Good morning MAR members!
What a week! September in April…whew. I spent last week in Sacramento at the CAR Legislative Day and Spring Business Meetings, and it was hotter here in Marin than in Sacramento. Frankly, it was downright perfect in the Central Valley, cooler than the last two years when I’ve been there.
Be sure to mark your calendars for next Tuesday, May 13 at 9:30, which is MAR’s general membership meeting at Embassy Suites in San Rafael. Our guest speaker will be Sarah Sutachan, who is the Manager of Broker and Real Estate Finance Outreach for CAR. Since I’ve been an MAR member, one of the biggest meetings of the year has always been when Leslie Appleton Young is the featured speaker. Leslie is CAR’s Chief Economist, and always brought valuable perspective to the statewide and Marin markets. Leslie, who lives in Los Angeles, is paring down her travel schedule and is somewhat passing the torch to Sarah, who is a valuable member of her staff. Join me and the rest of MAR’s leadership team to welcome Sarah Sutachan and gain valuable market perspective that you can use in your business today and get the most recent market info for your clients. MAR member Steve Dickason will also be delivering his valuable Marin Market Update. Registration is only $10, and it’s open online. Click here to register online.
I’d also like to take a moment to share my support for our dear colleague and longtime MAR member Marie Whitemore. Her 7-year-old granddaughter Gabrielle unfortunately is suffering from a very serious and inoperable brain tumor. This little girl just underwent chemotherapy and is now beginning a more aggressive treatment…an expensive treatment that is not covered by insurance. The Talbert family from the peninsula had a similar situation with a family member battling a similar condition, and the Talbert family has generously offered to match every donation dollar-for-dollar. I’d like to encourage all of us to support the family however we can. For more info, please click here . The entire MAR family’s thoughts and prayers are with Marie and Gabrielle.
And what a week in Sacramento. Lots of CAR business before the legislature, I’ll get that legislation next week.
The big day for me was Wednesday, where MAR CEO Andy Fegley and I attended and testified at two different Assembly committee hearings in support of Marin Assemblyman Marc Levine’s bill AB1537, which relates to the minimum density for housing developments in much of Marin. Levine’s bill lowers the minimum density from 30 units to 20 units/acre.
Currently, Marin is lumped in with San Francisco and Oakland as being “metropolitan” and is something of an anomaly in the Bay Area with minimum zoning at 30 units per acre. I knew that Sonoma and Napa were designated as “suburban” at 20 units/acre. What I didn’t know is that Santa Clara County…the Bay Area’s most populous county…is also designated “suburban” at 20 units/acre.
Levine’s bill corrects that anomaly and re-designates Marin as “suburban” at 20 units per acre. Last Wednesday, Andy and I, along with Supervisor Kate Sears and members of Bridge Housing and other agencies that historically have been against this type of change joined forces to support Levine’s bill. AB1537 passed unanimously through the Housing Committee and then passed through the Local Government Committee. MAR testified in support at both meetings.
MAR strongly supports this bill, and we are doing everything we can to assist Assemblyman Levine’s efforts to win passage. The bill has progressed further than similar bills have fared in the past, and we plan to continue our efforts to support its passage.
The most fascinating session of the week at CAR was the Public Policy Forum. The topic was online auctions. Rick Sharga, the Executive VP at Auction.com generously made himself available for this meeting, which was absolutely packed and standing-room-only. And I learned SO MUCH!
(this is a long account, sorry, but so much valuable info was shared and all the MAR members are talking about auctions)
-Auction.com sold 35,000 properties online last year, with the vast majority going to investors.
-Auction.com is a licensed broker in 48 states.
-Google just invested $50M in Auction.com, and now owns a 4% stake. That investment values Auction.com at $1.2B. Google will be helping Auction.com improve its mobile platforms.
-Speaking of mobile, Mr. Sharga shared a story about an investor in India who learned that he won an auction. He contacted Auction.com to verify that he could finalize his cash purchase on his phone. From India.
-It’s written into their Auction.com’s contract that “shill” bidders are part of the process. Mr. Sharga’s first response was that “shill is such a nasty term.” They call it “seller bidding”. It’s perfectly legal, but ethically dubious in my opinion. Meaning, if the auction slows down, or doesn’t get to the reserve, Auction.com will place a shill bid, in an attempt to get you to bid higher. It’s not a real bid, and thus you are competing against yourself. Can you imagine? In my mind, that’s the same as a listing agent telling you there is “another offer” or “multiple offers” when there really isn’t one. Gigantic breach of our REALTOR Code of Ethics. But since Auction.com is not a REALTOR member, the Code of Ethics does not apply. CAR currently has sponsored a bill before the legislature to outlaw shill bidding.
-That 75% of Auction.com’s business is generated by investors.
-That most of Auction.com’s clients are not interested in anything other than cash buyers.
-That Mr. Sharga himself declared that Auction.com was “not ready for the consumer market.”
-In regards to CAR-sponsored legislation AB2039, Mr. Sharga admitted that “our contracts need work” and “we were never set up to work with consumers.” AB2039 seeks to prohibit the current practice of indemnification clauses in the cases of short sale lenders seeking to use Auction.com to “verify” the short sale price. As many of you know, Nationstar has been incorporating this “verification” process as part of their standard short sale process. As the listing agent, you are required to sign a contract that indemnifies Auction.com of any liability during this auction process. Net-net, as the listing agent, you and your broker are carrying the entire liability for any wrongdoing by Auction.com, even though at that point in the process Auction.com basically controls the listing. AB2039 prohibits this indemnification practice, and CAR is working very hard for its passage.
-Among other investors, Auction.com and Nationstar happen to share a single common investor. Go figure. Fortress Investment Group is the majority owner of Nationstar, and Fortress Investment Group is also a major investor in Auction.com. Mr. Sharga called that a “coincidence”, and said that there is no financial relationship between Auction.com and Nationstar other than the “buyer’s premium” that Auction.com is awarded when a property sells through its platform. So he says.
-Mr. Sharga didn’t want to comment on a similar arrangement that has resulted in a current investigation where Benjamin Lawsky, superintendant of the New York Department of Financial Services is seeking to clarify the relationship between another auction site, Hubzu, and mortgage servicing firm Ocwen Financial. Seems that Hubzu was spun off from Ocwen in 2009. Mr. Sharpa encouraged us to Google Mr. Lawsky’s investigation of Hubzu. It’s quite an interesting search, you should Google it yourself.
-Mr. Sharga shared that the reason for this short sale price “verification” is because the “servicers feel that they’re getting ripped off.”
Which brings us to…
-In regards to the new practice of loan servicers in short sales requiring the property to go onto Auction.com to “verify” the price, in California 75% of the properties that go through this verification are sold to someone other than the original offeror, with a 15-20% “uplift” in the price. He was pretty adamant about that “uplift”. Mr. Sharga answered a question that I had: if the original offeror on the property has to increase his/her price to get it via the auction, that person does NOT have to pay the 5% buyer’s premium. That’s about the only good thing I heard at this session.
-For many auction properties, Mr. Sharpa acknowledged that there is a current disconnect between the initial bidding price and the actual reserve. Meaning the property is actually not for sale at the price that is entered into MLS.
The meeting went on and on and on, to the point where they had to stop it with many people still in line to speak.
Next week, I’ll give you a rundown of the rest of the CAR meeting.
That’s it for now.
I wish you a safe and prosperous week!