Tuesday, February 10, 2009

A Report From The Frontlines - Part One

I have steered fairly clear of bringing my worklife back home to the Lair. Generally, I like to blog at work, not blog about work. But, alas, the time has come to share some observations from the frontlines of the economic meltdown.

I work as a transaction coordinator for one of the top-producing real estate teams in Florida. Basically, I do all of the behind-the-scenes work, all of the research and paperwork, and all of the detail necessary work - which allows the agents on my team to focus on selling real estate. It's a lot of work, a lot of stress, and it's definitely not my life's dream. But, for the moment it pays the bills, and well, I'm pretty good at it. And, of course, there's the benefit of having a ringside seat for the Great Depression 2.0.

I started working in real estate at the height of the market - January 2005. I didn't know a thing about real estate, but I quickly learned the industry lingo - "no doc interest only loan", "not contingent upon appraisal" and "preconstruction flip." From 2002 to 2005 the market in many Miami zip codes rose nearly 200% in value thanks to "creative financing" and the new "investor" class. I watched as nurses and construction workers and waiters bought condos for $400,000 and I wondered "how the fuck can everyone afford to buy at these prices?" Well, in October 2005, the market turned, nearly overnight, and like a big game of musical chairs, a lot of those in the "investor class" suddenly couldn't sell and got stuck without a chair.

Our market has plummeted by nearly half since the height, and now I specialize in processing and negotiating short sales. A short sale occurs when a property owner sells her / his property for less than what he / she owes on the mortgage(s), thereby sticking the bank with the difference. It's my job to put together a convincing package for the bank to convince them that it's better to take, for example, a $100,000 hit than to foreclose on the property and lose even more through attorney's fees and further market depreciation. For the seller, a short sale is a much, much better option in that it only damages the seller's credit score for 2 to 3 years - as opposed to a foreclosure which obliterates the credit score for 8 years, and the seller will always have to disclose to any future mortgage lender that he / she has had a foreclosure in the past.

Unfortunately, what is occuring is a tidal wave of short sales, each one costing the banks tens of thousands, and often hundreds of thousands of dollars. And, each successful short sale brings down the value of the whole neighborhood - which causes more homeowners to become "upside down" - meaning that they now owe more than the property is worth. Then, everyone in the neighborhood wants to "get out" and short sell their property. It's a downward spiral fueled by fear and anxiety.

Just as the "safeguards" failed on the way up, the rules that are in place that regulate who can be approved for a short sale are failing on the way down. What do I mean? Well, here's what you won't hear from Lou Dobbs, or any of the other populist media personalities. (to be continued).


1 comment:

Lauren J said...

These are scary times. I'm keeping my fingers crossed all will work out reasonably okay. But damn, we're all coming out on the loosing end.