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Don’t Believe Everything You Hear On The Radio

Even Those Financial Gurus You Know And Trust Can Be Wrong

This weekend, I caught part of a nationally syndicated financial talk show on the radio. While I appreciate and agree with much of what the host usually has to say – this was one of those times that I found myself yelling at the radio.

A home buyer called into the program with an issue where she felt that she was going to lose her earnest money because her 21-day financing contingency had expired – and she was unable to get a mortgage.

The host thought the 21-day financing contingency was too short… and told the caller that she should have had an attorney negotiate the terms of the contract – and at this point in time, she should renegotiate the terms of the financing contingency.

Well I’ve got some news for you, sunshine.

Unless your attorney is offering to pay top dollar for one of my listings – you won’t see a financing contingency from my clients that exceeds 21 days… and it will be highly unlikely that you will see my clients sign away their liquidated damages by extending that contingency.

Years ago, it was common to see financing contingencies that continued right up until the closing date… but that was then – and this is now. Back then, if the buyer could fog a mirror – they could get bought. Not so these days.

As a consultant to my home selling clients, I find it my duty to protect their interests to the best of my ability… and that includes negotiating the financing contingency in such a way as to provide liquidated damages of having a property removed from the market by a buyer who can not complete the transaction.

Just because you hire an attorney to negotiate on your behalf doesn’t mean that the other team is going to lay down and let you run them over.

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    Bidding A Tearful Goodbye To An Old Friend

    Sometimes Life’s End Brings Meaning To Life

    If you don’t like mushy posts – now is a good time to move along.

    Back in the Spring of 1998, my sister was involved in some sort of charity work that prompted her to call me up one day and say, “I’ve found a cat for you!”

    “What kind of Siamese cat is it?” I replied.

    “Well… it’s not a Siamese cat – but she’s a really cool cat,” she shot back.

    “Sis, you know I’m a cat snob…”

    “Doug, the cat’s owner is on his deathbed. His family can’t take the cat. He has attended to all of his affairs – and his cat is the last detail he needs to attend to. She’s a really cool cat!” my sister insisted.

    So I agreed to take on this full-grown female feline.

    When she arrived, my sister couldn’t remember her name – but that didn’t matter. She was big and fat and colored black and white like a Gateway computer box… so I named her Gateway.

    I took her to the vet to make sure she was okay, and the vet told me that she thought she was five or six years old at that time – and in good health… other than being rather heavy.

    For the first few months, she kept to herself – often hiding under my end tables. When I would try to pick her up, she would hiss at me and act like she would bite me… so I gave her plenty of space – after all, I didn’t know how she had been treated in the past.

    I remember the first time I let her go outside… a neighbor was walking his Great Dane, and Gateway ran up to that dog sideways – trying to look as big and menacing as she possibly could – with her fur standing on end. It was truly comical, as she had no claws – and that dog could’ve made an hors d’ oeuvre out of her.

    Over the years, Gateway and I became the closest of friends. She asked for very little, but gave in ways that are hard to measure. She never got up on the counters or knocked anything off of the tables. She was truly the ideal pet. I have left her for as long as ten days without any kind of a mishap – try that with a dog.

    Kitty was a talker – but not a yakker. She would stand patiently at the door to go out… but would only speak to you if spoken to. When you let her out or let her back in, she would always thank you, as well. People were always amazed at how truly courteous Gateway was… and they found her combination purr and meow beyond adorable.

    Two weeks ago, I moved her over to my girlfriends house as I would be moving in the following week. My girlfriend has known and loved Gateway for the last eleven years… but it has been several years since she subjected her home to the “furball”.

    The first thing that I noticed was that Gateway was incredibly happy with the move. She loved my girlfriend – and my girlfriend let her sleep in bed with her… which Kitty loved, as I stopped letting her in the bedroom years ago because of all of the fur she would leave everywhere. By the time I moved in, I could see that both my girlfriend and Kitty were as happy together as I’ve seen either one of them in a long time.

    One of the peculiar things that Gateway would do is stand guard when one of us went to the bathroom. I know – that’s sounds strange… but she would park in the doorway facing away from you – and making sure no one bothered you while you took care of your business. She felt like it was her job, I guess.

    Since my girlfriend has a hearing impairment, Kitty would let her  know that someone was at the door. I know that sounds as strange as the bathroom guard duty – but like I said… this was a special kitty.

    On Wednesday, I remember talking to my girlfriend about how happy Gateway had been… purring all the time and obviously happy that we were letting her sleep on the bed with us – and my girlfriend replied that she was really happy having her, as she was bringing more joy to her than she could ever expect.

