The economy is dead, long live the economy!  Subprime schmubprime.  There is a problem in the commercial real estate financing world, liquidity, but it's not at all comparable to the residential world's woes.  In fact, Torto Wheaton (the research group now owned by CBRE) in tracking markets across the country came out with a report on Friday a week ago that noted that warehouse space demand in the US is actually stronger now than a year ago!

That's not to say it's all great, they did say that only 12 of the markets they track (of over 50, maybe even more) were down in 2007 from 2006, but that is mostly likely I think to the fact that the warehousing and bulk distribution models most large companies are following are in a state of rapid change.  Intermodal transportation was not a word on everyone's lips 20, even 10 years ago, but it's the word-of-the-day among industrial real estate brokers, developers and investors. 

In short what's going in warehousing and distribution is that the Wal-Marts of the world are going to even fewer, larger distribution hubs, and they are becoming more aligned with mass freight transportation hubs.  That primarily means port cities like Long Beach and Miami, but also railroad hubs like Chicago and Kansas City (Chicago, incidentally, is the world's 5^th largest port, we just don't use Lake Michigan to take delivery of anything but iron ore - it all comes in by rail). 

The office market, too, has remained relatively strong, with rent fundamentals remaining very encouraging in most major and even minor markets, but transaction volume for investment sales (unlike leasing) has slowed to a near halt, particularly in secondary and tertiary markets while investors figure out what's going on.  As one client of mine put it the other day, they don't care as much about missing out on the market going up 5% from here before they get back in, as long as they don't make the mistake of being in now and seeing it go down 20% before we know it's safe again.  As a higher leverage buyer, a 20% value drop for them would wipe out 80% or more of the value of the equity they had in a deal, pretty detrimental to investor returns! 

Not everyone is on the sidelines, though.  CoStar reported last week that something like $39 billion in "vulture fund" money raising has already taken place for those sharks circling for opportunities to bite those in trouble.  This is in addition to the $71 billion (yes, folks, these are numbers with a B) that private equity groups raised in 2007 as reported by the Private Equity Real Estate (PERE) weekly newsletter on the following day.  There is a lot of money out there to buy commercial investment real estate and most market watchers are seeing that as buoying the market, even in the current liquidity crisis (who is lending money these days?!).  The pundits are split, though, as to whether that just prolongs the correction or whether it actually helps prevent it (remember the old "soft landing" thing Alan Greenspan always looked to achieve?).  I am with the later group at present, as there is so much money out there it would take a true, sustained recession to really take down the commercial real estate investment market at this time. 

One of the big question areas is hotels, one of the hottest asset classes in the past 18 months.  If the economy were to tank the travel and lodging industry is always hurt, but returns and growth of RevPAR and other metrics have been so strong it's hard to keep people out of the market for these assets right now. 

Foreign interest is especially high now, since the dollar's decline makes everything here seem cheap vs. historical averages, as long as you're holding Pounds, Euros or pretty much anything other than US Dollars.  Even the Canadian Dollar is pretty much on par with the greenback.  My entire life memory it seems we could just use 70 cents on the dollar for Canada.  No longer.  The tough part is that US investors really can't afford international real estate investments, just when those markets are really taking off.  The flip side is one might argue that it's never too late - who knows how far the dollar could decline and for how long.  If you like the dollar's chances, hedge against the currency risk, but look at foreign markets, because they have been very strong for the past two years, and show no sign of abating.

Here's a bright spot - I just got quoted 175 to 200 bps over 10 year treasuries for an 80% LTV loan on a $70MM office building.  The 175 deal is for 5 year fixed money and the 200 deal is for a 10 year term.  With where interest rates are now, that's pretty much back to where the CMBS market was giving away money a year ago before things went haywire.  Those quotes included 2 years of interest only, something everyone said was never coming back - and here we are 4 months later and it's back aready!  The reason is that spreads like that over US government bonds are great yields for insurance companies and others that have to invest their money somewhere and in this interest rate environment aren't getting any yield out of bonds.  Are the lenders really back yet?  No, I don't think so, because this was a loan for a building that was mostly leased for 8 years or more, with below market rents (and a way below replacement cost price per square foot) and for a strong borrower, but still, I think things are indeed proving we're not in horrific shape. 

