Real Estate Snippets

Water the Trees

Walking the dog is good for many reasons other than bonding with the dog and getting exercise.  Yesterday, however, an unexpected observation came my way while walking the dog.  My walking path includes areas around the State Capitol building where lawns are maintained impeccably by overnight sprinkling and clandestine mowing.  One little park on our dog route has missed this tender care.  The grass has dried to a crisp from the recent heat wave .

A park bench in the shade was perfect for mopping the brow and breaking out the portable water dish.  As the dog was greedily lapping the cool refreshment, I happened to look up to be thankful for the brief respite the tree's shade was giving us.  Much to my dismay I noted the tree leaves were drying and beginning to curl.  I knew immediately these trees were stressed and needed water desperately.  This park had no water source and next year the beautiful trees will probably be gone.

Throughout my travels the rest of the day, I noted many trees whose upper leaves had already turned brown or dropped.   It's worrisome to see mature trees stressed this much.  Last night a small trickle of water from my hose ran on one of the boulevard trees and the hose will be switched to the other tree today.  I value the precious shade of trees too much to let them die.  Besides, I'm stressed from the heat even with enough to drink!  I can't imagine dying of thirst as well!

(c) Bonnie Erickson 2006

The Geek Bomb

It's no longer a surprise to talk with a customer service representative from India as many U.S. companies have outsourced their customer service divisions to India.  It is, however, a bit of a shock to find out info about Microsoft from an Indian online newspaper The Hindu. 

Microsoft held their annual Financial Analyst Meet last week at its headquarters in Redmond while Bill Gates  was vacationing in Africa.  It seems the meeting progressed normally until Ray Ozzie, Microsoft's Chief Software Architect and replacement for Bill Gates dropped a small Microsoft bomb.  Ozzie announced that even though Microsoft's focus had been on PCs the previous 30 years, the focus is going to change.  The new era will "start from a different vantage point . . . with Internet service."

Hmmmm.  There are about 850 million PCs and over 2 billion cell phones in the world.  Many of those cell phones have more "computing" ability than the PCs.  The Hindu states:  "The vision is getting clearer: 'Why buy a PC and put a lot of software on it? Why not use a device like your mobile phone — and the Web as your storehouse... of course paying us for every utility you download!'"   The recent switch of electronic lockboxes is a clear example of this shift.  The new "smart" cell phones can download the MLS, access the internet, unlock the boxes at showings, retrieve e-mail, store a database, access file info stored on-line, etc.  Who needs a computer anymore?

The article warns "it may not yet be time to throw away that PC — but Microsoft's message is clear: When it is time to replace it, think small. Very small."

Read the entire article here.

(c) Bonnie Erickson 2006

Completion

The ultimate fixer-upper is the Queen Anne Victorian my husband and I have taken in tow.  Rehabbing is in our blood.  Old lights are a commodity I seek out always.   Recycling and salvage yards are treasure islands for me, the inveterate rehabber.  My friend's opinion of this 10 year venture is that we might as well buy a house that really needs work as we've torn apart and fixed every other house we've owned.

A year ago these three pictures were my family room (Click on the pictures to enlarge.).  Today the lathe is still in place, but sheetrock, wallpaper primer, and wallpaper cover the walls.  New windows have been installed.  Cat 5 wiring is in place.  There's even a closet with a big window!  The hardwired smoke detectors are wired in series.  One goes off and we're all awake!  The trim is still awaiting a contractor to install several rooms at one time as a cost reduction.  Despite the missing trim, a sigh of relief was expelled when the construction dirt was finally finished in this room.

Is this kind of work fun?  The answer depends on several questions.  Do you mind plaster dust all over the house even when the room is closed off and the heat vents stuffed with towels?  Do you mind carrying hundreds of pounds of plaster down the stairs to the disposal trailer?  Do you have allergies?  Does it upset you when the plaster bag rips open in the hallway?  Can you mentally shut the door on the room and rest occasionally, or are you driven to keep working until it's done?  Are you willing to wear a HEPA mask to keep from breathing in any unknown hazardous substances?  Do you derive great pleasure when the room is completed?

I give different answers to these questions depending on whether I'm in the throes of the process or it's completed.  Do I mind the plaster dust when I'm dusting it?   Yes!   When the bag breaks?  A scoop shovel makes the clean up easier.  The HEPA mask?  I love it.  Fresh, pure air while sanding sheetrock or removing the plaster.  What an improvement over the old goggles and wet bandana from my youth!  Great pleasure?  The reward is immeasurable.

