Is a lawyer really necessary?

Interesting piece by Stuart Lieberman (lawyer) on the use of lawyers to assist in real estate closings, from RealtyTimes:

Do You Really Need a Lawyer For a Real Estate Closing

Real Estate practices and procedures are all local. For example, here in New Jersey things are done differently depending on whether you are located in North Jersey or South Jersey.

In North Jersey, people usually use a real estate lawyer to assist them with their real estate transaction. For as little as $700.00 or so, a lawyer can help you with the sale of your home. Prices do vary and it costs a little more if you are buying a home.

My office is located in Central New Jersey and we see both practices. When lawyers are not involved, title companies do most of the work that lawyers would otherwise do.

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119 Responses to Is a lawyer really necessary?

  1. James Bednar says:

    Started writing a rebuttal to the Amy Hoak article that crossed MarketWatch late last night. About a quarter of the way through, I saw that Calculated Risk had already done the same. I’ve got to find a way to sleep less.

  2. Clotpoll says:

    “Let’s kill all the lawyers.”


  3. James Bednar says:


    Are you familiar with South Jersey practices? It might be helpful for readers here to understand the differences in closing practices between North and South Jersey.

    A lot of the focus here has been on Broker/Agent commissions, simply because they add to the overall cost of the transaction. However, many here overlook other contributors to that cost, most notably Title Insurance (now there is a racket), but lawyers as well.


  4. James Bednar says:

    If you don’t know about the Title Insurance racket, this piece is sure to light your fire.

    From Forbes:

    Inside America’s Richest Insurance Racket

    Title insurance firms rake in $18 billion a year for a product that is outdated, largely unneeded–and protected by law.
    Parker Kennedy’s roots run deep in the California company his family founded 112 years ago. Through four generations the clan (unrelated to the Massachusetts political dynasty) has run what today is First American, the largest title-insurance company in the nation. It collects $5.8 billion a year selling this age-old mainstay of homeownership.

    All that cash–for an outdated product that should have been all but wiped out by digital technology.

    Title companies appeared a century ago, helping to protect home buyers from being swindled by crooks who sold properties they didn’t own. A title insurance policy protects the buyer in case the deed turns out to be defective but the seller cannot be collared to refund the purchase price. It is far less necessary in these days of computerized records, online searches and rare instances of title fraud or hidden liens.

    First American has doubled its prices in a decade, to an average charge of $1,472 per home for a title search and insurance. Meanwhile, thanks to computerized record-keeping, the cost of searching for a home’s ownership records online has fallen to as low as $25. Technology also has helped make mistakes rarer; now only $74 of each policy goes to pay claims–that is, make home buyers with defective deeds whole. That leaves a $1,373 spread for overhead and for profit.

    The title industry’s perennial protectionism has had a predictable side effect: corruption. Shielded by law from having to compete on price, insurers resort to bribes and gifts to real estate agents and mortgage brokers for steering business their way, deceptive front companies, phony “reinsurance” deals and other creative chicanery .

    Regulators in Washington State just revealed that First American spent $120,000 a month courting real estate agents with season tickets to University of Washington football games, tickets for Seattle Supersonics basketball games, shopping sprees and other goodies. The state report says the firm was “the worst offender” and committed more than a hundred violations a month in the 18-month period studied. It adds: “First American offers a prime example of how illegal inducements can help a company attain superior market share.”

  5. James Bednar says:

    From MarketWatch:

    GDP revised down to 2% in third quarter

    The U.S. economy grew at a 2% real seasonally adjusted annual rate in the third quarter, slightly lower than the 2.2% estimated a month ago, the Commerce Department reported Thursday. It was the slowest growth since the fourth quarter of 2005. The economy grew at a 2.6% pace in the second quarter. The big picture take-away from third and final estimate of gross domestic product was little changed from the report from a month earlier. As before, the collapse of homebuilding was a large drag on growth, offset by healthy consumer spending and robust capital spending by businesses. Disposable personal incomes were revised higher, while profits were slightly lower, although profits have still risen at the fastest pace in 22 years over the past year. Core consumer prices were unrevised in the report, showing a 2.2% annualized gain, still in the Federal Reserve’s discomfort zone.

  6. BC Bob says:

    In most cases, South Jersey does not use lawyers for closing, at least that’s what my lawyer friends state. The closing is done at the title company’s office.It’s that way in many other states. If you don’t order the title work, the lawyer will be happy to send your business to his cronies and receive a piece of that also. Think about what they really do for the closing, prepare the respa statement,[I can’t begin to tell how how many respa statements that I received that were wrong],get the buyout #’s, get the tax, water and utility credits [anybody can do this]. If there are issues with the inspection report, they relay your response to the other lawyer. One closing, myself and the other party went around the lawyers in order to come to an mutual agreement. Lawyers from both sides were screwing it up.

    That being said, if the general public does not know that their mortgage may double in 2-3 years, how the hell do they read a respa statement?? They may not need a lawyer rather a quart of plasma.

  7. James Bednar says:

    Residential investment was revised to a -18.7% from -18% in Q3, down from the -11.1% in Q2 and -0.3% in Q1.

    From the AP:

    Economic Growth Slows to 2 Percent Pace

    The economy has been losing momentum all this year. The main culprit behind the third quarter’s slowdown was the deepening housing slump.

    Investment in home building was slashed at a 18.7 percent rate — even more than previously estimated — and the largest cut in 15 years. That shaved 1.2 percentage points off third-quarter growth, the most in nearly 25 years.

  8. James Bednar says:

    Chain deflator, a measure of inflation, ticked up to 1.9% from the 1.8% initially reported and expected by analysts.


