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Thursday, December 31, 2009

House stripping redux…

I got to thinking about the topic of home stripping and actually ended up thinking that there maybe some instances where it's OK for the owner to take a few things out of the house. For instance, let's say the owner replaced a rather plain looking, builder-grade chandelier with a very expensive one. If the owner lost the house to foreclosure, wouldn’t it be OK to take the new chandelier and put back the old one? In my mind that would be OK; so long as the owner doesn’t just leaving a dangling set of wires where the chandelier should be. There are any number of similar cases that could be put forth where an owner may have upgraded something in the house and wants that upgrade back. So long as they do not just leave empty holes where they take stuff out, that might be OK.

I’m hard-pressed to find where to draw the line – what belongs to the bank and what belongs to the homeowner. Maybe that is the real problem – where to draw the line and how to avoid stepping over it. Situational ethics is always a slippery slope. There are those who would argue that it is wrong to remove anything that has been attached to or added to the house. Others might argue that the bank mortgage covered the house “as is” at the time of the mortgage and does not include anything new that the owner brought in or added to the house. Of course, one would have a problem with removing the shingles of a new roof that the owner might have added, so some level of common sense needs to apply.

The thing that I cannot justify is the stripping out of items and the failure to replace them, so that the house stays whole as a livable abode. Taking all of the light fixtures and plumbing out and leaving it that way is unacceptable behavior and that is what I see a lot of times. Putting some things back to make the place whole would possibly involve quite a bit of expense and perhaps that is the best guide. If you take the new chandelier, but have the old one to put back, that might work; however, to strip out the new kitchen and then put back the old cabinets and top is both impractical and expensive, even if you saved everything from the update.

So, is it OK to strip the home of fixtures, plumbing and other items? Absolutely not! But, is it OK for a displaced homeowner to take out a few items that he may have upgraded and put back the original items? Maybe. If doing so isn’t prohibitively expensive and it makes sense to even try. What do you think?

Wednesday, December 30, 2009

We know it's wrong, but is it illegal?

I saw an article at the CNBC Web site recently that discussed the stripping of foreclosed homes. Since that occurs all the time in this area, I was fascinated by the fact that the article claimed that an owner stripping a house is actually not illegal in many states - there just aren't any laws against it. The theory seems to be that the owner, and not the bank, actually owns things like the fixtures and appliances and other additions to the basic structure and it’s OK for him to take them out before the Sheriffs sale.

The article pointed out that most mortgages have provisions against this behavior and require the mortgagee to "keep the house in good order"; however, even under those mortgage provisions, stripping the house would result only in a civil action and not in a criminal action in many states. We see almost no prosecution of these cases locally and very few banks go after homeowners for stripping their houses.

I’ve actually shown houses where everything was stripped out – I mean everything, down to the drywall. In those houses all of the plumbing and fixtures was gone, the kitchens were completely gutted, all tubs, toilets, sinks, everything was taken. One house even had the flooring ripped out, so that one stood now on the sub-flooring. Needless to say, these are now pathetic looking shells. One such house, which had been on the tax books for over $1.5 Million is now carried at $300,000, and that is just because it is the shell of a 6,000 Sq Ft house.

Recently I had the misfortune to have a personal (or at least personal from a Realtor’s point of view) experience like this. One of my listings is an empty house that was broken into and part of the plumbing cut out by would-be copper thieves. It was very disturbing to walk into the place and know that it had been vandalized. I called the police who didn’t seem all that concerned about it. They sent out an officer, but he did nothing when he got there – took down my name and the name and contact information of the owner and that’s about it – he took no pictures, collected no evidence, nothing. Maybe I’ve watched to many TV police shows, but that was disappointing.

It turns out that the would-be thieves were either stupid or inept or both. They had cut out a bunch of pipes and then stacked them on the floor of the garage, apparently with the intent to return later to collect them. The officer explained that since the pipes had not been removed from the house, no theft had yet occurred and that the only crime at that point was malicious destruction of property. You can bet that I made sure that the place was not going to be broken into in the future – doors screwed shut and the like.

When the insurance adjuster came it turned out that the owner is lucky that the thieves left without their booty. Had the copper been removed, it would have been classified as a theft by the insurance carrier and the damage would not have been covered under the vacant house policy. As it is, malicious damage is covered, so the owner will get the repair made under coverage by the insurance. It was also fortunate that I had insisted on having the place winterized, so there was no water damage at all.

I have a hard time understanding the logic, or lack thereof, of a foreclosed homeowner stripping his house and I have no patience or sympathy for them, They should be thrown in jail the same as a thief who breaks in and steals stuff. Of course my recent experience tells me that even the thieves don’t have too much to worry about anymore. They would apparently have to be caught red-handed, in the house for the police to do anything at all.

Monday, December 28, 2009

The poor wealthy trying short sales on McMansions

The Sunday Detroit Free Press had an article by Kathleen Howley and Dan Levy of Bloomberg News about the alarming increase in defaults and short sales involving $1 Million-plus homes. These mansions in distress are mainly located in the areas that we might expect – California, Arizona and Florida – and many are second or third homes for the wealthy. A good number are also located in Michigan, however.

According to the article, about 12% of homes worth $1 Million or more are now 90 days past due on mortgage payments, as opposed to about 6.3% for mortgages on homes worth $200,000 or less. That is a big increase from last year, when only 4.7% of luxury homes were in default. A good number of these distressed luxury homes belong to luxury home builders who have gone belly-up in this recession. Read the whole article by clicking here -

As the article points out this trend has the attention of the banks because they take a much bigger hit on a short sale or foreclosure on a $2-3 Million mansion than they do on the typical $200,000 house. According to the article, there are 114,000 home mortgages in the U.S. of more than $1 million. About a quarter of all mortgaged homes in the United States have loan balances bigger than their current value, known as being upside-down or underwater. That would mean 28,500 Million dollar-plus mortgages on these mansions are underwater and 13,680 are now more than 90 days overdue. When you apply the general real estate statistics of value declines of 20-30% over the last couple of years (at least in Michigan) you get huge losses in this category – losses big enough to cover the entire house value of normal people’s homes.

The various Federal programs to help homeowners hasn’t had any impact on these poor homeowners because there is a limit on so-called jumbo loans of $729,750 and most of these houses have loans that greatly exceed that limit. I suspect that there is little sympathy in the halls of Congress for the struggling Million Dollar homeowner; however, many in California might point out that this would be a typical middle class home out there. I have trouble getting my head around that.

