What happened to the Real Estate Market, and how does it get fixed?

I have found that this article sums it up best.  Please visit  www.workingre.com/workingre/rise-and-fall.html

John Liffland hits on all the major points: Greenspan and interest rates-setting America up for collosal failure for not recognizing all the contributing factors of inflation (especially energy costs, which how anybody couldn't see their gas pump bill tripling over the last few years, mortgage lenders (not just predatory lending and fraud, but ridiculous loan programs that were unrealistic in terms of ability to finish paying back), appraisers (uneducated, improperly trained, and pressured to hit numbers or lose potential work--I am an honest appraiser and have lost work/clients because I was blamed for the low value of the house (this happens much more than one would ever expect, which in turn leads to giving the uneducated appraiser the job because they couldn't appraise a property without being given a number from the lender to hit)), investors (where they came from, and where they've gone), and how all this ties into the assessors issue to produce a reliable assessment and the proper tax revenue to be received.

The economy is in trouble.  The dollar is week, and now we are seeing bailouts coming from somewhere other than domestically.  China is quickly gobbling up resources, and becoming the global power of the 21st century and this started with the US so willing to buy up there products.  China, and India too, have become the manufacturing centers of the world.  When was the last time you called a customer service line that didn't get routed to India.  Jobs are leaving much more rapidly than they are being created in the US.  Cheaper labor, and a global market have left the States behind in the dust.  My grandmother is a staunch believer that you buy American.  Let's be honest though, we are all tied to cost, and if someone else can make the same product for cheaper, our own capitalistic market will tell you the cheaper wins out.  Take some time and go around your house; how many items say "Made in USA", probably not as many as "Made in Taiwan".  We have outsourced almost everything, manufacturing to customer service.  What America needs (which is a little too late in my opinion) is a history lesson of what happened to Spain 5-6 centuries ago.  They had wealth coming in from the New World and they began outsourcing everything, crippling its pseudo-economy, leaving their public uninformed and uneducated with no skills to build a better tomorrow.  A little creepy in the similarities of today.  People want to complain about illegal immigrants taking all the work; more like taking the jobs that were "beneath" us.  The good ol' American Dream of hard work can make it happen, has turned into "Give that hard work to somebody else".  Lookout, wait until the investors in our real estate market turn out to be the one who was taking your call about your VISA bill.

Why can't America bail itself out?  A question we have to research is where has the government spent it's money?  9/11.  Osama Bin F-Face may not be able to blow up America, but it seems as though he has had a helping hand in blowing up our economy.  We have spent an incredible amount of money and man power in Afghanistan an Iraq; for what, to bring Democracy to the Middle East.  Time for a quick history lesson;  The Crusades.  They didn't work then and it is not working now.  Our government officials need to learn the saying "Learn your history, or you'll be damned to repeat it".  Well, to me, it looks as though our leaders missed more than one history class, and now we will be the ones who expense the lesson.  The only question left is how long and how hard this will affect us as a nation.  Is this the next Great Depression?  Maybe.  

How do we solve this problem?  I believe first and foremost we need to make a massive effort (an unprecedented financial backing) in finding a new energy source.  This will end our dependency on foreign oil, and may make us the world's energy broker (if indeed we discover a new energy source).  We need to stop giving tax breaks to jobs being taken overseas.  Why are we giving other nations the advantage; for a couple of fat cat corporate heads, not impressed.  We also need to put much more money into education.  Our national education plan is a joke and feeds the "Circle of Stupidity" that is taking over America.  No child left behind, more like bring all the kids back to the level of the least intellectual of the group so that one not-so-bright child doesn't feel bad about him/herself.  This does not work.  Texas manipulated the system to make it look as though it was a good one, when in reality, the less than bright students were held out of the testing, improving the scores on paper.  Government grants and loans given to research, bringing jobs back to the States, and improving a weak and lost education system are the things that can turn this around.  This is not an immediate solution, but there is not an immediate solution.  We need to be future-seeking, not future-giving away. With more jobs and money, homes will be sought after again; maybe not so much as an outsider investor, but the the families that can now afford them, without the ridiculous loan programs, so they can keep them.

The problem is here, now we have to fix it.

