Housing shakeout leads to reinventions
Rancho Palos Verdes loan consultant Frances Baldwin said when she realized the housing market
was changing she altered her business to focus on helping people, such as the owner of this Rancho Palos Verdes house, negotiate short sales or loan modifications. (Bruce Hazelton / Staff Photographer)
Frances Baldwin stood in the rear patio of a Rancho Palos Verdes house that overlooks the Pacific. Where, despite the serene ocean view, Baldwin, the three-bedroom residence and its owner are being swept along by turbulent currents in the housing market.
Slumping real estate prices and a wave of foreclosures have turned properties "upside-down," where a home's value is less than the mortgage held by the owner.
In the case of the Rancho Palos Verdes house, the owner owes $1.3million, but the property is worth much less. Baldwin, a long-time real estate professional, has listed it at $1,099,000, but will likely lower the price much further.
Baldwin is trying to satisfy both the owner and the bank through a short sale, in which a property sells for less than the mortgage value, and the bank forgives the difference.
Baldwin, a partner and senior loan consultant at Excel Funding Real Estate Loans in Rancho Palos Verdes, has shifted her focus to short sales as her loan business has plummeted. Baldwin's dilemma is a sign of the times, as nearly the entire industry has watched business prospects evaporate.
"The loan part of the business has slowed down by 95percent," Baldwin said. "I knew this was coming over two years ago."
That is when she started shifting her business focus to short sales.
The short sale process can take six to eight months, which buys the owner time as Baldwin negotiates with the banks and ultimately tries to sell the property.
"It all has to do with the packaging and negotiations," Baldwin said. "So I'm keeping people in their home without paying mortgage for six to eight months."
This allows the homeowner to save up for a future down payment. More importantly, the short sale process helps the homeowner avoid a foreclosure, which can ruin a credit rating and make another home purchase a few years later difficult or impossible.
Baldwin said she has closed nine short sale transactions, with another 42 "in the pipe."
In some cases, Baldwin may help the homeowner keep the home by persuading the bank to agree to a loan remodification, in which the lender lowers the mortgage balance to fit the actual value of the home.
Baldwin said she has arranged five loan modifications so far.
Part of Baldwin's job is to soothe the frayed nerves of homeowners who could lose the roof over their head.
"I hear doom and gloom every day, but I have to stay positive, and I have to keep my clients positive because losing your house is such an emotional process," she said.
Unlike Baldin, many other real estate professionals, from loan brokers to Realtors, have left the industry altogether as business dried up.
Other local real estate offices have downsized and consolidated to keep pace with the drop in homes sales.
Earlier this year, Carriage Realty & American Broker Loans moved from Rancho Palos Verdes to a much smaller location in Rolling Hills Estates.
Over the past three years, they also cut the staff from nine to four people as business has dropped 80 percent.
"We cut back our overhead 95 percent. And as a result, we're making 80percent less money now, but we're getting to keep more of what we've made," office manager Warren Snyder said. "So it's worked out for us. But it's a very terrible time for everyone."
Still, some businesses have not been hurt by the real estate slump.
Redondo Beach real estate attorney, Peter Rustin, said his business has remained stable despite a volatile market.
"Our business hasn't necessarily changed, or necessarily gone up or down," said Rustin, a litigator with the law firm Spierer, Woodward, Corbalis & Goldberg. "Even in a good market, people have gotten into trouble on loans and need advice on real estate transactions. And in real estate transactions, conflicts are going to arise."
Posted: 10/22/2008 07:42:58 PM PDT