The other tactic smart borrowers are employing right now is short-term debt placement - 3 year deals at even better interest rates because of the short term.  They are less risky for the lenders and let the borrower assume that in 3 years things will be much better for long term financing again.

I don't normally post pictures this big but this one needs it.  It's pretty clear where the red zones are here:  CA, NV, AZ and FL.  This is the 2007 foreclosure rate map for the entire United Stated (by county I believe).  All of OH, half of MI and most of TN and CO are also pretty hard hit.

I'm not sure the cause and effect on CO and TN, but the OH and MI problems seems to stick out here as the steel belt, er, rust belt.  In the commercial world I have not looked at Michigan in a long time because long before the subprime crisis it had alreayd been blacklisted by most lenders for commercial properties.  Other than that, it seems that it is clear that there is a notable concentration in urban areas compared to rural counties (there is next to nothing of note in the strip that runs from ND south all the way through TX to Mexico).  I guess farmers didn't get so caught up in this subprime mortgage craze...

The map is courtesy of Torto Weaton, the research arm of CBRE, though they aren't the original source, they just added to it.  Their addition to this map that is not residential related is those 12 black down arrows.  They are the only industrial real estate markets in the country that are down from 2006 in Torto Wheaton's rent index.  That's a big difference from the residential market, whre there is a lot more red on this than those black arrows.  The commercial market continues to hold up reasonably well, especially for rental rates, even despite a liquidity crunch in the lending markets.

I have somewhat given up on REALTOR.com and whether they will ever have a definitive, market leading direction.  It seems to me that this site is the worst-leveraged repository of information in the information age's internet real estate site boom.  Of course, as an NAR member this is not very encouraging.  It seems a classic case of the aircraft carrier unable to maneuver in a war of nimble destroyers and gunboats.  Of course, I've so long ago written this off that it's possible something monumental has come out recently and I'm not aware.  It's interesting that Fred Miller's recent post of the letter from Mike Long (CEO of Move.com, NAR's partner in charge of R.com) is dated a year and a half ago and quite frankly, for a lot of text, doesn't really say anything, so I guess it should be no surprise that it hasn't turned into anything in the time since its drafting?

The competition certainly seems to have managed to grab the eyeballs of the internet-savvy real estate curious public.  However, that doesn't mean those guys have yet found a way to make money off that, and I'm not sure how many of them will survive long-term, even those that have gotten the best recognition (on this site that certainly means Zillow and Redfin), but that's what this post is about. 

Is REALTOR.com all washed up?  I don't think so.  For all the lack of direction that R.com has taken, it still gets millions of people a month and it still has the most vast inventory of homes available and of market data, the later of which is (to my knowledge) still not being used by the site. 

There are invariably going to be multiple sites out there with strong niches carved out for themselves, and no one site can ever be all things to all people.  Is there a way to be both big and small?  I think there is.  Here is just the most simple start of the answer:  incubate and sell.

1.  Incubate.  With $100 million or something like that certainly Move.com/R.com can use a few million here and there to start a few smaller, niche sites, sites that operate separately, but with the support (financial and otherwise) and most importantly, access to the data of R.com.  If you can't beat ‘em, join ‘em, or in my opinion, even better - OWN them (or at least a big percentage share of them).  That's not to say that R.com should become an internet incubator as a primary business line, but given the huge name they put behind a project it will immediately give it additional credibility to get outside venture capital, the single biggest hurdle these companies face before they find a way to actually make money off eyeballs.

2.  Sell.  Why are we as REALTORS all paying to have R.com service when it should be paying us for what we give it - all its inventory (homes for sale) and all its data (historic sales information).  Why is the Zillow Z-Estimate based on flawed information when all the real data is already sitting in the regional MLS systems read to use (that means sell) and it's almost without flaw.  Is this just too obvious or is there a gaping hole in the business plan that doesn't leverage that?  There are ways to tie in even to Redfin and those like them (don't stone me for this!). 

Why did it take Point2 to create the first national MLS, when REALTORS have had the MLS system in place for the longest time - it's an embarrassment if you ask me.  I'm not sure, but I'd guess it's still not too late to partner with them to do one or both of the two themes above.  At least that would be going with a proven winner that seems to have a plan, since I think they have well over 100,000 real estate agents now in the US and Canada, who get a lot more from Point2 for their money than they seem to get from R.com.

