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

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

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

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

From a recent Realty Times article by Ken Harney comes this report of the rise of investors as buyers in the current market

The quarterly "homeownership survey" by realty information firm Move.dot.com found that one of every eight buyers last month was an investor - someone looking to acquire property at a favorable price, planning to fix it up, rent it out or resell later for a profit.


The investor ratio is up from just one in 20 buyers as recently as March, and represents a huge turnaround in Americans' attitude toward real estate.

Buyers who target foreclosure sales are particularly active right now, according to the study, and account for 25 percent of all consumers looking to purchase houses.

Among these foreclosure buyers, fully 42 percent are investors. Thirteen percent say they're buying properties to convert into rentals. Eleven percent intend to rehab them and sell them as quickly as possible.

And interestingly, 17 percent say they plan to let a family member live in them for an extended period of time -- until market values have rebounded enough to sell the house at a substantial profit.

Certainly I see this in my market, especially with houses that banks have marked down to "dump it" prices. In that case I also see a lot of sleazy Realtor deals, too - those sales that take place just after a property comes on the market or just after the latest price reduction that somehow go to the friends and family of the listing Realtor, even if there are multiple offers. We've likely all hit those stinky deals. The recent HUD rules on giving potential owner-occupants first dibs on sales may help some, but the real sleaze-bags in our business will figure out how to get around that, too. Until such time as we get more transparency into real estate deals there will always be "Playa's" scamming the system.

Those clowns aside, I guess I don't see anything wrong with professional investors (and investor groups, which I see a lot) taking some of the excess inventory off the market. There seems to be lots of investor money out there right now and they are buying up some of the real dregs of the market, so more power to them. I do get a little concerned with the many amateur investors that are out bidding on houses. I know that they think they have done all the right homework - will the place cash-flow and all that - but many just don't have a realistic picture of the cost to fix up some of these places, so that they can be rented or flipped. It's from this group that I see the most "boomerang houses" - those that go back on the market within 6-8 months with half-finished fix-up projects.

I think that what some of these investor groups need to do is to put many of these properties back on the market as land contract deals. The investors could make great interest rates, if they would take the risks involved (and after all they were taking a risk on the initial investment). What they would find is a fairly large group of potential buyers, most of whom just went through a foreclosure, who now have steady incomes and manageable debt loads.

What a sweet deal, if some investor who has picked up a house for 20-30% below market value can now turn around and sell it for near market value at an above market rate interest rate. It's sort of an investor double dip. If more investors pursued this idea they would also be helping some of the thouands who have gone through the misfortune of foreclosure on their homes. Maybe that idea will catch on; however, it's probably too slow of a return for these fast movers, who have never been know for helping anyone but themselves.

As reported in a Realtor News article from their Source: The Wall Street Journal, Ruth Simon and James R. Hagerty (11/24/2009), more than 23 percent of people with mortgages owe more on their properties than they are worth, according to a report released Tuesday by research firm First American CoreLogic.

Another 2.3 million homeowners are within 5 percent of being underwater, bringing the total of those who are upside down or close to it to about 28 percent.

About 5.3 million U.S. households have mortgages that are at least 20 percent higher than their home's value, the First American report says. Borrowers owing more than 120 percent of their home's value are the most likely to default, First American calculates.

The majority of underwater mortgages are in the following states:

 Nevada: 65 percent of homeowners are underwater

Arizona: 48 percent

Florida: 45 percent

Michigan: 37 percent

California: 35 percent

The report also notes that most U.S. homeowners have home equity, and nearly 24 million owner-occupied homes don't have any mortgage at all, according to the U.S. Census Bureau.

I can certainly add my own anecdotal take on these numbers. I do 2-3 CMA's a week for clients who request market analyses on their homes thru a Web-based service that subscribe to. Over the last 12-18 months almost every request that I received resulted in current market price numbers that are lower than what the public records show is owed on the property. Most of these underwater homeowners bought within the last 5 years, but many are long term owners who took out home equity lines of credit for whatever reason and now find themselves upside down on the debt vs. value of their homes.

