Tucson and the F word
September 19, 2007
Post Tags: Tucson Real Estate , What-is-an-F-in-real-estate
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How Many F’s for a Single Property?
I don’t even want the word in the title. I don’t want the traffic it often brings or the association with the term. I hope you all know in real estate what the F word is.
If not it starts with a sound like “4″ followed by “clothes” finished with “sure”. This is the F word to which I’m referring. Everyone seems to be up in arms these days because the F rates have climbed and doubled since last year. This of course is a concern. How big a concern?
Do you know what constitutes a “F” notice?
How about this question. How many “F’s” are there for a property? One “F” for one property? Isn’t that how it has always been? Isn’t that the right answer? Isn’t that how it always seem to be portrayed?
If we are going to count “F’s” shouldn’t we know what we are counting?
Who’s got the answers?
Anybody is free to chime in here. Real Estate Agents, Mortgage Industry related, anybody. How many “F’s” can be counted against a single property?
This is important isn’t it? If we are all going to go bonkers over these numbers shouldn’t we at least know what we are bonkers about?
September 20th, 2007 at 12:25 pm
Hi Dave!
Foreclosure is not really “that” important in and of itself. The problem is that we have never had such a great exposure to foreclosures. Which are perfectly normal… its the volume that is not normal.
The people that could least afford a big house payment and haven’t even got to the real big payments are defaulting. They are underwater in terms of real home value and in terms of the resetting rates. Its going to be an ugly Christmas…
Foreclosure: The legal process by which an owner’s right to a property is terminated, usually due to default. Typically involves a forced sale of the property at public auction, with the proceeds being applied to the mortgage debt. Read here as well:
http://en.wikipedia.org/wiki/Foreclosure
Counting? I’m not quite sure I understand what your asking. I mean its really simple and has been happening since mortgages have been around. It boils down to buying something you can’t afford and having it taken away.
I would say that you can only “count” it once. I know two people that are 60 days behind right now. They are waiting and saving for the foreclosure notices with full knowledge of the consequences. Renting is 20 times cheaper than catching a falling knife right now.
September 20th, 2007 at 5:56 pm
Dave,
It doesn’t matter how many ‘F’s there are in a property.
All that matters is that you and your professional Realtor friends learn how to process bank REO.
It’s gonna be the next new new thing, The banks will be swamped, they’ll need help.
Rising Forclosures = Profit!
All seriousness aside,
watcher
September 20th, 2007 at 6:27 pm
bobby joe,
How does one determine the volume?
Watcher,
good to see you survived the summer, wasn’t sure I would this year, the hottest one I can remember in 8 years.
How many F’s matter to me because I can’t really do analysis without it.
I don’t have any professional Realtor friends unless you count Barbara.
I have no idea what REO is, I’m a writer and analyst, don’t do much at the bank.
Never been much interested in the “next new new thing”
If banks are swamped do we call that a “Flooded banking market”?
Rising Foreclosures = Profit! For who? Not the banks, not the seller? maybe RE investors.
September 20th, 2007 at 9:30 pm
bobby joe,
How does one determine the volume?
Here is reset chart for all the “exotic” and “normal” products for the entire housing market done by analysts from B of A:
http://blogs.ocregister.com/mortgage/resetbigchart.gif
September 21st, 2007 at 1:03 pm
Dave,
Sorry for not defining REO. It is ‘Real Estate Owned’. Property that has been returned to the lender through default and is now on their books.
Banks and lenders are not presently swamped. For instance CountryWide only has $2.5 BILLION worth of REO right now, about 12,000 homes nationally. A drop in the bucket, really…
http://countrywide-foreclosures.blogspot.com/
But as more mortgages reset next year and foreclosures increase, the amount of REO can only increase also.
You asked…[[Rising Foreclosures = Profit! For who?]]
For Realtors, Dave. Make money going up, make money going down. You’re totally hedged.
I was only trying to point that out.
watcher
September 21st, 2007 at 1:58 pm
watcher,
Thanks for the clarification on REO. There is certainly something there to be watched in the next couple of years.
As to realtor being totally hedged. I think you left you the part about expense of doing business. Being in real estate isn’t cheap as many find out when they get into it. There is a lot more outgo than most people ever realize.
Depending on the relationship an agent has to a brokerage and broker their annual expenses can exceed $40,000 a year in fee, and expenses and for some it is more than that.
Some expenses are tied directly to transactions but many are not. Health insurance is a huge monthly expense. Real Estate agents for the most part are self employed, full social security payments, no retirement plan, no health insurance, no car, etc.
There are also huge personal service marketing expenses which are pretty much fixed as well. If you have 12 transactions a year or 30.
It is very possible to close a transaction and in the end it cost you money.
So it might be a hedge but a hedge isn’t much protection.
Countrywide’s liquidity issues had more to do with wall street investors than default on loans. Much like what happened to Northern Rock in England this past week. There was a run on the bank. No bank is liquid. No bank can provide all depositors their money at the same time.
What Countrywide and First Magnus underwent was a reverse run. They had product to sell that suddenly no one would buy.
If you have all your assets tied up in a warehouse of ice cream and suddenly the ice cream melts. . .
Or you grow spinach with a short period of time from harvest to market and there is a breakout of bad spinach . . .
A lot still depends on the attitudes of those involved in the buying and selling of the product.