My first job was in a medical office. My step dad was a doctor so as soon as I turned 14 he did the paperwork and put me to work. I started off working up front and learned to run the whole office over the course of 6 years. At that time medicine was considered a “service” industry.
Over time it seems as if the “service” has been removed from medicine and all that is left is the business; aka: cash flow. Medicine seems to be less like helping people and more like making $200K per year and driving a new Mercedes. I mean, how much meaningful conversation can really happen in the allotted 8 minute office visit? Oh, by the way, did you want to check my vitals and see the rash that I made the appointment for?
When your Jewish mother told you to marry a doctor, did she want you to marry a person with a heart for healing or did she want you to own a home in the Hamptons?
Something similar has happened in real estate. And it happened to me, too.
When I got into real estate I liked that most self made millionaires had made it in real estate and I found that intriguing. When I first started in the business I rented and wanted to be a home owner, I wanted to change my life for the better. I wanted to know how this whole “owning property thing” worked and I wanted to help other people change their lives, too.
When I got in I couldn’t get a loan.
I had bad credit and no cash and a new career that, while promising, didn’t have a 2 year record tracking income. I was a young step-mom with a 6 year old first grader to watch and a husband that worked – a lot.
I worked hard and helped a lot of people. I learned financials, chatted about goals, set up timelines and and learned how “successful” people did it. I learned how to crunch the numbers and differentiate a good investment from a bad one. I learned a lot.
Five years later, we bought our first home.
As time went by it became easier and easier to buy a home. First the numbers showed that it was practically impossible, statistically, for folks with 720+ FICO scores to default on a loan. Loans were made and profits rose. Wanting to get in on the good time, more companies came to the table. More loans were made and more money was made. Slowly competition eroded qualifying and eventually the qualifications came down so low that verifying an income was not even a requirement to qualify for a loan. True, the borrower had to sign the loan application, thereby swearing that the information given was true and correct. But, that was small print. And the lender didn’t feel obliged to point it out.
Something shifted. What we were doing and striving for got a little greyer. Was I still changing people’s lives? Was I serving my client, or was I selling them something in order to get a paycheck?
Sure, there were licensees that pointed out the fine print. We warned the borrower against committing fraud. But the snowball was already picking up speed. In order to compete, with another licensee or with the neighbors down the street, heads were turned. Allegiances were broken. The Agency bond was broken.
Or maybe the licensee became the accomplice. Looking the other way when $40,000 credits were given to the buyer. “They are not my client”, or “It’s in my clients’ best interest to sell this house – regardless of the means” we rationalized.
Real estate became the fat cat, a place to make money, and faces were replaced with dollar signs. Sales trainers taught us to spend as little time as possible with each client in order to crank up sales volume. Do I remember all the clients I have had over the years? No.
I was in a meeting recently and sat next to an agent who’s name looked familiar. We both knew that we’d worked a transaction together but neither remember who/where. I could just chalk that up to time in the business or is it an underlying theme of disconnect?
I got an email from a client in Switzerland. We are working out dealpoints on her condo sale.
I quickly and efficiently pounded out an email to the Buyer’s Agent and hit SEND.
He quickly replied, letting me know that he sent the issue on to his client.
This is an agent that I don’t know, have never met, have never spoken to on the phone. Think I’ll make a call and make a friend of him. As a service to my industry and to my client.
Strategic Defaults – Financial Decision vs Ethical Dilemma
In a world who’s morality is contrived from the probability of pain, is there a “morally correct choice” to purchasing another property when you can no longer afford the property you are in?
If nothing has changed except the value of your home, is it ethical to stop paying?
If the house down the street is for sale at $100k less than your mortgage, would you be selling your soul for $850/mo?
Is your mortgage a “personal promise” with moral implications or simply a business deal where you promise to pay or the bank takes it back?
A study in September 2009 from the credit reporting agency Experian and consultant Oliver Wyman estimated that about a fifth of delinquent mortgages in the U.S. involved borrowers who were strategically defaulting.
Using this logic, if there are 12.94% of mortgages are behind, then 1/5 of that, or 2.58% of mortgages are strategic defaults. That doesn’t sound like a lot when 21% of single family homes with mortgages in Q4 were underwater.
Does that mean that the other 19% of folks feel a moral obligation to pay their mortgage? Or are they good parents providing a stable home to their kids? Or??
We have these discussions at my house ALL THE TIME! Mike is part of the class action lawsuit against Countrywide. He feels cheated by the bank, although he freely spent every penny they gave him. He thinks that the banks charge crazy high interest rates to “cover” the folks that quit paying. To him, it’s just a financial decision.