  9. BC Bob says:

    “As before, the collapse of homebuilding was a large drag on growth”

    “The main culprit behind the third quarter’s slowdown was the deepening housing slump.”

    Collapse and deepening!! With the mountain of inventory and sales in the crater, I can’t imagine prices coming down, Richard must be onto something that we are all missing.

  10. njrebear says:

    #9 Bob,

    In the latest survey which involved a frantic search, it was found that 5 wall streeters bought homes. :)

  11. James Bednar says:

    My Christmas Wishlist.. hint hint..

    My Wish List

  12. Rich In NNJ says:

    And not ONE book on whiskey (or if you prefer whisky)?


  13. rhymingrealtor says:

    That being said, if the general public does not know that their mortgage may double in 2-3 years, how the hell do they read a respa statement?? They may not need a lawyer rather a quart of plasma.


    I go to all my closings and explain the papework in detail, I have on occasion met an attorney who will do the same for the clients, rarely though. I have worked with a title company and they do incredible work and spend much more time go over details that attorneys. They use an attorney for the review period at a flat rate of 150.00 then use them again for inspection issues if necassary. They are available for questions at most any time, via phone or email. I can’t say enough about them. Except to my clients because If I suggest they use them instead of a lawyer… E & O here we go.
    The attorney cost is not as what is stated in the reatly times article. There is the cost stated when you first sit down with them generally $ 1,000. then keep looking for a the other padded amounts. I just got a client from last dec a $1600.00 refund from a @#$$@%^ attorney. I went over that respa like a hawk, disputed every charge ( nicely of course ) and 10 months later whella! oops made a mistake! Found that money!. And Bob just as you feel you had to work around them, so do we. They get into ego contests with each other on a regular basis, ( sometimes known as pissing contest’s).
    I was at a closing 2 years ago, where the attorney F@d up so totally and then had the nerve to tell the client he would close it but they would have to bring in $200.00 more. We walked out and I followed him to the ATM telling don’t do it ! you have the keys, He insisted on paying him. That attorney has sinced lost his license.
    On the other hand if you will be using an attorney, I will give you a couple names, based on my experience of how they treat their clients, there availability, whether they are diligent,honest and their charges are not hidden.


  14. rhymingrealtor says:

    My Christmas Wishlist.. hint hint

    I must admire a man not afraid to show his geeky side (-:


  15. bergenbubbleburst says:

    richinnj: Or if you really want to be correct, uisce beatha, whiskey is the anglicazation of those words. Uisce Beatha translates as water of life in English

  16. bergenbubbleburst says:

    Uisce Beatha is the Irish word.

  17. chicagofinance says:

    rhymingrealtor Says:
    December 21st, 2006 at 9:32 am
    My Christmas Wishlist.. hint hint
    I must admire a man not afraid to show his geeky side (-:

    KL: seriously – where is the friggin’ pocket protector? does he own a light sabre too?

  18. chicagofinance says:

    Rich In NNJ Says:
    December 21st, 2006 at 9:18 am
    And not ONE book on whiskey (or if you prefer whisky)?

    OH – we prefer single malt scotch

    Maybe Maker’s Mark if you got some premade eggnog.

  19. FirstTimeBuyer says:

    I think both parties should use an attorney and forgo the agents.

  20. James Bednar says:

    I’d like to see a transition to a transaction brokerage model where the industry is compensated for the work necessary to facilitate the transaction, and nothing more.

    As long as we’re wish-listing here, how about a competitive title insurance market and a flat-fee open MLS?


  21. chicagofinance says:

    note: crib is available

  22. James Bednar says:

    Burj Al Arab would be my top pick.


  23. chicagofinance says:

    er….would you really want to go there?

    That city is kind of the equivalent of a gold-plated Short Hills mall.

  24. James Bednar says:

    Only if someone else picks up the tab.


  25. James Bednar says:

    Actually, my top pick would be a tour of the South Pacific islands. Tonga, Fiji, Samoa, Tahiti, Vanuatu, Solomons, Marshals, etc.

    I’m really a coral geek above all else. I’ve been captively propagating coral for about 5 years now. My main focus right now is propagating Anemones (Entacmaea Quadricolor), but I’ve grown plenty of hard coral as well, Acropora, Montipora, etc.

    Being able to dive the South Pacific reefs has been a dream for quite some time now (as is a greenhouse to be able to grow out much more).


  26. BC Bob says:


    I can just imagine some of the stories!! The last closing I had, the respa was off by almost 10K. I picked it up right away and told them to rectify it, while we left the office. It took the two attorney’s almost 10 minutes to balance this. They were scrambling with their calculator’s like there was no tomorrow. This was after, they almost caused the deal to go sour just a week before.

  27. rhymingrealtor says:

    I’m really a coral geek above all else

    Please stop your killing me here !Tears in my eyes,coffee on my keyboard. I can’t wrap gifts in the condition you’ve left me in!


  28. James Bednar says:

    In the early part of ’05 I considered buying a place up in Independence, just up the road from Hackettstown. Was an older home (as in 1800s, not 1950s) on roughly 11 acres. I was really interested in the 2 greenhouses on the property. I was almost sold on it when I saw the MLS listing.

    We took a ride up to take a look, but unfortunately, the greenhouses were of the un-glazed variety (hoop and sheeting). This style would never work for year-round aquaculture.

    Probably better off, on the way home I not-so-quickly realized that I’d be miserable making that commute every day.


  29. chicagofinance says:

    biking, coral, economic theory, real estate, blogging, polska kielbasa ==> can someone discern some kind of pattern?

  30. Pat says:

    JB: They are missing a forum over there. You may need to set them up with “The impact of psychological forces on macroalgae and microcorallimorpharians.”