R.com leadership is instead taking that site and information the way of the Detroit auto manufacturers and the steel industry leaders of a generation before them.    What both of those industries have seen is that by the time they got (or get) their act together, the world long ago passed them by and they can never regain what they were, ever.  The NAR is the largest trade organization in the country, but it's strategic technology partners seem to be taking it the way of the dinosaur rather early on in this "battle" for the internet solutions to residential real estate, while all its members sit here on AR and elsewhere night after night carving out their own niches all alone because their leaders have left them to the wolves.

PS - late add:  I just read Lenn Harley's recent post on the now-banned use of the phrase "MLS" by REALTORS who are members of the MLS they are effectively promoting when they put an IDX link on their websites.  This is from the NAR, not R.com but in this case it's effectively the same issue...guys you are going backwards, not forwards. :(

Illinois homeowners and brokers/agents beware, there is a new radon disclosure form required of ALL sellers in the state as of January 1st, 2008.  The new Illinois Radon Awareness Act goes into effect just as you're toasting your friends and singing that corny old Auld Lang Syne song.

Furthermore, before a buyer will become bound on a contract to purchase real estate the seller will be required to provide a pamphlet entitled "Radon Testing Guidelines for Real Estate Transactions" and the "Illinois Disclosure of Information on Radon Hazards," (sellers, get it from your agent, agents, get it from your broker). The pamphlet is provided by the Illinois Emergency Management Agency Division of Nuclear Safety. That's interesting, and scary - the nuclear people are in charge of this - maybe there's more to this than they are telling us?!

On the carbon monoxide detector front, for more information, here is an article on that law which went into effect on the first of the year (yes, 2007).  CO detectors are required effective that date in ALL homes in Illinois (rental, owner occupied...ALL homes) and must be within 15 feet of every room used for sleeping purposes. 

"But what if I live in a high rise?" you ask.  There's good news then for you.  There are exceptions to the rule.  As per the article "The law exempts residential units that are in buildings that: (1) do not rely on combustion of fossil fuel for heat, ventilation or hot water; and (2) are not connected in any way to a garage; and (3) are not sufficiently close to any ventilated source of carbon monoxide. Buildings that have electric heat are exempt."

For everyone else, not having one is a class B misdemeanor.  Tampering with or removing one is a class A misdemeanor.  I asked Enoch and angel and none of us know what a class B or a class A misdemeanor are, but they don't sound nice.  If you're not exempt, you'd better shell out the $20 - $50 (per detector) and get them installed.  Of course, I doubt the governor has a special task force of CO detector police going house to house, so I'm sure the most likely legal targets are owners of rented homes and apartments.

(Thanks to Madlantern for the burning house clipart.)

The cry for some sort of mortgage relief for troubled borrowers is everywhere.  Apparently all the subprime homebuyers in the US are in California, or at least they are the largest group to catch "bail out" fever, but then, what can you expect from a state that is so communistic it is oft referred to by its own citizens as the Peoples Republic of California.  What a place: beautiful weather, flashy cars, ever-rising real estate prices and when it all goes bad, just get together and scream and you don't have to own up to it.  Sounds like fantasy world to me.

As I noted in my last post, all this hubbub is about less than 1% of the homeowning population in this country.  You could have fooled me, I would have thought the entire country was going into foreclosure!

I'm not at all callous, I do know what it's like to worry about making payments, and in fact I feel quite bad for those in a pinch, no matter how they go there, but that doesn't mean walking away from your responsibility or expecting someone else to step in to clean up your mess.  Sometimes life takes unexpected turns for the worse.  Only in this generation, and seemingly only in this country, does everyone seem to feel that when that happens it's okay to just throw up your hands and file for bankruptcy or to expect everyone else to bail you out, be they wall street investors, the Federal Reserve or fellow taxpayers.  Whatever happened to a sense of responsibility? 

