Lessons from a Carpet Layer

I was talking to my brother this week. He has a carpet installation business and has about 30 guys laying carpet on any given day. Most of his accounts are commercial, a decision he made about 6 years ago, and he has some big accounts that he travels for.

Most of his business is repeat business. He has a relationship with the one guy that orders for Pizza Hut, Denney's, Roundtable. He shows up on time, does a good job and stands behind his work. He's also got $500K worth of work lined up for Q1 '09 and that's just counting his biggest accounts. Most carpet layers are starving.

Two things I've learned from my brother;

1) Deliver, every time.
2) Focus on the clients that will need you again and again.

How's your business shaping up for 08? What are you doing different for 09?

Love This From Kiplinger's - How we React to Uncertain Times

http://us.lrd.yahoo.com/_ylt=AvLF7HoeVV3ljkNEaIYvkqVG2vAI;_ylu=X3oDMTFjZ3JuczY3BGlpZAMyNTIzNjIwOTY0MzcxODExMDU5BG5vaAM1BHBvcwMyBHJpZAM1NTQ3/SIG=12abtde5p/**http%3A//www.kiplinger.com/magazine/archives/2008/11/bad_decisions.html

YOUR MONEY
Bad Decisions in Bad Economic Times
Curb your emotions and avoid costly financial mistakes.
By Bob Frick, Senior Editor
From Kiplinger's Personal Finance magazine, November 2008

Maybe your investments have taken a beating or the bank has cut your home-equity line of credit in half. Or you just spent $100 to fill your gas guzzler's tank. A lot of financial stress is going around these days, which puts us in particular danger of making stupid mistakes.

You'd think the opposite would be true -- that we'd get more conservative with our money when we're feeling pinched. But smart people who study such things know how fragile we are when it comes to holding on to what we have. "Investors will endure all kinds of risks, crazy risks," to maintain the status quo, says Don Moore, a professor of organization behavior at Carnegie Mellon.

A recent study by Moore's colleagues shows just how easily we can be induced to take risks. In the study, a series of questions made participants feel either relatively poor or relatively wealthy. Those made to feel poor were asked to peg their income on a scale that started at "less than $100,000" and went up in $100,000 increments. Most landed in the bottom tier. The scale for those made to feel wealthy started at "less than $10,000" and went up in $10,000 increments. Most participants ended up in the middle to upper tiers.

Once they were primed to feel rich or poor, they were either paid $5 for participating or given the option of receiving up to five lottery tickets. The "downtrodden" chose twice as many tickets as those who'd just had their financial egos massaged. "People are often willing to go double or nothing to avoid feeling that they're losing," says Moore.

In addition to psychology working against us, we are also biologically programmed to make poor decisions under stress. Psychiatrist Richard Peterson points out that stress hormones affect our brains to make us short-term, impulsive thinkers when financial problems often call for long-term, creative solutions. Peterson runs a hedge fund based on "emotional arbitrage" -- he buys stocks laden with dire predictions, and sells ones with too much upbeat buzz.

He also counsels financial advisers on how to deal with clients' emotions. One thing he preaches: Don't fight biology. "People need to take action because they are chemically primed to take action," he says. The fight-or-flight response should be channeled in a positive way, though, such as moving money from a growth fund to a value fund after the market has tanked.

And if tinkering with your portfolio doesn't calm your nerves, maybe understanding a psychological quirk called recency will. It seems we pay too much attention to the recent past when making decisions. For instance, in 1999, the average investor thought the market would rise 30% in 2000, says Brian Bruce, editor of the Journal of Behavioral Finance. (Instead, the tech bubble burst and Standard & Poor's 500-stock index started a three-year plunge.)

Bruce says that recency can also make investors more pessimistic. Events such as the Korean War and the Cuban missile crisis, and bear markets, such as the ones that followed the 1987 market crash and the demise of the dot-coms, destroyed investor optimism. But in the year following the bottom of those setbacks, the S&P 500 rose 36.6%, on average.

In the short term we forget and react, at least I know I do! It's a nice reminder that the stock market JUMPS after these bottoms.
Just like in Real Estate - It's time to buy!

Working on Bank Owned Properties [REOs] helps me to see that there really is a lot of cash in the market. We are seeing multiple offers on properties under $250K - often all cash!

Rental Fraud Alert in San Jose and surrounding areas

These are all rumors - I have no first hand knowledge - however, my friends are running into these issues:

1) The property manager puts a rental on craigslist. The same day "evil person" puts the same property on craigslist for less money and with easy qualifying guidelines, ie; no credit report. Evil then shows up at the house, collects money and disappears with the renters money.