Just like the rest of the market, this is a great time to buy a Million Dollar mansion. You could probably pick one up in foreclosure for 50-60 cents on the dollar, maybe less. That’s just what some people who have money are doing right now. I’ll have to pass on that right now, but it’s a thought. Of course, you’d still have to pay the taxes on the thing and that can amount to more per year than most people pay for their mortgages and taxes combined. I guess that old saying applies that if you have to ask about the taxes you probably can’t afford it.

I somehow have a hard time being too empathetic with these beleaguered Million Dollar home owners. I don’t think it is an envy thing so much as being fairly sure that they’ll find some way to game the system and land on their feet. You won’t see their possessions sitting out by the curb or see them showing up for a night at the local shelter. And I imagine that making the “hardship” claim to get the bank’s agreement for a short sale must be a challenge for many would be sellers – “well, you see, my client’s year-end bonus was only $20 Million this year, instead of the $100 Million that he expected and his alimony and child support payments eat that up, so he is severely short of cash and needs to downsize his lifestyle.” Oh, the hardship of it all. Where ever will we park the Bentley?

Saturday, December 26, 2009

Forbes Names Cities With Biggest Price Drops

Cities that experienced housing recessions were affected as much by local economic factors as they were by national ones, according to a study by Local Market Monitor for Forbes magazine. Cities that have lost the most value are concentrated in the Midwest where unemployment has taken its toll, and in parts of California, Florida, and Nevada where the rising cost of housing encouraged home buyers to gamble on their ability to afford housing long term.

On average, housing markets on the West Coast lost the most value – 21.6 percent since their peak. Florida lost 31 percent. The Northeast lost an average of 8.6 percent, and the Midwest on average lost only 5.6 percent
(with the big exception being Michigan where the value losses were in the teens or larger in most areas – ed.) - Source: Forbes, Francesca, Levy (12/21/2009)

Here are the top five cities in each region that lost the most value:

Merced, Calif.: -62.11 percent
Stockton, Calif.: -54.29
Modesto, Calif.: -52.42
Vallejo-Fairfield, Calif.: -47.62
Las Vegas-Paradise, Nev.: -47.53

Port St. Lucie, Fla.: -46.43 percent
Cape Coral-Fort-Myers, Fla.: -46.38
Naples-Marco Island, Fla.: -43.63
Bradenton-Sarasota-Venice, Fla.: -41.52
Fort Lauderdale-Pompano Beach-Deerfield Beach, Fla. -39.93

Detroit-Livonia, Mich., -30.66
Warren-Troy-Farmington Hills, Mich., -27.95
Flint, Mich., -27.47
Ann Arbor, Mich., -20.37
Jackson, Mich., -17.30

Providence-New Bedford, R.I., -17.30
Worcester, Mass., -16.17
Atlantic City, N.J., -16.15
Poughkeepsie-Newburgh, N.Y., -14.60
Barnstable Town, Mass., -14.48

Somehow this "news" feels awfully old here in Michigan. Maybe we’re just getting so used to bad news that this type of report has become a part of the background noise. There is a tendency to become a bit numb to the continual beat of bad economic news. If there’s a bright side to these stories it is to be found in the buyers who are getting great deals at the expense of distressed or foreclosed homeowners.

There are lots of articles that belabor the point that much of this lost value was all an illusion to begin with, caused by an irrational and unsustainable run up of home values after the Internet bubble burst in the late 90’s. That’s likely true, but it provides little comfort for the people who bought a home with in the last 4-6 years and paid those inflated prices.

Not all of those buyers were greedily overreaching and making bad financing decisions. Many were just regular folks who needed to move or wanted to move and who believed the conventional wisdom of the time that real estate always goes up in value. Boy, was that bad wisdom. Depending upon which reports one reads the U.S. has lost between $4-7 Trillion worth of real estate value in the last few years. While it could be viewed as paper losses by most, for many it is very real and very painful.

One thing the Forbes article did not do was to predict how much further the value losses will go in the coming year. Locally, it “feels” like the rate of loss has slowed. I have been telling people that we are losing 1.0 to 1.5% of value per month, but now we seem to be down to .75 – 1.0% per month, which is still significant, but which gives some hope that we’re nearing the bottom of this process and about to turn things around and get back to positive appreciation again. Hopefully, when that happens, the appreciation will be at more modest and sustainable pace than it was prior to the bust.

Friday, December 25, 2009

Waiting for the magic...

Patience and perseverance have a magical affect before which difficulties disappear and obstacles vanish – John Quincy Adams. That was the saying that a co-worker put into all of her Christmas cards to her fellow Realtors. Likely it is good advice for the Realtors and their clients.

I often go over what I call the “three-P’s of real estate” – patience, perseverance and price – with listing clients. I do that within the context of a discussion of their role in the process. I usually also discuss the three-C’s of real estate – clutter, cleanliness and condition – and help them understand what they need to do and keep doing during the listing to keep the house in showing shape.

In the current market I have to advise that it will likely take 12- 18 months to sell, unless they are pricing at the foreclosure level, so patience is required. The perseverance comes to play every day when they have to get the house in showing shape before going off to work. Of course the price issue is one that we constantly must re-visit in the face of still declining market values.

The three-C’s of real estate are something that must usually be dealt with prior to getting the house on the market and then must be maintained. It is so easy to let clutter creep back into the picture or to not continue to make those little touch-up repairs as things happen during the listing. And, let’s face it; cleanliness is somewhat in the eye of the beholder. Very few homes are kept in a white-glove inspection condition of cleanliness; however, keeping surfaced dusted and cobwebs out of corners isn’t asking all that much. Running a vacuum over the floors once every day or so doesn’t take that long, it’s just not something that may normally be on the daily schedule.

This time of the year would normally be very slow and indeed things have cooled a bit since November; however, the extended and expanded homebuyer tax credit is starting to have the desired effect of getting more people out into the market before it expires on April 30th. I suspect that we’ll see a nice upswing in February and March, as people rush to beat that deadline. I just have to be patient and persevere until that happens.

Thursday, December 24, 2009

Using the homebuyer tax credit to help Boomers downsize…

A recent article by Bob Hunt on the Realty Times Web site (click here to read the article) made the point that the extended and expanded homebuyer tax credit may be used by buyers no matter whether they are moving up down or sideways. That is worth remembering and using to get newly retired or about to retire Baby Boomers off the fence and into the market.