It is tough and sometimes sad to have to tell owners that they can't get out of their homes to move for a job or retirement because it's now worth so much less than when they bought. For many the value of their home was a big part of their retirement nest egg, an egg now gone bad. For some the home they loved is now a ball and chain preventing them from making that move South for retirement or maybe closer to family. For others it is the thing holding them back from seeking work elsewhere, where jobs may be more plentiful than in Michigan. For many sellers these last 2-3 years that has meant bringing money to the table to sell their homes, so that they could move on. For some that has meant just walking away and losing everything that they had worked so hard to get. It's not a pretty picture.

One might think that the Federal programs, like the Making Homes Affordable program, would help; however, the lenders have not jumped on board that program and would seem to prefer foreclosure to doing loan modifications and workouts with strapped owners. So. While Wall Street and the big banks give themselves obscene bonuses, Main Street America continues to see hopes and dreams go down the foreclosure drain. It's got to stop somewhere, sometime and it may take a severe backlash and uprising of the borrowers to spur the changes that are needed.

I'm not necessarily a fan of bigger government, but the big players on Wall Street have proven over and over that they cannot police themselves and that greed always wins over common sense. The pendulum needs to swing back from the almost totally unregulated markets of the Bush years to something that allows for innovation and entrepreneurship without encouraging excess. I'm not sure that either of the political parties that we are stuck with have the intelligence or political will to find that middle ground. We shall see.

"Nothing is impossible. Some things are just less likely than others." (Jonathan Winters), from the Jack's Winning Words Blog. Like Jack, I always enjoyed Jonathon Winters' humor and remember his TV show. He made up some great characters to use in his comedy routines.

This week I'm trying to get two deals to the closing table. Neither is impossible, but one is more likely than the other. The one that is likely is one where we ran into a medical emergency that postponed a closing last week. Now we're dealing with overnighting documents back and forth and other issues that, while inconvenient, are certainly not impossible. The other was delayed at the last minute due to lender concerns with the appraisal and the hideous process that has taken hold since HVCC was enacted.

The HVCC law, which had the good intention of removing undue lender pressures from appraisers has resulted in a convoluted and not well understood process of dealing through appraisal management companies to insure an arms-length distance between the lenders and the appraisers. That has added cost and time to the process, as well as having the unintended result of some out-of-area appraisers being assigned to do the work and not having local market knowledge.

In my case the appraiser apparently turned in an appraisal that the lender's underwriter isn't happy with; so, the underwriter has ordered the appraiser to submit more or different "comps" to justify the appraisal (whatever it turned out to be). Normally that wouldn't be a problem, but in this case the original appraisal order took over two weeks to get done and the results took another week to get back to the lender and now they are ordering more work that will add a week or two more. We were supposed to close last week. The HVCC law was good in its intentions, but the bureaucracy that is had created is a nightmare. So it appears less likely that we'll actually close that deal this week...but not impossible.

Here's some "mixed blessing news" from a recent CNN Money story. The typical U.S. family earning the nation's median income of $64,000 a year could afford to buy 70.1 percent of all homes sold in the United States during the third quarter, according to a report from the National Association of Home Builders and Wells Fargo. The report relied on the government standard of spending no more than 28 percent on housing. In the same quarter of 2008, only 56.1 percent qualified.

The five most affordable areas are:

Indianapolis
Youngstown, Ohio
Detroit
Warren, Mich.
Grand Rapids, Mich.

The five least-affordable areas are:

New York City
San Francisco
Honolulu
Santa Ana, Calif.
Nassau and Suffolk, Long Island, N.Y.

That's great news...if you have a job, which some estimates for Michigan say would leave out about 20% of the population of Michigan. Interestingly enough, our estimated median income is higher than the national average at $72,591. (as estimated by Low-Income Home Energy Assistance Program (LIHEAP) Clearinghouse on September 24, 2009).

