Bend Oregon real estate: "Worst of the worst"

OK, this time I really will keep this short. I did the PPP yesterday, and I think I blew an O-ring.

Well, not really. But it sure as hell was the hardest exertion I've done in awhile. And a hell of a lot of fun. It's things like the PPP that makes me really like Bend, and makes me start to overlook what have started to seem like fatal, insurmountable flaws.

It's really odd. I see a lot of what's wrong with Bend, and link it to the Amenity Locusts that populate this place. And to date, I haven't had to interact with people like that much, for the most part. I don't "do" things like the PPP. And there is a certain "crowd" that does that. I think.

Oy. If you haven't figured it out, I'm just a person riddled with self-doubt (except when it comes to Bubbles bursting). And when I participate in something with people who I perceive to be the bane of Bends existence, and then they turn out to be all right... well, I just get a little guilty about throwing these people, as a group, under the proverbial bus.

I start to think Bend has a chance. That the people who in many cases participated in the Bubble, and in many cases fueled it, are actually within eyeshot of "normal".

And I got up today & watched "Houses of Sand and Fog", which is a really great movie about a real estate situation gone horribly wrong. And it is very hard to watch this thing, because the parallels between what happens in the movie, and what will happen to Cent OR resonate very strongly with me.

I encourage you to watch it, because it brings home something that a lot of people seem to overlook when the are grave-dancing or scavenging for busted situations; and that is that peoples homes are not just investments, they many times become objects that people imbue the whole of their self-worth in, their lives.

It's pretty easy to be cold about this stuff when it's not happening to you. And sometimes it's easy to be dispassionate when you think it's happening to people who "have it coming". And a hell of a lot of people around here "have it coming".

A way out with the short sale

More local homeowners who face foreclosure are turning to a rare option to avoid that fate

By Andrew Moore / The Bulletin

Published: May 18. 2008 4:00AM PST

The short sale.

In real estate, it’s the sale of a home or property for less than the amount owed the lender. The owner nets nothing on the sale and until recently, it also meant a tax liability, as the IRS considered the difference between the sale price and outstanding loan amount as income.

It’s not a favorable option, but a short sale can be the best way for a homeowner to get out from under a loan and avoid foreclosure, according to local real estate representatives.

Trouble is, a successful short sale is entirely dependent on the lender’s authorization. A seller may find a willing buyer, but unless the lender agrees to take a loss on the property, the sale won’t happen.

And as more homeowners near foreclosure — in Deschutes County, there were 528 notices of default, a precursor to foreclosure proceedings, filed between Jan. 1 and Thursday, a 303.5 percent increase over the same period last year — more homeowners are pursuing short sales.

Tom Greene, the president of the Central Oregon Association of Realtors, said roughly 7 percent of the homes currently listed in Deschutes County are short sales. That represents a huge jump, he said, as short sales used to be exceedingly rare.

“This is a new phenomena,” Greene said. “You used to run into them once every six months.”

Short Sale 101

The reason most homeowners ask a lender for a short sale — be it hardship, a job transfer or a bad investment — is to avoid foreclosure, said Cat Zwicker-Grant, principal broker with Desert Sky Real Estate in Redmond.

The upside of a short sale is it doesn’t negatively affect a homeowner’s credit score, the way a foreclosure would. The downside is the homeowner surrenders their investment in the home and has to certify he or she has not profited from the sale in any way. In addition, most lenders want proof a homeowner doesn’t have other financial means to pay for the loan, Zwicker-Grant said.

“You are asking the bank to accept a loss on your behalf, so if they do that, they want to know you are worthy,” she said.

In other words, if it’s a second home a homeowner is trying to short-sell, the chances a bank would accept one are slim, Zwicker-Grant said.

Filing for bankruptcy won’t help, either. If you can’t make mortgage payments, you can’t keep your home, said Deidra Cherzan, a Bend attorney who specializes in bankruptcy filings.

Bankruptcy law does provide exemptions for primary residences but only if the mortgage is in good standing and the filer can continue to make payments, she said.

The key to a successful short sale is to start the process early, Zwicker-Grant said. Contact the lender, and begin the application process. The next step is to list the house and find a buyer. If one is found, the buyer submits the offer to the lender, which approves or rejects the sale.

The trick is timing, Zwicker-Grant said. Most homeowners don’t begin the short-sale process until they are behind on payments. This often puts homeowners up against the clock.

A notice of default is generally sent out after 90 days of nonpayment, and a house can be put up for auction by a lender 90 days later. If no one bids on the home, it is foreclosed on by the lender and the lender assumes ownership.

Banks or lenders typically don’t want to own real estate, so even though they may take a loss on a short sale, it’s often less costly in the long run, considering the amount a bank would pay for title fees, to maintain a home, cover its taxes and pay real estate commissions when it sells, Zwicker-Grant said.

Zwicker-Grant said banks can be choosy when it comes to approving short sales and accepting bids. Like other sellers, they often hold out for the best possible deal.

“Just because the first offer came in, (the lender) looks at what’s going to close the quickest and get them the most money,” Zwicker-Grant said. “The bank is really in the driver’s seat.”

