I've moved

I'm always trying to do things better, and make the best use of the technology available to me, so I've decided to move this blog over to a new platform. You can now find me at http://randallbrennan.com/. I hope you'll join me there.

It is now "soon"

For the past couple of years, my website has had a big ol’ “Gone Fishing” sign hanging on it. When I let my license go inactive, I would have just closed it down all together except that the domain hosts were also taking care of my email servers, and I just didn’t want to figure that out, too. So I just left it there, awaiting the day I would come back and dust the place off, getting it ready for another go-round.

So here I am. When last I looked at the old site, there was not much more than a cryptic message that “big changes were coming soon.” Well, “soon” has arrived (finally), and I’ve spent quite a bit of time over the last couple of days sprucing up the place. I know a serious internet marketer would be appalled that I am using a template site, but I have reasons, so I’m sticking with it. Flash site or not, it was a conscious decision to stay where I am – for now.

In honor of basically restarting my career, I’ve thrown a new template on the site. In general, I like the layout and appearance, but I can’t help but wonder what the developer was thinking with the little fairy bubble that floats around. Another case of "just because we can doesn’t mean we should." Unfortunately, I can’t make it go away. It’s part of the code that I don’t have access to. I know, I know, that’s “proof positive” that I shouldn’t be using a template site, but I look at it as an annoyance rather than a deal-breaker. I like the look of the rest, so far; we’ll just pretend it’s the spirit of the website, OK?

I’ve also been adding a few things that folks might find useful and/or interesting. My new company, Equity Colorado, provides me with a newsletter service. Once a month, a new edition is put out, and I will be uploading them to the site, ready for anyone who desires to download and enjoy. I’ve added a few back editions, also, and I’ll be adding more as time goes by and I find a few free minutes. If you follow me on twitter or facebook, you’ll know when the new editions are ready.

A really big addition to the site will be the financing calculators. I’ll be adding those as I go. Each one is worthy of a blog post, so I’ll be doing a series on them, too. These calculators are a handy way to help with the decision process when buying and selling real estate. Some will mainly be of interest to buyers, some to sellers, and some to buyers and sellers both. There will eventually be some just for analyzing real estate as an investment. I’ll let you know when new ones are added.

Go take a look at the “new” site. It’s still a work in progress, and always will be. It’s just one of the resources I have available for your use. Definitely let me know if you want to see something else added, and I’ll look for way to get it there.

The best performance improvement is the transition from the nonworking state to the working state. ~J. Osterhout

You gotta know what you own

photo by Kevin Rosseel

By now, you have no doubt heard about the two foreclosures that were overturned by the court in Massachusetts last week. There has been a lot of talk about what this means for the foreclosure system. The opinions floating around are all over the board, from “nothing will happen,” to “foreclosures are rendered illegal.” As is almost always the case, the truth lies somewhere in the middle.


To find the truth, it is helpful to figure out exactly what happened, and to do that, we need to fully understand how real estate financing works.

The vast majority of real estate purchases in this country are paid for with borrowed money. In common terms, we use a mortgage, but that is really a simplification of what’s actually going on. Really, financing real estate purchases involves a two step process involving a note and a mortgage or deed of trust.

The note is a contract between the borrower and the lender. It spells out the terms under which one person gets to use the other’s money. The note is very specific about who is borrowing the money, what it is to be used for, how long the loan is for, and how much it is going to cost the borrower. This is the I-O-U.

Of course, in a real estate purchase, the amount of the loan is pretty substantial. It is not something that the average borrower can come up with at a moment’s notice, and is also large enough that the lender will not usually willingly take on all the risk of something going wrong and the borrower stops making payments during the life of the loan. In other words, the lender wants to make sure that if the borrower does indeed stop making the payments as agreed in the note, there is some recourse. That’s where the second part of the financing process comes in.

The deed of trust – or mortgage, depending on your state – is the part of the process the borrower uses to give the lender some piece of mind. With a mortgage, the lender is given the right to force the sale of the property in order to recover the amount that was lent out if the borrower does not meet the terms of the note.

Here’s where it starts to get a little complicated. The note, while considered a liability to the borrower is an asset to the lender. Assets can be sold, and a whole industry has been set up around the buying and selling of these notes. This is called the secondary mortgage market. It is quite common that loans are not made until it is known who will be buying it, and the loan is sold practically before the signatures are dry. By selling the loan, the lender has a more cash to lend out again, and the process starts over.

What we’re interested in here, though, is where the original note went, and what went with it. The note was sold, but was the mortgage? In some states, yes. In Massachusetts, no.

In Massachusetts, a mortgage is sold separately from the note, but, obviously, usually at the same time and to the same company as the note. In the cases that were just overturned by the Massachusetts high court, that is not what happened, although the banks that owned the notes thought it did. There is a requirement in Massachusetts that states that a mortgage buyer must be identified when a mortgage is sold, or there is no sale for that mortgage. That didn’t happen here, so, in these cases, the note was sold, but the mortgage was not.

Now remember, the mortgage is what gives the lender the right to force the sale of the property. If the lender does not own that right, it cannot foreclose when the loan is not repaid. Technically, the owner of the mortgage can foreclose, but if it doesn’t own the note, why would it bother? The foreclosure process is expensive and time-consuming.

So what’s going to happen? Are hundreds of foreclosures going to be overturned? That remains to be seen, but this is a clear demonstration of why title insurance is a requirement in a real estate transaction. That, however, is a conversation for another day. What I can say, though, is that lenders will be stepping up their efforts to making sure that all the details are taken care of during the foreclosure process, even if it means slowing the process down to make sure it is done.

The foreclosures are not going to stop, though. That, I can guarantee.


Creditors have better memories than debtors. -- Proverb

The situation is changing



 Not too long ago, we were in the middle of long, upward-trending market. Real estate values were appreciating steadily and sometimes substantially. Then, suddenly, the situation changed. BAM! The bottom fell out, or the bubble burst, or whatever. Use the analogy of your choice, but virtually overnight we went from a strong sellers’ market past a strong buyers’ market and right into recession where folks couldn’t buy homes no matter how badly they needed or wanted to do so.

That’s where we’ve been for the past couple of years, although we’ve been slowly but surely working our way out. The real estate business is different, but it’s still IN business. New rules are being figured out and experimented with. The credit rules are being eased again and new loan products are being created, allowing more and more folks to buy homes with loans that make sense. Banks and mortgage servicers are figuring out the fine line between dripping foreclosed inventory into the market fast enough to clear the backlog, and flooding the market so much that the nascent recovery is inundated.

Slowly but surely, we are crawling our way out of the depths of the market.

In just the past few days, there have been a few interesting pieces of news slip across my computer screen. First, interest rates are continuing to rise. It is possible that we have seen the bottom, and are moving past it. Second, the number of transactions has increased over last year. Finally, although many (most?) predictors are showing continuing price decreases into 2012, at least one model is showing that some parts of the country might actually see some price increases by the end of 2011.

I’ve already written about the importance of rising interest rates as a factor in determining the true cost of real estate. With rising rates, buyers have a lot of incentive to buy NOW. The more buyers buy, the smaller the inventory, which leads to upward pressure on prices. Add in the potential of rising prices, and the urge to buy now gets stronger still.

Factor all these pieces of information into the equation, and it really does look like we might be able to see a recovery coming ‘round.

When journeying down the long dark road, we must continue on and never give up faith we'll one day reach our destination - no matter how ugly that road appears before the naked eye. – Reed Murphy