Save $50-150 for the average home with taxes, but who pays

Tax savings and the portability of your tax savings when changing residences in the state of Florida seemed to be the driving force behind Amendment 1, along with an attempt to spark the real estate market back into productivity and add a boost to the economy.  Has it or will it work?

No.  There has been a spark here and there resembling an increase of sales in the state, but I am not willing to say that Amendment 1 has had anything to do with it.  With increasing foreclosures, and the increasing popularity of the short sale, the market is noting an increase in sales because there are fantastic deals (if you have the credit score or reserves to go out and buy), not so much because the average homebuyer can save an approximate $50-$150 a year ($4-12.50 per month) with there new tax cuts. This does help people that have luxury homes, that are taxed a considerable amount more, but doesn't that sound like the rich getting richer.  Hurray for the Wealthy, somebody gets something out of this.

Who are the real losers/winners with Amendment 1 other than luxury home residents?  There are quite a few.  Now I would be foolish not to recognize that Florida is where many people come to live theire second life. With social security being more of supplement to some other source of income than providing sustenance, I could see how someone over 65 would be counting every penny it could save.  Do the elderly move around a lot?  NO.  So why do they need tax saving portability?  I'm not saying that they are not watching there pennies, and it isn't tight, but $4-12.50 a month in savings doesn't quite equate to what cost the losers face.

With that said, Florida is changing.  Yes, it still is home to the reitirees, but the age is coming down quickly.  The majority of the building over the past 5 years has not been for the older citizens, but for up and coming families, and with these families come children, and with children come the need for more schools.  Schools in Florida, uh, ya, they aren't that good, still ranking in the bottom half of the US, but they do seem to slowly be getting better, until now.  Amendment 1, according to some state economists, will cost schools $1.5 Billion.  May the Circle of Stupidity begin.  Being a retiree state for so long, education has more often than not , been on the short end of the stick.  It was just a few years ago that a law needed to be passed to limit the school classroom size down to 42 students.   A 42:1 student to teacher ratio, is absurd.  Growing up, in Fairfax County, VA, one of the top public school systems in the nation, 30 was considered a lot, but manageable.  And now, in a time of needing more schools, teachers, and materials (and with today's advancing technology can get a little pricey), schools are going to lose $1.5 billion.  Lets chalk up our children and their future as a loser in Amendment 1.

A major reduction in the state budget has a funny trickle down effect.  Less tax revenue, less money to give out.  With less money going around, cities, counties, municipalities all are seeing a reduction in the dishing out the funds.  Less funds=pay cuts, job cuts, loss of benefits.  Now we have hard working government employees losing their income and livelihood.  I'm pretty sure the $4-12.50 isn't helping that much.  The local government employee is being chalked up as a loser too.

In addition to Education and the Government Employee, the Investor in our beautiful state is a loser in Amendment 1.  Investors like tax breaks.  However, there are no tax breaks for them.  Amendment 1 is for Homestead Properties.  In fact, the Non-Homestead Properties, new homeowner and Investor will end up with the burden of making up for the loss in funds, as they will not be privy to the portability.  Loser.

Well, I geuss we know where I stand on that.

AVM vs Appraiser, Is the legend of "The Terminator" starting?

We all know the movie.  Arnold is a machine sent from the future to kill off the saving grace for the human race, because computers had found a conscience.  This obviously hasn't come to fruition, or are we in the beginning stages of computer programs being given to much authority. 

If your credit score is good enough, I'm sorry, great enough (and wow, nowadays it seems as though it better be), lenders will run an automated valuation model on a home and presto, without even looking at the home the mechanism spits out a number.  This number will be the guide on whether or not they will loan money, as well as how much they will loan.

Then we have the publicly accessible AVMs like Z......, that completely mislead the users.  I know in my less than a decade old subdivision, there has never been a sale over $320,000, but Z...... had a home valued at over $400,000 at the height of the market in late 2005, and now at $239,000.  My neighborhood may have been hit with a rollback, but wow according to Z...... they've come back 40%, when in actuality the market has seen about a 20% decline in values.  Let's just say that if the subject in question had all the most elaborate upgrades we could imagine, the market would more than likely see these as overimprovements and superadequacies and would not pay $400,000+ even in the height of the market.  Where does the computer even notice improvements or depreciation or anything other than $/SqFt and proximity to the subject.  It seems to fail to factor in age, lot size, or location?  Publicly Accessible AVMs do nothing more than mislead the Public.  They are a detriment to the industry on so many levels.  A seller may tend to terminate his relationship with the agent if they believe their home is severely over/underpriced all because of an AVM.