2) Owner receives a Notice of Default. Owner rents the property to a renter - collecting rents and deposits all the way up to the trustee sale - and sometimes even after. The bank then shows up to evict the tenant.

If you or someone you know is renting something - check to make sure you are actually working with the owner and check NOD records. Your great local Realtor is a great resource for this information.

Values continue to decline as unit volume rises

In San Jose, we are seeing multiple offers on properties under $300K - perhaps suggesting a bottom or slowing of the decline in home prices. Additionally, the number of monthly sales has been increasing since January 08.

This information just came in from CAR:

Home prices throughout most areas of California will post declines next year while sales of existing homes will continue to rise in 2009, according to a forecast released by the California Association of Realtors.

“The current uncertainty about the financial system and economy is likely to persist over the next several weeks, and could extend into next year,” said CAR President William E. Brown. “Our forecast assumes that the financial system will begin to show signs of stabilization late in 2008 and into early 2009.

No one can tell the future - what do you think is happening in this current market?

Are we as a nation overleveraged?

A week or so ago, I posted a link to Bill Clinton talking about the economic crisis and how we as a nation are overleveraged.

This week I heard myself admitting that I voted for Perot because he is a business man and would get us out of debt.

Then I see this:

NEW YORK (AP) -- The National Debt Clock in New York City has run out of digits to record the growing figure.

As a short-term fix, the digital dollar sign on the billboard-style clock near Times Square has been switched to a figure -- the "1" in $10 trillion. It's marking the federal government's current debt at about $10.2 trillion.
Don't Miss

* 8 of 10 Americans stressed because of economy
* The anxiety index

The Durst Organization says it plans to update the sign next year by adding two digits. That will make it capable of tracking debt up to a quadrillion dollars.

The late Manhattan real estate developer Seymour Durst put the sign up in 1989 to call attention to what was then a $2.7 trillion debt.

We can't keep this up for long - we are drowning

The BEST EXPLANATION of our current economic status

Bill Clinton was on Letterman on the 22nd. He gives a concise and insightful view of the instability in the financial markets.

Here's the youtube replay:

Why Realtors love an erratic stock market

The last year has brought a lot of uncertainty in the real estate market. Where's the bottom? Where's it going?

When faced with uncertainty seasoned investors watch and buy when it makes sense. Novice investors wait until the market rebounds then try to get in with the rest of the herd.

While the investors wait for the real estate rebound they tend to put their money in the stock market to get a decent return.

These headlines:


Market Overview - Yahoo! Finance - The basics of investing.

The major indices were pummeled on Monday due to uncertainty over the details regarding the U.S. government’s $700 billion plan to fix the financial market turmoil and news that the two remaining major Wall Street investment banks converted to a traditional banking structure.


...typically are strong enough, and cause enough pain, to scare investors back out of the stock market and into real estate. That coupled with multiple offers on the low end of the market all work together for the real estate rebound.


So, stock market pain = realtor gain.

That's why realtors love an erratic market.

NOD Filings Plummet!

Did the market suddenly move from 50+ Notices of Default filed per day to 3? Is the market miraculously fixed overnight?

I was at a meeting this week where we were discussing the market, foreclosures and Notices of Default.

Up until September 6th, NODs were being filed at a rate above 50 per day and sometimes hovering around the 100 per day mark. September 9th there were 3 NODs filed.

We were trying to figure out this huge drop off in NOD filings. We came up with all sorts of ideas ranging from the fannie/freddie take over, changing market, etc. but it all boils down to recent legislation that makes it harder to foreclose on a borrower in default.

SB1137 is legislation that requires lenders to give the consumer an extra 30-day notification prior to filing the NOD. The lender is now required to meet with the defaulter in person or via the phone to "explore options" to avoid foreclosure. Loans originated 2002 and earlier do not have the 30-day requirement and could proceed with their NOD filing. Using the 3 filings vs the 50/day prior minimum, 94% of the loans in trouble were originated post 2002.

I have mixed emotions about SB1137. On one hand, I like to see lenders working with borrowers in default. On the other hand, lenders have [mostly] realized that foreclosing on a borrower is MUCH more costly than working something out. Even Fannie and Freddie recently issued a press release basically saying that they were actively working on loan modifications wherever possible. Lastly, the crisis that we are having is one of liquidity. Loans are more and more difficult to get, even with big downs and good credit. If California makes it more difficult for the lender to get their money back, no one will be lending here. Not a good idea given the current climate.

