An idea for real estate investors...

From a recent Realty Times article by Ken Harney comes this report of the rise of investors as buyers in the current market

The quarterly "homeownership survey" by realty information firm Move.dot.com found that one of every eight buyers last month was an investor - someone looking to acquire property at a favorable price, planning to fix it up, rent it out or resell later for a profit.


The investor ratio is up from just one in 20 buyers as recently as March, and represents a huge turnaround in Americans' attitude toward real estate.

Buyers who target foreclosure sales are particularly active right now, according to the study, and account for 25 percent of all consumers looking to purchase houses.

Among these foreclosure buyers, fully 42 percent are investors. Thirteen percent say they're buying properties to convert into rentals. Eleven percent intend to rehab them and sell them as quickly as possible.

And interestingly, 17 percent say they plan to let a family member live in them for an extended period of time -- until market values have rebounded enough to sell the house at a substantial profit.

Certainly I see this in my market, especially with houses that banks have marked down to “dump it” prices. In that case I also see a lot of sleazy Realtor deals, too – those sales that take place just after a property comes on the market or just after the latest price reduction that somehow go to the friends and family of the listing Realtor, even if there are multiple offers. We’ve likely all hit those stinky deals. The recent HUD rules on giving potential owner-occupants first dibs on sales may help some, but the real sleaze-bags in our business will figure out how to get around that, too. Until such time as we get more transparency into real estate deals there will always be “Playa’s" scamming the system.

Those clowns aside, I guess I don’t see anything wrong with professional investors (and investor groups, which I see a lot) taking some of the excess inventory off the market. There seems to be lots of investor money out there right now and they are buying up some of the real dregs of the market, so more power to them. I do get a little concerned with the many amateur investors that are out bidding on houses. I know that they think they have done all the right homework – will the place cash-flow and all that – but many just don’t have a realistic picture of the cost to fix up some of these places, so that they can be rented or flipped. It’s from this group that I see the most “boomerang houses” – those that go back on the market within 6-8 months with half-finished fix-up projects.

I think that what some of these investor groups need to do is to put many of these properties back on the market as land contract deals. The investors could make great interest rates, if they would take the risks involved (and after all they were taking a risk on the initial investment). What they would find is a fairly large group of potential buyers, most of whom just went through a foreclosure, who now have steady incomes and manageable debt loads.

What a sweet deal, if some investor who has picked up a house for 20-30% below market value can now turn around and sell it for near market value at an above market rate interest rate. It’s sort of an investor double dip. Maybe that idea will catch on. It's probably too slow of a return for these fast movers.

Break out the petards again...

Get your petards out, we may be about to hoisted to the yardarms again by new FHA rules that go into affect next month. Michigan is one of several states that allows a developer to build what we call "site condos" – single family houses on individual lots, but within a complex that is classified as a condominium, because of shared areas like roads or playgrounds or just the island at the entrance to the development. So, it looks just like a regular subdivision full of regular single-family houses; but, it’s not – it’s a condo complex, at least in the eyes of the FHA.

From a recent RealtyTrac article by Peter Miller comes these highlights of the new rules.

The FHA says that starting December 7th condos must meet several new standards:

• All projects not deemed to be used primarily as residential real estate are out.

• Because of noise worries, FHA insurance will be unavailable when properties are within 1,000 feet of a highway, freeway, or heavily traveled road; 3,000 feet of a railroad; one mile of an airport; or five miles of a military airfield. The FHA says that lenders “must avoid or mitigate” such conditions before completing their loan review process, but how does one avoid or mitigate an air force base? How much mitigation is enough mitigation? The obvious result is that with an abundance of caution lenders will be unable to finance properties with potential noise hazards.

• There will be no more FHA loans if the “property has an unobstructed view, or is located within 2,000 feet, of any facility handling or storing explosive or fire-prone materials.”

• Also, FHA loans are out if the property is located within 3,000 feet of a dump, landfill, or super-fund site.

• Not more than 25 percent of the property’s total floor area can be used for commercial purposes.

• No more than 10 percent of the units may be owned by one investor. This will apply to developers/builders that subsequently rent vacant and unsold units. For two and three unit condominium projects, no single entity may own more than one unit within the project; all units, common elements, and facilities within the project must be 100 percent complete; and only one unit can be conveyed to non-owner occupants.

• No more than 15 percent of the total units can be in arrears (more than 30 days past due) of their condominium association fee payment.

• At least 50 percent of the total units must be sold prior to endorsement of any mortgage on a unit. Valid presales include an executed sales agreement and evidence that a lender is willing to make the loan.

• At least 50 percent of the units of a project must be owner-occupied or sold to owners who intend to occupy the units. For proposed, under construction or projects still in their initial marketing phase, FHA will allow a minimum owner occupancy amount equal to 50 percent of the number of presold units (the minimum presales requirement of 50 percent still applies).

• Projects in designated wetland and flood zones will not qualify for FHA insurance.

So, how will this impact us here in Michigan?

Well, unless there are exceptions made for our site condo designation or some process put in place for exceptions on a case-by-case basis, this could have a disastrous impact upon our market. Developers have been using the site condo development approach almost exclusively since the 1980’s, so most of our newer homes are actually site condos. There were sound economic reasons for developing this classification and for developers using it to build single-family homes.

However, think about the new neighborhoods that you may have visited lately. How many are near what could be classified as a “busy road” or how many are near a gas station or railroad or airport? And the wetlands rules may impact vast tracts of land in Michigan, which has extensive wetlands areas. Some of the new rules won’t have much impact in these neighborhoods, since few site-condo homes are usually rented out; however, the rule about the percentage of the complex that has been sold could prove to be a showstopper issue for stalled out or abandoned developments. Do you know anyone who bought one of those foreclosed homes in a stalled out development? They may be royally screwed by these new rules.

Every time that FHA puts out new rules there is uncertainty about how they might be interpreted and applied to our site-condos. It may well be that they have enough experience with that issue already to have a good and workable exception policy already in place. It may be that much of our housing stock just became uninsurable with an FHA loan guarantee. We just won’t know until we get some time and some test cases under our belts. Let’s hope we don’t need to use the petards again.

One in Four Borrowers Are Underwater

As reported in a Realtor News article from their Source: The Wall Street Journal, Ruth Simon and James R. Hagerty (11/24/2009), more than 23 percent of people with mortgages owe more on their properties than they are worth, according to a report released Tuesday by research firm First American CoreLogic.

Another 2.3 million homeowners are within 5 percent of being underwater, bringing the total of those who are upside down or close to it to about 28 percent.

About 5.3 million U.S. households have mortgages that are at least 20 percent higher than their home's value, the First American report says. Borrowers owing more than 120 percent of their home's value are the most likely to default, First American calculates.

The majority of underwater mortgages are in the following states:

Nevada: 65 percent of homeowners are underwater
Arizona: 48 percent
Florida: 45 percent
Michigan: 37 percent
California: 35 percent

The report also notes that most U.S. homeowners have home equity, and nearly 24 million owner-occupied homes don't have any mortgage at all, according to the U.S. Census Bureau.

I can certainly add my own anecdotal take on these numbers. I do 2-3 CMA’s a week for clients who request market analyses on their homes thru a Web-based service that subscribe to. Over the last 12-18 months almost every request that I received resulted in current market price numbers that are lower than what the public records show is owed on the property. Most of these underwater homeowners bought within the last 5 years, but many are long term owners who took out home equity lines of credit for whatever reason and now find themselves upside down on the debt vs. value of their homes.

It is tough and sometimes sad to have to tell owners that they can’t get out of their homes to move for a job or retirement because it’s now worth so much less than when they bought. For many the value of their home was a big part of their retirement nest egg, an egg now gone bad. For some the home they loved is now a ball and chain preventing them from making that move South for retirement or maybe closer to family. For others it is the thing holding them back from seeking work elsewhere, where jobs may be more plentiful than in Michigan. For many sellers these last 2-3 years that has meant bringing money to the table to sell their homes, so that they could move on. For some that has meant just walking away and losing everything that they had worked so hard to get. It’s not a pretty picture.