Many retirees have been sitting on the sidelines waiting for the real estate market to recover, so that they can sell their current McMansion and downsize into a retirement home or condo. That’s not likely to happen for years, maybe a decade or more, if they are waiting for the full recovery of lost value. A case can be made that they will make up a portion of any loss on the great deal that they get on the new place, since it too will be down in value; however, when downsizing there is most often a net loss on the two deals. Enter the tax credit on the new buy, which may make up some of the difference and take away a little of the sting.

If the person is already retired, they may already be in a low enough income bracket to take full advantage of the $6,500 credit for existing homeowners. Of course, they also have to sell their home in the face of a tough market, but that is a separate challenge. The tax credit only lasts until the end of April, so it is important to get their current house on the market now. Maybe they’d agree to write a listing agreement that also expires at the end of April, if their current house hasn’t sold by then. Maybe they’ll explore other options for their current house, even if it doesn’t sell by the end of April deadline.

In many cases, retirees who are selling a big home may wish to move into a luxury condo complex, maybe one associated with a lifestyle, like a golf community; so, the move might financially be a lateral move and the tax credit could be a nice kicker to help get it going. The point here is that we, as Realtors, have another tool to use in our discussions with potential retiree home sellers, one that should help spur action. So, read the article and come up with your own way to explain it to your potential retiree clients. Maybe it will help them overcome the inertia that has locked so many in place recently.

Wednesday, December 23, 2009

Assessments get real…

For the past year or so I’ve been using a SEV multiplier range of 1.4 – 1.8 to get a gauge on home values, because that’s about what sold homes in the area were running. Now the multiplier is back close to 2.0 (about 1.7 to 2.0) not because values went up, but because the assessors finally caught up with the devaluation trend and marked down the SEV’s in this year’s assessments. In many cases that also meant that the SEV value and the Taxable Value of homes have re-sync’ed and now both are going down.

The other rule-of-thumb gauge that I’ve been using is still headed down – the cost per Sq. Ft. for homes. I had been using $85 – 125/Sq Ft, depending upon size, quality and condition. Now that is down to about $50 – 115/Sq Ft.(and even lower in some hard hit areas like Pontiac). It may be counterintuitive, but, the smaller the house the higher that number generally is – there is less Sq Footage to spread the cost of the infrastructure (heater, water heater, etc.) over, so small houses cost more per Sq Ft.

As I look at what has happened to assessments over the last two years, it is obvious that the assessors are only grudgingly making the changes. Assesses values are still 10—20% higher than current market values. Perhaps that is because the assessed values are only adjusted once a year and the current market-driven devaluation continues at about .75 to 1.0% per month.

The drop in assessed values and the subsequent drops in taxes and tax revenues are what is driving the crisis in local governments. Many local governments are stuck with bad union contracts that they wrote when times were good, many making promises of retirement benefits that the governments can no longer afford. There is a day of reckoning coming on that. Right now the local governments are doing everything that they can to keep their workers, which means sacrificing road repairs and delaying other projects. Eventually one would have to wonder; if there’s no money left for these people to do anything, what do we need them for?

For now I just make the adjustment to my home valuation rules-of-thumb. I’m even starting to see sales with SEV multipliers over 2.0, thought those are mostly waterfront homes, which have always been high. I’m still seeing lots of foreclosed homes sell for less than their SEV value, which I take to mean that they were in pretty poor shape or they were a part of some scam being pulled off by unscrupulous realtors and investor partners.
It’s interesting, too, that many homeowners welcome the reduced SEV and taxes, but continue to insist that their homes are really worth more than the SEV would indicate. You can’t have it both ways. The assessments went down because the assessors reevaluated the market value of the house in the current market environment. Your house isn’t somehow the only $300,000 house left in your otherwise $250,000 neighborhood.

Monday, December 21, 2009

Grumpy Old Men (and Women)…

Is it just me or do all of our politicians at the state and national level seem to be grumpy old men and women (no matter what their ages)? Every bill seems to be bitterly fought over in the most partisan manner possible. Every Congressman or Senator from one party thinks that every Congressman or Senator from the other party is a scoundrel or worse. Apparently one is either a “do everything for me liberal” or a “do nothing and let the capitalists rape plunder and pillage conservative.” One is either a pro-abortion murderer or a right-to-life fanatic, willing to kill to make that point.

Our political parties and the representatives from them seem to be held hostage by the extreme nut-case radical wings of their constituencies. It is time for change. I have been advocating the creation of a third political party, one that is more centrist in nature; but, that is unlikely to happen. What could happen, due to the influence and ubiquitous nature of the Internet, is the rise of viable no-party candidates. There is, after all, no requirement anywhere that candidates for office must be affiliated with either of the nut-case parties that we have today.

The main reason the parties exist today is to funnel money to candidates from their organizations. The political parties offer the advantage of being organized, of having so-called grass-roots groups at the ready to go out and knock on doors and run fund raising activities. The party big-wigs then use this dole to keep candidates in line – “don’t vote the way we want on this or that bill and we’ll cut off your funding.”

A few independent organizations, most notably the NRA and AARP have shown their ability to mobilize support for issues and influence things, too. It’s unfortunate that they most back the positions of one or the other of the grumpy old men parties. And of course there are the Catholic Bishops, who now represent a veto-power of sorts with at least the Republican Party. However, as several recent efforts have shown, the Internet can replace that organization and can do a very good job of both fund-raising and of creating awareness and support, especially among the younger voters.

So, maybe it’s time that some younger candidates take to the Internet as independents, running without the strings that come attached to the major parties. Right now the two independents in the Senate command a great deal of attention from both parties, even though both tend to side with one more than the other. What would happen if there were 10 or 20 independent Congressmen and 5-10 independent Senators?

Right now they get shut out of the prime committee positions in Congress because the major parties have firm control; however, if more independents were in the system then there would be no way to govern without ceding them some power (look at what happens overseas when majority parties must align with smaller parties to form a government). It would certainly change the dynamics in Washington. It would also force the electorate to study the positions of these candidates more closely, since they could not be counted upon to toe the line of one of the major parties.

In the last Presidential election, Ron Paul, a radical thinker of a different kind, found quite a following on the Internet and made a much deeper run in the Presidential nomination process than would have otherwise been possible, even without the support of his party. Paul flamed out when his positions on a variety of topics were better understood and he was found to be a bit too off base by many. What he proved was the value of a viral campaign on the Internet. Imagine if a more moderate, intelligent, photogenic candidate would wage the same type of campaign, without the stigma of being from one of the major parties. I predict that it will happen soon. Who needs political parties? It’s time to get rid of the grumpy old men and women.

