty to disclose recent low-ball appraisals?

(Home Buyers Beware)
Nothing can hurt a real estate transaction more than a home that doesn’t appraise to the contract price. In this depreciating market, I have heard many colleagues bemoan the “low-ball” appraisal. For a listing agent, a low-ball appraisal doesn’t just mean the possibility of losing a home buyer because the lender would not finance the purchase at the contract price; it’s also a dilemma of disclosing the valuation to future potential home buyers.

Although low appraisals also happen in appreciating markets, this market is unique. Along with depreciated values, the new Home Valuation Code of Conduct (HVCC) has also impacted on residential real estate appraisals and transactions. The HVCC was created out of an agreement between Fannie Mae, Freddie Mac and the Federal Housing Finance Agency to increase the integrity of residential appraisals by prohibiting lenders (or third parties) from “influencing or attempting to influence the development, result, or review of an appraisal report” (www.freddiemac.com/singlefamily/pdf/hvcc_746.pdf). The HVCC went into effect on May 1st 2009, such that Fannie Mae and Freddie Mac would no longer purchase residential mortgages with appraisals that did not adhere to the Code.

Before the HVCC was enacted, it was not uncommon for real estate agents and/or loan officers to try to influence valuations by offering alternate comparables or other pertinent information. This type of communication may have been necessary in cases that involved unique properties or where the appraiser was missing important information. However, it is also this type of communication that attempted to influence the appraisers to increase valuations!

To address the issue of appraisal influence, the HVCC requires strict rules on appraiser selection and communication; lenders and real estate agents are not allowed to hire appraisers nor are they allowed to communicate with appraiser in such a way that may influence the appraisal process (www.fhfa.gov/webfiles/277/HVCC122308.pdf).

Some critics of the HVCC complain that lenders are using third party appraisal services which hire appraisers who are unfamiliar with the neighborhood or worse- hiring appraisers from out of state. A colleague, relaying a recent experience, told me that a low-ball appraisal that was provided for a client may have been due to one appraiser coming to a home in Bethesda for the “inspection,” while another appraiser from Texas completed the appraisal for a national lender.

Low-ball appraisals do not kill all transactions. In fact, many buyers and sellers come to agreement on a new price and settle without any other obstacle. However, there are transactions where the buyer and seller cannot agree on new price and the home is back on the market. This is where the listing agent has to decide what information to disclose about the previous appraisal. Although Article 1 of the Code of Ethics and Standards of Practice of the National Association of Realtors (NAR.org) pledges Realtors “to protect and promote the interests of their clients,” it also obligates Realtors to treating all parties honestly. Additionally, Article 2 of the code of Ethics prohibits Realtors from misrepresenting or concealing pertinent facts relating to a property or transaction.

In the current market environment, low-ball appraisals may be an increasing trend. Revealing or not revealing these low valuations to future potential home buyers may also become a source of future disputes.

This column is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of November 16, 2009. Copyright © 2009 Dan Krell