There’s always something to howl about.

Month: June 2007 (page 3 of 8)

How do you handle a challenge?

BloodhoundBlog RealtorWives braille imageTraditionally, BHB is a blog where authors plant seeds of information in the minds of readers from all over the nation (and globe if you will). Today, rather than give advice, criticize something or tell you my thoughts about the RE industry, I pose a question based on a bizarre dream I had last night (and my own ignorance):

Have you ever worked with a blind, deaf or special needs client? What considerations were made? How does a blind person know the home is not in disrepair? If someone is disabled, how does that change your search to narrow down homes to purchase? Are closing documents available in braille? How long does a closing take in sign language?

Most of you know I’m not a Realtor (rather a Realtor sidekick), but I do spend most hours of my life focused on my husband’s clients and business. I think most people are scared to ask stupid questions… but not me!

So, tell me (and the readers) about your biggest challenge when representing buyers or sellers with special needs- knowing laws and how to handle special situations can prepare new agents and new readers for potential clients! Knowing how to catch a curveball (baseball allusion for Jeff) in advance of the pitch makes any batter more confident when it’s time to step up to plate!

The Imperative of Divorced Commissions, Part 1: Fundamentals of Narcissism.

3bac.jpgI was running in a local park a few days ago. The road into the park is about a half mile long and barely wide enough for two cars to pass in opposite directions, thus there are “NO PARKING AT ANY TIME” signs on both sides the entire length. As I drove in two mini-vans were parked next to a field, and I waited as two other cars coming the other direction passed. Three women were in the field chatting and setting up cones, perhaps for a relay.

As I ran out ten minutes later, the vans were still there, but now there were five cars stopped in one direction while three others drove by in the other. The women were oblivious, corpulent Paris Hiltons. When I suggested they move their vans to a parking area fifty feet away, one said “Oh, get real. It’s not as if this is a major thoroughfare.” Solipsism at its summary best. Rules are fine unless they’re inconvenient.

696.810 Real estate licensee as buyer’s agent; obligations….
(3) A buyer’s agent owes the buyer involved in a real estate transaction the following affirmative duties: …
(c) To be loyal to the buyer by not taking action that is adverse or detrimental to the buyer’s interest in a transaction;
(d) To disclose in a timely manner to the buyer any conflict of interest, existing or contemplated;

Whenever the charge of venality is brought against the real estate profession, out comes the Code of Ethics, here codified into Oregon statute. It’s our Wizard’s Curtain; while most agents I work with — and I suspect most people here — take it very seriously, too many don’t.

The reason high BACs and agent bonuses are used so often as marketing ploys is because they work. I was told recently by one agent who incorporates both in many of his older listings that not only does he immediately get more showings, once under contract the buyer’s agent is much more eager to cooperate to get Read more

Zillow.com off the hook in Arizona?: “State rethinks crackdown on online home appraisals”

This is me in the Arizona Republic (permanent link).

State rethinks crackdown on online home appraisals

The move by the Arizona Board of Appraisal and Attorney General Terry Goddard to prosecute Zillow.com, and potentially other Internet-based home valuation services, may be at an end.

Last June and November, the board ordered Zillow to cease and desist offering its free “Zestimates” in Arizona. The Attorney General’s Office followed up with a letter of its own, threatening prosecution. No other Automated Valuation Model was targeted.

Arizona Senate Bill 1291 was drafted earlier this year to fortify the board’s argument, redefining “appraisal” to mean any opinion of value, not just a paid evaluation contracted from a professional appraiser.

Rep. Michelle Reagan initiated the process of amending the legislation to permit AVMs to operate in Arizona. Her amended version passed the House and was subsequently further amended in a joint House-Senate conference committee.

The Senate voted Monday night to approve the amended version of SB 1291. Among the amendments was an exemption for free Web-based AVMs from regulation under the state’s appraiser licensing laws. The House approved the amended language Tuesday.

As the Web site LittlePinkHouses.com notes, the amendments also undid other changes that had been sought in the bill. The composition of the Board of Appraisal will not be changed to include a majority of professional appraisers and the legal definition of an appraisal will conform to a common-sense understanding of the term.

As originally drafted, the bill would have outlawed virtually any estimation of value, possibly even including the casual conversations of neighbors. This is the amended definition of an appraisal:

“A person who produces a statement that is provided to any other person concerning the estimated value of real property through an Internet Website, automated valuation or other software program or other means of comparative market analysis and who discloses that the estimate is not an appraisal.”