    KL: I’m desperately seeking a “large, pink sparkly unicorn” and you’re already WRAPPING! CF..get you a night in the “pleeeease let me get lucky Liberace” room if you find me a pink unicorn!


  31. Lindsey says:

    There are people who are wishing for something other than books and vacations today in Rhode Island. From Ben Jones place (cut from his edit):

    The Providence Journal from Rhode Island. “One classified newspaper ad says ‘1st Mo. FREE.’ Another: ‘Free Heat, Free Hot Water and FREE RENT!’”

    “The reason is simple: rental properties are going empty. ‘Our occupancy rates are off anywhere from 2 to 5 percent’ from last year, said Cheryl Martin, VP of Residential Property Management of Warwick. ‘We need to do something to be more aggressive in order to compete.’”

    “Property managers and real-estate agents say the demand for rentals priced at $1,100 per month and up has gone soft. Not since the recessional mid-1990s…”

    “The large number of rentals going empty is reflected statewide in the ‘rental vacancy rate,’ which has nearly doubled in the last three years, to 7.7 percent last year, according to U.S. Census data.”

    “The construction of hundreds of condos, many in downtown Providence, has also flooded the real-estate market, and some of the spillover is driving up the inventory of rentals as condo owners who can’t sell their units decide instead to rent them out.”

    “‘I have a client right now, he’s got a little house on Ninth Street for $1,600 a month, and he’s down to $1,300 and nobody even wants to look at it,’ said Suzanne Knight, a real-estate agent on Providence’s East Side. ‘It’s been vacant for four months now. … There’s just much more supply than demand.’”

    “East Side property owners are competing with new downtown properties, Knight said. ‘There are hundreds of rental units downtown that weren’t here two years ago,’ Knight said. ‘You’d think landlords would lower their rents, but it takes a while. So they’re empty.’”

    I thought the high cost of rent was supposed to drive people into the purchase market, what happened?

    Seriously, this another big rock on the tracks for those who are expecting the train to climb back up the hill in 07.

    Cue Booyaa Bob

  32. Silgailis says:

    #32 Pat: Unicorns can be found at the site. #861058, 12 inches high, 3 colors available, made in Europe, $59.95.
    This site carries gorgeous toys, but not of the electronic type.

  33. Pat says:

    Good try, Silgailis..was there last week (on-line) they’ve been out of pink unicorns for a while.

    Found one on ebay in CA but never have it in time.

  34. FirstTime says:

    # 14 rhymingrealtor
    Can you pl suggest some good RE-attorneys for contract/closing in Bergen county fairlawn area.

  35. njrebear says:

    Italian oil facility in Nigeria seized

    Armed men attacked two foreign oil facilities in southern Nigeria on Thursday, and both shut down production as security worsened in the restive, oil-rich region. Royal Dutch Shell PLC, which came under attack earlier this week, began evacuating families of foreign workers.

  36. BC Bob says:

    An old article. A little off topic but relevant to previous discussions regarding price declines and durations.

    Note- Past results are not a reliable indicator of future performance. This past history did not experience bidding wars, flippers, toxic lending and massive fraud. This bust willl be much more severe, only an opinion.

    “The bottom line: Real estate prices eventually correct themselves. And unfortunately for homeowners, it often takes years before home prices start to rise again, especially after a big run up.”

    “National City recently studied 66 major metro regions over the past 21 years that suffered through a 10 percent or greater decline in prices for at least a two-year period of time. It found that home prices, once they begin to correct, tend to decline 17 percent on average before markets heal themselves.”

    “And the average duration of these adjustments is 3.5 years,” says DeKaser.”

    “So what about families who recently bought into one of these “extremely overvalued” markets in hopes of turning a fast buck? “I extend them my deepest sympathies,” says DeKaser.”

  37. John Luis says:

    George Otlowski Jr is the best realestate attorney in all of JERSEY. Honestly he is high recommended.

  38. njrebear says:

    Stocks Fall After Weak Regional Report

    …the Philadelphia Federal Reserve’s December business index, which gauges regional manufacturing activity, came in at a negative 4.3 compared with a positive reading of 5.1 in November.

    Earlier in the session, investors tried to shrug off news that the economy grew at a slower pace in the third quarter than had been estimated. Gross domestic product fell to 2 percent in the third quarter amid a cooling real estate market; the Commerce Department estimated a month ago that the reading would be closer to 2.2 percent.

  39. njrebear says:

    here we go…

    A coalition of nine banking and housing groups, including the American Bankers Assn., asked six federal and state bank regulators to abandon the idea of adding so-called hybrid adjustable-rate mortgages, or hybrid ARMs, to guidelines they put forward in September. . . .

    Lawmakers and consumer groups have called on regulators to incorporate the mortgages in the guidelines, which banks use to set underwriting and disclosure standards. The guidelines currently apply to interest-only and payment-option adjustable-rate loans. . . .

    In a Dec. 7 letter to regulators, six members of the Senate Banking Committee, including incoming Chairman Christopher J. Dodd (D-Conn.), asked that the hybrid mortgages be included because they “have a number of the same risky attributes” as the mortgages already covered by the guidelines.

  40. BC Bob says:

    John Luis: RE Attorney

    ….skilled in forbearance also???

  41. James Bednar says:

    For those who don’t follow the economic data regularly, the Philly Fed Index attempts to gauge manufacturing activity in eastern PA, southern NJ, and DE.


  42. BC Bob says:

    From Post #42,

    “It’s losing jobs. It’s struggling because it produces components for houses and autos.”

    Go ahead, be naive thinking that auto’s are only a midwest problem!!! Kind of like stating why should worry about the dollar, it won’t affect homeowners???