I think it's funny that I didn't get any checks from all those people selling homes in California in 2005 for double what they paid for them only two or three years earlier, yet they want people like me, again as an investor or as a taxpayer or both, to now step in and "rescue" them.  Here's a novel idea if your mortgage is $400,000 and your house is worth $300,000 - keep paying your mortgage and keep living there and move on with life.  So what if you're underwater on the loan, does that mean the house suddenly doesn't work for you?  It must still work for you if you just want the lender to take a writedown to $300,000 as one of the ideas Robert Kerr suggested on Brian Brady's Bloodhound Blog plays out, since you'd stay in it if the mortgage was only $300,000, right?  Hmm...

I think my grandparents on my dad's side owned the same house for about 50 years.  I'm sure it had great appreciation over time, but I'm equally certain that there were a few down years in there as well.  I don't remember the stories about how the Federal Reserve came to the rescue.  I do remember from many a person that went through the Great Depression, stories about bread lines and 18 hour work days - when they could get work.  How different in contrast is this subprime "disaster"?  On the radar screen of horrific events in the lives of the American populous this doesn't make the list, not even near the bottom.

Here's another conundrum I'm stuck on.  If the issue is people that bought homes with nothing down and can't make payments now, how is going through foreclosure such a horrible thing - are they really worse off now than before?  That does sound callous, I know.  Think about it for a second, though.  If they didn't have a home before, and have nothing invested in it (remember, nothing down), then they don't lose anything in being foreclosed on do they!?  Again, it's almost fantasy land.  Their already-bad credit will take beating, but then, it should if they don't want to own up to the financial responsibility they signed on for.  Last I knew that's actually what a credit score was supposed to indicate - how likely they are to not live up to their financial responsibilities.  Best of all, when the long foreclosure process finally ends, after they haven't paid a dime for six months or more to have those nice digs (which invariably they will trash before moving out) they get to go back into the rental market at a time when oversupply in the for sale market has been lowering rental rates.

This is especially relevant because as I noted to Lenn Harley and as Carole Cohen wondered, this is something of a local situation in some markets, but not in any way a national crisis or equally applicable to people in all areas of the country.  May G-d bless us to not have to ever face foreclosure ourselves, and may those in authority have the gumption to handle this fairly - for all involved, not just to make less than 1% of the population happy because they were irresponsible in their borrowing and spending habits. 

This particular blog is about the residential real estate market, but I'm borrowing the title from an article last Friday by Torto Wheaton Research regarding the commercial real estate market, in comparison to the "woes" of the residential real estate market.  The article noted that other than sharing the words "real estate", the two markets share little or nothing in common.  But it begs the question, is the residential market really woeful - is it really crashing or might it be smooth skating?

An interesting interview in this month's REALTOR magazine with Lawrence Yun, the NAR VP of research suggests quite a different perspective, and almost upbeat one (though the NAR is known for that).  While August foreclosure rates nationally were at their all-time high of one for every 510 households (that data is from a different magazine, the Illinois Association of REALTORS Magazine), Mr. Yun's presentation of the numbers is compelling.  Despite existing home sales down seven percent year over year, they are still on par with 2002, which was not a bad year by any measure. 

In fact, the NAR data shows that two-thirds of the markets they collected data in showed positive price growth in the third quarter, besting the second quarter's one in every two markets.  More importantly, in the markets with price declines, most were down only one or two percent, with only a few markets in the country seeing five percent or greater price declines.  It seems overall as though the corner has been turned.

The looming, in progress or perhaps already past disaster that the subprime lending market fallout is supposed to have created seems rather minimal by Mr. Yun's count.  Only nine percent of all borrowers fit into the subprime category and only a scant five percent of them are in trouble, so less than one percent of the market is really in a pinch (using the earlier statistic, one in 510 is only two tenths of one percent, hardly worth mentioning).  That, the NAR estimates, will result in about 200,000 homes nationally coming back to the market through foreclosure.  Given the four million homes on the market, the result is a net increase in supply of only five percent, not exactly cause for great alarm. 

What's more, he points out, is that there have been 4.3 million net new jobs created in the past two years and historically that should translate into demand for over two million home sales (roughly one for ever two net new jobs) and that has not shown itself, so whereas some pundits might say there is pent-up supply (would-be sellers that haven't put their homes on the market because it has been perceived as soft), the NAR actually projects there to be a lot of pent-up demand, rather encouraging.  The only problem is getting those people into the market and that, we understand from Mr. Yun, is not happening because of the general media-fueled perception that the market is in the tank.