Sunday, December 20, 2009

Oh great, now I live in a sourpuss state…

The Associated Press reports that a recent study on personal happiness found that those who live in sunny, outdoorsy states - Louisiana, Hawaii, Florida - say they're the happiest Americans.
The study published in the journal Science was based on two data sets: one on personal reports of happiness for 1.3 million Americans and the other that included quality of life measures such as population density, air quality, home prices and crime rates.

The study was conducted by economists Andrew J. Oswald of the University of Warwick in England and Stephen Wu of Hamilton College in Clinton, N.Y.
The top five state for happiness were:
1. Louisiana
2. Hawaii
3. Florida
4. Tennessee
5. Arizona

At the other end of the scale, last in happiness - is New York state. And just guess were we here in Michigan came in. At least we weren’t the worst state. We were the third from the bottom of the list. The bottom five are:

47. New Jersey
48. Indiana
49. Michigan
50. Connecticut
51. New York

Oswald suggested the long commutes, congestion and high prices around New York City account for some of the unhappiness.

He said he has been asked if the researchers expected that states like New York and California, which ranked 46th, would do so badly in the happiness ranking.
“I am only a little surprised," he said. "Many people think these states would be marvelous places to live in. The problem is that if too many individuals think that way, they move into those states, and the resulting congestion and house prices make it a non-fulfilling prophecy."

Besides being interesting, the state-by-state pattern has scientific value, Oswald explained. "We wanted to study whether people's feelings of satisfaction with their own lives are reliable, that is, whether they match up to reality - of sunshine hours, congestion, air quality, et ceteras - in their own state. And they do match." Oswald and Wu used data from CDC's Behavioral Risk Factor Surveillance System collected from 2005 to 2008. The survey, launched in 1984, collects information on a variety of health measures.

At a macro level, the recent world happiness survey concluded that the United States was not anywhere near the top of the happiness scale. Would you believe it, Bangladesh is the happiest nation in the world! The United States, on the other hand, is a sad story: it ranks only 46th in the World Happiness Survey. That's way behind India, the fifth happiest place in the world, and others including Ghana and Latvia, Croatia and Estonia.

Research led by London School of Economics professors into the link between personal spending power and the perceived quality of life has conclusively proved that money can buy everything but happiness. The study revealed that people in Bangladesh, one of the poorest countries in the world, derive far more happiness from their small incomes than, for example, the British (32nd on the list) do from their relatively large bank balances. In fact, people in most rich countries including Austria, Netherlands, Switzerland, Canada, Japan and others are much more unhappier than their poorer counterparts in countries like the Dominican Republic and Armenia.

Most unfortunate, however, are Russians and people in some other parts of the former Soviet Union. They are neither rich nor happy, indicates the World Happiness Survey. Slovenia, Lithuania, Slovakia, Russia, Ukraine, Belarus, Bulgaria and Moldova follow the United States in the list to bring up the rear.

So I guess I live in one of the worst states in one of the worst countries in the world as far as happiness goes. Bummer. I was actually pretty happy with things.

Saturday, December 19, 2009

Get strategic before you get foreclosed...

From an Associated Press story by Alan Zibel (12/17/2009) comes this projection for foreclosures in 2010.

More than 1.7 million homeowners were verging on foreclosure this fall, making it likely that these houses will soon end up on the market one way or the other, driving down overall housing values.

"We're going to be dealing with high levels of distressed (sales) in the marketplace for at least a couple of years," says Mark Fleming, chief economist of researcher First American CoreLogic, which has been studying the problem.

And from The Wall Street Journal, James R. Hagerty and Nick Timiraos (12/17/2009) and Bloomberg, Emily Friedlander (12/17/2009) comes this update that more people are choosing to walk away from underwater homes.
"We've been in recovery mode for most of the year. How many foreclosures do they have to dump on the market to affect that? I don't know," says Deborah Farmer, owner of StarLight Realty in Tampa, Fla. "Any house priced under $225,000 will be affected by a large increase in foreclosures in this market."

A growing number of home owners in Arizona, California, Florida, and Nevada—where prices have fallen the most—are walking away from their properties. They are leaving the deal behind not because they can’t pay but because they don’t want to. A study by researchers at Northwestern University and the University of Chicago concludes that as many as 25 percent of defaults are driven by strategy, not necessity.

If many other people follow suit, “It’s going to be really difficult to prevent a cascade effect," says Paola Sapienza, a professor of finance at Northwestern.

Brent White, an associate law professor at the University of Arizona, points to actions by banks themselves to avoid staying in bad business deals as an example of why homeowners should make a decision "unclouded by unnecessary guilt or shame."

For instance, on Thursday, financial services firm Morgan Stanley announced that it is turning five San Francisco office buildings back over to its lender two years after it purchased them when the market was at its priciest. The buildings are estimated to be worth about half of what Morgan Stanley paid. “This isn’t a default or foreclosure situation,” spokeswoman Alyson Barnes told Bloomberg News. “We are going to give them the properties to get out of the loan obligation. Morgan Stanley is apparently current on the loan, so this is what is known as a “strategic default.”

Some might ask: If strategic defaults are OK for banks, why aren’t they OK for ordinary homeowners? You may recall that not too long ago I opined the same in this Blog in a post titled "Just Walk Away Renee." It's interesting that the same institutions that label foreclosed homeowners as deadbeats find it strategically expedient to do the same thing. So maybe I should have labeled my earlier Blog post - Just Get Stategic Renee. Of course, the banks likely wrote non-recourse deals for their building purchases, which allows them to just give the building back to satisfy the contract. Too bad that they won't do the same for their borrowers (a few will; but, most balk at that as a resolution of the debt).

Most of the Market Analyses that I do for homeowners these days result in current market value estimates that are below what they owe on them, which results in them wandering off mumbling to themselves and abandoning whatever plans that they had that involved moving. A homeowner has to have been in the house for at least a decade without refinancing (or at least without taking out equity if they did refi) in order for them to be in a position to consider selling. For those people the issue is giving up the perceived value that they thought they had in the house.

