Ask and You Shall Receive

I recently asked Joe Rollins, CPA, CFP, and the "Master of My Financial Well-Being", to contribute a piece (or better yet a series) for my blog on the general malaise of the real estate markets and just how did he intend to keep me and my husband in the lifestyle to which we were accustomed. Instead of just bluntly telling me to figure it out for myself (he is after all, brutally blunt) and go get a real job (he says that 54 is still too young to be a Wal-Mart greeter and I'm flattered?) he sends me this microcosm of brilliance on estate planning. He must be busy. I think this falls under the category of "other important stuff".

Frank was a single guy living at home with his father and working in the family business. When he found out he was going to inherit a fortune when his sickly father died, he decided he needed a wife with which to share his fortune.

One evening at an investment meeting he spotted the most beautiful woman he had ever seen. Her natural beauty took his breath away. "I may look like just an ordinary man," he said to her, "but in just a few years, my father will die, and I'll inherit 20 million dollars."

Impressed, the woman obtained his business card and three days later, she became Frank's stepmother.

Women are so much better at estate planning than men.

I'm still hoping for a "real" editorial from Joe, although it is high season for he and his staff. I've got time. Stay tuned. (It's not that I feel slighted that he wrote a great piece for my husband's company blog, Airline Merger-Mania: Investment Shake-Out - Boom or Bust, including an entertaining nostalgic look back at the easy days of air travel.)

Joe Rollins is the President and CEO of Rollins Financial Counseling, Inc. and Rollins and Associates, P.C., Atlanta, GA., with assets currently under management in excess of $200 million (unfortunately, they are not all mine). You can email Joe at jrollins@rollinsfinancial.com.

Truth in Advertising - NAR Teeters on the Edge

The National Association of Realtors, the largest U.S. trade association, has 1.3 million members (of which I am one) breathing down their necks (of which I am not) to do something to save the sinking ship! Saving their very sizeable membership (which will probably be surprisingly lighter by the end of ’08) is not a job for the timid – which the NAR has never been. Rather another phrase comes to mind when I consider the “Voice of Real Estate”….”Often in error, never in doubt.”

When the NAR set about to shake things up for their members, set the record straight so to speak, they went at it with a $40 million dollar “Public Awareness Campaign” that could be called “Trust Me – Buy Now.”

The Mission: To right the wrongs perpetrated by a negative press that suggests the current housing market stinks and that the volatile nature of downward spiraling prices might just make it a less than an ideal time to buy a house. The NAR wants to remove the “psychological block” that the negative media has inspired declaring that home-buying "opportunities have never been better." Isn’t this just another example of unbridled and unfounded optimism?

The new NAR campaign is surprising to me because it focuses on the financial investment aspects of purchasing. Of course the largest trade association has plenty of lawyers and they stop way short of security infractions on investment opportunities. Their argument is based on historical real estate data, part of which is based on an overheated market and in the face of cold hard market facts, seems irresponsible. If someone needs a house, wants a house, and buys with eyes wide open that is one thing. But to suggest that now is a financially sound time to do so…I don’t think so. NEI – Not enough information on just where the bottom may be.

The following video is one of the new NAR ads for TV entitled "Building Wealth."



Bob Garfield of Advertising Age really got his ire up over the NAR’s new campaign and lets loose with both barrels clearly demonstrating that real estate values and Realtors are subjects fraught with emotion:

“The campaign, in other words, is a perfect miniature of the inherent conflict of interest Realtors wallow in, like pigs in the sty, all the time. They have no incentive to perform due diligence for buyers. They don't even have incentive to protect their clients, the sellers. Their only interest is in closing the sale. Seven percent of $500,000 is $35,000, no matter who else takes a bath.

“That's why they steer buyers to their own listings. That's why they have cozy understandings with appraisers and mortgage brokers. That's why they sniff the cat odor and declare it a piece of lint in the furnace. They are now and always have been salesmen posing as advisers. Please note that your CPA does not have a magnetized sign on his car door.”

Bob, how do you really feel? Maybe a little off Ad Age subject? Maybe a little personal? Ouch!

Bob’s right about one thing…my CPA does not have a magnetized sign on his car door.

Perhaps we should submit NAR’s president, Dick Gaylord, for the Anheiser Bush’s Real Men of Distinction Award for their $40 million ad campaign to convince Americans that NOW is the time to buy a house.

The Levers Effecting the Mortgage Markets

I will leave the explanations of the mortgage industry to the experts and simply pass along the best explanations as I find them.

Dan Green posted on his blog site, The Mortgage Report, this very simple but excellent visual and auditory rendering of the state of affairs in the mortgage industry.

Dan says, "I can't promise that this 5-minute video won't bore you. But, I can promise that it will give you terrific insight into mortgage lending and how guidelines are changing." He's right.

As it applies to the housing industry, all the people outside the core Dan describes have the option to sell their house - if they can - to get out of an undesireable mortgage. But they will not be able to buy another house because guideline changes have rendered them an "outsider". The pool of available buyers continues to shrink. Take a look:

Mortgage Video: Why It Matters When Mortgage Guidelines Change

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I will follow this up with a recent post , Fed Cut: What It Means For Your Mortgage, by Diana Olick with Realty Check, of CNBC.