Would I recommend others take on a rehab project of this size?  Only when it's in your blood.  Even small rehabs are annoying to some.  For me, however, the reward is worth the blood, sweat, and tears along the way!

(c) Bonnie Erickson 2006

Can't Buy Happiness

A new twist on happiness as applied to real estate is presented by Daniel Gilbert, Harvard University psychology professor and author of "Stumbling on Happiness".  Gilbert talks about how owners of material things like houses experience a sense of loss when they have to part with the thing they own.  The loss seems more stubstantial to sellers than the buyer's gain through acquisition of the same item.  Gilbert thinks this one insight may be the key to why it's so difficult for sellers to reduce the price on their homes when they list them.  It's not necessarily about the monetary loss but the emotional attachment and subsequent loss the sellers will experience when they part with their home.

Sellers see their homes differently than buyers because of their emotional attachment.  Sellers attribute more value to the home than others with less emotional involvement.  In our office, we have an illustration of how different people in a transaction view the same house.  The picture the owner sees is like the Taj Mahal.  The inspector sees the same house depicted with bandages and all kinds of imperfections.  The appraiser sees the house as very small.  The buyer sees a dreamy house.  It's hard to admit, but our history and our feelings sometimes get in the way of seeing the house logically.   That's why it's important to base the price of your home strictly on comparable sales in the neighborhood and then increase or decrease the price based on whether the market has remained stable or changed as ours has in the Minneapolis St. Paul area of Minnesota.

(c) Bonnie Erickson 2006

I Pushed the Wrong Button!

If you are suddenly getting an e-mail notification that I'm posting entries to my blog and you don't want to be on my mailing list, send an e-mail asking to be removed.  I had cleaned the list before vacation and when I returned, everyone on my blog mailing list was gone.  I must have pushed the wrong button!  If you asked to be removed before, but are once again getting the e-mails, just click on this link.  I won't be offended.  My husband was the first to say "Remove me" and I love him dearly!

(c) Bonnie Erickson 2006

Take It In the Shorts

Sellers and REALTORS® have already been identified as casualties of the market turn, but no one has considered the mortgage companies.  The foreclosure rate is increasing like wild fire and more and more the term "short sale" is being discussed.  Many REALTORS® had never heard of short sales until this year.  I guarantee you, most sellers had not heard the term either.

So what is a "short sale"?  Put bluntly, it's when the mortgage company "takes it in the shorts".  A short sale usually happens when the seller is delinquent or defaulting on their mortgage payments and the property cannot be sold for the amount that it is mortgaged for.  Homes purchased last year with zero down payment that are listed for sale this year have lost value in most cases.  Because the market changed rapidly and without warning, the properties for sale this year are taking deep discounts and sellers are making huge concessions.  To attract a buyer, listed houses have to be the best and the cheapest.  The others are not selling.

If the seller purchased last year for $150,000 with no down payment and the house is only worth $120,000 this year, it's impossible for the seller to get a purchaser for $150,000.  In order to sell the house for $120,000, the mortgage company has to agree to the loss.  Because the purchase price is short on the funds needed to pay off the existing mortgage, it is called a "short sale".

One might proclaim, "What a deal!", but that's not the case.  Not only does the mortgage company lose $30,000 plus attorney fees in the above scenario, but the seller will be issued a "1099" for tax purposes by the mortgage company at the end of the year.  A 1099?  Instead of getting a W-2 for declaring employed wages, the seller is issued a 1099 for "self-employed" income.  The seller has to pay taxes on the $30,000 that was lost on the sale.  The IRS figures that this money was distributed to someone when the house was purchased and, therefore, someone has to pay taxes on it.  Since the money was not received by the mortgage company, it is assumed the seller received the money and spent it (which they did . . . on their house).

A frustrating characteristic of most short sales is that the time is not short.  Frequently the lender is slow to approve a loss of this much money.  The decision has to go through channels and committees, and everyone knows how cumbersome channels and committees can be.  Market trends statistics have to be provided; forms have to be correctly and completely filled out;  and the decision maker has to be present instead of on vacation.   

The advantage to short sales is that this may be the only options sellers have to bail out of a difficult financial situation.  Choosing to pay taxes on the "lost" money is many time better than having a foreclosure on your credit report.

(c) Bonnie Erickson 2006

Rental Repairs

A landlord once told me the way to guarantee that tenants paid for needed repairs on their dwelling unit was to write in the lease that all repairs over a certain cost were the responsiblity of the tenant.  This system made no sense to me.  If the landlord was aware of the defect, made the repair and charged the tenant, how was s/he going to collect the repair costs if the tenant refused to pay?  Take them to court and evict them?   