This language absolves not just Zillow but also real estate licensees producing Broker Price Opinions for lenders and, presumably, other methods of evaluating homes.

The amended bill awaits only the signature of Gov. Janet Napalitano to become law.
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The Real Risk in Real Estate Flipping

New investors rarely stop to address the subject of risk tolerance. People who have never done a single real estate deal see others making a lot of money in real estate and want to jump right in. They never stop to understand the true risks of real estate.

Most investors and books will tell you that real estate is a pretty safe asset class to invest in. This is certainly the case if you are buying core buildings or if you are employing a reasonable buy and hold strategy. Sadly, many investors hear safe investment and assume that opportunistic investing is just as safe.

If an investor is solely a real estate flipper, he/she is taking more risk than investing in the stock market. That might be a surprise to some, but consider the returns. On average the stock market returns 9-13%, while flippers should expect 15-20% returns on their capital investment.

This higher return is certainly accompanied by more risk. First, consider the fact that in the stock market your downside risk is typically capped at 20-30%. Very rarely does the stock market lose more than 10% in a given year. Additionally, a single blue chip stock is not likely to even have that kind of a loss. In contrast, a flipper has a very real chance of losing all of the money invested in a deal. The odds of this are even higher for a novice flipper.

Another aspect of real estate investing is the sweat equity or opportunity cost of the investors time. I can go into my E*Trade account in about two minute, buy a Dow Jones ETF (exchange traded fund), and essentially guarantee myself a 9-13% return on that money for 20 years. However, if I decide to flip property I either have to hire a property manager or I have to act as general contractor, organizing the work to be done. Either way, investors will still spend a tremendous amount of time working on site or dong something with the investment.

Taking Read more

The responsibility of mortgage brokers and other front-liners in the foreclosure fiasco

A quick note: I am a mortgage broker and banker so I wear both hats. I consider myself in the group below.

Seth Godin wrote a great post the other day simply titled “Responsibility” that focused on one key question: “Are you responsible for what you market?”

His answer was a resounding yes based on this premise: marketing works. If you agree that marketing works then you should agree that the idea of free choice is really not that free. Marketing influences choice. Godin cites the decline in cigarette smoking over the period since advertising has been significantly curtailed as one (of many) examples:

If marketing works, it means that free choice isn’t quite so free. It means that marketers get to influence and amplify desires. The number of SUVs sold in the United States is a bazillion times bigger than it was in 1962. Is that because people suddenly want them, or is it because car marketers built them and marketed them?

Cigarette consumption is way down. Is that because people suddenly don’t want them any more, or is it because advertising opportunities are limited?

This post led me to some new thinking on our embattled industry and the current round of finger-pointing up and down the money-ladder. The common refrain from mortgage brokers as a defense to the “predatory lending” accusations being bandied about by consumer groups and government entities is “We only sold what the banks gave us to sell” and “Brokers don’t underwrite the product.” These notions that depict brokers as impotent pawns in the mortgage game with little control over their actions-resigned to the whims of the banking world, forced to peddle whatever products were made available by the banks- is callous and dangerous. This position is clearly one that Mr. Godin would whole-heartedly disagree with; and I do too.

As brokers we’re responsible for the loans we choose to put our customers in. When we choose to put a retired person on fixed income in a negatively amortizing payment-option loan for maximum rebate with out clearly identifying their comfort level and understanding of the Read more

Southwest Real Estate Blogging Conference: Notes from the epicenter


Jay Thompson, The Phoenix Real Estate Guy, making his presentation on real estate weblogging at today’s Southwest Real Estate Blogging Conference. Jay was fantastic, with one practical demonstration after another of the power of weblogging. Jonathan Dalton added some great insights from the sidelines, and the incomparable Dave Smith made the trek up from Tucson. I’ll have more tomorrow, along with video of Jay’s presentation and mine. In the meantime, Staging Arizona Real Estate has a report on the event.

More: Jay Thompson, Jonathan Dalton, Shailesh Ghimire.

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Pay the Loan Down and Refinance Later? The IRS is Out To Getchya !

Rising real estate prices and serial “cash-out” refinance transactions has the IRS licking their chops. Mortgage interest deductions are limited to the acquisition indebtedness plus a maximum of $100,000 for home equity indebtedness. Scofflaws have taken advantage of the fact that the IRS is not able to track the segregation of loan transactions by loan proceeds usage. In fact, your friendly CPA has probably told you “not to worry about it” when you erroneously overdeduct the mortgage interest for the loans you’ve taken against your home.