As of Wednesday, there were 131 short-sale homes listed in Bend and 68 in Redmond, representing roughly 9 percent and 7 percent of the listings in those markets, respectively, Greene said. Since Jan. 1, 17 short sales have closed in Bend and 34 in Redmond, according to Greene.

Valerie Hunter, principal broker at H & H Preferred Real Estate in Redmond, said she has helped close nearly 40 short sales in Central Oregon in recent months, the most she’s seen in the eight years she’s specialized in them. But as banks back up with short-sale applications, Hunter said the process is getting harder.

“Seventy-five percent don’t get successfully negotiated,” Hunter said. “It’s a lot of work to do a short sale, and I try not to do them anymore because they are becoming more of a headache.”

If a short sale is approved, and a buyer purchases the seller’s home, the seller is not completely out of the woods. In past years, the amount of the loan forgiven by the lender — the difference between the outstanding loan amount and the sale price — was considered taxable income by the IRS.

That changed in December when President Bush signed the Mortgage Forgiveness Debt Relief Act of 2007. The act excludes income derived from debt forgiveness on a principal residence from taxation, but only for debt forgiven in 2007, 2008 or 2009.

For that reason and because of market conditions, Zwicker-Grant is seeing more homeowners take advantage of the process.

“Short sales have always been around, but we’ve never seen it so prevalent,” Zwicker-Grant said.

Andrew Moore can be reached at 617-7820 or amoore@bendbulletin.com.

It's pretty easy, especially in a forum like this one, to take this as the greatest news in the World. Short sales & foreclosures mean that for those of us who stayed responsible and held back from the insanity, we will get much better deals, and perhaps fulfill a life's ambition.

But these people who are going through this mess, whether responsible or not, are in many cases going to end up in terrible straits. They might be homeless, they might have kids. They might be unable to own a house again for many years. And to add insult to injury, many around here are losing their jobs.

I don't want to come off like a bleeding heart woosie (too late?), but ALL involved, whether owners losing their homes, or "vulture" buyers looking to capitalize on this deteriorating situation, and ESPECIALLY the intermediaries who MADE IT HAPPEN, should stop and take stock of this:

I said from Day 1 that there would come a day when ALL INVOLVED would WISH THIS THING NEVER HAPPENED. Even those who stand to capitalize, should step back & really think about what is happening here: People are losing their homes & jobs, and are faced with interminable and extremely uncertain circumstances. Again, some have kids & will be living in their cars.

There but for the grace of God...

Houses aren't stock certificates. We live in these things. We grow up in them. We make our lives here. And God knows MANY of those who fanned the flames of this thing are selfish asses, and no one wants to see them go down hard more than I.

But there are some who are not in that camp, who are simply caught in a bad situation. And in virtually every case I rationalized, "Hey, these are just rich Cali jerks who totally deserve to suck fucking air, because they caused this thing". And in a lot of cases this is exactly the case.

But I hope to retain some sort of respectful dignity about the situation, and remember that many of these people are going through horrendous circumstances, whether low-life Cali's or not, and human misery no matter the source should not be a source of glee.

Speaking of glee.

It is getting harder & harder to write this blog. I don't think I'm about to quit imminently, but this thing was started to first Convince People that there was in fact a bubble in the bursting. I know. Reading that sounds moronic, but Yes, I do remember that there were MANY who scoffed at this blog & it's predecessor & their commenters that Bend Is Immune, Bend Is Different, Bend Will Go Forever Upward.

Geez, and for awhile it seemed like they could be right.

We now know of course that Bend IS normal. Bend is a working town. Bend is NOT Aspen, and never will be. Bend must normalize. And unlike David Foster, who seems to intimate at times, that "normalize" means "plateau at the current level, with a steadily increasing volume, such that I might actually make a living again", I do not define it so.

Normalize to me means hitting some sort of parity with respect to local incomes.

And that means medians far, Far down from here, probably near $200K, or less.

And that means financial hardships unlike anything anyone has ever seen around here. At least not in the last 25 years.

And this just means a lot of personal despair. People going hungry. Sleeping in cars. Just misery.

So maybe I should grave dance a little less. Maybe you should not gleefully cheer a bubble ever higher (you know who you are). And maybe we should all try to avoid these sort of things in the future, if possible.

Because the end result is always human misery. That's it. Some get rich, many get poor, but the game is not really zero-sum because human misery is always produced in abundance.

I'll finish with bashing what became crystal clear to me this past Wednesday, but first a question:

What do YOU think best measures the economic impact of tourism in Central Oregon?

OK, I have my own answer, and I simply look for a parallel to the impact of a company.

But actually try to come up with your own answer before reading on.

OK?

My own personal answer is "revenue". Is this the perfect answer? No.

There are some non-profits that have no real "revenue" to speak of. There are wholesalers that have enormous revenue, but have little in the way of real net profit. There are banks whose revenue may not really reflect their local influence.

So my answer is revenue, although I realize it is not perfect.

COVA's answer to this question, with respect to Central Oregon tourism, is also revenue.

Plus Wages.