Then check out the CNBC video interview and debate with James Lockhart, Director of the Office of Federal Housing Enterprise Oversight (OFHEO) on the comprehensive reform of Government Sponsored Entities (GSE), Fannie Mae and Freddie Mac, and the talk of temporary increases in conforming loan limit as a means to provide mortgage relief.

Homeowner Sues Real Estate Agent - Somebody's Got To Pay!

This will be one to watch. Closely.

"Marty Ummel feels she paid too much for her house." And it's not her fault. It's the real estate agent's fault, and she wants him to pay!

The Ummels, a California couple, are suing their real estate agent, Mike Little (Remax) because they discovered two houses in their 26-home community that sold for "substantially less" than the price they paid in 2005. The difference was $105,000 to $175,000 less on $1 million-plus houses in Carlsbad outside San Diego. The Ummels say that the real estate agent should have, but did not, share this information.

The following video is from the Today Show. I take my hat off to NBC because they had an attorney sharing the couch to balance the story. The attorney did not think the Ummel's lawsuit had merit. “I think the standard of proof will be that this agent willfully, deliberately and with malicious intent withheld this information."

The woman is obviously convinced she has been wronged and is pursuing her case with the tenancity of a bulldog.

The lawsuit is for $105,000 plus legal fees. Legal fees at this time were quoted as $75,000 and is scheduled to go to trail in March. Legal fees to date are more than Ms. Ummel's annual salary as a fund-raiser for the California State University.

“I do not think I’m obsessive-compulsive, but I am 114 pounds of absolute perseverance,” Ms. Ummel said. You decide: she picketed the offices of the offending agent on weekends for an entire year. This determind nature certainly speaks well for her success as a fund-raiser. Her husband has obviously learned to say "Yes dear!"



The National Association of Realtors could find no other cases within the last five years that were based solely on issues of valuation. This case could set new precedents.

The state of the real estate market could draw more fire from an angry mob of homeowners who face receeding real estate valuations. We may be hearing more often, "Somebody's got to pay!"

From a New York Times article:

“If you put someone into a property at the top of the market, you look really bad if it goes down,” said K. P. Dean Harper, a real estate lawyer in Walnut Creek, Calif. “There are a lot of letters going out from lawyers to real estate agents saying, ‘My client would never have purchased if you had properly evaluated the market conditions and the value of the property.’ ”

Maybe it's time to invest in that crystal ball...no matter what the cost.

A Pragmatic Lament - on the Real Estate Market, the Stock Market, and Life in General

That’s right: it’s not pretty to find a real estate consultant with time on her hands, stock market looser, and amateur philosopher in one confusing, messy package. But that’s me in the week of January – what day is it and does it really matter?

This week I decided to change my blog description from “Commentaries on Real Estate Sales and Marketing” to “Commentaries on Real Estate and other important stuff” so I would have something to write about. Like important stuff. I have to stay out of trouble, after all, and God knows trouble lurks around every corner in all the most likely places.

I got an email this morning from a guy who wanted to get together to discuss the prospects of real estate development in Brazil and the ramifications this could have on our prospective incomes. After recently spending about 100 hours as a part of a five-member consulting team for an Indian golf course developer outside of Mumbai, I’m a little skeptical of these pie-in-the-sky schemes. (I should have heeded my friend at India's Housing Bubble blog.) Of course things could be worse…the Indian project could resurface and I might actually have to go there for a couple of weeks! Sounds adventurous but something I would never have considered a few years ago. First-class vacation, yes…India as a hired gun, absolutely not the A-list. So would starting a day with “Bom dia” in Rio be better? Duhhh?

But I digress. Back to my pragmatic lament. Regardless of all the news I read on the various markets that are in the tanker (or maybe because of), I have a deep unsettling feeling. When the real estate and stock markets are performing in a less than stellar fashion – at the same time - I start feeling the overwhelming uncertainty of the R-factor: receding asset values.

At a time like this it is impossible to buy or sell anything – after all how can you? If you have no idea the worth of your real estate or stocks how can you buy or sell? It seems a good time to pack up and head to a deserted island and bask in the sun until the world rights itself. The only guilty caveat here is “turning tail” and running, leaving the world as we know it in Bernanke’s hands. Oh, whatever.

Gone are the real estate industry blogs espousing the sage words of wisdom about how to thrive in this down market. Gone are the “back to basics” lectures and mantras. Things have been reduced to the lowest common denominator – there are just so few buyers. Real estate industry bloggers – vs. bloggers for listings – have resorted to the subject of the preponderance of on-line real estate business models. Now there is no lack of chatter for their start-ups and failures. Everybody’s doing it – that is starting them up, closing them down, and talking about it.

To fill out my schedule of late, I have been an outstanding performer on the lunch and dinner circuit. Friday I’m having lunch with a real estate development/environmental attorney and I’m sure we’ll rehash the good old days when we spent three years working on zoning and entitlements for a private waste-water treatment plant for a large golf course development. Oh, those were the giddy days of real estate!