They take away work from the appraiser, or better yet an appraiser is "no longer needed" by a bank/lender because their work did not come close to that of the AVM, therefore the appraiser is the one who didn't do the appropriate research.  Can an AVM tell if a closed sale was typical (in this market, do they recognize foreclosures as "typical transactions")?  Lets get real.  Lending money on what a computer program tells you, without verification that the home still even exists, doesn't sound like a good economic philosophy, but yet AVMs are becoming more accepted.

Beware of the AVM, especially if they start to say things like, "I'll be Back".

Appraiser looking for work Florida, "Will work for food"

The constant search for work continues.  It was another day of knocking on doors (or better yet, peering into the windows of once were a mortgage companies).  Do I submit to the larger Appraisal Management Companies and take an enormous fee cut to do work for people that seem completely unorganized, and just push for time and not quality; do I go to work for an established appraisal firm that takes a 30-50% cut of the fee; or do I go and try ad blitz campaign involving every method (within affordable reason, mind you it has been slow and the diet of black beans and rice can get a little tiring)?

Let's discuss the first option of the Appraisal Management Company.  Don't get me wrong, I'm a fan of capitalism and all of the little nuances attached to it, however I don't believe that AMC's provide a better or equal product for less.  In fact, they provide my product for what I'm geussing is much more than what I charge, but they provide the connection of the two parties (what a pile of...).  I don't know what happened to just doing a google search, or picking up the phone to find a qualified appraiser.  Myself and some of my peers, (as can be found on AppraisersForum.com ) for the majority seem to be in the opinion that AMC's are the ruin of legitimate appraisal services.  I have found that AMCs will call with 3-5 different people throughout a day to get the "status of an appraisal (the same appraisal order".  Most times I don't mind, and with clients outside the AMC realm, I will keep them informed, however why does an AMC need to know so many times (as once counted, 10 times in a 3 hour period, when the appraisal inspection was done the day before).  If they didn't need an update every 20 minutes, maybe the work would get done more quickly?  Just an observation.  It is of my opinion that they, the AMCs, may have made promises to lenders to get there business (from turn-times to cost) with no concern for the quality of work they are providing.  In a crazy market like the one we are in, with limited data to work with, it takes a considerable bit more of time to research market areas and needle through the work, confirming sales conditions (foreclosures, foreclosures, foreclosures) and doing the job appropriately.  Now the kicker, New York is revamping there system of how the appraiser is chosen by a lender, and it is this appraiser's perception that the AMCs are going to be a necessity according to law.  At least it appears that the AMCs will not be subsidiaries of the banks that the loan is being generated through (cough, cough, Wachovia-Greenlink, Countrywide--LandSafe, etc., etc., etc.)  It may turn out to be join or perish, but I think I will go down fighting, as my experiences with AMCs have left me a little bitter.  I'm sure I will discuss AMCs in more frustrating detail in another post, but for now I will move on.

The next option, going back to working for an established appraisal firm.  Yes, I have given this considerable thought, but what says that the appraisal firm would be getting me more work than what I am getting now (which admittedly isn't much, but it is some, and I do get to keep the entire fee).  I would have to work twice as many assignments to get the same pay.  I could do that with the aforementioned AMCs, however going with an established firm, I could be asked to sign a non-compete clause, and be shorting myself of potential clients for my own business (I'm not sure of the enforcement of a non-compete clause in Florida as it is considered a Right to Work state).

 So, nearing financial devestation, I am starting the blitzkrieg of advertising (well, maybe not blitzkrieg per se, but a campaign nonetheless).  I have updated (pretty much started) a web-site to present my appraisal business, continued the door to door search, and begun a blog.  I'm hoping that the business will be able to continue, as my fiance and I hope to have a meal that doesn't consist of black beans or rice.  Any questions or concerns, please feel free to check out the website, ajappraisers.com, as updates are constant, as it is in it's infancy, with the promise of new and exciting contact to come.  Good wishes to all.