    On Thursday, we were out on the deck enjoying the beautiful weather – and Kitty spent a great deal of the day out there, as well. She loved the outdoors. My girlfriend thought a flea had jumped on her, so I brought Kitty in and gave her a bath – then brought her back out on the deck so she could dry off. Unlike most cats, Gateway was very good about taking baths – and although it was a little early, I fed her some wet food AND some of my girlfriend’s roasted chicken she had made the night before as a little treat for the hassle of having to lick herself all over to put those millions of hairs back into place.

    While my girlfriend was relaxing on the couch, I headed downstairs to my office to get some work done. While I was working, Gateway came and rubbed up against my legs – as she did all the time – then laid down under my desk – which she also did all the time. I paid no attention to her until I heard her gasp for air.

    At first, I thought she might be struggling to cough up a hairball – but she was laying on her side staring forward with her eyes wide open. I ran around to the other side of the desk and picked  her up and raced upstairs with her – but it was too late. My attempts to resuscitate her were unsuccessful, as her heart had stopped.

    I held her in my arms for at least a  half an hour while my girlfriend and I wept and told her what a good kitty she was and how much we were going to miss her.

    So I wrapped her up in a fluffy towel and gently laid her in a heavy cardboard box to spend the night on the patio until the next morning when I could find a spot to give her a proper burial. In the shade of a River Birch on the high bank of the creek running on the back of the property, I dug her grave and laid my furry friend to rest. This Fall, I will find a nice Dogwood or something similar to plant on top of her grave to ensure that she won’t be disturbed in the future.

    In cat years, Gateway was somewhere between 80 and 88 human years. Over the last year, I had noticed that she was becoming less active – and she was having a hard time jumping up on the couch to sit with me… but her demeanor never changed. She never complained about anything… well, other than not getting wet food at dinnertime. In my eyes, she was still the young, feisty kitty that would take on a Great Dane.

    I am so very thankful that she was able to spend her last few weeks with my girlfriend and me; that her last day was one of her best – in spite of the bath she tolerated so well; and that she sought me out to say goodbye before she passed from this world. I will miss her like words can not describe.

    Gateway taught me how not to be a cat snob.

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    A Governmental Takeover Of Real Estate Brokerages?

    An Extrapolation Of Epic Government Involvement

    At this moment, the President and Democrats in both Houses of Congress are finalizing a health care reform bill that not only no one understands - it won’t  even be read by any of them prior to its passage.

    The stated reason for this takeover is the spiraling cost of health care in this country. But health care costs are not the single largest expense that Americans pay for their existence. The single largest expense is housing.

    While a majority of Americans are satisfied with their health care, the Democrats are in high gear to eliminate the health care system we currently enjoy – ostensibly to implement a system like Canada, the United Kingdom – or even Massachusetts. Many of these Americans are standing up against the Democrats in town hall meetings across the country.

    But how many of  these Americans would stand up if the government chose to take over the real estate industry? After all, doctors and nurses are ranked in the top ten most prestigious careers in this country – while real estate agents and brokers are at the bottom of the list.

    Think about it – an argument to nationalize housing could easily be more acceptable than the argument to nationalize health care. What would the cost of housing be if you could eliminate profit from the equation?

    The largest single expense when selling a home is the brokerage fee, followed by the costs to obtain a  mortgage. What if these functions were performed by government employees with no profit motive?

    Far fetched? The two largest purchases that most Americans make are houses and cars. And we all know who is now making the cars.

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    Banks Have All The Money – Money Is The Root Of All Evil – Therefore Banks Are Evil

    Another “Don’t Ya Just Love Working For Free” Story

    In the minefield of residential real estate lies the ubiquitous short sale. Fundamentally, all  short sales have a commonality – the market value of the property does not exceed the disposition costs plus mortgage liens and other encumbrances. A short sale requires a successful negotiation with the lien holders – and the operative word here, boys and girls, is successful.

    It was the summer of 2007, I found a nice big lake lot for my clients. After many years struggling to advance in their careers, they finally reached the point where they could build their dream home. Their kids were now adults, and it was time for them to begin to enjoy the fruits of their labor.

    With a builder in mind, they set out to acquire this lot and begin construction on a 3500 sf 5 bedroom 4.5 bath home. The bank had many requirements, including a set of plans and specifications, as well as a variety of documents from the builder.

    The bank – that shall remain unnamed – would only finance 70% of the appraised estimated value of the completed property. Not an uncommon practice – as it gave the bank a level of protection in the event that the future wouldn’t turn out as planned… and we all now know what happened to the residential real estate market since the summer of 2007.

    The house was slated to be completed in April of 2008 – a goal that seemed more than attainable. Eight months to build a  home like this would be considered child’s play for any builder. Unfortunately for all the parties involved – that wasn’t the case.