But for that, nothing could be much better for a buyer: prices are moderate, especially given lowered seller expectations, and interest rates are near historic lows.  Apparently the old adage is right, though, perception is reality.  Given the general media bend towards sensationalism, one could hardly expect anything but tales of woe, which as things become more obviously positive, will surely overnight become stories of market bullishness and price spikes.  It's whiplash for the consumer (and that's Snidely Whiplash on the right).  The smart advice:  if it's time to sell, don't panic.  It might take a while, but the market is there.  We saw four of the highest priced residences in our building go under contract in a two week span in the last month.  If you're a buyer, I'd say get in while the getting in is good, at least as I see it in the downtown luxury Chicago residential real estate market, and by the numbers, that's not dissimilar to much of the rest of the country.

Here's an interesting trivia question: how can you use an in-place credit line, at a great interest rate, and not at all impact your credit scores or even have it show up on your credit report?  The answer is to borrow from your life insurance policy or policies. 

I'm not much in favor of living much on credit to begin with if it can be helped, certainly not as a way of life, but a sudden great need for credit is just when this makes the most sense - when someone who maintains very healthy credit scores needs to borrow something short term, doesn't want to do so at credit card type rates, and doesn't want to hurt that long-defended credit score. 

As an example of when this might make lots of sense, maybe you live in a condo and don't own a parking space or want a second space to go with the unit and there is one available to purchase.  In downtown Chicago that will run you as high as $50,000.  For most, it's not something you can or want to put on a credit card and refinancing your home to do this might not make a lot of sense, yet most people don't necessarily keep a lot of cash around in their checkbook to seize this opportunity when it comes up.  Perhaps an even better example is the extra amount you need for the down payment on a retirement home or to lend your son to buy his first place.

I can't speak as a loan officer and this is just based on my personal knowledge and understanding, but with relatively little paperwork and hassle, no review or qualification necessary, and almost no time (inside of a week) you can have a loan off your life insurance policy or policies, almost to the full amount of their cash value.  As long as you have had them in place for several years, no doubt those policies have some value.  For most people these policies are only thought of as a source of savings during a desperate thought of cashing them in at some point in a financial crisis (don't do that - remember you can borrow almost the same amount from your own policy and keep the policy in place).  Best of all, borrowing from them does not show up on your credit report (it will reduce their value on a personal financial statement, though) and the interest rate will probably be around 8%. 

There is generally no time-specific requirement for paying back the loan(s), though you will have to pay the interest they otherwise should have accrued at least once per year.  As with all borrowings, of course I will always advocate paying them back/down as soon as possible, even if that means the discipline of establishing a forced monthly payment for yourself. 

If your policies don't yet have much cash value (common if they are small policies or relatively new) a good way to build the cash values up over time is to use them as a forced savings plan by contributing something extra each month or year to overfunding them, which most policies allow - the extra moneys of which are all automatically invested.  Tax planners will tell you that you later have a great tax-free income source in place as well, since the borrowing against future policy values (when years from now they have very large cash values) is all tax free "income" that really never has to be paid back if you play it out so far that you ultimately jus t wait until death for the policy's death benefit to pay off the loan and whatever is left goes to your estate. 

Next time you need a low interest, off-credit loan, dig up your life insurance statement and see if there isn't one already approved and waiting for you.

The financing market for commercial investment real estate turned close to upside down in July and August and it's hardly gotten around to righting itself.  I saw an article recently by the chief economist for the international brokerage network NAI saying that typically these things take about 18 months to correct. 

All is not horrible, though (unlike the housing market in many places around the country, like Poinciana, Florida).  Most larger institutional owners (REITS, pension funds, and the like) only leverage 50% to 65% anyway, and those guys can still get loans quite easily, even if the spreads have gone from 110 bps over treasuries to as high as 200 over since earlier this year.  At least T-Bills are DOWN overall, something I predicted rather astutely in a CoStar article earlier this year (sorry, hyperlink not readily handy) that became the third most read article to date for them.  The market has definitely been effected, though, by the debt market moves, particularly deals that were being driven by the high-leverage players that were living on 80% or greater LTV deals with low interest rates and long interest only (I/O) terms, even 10 years.  A correction was long overdue for sure (who thought of 10 year I/O debt at 90% LTV anyway...like property values never go down? - must have been somebody not long in this business).