One might think that the Federal programs, like the Making Homes Affordable program, would help; however, the lenders have not jumped on board that program and would seem to prefer foreclosure to doing loan modifications and workouts with strapped owners. So. While Wall Street and the big banks give themselves obscene bonuses, Main Street America continues to see hopes and dreams go down the foreclosure drain. It’s got to stop somewhere, sometime and it may take a severe backlash and uprising of the borrowers to spur the changes that are needed.

I’m not necessarily a fan of bigger government, but the big players on Wall Street have proven over and over that they cannot police themselves and that greed always wins over common sense. The pendulum needs to swing back from the almost totally unregulated markets of the Bush years to something that allows for innovation and entrepreneurship without encouraging excess. I’m not sure that either of the political parties that we are stuck with have the intelligence or political will to find that middle ground. We shall see.

Nothing is impossible...

“Nothing is impossible. Some things are just less likely than others.” (Jonathan Winters), from the Jack’s Winning Words Blog. Like Jack, I always enjoyed Jonathon Winters’ humor and remember his TV show. He made up some great characters to use in his comedy routines.

This week I’m trying to get two deals to the closing table. Neither is impossible, but one is more likely than the other. The one that is likely is one where we ran into a medical emergence that postponed a closing last week. Now we’re dealing with overnighting documents back and forth and other issues that, while inconvenient, are certainly not impossible. The other was delayed at the last minute due to lender concerns with the appraisal and the hideous process that has taken hold since HVCC was enacted.

The HVCC law, which had the good intention of removing undue lender pressures from appraisers has resulted in a convoluted and not well understood process of dealing through appraisal management companies to insure an arms-length distance between the lenders and the appraisers. That has added cost and time to the process, as well as having the unintended result of some out-of-area appraisers being assigned to do the work and not having local market knowledge.

In my case the appraiser apparently turned in an appraisal that the lender’s underwriter isn’t happy with; so, the underwriter has ordered the appraiser to submit more or different “comps” to justify the appraisal (whatever it turned out to be). Normally that wouldn’t be a problem, but in this case the original appraisal order took over two weeks to get done and the results took another week to get back to the lender and now they are ordering more work that will add a week or two more. We were supposed to close last week. The HVCC law was good in its intentions, but the bureaucracy that is had created is a nightmare. So it appears less likely that we’ll actually close that deal this week...but not impossible.

Housing most affordable in decades...

Here's some "mixed blessing news" from a recent CNN Money story. The typical U.S. family earning the nation’s median income of $64,000 a year could afford to buy 70.1 percent of all homes sold in the United States during the third quarter, according to a report from the National Association of Home Builders and Wells Fargo. The report relied on the government standard of spending no more than 28 percent on housing. In the same quarter of 2008, only 56.1 percent qualified.

The five most affordable areas are:

Indianapolis
Youngstown, Ohio
Detroit
Warren, Mich.
Grand Rapids, Mich.

The five least-affordable areas are:

New York City
San Francisco
Honolulu
Santa Ana, Calif.
Nassau and Suffolk, Long Island, N.Y.

That's great news...if you have a job, which some estimates for Michigan say would leave out about 20% of the population of Michigan. Interestingly enough, our estimated median income is higher than the national average at $72,591. (as estimated by Low-Income Home Energy Assistance Program (LIHEAP) Clearinghouse on September 24, 2009).

In another CNN Money article from April of this year they reported the county-by-county median incomes. Of course, Oakland County ranked high at $81,650, with Livingston County and Macomb Counties coming in at $103,385 (big surprise there) and $81,650 respectively. Wayne County clocked in at $63,020 and Washtenaw County felt the drag of Ypsilanti at only $60,605.

If one looks at the 28% of gross income for housing rule, you can see that people in Oakland County could afford homes with payments of about $1,900 per month, which would equate to a mortgage about $380,000. Believe me that would buy most of the nice homes on the market these days.

So home buyers have a very nice choice to make – either buy that bigger house now that you had on your wish list for the future or buy what you need now and sock the money away that you will save because of the lower prices and current low interest rates. Most financial advisers would likely recommend the latter course of action as a great way to save for the kid’s college or other future needs.

The other good thing that saving the extra money would do for you is to give you a cushion of savings to fall back on, should something happen to your job. Too many recent foreclosures happened because the owners were living right on the edge, pay check to pay check, with no leeway for any variation in income. Any little loss of overtime or job hours or any health related issue that kept them out of work for a while, put them over the edge. That’s why we are now seeing a wave of defaults in the Prime Mortgage space that is replacing the Sub-Prime as the biggest source of new foreclosures.

Of course, how people spend their own money is up to them. Let’s just hope that most have learned something fro the crisis that we are still in and will make lifestyle changes to adjust to the “new reality”. Maybe they could make a reality TV show about that. Naw…it’s too boring watching people do intelligent things.

Fire Sprinklers Set to Become Standard in New Homes

Members of the International Code Council's Residential Building Code Committee (RBCC) have made it clear that fire sprinklers are destined to become a standard feature in all new homes. The fire sprinkler requirement was added to the International Residential Code (IRC) last year, and it is scheduled to become effective January 1, 2011, in states that adopt the latest version of this code. Currently, 48 states use the IRC as a basis of regulating residential construction, although some states lag behind in adopting updates. I checked and Michigan is one of the states that might be called “lagging behind”, since it currently has implemented only through the 2006 set of IRC standards. It is inevitable that the state will eventually catch up on this.

The National Association of Home Builders (NAHB) had petitioned the International Code Council (ICC), which publishes the IRC, to repeal the fire sprinkler requirement, but the RBCC rejected that request by a vote of 7 to 4. Following the committee vote, NAHB attempted to use a new procedure in the ICC process that allows members assembled at the hearing to overrule the committee decision, but the members made it clear that they were standing firm on protecting American families from fire. More than 1,000 ICC members in attendance voted overwhelmingly to affirm the RBCC's decision.

"ICC's message on this matter is pretty clear," said Jeffrey Shapiro, P.E., executive director of the IRC Fire Sprinkler Coalition. "Their membership has now supported the home fire sprinkler requirement at both the 2008 and 2009 annual hearings, and each of those votes passed by more than a two-thirds margin." Those decisions have now been further affirmed by the RBCC, which is a balanced, consensus committee that includes home builders, building and fire safety officials, architects and engineers.

So it looks fairly inevitable that new homes will eventually have to have sprinkler systems built in to them. That will undoubtedly save some live and most assuredly increase building costs. Some small amount of the cost increase may be off set by slightly lower insurance rates, but the insurance industry will likely argue that they must increase the water damage rate for the house by an equal amount, since the sprinklers going off will cause quite a bit of water damage. Then again, having the sprinkler systems in isn’t meant to save possessions; they are there to save people and that’s a good thing.

One site that I went to had a statistic that said that 90% of all residential fires could be contained by the operation of a single sprinkler. When you think about it, that's probably true, since most fires in homes start in a single room and then spread. If that original room fire was doused in that room, it certainly would save both the house and the lives of whoever was in the house at the time. As much as I occasionally rail about laws and rules designed to save us from ourselves (many are really stupid) this one seems to have merit. To read more about these systems, here's a site to visit.

The second wave is a whopper...

Last week's Business Week has a big, front page story about the impending wave of commercial real estate foreclosures that certainly is scary. The article talks about how many really big companies and really big, important properties are in really big trouble and how many will end up falling into foreclosure or bankruptcy in 2010. Great, just what we need, another tsunami of foreclosures and bankruptcies to help the economy along. The issues in that space are as complex and muddled as they were in the residential space, perhaps more so.

I can see this happening even in my little village, where "office space available" signs are all over and store fronts sit empty after businesses have failed. Driving around the area there are tons of commercial buildings sitting empty and starting to deteriorate. We have an especially large supply of old manufacturing sites that have been abandoned in Michigan, most from the automotive companies, but quite a few from other companies that have shipped manufacturing operations to China or elsewhere.

This is a problem that the Federal government might have trouble helping with. I can't imagine a "first-time manufacturer" program to subsidize factory purchases; although there are state tax breaks available to those willing to locate their manufacturing in Michigan. Many of the empty manufacturing plants have major environmental issues that future owners might have to deal with, too. That can be a deal breaker for a start up company that is just looking for a place to set up a plant. There is also a glut of both retail and office space available, which is a holdover from the giddy days of the building bubble in the late 1990's and early 2000's. The days of a strip mall on every corner are over, but now what are we to do with all of that empty space?