    The builder was having problems with his other projects – so much so that he was having great difficulty even getting started on this project. The owners threatened to pull  him off of the project if he didn’t get started – so after several months with nothing taking place on site, the construction began.

    Although the house was making progress – and the builder assured the owners that the house would  be complete by the one-year construction loan deadline – he did not deliver as promised. The house was still in need of almost all of the interior completion – as well as the exterior brick work, paving, deck construction, final fill and grading, and landscaping.

    The owners talked to the bank about their displeasure with their builder, and asked for an extension on their construction loan. Keep in mind that the owners had been making monthly payments on the balance that had been spent thus far – so it’s not like the bank was losing ANY money on the slow construction.

    The bank would only give the owners a 30-day extension – at an additional cost of $2000. That’s $2000 in addition to the interest payment on the construction loan balance. The following month, the owners had to repeat this procedure.

    At this point, the construction had nearly stopped. The builder had plenty of excuses and apologies – but apparently no funds to continue the project. The owners had no choice but to seek out a new general contractor.

    All the contractors that were interviewed brought the owners bids that were higher than the remaining funds that were left in the construction budget to finish the job. Meanwhile, the original builder kept saying that if given the chance, he could finish the job.

    And the bank would not budge on modifying the loan. No way – no how.

    Just about the time that the owners had to pay another $2000 penalty to the bank for another 30-day extension – the builder takes a dirt nap. At only 40 years old – skinny as a rail – married with two young children – never smoked or drank – the most unlikely person in this story fails to wake up one morning in October.

    Of course, everyone is shocked. No one imagined that a man of his age and physical condition would die of a heart attack. And although the owners are disturbed at his performance in the construction of their home, they attend his funeral along with his friends and family.

    At this point, the owners approached the bank – yet again – to explain that the builder had passed, in the hope that they will finally modify their loan.

    Request denied.

    So they raided their savings to continue the construction while giving the builder’s widow a few weeks to recover from the shock of her husband’s untimely demise. During the following few weeks, the cabinets; brick front; and driveway were installed.

    The builder’s widow was unable to find any paperwork regarding the construction. Nada. Zip.  Perhaps the builder had a hiding place no one knew about. At that point, the owners approached the bank for a copy of the performance bond. After all, that’s what a performance bond is for – to ensure the completion of a project.

    But the bank reported that they could find no record of a performance bond.

    Oh, they required them on their construction loans before this one… and they’ve required them on their construction loans since this one – but on this particular loan, it was apparently not required.

    So there were the owners – with no performance bond, and an incomplete house with not enough money left to finish it. Their savings were drained, and their bank wouldn’t have any part of providing a solution – in fact, the bank still wanted their monthly interest payments AND $2000 monthly deadline extension penalty.

    Did I mention that the owners were also putting their daughter through college?

    So the owners began discussions with some builders and hard-money lenders in a final attempt to finish this project… all while the real estate market had been in a free fall. The builders discover many items that must be repaired or replaced, as they don’t meet code. For example, the electrical panel – which is full – did not have the circuits run for the stove, heating or air conditioning.

    It became painfully obvious that without a loan modification, this house would not be completed – well, not by these owners, at least. And the bank still wouldn’t have anything to do with a loan mod.

    Can anybody say “Short Sale”?

    So I listed the property for sale as a potential short sale. I showed it several times – as did other agents, and encouraged several offers – but the best one that crossed my desk was for $125K. So I called the bank… only to discover that the owners had filed for bankruptcy protection.

    Needless to say, bankruptcy tends to put a damper on things.

    So for the next couple of months, I had to disclose the situation to potential buyers and their agents… and along with the economy, the market continued to sink as did the interest in this property.

    Finally, we were made aware that the property had been discharged from the bankruptcy – and we could attempt a short sale. I communicated with the bank of my intention to lower the list price to $175K – along with my doubt that we’d ever see a offer that high.

    And as hoped, the interest and activity kicked up.

    Unbeknowsnt to me, the bank had started foreclosure proceedings… but I felt I could get an acceptable offer in the few weeks before the foreclosure date.

    In the beginning, the offers came in ranging from $83K to $125K… so I began working a multiple offer scenario.  In the end, I was able to get an offer for $177K – all cash – to close in two weeks.

    And once again, the bank never failed to disappoint.

    The day was Tuesday -  and the  bank wanted us to close it that Friday – two business days ahead of the scheduled foreclosure date. Now I know you’ve heard stories about all these banks that drag their proverbial feet when it comes to short sales… well this wasn’t one of those banks.

    Their rationale was that since Georgia is a “restart” state – meaning that each time they begin the foreclosure process it costs them money – they didn’t trust the buyer to perform, and did not want to risk the $2500 it would cost them to “restart” the process.