For me, I think that I borrowed that money and promised to pay it back. I believe I have a moral obligation to follow through – it’s my word. Although y finances have changed drastically from ’06, I am still paying back my debts.
What do you think? Are you underemployed? Unemployed? Did you file for bankruptcy? Walk away from a home? Or are you unaffected by the current economy?
Representation and The Code of Ethics
This weekend I got a call on one of my listings and arranged to met at the property. Because it was a call off my advertising, and not someone I knew, Mike went with me to the appointment.
The couple that I met were super cute, just starting out and had no idea that my job as a listing agent is to get them into MY listing. There may be a bigger, cuter, cheaper one down the street but it doesn’t matter. My main allegiance is to my Seller.
Article 1 of the Realtor [not all licensees are Realtors]Code of Ethics states that I am to “protect and promote” my clients’ interests.
That’s why when I have a Buyer come to me that already has a property picked out, I still make them look at property and understand what else is available. I still make them get a property inspection, so they understand the condition of the property. I still read through the CC&Rs and highlight the issues that I think will impact them.
It pisses me off when I run into an agent that sees a client as a big $ sign and just wants to squeeze every penny from them. That’s the real problem with our current economy! Lenders that squeezed clients into properties, never telling them that their payment would jump in month 13. Too many “agents” hustling to make big bucks with no knowledge or interest in taking care of their clients!
When my boy was 2 years old he would come to the side of the bed and beg for chocolate chip ice cream for breakfast. He really really wanted it BUT, I knew that ice cream for breakfast was not good for him. Same thing with a client, you might really, really WANT that house but until your debts are paid down and your job is permanent and you can qualify for the payment, it might not be good for you.
The Instant Loan Modification
I have a buddy that was going through a divorce when this financial time bomb began it’s implosion. The market got soft, his investments grew sour and he had to sell property to keep his head above water.
During the drama, he struggled with the loan on his primary residence. He got a few months behind and he asked the lender for help. They, in turn, told him that he didn’t qualify for a loan modification.
He got a room mate, changed jobs and found a way to keep things current.
Last month his lender spontaneously sent him a loan mod. It dropped his rate to 4.25% fixed for 30 years. He ecstatically signed the papers and accepted their offer.
Interesting.
Then, last night, I get a call from a client. Her bank sent a message that their loan modification has been accepted. This is a modification that we began last summer. My client could not prove enough income to make the modified payments so was instead put on a forbearance program to pay back the arrears and catch up on payments – she was 4-5 months behind after losing her job.
Since then she’s been making the normal payment, plus the “catch up” amount, with the threat of NOD if she defaulted.
She’d given up on the loan modification.
Last night she gets an automated phone call that her modification was approved and hold the line to talk to an agent. While she was on hold she called me to see if it was a scam or if Citibank would actually lower her rate.
Perhaps it’s just coincidence but interesting that within a 72 hour period I have 2 clients that are getting instant loan modifications – or instant streamlined refinances. Was there a new release of financial stimulus monies? Did bankers, ala “The Grinch That Stole Christmas”, suddenly hear the sweet song of the Whos and grow hearts?
If they did grow hearts, how do I use this knowledge to help the rest of my clients?
What do you think? Any bankers out there going above and beyond to help the masses get their finances in order? Anyone else pleasantly surprised by a lender lately?
Debt Collection 101
Got a call from one of my vendors yesterday. He is my #1 guy for all things cleaning. Not just the once over quickie cleaning but getting the grout white again and making marble shine so I can sell your house kinda guy.
Turns out that one of his favorite clients had her house cleaned and then fell off his radar. The house is on the market and apparently the client is getting a divorce so the house is vacant and my guy is not getting his phone calls returned. There was some communication from the client that the husband [or soon to be ex-husband] was less than cooperative with the communal check book, ergot, the problem.
First thing we did was gather a little information. I looked up the listing. It’s on the market, active, vs being in contract or sold. The mailing address on the tax records has not changed – even though the house is vacant.
Plan of action: 1) call the agent and see if she can facilitate payment. 2) Send a demand to mailing address and agent. This puts the client on notice that this bill needs to be taken care of. 3) Put a demand into escrow – so if and when the property sells, my buddy gets paid. 4) 30 days after the demand is sent, file suit in small claims court.
99% of the time, sending the demand gets things moving along and my buddies don’t have to continue.
It sounds like this is just a temporary glitch in my buddy’s clients’ life and she’ll want to keep using his services for years to come. I believe the majority of folks are good folks and the relationship can be continued with a little firm but compassionate nudging.