Since I'm just a Realtor and not a lawyer or financial advisor; I, of course, advise people to seek advice on what to do from those qualified professionals. If they want or need to try a short sale I can help with that and there are a few (though very few) reasons to try that route first. I've re-opened my Web site just to help people better understand their options. I'll have to go update that site to better explain the "strategic" option of walking away.

Friday, December 18, 2009

Ridiculouosly uncomfortable times...

“To be uncertain is uncomfortable, but to be certain is ridiculous.” (Chinese Proverb) from my favorite source of quotes like these – the Jack’s Winning Words blog. I’d have to say that these are uncertain times and that I’m not comfortable with where things are headed. There are certainly indications that a recovery is under ay, that we have bottomed out and started back from this terrible recession; and yet, there are also those who see the very real possibility that this is a double-dip recession – one that has a false bottom and gives the illusion of a recovery, only to plunge even further when that brief respite ends.

I have witnessed some indications of relief, albeit very small ones locally. We have had a few months now of slightly declining inventory in the real estate market and a month or tow of increasing median sale prices – both supposedly leading indicators of a recovery. I have also noted that foreclosures and a percentage of overall real estate sales has steadily dropped through the year from high in the 70% range to just about 30% by the end of the year. That, too, is a good leading indicator of change for the better.

Locally, the market has shifted from predominantly foreclosures to short sales in the distressed sector, which at least indicates that people are more pro-active about being in a distressed state and trying to do something to avoid foreclosure. While that’s good, it is still disturbing that there is such a high level of distressed market activity – still well over 50% of all sales. We still have a big problem, but now people are so used to it that they are acting faster to get out from under their distressed homes.

We also still have a market where a great number of homeowners (some would say the majority) are under water on their homes – they owe more than they are currently worth. I’m not sure what the exact turnover ratio is for home in this area, but if I believe that we are now at value levels that are about at the 1998/99 level, I have to believe that a huge percentage of our local homeowners have properties that they bought since that time that are now worth less than when they purchased. Since that same 10-years timeframe was the heyday of the 100% financing boom, most of these houses are worth less than what they are mortgaged for – of that we can be certain.

We used to be certain that homes always went up in value over time; now we are certain that this is not always true. That turns out to have been a ridiculous assumption. So, now we are uncertain when the recession will be over and how soon home values will come back. That is an uncomfortable feeling, but one we may need to get used. There is probably some Chinese saying to cover the fact that the “good ole days” that we so fondly remember are gone forever and that we will need to adjust to a new reality; however, failing that I’ll just blend a couple of modern day sayings – It is what it is, so get on with life.

Thursday, December 17, 2009

Pardon my pessimism…

The NBC Nightly News had a story on Wednesday night of this week about the latest NBC/Wall Street Journal survey of U.S. citizens about their feelings about government and the President and how things are going. I was not surprised to hear that President Obama’s ratings have plunged and that now more people believe that the country is headed in the wrong direction than believe we are headed in the right direction. A majority now disagrees with the President and rates his job performance below average.

If you look back over as many Presidents as I can remember in modern history – which we would likely need to start at about the Kennedy era – that same thing happens to them all. They come in on a wave of hope and optimism, with supporters all around and great press; but, within a year or so they are considered to be scoundrels who need to be booted out of office. We are a hard people to keep happy.

I will certainly admit to being a bit of a pessimist, mainly about the ability of any government run program more so than about the President. I though that George W. Bush was without the intellect necessary to lead, but for the most part our Presidents of late have not been the problem. Presidents can provide broad policy guidance, but it is the Congress making laws and the Federal bureaucracy promulgating rules and regulations who cause the real problems, both through their pandering and condescending laws and the absolutely mind bogglingly stupid regulations. Just read back through my recent posts on the totally unsuccessful HARP, HAMP, HAFA, D4L programs that have been foisted off on hopeful and trusting homeowners who believed that help was on the way.

Author Ken Kesey would today set One Flew Over the Cuckoo’s Nest in Washington instead of an insane asylum, unless of course that was too obvious, even back then. One outcome of the NBC poll that was also painfully obvious is that poll respondents think that this past year was one of increased division in the political process. Our political climate is in worse condition that our global climate, with the two parties at such diverse odds that almost nothing can get done.

I continue to think it is time to scrap the two-party system in favor of finding some folks in the middle who can do more than just argue with each other. Maybe it could call itself the do-something party. Of course, the current Republican Right wing would likely object because “Do Nothing” has been their rallying cry for quite some time. And perhaps the Left wing Democrats whose cause seems at times to be “Do Everything” would object too.

So here we are again – an unhappy people – against whatever our leadership is trying to do and whatever ideas are on the legislative table. We don’t like what has been suggested, but we don’t like where we are either. We don’t like where either party would take us next, but we sure can’t stay where we are. We don’t want to be left to fail, but we don’t want the help that you offer, either. What a pathetic situation for a nation to be in; but what are you looking at over there – mind your own business. Who in their right mind would want to be President of this crew?

Tuesday, December 15, 2009

Deed for Lease Program

Fannie Mae has announced yet another program to try to help struggling homeowners get through the current recessionary crisis – this one is call the Deed for Lease program. Bob Hunt did a good review and analysis of the program on the RealtyTimes Web site – see .

Obviously there are people back in Washington flailing about for anything that might help people during this mess. In this case the program is aimed at trying to keep people from being displaced from their homes, even as they are losing the home to foreclosure. I’m sure that there are those who would say “the hell with them”, they messed up; throw them out of the house and move on with life. Perhaps that’s what the banks would like, too – to just get the problem with these people behind them and move on.

Bob makes some very good points in his article about testing these various programs for viability – asking the question, “Is this likely to work?” In the case of this program and the earlier HAMP (Home Affordability Modification Program) aimed at encouraging loan modifications for delinquent homeowners and even the new HAFA (Home Affordability Foreclosure Alternatives) program, the answer is likely NO. These are all well intentioned programs created by Washington bureaucrats without enough analysis or consultation with lenders. They don’t work because the numbers don’t make any sense for anyone involved – either they are too low for the lenders or too high for the homeowners.

Many of these half-baked ideas seem designed as much as anything to give the Washington folks some press release opportunities – opportunities to say to the public, “See we’re doing something back here.” One big missing ingredient is all of these programs is any ability to sort out the deadbeats from the honest citizens who have fallen on hard times. The banks don’t have the time and staff to try to do that, so they have to treat everybody pretty much equally, which is to say pretty shabbily. There was a saying on the Jack’s Winning Words Blog recently that probably applies to these programs too - “The truth is that many people set rules to keep from making decisions.” (Coach K). People create programs for that reason, too.