    I had never heard of anyone taking a short sale from contract to closing in three days before – but as a good pioneer who has taken many an arrow in the back in this business we know as real estate – I proceeded to give it my all.

    I worked late into the wee hours of the next morning putting the short sale package together… complete with everything sans an executed agreement with the new proposed closing date. To the bank’s credit, they wanted to get the package quickly – even without an executed agreement – so that they could begin their analysis and order the BPO.

    The buyers, who were from Canada, were spooked by the banks insistence on a quick close. Way to go, currency breath. I warned the bank that this offer was extremely good, and that they should risk a restart to make this deal work… but they didn’t see it that way – and the buyer withdrew their offer.

    One day down – two more to go.

    The next highest offers contained contingencies – and they could not possibly close by the bank’s unreasonable date, so I had to move on to the cash offers.

    The best cash offer was for $130K, and they could close in the two remaining days we had left. We drafted up the contract and emailed them to all parties for their signatures. The BPO had been ordered with a rush (for the previous offer that the bank spooked) and the closing attorney assured us a time for the closing.

    A rush title exam was ordered and assured, and power-of-attorney docs were drafted for me to stand in as Attorney-In-Fact for my absentee clients. Funds were verified, and cashier’s checks were being drawn to avoid any trouble with wire transfers.

    I prepared a new preliminary HUD-1 for the bank, along with the proposal letter and supporting documents for this new contract. All we were waiting on was the BPO.

    Before the BPO had come back, the bank had made up its mind that they would accept no less than $150K for the property.

    “What if the BPO comes in at $100K,” I asked.

    “The last BPO in May came in at $196K” was their reply.

    “I would stake my life on the fact you’ll never see $196K for that property,” I quipped.

    “Well, we’ll see what the new BPO comes in at,” was the bank’s response.

    Meanwhile, I drafted up a two-page letter outlining all the additional costs that I believed would not be considered in a BPO, as property evaluations are seldom for incomplete construction. I even submitted one construction estimate that was in excess of $200K for the completion of this house.

    Well the BPO came in – on time – and on the money. $129K.

    Now you would think that a bank that was insisting that we close in such a hurry would accept an offer that equaled the BPO value, right? Think again. They were sticking to their figure of $150K.

    All I could do is convey this message back to the buyer’s agent - If your client comes up with another $20K, we have a deal. If not, thanks for playing. There will be no parting gifts this evening.

    So yesterday was D-day. The buyer was ready, able, but not willing to bring the extra $20K to the table. The bank was not willing to release the property, and chose to take their chances on it as an REO. The agents witnessed yet another deal gone dead – and more wasted time working for free.

    One thing is certain – the road to a successful short sale is not necessarily the quickest one.

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    Now Could Be A Good Time To Buy A Top-Notch Home

    Some Well-Maintained & Updated Homes Are Better Values Than Foreclosures

    When all of the comparable homes in an area are foreclosures and short sales, you could get a really good deal on the nicer, well-maintained and updated homes.

    A broker recently called me regarding one of her listings. It’s a super nice property that’s been upgraded to the hilt – but every single comp within five miles that has sold in the last twelve months has been a foreclosure or short sale. Her problem was not that her listing wouldn’t sell – but that it might not appraise.

    In certain areas, finding good comps for nice homes has become quite difficult – and depending upon the appraiser, you might not get the appraised value that is specified in the contract. Obviously, this is more of a problem for the sellers than for buyers.

    When home prices are rising, homes that are not in good condition often sell for more than they should – and will appraise for more than they should, as well. The nicer homes tend to pull the values up. But in a declining market, homes that are in need of repair – or a quick sale – tend to pull the values down… therefore the sellers of nicer homes find it difficult to obtain top dollar – or a higher appraised value – for their properties.

    So while you’re out trying to find the best foreclosure or short sale for your clients – take a look at some of the nicer listings. If you find a motivated seller, the best deal just might not involve a foreclosing lender.

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    Those Who Can Not Remember The Past Are Condemned To Repeat It

    Add This 1934 Cartoon To The “There’s Nothing New Under The Sun” List:

    Click for larger image

    Click image for larger version

    If you think the housing market is bad now – just wait until these economic policies drive interest rates up… and don’t kid yourself – they’re heading up NOW.

    George Santayana knew what he was talking about.

    It’s a good time to buy real estate – while you can afford it.

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    Put Down The Pipe – And Step Away From That Lease Agreement

    Yesterday’s Unrealistic Sellers Are Today’s Unrealistic Landlords

    Just when we thought we had finally convinced all potential sellers that the real estate market was in a crisis – and that realistic pricing was the only way that a sale could be consummated – we now must deal with the unrealistic landlord.

