Yesterday brought a Fed rate cut by a half point that was
part of a series of coordinated cuts by the European Central
Bank, the Bank of England, The Bank of Canada, the
Swedish Riksbank and the Swiss National Bank. But this is
only one step. Stock losses are growing as the credit crisis
expands to global markets. The trend signals a bear market
and likely a global recession. As I’ve written previously
the markets are directly affected by census emotions, and
we’re seeing investor panic as the indexes drop below historical
thresholds. This week’s update is devoted to giving
you knowledge to get through this situation with the best
outcome possible for all.

Credit trends are showing tightening money (yet again)
due to the expanding freeze on credit that is rippling
through a variety of credit sectors. This condition has
spread to all credit sectors, including commercial paper. So
it’s more imperative than ever to ensure that your buyers
are pre-approved… especially buyers needing jumbo loans.

It might be timely to remind your sellers that the ultimate
price of their home depends almost exclusively on the
eventual appraised value, NOT their listing price. Appraisal
reviews are more common now, especially in declining
markets. This means that the lender may lower the appraisal
value if they think the property is worth less than the
agreed purchase price. When you write purchase contracts,
or review offers, plan that the review could extend the escrow
period by a week or more.

FHA programs that promise to write down loan principle
are not proven yet. We won’t know until more of these
close in the next 3 months whether the borrower’s credit
scores are lowered by participating in these FHA loan programs.
I’ve heard that when lenders do a short sale or loan
modification the original lender may place a derogatory
mark on the credit report that is as serious as a foreclosure.
More on this later when additional data is available.

My best advice is to stay calm and keep things in perspective.
The stock market crisis only serves to illustrate the
relative strength of real estate as an investment. With pending
sales up nationally in August by 7.4% there ARE homes
being sold. Compared to a 33% loss in stock values real
estate here remains a solid investment.