Hopefully we can get through this next wave of real estate foreclosures without swamping the economy again. There doesn't seem to be the stomach for many publicly funded bailouts in this space, at least not yet. We'll have to see if there are some commercial owners who are "too big to let fail." I can just see the outcry if we all end up bailing out The Donald or some other high profile commercial landlord.

Transfer tax exemption...

From our Capital Title sister company comes this short piece about a possible tax break for sellers in Michigan.

With lower property values due to our struggling economy, many homeowners have been able to take advantage of an exemption contained in the Michigan Transfer Tax Act. If a seller meets the criteria, they would be exempt from paying the state transfer tax. Following are the criteria:

- The property must have been occupied as a principle residence – classified as homestead property.

- The property’s SEV for the calendar year in which the transfer is made must be less than or equal to the property’s SEV for the calendar year in which the seller acquired the
property.

- The property cannot be transferred for consideration exceeding its “true cash value” for the year of the transfer.

For example:If the SEV of the homestead principle residence when acquired in 2005 is $100,000 and the current SEV on the property is $90,000, then the first two criteria have been met.

To establish the “true cash value” of the property, you must double the current SEV at the time of transfer. In this scenario, the true cash value would be $180,000. If the property sold for $170,000, then the 3rd criteria has been met of Exemption “u” as designated by the Michigan Transfer Tax Act.

Sellers who believe they may be eligible have up to 4 years from the transfer date to file for the exemption. It is also important to note that there are no similar exemptions in the County Real Estate Transfer Tax Act. The state transfer tax is the larger of the two taxes that are charged on a sale, equal to $7.50 for each $1,000 of the sale value; so, this can be a significant potential savings.

If you were a seller earlier in the year and didn't know about this exemption, you can still file a claim for it and get a refund of the transfer taxes that you paid on the sale, assuming that your sale meets all three criteria discussed above.

It is up to you as the seller to find out what the SEV was at the time that you bought the property, which you can do by calling the County Treasurer's office and having them look that up for you. They can also tell you what the SEV was this year at the time that you should, but you should already know that from this year's tax assessment notice.

You will be required to fill out an affidavit swearing that the information is correct when you file for the exemption; so, don’t try to “game the system” on this, because the penalty is fairly severe. The law reads - “If after an exemption is claimed under this subsection, the sale or transfer of property is found by the treasurer to be at a value other than the true cash value, then a penalty equal to 20% of the tax shall be assessed in addition to the tax due under this act to the seller or transferor."

Every little bit helps these days; so, put in your claim, if you sold or are selling and your sale meets the criteria. For a worksheet that you can fill out to to see if your sale qualifies, click here.

Veterans Day thoughts...

“Grandpa, were you a hero in the war?” Grandpa replied, “No, but I served in a company of heroes.” (Richard Winters) from the Jack’s Wining Words Blog on Veterans Day. I don’t often think about my time in the service (Army) or the year that I spent in Viet Nam. That was a long time ago and I have moved on with life; however, Veterans Day always has lots of stories in the news about vets from various eras and wars, so that experience gets pushed to the front of mind once a year.

I have often told people that there is more truth to the old TV series M.A.S.H. than most realize. Even in Viet Nam, while the war raged in the “the bush”; there were quite a few fairly humorous things going on back on the bases. I served with an Army construction Group at the Battalion and Group levels in posts like Quang Tri, Phu Bi and DaNang (likely all three spelled wrong). Our guys would go out every morning to rebuild roads and bridges and the Viet Cong would come out every night to blow them up. It was perhaps a small metaphor for the frustration of the entire war there.

I recall that, once my outfit got to DaNang, it was almost as if the war was somewhere else. The Base at DaNang was so large, with a huge perimeter that stretched 50-60 miles around the bay of DaNang, that life inside it on the base seemed almost normal. The beaches there are some of the most beautiful anywhere in the world, albeit, punctuated at the time by barbed wire barriers at both ends. We spent many Sunday afternoons on the beach, almost as if the war stopped for the day.

I certainly don’t want to make the entire experience sound too idyllic. I wasn’t directly involved in any firefights; but the first couple of bases that I was on would regularly come under mortar and rocket attack, so there were some dicey moments and I found that the old saying “there are no atheists in the foxholes” was true. There is something about listening to mortars walk their way towards your bunker that can add clarity to your relationship with God.

I go every year and march in the Memorial Day parade in our little town. Hundreds of people line the streets of Milford to applaud the passing soldiers and vets. It is an event that helps put some perspective on why we serve and whom we serve. It’s easy to lose sight of that in the midst of a war zone. Hopefully, if you see an active duty soldier on days other than Memorial Day or Veterans Day you will take the time to say thank you for serving. It will make you and them feel better. So, thank you veterans and thank you to those serving in Afghanistan and Iraq and countless other foreign places in defense of our liberty.

From the land of Droids...

OK, I've had my Motorola Droid since last Friday, so I've had a bit of time to play with it and add apps and see what it will do, at least for me. I'm not into music, so I haven't tried anything in that realm except to set up a Pandora radio station, which works fine. I was more interested in finding out how closely I could tie it into the rest of my home office compute environment - what things that I can do or share between my desktop (now mostly used as a file and print server) and my laptop over my WIFI net.

Let me preface the remainder of this post by admitting that I'm little more than a power user of PC's. I'm not a techie, although I'd admit to be a wanta-be sometimes. I've been around PCs since they were invented and worked for Digital Equipment Corp in sales when they were invented (that may give you a clue that I'm also and old dude). I'm not afraid to install hardware or software into PC's but I haven't a clue how to write software. I do create and maintain several Web sites, but that is just knowing how to use a good Website development tool. I'm basically a user, who knows just enough to get into deep doo-doo every now and then, but who isn't afraid to try things.

The good news for me is that I can share almost everything that I need to access. I have installed the Estongs File Manager and the DocsToGo Apps and set up my WIFI network to allow access to my laptop and desktop files. This all works great. I can "see" my word and excel and PowerPoint and pdf files from the phone and can copy them and paste them into the phones file space. Once they are there, I can open and manipulate them as needed with DocsToGo and then send them as attachments via email. I have all of my email accounts routed through one account that also forwards to the phone, which means that I can do useful email work while on the road. As a Realtor, I can also get to my local MLS database and "see" any listed property and even schedule a showing on-line with some of them. This is all good stuff to me.

My next challenge will be figuring out how to print a file from the phone, either over Bluetooth or over the WIFI net. I have yet to find any printer drivers to install or haven't really even figured out what I need to do that. I'm relatively certain that my company is not going to allow us to attached to the office WIFI Network from these phones and I guess I can't blame them, since there are security issues and potential virus issues that the corporate IT types need to worry about.

There were certainly lots of moments of frustration in the first couple of days as I figured out how to navigate to the functions that I was trying to use or how to order and install stuff or other "learning curve" issues; however, overall I must say that I'm quite impressed with what one can do with this little wonder Droid. There are already lots of things that I hope there will be apps written to accomplish with this tool. The possibilities with this much power in the palm of your hand are enormous.

Come on along for the ride…

Congress passed and the President signed the law extending the first-time tax credit until next June 30th. They also threw in a $6,500 carrot for people who were not eligible for the original credit – current homeowners. The new $6,500 federal tax credit for so-called "move up" buyers took effect immediately upon enactment. That means that potentially hundreds of thousands of Americans who fit the key ownership and income criteria for the new credit are eligible for it … right now.

What are those tests?

Number one: You have to have owned and used your current home as your principal residence for five consecutive years out the past eight;

Number two: Your adjusted household annual income cannot exceed $125,000 if you file taxes as a single, or $225,000 if you are married filing jointly.

To qualify, you've got to sign a contract to purchase a replacement residence before next April 30, and go to closing on it by June 30, 2010.

In addition to the traditional move up buyers, this is great news for the thousands of baby boomers who were hoping to downsize in retirement. This tax credit may help take some of the sting out of the loss that many will have to take on their current homes.