    I’m not talking about the professional Leona Helmsley kind of landlord – they’ve always been around. No, I’m talking about the unrealistic sellers who are instructing their agents to continue to market their properties for sale… AFTER they have rented them out to unwary tenants.

    Don’t get ahead of me, now. I know that this concept is not new. Home managers have been around for years… and they provide a great service to home sellers by furnishing the home – keeping it in showing condition – paying the utilities – maintaining the yard – all while being prepared to move out with 30 days notice.

    Of course, home managers enjoy deeply discounted rents.

    And therein lies the rub. The unrealistic seller wants market rent – while marching prospects through the home. A few days ago, I wrote a quick post about our new GAR lease, more specifically about Section 20 which reads:

    Upon 24 hours advance notice to Tenant, Landlord shall have the right Monday through Saturday for 9:00AM to 8:00PM to access Premises of Property to inspect, repair, maintain the same and/or to show the Property to prospective buyers. In the case of emergency, Landlord may enter Premises or Property at any time to protect life and prevent damage to Premises and Property. In addition, during the last ___ days of the term of the Lease, and during any period when Premises is being leased from month to month, Landlord may also place a “for rent” or “for sale” sign in the yard or on the exterior of any dwellling on Property, may install a lockbox and may show Premises to prospective tenants or buyers. In the event a lockbox is installed, Tenant shall secure jeweelry and other valuables and agrees to hold Landlord harmless for any loss thereof. For each occasion where the access rights described above are denied, Tenant shall pay Landlord the sum of $_______ as liquidated damages; it being acknowledged that Landlord shall be damaged by the denial of access, that Landlord’s actual damages are hard to estimate, and the above amount represents a reasonable pre-estimate of Landlord’s damages rather than a penalty.

    Not only are the unreasonable sellers wanting to install turnstiles on their rental properties to march prospective buyers through – they got those wishes inserted into the pre-printed portion of the new lease. Unfreakingbelievable.

    When I was first presented with this new lease a few days ago, I laughed almost hysterically when I read that section… wondering aloud why they would put such language into the pre-printed portion of the lease. Who in their right mind would agree to such terms without a major concession?

    I forwarded the lease to my client, informing him that this was a pre-printed portion of the lease… and that it probably was not the landlord’s intention to place such a limitation on quiet enjoyment.

    I was wrong. The landlord does wish to continue marketing the home in search of a buyer… and the first lease draft included language that allowed the landlord to terminate the lease with 60 days notice – while only providing one month free rent to my client for the inconvenience.

    The funny thing is that if my client desired early termination – they wanted him to pay ALL of the remaining monies that would be due for all remaining months. In other words, they wanted my client to be a home manager who would smile while grabbing his ankles.

    We countered this draft stating that unrestricted access was unreasonable – but that we would agree to monthly inspections as well as showings to actual BUYERS who place an offer contingent upon physical inspection… after all, that’s how commercial rental properties are handled with tenants in place. Tenants are entitled to quiet enjoyment, after all.

    They came back wanting to secure showings with a one-week notice. “Are you serious?” I asked, “’cause you’re never going to get a tenant to pay market rent with all these inclusions.”

    My client said if they would cut the rent 20%, he would agree to it. The unrealistic landlord would only agree to a 4% reduction. Needless to say, we will not be signing a lease with this landlord.

    The sad truth is that there are many other potential landlords who are also angling for such an arrangement, as evidenced by my conversations with their agents. Many more than I ever thought were possible.

    One agent told me that her client wanted to put a lockbox and a sign on the property 90 days before the end of the lease. Another said that his client wanted to continue marketing the property for sale from day one of the lease. Neither were offering reduced rent. The latter has had an empty rental for five months.

    If you are a potential unreasonable landlord – catch a clue. If you want a home manager – get one. Don’t waste everyone’s time trying to get a tenant who will live in your proverbial glass house for full rent. Think about it – do you want the moron who would agree to those terms living in your house?

    If you are a potential tenant – get the advice of a broker or attorney before signing your rights away… unless, of course, you ARE a broker or attorney.

    If you are an agent who is trying to perpetrate these unreasonable conditions while expecting market rent – you should be ashamed of yourself… especially if you’re offering a ridiculous co-broke.

    And if you are an agent representing a tenant client – it is your responsibility to ensure your client understands the ramifications of all of the conditions in the lease… including what could happen if the landlord defaults on the mortgage.

    I think I’ll start asking the listing agents to send me a draft of their leases before showing their listings. After all… why should I let them waste my time?

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    Show Me Yours – Then I’ll Show You Mine

    Looking At Rental Properties With A Whole Different Perspective

    The more things change… well, the more they change.

    In the past, when you represented a tenant in the lease of a property, it was understood that the tenant would provide authorization for the landlord to perform a credit check, if desired. This authorization, however, was a one-way street.