  43. James Bednar says:

    A graph of the Current and Future General Activity Indexes from the Philly Fed:


  44. rhymingrealtor says:

    First time buyer,

    I suggest you use a title company. You will save money, headaches, and will get answers to your questions promptly.If you are interested email me at and I can give you the name of one from south jersey, that will come to your closing wherever you want it.

  45. Applied Coral Technology says:

    #30 James Bednar Says:
    December 21st, 2006 at 11:41 am
    “We took a ride up to take a look, but unfortunately, the greenhouses were of the un-glazed variety (hoop and sheeting). This style would never work for year-round aquaculture.”

    Hey Jim,
    I have a biz plan i’d like you to look at. we could get all these guys with big bank accounts waiting around to buy a house to invest and make some money so they can afford that dream home..
    Wanna check out the plan?


  46. James Bednar says:


    I’d love to, drop me an email at:

    jamesbednar at gmail dot com


  47. Applied Coral Technology says:


    I’d love to, drop me an email at:

    jamesbednar at gmail dot com



  48. Anonymous - not a lawyer says:

    James, to be fair, you only printed the portion of the article pertaining to lawyers without the key conclusion that the author made: that it makes sense to hire a lawyer for the transaction.

  49. James Bednar says:


    I wanted to grab the smallest snippet possible as to not awake the copyright demons at RealtyTimes. They have become very defensive about cut/paste content lately. I tried to grab enough to get a point across, but little enough so that you are enticed to read the article where it was published.


  50. Anonymous - not a lawyer says:

    Yeah, I can see why they might be a little touchy, he he.

  51. 2008 Buyer says:

    Goldman Building market for Home Price Deriv.

    NEW YORK – Goldman Sachs is laying the foundation for a new market that will let investors trade in the $22-trillion U.S. residential property sector — without a realtor.

    Next month, Goldman expects to begin trading forwards, swaps and options linked to U.S. house prices indices. These instruments will not only let investors benefit from rising prices, but also hedge against a slump, which could be useful as an extended bull run for house prices grinds to a halt.

  52. James Bednar says:

    Lereah says we’re at the bottom. I wish I could be as optimistic as he is (while also being honest, that is).

    Housing ‘close to bottom,’ realtor-group economist says

    Data coming out of the housing market suggests “we’re pretty close to the bottom,” the head economist for the National Association of Realtors said Thursday. David Lereah said he expects a shorter housing contraction than the two previous downturns the past 20 years. He said mortgage applications have come up a bit and existing-home sales are starting to show signs of bottoming out. “Builders have cut production, which you want to see and leads to a much healthier market going forward,” Lereah said during a conference call.

  53. bergenbubbleburst says:

    JB: I know it is Lereah’s job, but simply put he is a liar. He gets paid to lie.

  54. BC Bob says:

    “David Lereah said he expects a shorter housing contraction than the two previous downturns the past 20 years.”

    …….and I expect to be trading back at $80!!! What data does he utilize to arrive at this conclusion???

    “The Mortgage Bankers Association’s index of refinancing fell 14.6 percent to 1968.8 from 2304.4, while the purchase index dropped 5.9 percent to 436.5 last week from 463.8.”

    “There is still a big overhang of unsold properties that has got to be winnowed out,” said Richard DeKaser, chief economist at National City Corp. in Cleveland

    “We’re not sure how long it will take and what it will take to get buyers off the sidelines,” Chief Executive Officer Ara Hovnanian said in an interview.,0,5977727.story?coll=chi-business-hed

  55. gary says:

    Is this guy out of his f***ing mind?

  56. Clotpoll says:

    Hey Grim (from #21)-

    When RE moves to a transactional, “menu-based” or “facilitative” business model, don’t you dare buy!

    That will be the sign that RE has become a commodity, like plane tickets or computer chips.

    As for title companies, attorneys, etc…don’t get me started. As with other aspects of RE, there are a handful of principled, well-intentioned people in these fields, but there are plenty of examples of subhuman behavior to be found. The DOJ is taking a long look at illegal “tying” relationships between title and both attorneys and mortgage lenders, as well as outright bribery on a massive scale (go to any professional sporting event in the US, and scope out the best seats: those are the title guys and their “guests”).

  57. Clotpoll says:

    FTB (from #20):

    Judging from that statement, you are obviously a first-time buyer.

  58. NJGal says:

    As an attorney (although one not versed in real estate law), I can tell you that I have “heard” that all you really need for a closing is a well-versed paralegal.

    That said, it’s a huge purchase, and that makes people nervous. Something about having a lawyer there, as someone completely “on my side,” as opposed to an agents who is making money from the deal, would just make me feel better.

    Naturally, I’m biased, as our family has several lawyers, including my dad, who is not a real estate attorney but has been doing closings on the side for 20 years, and an uncle who is heavily involved in real estate. I know they’ll be looking out for my butt when I buy, and what’s even better, they’ll work for a beer:)

  59. chicagofinance says:

    James Bednar Says:
    December 21st, 2006 at 3:31 pm
    Lereah says we’re at the bottom.

    grim: yeah – the false one….dive in!

  60. njrebear says:

    Americans spend every cent – and more
    Critics say America’s negative savings rate can’t be sustained and see a recession coming. Are they right?

    1]The savings rate was a negative 0.6 percent in October.
    2]As recently as the second quarter of 1985, Americans were saving more than 10 percent of their paychecks.
    3]Dean Baker, co-director of the Center for Economic and Policy Research, said the negative savings rate cannot be sustained over the long run. It will end when consumers cut back on spending, which in turn will spark a recession, he said – something he sees happening as soon as next year.
    4]Largely to blame for the negative rate, Baker said, is the spike in home prices over the last five years that convinced many Americans they no longer needed to save.