So how do you get a good deal in a bad lending market - just buy deals with the loan already in place.  For the longest time CMBS ("conduit") debt has been the biggest potential burden on deals, with large defeasance costs to get rid of wrong-sized debt hurting deal pricing (where the debt that can be assumed is too small on an LTV basis for the sale price because it was put on at a higher LTV in the previous purchase but the property has appreciated significantly since then).  If there is only a few years left on good debt the benefits can be minimal, I admit, but for those more confident in the normalizing of the debt markets in 1-2 years, even a very short term in-place loan can be a long enough bridge to a better future, especially if there is a value-add play on the property that would normally encourage a refinancing a year or two or three into the deal anyway.  It's nice to pick up a deal in today's market with an in-place loan with an interest rate in the low to mid 5s, when the market is a point higher.  Since I/O has almost gone away, those deals that had gotten through that period and started amortizing are no longer looking as ugly to assume the loan on as they were 6 months ago, either.

In fact, in the right situation, suddenly this market gives deals with in-place financing a huge advantage over deals that are free and clear (or where the debt is so wrong-sized that it doesn't matter).  Finding those deals doesn't just make it easier to get to closing, it makes it easier to offer better terms overall.  That doesn't necessarily mean just pricing, though that is relevant, but especially important is the ability to make an all-cash/non-financing-contingent offer knowing the financing is already in place (all this assumes, of course, that the financing is readily assumable as it generally will be).  Shorter due diligence and closing timing means a stronger offer to a seller every time.

The only buyers that don't get to reap this benefit are TIC (Tenant In Common) buyers, who can't assume traditional debt, whether conduit or balance sheet debt, because the loan servicer will not allow a TIC ownership structure to have up to 35 separate owners jointly assume the debt if it wasn't created originally that way.  The next market cycle, though, I fully expect the lending market to have gotten over the TIC assumption issue and I figure it is only a short time before a TIC ownership structure can assume existing non-TIC debt, or at least there will be a hybrid debt model that comes out that will allow that and eventually force others to follow suit, as that industry continues to grow and become, potentially, the next REIT phenomenon.

There certainly are regional differences in protocol and whilst Bermuda shorts and a Tommy Bahama shirt might be de rigueur in, well, Bermuda, they certainly can't pass for a showing in Manhattan.  That said, regional and cultural differences aside, I think there has been a substantial lowering of the real estate industry's sense of class and professionalism over the past few decades.  Despite my example, this is hardly relegated to dress.

Anyone that reads blogs here or elsewhere at all knows that REALTORS may be the largest trade organization in the nation, but real estate agents as a whole are also one of the most maligned and disrespected professions in the country.  That's pretty sad, since few people in this country have not used a real estate agent at least once for a purchase or sale of a home, or even a rental of one.  Perhaps if the industry were a little more professional, in so many ways, this would not be the case. 

I subscribe to the Internet Crusade group's (Saul Klein's gang, the guys that do the e-Pro designation) RealTalk Digest.  There was a debate that must have gone back and forth for two months recently about dress code alone as it related to professionalism in the real estate industry.  I should note that there was certainly no consensus of opinion on what really constituted professional dress, not even close.

Our own beliefs and lifestyle aside, there are an awful lot of people in this country that seem to wish things were more like they used to be, and I don't think proclaiming a dedication first and foremost to Jesus is a part of most of their opinion bases.  My life companion, angel, and I wear formal hats when we are outside.  No, it's not just a Jewish thing, it's a gentlemen thing.  You might have heard of a gentleman - or perhaps you (or your parents?) can even hearken back to the days of Carey Grant and the like, when men wore hats (and so did women) and gloves, and suits, even when they were digging up someone's back yard to bury something (like a body - yes, even the murderers had class back then!).   Back to the story, those in their 40s, 50s and older smile and often compliment us on our hats, whereas those in their 20s and 30s have told us we look "peculiar".  That last comment came specifically from a whore who lives in our building, is a medical doctor, and runs around looking like a two bit hooker.  To quote a line from a movie of a younger generation (Ferris Bueller's Day Off) "I weep for the future."

