I read an interesting and enlightening article today, that I thought I would share with you.  Thanks go to Preston Howard from Rose City Realty in Pasadena, CA who penned this article.

“One of the most frustrating things about the new world of real estate finance is the good old fashioned appraisal.

You can have a borrower who makes more money than the amount of the loan that they are requesting with an 800 FICO score and a stellar financial profile. The file can get underwritten and the deal can be the most solid deal that a bank has seen, but no one is safe until the appraisal comes back confirming the value requested. Homeowners who have been through this painstaking process know what I’m talking about. Realtors walk around in doldrums of disgust as their brokerage commissions go up in smoke. Fellow mortgage brokers bury their heads in shame and pain as deal after deal dies at the hands of an appraiser. However, the unfortunate thing is that there appears to be no end in sight.

The reality is that there were many appraisers out there who severely inflated our housing bubble by doling out overly generous values. However, the appraisal flu has spread throughout the ranks of entire armed forces of the appraisal brigade. By and large, conservative appraisers are coming in lower than ever, while aggressive appraisers have become more conservative. Lots of appraisers have quit the business entirely, while others have become property inspectors! Why is this?

Part of the pressure is coming from banks that want more conservative valuations due to enhanced regulatory scrutiny. Other forces at play include an overly abundant inventory of distressed properties. In the past, appraisers made adjustments for distressed sales; but in many markets, this is no longer the case. Given that so many appraisers are no longer making adjustments for distress, valuations are coming in 15-20%. Both instances have stalled the recovery of the housing market. Inexperienced appraisers from 50 miles away are being utilized to value properties in niche, pocket, and specialized markets. Accordingly, market knowledge is overlooked and expertise is left out of the equation. The scant facts are coming in and the effects are damaging. National realtor boards approximate that ten percent of escrows have been killed due to a low valuation. Another twelve percent of transactions are stalled in limbo, while a final eighteen percent have had to return to the negotiating table for a price change.

So, what are we to do? This calamity started when New York governor Mario Cuomo fought hard for the installment of the Home Valuation Code of Conduct (HVCC). Since its inception, mayhem has been unleashed across the real estate industry. What was meant to “protect the consumer” has essentially harmed the consumer, paralyzed our industry at a micro level and the economy at a macro level. Real estate professionals have been mobilizing, and the results have been mediocre at best. With the advent of the Dodd-Frank Financial Reform Bill, the HVCC has seen its “sunset”; however, the low appraisals continue to persist. The one thing that is now allowed is that anyone “with a beneficial interest” in the transaction can contact the appraiser and provide comparable sales to substantiate values. While this sounds promising, many lenders still heed to the rules of HVCC and will not allow brokers or borrowers to contact the appraiser. (Talk about not following the rules). Thankfully, some consumers are taking matters into their own hands. I have encountered homeowners who just so happened to be writers and have profiled the issue in front-page articles in the Los Angeles Time while others have been able to get their woes heralded in The Wall Street Journal. Constituents across the county are lobbying members of Congress and the Senate to draft legislation to change the HVCC. However, I don’t believe that anything major will be done until those in power are denied a loan.

Much like there were the “Friends of Angelo” who got preferential treatment with refinancing with Countrywide (many of which included various Federal lawmakers), the same will most like have to apply in the appraisal industry. When Congressmen, judges, and commissioners start to receive declination letters en masse due to low appraisals, then we will see a shift in the pendulum. I haven’t heard of Ben Bernanke getting a low appraisal on his home or President Obama. However, I do believe that if Max Baucus (Chair of the Senate Finance Committee) gets a low-ball appraisal, then the issue will get traction. If the “Gang of Six” all get forced to the negotiating table due to a low valuation, I have a feeling that our deficit will take a back seat to Senator Coburn and Senator Conrad’s desire to lock in a rate that hasn’t been this low since both gentlemen were in elementary school.

In summary, we are all tired of watching deals go up in smoke over conservative appraisals. It’s a shame to not go forward on a deal with good credit, strong cash flow, and clean collateral when you don’t know if you are at 75% or 85% LTV. Collectively, we need to advocate change and encourage local and national champions to spearhead the issue. Money is being spent, deals are being lost, and tempers are flaring. Enhanced legislation and examination are needed to stop the run away train of low valuation. Therefore, call your member of Congress and express your frustration. If you have access to media, spread the word. Our equity depends on it and ultimately, so does our economy.”

Preston Howard is a mortgage broker and Principal of Rose City Realty, Inc. in Pasadena, CA. Specializing in various facets of real estate finance, he can be reached at howardpr@rosecityrealtyinc.com.

Ann Sacks Tile Taken from Nature

The name Ann Sacks has long been synonymous with luxury tile, stone and plumbing supplies.  Recently they rolled out a new tile collection that is fabulous.  Click here for the link.

ANN SACKS has 21 company owned showrooms that sell a very wide range of fine tile, stone and plumbing products. Tile and stone from ANN SACKS may also be purchased from independent dealers across the United States.

Coldwell Banker has launched both a mobile application and an interactive advertisement for the Apple iPad.

Coldwell Banker’s free iPad app allows users to search for property listings, agents and local franchise offices in either map or list view.  The app highlights the company’s “ON LOCATION” videos

that feature listings, local communities and agents.

Michael Fischer, speaking for Coldwell Banker Real Estate, said: “Two years ago, we entered the world of video with our Coldwell Banker On Location You Tube channel, and we now have more than 40,000 agent, community and listing videos on the site.  We set out to combine this content with iPad’s ability to deliver a great video experience.”

I have my very own QR code…you ask, what is that?
It is a code that will soon be on every product or service that is being traded, as a sort of barcode, but with a lot more information on it than a traditional barcode.
Check it out—you can see my QR Code above.

“Tax Day” is fast approaching. Do you know where the money in your IRA is?

With approximately 50 million households in this country owning some type of Individual Retirement Account, the question becomes who and what is controlled within your IRA. Do you want a stockbroker, a suit-and-tie banker or an employer of a large institution controlling your destiny or do you want to be in control? If you are independent minded and prefer to be in control, then a self-directed IRA is for you.

A self-directed IRA is legally no different from any other IRA. There are rules set forth by the Internal Revenue Service that define everything that is permissibe within your IRA (see www.IRS.gov for more information). “Self-directed” simply means that you can choose the investments that your IRA will invest in.
The rules that the IRS sets forth for these IRA’s only define those assets that are prohibited from your IRA.
They are:
-Collectibles such as antiques, cars, stamps.
-Life insurance contracts.
-”S” corporation’s capital stock.
That is IT! Any other investments are acceptable because they are are excluded as “prohibited” investments according to the IRS.

The next blog in this series will delineate the types of alternative investments that could be used in your self-directed IRA to create wealth for your retirement while at the same time provide diversification for your portfolio.

Spring is officially over, and summer is blasting our way. It’s been very hot and humid in the Mt. Washington Valley already for the past month or so, but today is rainy and humid. I am grateful for that as the lawn and plantings around my home need it greatly.

Looking to the back patio and the view of Conway Lake and the surrounding mountains, I am struck again by how mesmerizing and awe-inspiring it is living here at Royal View. The mountains are shrouded in wisps of clouds (some resembling my dog Toby) and slowly lifting their gossamer fingers over Conway Lake. The mountains have all but disappeared! As the sun starts to peek out the mountains re-appear as if by magic.