That’s about to change. The IRS is requiring lenders to report any and all cash-out refinance transactions this year on the Form 1098. This now gives Big Brother an opportunity to segregate new loans by proceeds usage and set a trap for the willing tax scofflaw.

Let me give you an example: Bill and Jacqueline bought a beautiful home in Houston, TX for $250,000 in 1998. They put $100,000 down and took a $150,000, 30 year mortgage. They set their acquisition indebtedness at $150,000 but were reducing it as they paid the loan through an amortizing loan. In 2003, they refinanced $140,000 into a 15 year, low rate loan as their home value grew to $340,000. They plan to refinance their home in 2012 to pay for their twins education at the University of Texas. They recognize that they’ll need about $200,000 for the twins’ education but figure that they’ll be well under the acquisition indebtedness plus home equity indebtedness limit for tax deductibility of mortgages.

They’ll owe about $35,000, borrow $200,000, and be well under that figure…right?

WRONG. Acquisition Indebtedness is reduced by an amortizing loan, in their case, it is reduced to about $35,000. Add the $100,000 for the home equity indebtedness and their limit for the deductibility of interest will be closer to $135,000. The interest on $100,000 of that loan won’t be tax deductible, costing them about $2,000 to $4,000 in extra income taxes each year.

…and they WILL get caught. The IRS is following the money now. If you’ve used your home as an ATM and haven’t reinvested the proceeds or improved your property, you Read more

Can an $8 Billion Private Equity Fund Affect a $1 Million Commercial Investor? It Certainly Can…

Addressing several people’s concerns about the state of private equity and the possible assertion that private equity could be the next fallout candidate, I thought I would look into this situation a bit more. For those of you who think that this discussion will be outside of the scope of commercial real estate investing, read on and I am sure you will be pleasantly surprised.

At the 8th Annual US Real Estate Opportunity & Private Fund Investing Forum several very important items of note were mentioned. The most significant item is the increase in fundraising efforts, which has moved up from $35 billion in 2005 to $60 billion in 2006. On the heels of that announcement, Morgan Stately Real Estate has just announced it has raised an $8 Billion fund designed to invest in Real Estate in established and emerging markets.

Before I discuss how these numbers will affect the common investor, I want to take a step back and clearly outline what a Private Equity Real Estate Fund or Opportunity Fund does. First, these funds begin by raising investment capital. The larger funds typically bring in money from pension funds, hyper wealthy individuals and governments all over the world. Then, they take these funds and make leveraged investments. An $8 Billion fund will probably invest in about $30 Billion worth of real estate. Investors typically expect returns of 12-20% based on the investment strategy and they expect to exit the fund within the span of 7-10 years.

These funds make a variety of investments. First, they typically invest in all major commercial property types (hotel, industrial, office, retail, and apartments) and minor ones as well (storage units, trailer parks, malls, etc.). Additionally, they may purchase Real Estate Investment Trusts, Mortgage Companies, Real Estate Services firms, etc. With $30 Billion to invest, any and all real estate investments are fair game.

Over the past 20 years the private equity industry has grown tremendously. While the major players (Blackstone, KKR, etc.) get all the headlines, many smaller private equity firms operate in lower tier investment categories. If KKR looks for Billion dollar deals, these firms will Read more

Real Estate Weblogging 101: A how-to book-in-weblog-form for would-be real estate webloggers

In commemoration of the Southwest Real Estate Blogging Conference, BloodhoundBlog today launches Real Estate Weblogging 101, a book-in-weblog-form about weblogging for real estate professionals.

The book is built as a WordPress weblog because it seemed foolish to me to write about a deep-linking medium without deep linking. Even so, I believe this is the first time WordPress has been used to publish a book. It seems plausible to me that dead trees are a dead letter, so this won’t be the last book “printed” in an on-line content management system.

In large measure, content for Real Estate Weblogging 101 comes from BloodhoundBlog posts written over the course of the last year by Greg Swann, Teri Lussier, Kris Berg, Brian Brady and Allen Butler. Because the book is written using the “Pages” feature of WordPress, it is built with revisability and extensibility in mind. We anticipate adding appropriate articles to the book as they become available.

From an introductory article to the book:

This is a book about real estate weblogging, but it seems absurd to write about weblogging in the form of a book. The Dan Rathers of the world will finally admit that the old media are obsolete on the day after the last paper-boy dies of old age. The internet is a linked world, and to write about an internet phenomenon without linking is absurd. And the internet is an infinitely revisable world, so to give up the power of instant, infinite revisions seems foolish. Unless you print it out at home, you can’t take this book with you to the beach. But what you can do is pursue all of the supporting links until your understanding of real estate weblogging approaches perfection — where perfection is understood to be a blindingly moving target.

