Dealing with sub-prime

Posted on 04 Mar 2008 at 2:19pm
By David Taffet

How has market volatility affected Dallas’ real estate community?


Diane Sherman

The sub-prime mortgage crisis certainly hasn’t been good for real estate nationwide, but to listen to national news, the sky is falling.

Only not necessarily in Dallas. While the marketplace has had to adjust, Big D has fewer naysayers than other regions.

To get a handle on it, we asked a variety of real estate professionals agents, builders, mortgage lenders this question: "How has the sub-prime mortgage crisis affected your business?" Here’s what they said.

I specialize in the market that puts me in transactions $300,000 or less. I mostly work with sellers. Yesterday, I got three offers on three properties, so I wouldn’t say it’s been bad for me. And we haven’t even hit the spring market yet.
Diane Sherman,
David Griffin Realtors

The sub-prime market has really not affected my business per se. The majority of our buyers had good credit scores to start. With that said, what lenders are requiring in general has changed dramatically even for traditional mortgages, so even folks with average credit scores are being scrutinized heavily. It’s also not unusual for underwriters to ask for more than one appraisal on a property. With 49,000 homes currently on the market, the absorption rate per month is about 10 percent. Sellers have to be more price-sensitive when listing so they can be the 50 percent that sells versus the 50 percent that may not.
Susan Melnick,
Virginia Cook Realtors



Steve Shatsky

The sub-prime mortgage crisis has kept me very busy. As a short-sale specialist, I work with many homeowners facing foreclosure for a variety of reasons, and their inability to qualify for refinancing on adjustable rate mortgages has increased noticeably.Some are seeing relief from government programs that have created opportunities for both sellers and buyers.The Mortgage Forgiveness Debt Relief Act of 2007, which eliminated the tax burden formerly associated with a short-sale solution, benefits sellers and lower mortgage interest rates and increasingly competitive pricing onforeclosed properties helps buyers.
Steve Shatsky,
Keller Williams

Before, as long as you qualified for the loan, your rate didn’t change much. A minimum credit score for purchase mortgage insurance on a conventional loan was 575. Since the mortgage debacle, Fannie Mae has imposed risk-based pricing.
Brent Foster,
First Horizon



Dan Cohn

Everyone is being scrutinized whether you have A+ credit or not, whether you’re a doctor with a six figure income or not. If you don’t have excellent credit, it’s going to be very hard to get a mortgage. But our real estate is still affordable. Dallas never appreciated like other places. We have open houses and I still get terrific traffic.
Dan Cohn,
Virginia Cook Realtors

We need to approach our real estate investment as something we can afford to live in today. People don’t need to extend themselves more than they can comfortably afford. As credit standards have tightened, it affects the first time homebuyer, people who need to sell quickly to transfer for a job and those in a house they can no longer afford. But the sub-prime market is really a very small part of what our market has been.
Jeff Updike,
ReMax Urban

With the sub-prime crisis, underwriting standards have become more strict, resulting in some buyers finding it difficult to obtain financing and perhaps deciding to wait on the sidelines a little longer. FHA loans are once again re-gaining popularity due to their more forgiving underwriting standards and lower minimum down payments. The sub-prime fallout has also resulted in a high percentage of loan defaults, and more properties entering foreclosure. We should see some stabilization in the mortgage market in the next 12 months.
Cody Farris,
Texas Prudential Properties



Lory Masters

Actually, we’ve just had an influx of buyers because of the Fed dropping the rate. It has taking a little longer to sell some of our listings because there are so many properties for sale.
Lory Masters,
Master Realtors

The buyer that we’re dealing with tends to not be buying new construction. The majority of the foreclosures will be in surrounding, suburban markets. [The sub-prime crisis] has tightened lending guidelines necessarily. They’ve stopped giving loans that shouldn’t have been offered in the first place.
Steve Habgood,
Hewitt & Habgood

It has really affected my relocation business. I had a very nice listing in Rowlett, but there were three foreclosures in the neighborhood that were purchased on sub-prime loans as competing listings. The relocation property was in better condition, but the foreclosures were priced about $18 per square foot less. The relocation property went under contract quickly due to condition and amenities, but the appraisal came in $3,000 lower because of the foreclosures listed in the neighborhood. Some relocation companies are limiting buy-outs because of the effect of the sub-prime market. One foreclosure can affect an entire neighborhood if there are not many competing listings or recent sales.
Keith Yonick,
Texas Prudential Properties

What it has affected is contingencies people who couldn’t get out of their existing homes. I’ve only lost one sale because they weren’t qualified.
Cassian Bernard,
David Weekley Homes

The sub-prime crash has slowed the market extremely, especially in the lower-price ranges, but it has created an opportunity for investment buyers. There’s a strong market for rental properties and investment buyers can pick up properties that might not normally be accessible.
Bob McCranie,
William Davis Realty

The people I work with are qualified borrowers and not having problems. It may take a little longer, but if you’re qualified, you’ll still get what you want.
Steve Shepherd,
Worth Ross & Associates


***All photos by Arnold Wayne Jones****
This article appeared in the Dallas Voice Defining Homes print edition March 7, 2008

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