What do you think? If someone owes you do you get more mileage with the sword or with honey?
4 New Real Estate Laws for Landlords
Happy New Year!!
It was a great 2010 and 2011 has all the ingredients for an outstanding year.
As an apartment broker and property manager, a big chunk of my business has to do with income property, Landlords/Investors, Tenants and how to help them to all get along.
With that in mind, I just wanted to share 4 new laws that come into effect in 2011 and affect the Landlords/Tenants dance:
#1
AB 1263
Serving an Unlawful Detainer Action on a commercial tenant.
This law changes the method of serving an unlawful detainer notice on a commercial tenant. The law provides that service on a commercial tenant can be made by any of the following methods:
(1) delivering a copy to the tenant personally,
(2) leaving a copy with some person of suitable age and discretion at the property and sending a copy through the mail, as
specified, or
(3) by affixing a copy in a conspicuous place on the property
and sending a copy through the mail, as specified.
AB 1263 amends Section 1162 of the CA Code of Civil Procedure.
#2
SB 1149
Prohibits general release of court records in foreclosure-related eviction unless landlord prevails; New cover page with Notice to Quit to tenants after a foreclosure
This law authorizes a court clerk to allow access to court records of eviction proceedings involving residential property that has been sold in foreclosure if 60 days have elapsed since the complaint was filed and judgment was entered against all the defendants (tenants).
This law also requires, until Jan. 1, 2013, that any Notice to Quit served to a tenant of residential property within one year after a foreclosure sale include a separate cover sheet containing an additional notice to tenants (statutory language in Section 1161c(b) and (c)).
Amends Sections 1161.2 and 1166 and adds Section 1161c of the CA Code of Civil Procedure.
#3
AB 1800
Unlawful renting of residential dwelling
[I call this the Craigslist Scam Law and I’ve written about my actual knowledge of this scam and the scammers victims]
Existing law makes it a misdemeanor for a person to claim ownership or take possession of someone else’s residential property for the purpose of renting or leasing it to another without the consent of the owner. This law increases the penalties for this offense to a maximum of $2,500 or imprisonment in a county jail not exceeding one year or by both. [Not enough of a penalty when I’ve seen in excess of $5K being lost by unsuspecting would be tenants.]
Amends Section 602.9 of the CA Penal Code.
#4
H.R. 5297 (Section 2101(h)) (Small Business Jobs and Credit Act of 2010)
Landlords to report payments of $600 or more on IRS Form 1099 [Another in the string of legislation making realtors tax collectors. My small investors are already bad at keeping their records clean. Now the IRS will be after them for not filing a 1099 on the gardener or house cleaner.]
H.R. 5297 includes an expansion of the 1099 reporting related to a trade or business. Under existing law only those real estate professionals engaged in property management-type businesses have been required to file Form 1099. This new federal law extends the Form 1099 requirement to any person who receives rental income. This requirement would apply to any landlord (including a small investor), rather than only those who are in the business of managing property.
Starting Jan. 1, 2011, any person who receives rental income must provide a Form 1099 for all payments of $600 or more made to service providers such as plumbers, carpenters, yard services and repair people. The purchase of goods is not included within the reporting requirement. The Form 1099 is provided to the IRS and to the service provider. The new requirement applies to both residential and commercial property.
I am not in the business of practicing law but am provided this information from CAR and wanted to pass it along to you. I like keep my clients in the know and that includes recent legislation. Knowledge is power. Please check with your attorney if you need clarification on how these changes will affect you and your business.
Until next time!
Stupid Kitchen – Who Designed This Anyway??!!
First off, let me admit that I am very spoiled. I have a place to live. I see people every day that are in default and are losing their houses. I know. I am lucky to have a place. It’s super great and my sweetie makes me laugh every day. I am super blessed. Ok, now can I bitch just a little?
We just moved into a pretty place with big windows and a granite kitchen. I have a seperate office, it’s beigey beige neutral, there’s a great balcony with a view of the hills. It’s all good – until I started unloading my 82 boxes of kitchen utensils, spring form pans and super duper shishkebob skewers. You know, the kind that are flat so the veggies don’t sag around the middle of the skewer and char on one side?
It was in the middle of unloading my “dodads” when I realized that I have one drawer. One. One drawer. I had to put my silverware in there because it’s just wrong to have my knives floating all over the cabinet. Free. So, now they are occupying my one drawer.
So, where do I put my parmeasan cheese grater? My towels? My tin foil and baggies? Where do I put all the weird little stuff in my junk drawer like tape and screws? How about my potato masher and the kneeder thing for pastry? How about my lemon juicer and garlic press?