Please feel free to pass along any “important stuff” that crosses your desk. As always, I appreciate the loyalty of my three readers and will continue to attempt to elucidate, entertain, and inform.

Thanks for listening…

Distressed Asset Investors: Deliver Us From Evil. Devils or Angels in the Age of the Bail-Out?

“Distressed asset investors” is just too boring a term to pin to a headline if you want to sell newspapers. “Banks’ Bad Loans Attract Vultures” is much more likely to get your attention – as it did mine when I saw an article in the Atlanta Business Chronicle.

The visual associations stir the imagination: “Distressed asset investors – commonly called ‘vulture investors’ by bankers because they hover around banks and companies with problem assets – are returning after a decade of continuous economic growth.”

The ABC continues by pointing out that this species last came to prominence in the early 1990s. What in the world have these poor birds been feeding on for the last 17 years? They’ve got to be starved by now and ready for some real grub. “Let’s eat!”

I’m not sure whether the insulting nod goes to the vulture or to the rescuing investors, but I am pretty sure that both are performing, each in their own small way, a very necessary service to the world. The negative connotation comes from our cultural taboo that someone should profit from another’s misfortune. But to a bank awash in bad real estate debt these investors look more like angels of mercy.

There are a growing number of investment funds being raised for the purpose of buying problem assets, like developed residential lots, at hugely discounted rates and holding them until the market turns around. For the home builders and banks, thank God that these investors are stepping up to the plate.

Distressed asset investors looking to capitalize will find no shortage of opportunity. For now most speculation is in residential real estate but that could be changing with hair-line cracks appearing in some commercial real estate markets. Opportunities on the horizon for acquiring distressed assets also include an eye on commercial companies that may be divesting themselves of burdensome assets if the economy is further stressed in 2008, as many fear.

According to the ABC the vultures are generally offering to buy bad loans for about half their original worth and sometimes just half of what’s on the books.

I guess I’m kind of taking this personally since my real estate lineage began with a flock of vultures. Of course I didn’t know in 1976 that I was taking up with a bunch of scavengers; being naïve and in my 20’s right out of college, I thought that I had a very respectable job (maybe even a career) in the exciting work-out world of distressed real estate.

I guess I didn’t hear all the whispers behind my back, “Oh, they’re such a bunch of *#*#!* vultures…” I guess it could have been worse. At the time I was the junior member of a small company doing massive work-outs settling REIT debt with their investing banks. Ron Glass was part of that group and he has returned to his roots as the current “King of the Work-Out ”. He is a master of his art and when we spoke last week his concern for the overall health of banks’ real estate loan portfolios was appropriately pessimistic.

Well, our real estate world has been rocked but where there is crisis, there is also opportunity, as long as what you don’t know doesn’t kill you. Let’s be careful out there.

Real Estate - The Message is Survival, Pure and Simple

I want to write a political blog today because it would be just too much fun. Or a blog about the new tech toys from the Las Vegas show. But…real estate is my game and so I will not defect. But I have to tell you (like you didn’t already know it) there is a dearth of new real estate material out there to blog about. Even the majors, WSJ, NYT, MSNBC, AP, Reuters, are all dragging the same tired bad news through the pages and air waves of today’s press coverage.

I really don’t want to whine, but how in the world can I demonstrate respect for my three readers and continue to drop at your doorstep, one more time, the pearls-of-wisdom from the National Association of Realtors (the analogy is the family dog who proudly presents the dead crow to the dinner table). As evidence of their stupidity and complete disregard for reality, I present as Exhibit A, the last words of 2007 from Lawrence Yun, chief economist for the NAR:

"It’s difficult to say affirmatively whether or not we hit the bottom, but I can say most of the declines in existing home sales have likely already occurred and any further decline from this point onwards will be more minimal and at the same time we could see some unleashing of pent-up demand, early demand in 2008."

WRONG prediction for the third year in a row! Today they revised their projections down for the umpteenth time.

Let’s get real. Whether you are a developer, builder, real estate agent, or buyer, seller, or status-quo homeowner, the object should be to be standing when we get to the other side of this real estate market. The message is to survive, pure and simple.

We’re now way beyond lessons from previous downturns. You will no longer hear from me what we did to climb out of the market when interest rates were up to 19%. How can it be worse than current conditions?

The high interest rates of the late 70’s and early 80’s kept builders from building to the level of today’s inventory and those high rates kept all but the very well-heeled from buying. When the market recovered from that scenario there was a backlog of able buyers. There were not the homeless foreclosure herds littering the landscape. The subprime lending and resulting foreclosures has removed those potential buyers from the market place for at least seven years. What a legacy.

For all the lessons of real estate history, I think we are in somewhat uncharted territory. We won’t know we’ve hit the bottom until we’re climbing out, no matter how many cheerleaders are chanting otherwise. I will probably be stoned for this opinion, but I just can’t see how a drop in interest rates could have any lasting positive effect at this point.

Let’s hope Countrywide shores up. Denials seem to mean nothing these days.

Subprime is the word of the year? Now what does that tell you?