Luxury Agents Try ‘Shock and Awe’ Marketing

Marketing multimillion-dollar mansions may require stepping outside-the-box and getting fancy in luring potential buyers, from hosting mini-circuses, raffling off Botox treatments, to having models lining the properties, and more. "Price is key, but it's the presentation that will sell the property," Lisa Sorrentino, a real estate agent in Calabasas, Calif., told The Los Angeles Times. Sorrentino held a mini-circus in the back yard of her $8 million listing, complete with a juggler, contortionist who floated in the pool in a plastic bubble, and a stilt walker. “Competition for qualified buyers is fierce, leading to a game of one-upmanship by agents looking for any edge,” a Los Angeles Times article notes. Real estate instructor Paul Habibi with the UCLA Anderson Graduate School of Management even refers to it as “shock and awe” marketing. "Years ago you simply posted the listing on the Multiple Listing Service or hung a sign out, and pretty soon you'd have it sold," Habibi told The Los Angeles Times. "Now sellers are reverting to other tactics to tap into buyers and get them on the hook." And open houses are getting fancy. For example, one agent offered horsebacking riding to show off a 6-acre estate of the home he was listing while a Malibu agent lured buyers to an open house by raffling off Botox treatments and Thai foot massages. In listing another luxury home, one agent had models line the front of a new condo project and serve free drinks with the theme “it’s always cocktail hour” at these condos. Source: “Real Estate Agents to all out to Market Luxury Homes,” The Los Angeles Times (Oct. 27, 2011)

Survey Reveals 5 Home Buying Myths

Overall, today’s home buyers tend to be fairly knowledgeable about the real estate market, but there are still a few points of confusion in the process, a new survey by Zillow of 1,000 potential home buyers finds. Here are the five main areas of confusion the survey revealed: Appreciation: About 42 percent of home buyers believe home values will appreciate by 7 percent a year. Reality: Historically, home values in a normal market appreciate by 2 to 5 percent in a year. Mortgage insurance: 41 percent of buyers think they will have to purchase private mortgage insurance, regardless of the amount of their downpayment. Reality: Buyers only need to purchase PMI if their downpayment is less than 20 percent of the home’s purchase price. Appraisals: 56 percent of the buyers said the purpose of the appraisal was to determine if a home was in good condition. Reality: That’s the purpose of a home inspection; an appraisal estimates fair market value. Home owner’s insurance: 37 percent of home buyers said that buying home owner’s insurance is optional. Reality: Lenders require homebuyers to purchase homeowner’s insurance. Ownership: 47 percent of home buyers said a prospective buyer owns a home after the purchase contract is signed. Reality: The purchase and sales agreement is the beginning of the closing phase, but it can be a long process until they finally take ownership. Source: Zillow Inc.

Senate Approves Higher Conforming Loan Limit

To the chagrin of some industry participants and the elation of others, the Senate voted in favor of an amendment that would reinstate the heightened conforming loan limits for mortgage loans backed by Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA). The amendment, introduced by Sens. Johnny Isakson (R-Georgia) and Bob Menendez (D-New Jersey), passed late Thursday with a 60 to 38 vote. The conforming loan limit was previously increased on a temporary basis to $729,750, but the rate expired September 30 and returned to its original rate of $625,500. If the House also approves, the conforming loan limit will rise again to $729,750 and remain there through 2013. Representatives from the National Association of Home Builders and RE/MAX spoke out in their support of the Senate’s decision. “The National Association of Home Builders [NAHB] commends the Senate for approving” the amendment, stated Bob Nielson, chairman of the NAHB. “Restoring the higher loan limits for the housing government sponsored enterprise and the FHA will provide home owners and home buyers with safe and affordable financing while providing a much-needed boost to housing markets all around the country,” Nielson added. Nielson believes allowing the conforming loan limit to return to its original rate would “reduce housing demand, and place downward pressure on home prices in major markets,” which will “exacerbate the current housing downturn, trigger more foreclosures, impede job growth and endanger the fragile economic recovery.” RE/MAX chairman and co-founder Dave Liniger issued a statement Friday in response to the Senate’s vote, saying “Raising the loan limits was the right thing to do in 2008, and it would be a big mistake to burden the market at this point with lower limits. Housing is still fragile, and if the higher loan limits aren’t extended we risk losing momentum we’ve worked hard to build over the past three years.” However, with the GSEs guaranteeing about 90 percent of all residential mortgages, others in the industry feel the government is crowding out the private market, and extending the inflated conforming loan limit will prolong this trend. At a Senate subcommittee hearing in September, Martin S. Hughes, president and CEO of Redwood Trust, urged Congress not to extend the heightened conforming loan limit. “[T]he government is crowding out private securitizations, by maintaining an abnormally high conforming loan limit and by subsidizing the guarantee fees that the GSEs charge issuers,” Hughes stated.