  61. anon says:

    off topic and from a prior thread, does anyone have any comments on this :

    is NYC different?
    December 20th, 2006 at 11:16 pm

    the highlights:

    The Year the Bubble Didn’t Burst in Manhattan
    By Tom Acitelli

    At the end of the third quarter of 2005, the average sales price was $1,149,813; up it went the following third quarter, to $1,288,748, according to the appraisal firm Miller Samuel, which releases a quarterly report on the borough’s housing market with one of Manhattan’s biggest brokerages, Prudential Douglas Elliman. This third-quarter 2006 average was also up over the year-end 2005 average of $1,221,265.

    The first-quarter 2006 average was a sharp increase over the fourth-quarter average of 2005: $1,187,404 to $1,300,928. The average Manhattan apartment price, in fact, increased year over year in each of the first three quarters of 2006, and it looks likely to do so in the fourth, which ends Dec. 31.

    The median price—a better indicator of the market than the average—was $750,000 in the third quarter of 2005, and it rose to more than $845,000 in the third quarter of 2006. The median increased year over year during the first three quarters of 2006, in one case particularly sharply: It set an all-time Manhattan record of $880,000 in the second quarter.

    While they didn’t spike like prices, sales either increased slightly or stayed generally steady this year. In the first quarter, Manhattan condo and co-op sales dipped slightly year over year, according to Miller Samuel, and in the second quarter, they dropped more than 11 percent. But in the third, sales were up nearly 6 percent between 2005 and 2006.

  62. AntiTrump says:

    Guess what folks.

    Couple of Richard’s rich wall street connections bought 700K homes. So the housing market in the rest of nj is going to keep going up, up and up. That means the 700K home you didn’t buy will be 750K next year and 800k the year after.

    Since incomes aren’t catching up for most folks, to pay the mortage on these houses, maybe a 60 year mortgage will help. i.e. you buy a house when you are 1 year old with a 65 year mortgage and it is paid off when you retire. Great way to become a home owner.

  63. HeHeHe says:

    I think it’s interesting it was put out by an appraisal firm in conjunction with a realtor and contains such insightful paragraphs as:

    “Blame the media, brokers tell The Lab. Others cite an entire category of real-estate blogs devoted to the bubble theory, relying heavily—even gleefully—on the pessimism from 2005 going into 2006.”

    Sounds legit.

  64. AntiTrump says:

    I like to look at this house for a laugh sometimes. Proof of that some sellers are still living in the cave.

  65. njrebear says:

    from 66 on savings rate-

    The CNN article states that
    “But other economists say the negative rate overstates the problem of consumption versus savings. They note the savings rate doesn’t measure things like money going into bank accounts, 401(k)s and other retirement plans or mutual funds”

    however the following Federal Reserve Bank of San Fransisco-

    “Since IRA and 401(k) contributions are not part of personal outlays (and, therefore, must be included in the difference between personal income and personal outlays), these contributions are included in national saving computations.”

    It looks like economists interviewed by CNN have no clue just like the realtor i met over the weekend.

  66. Rachel says:


    That house is on GSMLS with Keller Williams for $645K. #2339432 DOM=43.


  67. njrebear says:

    Dec 22
    08:30 Durable Orders
    08:30 Personal Income
    08:30 Personal Spending
    10:00 Mich Sentiment-Rev. Dec

  68. njrebear says:

    The other day there was a discussion on Money Market and CD accounts.
    I just found out that Ing Direct is offering its current customers ( me :) ) electric Orange accounts that gives out 5.3%.
    This account will be made available to everyone in Jan 2007.

  69. Richard says:

    bob and njbear, try tapping your heels together saying ‘there’s no place for anything but a RE market crash, there’s no place for anything but a RE crash’. maybe you’ll get your wish. LOL! you guys are so smart you’re stupid.

  70. Richard says:

    you RE permabears are good for a laugh. why don’t you smell what you’re shoveling?

  71. Richard says:

    sadly this blog has denigrated into a cult-like following. sorry jim, i know you tried but you attracted too many of the same bees. they’ve got house envy and while they claim they have a ‘down payment’ they won’t spend it. who here is worth $2 million+ in assets? i’ll confidently guess not one regular poster else you’d not be on this blog and off somewhere making money so you wouldn’t have to worry about losing 2% on your RE investment even though it would be a primary residence and you wouldn’t be selling anytime soon. get off the blog and make some money. maybe you won’t bitch as much.

  72. syncmaster says:

    get off the blog and make some money. maybe you won’t bitch as much.

    Trying to get a rise out of the natives?

  73. njrebear says:

    “while they claim they have a ‘down payment’ they won’t spend it. who here is worth $2 million+ in assets”

    Is 2 million requirement part of of the new fed guidelines for first time buyers? How many home owners have 2mil in assets? Where did 2 mil come from? Just another number you pulled off thin air like those 5 wall street home buyers?

    “somewhere making money so you wouldn’t have to worry about losing 2% on your RE ”
    I thought your estimate was 5-7% loss. Did you change your estimate yet again? Don’t make me dig up your old posts, i have 4 days off you know :)

    Again no substance or concrete evidence … just more numbers pulled out of thin air.

    Sad because you didn’t find the sixth buyer yesterday?

  74. njrebear says:

    Another Subprime lender bites

  75. James Bednar says:


    Why the dramatic shift of viewpoint? I was going back through some of our old email conversations and the shift in your demeanor and attitude has been nothing short of amazing.

    I understand that you were looking to buy earlier this year. I can only assume that to be the case since you were talking about actively lowballing properties. Did you finally buy? I’d hate to think that this shift in polarization took place simply because of that transaction.