The wonderful thing about a book in the form of a weblog is that you can help make it better, too. Just as Charles Johnson at Little Green Footballs helped Dan Rather discover this strange new world — no matter how much he might rather didn’t — you can set me right when you find me in error — and Read more

The sweet euphony of iPhone news . . .

First: YouTube on board. We’ll continue to do our listing videos in NTSC video. Anything less stinks in a broadband world. But we’ll do YouTube versions, too, for all the mobile phone vendors who will leap on this bandwagon.

Second: The natives are restless:

June 29 is the day many gear-heads have marked on their calendars as iDay, the release of what independent analyst Richard Doherty calls “the most eagerly awaited consumer technology device of the last 20 years.”

Since January, when it was first announced, the iPhone has captivated consumers, Wall Street investors and the media as the right product at the right time.

Apple CEO Steve Jobs has positioned it as the most advanced meeting of the Internet and wireless technology, with an iPod thrown in for good measure. And it looks really cool, and unlike any phone before it.

For Apple, the release of the iPhone promises to effectively double the company’s revenue within just a few years, based on the worldwide thirst for cellphones. For consumers, the trick is going to be nabbing one of the early iPhones on opening day before stock sells out.

The iPhone is being sold only at Apple’s 200 retail stores, Apple’s website and nearly 1,800 AT&T (formerly Cingular) stores beginning at 6 p.m. local time across the country. AT&T says it will close its stores at 4:30 p.m. and reopen at 6 p.m. Apple would not comment on its plans. No pre-orders are being accepted. Fans are expected to camp out in front of stores for days.

Jobs has projected sales of 10 million iPhones within the first 18 months — worth more than $5 billion retail. Neither AT&T nor Apple will say how many phones initially will be shipped to stores. Doherty expects 1 million units to be available in the first wave. He predicts stores will be sold out by the time they close on June 29.

Third: What else you can do if you intend, like us, to sit on the sidelines for a while.

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Zillow.com dimed out by ubergeeks: “Please don’t crash”

From Worse Than Failure, a coder’s redoubt:

Donniel Thomas writes “Javascript isn’t for the weak of heart or those short of patience. What works in one browser may not function properly, or result in a nasty JS error in another (*cough*IE*cough). Which is why I can understand what this programmer meant.”

The following screenshot is from the homepage of Zillow.com, which is one of the most popular and AJAX-y Real-Estate sites on the web. And, as of this writing, the coder’s plea still remains …


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Subprime Lending Fallout Goes Upstream to Take Down Two Major Hedge Funds: What does this Mean To Real Estate Investors?

Two major Bear Stearns Hedge Funds face foreclosure due to their significant exposure to the subprime lending market. While this does not fall under the category of real estate investor, I spent last summer working for Bear Stearns and interacting with many of their hedge funds. Based on the very limited details of the stories out now, I cannot be certain if I have worked with these two particular funds. I can be certain; however, that it would not be a good time to be in the mortgage space at Bear Stearns.

In my three months at Bear Stearns, I met some of the smartest people in the businiess. While this is not an advertisement to work at Bear Stearns, I think they are a very well run organization with smart people. This of course begs the question, how could something like this happen to such smart people? Furthermore, with all of the subprime lending issues out there, what does this mean for borrowers who are less creditworthy?

Simply put, in my humble opinion, the subprime market will be doomed for some years (at least five or more). Since I know this site is filled with a ton of very smart mortgage brokers, I will outline my reasoning.

Consider the following information:

1) Many subprime lenders have filed for bankruptcy

2) Major buyers of Mortgage Backed Securities (like Bear Stearns) are having issues with subprime mortgages

3) Despite what the National Association of Realtors says, the housing market seems to be taking a slow and steady turn for the worse

4) Major Banks have tightened their lending policies

Lets take an example of a typical transaction before the subprime fallout. A low creditworthy borrower applies for a subprime loan. Some intermediary or mortgage broker, supplies them with the best loan for them from either a bank or a conduit lender. The bank/conduit lender then sells the loan to an investment bank (like a Bear Stearns or Goldman Sachs) to free up more money to lend and to remove the risk off their books. Finally, the investment bank packages this loan in the form of bonds that investors looking Read more