Real Estate Valuations and Appraisals


BEING UNDERWATER – For the past 6 months we have been setting forth in these newsletters that the real estate market is returning. We have stated that much of the equity to which most have been waving goodbye, will return. It is not an overnight happening but a positive movement which is better for the economy and the public. I have taken some heat for my prediction from naysayers who I guess like being members of the “the sky is falling” group.

Well we now have some more evidence that there is movement to lend strong credence to our theory here, that the real estate market is making its way back. This past week Corelogic reported that 700,000 homes have emerged from negative equity positions between the 4th quarter of 2011 and the beginning of the 2nd quarter of 2012. This movement represented a 1.5% reduction of houses underwater; or from 25.2% underwater to 23.7%. In the one quarter there are underwater houses dropped below 12 million. Ladies and gentlemen this is significant and very positive.

To give further impetus to the recovery, the following is offered. There are an additional 2.3 million borrowers who have less than 5 percent equity in their properties which are considered “near—negative equity mortgages. When added to the negative equity position before the upward tick the overall equated to 28.5 percent of all mortgaged properties. However, the near negative-equity property owners only tally to 1.9 million at the end of the 1st quarter which is a reduction of 400,000 properties. As property values continue the rise, that number will decrease as the equity factor rises above the 5 percent mark.
What do these percentages really mean? It means that this turn around decreased the dollar value of negativeequity properties to the tune of $51 billion from $742 billion to $691 billion. It is also found that those in the worst case scenarios have 2nd mortgages and it was indicated that there underwater position was $35,000 greater in negative-equity position or $82,000 to those without 2nd mortgages at $47,000. This equates to a comparison of 39 percent (those w/ 2nd mortgages vs 19% for those without 2nd mortgages.

WELLS FARGO BAN – This major national lender announced this week that a settlement was reached with the U. S. DOJ as to the lawsuit filed in 2009 and then a portion in 2010. The settlement is for $125 million to borrowers who are thought to have been wronged during their mortgage process. There is also private agreements between Wells Fargo and some cities, as Baltimore, in which the bank has agreed to provide funding for rehabilitation of some areas of the city. The stated amount of $50 million will be shared with other major areas. Even North New Jersey, albeit I doubt any of those monies will get to the upscale areas. They are for likely Paterson and other similarly troubled locales. However, $50 million among 8 areas, as Trenton, Baltimore, areas of San Francisco, etc. will get very little assistance. Another great deal negotiated by the DOJ. Wells Fargo has also discontinued as of July 13th all Wholesale Mortgage Funding. They no longer accept any mortgages from independent mortgage brokers as they are the ones Wells Fargo created their problem leading to the lawsuit from the DOJ. Of course Wells couldn’t be guilty, just ask them. I guess their underwriting guidelines were perfect and their review process for appraisals was beyond reproach. Hey, believe that and I’ve got waterfront property in the Everglades that you’ll just love for your kids to take a dip any time they want. Don’t worry, the gators and pythons are all kid friendly. As an aside, did you know that it is estimated that Florida Everglades has over 100,000 Burmese pythons which are humongous. Now there is a new python on the block the African python which is very aggressive to including humans. They are somewhat smaller than the Burmese and they like each other, enough to mate and create what is expected to be the super snake which is a man eater. The newcomer is not fully in the Everglades yet. They are in Miami-Dade, in backyards and near the city. Eating cats and dogs and whatever else gets in their way. Just as the market is picking up.

About dangerous things, let’s get back to Wells Fargo. The usual rhetoric is being spewed by its executives as to how they are committed to serving the public and insuring they are given every opportunity to own a home and do it safely, blah, blah, blah. And for those who believe this worn out diatribe, they should be committed. To think that the are concerned about the people and not their bottom line is ludicrous. Try missing a payment with them and see just how much they care about you. Truthfully, no one has enough fingers to point at everyone who was responsible for the real estate meltdown. From the buyers and sellers to the banks, inept and crooked mortgage brokers, to the inept appraisers and greedy real estate brokers right to the attorneys who turned their heads and title companies which just ran with the crowd. Everyone, ladies and gentlemen.. They were all guilty.

Were people taken advantage? Yes! Were banks mislead by Realtors and appraisers? Yes! Did attorneys and title companies blinded by being inundated with closings to really pay attention to what was happening? Yes! The major lenders as a Wells Fargo, have the least excuse. They allegedly had in place multiple fail safe systems which they bragged about. Where was their underwriting and appraisal reviews. Where were their high paid economists? They were in place but obviously not prepared to read the market that was truly so obvious to a good number of professionals. So, now a multi billion dollar bank is going to pay out a pittance to their accumulated wealth to “make things right”. Let’s see, if they have to pay money out they can just raise fees or rates to the consumers that they are “oh, so worried!” Here’s that property in the Everglades again.

During a recent interview on CNBC, Warren Buffet said he could end the deficit in 4 minutes. “You just pass a law that says that any time there is a deficit of more than 3 %, all sitting members of Congress are ineligible for re-election.
The 26th amendment (granting the right to vote for 18 year olds) took only 3 months and 8 days to be ratified. Why? Simple? The people demanded it. That was in 1971—before computers, e-mail, cell phones, etc.
Of the 27 amendment to the Constitution, seven (7) took one (1) year or less to become the law of the land— all because of public pressure.”
He suggests a Congressional Reform Act of 2012—-
1. No tenure / No pension ( you collect a salary while in office and none when your out
2. Congress (past, present & future) participates in Social Security (all funds in the Congressional retirement fund are to Social Security immediately)
3. Congress can purchase their own retirement plan, just as all Americans do.
4. Congress loses its current health care system and participates the same as the public.
And there is more. Clearly, this is not humor but maybe our government thinks it is.