I have heard of properties selling 3-4 times because of problems with loans. Have you heard of or experienced this? Do tell!

Three statistics that suggest a rosy market

I keep saying the market "feels" better, faster, stronger. It's just so California.

Being surrounded by engineers in this silicon valley, I know you've been frustrated with all my "feelings" - too reminiscent of a Barbara Streisand song - so here are a few numbers to sink your teeth into.

1) Sales - up 16.8% from July and 32% from the same time last year. August is our normal cyclical dip - everyone running off for the last bit of summer - and even with "the dip" it was up 16.8%.

2) Median Sales Price - 648,500 vs 864,000 same month last year. That's a 33.2% drop from last year. The homes that are priced right are now getting multiple offers. One I just heard of was 95132 - a zip code that's been killed this last year. Ask price of $625K, it got 7 offers and went 17,500 over ask price! That from an area that was doing NOTHING a year ago!

3) Days of Unsold Inventory - Last year we had 210 days of inventory - that's 7 months of inventory, today that number is 125 or just over 4 months of inventory - which is a good balanced market. It's starting to shift out of a buyers market and into that grey in between world. It's not a seller's market yet - and it may not reach "seller's market" for a while. The argument being that there are still properties in default that will add to the supply for the next few years. All I know is when multiple offers start, a strong buyers market is coming to an end.

These numbers are for houses in Santa Clara County. There are plenty of submarkets that don't fall within these confines but, great news for sellers and no so great news for buyers.

This is what the market looks like just before the prices start to rise. There are still bargains to be had. Find yourself a good Realtor and get in while you still can.

New Regulations Chase ALL Mortgage Loans Out of NY State

For the last few years - perhaps as many as eight or ten - there have been increasing reports of abuses in subprime lending. Folks that could have/should have qualified for a "better" loan, didn't. Credit worthy borrowers were charged multiple points and high interest rates. The consumer wasn't saavy, didn't speak the language, or didn't shop around. Sometimes there was even elder abuse.


Instead of holding fraudulent individuals and/or companies liable, various states have attempted to label "high cost loans" as fraudulent, usurious and have attempted to regulate them into extinction. The latest iteration is in the state of New York. New York's new regulations deem the investor [the ultimate purchaser of the note] liable for any irregularities in the loan.

Let's recap the flow of money; the loan is "originated" by one company, sold to the initial investor/bank/mortgage company who then re-sells it in huge blocks to the "investor". This final investor is often made up of retirement funds, investment pools and mortgage backed securities that are sold on the stock market.

Let's say you had your choice between two stocks with a similar return; Google stock or a mortgage back security - that may be able to sue you for sub prime loans buried in the portfolio - which stock would you execute?



I totally get that these states are trying to "protect" their voter base. The problem is that high cost loans have a place and making the investor liable just means that the investor won't spend their money there - any money. In our internet world, the liquidity market is not limited to geographic regions like the old community banks. Putting the investor at risk just makes the grass so much greener anywhere else.






New York Versus Freddie Mac: Round One

New York Versus Freddie Mac: Round One
By Peter G. Miller

It’s fight time in New York. On one side is newly-passed state legislation which sets tough standards for subprime and “high cost” loans and on the other is Freddie Mac, which says it won’t buy such loans in the state after September 1st, the day the new law goes into effect.

This is a big deal because if New York lenders can’t sell mortgages to buyers such as Freddie Mac, they simply won’t make such loans. You can guess what happens next: No subprime loans, no high cost loans, no buyers, no sales. A big chunk of the real estate market will close down.

Technorati Tags: subprime lending, lending meltdown, law of unintended consequences

Fed Takes Over Fannie and Freddie

Got this news alert today:

The federal government has taken control of ailing mortgage giants Fannie Mae and Freddie Mac. Bush administration officials announced Sunday that the executives of both institutions had been replaced.

This seems like de javu of the S&L crisis in the 90s only no resolution trust corporation to sell off foreclosed assets. Instead we agents are scrambling to handle the tidal wave of short sales and REOs that are coming on the market.

What do you think the Fed's next move will be?

Radioactive Granite, Formaldehyde in the Cabinets - Are We Sacrificing Our Health for Our Vanity?

What’s Lurking in Your Countertop? - NYTimes.com

The granite, it turned out, contained high levels of uranium, which is not only radioactive but releases radon gas as it decays.