Yes, that is local Revenue Plus Local Wages.

Stop. Think.

If you were trying to sell your business, would you in any circumstance list your revenue as Revenue PLUS wages? No. Not unless your crazy. You'd just post revenue. You might also post wages as a separate item. But you would NEVER SUM THEM TOGETHER.

Wages are of course paid out of revenue. Summing them in any way is almost pathologically deceptive, if you were to try to describe "influence", or Economic Impact.

But this is exactly what COVA does.

This is an obvious falsehood, so what is the motive?

That should be clear, COVA has a clear motive to wildly overstate the economic impact of tourism to the area. It is after all a taxpayer funded boondoggle. And the dollars COVA receives are in direct proportion to Economic Impact it can show to local incompetents manning City Hall.

So what to do?

Step One is take a page from the lottery system: Wildly Overstate The Jackpot. If you ever take a close look at lottery payouts, you realize that the $100 MILLION dollar stated payout, is never so.

It is paid out over 29 years. It's like summing up your mortgage, and stating that as the principal amount. That's just dumb.

So COVA does the same, and they do it in such a blatantly wrongheaded way, that I never even thought to question what they would have ever meant by Economic Impact. I straight up assumed that it was revenue, based on room taxes, and other mechanical means.

No, there is a massive double counting. It's like a bank that counts not only loans among its assets, but ALSO IT'S DEPOSITS. Which are of course liabilities.

COVA's figures for Central Oregon Economic Impact are a 100% Fraud.

And I mean that 2 ways. First is the aforementioned egregious double counting. Next is the figures themselves are 100% manufactured.

Now I and probably others have long had their doubts, especially given the surgical precision of the "revenue", when if you can even operate a calculator, you now is 100% impossible. But this past Wednesday, COVA conspired with the Bulletin to put your fears to rest with their piece, "Tourism for the whole family".

I won't reprint it here, because you can view it in it's entirety online. But it seems like it may be in response to BEM's initial suspicion that COVA's figures were so old they must be very stale, and that their inherent precision made them extremely suspect.

They promptly INCREASED their figures a few weeks later. That was a few weeks ago. In this current piece, they have INCREASED the figures yet again, with the standard surgical precision.

Audette on Tuesday released the tourism agency’s 2008 Annual Report, which showed the impact of tourism in Central Oregon increased 5.2 percent in 2007 over 2006, to $570.7 million.

Ahh. Up 5.2%. Like clockwork. Just a smooth ride upward, ever upward. How relaxing. How enjoyable.

How wonderful in securing more taxpayer funding.

COVA MUST show a smoothly increasing trajectory of IMPACT or there may exist the possibility that, God forbid, their funding might be **gasp** reduced.

And so there is a large impact. Always.

The impact is Very Large (due to double counting), and very.... smooth. Huh. Up 5.2%, you say Alana Audette? Interesting.

As I look across each of the components of the Economic Impact Of Tourism In Central Oregon, Accommodations, Eating/Drinking, Food stores, Air/ground transportation, Recreation, and Retail sales, I am struck by two things:

First, What else is there! "Retail Sales"? I mean, my God, you included everything, then you threw in the kitchen sink for good measure.

"Air transportation"? What about the endless tales spun by The Bulletin about how the Redmond airport is almost overwhelmingly dominated by BUSINESS TRAVELERS?

"Eating/drinking"? My Lord. So when I take my kids to Baldy's, I 'm having an "Economic Impact" on Cent OR Tourism?

I thought Revenue + Wages was a recipe for double counting. What COVA "defines" as tourism related, is just inane.

Now I realize that they probably DO take some percentage of local eatery receipts... but how much? They've already shown a strong predisposition to inflating things for their own benefit, can we possibly assume they've done any different here? I don't think so.

Secondly, I looked close at the SOOTHING increases in EACH AND EVERY category. To paraphrase Sir Arthur Conan Doyle:

Gregory (Scotland Yard detective): "Is there any other point to which you would wish to draw my attention?"

Holmes: "To the curious incident of the dog in the night-time."

Gregory: "The dog did nothing in the night-time."

Holmes: "That was the curious incident."

You'd think that maybe the 5.2% increase we can so confidently depend on (Did I mention that Bachelor was DOWN sharply on the season?), seemed to be accompanied by each of the component REVENUE + WAGE impact rising almost as smoothly. Very smoothly. Each one.

Dunc, when your store is up 10% on the year, what are the chances that EACH AND EVERY CATEGORY IN THE STORE IS ALSO UP 10%?

Seems slim to me. Real slim. But this is Bend. A fantasyland where all your dreams come true, all trajectories are forever up, and by God, when they aren't, the fractions are adjusted the estimations are re-jiggered, and every little thing has an almost scarily perfect Stepford Wives precision to it.

Look closely at this graph. The ONLY down local area is Jefferson County. And each and every component is down in lockstep with the total drop there. The ONLY place you find MIXED results is in useless Wasco County, where retail sales fell $100K, and all else was flat or higher.

Not Bend. All is up, and each is up. Nothing left behind, all beneficial. Fantasyland. Xanadu.

The spice must flow...