    You wouldn’t be the first here to make the Jekyll and Hyde switch after purchasing, two others before you have as well. One of which really surprised me, since I would have classified him as one of the more bearish readers.


  76. njrebear says:

    ” understand that you were looking to buy earlier this year”

    bsg holder envy? :)

  77. Clotpoll says:

    Where you sit is where you stand.

  78. Clotpoll says:

    Although our friend Richard writes with the subtlety of a flying mallet, he’s probably one of many recent homebuyers who has realized that- despite the nonstop predictions of disaster around here- the sun keeps coming up every morning.

    He is also dead-on in his assessment of the plethora of arbitrage and relentless minutiae-crunching within many threads here. It’s like a pack of vultures picking at a dead rabbit…not much meat there. And what a way to assess owner-occupied RE! Call me stuck in the ’50s, but I contend “home” is supposed to be about family, comfort and good times. The market goes sour? Stay in your home thru the down cycle. Nobody just wakes up one day and suddenly realizes NJ is expensive. And, even though there are thousands of the proverbial “500K POS Capes” out there, there are affordable, nice places to live all over NJ…if one is willing to compromise just a tad. RE is a game of compromise, because not even millionaires can “have it all”…there’s always a tradeoff among the three factors of price, location and amenities of homes buyers consider (I contend the best anyone can do is get 2 out of 3 of those factors…the third factor will be out of the buyer’s control and must be accepted). No matter how bad things get in NJ, a 450K 4 BR Colonial in a top school district on the Midtown Direct line ain’t in the cards. Sorry; location DOES matter.

    I have tried to grasp the merit in the idea of renting, hoarding cash and waiting for the big market crash in order to swoop in and obtain maximum value. However, I can’t help but think that the element of putting your life on hold that this strategy requires also has significant costs. Renting- in and of itself- implies transience, impermanence and absence of commitment (please don’t read this as an accusation of renters being shiftless drones who have 400 FICO scores, leased Escalades and closets full of $300 jeans). You can be in a beautiful place…great landlord…below-market rent…but you are essentially “on hold”.

    And on hold for what? It seems that for many here, the only x-factor left is when to call the bottom of the market. All but the blind agree it’s down; the only question is how much further it will fall. 5%? 10%? 20%? Is the benefit of catching the absolute bottom worth the wait and uncertainty? And, what if the bottom is in…and you’re missing it now? Are you so invested in the “big crash” theory that you can’t pull the trigger in a rising tide?

    Cost/benefit analysis requires an evenhanded assessment of both sides of a proposition. I, for one, see a lot of attention here to the cost side…while the benefit side of the ledger gets lip service (or worse). This blog doesn’t get the attention that comes its way because homeownership isn’t highly desired and valuable.

  79. NJGal says:

    If it is indeed the case that Richard went bullish after he bought, that’s pathetic. Truly, truly pathetic, especially because he won’t admit it and comes on here acting like an a–.

    And Clot, why is it that life is “on hold” just because one is renting? There would be a lot of people in the world who would have a big problem with that. Imagine you were dirt poor, but able to afford rent, had a nice family, and although you didn’t have much, life was good, you had each other and life goes on. Are those people “on hold” just because they rent? No, they’re not, and it’s elitist and snotty to suggest it. One of the reasons I detest so many people in this area.

  80. Clotpoll says:

    NJ Gal-

    My “on hold” comment was directed at the permabear renting contingent that posts here. It was not meant as a global statement on renting. In fact, the RE world NEEDS rental…the entire structure of residential RE in this country would literally collapse without it.

  81. James Bednar says:

    Isn’t the average homeowner in their home for only 7 years?

    I’m not sure the source of that meme, or whether or not it’s true or false. But I fail to see how those seven years don’t represent the same level of transience and impermanence as renting.


  82. James Bednar says:

    Heck, our friend Blanche puts that number at 4 – 7 years.

    If housing values go flat, it takes more time to build equity, and with the average homeowner staying only four to seven years, that isn’t enough time to step over a flat or declining market.

  83. Clotpoll says:


    7 years is the national average. However, the average doesn’t tell the story. First-time owners in places like NJ only own for around 3 years (in the physical sense, you can definitely call that transient)…so the older and married-with-children segments of the population bring the average higher by owning longer. I would also submit that even serial, consecutive ownership still respresents permanence. It is a commitment to ownership.

    However, there is a tacit PSYCHOLOGICAL difference between: a) assessing the risks of ownership as outweighing the benefits, with those risks being perceived as so great that renting is preferred; and b) belief that ownership, even with its set of inherent risks, is preferable to renting.

    We all have our own lenses through which we view the world. The impressions we record lead to belief before they lead to action. And the beliefs of the choose-to-rent contingent (not to be confused with the must-rent crowd) are very different from those on the ownership side. It’s those psychological differences that make the market…otherwise, we’d all be thinking- and doing- the same thing.

  84. Seneca says:

    Richard and other “buy now” enthusiasts,

    Hypothetical situation:
    Two investors are looking to put some money into the stock market and both decide that they want a Wall St. play and both decide that Lehman Brothers is a well-run firm.

    Investor A plans on a long-term hold and buys 10,000 shares in April 2006 for $77.02 a share or $770,200 without looking at historical prices.

    Investor B plans on a long-term hold as well but looks at the internal trend line of the stock price and believes it is currently overpriced. She waits until the stock price comes closer to the trend line and buys 10,000 shares in July 2006 (just three months later) for $60.20 a share or $602,000.

    Today, investor A can sell his shares for a $2,900 gain. Investor B can sell her shares for a $171,100 gain. Rest assured, Investor B felt no envy for Investor A who held the shares longer than she did.

