All Forum Posts by: Brad S.

Quote from @John McKee:

Can you get a list of appraisers that your bank uses ahead of time? Usually my bank will give me a list of 3 that I choose from and of course I always choose the cheaper one. I would call them to get their opinion on how they evaluate these ADU units before proceeding forth.

Oh, and by the way, if you are choosing the cheaper one, you probably aren't getting the "better" one. Good appraisers, like me, don't typically accept the cheaper fees, because we understand the actual work involved in properly analyzing and valuing a property. And if you are trying to get a true valuation of the ADU, I'm thinking you don't want someone who just wants to quickly get the job done, without considering it may have some actual value. Many times I have seen the ADU value similar to the main house gla value, but I can see how someone who is accepting a substandard fee, isn't motivated to their proper job.

Quote from @John McKee:

Can you get a list of appraisers that your bank uses ahead of time? Usually my bank will give me a list of 3 that I choose from and of course I always choose the cheaper one. I would call them to get their opinion on how they evaluate these ADU units before proceeding forth.

Please provide me the name of the bank that allows you to choose your appraiser. It is illegal for the Borrower to directly have an influence on who the appraiser is, for a federally related transaction.

Quote from @Steve Vaughan:

@Carlos Ptriawan initial thoughts are to have the ADU performing as a rental with a lease in place and ensure the county knows of it so it's reflected with the assessor.

Souns like a great property!

Good idea, but unfortunately, that will typically won't make a difference. The Assessor records do not necessarily reflect the legal city records. I worked as a deputy assessor for LA county and just because we put it on the records, did not mean it was legally permitted, etc. And if it isn't legally permitted, it typically would not add value.

First thing I would do is delete this post, since you are advertising to the world that you are intending to qualify for a loan based on false pretenses. Not sure that is the proper legal term for this particular case, and I'm not an attorney, but there would seem to be a clear legal basis for fraud, based on your clear intention to leave your employment right after you qualify for the loan. I would also read all the loan paperwork extremely well, to make sure you aren't perjuring yourself. 

Quote from @Gurjot Grewal:

Hey BP, when buying all cash is there anything I should be looking out for? Money will go to the sellers title agency. This is for a buy and hold that I will get delayed financing on. 

-any tips for verifying title is legitimate? Is a phone call typically enough for you? 

-Ill need to get title and home insurance. Anything else?

-Should I bother with an appraisal if I believe Im buying below market based on comps. 

Anything else I should get or look out for? Thanks!

Title - as long as you are comfortable with the title company and title officer. Or you can possibly pay for a 2nd opinion from a trusted title co. 

Appraisal - depends on how comfortable you are with your valuation. I don't ever get appraisals on my all-cash, because typically they are significantly under market value, and I am an appraiser, so there's that.  lol  ...oh, and I don't trust some appraisers.  lol

Inspection - For properties I am going to rehab, I typically don't get a home inspection either, since that is going to tell me all the things I know I already need to do. But, again, that depends on how comfortable you are with your assessment of the property. Now, I definitely have some professionals look at and evaluate specific issues, like foundation issues (structural engineer), and slope issues (geologist), etc. But, I don't need an inspector to tell me the roof needs to be replaced, electrical needs updating, plumbing leaks, windows are not seated correctly, etc, if I am planning on changing all those anyway.

Good luck and congratulations ...almost! 

Quote from @Vadim F.:

Can't really compare sub-prime mortgage crisis to what is currently going on. Lots of factors come in to play. During sub-prime crisis loans were being funded to literally anyone for any amount with 0 down. Those times are long gone. Also have to factor in, how many people bought and refi'd their properties during lowest rates in history. Even if prices were to dip 20-30% in some markets, the people with rates in the 2s and 3s aren't going anywhere, since their buying power is much lower. 

Having said that, will there be some type of correction? MAYBE. I don't see a buyer's market in any market in the US currently. 10-15% price dips from all time highs during covid times might be the most we get. Also, people forget a lot of the time that the current rates are still relatively low and are just spoiled of what was experienced the past few years.

I guess that was a general comment, but there was no specific reference to the sub-prime crisis in my post/replies or the video. But, it seems obvious you didn't watch the video, since it isn't talking about nominal prices dropping 50% and doesn't reference the sub-prime crisis specifically. But, I do agree, that there are some mitigating factors now, which may assist to stabilize a "bottom". But, that doesn't refute the fact that affordability in many areas are below their typical balance point. 