What fast food drive through eating man designed my kitchen?
As I was unpacking I found my kitchen aid attachment basket. Did you know that my kitchen aid mixer, the older one with the screw on bowl which is so much better than that stupid hanging bowl thing with the up and down switch, has an attachement to grind meat and grate cheese and even make pasta? Well, I have them all. All the cute little attachements that make my mixer such a great workhorse in the kitchen. So, I keep all these dodads in this big basket that goes beside it in the cabinet.
This got me thinking.
Right now I have some of my baggies beneath the sink, tin foil above the stove – that’s another thing. No exhaust vent. How much smoke can a quarter inch film of carbon really soak up? This stupid fan just blows the smoke all over the house. Last night when Mike got home he walked into the cloud of the kitchen and started coughing. The smoke was so thick that he had to open the back door and sit next to it just to catch his breath. I know that no one cooks anymore but come on. Don’t even put a fan in if it’s not going to work. That just brings expectations that are totally unrealistic. But, back to my story.
I figure I can take the big box of utensils, now sitting on the kitchen counter, and transfer these into cute little baskets that I can then put into the cabinets.
Now, the next issue will be what to do with all the pots, pans, rice cookers, cuisinarts and cooking dishes…..maybe they can go in the closet.
2/2 Condo with wood floors and private patio – $1500/mo
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How Do You Know When It’s Time to Dowsize Mom’s House
At lunch yesterday, we were discussing our parents – the good, the bad, the ugly. Some are good with money, others not. Some are in great health, others not. Some are fine taking care of themselves, others not.
This entire discussion began after learning that my friends mother had passed. This mother was managed well by her husband but, when he passed a few years ago, her demons were let loose. She had periods of paranoia, she gave away valuables, she disappeared. She was manipulated by the bad brother, she was taken advantage of, she was diagnosed with Alzheimer’s.
The family knew that mother’s memory was sporatic but no one knew how to broach the subject. The mother was feeling afraid and unsure but she covered it with false bravado. The family was concerned for mother’s safety but didn’t feel that it was their place to say anything. After all, she was the mother.
The tricky thing with Alzheimer’s is that the longer you leave the elephant in the living room, the harder it is to talk about it. Erratic behavior becomes the norm and the patient is less able to coherently discuss the issue.
In the beginning there are many “opportunities” to “notice” that something is off and to discuss it. I don’t recommend asking a question like “did you just run the car into the garage wall?’ The standard reaction to this would be one of defense and then a constructive conversation is lost.
Instead, try something like “mom, that’s the third time you’ve bumped into something with the car this week. I’m worried that the next time could be really serious” ‘It might be time to find other ways to get your errands done”
My grandmother was super stubborn and super independent. She refused to move close to the family and she refused to give up the car. When she passed I finally got a close up look at her car. It had scrape marks about two feet from the ground and all the way around the car. She had rubbed and bumped and smooshed every panel of that car. Today I am just grateful that she didn’t take herself and someone else out with her.
When it came time for my granddaddy, the second time he ended up in a ditch and had to get the car towed, my dad took his keys.
Each person’s parents age in different ways and each person handles it differently. Just remember, when your folks start reminding you more of your kids than of responsible adults, it may be time to start thinking about downsizing!
So, how do
The 5 Cs of Credit
When I started in real estate in 1988 it was illegal to have a numeric score associated with your credit report. We learned to get a general impression of the company, their leadership and their spending habits by reviewing their trade lines. How they used credit and the consistency of their re-payment. From this we generated a hypothesis of the risk associated with the borrower and made a credit decision.
Since then it has become uncommon to even know what a tradeline is. Today the client is just a number and no amount of cajoling can change that – especially since the underwriter is a twenty something kid just out of college and doesn’t hardly know what a tradeline is!! In college we learned about the 5 Cs of credit. To me they are a much more reliable way to gauge risk than a credit company’s logarithmic formula. Maybe that’s just because I can see the logic behind the 5 Cs while the credit companies won’t divulge their numeric reasoning.
So, here are the 5 Cs:
1) Character – also known as integrity. Does the person do what they say they will.
2) Capacity – the ability to repay. Often based on past evidence and/or a current paystub.
3) Capital – also know as a down payment. Folks are less likely to default if they have skin in the game.
4) Collateral – something of value that the lender can sell if the borrower fails. “The House”
5) Conditions – current market
When I analyze and investment, tenant or overall transaction based on the above, I get a very clear view of the borrower’s current position and I have pretty good instincts into how their behavior will follow. It works for me. And I hope it can be a tool in your analysis tool box.
Real Estate By Rebekah 