This is also good news for the real estate industry. While first-time buyers have fueled a huge surge in the market, most of the homes that they are buying are starter homes or foreclosed and short sale properties at the lower end of the market. This new incentive may help fence sitters in the middle of the market take action to buy that next house. Many will have to sell their current home; so, that will add to the inventory at the lower end, giving the first-time buyers more choices.

This new incentive is likely to have the most impact in the middle of the country, where homes are more reasonably priced and incomes a bit lower, than on the coasts. That’s good news, since Middle America can use a break about now. The fact that it may help the battered baby boomer generation is good news too, although they still have to get out from under their McMansions in order to use the tax break.

For a FAQ from the National Association of Realtors on the new tax law, click here.

Just do it...

“I don’t think anything is unrealistic if you can do it.” (Mike Ditka). Yogi might have put it slightly differently, maybe “Don’t say it can’t be done, if you can do it – just do it.” Things that are sometimes labeled as unrealistic, such as personal goals in athletics or maybe business goals, are usually just stretches that one may not have bought into yet or may not believe are achievable. Many times the difficulties imagined in reaching an “unrealistic” goal are just that – imagined. Some people have an uncanny knack for throwing up imagined obstacles as a way to avoid even trying – they are usually labeled as pessimists. Some have just the opposite bent, imagining and attempting things well beyond their apparent skills or capabilities or perhaps in the face of great odds– these are the optimists of the world.

So, who is happier in the end, the pessimist who never tries because he/she believes that they can’t accomplish some goal, or the optimist who may try and try and try again to reach a goal that remains just out of reach? There are a number of classic sayings that would lead one to believe that it is better to have tried and filed than never to have tried at all. The optimist even finds some comfort in the learning from his/her failures and continues to make adjustments to the approach or technique that they are using to achieve the goal. The pessimist might adjust the goal down to be in line with his/her performance or abandon the goal altogether.

So how are you dealing with the struggles that most are going through to achieve success in the current real estate market? Have you learned and adapted and kept on trying, or have you given up and decided to sit out the recession and wait until the market comes back to you? Look around you and you will see both types of agents in most companies. Whom do you wish to emulate? Who seems happier to you? We can’t all be unbridled optimists, but perhaps we can learn from them and try to emulate some of their traits and practices. Who knows, maybe some of that enthusiasm will rub off on you; and then you’ll become a role model for some other struggling agent.

Is there no middle ground left anymore?

As I read things in various places – newspapers, blogs, magazine articles and elsewhere – it appears more and more like there is no middle ground left anymore on most issues. Polarization in our political system is so pervasive and so complete that every issue becomes black and white, them or us, left or right, red or blue. The other day I read something in what is supposed to be a real estate oriented blog that started out discussing the housing crisis, but which quickly devolved into accusations that everything that the Democrats in Washington are doing right now is leading the country into Socialism. In fact the discussion concluded that there can apparently only be two states for the country to be in – Capitalism or Socialism. How completely ridiculous is that?

I am old enough to recall when we had an extreme right wing in the Republican Party (Barry Goldwater comes to mind) and an extreme left wing in the Democratic Party (remember George McGovern and Hubert Humphery?) and a whole bunch of politicians somewhere in the middle who actually got things done. Those days seem long gone, as the two parties have coalesced around the two extremes. Now both parties seem to have litmus tests for party members and whoa to those who don’t toe the party line. The number of liberal Republicans and conservative Democrats around these days is so small that they have been marginalized; unless, of course, the party is control wants to tout “bi-partisan” support for something.

Now we hear the screams of the right and left wing nuts on every issue. It used to be that only very weighty issues like abortion rights would bring out the protestors screaming that the other side is leading the country into hell. Now everything is a threat to our very way of life in America and it’s all the fault of the other side – the side in control at the moment. There is no ability for compromise at the national political level, because the radicals from both sides are in control of the parties and the politicians. As soon as President Obama won the election the signs of “Stop Socialism” popped up on lawns. They replaced the “Stop Fascism” signs that had been there when Bush was in office.

Perhaps it’s time for the rise of a reasonable and reasoning third party in America. Ross Perot, who had his own problems and eventually self-destructed, mounted the last valid challenge to our dysfunctional two-party system. It would likely take someone like Perot, with the personal fortune to mount a national campaign, to lead a successful effort at creating a new political middle ground. I suspect that there is a very large untapped group of very dissatisfied Americans who are tired of all of the polarization and stagnation in our current political system who would flock to this middle ground. I could be wrong, but they’d get a good long look from me.

Seeing the real stars of real estate?

The little saying from Jack’s Winning Words Blog for today is, “When it’s dark enough, you can see the stars.” (Charles A. Beard). I had an initial reaction to that saying and then thought about it a bit more and came to a second conclusion.

The first reaction is the most obvious – to find something positive in any situation, like seeing a rainbow on a rainy day. The second was more real estate oriented and has to do with seeing who the real “stars” are in these dark days for Realtors. The gloom and doom that descended over the market a couple of years back has had the impact of clearing out lots and lots of would-be or pretend Realtors – those who jumped in thinking that it is an easy way to make a living or some extra bucks. Not so!

This real estate crisis has also brought down to earth many of the high-flying super teams and super agents, although the best of them have adapted and flourished through this mess. It has also created new “stars” of sorts – those agents and teams that jumped on the REO bandwagon and now represent most of the foreclosed homes in any area. Many of those likely will prove to be shooting starts, ready to burn out as son as the crisis is over.

Also created in this mess are what I would call black holes (to continue and already strained metaphor) – those sleazy real estate operators on the fringes who specialize in short sales and foreclosures, but not always to the best interests of the sellers involved. To be sure, these people always existed; it’s just that the current environment encouraged them to become more visible and bold.

But amidst all of the darkness there are also real stars in the business – agents who are out there day after day honestly trying to provide counsel and help for distressed homeowners and helping buyers find just the right new home out of an overwhelming inventory. These agents aren’t necessarily blazing across the sky; they just get out there every day working hard in trying times and keeping the Realtor torch lit in the darkness. It’s not easy to be a Realtor these days and certainly not easy to make a decent living doing it. The easy thing to do would be to go find a “real job” doing something else; however, the thousands of stars of real estate have found a way to persevere through the current hardships and carry on. I salute you – the stars that brighten the gloomy darkness.

Just walk away Renee and leave your home behind you…

That isn’t how the song went in 1966 when The Left Banke recorded it, but it’s the advice that a University of Arizona professor is giving in a recently published paper. The professor, Brent T. White, an associate professor of law at the University of Arizona, makes the case that our social mores, more so that any logic, forces people to struggle too long against the odds of their mortgage being severely under water.

In a move that White euphemistically labels a “strategic default”, he argues that the playing field is too far tilted towards the lenders and that too few borrowers understand that defaulting is not the end of the world that they have been told. Certainly there is damage to ones credit from a default; but, White argues that borrowers have not been told the whole story about how to rebuild their credit and how fast that can occur.

White argues that borrowers are too focused upon the shame or stigma of a default to think clearly about it as the strategic thing to do, when they are severely under water. The fact is that it actually causes more damage to the owner to “hang tough” trying to find a way to salvage an impossible situation. Too often these people burn through their savings and maybe their retirement savings trying to keep up with rising payments from ARMs that have reset or to keep up a lifestyle, even after things at work have changed and income has dropped dramatically. White would argue that the pride involved in not admitting defeat and waling away may cause more damage than just giving up the house.

I must admit that I have become very disillusioned about short sales as a solution to the problem. In my estimation, short sales do no one but the Realtors involved any good. The seller ends up with a blemish on his/her credit record that is almost indistinguishable from a foreclosure and the bank ends up taking less for the house. Only the Realtors involved get anything positive out of the deal – their commissions. That is why I have shut down my short sale Web site. I just couldn’t in good conscience continue to recommend this path to sellers who are under water on their homes.

So maybe a “strategic default” is the best way out of these bad situations. A deed-in-lieu offer to your lender at least puts you in the position of having suggested pro-actively the way out for both of you. It saves the bank having to go through the Sheriff’s sale and saves the homeowner having to see his/her name show up in the local papers in the foreclosure ads. It’s still no better than a foreclosure from a credit standpoint, but it can make the owner feel more empowered and more in charge of the situation. White also makes a strong case that there are actually financial benefits to be gained from walking away vs. staying in a bad mortgage situation.

