VOL. 37 | NO. 52 | Friday, December 27, 2013
New regulations put pressure on lenders
New Year’s resolutions are always good fodder for conversation this time of year, with many lenders sharing the same resolution.
They are, they vow, going to show up at work for the first weeks of January. Some will because it’s easier to update their resume on their office computer, others because they want their spouses to think they are gainfully employed.
Others are simply curious how new federal regulations will affect their industry.
A leading officer recently confided that his colleagues’ projections for the coming year fall into one of three categories:
- Volume will remain the same, with twice the work
- Things will slow while the new regulations are indoctrinated
Many in the third category spent Dec. 31, 1999 in bomb shelters with the food, generators and other survival gear they had amassed on the certainty that Y2K would be the end of the universe.
Those in category No. 1 always succeed. They were the leaders during the recession and made quite a bit of hay in the past two years when the market skyrocketed.
The new rules do not hit until January 10, 2014, so run to your nearest mortgage broker while there’s still time. But that’s only if you are self-employed, have less than 5 percent of the purchase price and 3 percent for fees saved and owe more than 43 percent of your income, including your house note. Those are the rules.
These Qualified Mortgage (QM) loans, when packaged properly, relieve the lender of liability should the loan go into foreclosure. Fannie Mae and Freddie Mac will still be open to insure loans that meet their guidelines, but the loan of choice for lenders will be the QM loan.
A resolution among Realtors is that they will never overprice a property again. When a property is overpriced and does not sell, the realtor is often vilified and attacked by the seller.
Many times the process goes like this:
- A seller calls to have the house listed.
- The Realtor does some research and prepares a comparative market analysis (CMA). For example, the Realtor may determine the house is worth $265,000, but recommend a list price of $279,000.
- The seller says “Let’s try $299,000. Can’t hurt.” In fact, numerous studies show that it does hurt.
- The agent reluctantly agrees.
- Many times there is a phone call form the seller while the Realtor is driving away saying: “There more we think about it, we should go with $325,000.You can always come down, but you can’t go up.”
Once again, in an enormous number of sales lately, the homes sell for much more than the asking price. Mark Deutschmann, the founding sage of Village Real Estate Services, has had several go for over $100,000 more than list price. The market does determine the house. (Wait’ll you hit the sale of the week below.)
So the sellers are at $325,000 on a $265,000 home.
And I am not kidding. A few hours later, a call/text/email arrives. “Have you put it in MLS yet?” The answer is “no.”
“Good, I have been talking to my neighbor, and she thinks we should go with $349,999. She says that $349,999 is about the same as $325,000.”
Maybe it is, but it is not the same as $265,000. And then the neighbor offers an irresistible carrot through the seller.
“She says if you sell mine for $349,000, she will list hers with you.”
Sale of the Week
The photograph of 1800 Chickering Road might look familiar to regular readers of this column since it was the Sale of the Week when it closed in April for $2 million. This week it is the sale of the week again, having sold for $2.6 million.
A flip of this magnitude usually involves an extreme makeover, but in this case, the demolition had begun but nothing was replaced. Timing is everything.
In a strange coincidence. Jimmy Pilkerton and Dana Griscom, who are in-laws with Pilkerton Realtors, had the listing when the house was sold in April. Robin Dahl, then of Parks and now of Pilkerton, had the buyer along with her sister Cathy Obolensky of Christianson, Patterson, Courtney, and Associates.
On last week’s sale, Robin and sister Cathy had the listing, and Jimmy and sister-in-law Dana Griscom had the buyers.
Furthermore, the house had been listed for 558 days when it sold the in April, and was not on the market when this sale occurred. This speaks to the market for the 558 days preceding April 28 and the 218 days since.
As was mentioned in the earlier column, this was the first sale of over $2 million outside of Belle Meade this year when it closed. In the eight months following this sale, there have been eight such sales of $2 million mark or more.
Richard Courtney is a partner with Christianson, Patterson, Courtney, and Associates and can be reached at Richard@richardcourtney.com.