    That was then… and this is now.

    In the current real estate climate we find ourselves in – it would behoove you to inquire as to the financial stability of the landlord before allowing your client to sign a lease. It is becoming a more frequent occurrence to hear about another instance of a landlord losing a property to foreclosure during a lease.

    While requesting the credit report of a potential landlord is an uncommon occurence – perhaps it should be as normal as the landlord requesting the credit report of the prospective tenant. After all – if the landlord defaults and loses the property to foreclosure, it will be the tenant who suffers.

    If the landlord refuses to provide authorization to pull their credit file – perhaps they are hiding the fact that they have not been paying their mortgage… as is the case in many short sale situations I have seen. Yes, it happens. In the past two weeks, I have spoken with two three landlords who are defaulting with tenants in place.

    Whether or not you insist on the landlord providing a credit report – you should make your client aware of the repercussions of a default on the part of the landlord according to the laws in your state.

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    Keeping It Light For Friday The 13th

    Sometimes You Have To Push The Seriousness Away. Seriously.

    Fellow blogger April Winchell posted this little tidbit a few days back:

    If you’ve ever read President Obama’s Dreams From My Father, good for you. I couldn’t get past the foreword.

    I wish I had. Because today I discovered that there’s a fairly juicy little subplot in the book, involving one of Obama’s high school friends.

    Ray, a fellow classmate of Obama’s, was also bi-racial, and also trying to define himself. But what set him apart was his colorful manner of self-expression. Ray cursed like a motherfucker.

    This would all be snickerworthy enough, but it turns out that Obama actually read the audiobook version of Dreams From My Father.

    And that means he read Ray’s quotes.

    And that means you’re about to hear the President of United States using language that would finish Cheney off once and for all.

    Warning: Mature Content

    http://tinyurl.com/cvrbap

    (Don’t shoot me – I’m only the messenger)

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    Times Are Tough – But That’s No Reason To Be A Thief

    I haven’t had a good rant in a while… and unfortunately, I don’t have enough time to have one right now – so the Reader’s Digest condensed version will have to do.

    Most agents who have been in this business a few years or more know when something doesn’t look right. We’ll see something – and although we don’t know the underlying logic… we instinctively know it’s just not right.

    This morning, I was perusing some rental properties for a client. As with listings for sale, it’s not uncommon to find some agents who are offering a ridiculously low co-broke. This morning was no different.

    This particular agent is offering a 10% co-broke if you show the property. Since many brokerages charge transaction fees – the co-broke on this listing could easily be less than the transaction fee. Kinda gives “co-broke” a whole new meaning.

    Now don’t get me wrong – a 10% referral fee for sending the client to a property shown by the listing agent is just fine. But 10% for bringing the tenant and showing the property is a non-starter – I don’t care who’s doing the paperwork.

    Just for giggles and grins – I pulled up this agent’s recent history. One sold listing and more than sixty leased listings. Every single one of them offered a measly 10% co-broke… and all but two were leased out by – drum roll please – the listing agent.

    [snarky comment] What an unexpected surprise! [/snarky comment]

    Of course, both of those co-oped listings rented out for full asking price… while nearly every single one of the double-ended listings involved a rent reduction… sometimes several hundreds of dollars in rent reduction.

    Now maybe you think that I’m just whining about some agent who is too greedy to offer a more generous co-broke – that’s fair. Maybe you think that I believe that a co-broke of 25% is more appropriate. I will tend to agree with you on both counts.

    But there is an underlying ethical problem here.

    When you list a property for lease and offer a ridiculously low co-broke – you are denying your client the best possible chance for achieving a quick lease at the highest possible rent.

    And therein lies the rub.

    If you are an agent who practices this kind of real estate – you should be ashamed of yourself. This behavior may not be illegal… but like any other kind of criminal, merely changing the law probably wouldn’t deter you from being a dishonest cheat.

    If you’re a home owner who has run out of time to sell your home in a declining market, and you’re considering renting your property to stop the red ink from flowing – it’s time to wise up.

    Listing your property with an agent to get it rented quickly is a good idea – but if you don’t know your agent well enough, maybe you should remove the incentive for them to be disloyal. Make sure your rental listing agreement includes language that guarantees a reasonable co-op brokerage fee is offered.

    Without it, you might get an agent like the one I found this morning who would rather your property sit vacant than lose 15% of one months rent in commssion.

    UPDATE

    I put a call in to an agent who has a rental listing. Here’s the exact conversation

    “Hi this is Zack”

    “Hi Zack – Doug Quance with Solid Source Realty here… how are you?”

    “I’m doing well, Doug – how are you?”

    “I’d be doing better if you told me your rental listing on Bonaventure was available and that you’re offering more than three dollars on the co-op”

    “That’s what I’m offering.”