    You can say its easy to come up with a scenario like this in hindsight but the bottom line is an informed decision on any large investment or purchase will frequently yield better results.

    Investor A may not have lost any money at this point, but Investor B now has enough cash to send a few kids to college. I think she is the winner in this scenario.

    Many on this board are not waiting for the absolute bottom of the market. However, we are not interested in the bridge you are selling.

    Good day sir!

  85. bergenbubblebust says:

    Clot: I try to give you the benefit of th edoubt, as a realtor. But then you make your comment that a 450K colonial, good schools, mid town direct aint in the cards.

    And you know that for a fact because of what?

    You should have ssen what you could have purchased in Ridgewood,and Wyckoff and other premier Bergen towns when real estate dropped last time.

    But there you go again with location, which transaltes into close to NYC, so the price will not go down.
    And all the companies in NYC know that, and they will tell their employees ge\ee guys we know Bergen Co, and other part of NJ is so expensive, and the property taxes are so high, but do not worry, because we will pay you a salary to afford those prices, etc. etc. That Clot is not in the cards.

    Real state declined before,and it will decline again, even in the better areas, and perhaps more in the better areas as the run ups were even more. I lived through it, its only different this time in the huge amount of recklessness in the market this time around, and the sad economic condition of our state.

    Location means everything,and guess what so does price.

  86. Clotpoll says:


    Your analogy is broken from the get-go. Can’t we agree that RE and securities are two separate asset classes? Your scenario also covers a period of weeks, not the years that are involved in the typical homeownsership scenario.

    If not, can we at least agree you can’t live inside a stack of LEH stock certificates?

    At the very least, could we agree with Cramer’s constant bleat: “you can’t fall in love with stocks…they’re just pieces of paper”.

    I have, on the other hand, seen people fall in love with their homes.

  87. bergenbubblebust says:

    JB: You have ro wonder why Richard (if he has purchased) and the other 2 posters you believ have purcahsed, still come to this site, and why the the hostility.

    Perhaps they have pruchased, but perhaps they are sad that they did, and they come here to strike out at us.

    We are the problem I mean right, if all the Bears who have not purcahsed went out an bought, all would be well.

  88. Clotpoll says:

    Hey Bubbleburst (#91)-

    I agree with you (must be Christmas!). Location AND price do mean everything. However, they only function in relation to each other. High-quality locations (and, BTW, I don’t limit that to Bergen…have you ever been to Tewksbury in Hunterdon Co? No train, no easy commute…but big $$$) will always translate into top-shelf prices.

    By the same logic, I CAN envision that 450K 4BR in a top school district on the Midtown Direct. However, if that were to happen, I also see it against the backdrop of 12% unemployment, collapsed capital markets, entire residential areas boarded up and abandoned…and 450K being that market’s equivalent of today’s 1 MIL. And if that were to pass, who would want that home…even at 450K?

    My only argument with you is that if housing prices contract to the point you expect, that drop will be reflected in the economy at large. And, that’s not good for anyone.

  89. ADA says:


    I agree with clot your analogy is flawed.

    In addition to clot’s points, you also ignore, in your own example, that investor B, would’ve also had to buy other worthless stock (i.e rent) during the period which he was waiting that would ultimately be worth zero.

  90. bergenbubblebust says:

    Clot: I nver said a wholesale collapse, but certainly a 20 to 25% drop in th emarket is not unreasonable, especially so in that prices have increase byt that much for the last 4 or 5 years.

    This bogeyman of oh if prices go down we all lose, is just that a bogey man. If we do not squeeze out the excees in this market, then we will all really lose. And as I have mentioned before our state is in dire economic straits.

    Recessions are a fact of life in a capitalist society, and when things get out of control there has to be a cleansing process, will some people get hurt, sure, however for many of them it will be their own fault.

    Once the pain is over, hopefully we will come back stronger.

    Everbody is a capitalist when things are roaring, its funny how when things start to sour (not accusing you of this), so many then start to worry about what will happen to ur sisters and brothers. We cannot have it both ways.

    Merry Christmas

  91. BC Bob says:

    “At the very least, could we agree with Cramer’s constant bleat: “you can’t fall in love with stocks…they’re just pieces of paper”.”

    Be fair, why the enormous extraction of HE over the last 5 years??? Because the homeowner feels “rich” on paper. I sat thru the 1988 downturn, I saw it coming with the recession, just didn’t think it would be worth selling at that time. You had a drop of approx 20% SFH and 40-50% condos. A 20 % drop in 1988 prices wasn’t singnificant to me. However, a 20-30% drop in 2005 prices would be quite severe. I agree with your analogy. I didn’t fall in love with my real estate paper profits, I decided the madness was at an unsustainable extreme. I monetized those paper profits. What’s the worst that can happen. I buy now at 20% off 2005, or get a free Mercedes, free closing costs, 2 years of monthly mortgage payments, etc…. Risk/Reward. You’re right housing is different as compared to stocks. That’s exactly what concerned me. There are no risk controls in this market. At least in stocks, if I’m over my head, I get a call from the margin clerk, who’ll blow me out of my position. Where’s the margin clerk in RE??? Different markets?? Yes Same psychology??? Yes

  92. Seneca says:


    Your assessment of my psyche is “broken”.

    >> can we at least agree you can’t live
    >> inside a stack of LEH stock certificates?
    >> I have …seen people
    >> fall in love with their homes.

    No, can’t agree. You have critically underestimated how pragmatic and utilitarian I can be. A house will provide me shelter, not affection.

    Clot, I enjoy reading your posts and appreciate the counterpoints you frequently present but you get a big “GROAN” on the “fall in love with their homes” point.