So we have yet another program, this one with the cute acronym D4L, which is creating more false hope that something can be done by government to stem the tide of home losses during this downturn. I suppose that, if these programs each require that the government hire a few more people to administer them, we can look at them as a part of the jobs program that the administration is also pushing. They can call that J4E – Jobs for Everyone. Oh, stop me before I give them more cute ideas!

Monday, December 14, 2009

New FHA Condo rules kick in...

The new condo rules from the Federal Housing Administration (FHA) went into effect last week and they are already drawing fire. From an article by Ken Harney on the Realty Times Web site comes this report on some of the key features of the new rules -

Among the key make-or-break rules that condo marketers, buyers, lender and realty agents now need to know about are the following:

* FHA won't insure mortgages in buildings or complexes where less than 30 percent of the units haven't already been sold.

* At least 50 percent of the units in a project must be owner-occupied or sold to purchasers who intend to occupy them.
* No individual owner or investor can hold title to more than 10 percent of the units in the entire project.
* No more than 25 percent of the square footage of a condo project can be non-residential -- in other words, used for commercial purposes.
* No more than 50 percent of the units can have FHA insured financing on them. FHA doesn't want to “concentrate its risk” in any single project.
* No more than 15 percent of the units in a project can be 30 days or more delinquent on their monthly payments to the condo association.

Basically if a condo complex doesn’t meet these rules then it isn’t eligible for FHA financing and FHA-backed loans make up the bulk of the financing normally used these days. I believe that these rules are to apply only to true condo complexes and not the site condo developments that make up the bulk of Michigan’s new build developments. It would be an even bigger problem if these rules are applied to site-condo developments.

As it is, these rules probably will cause havoc in Michigan in regular condo complexes. With the economy in the dumpster there has been a rash of investor buys of condo unit. The investors normally rent out the units. There were also lots of live-work complexes built, which would seem to violate the 25% rule for commercial use of the complex space. There are also numerous stalled out condo complexes which may now prove to be very difficult to sell, because 30% or more of the complex may not have yet been sold. In my little town there is also a small, 5-unit luxury condo complex that almost certainly could violate 2-3 of these rules. In fact, in that complex, which has yet to sell a unit, the first buyer will take the complex over the 10% ownership by a single owner rule. How dumb is that?

At a time when FHA financing is the primary choice for properties under $300,000 (a range that includes most condo complexes) setting the 50% rule effectively discriminates against those who try to buy into the complex after the first half of the units are sold. That doesn’t seem fair, does it? Of course that might not happen anyway, since the FHA won’t insure the first 30% of the units to be sold. Maybe that is the Catch-22 in this crazy set of rules.

Saturday, December 12, 2009

If you don’t buy a house you’re either stupid or broke…

That headline over an eBusiness Week article sure wouldn’t win any awards in a “How to win friends and influence people” class, but it’s probably true (read the whole article here - . Now is the best time in decades to buy real estate, especially residential properties. Commercial real estate is entering the same value loss phase that residential has been through for the last few years, but investing there is not for the faint of heart.

The eBusiness Week article referenced all of the usual reasons to buy now – lowest prices in over a decade, continued low mortgage rates, the tax credit for some buyers. At least part of the article seemed to be pointed at buying real estate as an investment, perhaps buying up rental properties or homes that could be fixed up and flipped. While that’s certainly an option, it’s one that amateur investors shouldn’t try right now. Even many experienced investors have been burned by the speed and depth of value loss on some of their properties.

Like lots of other free investment advice, this article is worth every penny that you’ll pay to read it. One certainly doesn’t need to be called stupid for being leery of real estate investing, even now. If the house that you invest in is for yourself and if you intend to stay there for a long while and if you really can afford it; then, it is s good time to buy, likely never better in our lifetimes.

But, if you are broke, or at least lack enough savings to make a decent down payment or to weather through a few months of layoff or job loss; then it’s still a bad time to jump into a house, even if it is a “great deal.” People getting in over their heads is a key factor that got us into this mess in the first place. We need to learn from those past mistakes.

There is a herd mentality that can take over – an “everybody’s doing it so I must, too” thought process that can drive stupid behavior. The greed and fraud of the hucksters feed on that thought process and nurture it into action. So, just pause and think. Apply a little common sense to the situation. Sure it might look like a great deal and, boy, wouldn’t it be great to have a big house like that; but, is it the best thing for you to do right now? If the answer is still Yes; then, give me a call and I’ll help you find that great deal on a new house. They’re out there. If the answer is No; hold on to my contact information and give me a call when you are ready. I’ll still find you a great new home.

Wednesday, December 9, 2009

I am the news, says the talking head…

“Discourse on virtue and they pass you by in droves. Whistle and dance the shimmy and you’ve got yourself an audience.” (Diogenes) - from the Jack’s Winning Words Blog. Jack went on to opine that – “People are more interested in being entertained than they are in being enlightened.”

I often grumble about the content of today’s so-called “news” shows on TV these days. If you take the commercials out there only about 22-24 minutes of actual air time left for the news in each 1/2 hour segment. In today’s newscasts there seems to be about 8-10 minutes of content that could reasonably be called actual news and the rest is either self-promotions or what I call “fluff news” – feel good pieces designed to provide an up-beat segment at the end of the broadcast.

I suppose that television is and always was an entertainment medium; so it should come as no great surprise that the so-called news shows have tended towards becoming just another entertainment segment in the daily schedule. Still, I recall in the heydays of Walter Cronkite and David Brinkley and other old-timers of the news-casting world that the content seemed to be meatier – or at least it seems that way in my memories of them.

It is particularly annoying when the local news personalities (they aren’t really news reporters any more) spend the bulk of the newscast promoting some upcoming event that they are to be a part of or to host. Locally, I happen to watch WDIV, and it was “news” of such importance that it consumed quite a bit of the half hour recently when the news team “reported” on their plans for the Thanksgiving Day parade. The same happens for the annual Fourth of July Fireworks and other significantt events that the WDIV news crew is tapped to host. And heaven help us around the time for the Detroit Auto Show, when the “news” is mainly about the show and the WDIV crew even shifts to the Cobo Hall show venue, so that they can better promote their own coverage of the event.