The article by White is one of those scholarly tomes, with footnotes that about equal the length of the article itself. Here’s the bottom line – if you bought a house in the 2004-2007 time frame, you likely bought at the peak of the market and your house in now worth 30-40% less than what you paid for it. It makes no sense to try to sell it and it may make no sense to try to hold on to it. The banks were given every opportunity and much encouragement by the government to work with owners to modify loans on upside down houses and they have refused. You don’t owe them any more loyalty that they have shown you. Just walk away and let them have the houses that they still insist are worth 30-40% more than the market price. You won’t get off Scott free – your credit score will take a big hit and it will take you time to rebuild it, plus you’ll end up paying taxes to bail the clowns at the bank out, too; however, you won’t have to wreck your savings and your retirement plan trying to save a lost cause.

Real Estate Remorse…

As with any big purchase or sale in our lives, there is a tendency for remorse to grab us shortly after the decision is made. In real estate this can be sellers remorse or buyer remorse or both on the same transaction. The reaction is the same, no mater which side you are on. The “Oh, my God, what have I done?” feeling that sets in about 24-48 hours after the euphoria of reaching agreement on a deal. It’s then that the doubts surface and fears take hold. What if I paid too much? What if I sold for too little? What if I move in and don’t really like it? Where will I go now that I’ve sold?

Those are all quite natural fears or doubts that we all have and sometime they can be overpowering for buyers or sellers. I’ve seen this reaction to a sale from both sides of the deal. I actually had a buyer back out of a transaction well after all of the normal hurdles had been cleared – she accepted the house “as is”, even after the inspection turned up several defects that would be costly to fix later (it was a foreclosed house). She also was approved for her mortgage, although she got a bit surprised by the closing costs that her mortgage rep finally showed her. In the end she just could no longer justify the cost and expenses that she was facing and backed out. In that case she lost her earnest money deposit.

I’ve also had sellers get remorse after accepting offers and progressing through the process of inspections and appraisals. Sellers who try to back out of deals face the very real probability of being sued by the buyers and that can be much more expensive than just losing an earnest money deposit. While courts have been loath to force the would be sellers out of their homes, they have awarded the jilted buyers quite hefty damages and usually also make the seller pay the real estate commissions that would have been paid on the defunct deal. Judgments can run in the 10s of thousands of dollars. Sellers with cold feet need to really consider that before backing out of a deal.

The home buying process is an emotional roller coaster for both sides, with highs and lows occurring at various times between the time an offer is made and accepted and the actual closing. Part of a Realtor’s job is to try anticipating and managing those emotional highs and lows through education and counseling. Sometimes we just have to let the emotions play out and continue to give what reassurance that we can that the correct decisions have been made. It can be a gut-wrenching ride for the Realtor, too; but I have no remorse about being in the business and having to take on these issues, too.

Get out from behind the mask

“There’s nothing that gives more assurance than a mask.” (Colette) from the Jack’s Winning Words Blog, of course. We think about masks at Halloween, but many people wear a “mask” of sorts all the time, when they hide their true emotions behind a stoic face or, even worse, if they hide malice or anger behind the mask of a smile.

We have sayings like “mask your feelings” in our vernacular and phrases like “don’t let them see you sweat” in business and sports. It is a part of our culture to be somewhat circumspect and to “keep a stiff upper lip” in times of trouble or pain. It is this tendency to hold things in and not share your emotions that likely leads to depression or worse. By being willing to open up, to share your feelings and needs and to ask for or accept help from others in dealing with highly emotional events, you will get the support that is needed by all humans. We are not islands. We are very social animals who need the interaction and support of those around us to deal with life’s curveballs.

There is hope and help to be found in one’s religious beliefs for sure; and sometimes self reflection and solitude are needed to internalize what is happening around us; however, at the end of the day, having someone that you can talk to is the best thing for getting through tough situations. Many times the two become one and the same and you can share your problems or needs with your pastor/preacher/priest/rabbi or imam.

I know that this advice is toughest for men, since we are the ones who are supposed to be keeping the stoic, stiff upper lip through everything; however, we are also the ones most in need of finding a way to let some of our bottled up emotions, fears, concerns and other pent-up feelings out. Hopefully you have an understanding and loving wife that you can talk things through with or maybe a best buddy that you can share things with; otherwise seek out that religious leader and get it off your chest. There is nothing more cathartic than being able to verbalize what is eating away at you with someone else.

So, leave the masks to Halloween or masked charity balls and share your feelings more openly with those around you. You’d be surprised how many people are there to help and support you, if only they knew that you needed their help. Sometimes all it takes is a good cry with a friend to get it all out, so that you can deal with it. At least that will get you started on the road to dealing with whatever it is that is troubling you.

Some kind of extention to the tax credit now likely..

The Senate yesterday seemed to be in some sort of agreement on some form of extension of the first time buyer tax credit and President Obama signaled that he supports an extension. It's not clear from the various messages being put out by various Senators (Senator Dodd of Connecticut said is is a done deal, but other Senators said not so fast) that agreement has yet been reached on the details or how what they want might be reconciled with whatever the House wants, but it does seem fairly sure that something will become law soon to extend the home buyer tax credit program.

There is still disagreement on the issue of who will be eligible - whether the program for first time buyers will just be extended or whether it will be expanded, as some Senators want, to include other buyers - so-called move-up buyers. While first-0tie buyers have provided a great boost to the market and have helped clear out a bunch of the cheaper foreclosed homes from the inventory, it would have a bigger impact if the people who now own a home and who wish to move up to a bigger home also had this incentive. They have largely been frozen out of the current market by the lack of credit by big lenders and no tax incentive at all to take action.

Other details to be worked out include what payback,if any will be required and over what period and what income restrictions the new program might have (that has been another stumbling block for move-up buyers, who in generally aren't in the lower-income brackets that the original program was aimed at helping).

So, even thought the news media rushed to tell everyone that the program had been extended, it has not yet even been officially voted upon in the Senate and has not been reconciled with the House or signed by the President. Remember that song from Sesame Street - "I'm just a bill." It may not even be that, yet. Let's all keep our fingers crossed that they actually do pass something soon.

Getting educated by the market

From the Jack’s Winning Words Blog come this little gem - “There’s no education like adversity.” (Disraeli). Well, if Disraeli were a Realtor today he’d have earned a PhD by now. From the sames source, Bill Gates, the Microsoft founder, put it a different way - “Success is a lousy teacher. It makes smart people think that they can’t lose.”

I guess Realtors are all getting a free education in the current market. Just think of all of the things that we’ve all learned about foreclosures and short sales; things that most of us probably thought we just didn’t need to know before this market downturn. And how many of us regularly dealt with HUD sales or even FHA and VA sales before the current crisis? How well-versed were we on Sheriff’s Sales and redemption periods or on helping to write hardship letters to lenders? How many of us had ever negotiated with a second mortgage holder to accept a partial payment on a short sale? Were we equipped to advise clients on buying houses that had been stripped or damaged by vandals or used as crack houses? Did we know how to look for the signs of real estate fraud and other sleazy practices?

I suspect that the answers to most of the questions above would be that we didn’t really have to know about any of those things before the current real estate crisis and recession hit. We were likely all fat, dumb and happy with success in the “normal” real estate market. Now, like a character out of some Charles Dickens novel, we’ve been thrust out on the street to fend for ourselves in a strange world full of empty, foreclosed houses, shady operators and new organizations and new rules, which many times are made up by each individual lender.

While most of us have found ways to cope with the new world of real estate, many have found it to be too confusing and too complex and have exited the business. New agents, who have never experienced a normal, balanced market in a normal, non-recessionary market, are learning the business under a worst-case scenario, but will likely be better equipped than most old-times to role with future market changes – assuming that they stay in the business that long. I only hope that they don’t see the temporary success of some of the sleazy operators on the fringe of the business as role models for their careers.

It’s hard sometimes to explain to the new people how things should be done (or would be done) in more normal real estate deals. This is, after all, the “new normal” that we are living through right now. There’s another old saying that probably applies to our current environment – “What doesn’t kill you makes you stronger.” Those who survive the “Great Recession” will be some of the smartest and strongest Realtors ever.