    “Are you serious?”

    “Yes, I’m serious.”

    “You have a nice day.”

    Three dollar co-broke on a $2500/mo rental property! My client got a big chuckle out of that.

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    In Like A Lion – Out Like A Lamb – 15 Minutes Of Fame Is Almost Over

    Infamous Real Estate Investor Casey Serin Puts His Web Domain On Ebay

    Many of you might remember Casey Serin from a few years ago – a young man who watched too many late night infomercials and bought too many courses from gurus who taught the so-called “secrets” of making the big bucks in real estate – a young man who ventured out and purchased and eventually lost some eighteen or so homes, many of them to foreclosure. He went from zero to negative hundreds of thousands of dollars in no time flat.

    Casey was quite the character with his online accounts of his impending doom on his blog Iamfacingforeclosure.com – a blog where he chronicled his dealings on selling his houses by short sale before the lenders foreclosed on them – to an audience of not-always-so-adoring fans who would post some rather scathing comments on his blog with great regularity. His day-to-day existence was a source of vicarious pleasure for many – a lot like witnessing a train wreck in slow motion.

    His blog provided such a detailed account of his obvious repeated instances of mortgage fraud that it ultimately had to come down, it was just a matter of time.  Oh there’s much more to that story – you can Google it – and to be honest, I’ve forgotten the bulk of it already. Honestly, I thought Casey was off the stage. For good. Forever.

    He has gone through some various machinations chronicled in Wikipedia – and his last gasp of public persona might be the sale of the domain that he set up ostensibly to blog about penny stocks, as evidenced by his listing on Ebay. I guess when you’re no longer detailing your crimes in real-time, nobody really cares anymore.

    Casey’s tale of woe was the type of a story that needed a Howard Beal kind of crescendo and ending – perhaps streaming video of the Feds breaking into his apartment to take him away Elian Gonzalez-style, or something else equally as riveting and bizarre.

    No, it’s finally over for Casey. He rode that pony of fame for all that it was worth – and he did his little part to help fuel the housing bubble that eventually busted and started the avalanche that would thrust the world into a recession. In a game of musical chairs, Casey was one of those guys still standing when the music stopped. I guess the taxpayers will pick up the tab for the carnage… and Casey will get the few pieces of silver he can for a domain name nobody will care about in a few more years.

    I mean no ill will towards Casey.  I’m not hating on him. I can understand how a young man could buy into the idea that real estate investing was easy – a no brainer. After all, we’ve seen those late night gurus… and if they could do it, why not Casey?

    I hope Casey finds a fruitful means to make a living – whatever that might be.

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    Think Your Taxes Are Going Down? Think Again

    In A Few Years We’ll Be Calling These Days The Good Ol’ Days

    Some believe that in the coming administration, their taxes will be lowered. Some even believe that they won’t have to worry about buying gas… or paying their mortgage… as Obama will make sure that all is well.

    Let me tell you how the cow will eat the cabbage.

    As of this writing, the federal government has pumped $2 trillion into places of which – thus far – they will not even divulge where the money is going. Keep in mind that is $2 trillion during a so-called “conservative” administration. At this rate, we will soon see a big spike in inflation as our money loses even more of its value. Our dollar has lost 27% over the last eight years… and these bailouts are nothing more than the government printing money – therefore making the remaining money supply worth that much less.

    One of the changes that will take place at the end of the year is the revision of the capital gains exclusion – a change that will not benefit the taxpayer. Current tax law provides a $250K exclusion ($500K for married couples) from capital gains taxes on a primary residence that the taxpayer lived in for two of the previous five years. The new law will prorate the exclusion based upon how many years the taxpayer actually lives in the home.

    Meanwhile, the inflation from the printing presses at the Treasury is going to cause a rise in the prices of everything – food, commodities, wages, housing… you name it. Higher wages will result in higher taxes due to the phenomena of bracket creep… and although real estate will rise in real value, it’s value on paper will appear to be much greater due to this inflation.

    As many have noticed over the last ten years, property taxes have gone up as a result of tax assessors using higher property values as a means to get more money for the government coffers… and now as property values are declining, those same assessors are not interested in lowering those taxes. In many cases, taxing authorities have increased the millage rate to make up any possible shortfall.

    The incoming president has communicated his desire to raise corporate taxes – completely ignoring the fact that corporations don’t pay taxes… they merely collect them from their customers – as well as his intention to raise capital gains taxes. With the cost of risk capital rising, coupled with the rising cost of doing business due to rising corporate taxes – and prices will be rising even if the inflation wasn’t there. Add them together and you have the perfect storm.

