I disagree. I think people will be surprised how contained such loans were, by and large. San Francisco’s supply-demand was out of whack. Consequently 2004 through fall 2008 you wound up with people with the MOST money down getting the properties. Not the opposite. Why choose the guy with 5% down versus the guy with 30% down, who could borrow more? This is why we’re seeing the market we’re seeing. The southeastern quadrant of the city saw more “toxic” loans.

To understand the real estate market you have to keep in mind there are several different values for any property at any given time:
1. Assessed Value – Value given a property by local and state authorities for purposes of taxation. Depends on your laws governing the state and local taxing authorities’ criteria. This is usually lower than all the other values but not necessarily.
2. Appraised Value – Value given a property in relation to comparable closed sales within the area adjacent or within close proximity to the property. An appraiser can only pull those comparable sold property records that are ‘LIKE’ properties, meaning closest matching the property being appraised. Falsely providing wrongful appraisals can get an appraiser in serious trouble with fines and or jail time. This is considered a snapshot, the truest most up to date value of any given property at that time. If property values decline it can be due to economic, employment, crime factors, etc…
3. True Value – Value the public gives a property based on a particular requirements like: area, availability, desirability, schools, etc… This one is tricky and where alot of people have misconceptions of value. This is the price a property sells for regardless of the other values. Most of these types of properties sell above appraised values as there is a low inventory to choose from and a larger pool of buyers wanting in. Lenders will only lend up to the appraised value and the difference between two values will have to be paid in cash by the buyer.
4. Actual Value – Value an insurance company or a builder may use for purposes of replacement or remodeling or to build new. This is usually a flexing formula for the area defined by the price and availbilty of materials, price of labor, price of land, etc… This is usually lower than the other values depending on build criteria but not necessarily.

REALTORS do not set the prices on properties based on their own formulas. They understand how to properly price property based on comparable values similiar to an appraiser. But it is the lenders that determine the appraisal company to be used thereby setting the trend for the value of the property.

This toxic loan mess was first created by creative financing by low level loan companies. EX: A couple wanted to purchase in the area they grew up in or to be closer to work but could not afford to as prices were out of their qualifying range but the property values were sky-rocketing every year (any property value rising above 3-5% per year will eventually create it’s own bubble). So the loan officer put together a loan package that was solely meant as a short term interest only or less loan that helped qualify the couple and WA-LAH… a new loan for their new home. Problem was this works only at the beginning and middle of the bubble. Bubbles burst, people lose their homes. This has been going on for some time in California especially in S.F and L.A. and other fast moving real estate markets.

What made the current crisis come to a peak was that this became the new lending norm along with much loved and overly used 100% financing. Then to make it worse these loans were then bundled and rebundled and sold over and over as viable securties on Wall Street. Most investors had no idea what they were buying till the poop hit the fan last October, causing a financial crash, the closure of many companies, mass layoffs and deflated property values. History shows us that Real Estate is still the best hedge against inflation and for long term personal wealth.

There is fault in the system and will take some long term pain till it is over. For the future – Don’t be greedy looking for short term gain without long term investment, invest in your property with a down payment even if you have to relocate to where it’s more affordable, don’t live beyond your means buying more property that you can afford. Abide by the simple financial rules we followed for years and almost anyone can eventually become a property owner.

i wasn’t advocating a fsbo type approach. i was suggesting that one licensed professional was enough per transaction.

it’s amazing the number of people who do not interview their agent (selling or buying).

My answer is generaly that one: If you divorce and have to split (or hopefully NOT split) $1M, you surely would find the best possible lawyer to protect your assets.

A house is about the same amount of money… and somehow, people dont even see the need for a good agent – as in “we interview many agents and picked the one who had the best identical vision to protect our assets).

Or is it pride that “they actually dont need an agent, so anyone would do”? I dont get it.

My second agent was great. Knew what I wanted and understood my plan (it involved a 1031 and possibly a reverse 1031 if timing didn’t work out). He told me it would take time to find what I was looking for. I told him I was in no hurry. He didn’t bother sending me to places that he knew I didn’t much care for, so we had very few interactions. Then one weekend he called me and said, “I got one for you,” and that was it. I would use him again when I sell.

Both agents were relatively new to the trade in ’04. But their styles were very different. The first agent was a pusher. The second was an adviser. I still believe it’s the buyer who is responsible to know his financial comfort zone and to find the right person to work with. If the buyer overpays, he has nobody to blame but himself.

we talk. we learn. we converse. we opine. we whine. we rant. we bark.we have fun too.

if eye wuz flamming anyon, you wuld definetely no it.

oh by the way, thanks Randy for agreeing with me. Lots of people do, now and then.

As I read Duggo’s last comment I realized this couldn’t be anyone other than him; since once again, he is flaming on someone. When is the madness going to stop Duggo?

I also understand the whole dynamic and it is a very touchy situation. You are all right. It is our job to get you the place at the lowest price, but your (buyers) job to get the place, as it is your money and your comfort level that has to be maintained. And that, unfortunately means you have to throw in all your chips sometimes. It is a balancing act, that is for sure. My clients who are working with me now, know that I struggle everytime I know we have to go over asking. You just never know how much is enough, or how much is too much. You gotta pay what you’re comfortable paying, and offer a price you’d be comfortable knowing was your best if someone comes in $1 higher, so you don’t think, “I would have paid that.”, and ultimately lose the home.

At the end of the day, I still think many an agent is starving and doing what it takes to get their “un-educated” clients to go way over.

But fear not! You are all educated. You’re reading this blog and the countless others. You will win in real estate!

Eddy, you are absolutely correct about just writing the offer. You have nothing to lose. You can’t win if you don’t play the game.

I think it’s all about GREED. Blame the sellers for thinking their property is the greatest in the world and worth top dollar. Blame the Realtor for coaching them to get the outrageous price, which only ups the realtor’s fee. And finally, blame the buyer who chooses to pay the outrageous price.

Trouble is with that theory is this: As a homeowner, I know that I will want top dollar for my fabulous house, when it comes time to put it on the market.

so I guess I’m guilty too..sort of.

Oh, one more thing. GOD ALMIGHTY. I wish this site had a built-in spell check…well. for some folks. LOL>