The American Clean Energy & Security Act of 2009

I've been seeing alarmist ads of TV about this bill for some time now, but it took an email from one of my past customers to get me to look into it a bit further. I certainly had no idea that is may have such a dramatic impact on housing and the ability for owners to sell their homes as it appears that it may. A part of the problem is that very few people anywhere, including the Congress, have any real idea of what is hidden in this bill and what impact it might have on everyday life.

The name of the bill is innocuous enough. I mean who can argue that we don’t need cleaner energy and that saving on energy use and costs wouldn’t somehow make us all more secure. But in this nice sounding bill, as in many things in life, the devil is in the details. The bill, as it was passed by the House of Representatives and sent to the Senate, is 1427 pages long. It has 835 Sections dealing with all sorts of rules regulations and programs. The bill was sponsored primarily by Representative Henry Waxman of California, which in itself explains a lot. Waxman, you may recall, staged the palace coup that toppled Michigan Congressman John Dingell from the Chairmanship of the House Energy and Commerce Committe.

When I received the email from my past client, he passed on some comments that he had received from someone who apparently took the time to read through the bill and highlight the areas that should be of concern to homeowners. Below, in parentheses are a few of his comments. The author has obviously reached his own strong opinions about the bill, so take these with a grain of salt. Since this Arthur has interspersed so much of his personal opinion into the content below, you may wish to go read the bill yourself, which you can do at http://www.govtrack.us/congress/bill.xpd?bill=h111-2454 . I have also put a complete PDF version on my Web site at http://www.themilfordteam.com/PDF/HR2454_Bill.PDF

Here are the comments that came with the email (edited to remove some of the more strident opinion expressed by the author)-

Beginning 1 year after enactment of the Act, you won't be able to sell your home unless you retrofit it to comply with the energy and water efficiency standards of this Act. H.R. 2454, the "Cap & Trade" bill passed by the House of Representatives, if also passed by the Senate, will be the largest tax increase any of us has ever experienced. The Congressional Budget Office (supposedly non-partisan) estimates that in just a few years the average cost to every family of four will be $6,800 per year. No one is excluded. However, once the lower classes feel the pinch in their wallets, these voters may get a tax refund (even if they pay no taxes at all) to offset this new cost. Thus you, Mr. and Mrs. Middle Class America, will have to pay even more since additional tax dollars will be needed to bail out everyone else.

But wait. This awful bill (that very few or no one in Congress has actually read) has many more surprises in it. Probably the worst one is this: A year from now you won't be able to sell your house. Yes, you read that right. The caveat is (there always is a caveat) that if you have enough money to make required major upgrades to your home, then you can sell it. But, if not, then forget it. Even pre-fabricated homes ("mobile homes") are included.

In effect, this bill prevents you from selling your home without the permission of the EPA administrator. To get this permission, you will have to have the energy efficiency of your home measured. Then the government will tell you what your new energy efficiency requirement is and you will be forced to make modifications to your home under the retrofit provisions of this Act to comply with the new energy and water efficiency requirements. Then you will have to get your home measured again and get a license (called a "label" in the Act) that must be posted on your property to show what your efficiency rating is; sort of like the Energy Star efficiency rating label on your refrigerator or air conditioner If you don't get a high enough rating, you can't sell. And, the EPA administrator is authorized to raise the standards every year, even above the automatic energy efficiency increases built into the Act.

Sect. 202: Building Retrofit Program mandates a national retrofit program to increase the energy efficiency of all existing homes across America . Beginning 1 year after enactment of the Act, you won't be able to sell your home unless you retrofit it to comply with the energy and water efficiency standards of this Act. You had better sell soon, because the standards will be raised each year and will be really hard (i.e., ex$pen$ive) to meet in a few years. The Act allows the government to give you a grant of several thousand dollars to comply with the retrofit program requirements if you meet certain energy efficiency levels. But, wait, the State can set additional requirements on who qualifies to receive the grants. You should expect requirements such as "can't have an income of more than $50K per year", "home selling price can't be more than $125K,.

Sect. 204: Building Energy Performance Labeling Program establishes a labeling program that for each individual residence will identify the achieved energy efficiency performance for "at least 90 percent of the residential market within 5 years after the date of the enactment of this Act." This means that within five years, 90% of all residential homes in the U.S. must be measured and labeled. The EPA administrator will get $50M each year to enforce the labeling program. The Secretary of the Department of Energy will get an additional $20M each year to help enforce the labeling program.

Sect. 304: Greater Energy Efficiency in Building Codes establishes new energy efficiency guidelines for the National Building Code and mandates at 304(d) that 1 year after enactment of this Act, all state and local jurisdictions must adopt the National Building Code energy efficiency provisions or must obtain a certification from the federal government that their state and/or local codes have been brought into full compliance with the National Building Code energy efficiency standards.


I’m generally not a fan of alarmist rants by people with a particular ax to grind or anyone who even listens to clowns like Rush Limburger; however, I’m also not a fan of radical liberals like Henry Waxman. This bill has lots and lots and lots of things buried in it that will cost everyone lots of money to comply with in the future. It deserves to be exposed to much more scrutiny than it has received and hopefully the Senate, in its deliberate style, will find and remove or modify some of the more onerous provisions that the House bill contains.

I’m generally in favor of doing things to decrease our use of energy in all aspects of life; however, having the government come into my home and tell me that I must do this or that to improve it’s energy efficiency before I can sell it feels more like a home invasion than a helpful program.

The American Clean Energy and Security Act appears to be another misguided attempt by our so-called leaders to save us from ourselves. I think they should stick to passing legislation that lawn mowers need labels that say that one shouldn’t stick their hand under the mower while it running. That’s still stupid, but at least it didn’t cost us much. One has to believe that, if John Dingell were still chairman of the House Energy and Commerce Committee, we would not have seen a bill with some many costly and questionable provisions.

Make me feel that I matter…

From the Jack’s Winning Words blog comes this advice - “Pretend that every single person you meet has a sign around his or her neck that’s says,” “Make me feel important.” (Mary Kay Ash). Jack added - I can imagine that Mary Kay used this in a pep talk to her sales people. I might adjust the sign to read: “Make me feel that I matter.”

What great advice and what a simple thing to do to make people fell better. Jack also related the story that was in the Detroit Free Press about General Motors CEO Rick Waggoner and how he used to greet the janitor every morning and inquire about his family. That janitor would tell people about that forever and how Rick was the only GM bigwig who took the time to recognize him. It made his day every time.

How many times each day do we get opportunities like that? Have you spoken to the clerk at the checkout? Did you say hi to someone on the street today? When you picked your child up at daycare, did you stop long enough to talk to the caregivers and let them know how important they are in your life? This isn’t rocket science; it’s just common courtesy, which all too many of us just don’t take the time for in our busy lives.

Even clients sometimes don’t get the personal touch that they deserve and need. I realize that in my dealings when my wife asks me some simple questions about my clients that I should know, but don’t – like “how many kids do they have?” or “what are the kids names and ages?” or even “why are they selling (or buying)?” Sometimes I get so wrapped up in the real estate process that I forget those all-important personal touches. I’ve got to use that Mary Kay technique of imagining a sign around the necks of my clients that says “Make me feel important, ask about my life.” In the final analysis, it’s not about the houses, it’s about the people.

Fraud plagues the first-time buyer program

There was a report on the news last night about the growing cases of fraud being discovered in the first-time buyer tax rebate program. The sleazy operators of the world will always find ways to game the system. What was interesting to me in the report was not the thousands and thousands who have made claims to be first time buyers, when in fact they either already own a home or certainly are not first time buyers (even by the 3 year rule in the program). You could have bet on that happening, as I have opined here before. What was more surprising is that well over ten thousand people have claimed the tax rebate without even buying a house – they just said that they planned to buy a house. Well, excuse me, how the hell did that happen. Why couldn’t everyone in America just say that they planned to buy a house and ask for their $8,000.