In another CNN Money article from April of this year they reported the county-by-county median incomes. Of course, Oakland County ranked high at $81,650, with Livingston County and Macomb Counties coming in at $103,385 (big surprise there) and $81,650 respectively. Wayne County clocked in at $63,020 and Washtenaw County felt the drag of Ypsilanti at only $60,605.

If one looks at the 28% of gross income for housing rule, you can see that people in Oakland County could afford homes with payments of about $1,900 per month, which would equate to a mortgage about $380,000. Believe me that would buy most of the nice homes on the market these days.

So home buyers have a very nice choice to make - either buy that bigger house now that you had on your wish list for the future or buy what you need now and sock the money away that you will save because of the lower prices and current low interest rates. Most financial advisers would likely recommend the latter course of action as a great way to save for the kid's college or other future needs.

The other good thing that saving the extra money would do for you is to give you a cushion of savings to fall back on, should something happen to your job. Too many recent foreclosures happened because the owners were living right on the edge, pay check to pay check, with no leeway for any variation in income. Any little loss of overtime or job hours or any health related issue that kept them out of work for a while, put them over the edge. That's why we are now seeing a wave of defaults in the Prime Mortgage space that is replacing the Sub-Prime as the biggest source of new foreclosures.

Of course, how people spend their own money is up to them. Let's just hope that most have learned something fro the crisis that we are still in and will make lifestyle changes to adjust to the "new reality". Maybe they could make a reality TV show about that. Naw...it's too boring watching people do intelligent things.

Last week's Business Week has a big, front page story about the impending wave of commercial real estate foreclosures that certainly is scary. The article talks about how many really big companies and really big, important properties are in really big trouble and how many will end up falling into foreclosure or bankruptcy in 2010. Great, just what we need, another tsunami of foreclosures and bankruptcies to help the economy along. The issues in that space are as complex and muddled as they were in the residential space, perhaps more so.

I can see this happening even in my little village, where "office space available" signs are all over and store fronts sit empty after businesses have failed. Driving around the area there are tons of commercial buildings sitting empty and starting to deteriorate. We have an especially large supply of old manufacturing sites that have been abandoned in Michigan, most from the automotive companies, but quite a few from other companies that have shipped manufacturing operations to China or elsewhere.

This is a problem that the Federal government might have trouble helping with. I can't imagine a "first-time manufacturer" program to subsidize factory purchases; although there are state tax breaks available to those willing to locate their manufacturing in Michigan. Many of the empty manufacturing plants have major environmental issues that future owners might have to deal with, too. That can be a deal breaker for a start up company that is just looking for a place to set up a plant. There is also a glut of both retail and office space available, which is a holdover from the giddy days of the building bubble in the late 1990's and early 2000's. The days of a strip mall on every corner are over, but now what are we to do with all of that empty space? The other big issue in our area is the huge negative impact on the tax base that will be caused by the expected 40-70% drop in commercial property values. A recent article in the local newspaper suggests that this is the issue that will sink several municipalities and school districts into failure. In Michigan, we have many small cities that are heavily industerial or commercial and they will likely go under when the tax money dries up from these sources.

Hopefully we can get through this next wave of real estate foreclosures without swamping the national economy again. There doesn't seem to be the stomach for many publicly funded bailouts in this space, at least not yet. We'll have to see if there are some commercial owners who are "too big to let fail." I can just see the outcry if we all end up bailing out The Donald or some other high profile commercial landlord.

In Michigan there are taxes levied on the sale of a house that are called Transfer Taxes - one at the state level and one at the county level. With lower property values due to our struggling economy, many homeowners have been able to take advantage of an exemption contained in the Michigan Transfer Tax Act. If a seller meets the criteria, they would be exempt from paying the state transfer tax. Following are the criteria:

- The property must have been occupied as a principle residence - classified as homestead property.

- The property's SEV for the calendar year in which the transfer is made must be less than or equal to the property's SEV for the calendar year in which the seller acquired the
property.

- The property cannot be transferred for consideration exceeding its "true cash value" for the year of the transfer.