    If I made all my major purchase decisions based on falling in love with something, I would drive a Mercedes SL500, not the Ford I currently own. My purchase wasn’t based on what I could afford as I had the cash for either/or.

    My example of the stock investment was meant to highlight that a major investment or purchase in an asset should be accompanied by some technical analysis and not purely driven by emotion. Fortunately for you and your peers, you will always have buyers walk into a home, “fall in love”, and sign on the dotted line without researching true value. I won’t be one of those buyers.

    I firmly believe that prices will decline from the recent sale prices of the past 12 months. At a minimum, I believe prices will remain flat for some time and until I find that ‘dreamboat’ of a house, I continue to save. I also own my current dwelling so the pissing money out the window notion does not hold up either.

    I don’t understand where the hostility that some (not Clotpoll but others) participants on this blog have comes from. If I believe a stock/home price is going to fall and you believe its going to rise, we should be able to rationally discuss the reasons why and have data to support our opinions. Why do people like Richard choose to debase the level of debate to something you might find on the Yahoo Finance message boards?

    I believe many people who come to this site are actually looking for coherent reasons why the market HAS stabilized so they can proceed with their buying. As it turns out, there is far more evidence supporting the market decline theory than there is the stabilization theory.


    Again, I am not trying to make an apples to apples comparison on stock vs. house as an investment. I am emphasizing the importance of doing one’s homework before acting.

    That being said, investor B was earning 5% in a money market account while investor A was losing money every day for almost three months. In the real estate scenario, Inv. A would be losing paper money because the home value was declining over time while Inv. B was losing less money, albeit real dollars, in rent. If it was three years instead of three months, there is a good chance that B would be 40k in the whole while A would be 50k+ in the whole.

    As typically happens on this blog when subtle points are made, many don’t see the real points being made in the example; DO YOUR HOMEWORK. I will try to be more obvious in my points in future posts.

  93. Seneca says:

    For those of you who watch the show “Family Guy” on Fox, my use of “whole” rather than “hole” was an homage to this week’s episode.

  94. ADA says:


    I understand your point and agree with you on doing your homework.

    But even in your example, investor A only loses 50K if and only (and that’s a big if) if he sells or has to sell while prices are declining. Investor B loses 40K in real dollars that he no longer has and will never get back.

    Every situation has its own specifics that will determine if it makes sense to buy or rent: how much A’s house declines, how much B is paying in rent; how long B waits to buy and if B is actually able to correcly time the market, etc etc.
    You are just arbritrarily punching in numbers into your example and then coming up with a “good chance” that B would be 40k in the whole while A would be 50k in the whole” over a period of 3 years.

  95. Clotpoll says:


    Agreed with you again. Except, I’m still a capitalist with the market on the way down. There are smart moves to be made right now- while the bears roar on the sidelines and the frightened wring their hands. One of the first things I learned from my Dad (was a developer) is that any big RE purge is the springboard for the next big opportunity. Look at RTC in the early ’90s…

    I think the only point at which we disagree is how much pain the entire economy would be in if that cherry Colonial on the Midtown Direct actually hits 450K. I’ll buy the “rolling recession” or “sector recession” argument in other assets, but given your premise that we are just beginning to feel the pain of an RE slowdown…and already it’s sliced 1% off GDP…any further decline would exponentially accelerate the decline of the economy in general. Housing is just tied to too many other components of the economy.

    BC Bob,

    I think the extraction of equity is a new phenomenon, based upon the proliferation of previously non-existent (or impractical) financial vehicles to facilitate the extraction. It remains to be seen whether these vehicles, in the hands of the average American, get driven off a cliff (so to speak). I think this Spring well tell a lot of the story.

    I also think the interest-rate environment is enormously different in this downturn as compared to previous ones. The fact that the slowdown is not accompanied by rapidly-rising mortgage rates argues for a “bottom” forming at a higher level than the permabears might expect. Of course, I do acknowledge the argument that the relatively high rates on the short end of the curve- where most of the risky loans have occurred- will forment some real pain.

    There IS a margin desk in RE…it’s the loan servicer calling your mortgage balance due and payable!


    You are a VERY logical, clearheaded person. That places you in a microscopic minority when it comes to purchasing residential RE. In my career, I’ve truly come across only a handful of folks with your mindset. Lots of people talk the game of restraint but melt at the thresholds of builders’ models. I know enough now to just walk away when I encounter self-discipline like yours. No emotion…no sale!

  96. bergenbubblebust says:

    clot: And what would have happened if real estate prices had not shot up the way they did? teh fact that you believe the economy is now so tied to real esatte is proof that things are so fragile.

    As far as rates, in the ealy 90’s (the last real estate bubble burst), interest rates fell and house prices fell.

    And finally once agian I would point out the bleak economic out look for NJ, how can there be a stong real estate market, when the state from top to bottom is falling apart. Being close to NYC is not going to save us.

    NJ was in much better shape 15 years ago, and that was in a rcession. You seem to gloss over that fact. There has to be a cleasnsing first, before three is a recovery, int he real estate market,as well as the state as a whole. Peace.

  97. Clotpoll says:


    I think if RE had not exploded post 9-11, the economy would’ve fallen deeper into a longer and more protracted recession than the one that occurred. It’s been conveniently forgotten that RE was the only thing working in the economy until stocks finally started coming back a little in ’03. We were the only growth engine going, and a lot of the synergy between RE and affiliated businesses were reinforced during that time. Like it or not, we are not a nation of manufacture anymore, and the new “service” economy is pretty disappointing as a creator of value for society and wealth for its labor force. What else is left? No wonder we filled the big hole in the middle of the economy.

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