Another concern I had with this system was that tenants would not report needed repairs because they wouldn't have the money to fix them.  Consequently the property could deteriorate without the landlord's knowledge, or the landlord's repair alert might come in the form of an exceedingly high water bill or city work orders.

My preference for tenant management of repairs was to penalize them if they did not notify me immediately of needed work.  The tenant became a reporting partner in the maintenance of their unit.  Because of this system and our responsiveness to reported repairs, word got around that our units were good places to live.  We soon had calls from prospective tenants inquiring about our vacancies.

(c) Bonnie Erickson 2006

Polish Fest 2006

A friend sent this announcement.  Sounds like great family fun.  If there's accordion music, there's got to be polka dancing and whether you like to polka or not, the energy is high!  Northeast Minneapolis is known for throwing good Polish parties so whether you're a "nor'easter" or not, you might want to check out the cash prizes, cakewalk, and clean entertainment!  The Bago Bago Dance Band?  Bago Bago?   Hmmmm.

Be forewarned that if you're looking for northeast Minneapolis by going north on Central from downtown Minneapolis, you will first hit "southeast" addresses even though you're going north.     This mix-up in directions has something to do with northeast Minneapolis being more distinct from Minneapolis back in the beginning of time.  It also has been the source of many Polish jokes because of northeast Minneapolis' ethnic heritage.  Regardless of its origin, keep going north through the south east portion of northeast Minneapolis until you find the northeast addresses.  If you're coming from the north, you'll have no trouble as southbound on Central encounters northeast addresses first!

Sales Aids

You know the market is getting bad when sellers start burying statues of St. Joseph in their yard.  My latest seller informed me of this tradition.  Burying a saint in the yard to aid in the sale of a house was a new concept to me.  Imagine my surprise when just 4 days later the online real estate community I participate in had a member question if anyone had heard of burying a saint to sell a house!  To make matters worse, there were responses from people all over the nation who knew about this tradition!  Now I'm feeling really naive!

The question was posed by an agent in South Carolina because her sister-in-law from Texas mentioned the practice.  Responses came from various places.  Maryland had a helpful website where statue kits and prayer instructions can be obtained for a small fee.  Boston replied that many Roman Catholic Arts stores carry the statuette with instructions and prayers.  Boston's client buried St. Joseph upside down, facing the street in the front yard and left him interred when the house sold.   Florida responded that the kits were sold at their board of REALTORS® office with the same instructions!  Virginia also sells the kits at their board office.  Tennessee gave another website with the disclaimer that the houses always sold when used, just that some sold later than others.   Still another website was sited by another agent, location unknown.   The Wisconsin agent suggested not to mount St. Joseph on the dash of your car as the car would not sell.  A different saint applies to cars!

Somehow burying a saint doesn't seem respectful to me, but it certainly demonstrates how tough our market has become when we start turning to spiritual aids to get a sale.

(c) Bonnie Erickson 2006

When No Doesn't Mean No

This is my brain when it comes to mortgage programs.  There are sooooo many mortgage options that it can become overwhelming.  Because of the different mortgage options available, a "no" from one mortgage originator may just mean s/he doesn't offer the program that fits your scenario.  An honest mortgage officer that has the ability to think creatively and is willing to research many programs is sometimes the key to getting financing.

Like the rest of the world, I am intimidated when it comes to my own personal mortgage application.  As a result, it helps me to work with people I know and can trust.  It also helps to work with someone who has a variety of programs to offer.  My self employment can sometimes be a negative factor in my applications.  Rental property ownership and business partnerships make my applications messy at best!  Some mortgage officers can't even figure it out!  (I steer clear of the ones that get confused!)

Many of my clients started their buying careers in situations that were equally messy.  Some had been rejected and were bitterly disappointed thinking their files were hopeless.  Many had gone to their local banks instead of to a mortgage broker.  Occasionally the prospective buyer gave up before they came to me, but when they showed up at my office step with that hang dog look, I sent them to my trusted mortgage broker.  Invariably they got financing or took a few months to fix a couple things and then got financing.  "My" mortgage officer had the ability to offer many programs to fit some of the quirky scenarios that came our way.  It was exciting to get people into a house when they thought they could never buy.

An initial no isn't always a final "no".  Remember that some places choose to work with "gravy" files, files that are easy and require very little research or documentation.  Others love the challenge of finding just the right program for your scenario.  An example of this is described in Larry Cragun's blog on lender product "agility".  Having lots of programs to offer a client can make their buying experience successful.  So, if you feel discouraged or have been rejected, give me a call.  I'll find one of those "agile" mortgage lenders for you!

(c) Bonnie Erickson 2006