Getting away from just the dress thing, how about not cussing all the time on the phone, does that really make you cool, or as "powerful" as Gordon Gekko in Oliver Stone's "Wall Street"?  Here's another - return any phone calls or emails you get, even from the competitor you don't like, within 24 hours.  If you can't do that for everyone, at least do that for all your clients and prospects.  For some reason this seems a rather foreign concept to a lot of people in the business, especially the younger generation (the 20 somethings and 30 somethings).  Here's yet one more - show up to all your appointments five minutes early...not 15 (that, too, is rude) and not one minute late, but just in time to be settled down in case the person you are meeting with is ready on time.  And can anyone really say they think it is professional to go into a meeting just after they finished sucking down a cigarette? 

One last one I can even say I'm guilty of having to fight myself at times in the days of the mobile phone - when touring with one client, is the next client or prospect really so much more important than the one you are with that you have to take their phone call in the middle of someone else's sentence?!

So many people today seem to want to make endless promises, but deliver rarely.  What ever happened to under promise, over deliver?  It's a very simple concept, a combination of managing expectations and just plain old being true to your word.  I can speak from more experience than my years should indicate that this will save you an awful lot of explaining when things go wrong and you can't meet expectations, because clients, even other agents, will not believe that it was your fault (even if it was). 

Here's another I'm adding after the original blog post:  is it so hard to say "thank you" and "you're welcome"?

This topic is one that could fill a book, so I saved most of the filler for people to comment, because I just wanted to throw out a few starting point peeves of mine as it relates to professionalism.  Being professional is something of a lost art, if you will, to me, and one that could sure stand a good strong comeback.

This is not about the quick fix 20 point boosts by a Rapid Rescore or any tomfoolery, this is about the long-haul and how to maximize your credit scores over time.  No, that's not my screen shot to the left, or at the bottom of this post!

Start at the beginning:  for those that don't have a copy of their credit reports, Annual Credit Report is a site sponsored by all three monitoring bureaus, which is (in effect) federally mandated, and will give any consumer their credit report from each bureau for free once a year.  They don't give out scores though, only the reports that lead to the scores.  My Clean Start is a service that offers for-fee additional products, but also has a free service to get a free credit report and score every 90 days from an unnamed bureau (at least on their front page it's not named, but since it references the FICO score, I suspect it's from Equifax, who generates the FICO score through another company of theirs, Fair Isaac).  I thought there was a way to get this free once a year as well from My FICO but I haven't seen that jump out on their site lately.  When you get them take a good hard look to make sure things are accurate (like there isn't a collection on there you actually paid off or your mortgage company is reporting you are late on a payment when you aren't).

Disputing errors:  the three credit bureaus are Transunion, Experian & Equifax.  All three now have ways on their sites to dispute errors in any credit report.  In my experience, changing a consumer's bad payment history is hard to do, if it is the reality of what happened.  However, there are lots of things often on a consumer's credit report that are wrong or that the consumer just doesn't know about, like the department store credit cards they opened in college and don't even have or use anymore, but still show as open on their credit reports, which can be detrimental to their scores if it results in too many open accounts. 

In my experience, since the advent of recent legislation forcing the credit reporting bureaus to make their information more transparent to the consumers they hurt (help?), they have made internet-based disputes of errors on the credit reports much easier to take care of personally than to waste money on a credit repair service.  Most (not all) of what I know those credit repair services to do (for a large fee) is just dispute any bad credit report issue, and in some cases actually get it removed even if the reported delinquency was correct, such as a late payment from a credit card company, because the creditor doesn't always reply to their investigation in time to validate their original delinquency report.  However, this is also a more difficult strategy to get away with today than it used to be, because most of the credit card and other credit companies have fully automated this and their systems automatically and immediately reaffirm the delinquency report to the bureaus, so they never miss the 30 day response window that gets you off free.  Start by calling the credit issuer and asking them to fix it and if they won't, just protest it with each bureau online (see below).

The only way to really get something legitimate removed is to beg (I'm serious) -  call the individual creditors and try to get them to remove records of things such as late payments from their systems (a surprising number of them will agree to do if the consumer has a good track record otherwise, especially since that happened). 