For example:If the SEV of the homestead principle residence when acquired in 2005 is $100,000 and the current SEV on the property is $90,000, then the first two criteria have been met.

To establish the "true cash value" of the property, you must double the current SEV at the time of transfer. In this scenario, the true cash value would be $180,000. If the property sold for $170,000, then the 3rd criteria has been met of Exemption "u" as designated by the Michigan Transfer Tax Act.

Sellers who believe they may be eligible have up to 4 years from the transfer date to file for the exemption. It is also important to note that there are no similar exemptions in the County Real Estate Transfer Tax Act. The state transfer tax is the larger of the two taxes that are charged on a sale, equal to $7.50 for each $1,000 of the sale value; so, this can be a significant potential savings.

If you were a seller earlier in the year and didn't know about this exemption, you can still file a claim for it and get a refund of the transfer taxes that you paid on the sale, assuming that your sale meets all three criteria discussed above.

It is up to you as the seller to find out what the SEV was at the time that you bought the property, which you can do by calling the County Treasurer's office and having them look that up for you. They can also tell you what the SEV was this year at the time that you should, but you should already know that from this year's tax assessment notice.

You will be required to fill out an affidavit swearing that the information is correct when you file for the exemption; so, don't try to "game the system" on this, because the penalty is fairly severe. The law reads - "If after an exemption is claimed under this subsection, the sale or transfer of property is found by the treasurer to be at a value other than the true cash value, then a penalty equal to 20% of the tax shall be assessed in addition to the tax due under this act to the seller or transferor."

Every little bit helps these days; so, put in your claim, if you sold or are selling and your sale meets the criteria.

"I don't think anything is unrealistic if you can do it."  (Mike Ditka). Yogi might have put it slightly differently, maybe "Don't say it can't be done, if you can do it - just do it." Things that are sometimes labeled as unrealistic, such as personal goals in athletics or maybe business goals, are usually just stretches that one may not have bought into yet or may not believe are achievable. Many times the difficulties imagined in reaching an "unrealistic" goal are just that - imagined. Some people have an uncanny knack for throwing up imagined obstacles as a way to avoid even trying - they are usually labeled as pessimists. Some have just the opposite bent, imagining and attempting things well beyond their apparent skills or capabilities or perhaps in the face of great odds- these are the optimists of the world.

So, who is happier in the end, the pessimist who never tries because he/she believes that they can't accomplish some goal, or the optimist who may try and try and try again to reach a goal that remains just out of reach? There are a number of classic sayings that would lead one to believe that it is better to have tried and filed than never to have tried at all. The optimist even finds some comfort in the learning from his/her failures and continues to make adjustments to the approach or technique that they are using to achieve the goal. The pessimist might adjust the goal down to be in line with his/her performance or abandon the goal altogether.

So how are you dealing with the struggles that most are going through to achieve success in the currreal estate market? Have you learned and adapted and kept on trying, or have you given up and decided to sit out the recession and wait until the market comes back to you? Look around you and you will see both types of agents in most companies. Whom do you wish to emulate? Who seems happier to you? We can't all be unbridled optimists, but perhaps we can learn from them and try to emulate some of their traits and practices. Who knows, maybe some of that enthusiasm will rub off on you; and then you'll become a role model for some other struggling agent.

The little saying from Jack's Winning Words Blog for today is, "When it's dark enough, you can see the stars."  (Charles A. Beard). I had an initial reaction to that saying and then thought about it a bit more and came to a second conclusion.

The first reaction is the most obvious - to find something positive in any situation, like seeing a rainbow on a rainy day. The second was more real estate oriented and has to do with seeing who the real "stars" are in these dark days for Realtors. The gloom and doom that descended over the market a couple of years back has had the impact of clearing out lots and lots of would-be or pretend Realtors - those who jumped in thinking that it is an easy way to make a living or some extra bucks. Not so!

This real estate crisis has also brought down to earth many of the high-flying super teams and super agents, although the best of them have adapted and flourished through this mess. It has also created new "stars" of sorts - those agents and teams that jumped on the REO bandwagon and now represent most of the foreclosed homes in any area. Many of those likely will prove to be shooting starts, ready to burn out as son as the crisis is over.