All of the local network news personalities do the same thing, since their upcoming appearances are apparently of such newsworthiness that it deserves to displace other, real news of the day. A cyclone in India, a mass killing in some other state – never mind that, “I’m going to be hosting the parade TV show tomorrow.” Even the local weatherperson gets in on the act these days, since most have become more identified as personalities than as meteorologists.

I suppose that, with newspapers having basically died and TV having turned it’s news coverage into an entertainment segment; we are left with the Internet as our primary source for real news coverage. The danger there is that some much of what is passed off as Internet news coverage occurs on Blogs from around the world and that means that the coverage is subject to interpretation and coloring by the blogger (of course the same could be said about the so-called network news shows). In many closed societies that may be the only source available to the outside world.

So, we are left with “news” shows with all of the heft of Entertainment Tonight. Even the network newscasts can’t seem to sustain broadcasts with more than 3-4 stories of real hard news content before they provide their “featured stories” of the night – the feel-good pieces that might have been on segments of 20-20 or 60 Minutes in times past. Those stories are easier to produce ahead of time than trying to cover real, breaking news and that likely has something to do with it.

Perhaps the ultimate cross-over show would be a TV Reality show about a local station news team in which they actually go on the air and present the newscast of the day; but, they also show all of the back-stage fun and games that go into producing that half hour of entertainment. I watch very little TV these days, so I could get my entire TV fix for the day wrapped up in that one show. Think of the drama and the humor and the action and interplay of the characters; and, oh yeah, a little of that news stuff, too.

Tuesday, December 8, 2009

HAMP, HAFA and other stuff…

In the land of Government acronyms HAMP and HAFA loom large these days. Both are part of the government effort to help distressed homeowners. HAMP stands for Home Affordable Modification Program, which was the program introduced to encourage banks to work with distressed homeowners to modify their existing mortgages, rather than go through a foreclosure. HAMP has worked, but not as well as the lawmakers had hoped. Many people just couldn’t work out qa loan modification or couldn’t even meet the obligations of the modified loans; so, HAFA, the Home Affordable Foreclosure Alternatives Program was introduced You can read the entire government document about the HAFA program at - It’s a tough read.

The main reason that HAMP failed is that many lenders see it as to their advantage to just take the house back through foreclosure, rather than work with borrowers to modify the loans. There is also the issue of second mortgages on many homes, which makes the whole loan modification process more difficult. A secondary reason for the lack of success with HAMP is that the lenders just weren’t ramped up to deal with the processes involved in working through loan modifications and the incentives offered to do that didn’t make it worth their while.

HAFA was created to deal with the reality that HAMP is failing to have the impact that was expected. HAFA starts with the assumption that a HAMP effort was made and that it just didn’t work out, for a variety of reasons. So, HAFA tries to provide incentives to the lenders to do a short sale or a deed in lieu with the borrower, rather than go through the foreclosure process. The idea is that foreclosures have costs that may be avoided, if the lender allows the borrower to sell off the place at its current market value as payment for the debt or accepts the deed as payment in full for the debt. The idea with either avenue is that the borrower gets to walk away without any further obligation to the lender. It still impacts the borrowers credit score, since it will still be shown as less than full payment of the debt for credit purposes; however, it may have less impact on the homeowners credit than a full-blown foreclosure would.

So, will HAFA work any better than HAMP? One cannot be blamed for being skeptical. This is still a program that asks an otherwise greedy lender to do something in the favor of the delinquent borrower – not something that they have been inclined to do in the past. Certainly the lenders have a case that the borrower should have done a better job of figuring out what he/she could afford before they got themselves into the loan. Many times that is likely true; however, in these tough economic times, with high unemployment, it is easy to see how many two-income families could have gotten themselves in over their heads, if one income is lost or reduced significantly. What the lenders really lacked (and still lack) is the staff to do the work to evaluate each case on its own merits.

One reason that HAFA might have a hard time being successful is that it introduces even more paperwork for the homeowners and the lenders to have to deal with to use the process. The Supplemental Directive from the government that introduces and explains HAFA is 46 pages long, if that gives you any idea how complex and lengthy the process may be. Will it work? We shall see. I’ll report back here in a few months. HAFA really doesn’t kick off until April of 2010, so there’s time for more modifications before then.

Friday, December 4, 2009

Is it a good time to sell?

My last post here talked about the continuing decline in property values in SE Michigan – down an average of 16% in my area year-over-year. That is the third consecutive year where we’ve had property value declines. Properties in the area are now 30-40% below their highs (which many put in the 2004-5 calendar years). So, given the decline in values; how can I even pose the question, “Is it a good time to sell?”

The answer to that question is less complex than it might seem. If you take current value out of the picture and look just at the other market factors that might impact a sale, the answer is yes, it’s a good time to sell. Why do I say that?

First, we have the extended first-time homebuyer tax credit, which now is expanded to include people who are current homeowners. That means that a segment of the market that has been effectively frozen in place – the move-up buyers making their first jump up the real estate value chain – now have incentive to do something. These will normally be people who have a starter home now and want to make the leap to that next home. They have an incentive from this tax break to put their current homes on the market and start looking for a bigger home. The new May 2010 deadline also adds a sense of urgency for potential homebuyers. There are tons of first-time buyers out in the market.

The second factor is that we are seeing and hearing more and more reports that we are at or near the bottom of this “great recession.” Economists are providing encouraging reports on most economic sectors that support that thought. Even in the housing industry there is positive news – home sales up for several quarters in a row. The new home building side of the business is still stuck in neutral, but rising sales of existing homes points to a recovery. We still have an unemployment issue to get over (a huge issue here in Michigan); however, consumer confidence seems to be making a comeback.

Third, there may also be some “pent-up demand” at work in the market, especially in the mid to upper end of the market. Lots of people backed off of plans to buy, whether it be a move up or even downsizing for retirement, because they wanted to wait and see what would happen in the market. Many wanted to wait until prices dropped. Now they are seeing and hearing encouraging news about the economy in general and seeing stories about real estate sales going up. There is a natural tendency not to want to miss the opportunity. In this case the opportunity is there to get the homes that they want at or near the bottom of the market. Many economists are saying that real estate prices should stabilize in 2010 and will start back up shortly after that. People who have waited may end up with a bad case of the “could, woulda, shoulda’s” if they don’t act soon. There is a “don’t miss the boat” mentality on the buyer side that is helping drive traffic through listed homes.