Fixes you can put in place today:  each credit report should indicate the account number for each creditor and the contact information for the creditor, making it pretty easy to close unused accounts (or to pay off unpaid accounts that the consumer didn't even know existed, which happens a lot after someone moves and doesn't notify every creditor).  Closing and consolidating accounts, making sure payments (going forward) are all on time and correcting factual errors in a consumer's credit report are probably the three most effective ways to raise credit scores other than the obvious - pay down high balances. 

One big mistake people make is closing too many accounts.  That's right, if you don't have some accounts open it will hurt you, not help you.  The other thing people often get wrong is closing the old accounts and keeping new ones.  Bad move - the credit reporting agencies score you higher for long-seasoned accounts.  Close the new ones if you can.  If you want more credit, ask the old accounts to increase your credit lines (it won't hit your scores the same way a new account opening does) and close the newest accounts if you can.

One tip I have seen proven is that paying balances down to below 35% of their maximum is beneficial to scores.  Therefore, it is better to pay three different credit cards down to 35% than to pay off one completely and leave two with higher balances.  I think 50% is another hurdle on the way to 35%.  The point is this:  it's better to have several open accounts with small balances than several with zero balances and one with a high balance (as a percentage of the available credit for the account).

Another good tip is to opt-out of receiving unsolicited credit or insurance offers.  This alone can boost your scores as much as 20 points, as well as cut down on all that third-class "junk" mail you get at home (another benefit being that there is less for trash snoops to dig for and steal your identity information).  To do so call (888) 567-8688 or go to the online opt out registry. I understand that giving your Social Security number and date of birth are not required to process the request, however, these may ensure that the request is processed properly.  This opt-out is good for 5 years.

Going forward:  Subscribing to a credit bureau credit monitoring service (we like Transunion's TrueCredit 3-in-1 service with the scores) will usually provide not only credit reports and/or scores, but suggestions on how to improve them as reported by the credit bureau(s).  All three offer individual programs that monitor only their own credit reports and also offer 3-in-1 reports that monitor ones credit scores and reports from all three bureaus at a time.  These can be updated as often as every 24 hours.  There are different rates for getting one report vs. all three and for getting scores included instead of just the reports.  The whole enchilada costs $15 a month for all three plus the scores, not too steep for its value.  Note that the scores these monitoring services show are consumer scores, and for mortgages they each provide a slightly different score that cannot be monitored the same way (for example, FICO is the mortgage score that comes from Equifax, but will not be the same as the Equifax consumer credit score).  Just by subscribing and regularly checking your credit score/report you will almost certainly see your scores go up.  Why - they give you points for being credit conscious, and checking your scores through one of their (paid) services counts as doing that in their eyes.  Of course, the cynical might note that they are giving points to those that pay them money every month, but welcome to capitalism.

Also, the monitoring services also provide a nice feature that includes email alerts when someone has checked or changed something in a credit report.  This is helpful for a consumer to know if something got corrected, or more importantly, got erroneously reported wrong, or even to know if their credit is being checked without their permission or knowledge, since the frequency of the checking of one's credit by creditors or potential creditors is also punitive to credit scores (to the tune of about 3 points per bureau per credit check).

Whether you have been the victim of identity theft or not, I like keeping a fraud alert on my credit report.  Any credit bureau will put the alert onto the other two reports.  I use (800) 680-7289, which is TransUnion.  This only lasts 90 days at a time but will post to your credit report within a day and then lists your designated phone number for anyone that might issue you credit (or issue credit under your name inadvertently to an identity thief) and they will call you at that number before any new accounts can be opened in your name with your information.  If you have been a victim of identity theft, you can extend this for seven years, but you have to have a police report to get that put in place.

The last note to this long post is this: use your available credit, at least once in a while.  If you pay your balance off in full every month the day before your statement comes out you might think that will help your score, always being reported with a low or zero balance...not so.  My scores recently were on a bit of a plateau and then I used one card for a huge amount of purchases over a month or two.  After the second month of showing a sizeable balance (even when repaid in between) my scores went further UP, not down.  The agencies don't want you to have no use of credit, they want responsible use of credit.  (originally posted on Enoch's Blog on Angelic-RE.)