    And please – spare me the mantra about Obama wanting to cut taxes on the middle class. I’ll believe that when I see it. As a US Senator, he voted to raise taxes on the middle class… and I’m still in the camp of those who tend to believe in someone’s actions before I’ll believe in someone’s empty words on the campaign trail.

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    Pinching Pennies And Blowing The Big Bucks

    Another Installment In The Saga Of Unintended Consequences

    Most of us have been driving less, lately. Record high oil prices drove gasoline prices to over $4 a gallon – wreaking havoc on our personal budgets… and the nation’s economy as a whole.

    Last Friday, I stopped in to visit my mechanic – and as usual, he told me about the car he was busy working on. This time, it was an engine rebuild due to “bad gas”.

    “Bad gas?” I asked.

    “The deposits built up so that the valves wouldn’t close properly,” he replied. “We’ve had four rebuilds in the last few weeks. I’ve never seen anything like it.”

    While it might be bad gas – I have another take on it. With the enormous increase in fuel costs, most of us are driving like little old ladies – myself included. But driving for maximum fuel economy is not necessarily good for your engine, as it allows carbon to build up on your valves.

    I first learned about this in the early 80′s, as my mechanic back then told me about one of his customers – an elderly lady – who would bring her car in every few months so that he could take it out on the freeway and give it a good run.

    You can tell when your engine needs to get the carbon blown out, as your engine will be idling rough. The best way to blow the carbon out is to accelerate hard on a freeway onramp – running it through the gears until you get up to highway speed. It works best when there is a good load on your vehicle, such as climbing a hill.

    I have “blown the carbon” out of my vehicles for years – and I even have a friend who asks me to take her car out a few times a year to blow her carbon out, as she’s uncomfortable doing it herself.

    Another tip is to have your fuel injectors professionally cleaned, which also can help keep your engine’s valves clean.

    An engine rebuild is not inexpensive  – it is a repair that can cost thousands of dollars. So before you spend the big bucks… maybe you should put the pedal to the metal every now and then.

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    If You Are A Home Builder – You Have A Problem

    Cost Of Building Materials Likely To Rise Due To Hurricane Ike

    Builders of new homes have been dealing with sluggish sales from lack of buyer demand, and with the potential of nearly $20 billion in damage due to Hurricane Ike – the cost of building materials could easily make a bad situation much worse.

    Builders have not seen a reduction in material prices in spite of the slowing of construction over the last two years, due in part to reconstruction of the damage from Hurricanes Katrina and Rita. While some material costs have gone down, most have not – and this latest giant hurricane striking a major population center is undoubtedly going to push material costs up.

    In the last year, spikes in the price oil have not only driven up the cost of many materials – it has also driven up the cost of subcontract labor for which builders rely. As energy costs go up – so do the manufacturing and transportation costs associated with the materials builders need.

    To make it a trifecta, the number of recently-built home foreclosures is at an all-time high – thus giving new construction some serious competition, as home buyers can find some very nice, nearly new homes for much less than most new construction.

    When you bring all of these factors to bear, you can rest assured that new home builders are in for some rough waters ahead. Rising costs will raise their “break-even” point, thus making their efforts less profitable without a retail price increase – which the current market will not bear. Since profitability is already impossible for many builders – more of them are likely to fail.

    “It ain’t over ’til it’s over,” Yogi Berra once said. Once again, Yogi is right.

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    Here’s One Way To Rid The MLS Of Overpriced Listings

    This Idea Is Submitted With Tongue Buried Deep In Cheek

    Sometimes I can only shake my head as I look at some of the listings in the MLS. Most good agents won’t take a listing that is overpriced… and if so, it’s usually not overpriced by much.

    When studying recent sales, I notice that the trend for a home to sell within a few percentage points of its current list price continues. Ultimately, it all comes down to supply and demand. If we can’t increase the demand – maybe we should restrict the supply… especially of overpriced listings.

    Well I came up with an idea. What would happen if a property tax reassessment could  be made when a seller put their property on the market?

    As my good friend Jeff Brown would say, ‘Now don’t jump the gun, locomotive breath.’ This knife would cut both ways. For those who are paying low property taxes – they would see a tax hike. But for foreclosures and other distressed properties – they would see a tax reduction.

    The benefit of using this system is that sellers would be much more reluctant to put their property on the market for some ridiculous price. The tax assessor would be able to say – Hey, you’re the one who said your property was worth that much – quitcherbitchin.

    On the other hand, buyers like some of my current clients would get a break on the purchase of their next homes. For example, on one property we are considering, the current taxes are nearly $7000 a year – but those taxes will be reduced by at least 40% after the purchase and subsequent reassessment. Having that reassessment right now would reduce the upfront costs of the purchase – not to mention that more buyers could qualify to purchase a property like this.

    There you go. I’ve tossed a grenade out there for you. Anyone feelin’ froggy?

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