After 3-Year Low, California Foreclosure Filings Rise Again

Having fallen to its lowest level in three years, California’s rate of foreclosure filings rose up to come back in line with recent rates, according to the latest information from DataQuick. At the same time, the share of properties at foreclosure auctions purchased by investors or other non-lender, non-government entities is growing. The rate was 29.7 percent for the third quarter, up from 28.3 percent last quarter and 22.7 percent one year ago. Foreclosure filings in the state rose 25.9 percent in the third quarter, while posting an annual decline of 14.4 percent. In total 71,275 foreclosure filings were filed on 70,554 homes in California in the third quarter. Most foreclosures involve loans originated between 2005 and 2007, according to DataQuick. The highest concentration of default notices took place in lower-cost neighborhoods. ZIP codes with a median sales price of $800,000 posted a 12.1 percent rise in notices of default filings as opposed to the statewide increase of 25.9 percent. In these ZIP codes, there were 2.8 foreclosure filings per 1,000 homes, while in ZIP codes where median sales price stands at $200,000, there were 11 foreclosure filings per 1,000 homes. The average homeowner who received a notice of default filing during the third quarter was eight months delinquent. DataQuick measured the median amount a homeowner facing foreclosure owed on a median mortgage to be $19,198 on a $331,333 loan. This is a 17 percent increase from the previous quarter and a 27 percent increase from the third quarter of last year. The counties that experienced the least amount of foreclosure filings were Marin, San Francisco, and San Mateo counties, while the counties experiencing the highest incidence of foreclosure filings were Sacramento, Madera, and Stanislaus counties. While foreclosure filings rose for the quarter, the rate of homes lost to foreclosure during the quarter declined by 8.4 percent. The total number of homes lost to foreclosure was 38,895. The is down 14.3 percent from last year. Homes that did foreclose in the third quarter took about 9.9 months from the notice of default to the final foreclosure. This rate is almost identical to the previous quarter’s timeline of 10 months but up from last year’s 8.7 months. Sales of foreclosed homes made up 34.2 percent of all home resales in California. This is down from 35.6 percent last quarter and 35.5 percent last year. Short sales, on the other hand, increased from last quarter, up from 17.4 percent to 17.8 percent. The third-quarter rate is also higher than the rate recorded in the third quarter of 2010 – 17.3 percent. “The way it looks right now, it’s reasonable to expect default filings to run at a somewhat higher level than we saw earlier this year,” said John Walsh, president of DataQuick. “Obviously, some lenders and loan servicers have begun to plow through their backlogs of delinquent loans more aggressively.”

Industry's Past-Due Mortgages Continue to Drop

How many homeowners in the United States are behind on their mortgage payments? It’s 6,373,000, according to Lender Processing Services (LPS). The number is staggering, but it’s actually on the decline, down from 6,397,000 as of the end of August, and 6,538,000 at the end of July. LPS offered the media an advance look at the high-level numbers from its mortgage performance report due out later this month. The company’s data, which is derived from its loan-level database of nearly 40 million mortgage loans, provides evidence that servicers are pushing those loans that have been languishing in non-payment status through the pipeline at a faster pace. At September month-end, the national mortgage delinquency rate – which includes loans 30 or more days past due, but not in foreclosure – stood at 8.09 percent. That’s down 0.5 percent from the previous month and 12.7 percent from a year earlier. At the same time, the foreclosure inventory rate – which LPS calculates as loans that have been referred to an attorney but have not yet reached the final stage of foreclosure sale – rose to 4.18 percent in September, up 1.7 percent from August and up 8.9 percent from September of last year. The same trend of a declining delinquency rate and rising foreclosure rate was reported last month as well. Of the 6,373,000 mortgage going unpaid in the United States, LPS says approximately 2,172,000 are part of the foreclosure pre-sale inventory. The remaining 4,202,000 are 30-plus days delinquent but not yet in foreclosure. Of these, 1,844,000 are past due by 90 days or more. According to LPS’ September study, the five states with highest percentage of non-current loans – which combines foreclosures and delinquencies – have held onto their rankings for three consecutive months. These include: Florida, Mississippi, Nevada, New Jersey, and Illinois. States with the lowest percentage of non-current loans include: Montana, Alaska, Wyoming, South Dakota, and North Dakota.

HUD Offers REO Homes for $100 Down in Select States

HUD has approved a program aimed at putting foreclosed homes back into the hands of owner-occupant buyers. In select states, from now into October of next year, buyers need a down payment of only $100 to purchase a HUD-owned REO home. The buyer must be an owner-occupant, utilizing financing insured by the Federal Housing Administration (FHA). Standard FHA underwriting guidelines apply, and the sale must be for the full amount of the current list price. The $100 down payment incentive program has been approved for two of HUD’s four national regions – the regions managed by the Denver Homeownership Center and the Atlanta Homeownership Center. HUD homes in the states listed, as well as the Caribbean are currently eligible for the program. Denver Homeownership Center’s Jurisdiction: Arkansas Colorado Iowa Kansas Louisiana Missouri Minnesota Montana Nebraska New Mexico North Dakota Oklahoma South Dakota Texas Wisconsin Wyoming Utah Atlanta Homeownership Center’s Jurisdiction: Alabama Florida Georgia Kentucky Illinois Indiana Mississippi North Carolina South Carolina Tennessee Caribbean HUD’s $100 down payment incentive program can also be applied to an FHA 203k loan, which can be used to fund repairs and renovations on the home. The 203k program allows buyers to finance both the mortgage and additional money for rehabilitation needs with a single government-insured loan. Matt Martin, CEO of Matt Martin Real Estate Management (MMREM), says this is one of the most exciting features of the new incentive program and should drive a lot of exposure to FHA’s 203k offering. MMREM is under contract with HUD to assist with disposition sales of its repossessed homes. MMREM handles properties throughout 16 states, or about a third of HUD’s REO portfolio. With an FHA 203k loan, “buyers can find a property that needs some TLC, fix it up however they want to, and finance the whole thing for $100,” Martin explained. “MMREM is excited to work with this recent initiative, in a way that it supports putting HUD homes back into the hands of homeowners,” Martin said. In addition to $100 down instead of FHA’s typical 3.5 percent down payment, HUD says it will also cover up to 3 percent of the closing costs in most cases.