And per your last sentence, I am assuming you are saying that current rates are still historically low. While that may be true, the issue is not how low the rates are relative to themselves (i.e. historical rates), it's how the rates relate to prices and affordability. Homebuyers are typically purchasing based on a mortgage payment, not a price, since most purchases are with the assistance of loans. Therefore, their purchasing power gets greatly affected when rates move as much and as quick as they have recently. For example, we had a relatively quick move from 3% rates to 6% (and higher), which is equivalent to around a 30% reduction in buying power. So, for $100k loan @ 3% the pmt is $421.60. Now, when rates moved to 6%, the loan amt has to be at $70,320 to keep that same pmt amt. Of course, that doesn't mean that prices will fall by the same relative amt (30%) but it definitely affects affordability, which affects prices relative to rates and income. See chart and matrix below.

Quote from @Paul De Luca:

Quote from @Brad S.:

Got your attention?

George Gammon is always fun, interesting, and very informative. 

But, don't worry, he didn't really mean 50% .....or did he!

Click below!

The Fed's New Plan To CRUSH Home Prices (50% Drop Possible)

 Haven't watched the video yet but how is this different than any other clickbait, doom-scrolling video about the housing market crashing?

Thank you for first clarifying that you hadn't watched the video. It's typically frustrating when people comment on something, which has nothing to do with the original post, since they hadn't bothered to read or watch what was presented. But, I sincerely appreciate you pointing that out first, rather than having some assumptions. 

But, to your comment, Yes, it is somewhat clickbait, but it is backed with real information and data. George Gammon knows what he's talking about and backs it up with actual data, charts, info, etc. He's also not specifically a housing guy, he's a market guy, in general, meaning financial markets mainly. So, I find his info to be fairly objective, with no big sales pitch and obvious slant. And he is subtly entertaining, not "in your face." I think you'd get some interesting stuff from watching.

Specifically, in this video he isn't saying that housing prices are going down 50% nominally (i.e. $100k ---> $50k), but that depending on the pace of inflation over the next # of years, housing prices can go down in real "value" as much as 40-50% or so., if nominal home prices remain relatively stable. 

Quote from @Chris Martin:

In 2007-2012 I saw 50% drops in many areas throughout central NC. A few examples:

I bought these properties in the same subdivision:

Original owner paid $105,500 on 7/7/2005 and I bought for $36,000 on 3/22/2011
Original owner paid $105,000 on 7/14/2005 and I bought for $35,000 on 9/13/2011

I could give hundreds more examples, but those are some of the ones I purchased. This little ranch single family was a mile away:

Original owner paid $79,000 on 8/5/2005 refinanced for over $100K and went to foreclosure (to HUD) for $99,500 on 8/5/2010, and I closed on it from HUD for $18,500 on 8/4/2011. My bid was 51% of list price after three 10% price reductions. I wrote about it on 7/27/2011 here on BP while closing was pending. I still own it. 

So, no, a 50% discount is certainly not unprecedented and honestly, I think 50% discount not unrealistic in some areas/neighborhoods that are ahead of the overall market. It may take a year or more to realize the 'bottom' in many markets, just like after the GR. Low beta markets (lower price volatility areas) like the Raleigh area will most likely have less dramatic (less steep) 'instant' price drops. 

And that is why you will most likely do well in whatever upcoming market we have. You seem more in tune to the possibilities and the fact that those possibilities are not evenly distributed to all markets -some markets do actually grow in a general downturn and others go down less than average, etc. It's the old adage, "real estate is local."

Quote from @Mike Dymski:

People have underestimated the impact of higher interest rates for an extended period and things are breaking (which is the intended result of QT).  That being said, 50% is pretty extreme given the supply shortage.  Certain markets that had huge increases in prices are currently down 10-15% from the peak...time will tell if that worsens.

I agree. Most people have a tendency to think "this is the new normal" in most situations that persist for any reasonable length of time. Me included. It's a strong tendency and challenging to look beyond our current personal experiences, and see the broader situation, attempting to understand the context of current conditions. I have been through this in multiple cycles, including the 90's tech boom, where one prevailing thought was that companies are no longer valued strongly based on their actual income and assets, but based on their potential income and ideas. When, in reality, many of these companies had grandiose ideas with little proven income potential and very few assets. And we can see in hindsight how that worked out for many companies. Point being the "this time is different" mentality, is a common theme which can get people in trouble.

Quote from @Andres Triveno:

I am buying a brand new construction and was wondering if it makes sense to spend the $400 for a home inspection? What could possibly turn up with a brand new build? I am open to hearing all opinions. 

Yes, yes and yes.

The time the builder will be most motivated to fix any items will be prior to closing.

Think of the city building inspector and local planning dept process as the RDA of the building process. The RDA for vitamins and minerals is the "recommended" daily allowance for the "average" person. That is the "minimum" amount recommended, not necessarily the "optimum." The Building Inspector (from the city, not to be confused with the Home Inspector) will make sure the building is built per code and safe, but that is not necessarily the same as "best practices" building. The Home Inspector should have a different viewpoint and will most likely point out some things beyond what the Building Inspector checks for.