But, all of that being said; how do we deal with the loss of value issue? The good news, if it can be called that, is that most of the shock is out of the system. People have been bludgeoned with the news stories of how bad things are and of the losses that all have suffered. There is more of a collective acceptance now of what has happened. Even the older homeowners who held out the longest against this truth have now acquiesced. Nobody likes what has happened, but just about everybody now acknowledges that it did happen to them, as well as others – their home is worth less today than it was 4-5 years ago. Most still have no real idea of the current worth of their homes, so that detail work remains; however, there is more resignation to the inevitable. The thoughts of waiting out the storm have also receded’ since there is growing consensus that it may take a decade or more to recoup the lost value, once things turn around.

The key to getting people moving on the seller side may be as simple as asking “do you want to sell?” Not do you have to sell; but rather, do you want to sell? The people that have to sell will continue to list as short sales or go into foreclosure. The people who may want to sell, but who have been just sitting on the sidelines, waiting for some reason or sign that it’s time to act, need to have this conversation with a Realtor. Sometimes it just takes that little push, that call to action, to overcome the inertia that is in the system. They should talk to their Realtor about why it is a good time to go ahead with their life plans. There is certainly also a case to be made that they will make up some or all of their ”loss”, if their plans include buying another home, even if they are downsizing.

So, is it a good time to sell? It sure is. This is the best that it’s been in several years for sellers. Buyers are out and have incentives to buy before summer 2010. What are your potential sellers waiting for?

Thursday, December 3, 2009

It didn’t magically skip over your house…

The local Spinal Column Newspaper had an article in this week’s issue that was all about the dramatic drop in property assessments in 2009 in our little corner of the Michigan market. In the article it put the overall average for the communities that it was focused upon at about 16%, with the high at a little above 23% and the low at 12.8%. The table below shows the average percentage declines for the various communities that the article covered.

City/Village/TWP...................... 2009 % decline

Orchard Lake................................... 15.35
Wixom............................................... 15.53
Wolverine Lake................................ 14.22
Waterford Twp................................. 23.05
Walled Lake...................................... 16.93
Commerce Twp................................ 12.80
West Bloomfield Twp....................... 18.20
Milford Twp...................................... 18.00
White Lake Twp............................... 20.63
Highland Twp.................................... 13.90

Overall for area................................. 16.00

Nowhere in the article was there any mention of there being specific neighborhoods or homes that were somehow miraculously passed over in these declines. So, one may assume that if you live in these areas your home was impacted at or near the level that was reported. Snce these are the averages, they give a good idea of where the assessors are in establishing neighborhood values.

I continue to run into homeowners who are somehow convinced that their home was spared – that somehow the poor Joes down the block got hit with value losses, but that their home is still at the value that they had it appraised at 3-4 years ago, when they last refinanced. It just ain’t so, folks. These numbers represent only the 2008-2009 assessed value declines. The drop in home values is now in it’s third year, with each year at or near double digit declines.

This is why I tell people who ask me for Comparative Market Analyses that their homes have dropped anywhere from 30-40% in assessed value (and market value) over that period (more in some communities and over 50% in Detroit itself). If anything, the assessors lagged the drop in market value by at least a year, as communities tried stubbornly to hold their assessed values up. Now they are catching up (or down) to the market.

The only good news from the article was when it pointed out that due to these drops in the assessed State Equalized Value (SEV) most Michigan homeowners are now in sync between their Taxable Value and the SEV. Due to an anomaly in Michigan’s property tax laws (The Headlee Amendment) it was possible that one’s home could appreciate rapidly, in terms of its assessed value, but the Headlee Amendment limited the amount of annual rise in the value that could be taxed to 5% or the rate of inflation, whichever was less.

During the real estate bubble run up many homes had big jumps in their SEV’s but were thankfully only taxed on amounts that were limited to a 5% growth per year – their Taxable Values. When the bubble initially burst and SEVs stabilized or started down, the Taxable Value on many homes still had lots of room to grow, before it was re-synced with the SEV; so it was possible that your SEV could be dropping while your Taxable Value and your taxes were still going up.

Now those two numbers have re-synced and values as well as taxes will rise or fall with the rise or fall in the rate of inflation. This year (for next year’s taxes) that means they fell by the percentages listed above. So, the good news, if you’re a homeowner, is that your taxes are going down. The bad news is that your house is worth less than it was a few years ago.

Tuesday, December 1, 2009

Believe in yourself first...

Here’s another great quote from the Jack’s Winning Words Blog - “Never think that you’re not good enough. My belief is that in life people will take you at your own reckoning.” (Anthony Trollope). How true. Have you every run into a person who is always down on himself or herself? How does that make you feel about them? How would you feel if your doctor started each visit with the statement, “I’m not a very good doctor, but I’ll try to see if I can figure out what’s wrong with you.” The same can be said about Realtors. If you don’t believe that you are a good Realtor your prospects and maybe your clients will see that and find someone who is good at it.

Many agents who are just starting out in real estate get hung up comparing themselves with successful long-time Realtors in their office or community and see themselves as “not good enough.” Baloney! The newbie has access to all of the same tools and programs as the experienced agent. Many times the newer agent has been trained on and has embraced the latest tools and technologies, while the old hands in the office are stuck in yesterday and still doing it “the old-school way.” There was certainly nothing wrong with the old school ways, when the customers were buying in the old school manner. The customers have moved on and so should the Realtors who serve them. Old timers in the office have the edge in experience, but not in what they could be doing to market a property. If the company that the new agent is with is doing things right to support them, they will have a mentor or some other experienced agents to help them with their first few deals.

So, go into every listing appointment or meeting with prospective buyers confident that your willingness to work hard and the backing of your company will see you through any situation. Don’t try to hide the fact that you are new, but there’s no real need to apologize for that fact either. Just lay out what you are planning to do market the property or to find the clients a new home – what tolls and programs your company offers that you’ll be leveraging on their behalf. Present your plan with the belief and confidence that you will be successful. Let your self-confidence reassure the clients that they have made the right choice of agents and of companies.

Of course, all of this advice would apply to the experienced agents, too; assuming that experience hasn’t blinded those agents to the constant need to learn, to re-invent themselves, to move on from the old-school ways and keep up with the needs and desires of the current customer base. I’m reminded of another old saying that I’ve heard occasionally from some of the old-timers when referring to a newbie – “I’ve forgotten more about real estate than they’ll ever know.” Perhaps that is true and perhaps what they’ve really forgotten is how to listen to and respond to the needs of the customers.