I am a proponent of the program and I think it has done a lot of good to re-ignite the housing market; however, I’m appalled that our government is so inept that it would actually send checks to people who have no proof that they’ve actually bought a house. We can only hope that someone in whatever bureaucratic office is in charge of that gets canned AND that everyone whom they catch committing fraud gets a new home - behind bars somewhere. I know it won’t happen. Bureaucrats never get fired and most people caught in fraud cases usually just get a slap on the wrist and a fine that they likely never pay anyway.

I think I’ve figured out a legal way to work this whole thing. I’m going to send in a rebate request and make the claim that I will absolutely not buy a house, because I don’t qualify; however, that I feel that I deserve $8,000 anyway for being honest about it. There’s probably some government boob somewhere who would authorize the check. It wouldn’t be fraud, since I would be honestly admitting that I’m not buying a house and that I don’t qualify. What do you think?

It ain't over 'til it's over - Yogi Berra

From a press release by the National Association of Business Economists –

“The Great Recession is over,” according to NABE’s latest survey. “The survey found that the vast majority of business economists believe that the recession has ended but that the economic recovery is likely to be more moderate than those typically experienced following steep declines.

The NABE panel upgraded the economic outlook for the next several quarters, compared with the previous survey,”said NABE President-elect Lynn Reaser, chief economist at Point Loma Nazarene University. “Following a sharp 6.4 percent (annual rate) contraction in the first quarter of this year and another 0.7 percent drop in the second quarter, NABE forecasters expect real GDP to rise at an above trend 2.9 percent rate in the second half.

The more-than-three-year downturn in the housing market is very close to coming to an end, with substantial growth (from a low base) expected for next year. According to the survey, the key areas of concern involve the large increases in federal debt and unemployment rates that are expected to remain very high through next year. The unemployment rate is forecast to rise to 10 percent in the first quarter of next year and edge down to 9.5 percent by the end of 2010. (Ed. – In Michigan we are still above 15% unemployment, so we have a ways farther to go to get back to “normal”)

Inflation is expected to remain contained throughout 2010. The good news is that this deep and long recession appears to be over, and with improving credit markets, the U.S. economy can return to solid growth next year without worry about rising inflation.”

I have to respond with a somewhat muted “Yea!” to this article, since Michigan is so far beyond the rest of the country in terms of unemployment (over 15%) and still in the top 10 in terms of things like foreclosures. I certainly hope that the rising tide of things getting better elsewhere will raise our boat, too; however, as that great philosopher Yogi Berra said - "It ain't over 'til it's over"

It's too early to tell whether the state’s commitment to attracting “green industries” will provide enough new employment to replace the lost automotive jobs in Michigan. We are becoming a smaller state, with a different employment focus. Let’s hope that the other side of the fundamental re-set that we are going through in our state’s economy provides most with the ability to live well and prosper (or at least afford a place to live).

Waiting for something good...

“You never wait too long when you wait for something good.” (Swedish Proverb) from Jack’s Winning Words. This most certainly could be applied to real estate, especially to those who have been searching fore the right new home for quite a while. However, it may also betaken too far. Searching forever for that perfect house – a foreclosed property at a ridiculously low price but on that is also in absolutely move-in condition – can become a never-ending process.

It is especially hard to find a foreclosed house that has no issues at all. Most have been left unoccupied for long enough that they have begun to deteriorate. Some have actually been vandalized or stripped (sometimes by the old owners). Sometimes defects are not found until you’ve gone through the inspection process and that can be really disappointing, since the buyer has committed emotionally to “buying” the house, only to find something that gives them reason to reconsider and walk away. These days there are also appraisal issues that sink many deals, which is also a bummer.

I’ve hit cases lately where buyers actually get tired of looking and start getting a lot more “flexible” on their list of requirements. It may even feel like giving up to them, unless we can find a house that they can get emotional about again. Then we can have a good laugh and repeat the Swedish proverb from above. You just never know how long is too long. I finally found homes for two couples that I have kiddingly referred to as my "three oil changes" couples - meaning that we have been looking for so long that Ive gone through three oil changes on my car. In both cases we had made multiple offers prior homes. Hopefully the current homes are the ones they've been waiting for all along.

To thine own self be true...

“To wish to be the person you aren’t is to waste the person you are.” (John Wesley) from the Jack’s Winning Words Blog. How apropos as I agonize over that person that I’m not. That person is unafraid of cold calling as a prospecting activity. That person is out there socializing around town and making new contacts everyday. That person is out front, in your face and probably wildly popular at bars or in certain social circles. I’m not that person and the truth is that I’m not wishing that I was.

I don’t like cold-calling, so I just don’t do it. I get out in a few social circles, but I’ll never be mistaken for the most popular guy at the bar. I’ll likely never get “in your face” about very much, but I’d enjoy a good discussion with you. I’m not “that person” and I’m OK with that.

I’m pretty comfortable with the person that I am. I seem to do well with people whom I meet in the circumstances that I’m comfortable with. I enjoy working with them and they seem to enjoy working with me. We have fun if we’re house hunting and we even have some fun with the sales process, assuming that the sellers have a sense of humor and aren’t too depressed about the market. I’ve even managed to become friends beyond the real estate relationship with a few and that’s kind of nice, too.

The real estate business, like lots of other sales jobs, is populated with people who are self-confident, outgoing and sometimes a little overbearing. There are big egos in real estate. Especially among the so-called super agents or teams. That’s OK, I guess, so long as one doesn’t just have ego and nothing else going for them. I have won more than one listing after one of the super agents was in and totally turned off the clients with their self-centered pitch. My approach is that it’s not all about me; it’s all about the clients – their needs and wants – and not my ego and its need to be stroked.

So maybe Shakespeare’s line “to thine own self be true” is the best advice. I’m happy with me and I think you would be, too. Give me a call if you want to buy or sell a house and let’s find out.

An optimistic realist....

“In so many areas of life, you need to be a long-term optimist, but a short-term realist.” (Chesley Sullenberger) Sully was the pilot who safely ditched Flt 1549 in the Hudson River. In his new book he says that all of life is a preparation for how we react to emergency situations. A spirit of optimism helped him when he was faced with reality. It was more than luck. From the Blog http://jackswinningwords.blogspot.com

Capt. Sullenberger was lauded as the “Hero of the Hudson” for his quick thinking and calm actions on the fateful day when he was forced to land his crippled plane in the Hudson River. In the countless interviews that followed he has been consistent in making the claim that a lifetime of planning and thinking about what he would do in an emergency like that prepared him to be able to calmly execute the maneuvers that resulted in everyone getting out of the plane alive. That day, a lifetime of optimism about his ability to do the right things, made the difference within the short-term reality that played out.

In real estate we all need to be optimists, especially in the gloom and doom that has surrounded the market for the last few years; yet we also need to be realists when it comes to setting prices for homes that we list. The trick is not to let yourself tip over the edge of realism into pessimism. There is a fine line between the two, one all to often crossed without much warning. One must find a way to discuss a depressed market with becoming depressing about it. That’s not always easy, especially with sellers who may have bought at the height of the market.

Long-term we all know that the market will return to a more balanced state (I hesitate to use the term “normal”, since that is hard to define). Short-term we have to deal realistically with the foreclosures and short-sales that dominate the current market. Long-term we can state with a great degree of assurance that real estate values will appreciate over time. Short-term, we still have value declines in progress that may this year add another 8-10% to the losses that owners have felt already. Long-term, as Realtors we know that this can be a very satisfying and rewarding profession to be in. Short-term most of us have to find some way to supplement severely depressed earnings from real estate.

So, what’s the take-away from all of this? You must remain optimistic about the future, about the profession and about the market; while at the same time conducting your business and your life in a realistic way to deal with the current conditions. To paraphrase and badly mangle an old saying, “It ain’t heavy, it’s my profession.” Wow, now there’s an optimistically realistic statement.

Forever Me…

In what reads like the penultimate salute to themselves by the ME generation my Iconoculture Web report this week focused upon a new service available in Switzerland to immortalize oneself. As reported in Iconoculture -

- Thanks to technology, immortality is surprisingly affordable and available. Swiss DNA Bank, located in an underground vault in Gstaad, offers swab-n-send DNA collection materials and access to a secure website to record audio, video and written life experiences, which will be stored indefinitely (Springwise.com 9.16.09).

- Your essence is kept in bank-level security in a nuclear-proof facility.