Also created in this mess are what I would call black holes (to continue and already strained metaphor) - those sleazy real estate operators on the fringes who specialize in short sales and foreclosures, but not always to the best interests of the sellers involved. To be sure, these people always existed; it's just that the current environment encouraged them to become more visible and bold.

But amidst all of the darkness there are also real stars in the business - agents who are out there day after day honestly trying to provide counsel and help for distressed homeowners and helping buyers find just the right new home out of an overwhelming inventory. These agents aren't necessarily blazing across the sky; they just get out there every day working hard in trying times and keeping the Realtor torch lit in the darkness. It's not easy to be a Realtor these days and certainly not easy to make a decent living doing it. The easy thing to do would be to go find a "real job" doing something else; however, the stars of real estate have found a way to persevere through the current hardships and carry on. I salute you - the stars that brighten the gloomy darkness. 

That isn't how the song went in 1966 when The Left Banke recorded it, but it's the advice that a University of Arizona professor is giving in a recently published paper. The professor, Brent T. White, an associate professor of law at the University of Arizona, makes the case that our social mores, more so that any logic, forces people to struggle too long against the odds of their mortgage being severely under water.

In a move that White euphemistically labels a "strategic default", he argues that the playing field is too far tilted towards the lenders and that too few borrowers understand that defaulting is not the end of the world that they have been told. Certainly there is damage to ones credit from a default; but, White argues that borrowers have not been told the whole story about how to rebuild their credit and how fast that can occur.

White argues that borrowers are too focused upon the shame or stigma of a default to think clearly about it as the strategic thing to do, when they are severely under water. The fact is that it actually causes more damage to the owner to "hang tough" trying to find a way to salvage an impossible situation. Too often these people burn through their savings and maybe their retirement savings trying to keep up with rising payments from ARMs that have reset or to keep up a lifestyle, even after things at work have changed and income has dropped dramatically. White would argue that the pride involved in not admitting defeat and waling away may cause more damage than just giving up the house.

I must admit that I have become very disillusioned about short sales as a solution to the problem. In my estimation, short sales do no one but the realtors involved any good. The seller ends up with a blemish on his/her credit record that is almost indistinguishable from a foreclosure and the bank ends up taking less for the house. Only the realtors involved get anything positive out of the deal - their commissions. That is why I have shut down my short sale Web site. I just couldn't in good conscience continue to recommend this path to sellers who are under water on their homes.

So maybe a "strategic default" is the best way out of these bad situations. A deed-in-lieu offer to your lender at least puts you in the position of having suggested pro-actively the way out for both of you. It saves the bank having to go through the Sheriff's sale and saves the homeowner having to see his/her name show up in the local papers in the foreclosure ads. It's still no better than a foreclosure from a credit standpoint, but it can make the owner feel more empowered and more in charge of the situation. White also makes a strong case that there are actually financial benefits to be gained from walking away vs. staying in a bad mortgage situation.

The article by White is one of those scholarly tomes, with footnotes that about equal the length of the article itself. Here's the bottom line - if you bought a house in the 2004-2007 timeframe, you likely bought at the peak of the market and your house in now worth 30-40% less than what you paid for it. It makes no sense to try to sell it and it may make no sense to try to hold on to it. The banks were given every opportunity and much encouragement by the government to work with owners to modify loans on upside down houses and they have refused. You don't owe them any more loyalty that they have shown you. Just walk away and let them have the houses that they still insist are worth 30-40% more than the market price. You won't get off Scott free - your credit score will take a big hit and it will take you time to rebuild it, plus you'll end up paying taxes to bail the clowns at the bank out, too; however, you won't have to wreck your savings and your retirement plan trying to save a lost cause. But, hey, I'm just a humble Realtor and not a scholar or financial expert. You should consult both. Read Professor White's paper and then talk to your advisors, both finacial and legal, before you do anythng.