- Given two passwords, relatives or friends can purchase access to the information for $69.

- The $399 cost of the DNA-plus-digital kit is the one-time-only charge. Digital-only storage is available for $299.

For those who indeed value their LegacySM, DNA storage provides confidence times two: white-coat expertise and the security of a nuclear-proof vault.

So, in theory, one could at some future time be cloned, using one’s own DNA and then have one’s digital memory somehow reinstated. Of course one would have to start over as a “mini-Me”, but I guess that’s not all bad, except maybe going through the raging hormones teen stage again.

I suppose that this makes as much sense as having yourself cryogenically frozen in hopes of one day being thawed out and cured of whatever killed you. It costs a lot less, too. It would probably be a little weird to have all of those memories of a prior life bouncing around in your cloned little head, but that would give others around you an answer to what it was that just made baby smile. People will say that you just remembered something funny that you did the first time around.

Maybe you could hide a bunch of money in a secret Swiss bank account before you kicked off and then only the future you would know the code. The possibilities are an endless as is the stupidity of the whole idea. Hey, save some money. For only $199, I’ll remember you; then, you won’t have too.

Boomers Aren't Choosing Urban Retirement

Part of the prevailing wisdom of the now-late-lamented housing boom was the theory that baby boomers were ready to trade in their suburban ranch houses for an urban retreat, thus saving themselves from lawn maintenance and automobiles.

Now many of the condos that were built in urban centers in anticipation of that happening are sitting vacant.

“Someone who grew up living in 2,500 square feet with a driveway leading up to the front door isn't going to downsize to 850 square feet until he's ready for assisted living," says Joel Kotkin, a scholar on urban development who wrote The City: A Global History.

"The new urbanists convinced the idiot development community there was going to be this massive move that never happened."Do these empty buildings further doom the future of cities?

Maybe not. "I wouldn't write off a storybook ending yet," says University of Central Florida economist Sean Snaith. "It just depends on how many chapters it takes to get there."

Source: Orlando Sentinel, Mike Thomas (10/11/2009)

One of the obvious reasons in our area that Boomers aren’t snapping up urban condos (or anything else for that matter) is that they are trapped in their current McMansions. Boomers are the poster child for the mistakes that were made during the real estate bubble. They bought more than they could really afford, because they got those great ARM loans. Many refinanced every year to pay for other toys or expenses. They lived as if there was no tomorrow and for many there’s won’t be a tomorrow. These are the successful couples where one got laid off and now they’re losing the house. These are the parents whose kids where into everything and now they’re being forced to move into a rental unit or another neighborhood. These are the couples that are now experiencing some of the highest divorce rates, due mainly to financial pressures.

So, will some or many of these Boomers end up in urban lofts or 900 Sq Ft condos downtown somewhere? It’s not really likely. These are also the same people who are frightened by urban crime statistics and who shy away from diversity, rather than embrace it. There will always be a sub-group within the age groups classified as Boomers who have been, and will remain, adventuresome, open to new ideas and new people. They will migrate into the cities because it makes perfect sense to them. They understand and appreciate the “green” aspects of not having to drive to get to things. They embrace diversity and find great value and interest in the various cultures that make up the inner city. They likely have been long-time supporters of the museums and art galleries and theaters and other cultural amenities of the city and now they can live and be a part of that culture. The main thing that they will ask is that the streets be relatively safe and clean and that there exist some reasonable form of public transportation.

The issues of safety, cleanliness and transportation are still the biggest challenge for big city governments, especially in the Detroit area. I have visited many big cities that have vibrant urban communities – Boston, Baltimore and Chicago come to mind. Detroit has a long way to go on all of those issues. Detroit has somewhat put the horse before the cart by promoting the building of Riverfront condos before they have solved these other issues. Now those condos mostly sit empty while the buyers wait for the city to get its act together. The saying from the movie about baseball - “build it and they will come” – doesn’t work if they think they’ll be mugged if they come or if they still need a car to get everywhere.

Hopefully, Detroit and other local urban centers will see what they need to do and do it. Otherwise we may see Boomers and other coalesce around other town centers, but not our urban areas

Not as much as you had hoped, but not as little as you might have feared.

I have lots of opportunities to respond to would be sellers who inquire about the state of the market and what their house might sell for on today’s market. I use the phrase above a lot as an opening positioning statement. There is absolutely no doubt left in anybody’s mind that the value of their home has gone down over the last 2-3 years. There are still those who are convinced that their home was somehow passed over for most of the devaluation and that it must be worth nearly what it was the lat time that they had it appraised for a refi loan (usually within the last 5 years). There are also the Eeyore’s of the world who are sure that their home has lost most of it’s value and that they are so far under water that they can’t sell.

Of course neither extreme view is correct in most areas. We do have some pockets of deep loses, such as Detroit, Ypsilanti and Pontiac. And we have some areas that have held values up fairly well – Ann Arbor comes to mind. The statistics that I track tell me that we have generally lost between 20-40% of home values over the last 3 years. The peak is generally acknowledged to have occurred in the 2005-6 timeframe. Obviously statistics based upon averages only give one a starting point from which to evaluate any particular house. Things like the quality of the house and its condition weigh in heavily to moderate the averages.

One of the reasons that people believe that they can’t sell is that they see and hear so many stories of homes just sitting on the market. It is true that the Days On Market (DOM) for many price bands has gone up considerably, especially for higher-end homes; however, a major factor in the elongation of the selling process is the lack of buyers out looking in the higher bands, rather than the price (perceived value) itself. Homes in price bands above $250,000 have always been considered to be “move-up” homes and with all of the turmoil in the local job market that have been few people brave enough (or secure enough in their jobs) to risk moving up right now. We probably get as much traffic in those higher price bands from corporate relocations as we do from local people seeking to move up.

So, is it a good time to sell and what can you get for your house? To answer the first question I always ask what the motivation is to sell. If you have a good reason, whether it be to downsize because of retirement, or because you need to move (for work or whatever reason) or you need to or want to move up in the housing market; then it is a good time to sell. As for what you can get for your home – less than you had hoped but more than you feared. Let me do a Market Analysis and I’ll tell you what that is likely to be.

Searching for contentment...

“Be content with your lot; one cannot be first in everything.” (Aesop) from the Jack’s Winning Words Blog. Jack posted this the day after the Tigers had lost to the Twins for the Division title. I suppose it had better meaning for that occasion. The Tigers did have a very good season and posted an enviable record for the year; however, that is scant consolation for their loss in what was a great baseball game.

In life and in real estate this is a tricky phrase to properly position. There is value in being able to be content with what one has in life, yet one cannot help but to keep striving to be first in everything that one tries. Winning certainly isn’t everything, but trying to win is important. In many peewee sports the participants are told initially that winning isn’t the goal of participating. The goal at that level is to learn how to play the game. Yet at each match, game or event, you’ll see and hear the coaches and parents urging on the kids to win. It’s human nature. If the parents, coaches and kids of the losing team can be content with the fact that the loss was a learning experience, then so much the better.

In real estate, one must deal with the relatively high probability of a loss - a property that doesn’t sell and goes to some other agent, a listing appointment that doesn’t go your way and goes to some other agent, a sale that goes south and can’t be saved, an offer that is rejected and cannot be turned around. Fortunately there are also many chances for wins and lots of things to be content about. I suppose that I would really be a malcontent, if I worried all the time about being number one in my market.

There are agents who have been Realtors for 20-30-40 years in my market. There are large, multi-person teams in the market that I serve. I could work 24 hours a day, 7-days a week (i.e. a few more hours than I currently work) and never catch those agents. So I have to be content with what I can achieve. I’ve set my goals at a reasonable number of listings and sales per year and I’m working hard to meet those goals. Meeting them won’t make me number one in my market, but maybe it would help me be more content.

Still, I can strive every year to maybe move up a notch in the local pecking order. I can celebrate small victories, like my local Web sites coming up higher in Google searches than some of those big guys. I can find happiness in being found on the Internet and getting out of state calls because of my Web presence. Like a peewee player, I’m still learning this game (after “only” 8 years in the business), so I try to learn from my mistakes and losses and get better out of every defeat – and maybe that is a victory in itself.