But with increasing regularity in recent months, the Environmental Protection Agency has been receiving calls from radon inspectors as well as from concerned homeowners about granite countertops with radiation measurements several times above background levels. “We’ve been hearing from people all over the country concerned about high readings,” said Lou Witt, a program analyst with the agency’s Indoor Environments Division.

Today I was chatting with a friend. Her kids bought a new home two years ago and have been in and out of the hospital ever since. After months of medical testing they finally tested the house. Turns out the cabinets were emitting fairly high levels of formaldehyde. They are in the process of ripping them out.

We tend to think that "natural" means healthy. As my step-father likes to say, "cyanide occurs naturally in plants, that doesn't mean I want to eat it".

The good news is, all of these toxins are relatively easy to test for. But, should I? I know I don't like throwing my money away on a test that's probably going to show that there is not an issue.

My best guess is that these "new" concerns will NOT be widespread. That's the argument, few folks are affected and it will not have a major impact on the consumer. Unless you, or your loved one, happens to be the consumer that gets sick.

Have Campbell Home Prices Hit Bottom?

Time to Get In The Game?

Over the weekend someone asked me if we've hit bottom - and I paused.

The challenge of playing the real estate market, like the stock market, is that it's only after the price goes back up that we can look back and ogle at "the bottom". My listings are getting more activity, there's less negativity in the market, financing is becoming available [more difficult than before but possible], we're happy to have gas under $4 [isn't that crazy!] It "feels" like we've already hit bottom and are coming out of it. I have a couple statistical reasons for you to ponder;

1) Sales per month have more than quadrupled. The number of sales per day dwindled to 338 completed sales in January contrasted with 1184 for the month as of 8/22.

California Realtors report homes selling more quickly - Pacific Business News (Honolulu):
In Santa Clara County the median price was $706,500, compared to the year-ago period's $852,500. Sales were up 2.8 percent in the year-to-year period.

2) OFHEO numbers show the national decline to be slowing with the San Jose Metro declining 8.33% since the second quarter of last year.

RATE OF HOUSE PRICE DECLINES SLOWS IN
SECOND QUARTER
WASHINGTON, DC – U.S. home prices fell in the second quarter of 2008
according to OFHEO’s seasonally-adjusted purchase-only house price index.
The index, which is based on data from home sales, was 1.4 percent lower on
a seasonally-adjusted basis in the second quarter than in the first quarter.
This decline was less steep than the 1.7 percent decline in the prior quarter.
Over the past year, prices fell 4.8 percent between the second quarter of 2007
and the second quarter of 2008.

For my last bit of non-empirical evidence; my investors are buying! When an investor can buy San Jose real estate with 25% down and break even, they come out in hordes! And they are! We've gotten some great bank owned property, foreclosure inquiries are on the rise and we've been out bid on a couple properties as other investors are beating us to the punch.

There's only one way to make money in real estate. You gotta get in the game!

16 Groups of People Kept Me Busy at My Campbell Open House

It's been a long time since I was busy at an open house.

The last open house I did, I watched "the last lecture" on YouTube on my laptop! [Great inspirational stuff, and a great speaker! Watch Randy here, but not the reason to hold an open house!]

Yesterday I was busy the whole time! It was so great! I made chocolate chip cookies - which is always fun and loosens people up so I am not the hawk at the front door - and wore my fuzzy purple socks to keep my feet warm and to slide around the hardwood floors.

Some of my groups were entire families out looking together, most groups were 2-3 people. Not once did I hear "the market is uncertain" or "we're waiting to see what happens". Most of what I heard was "We need a bigger house", "I moved here for work", "I want to be close to downtown Campbell".

There are currently 7,059 properties on the market in Santa Clara County, 324 in Campbell. For the month 1184 have sold in the county and 46 in Campbell. Which is about on pace for August.

I think the big adjustment is over. There may be some little movement; 3-4% during the holidays but, I am worried that that dip will be negated by any rise in interest rates.

What have you seen in your neighborhood?

4 Investment Lessons Learned The Hard Way

Just got off the phone with clients - a term I am using very loosely for these folks.

They bought an investment property about 30 months ago, with someone else, because their friend-of-a-friend salesperson told them it would break even. They apologetically called me a few months later. They were sorry they hadn't used me, they were trying to help this new salesperson and now they were having trouble with tenants and their new agent wasn't any help. [I looked up the salesperson on the DRE website and saw that he had been in the business 11 months.] These clients knew I did property management so they pumped me for information and help for about 40 minutes before begging off on paying for my services because they wouldn't break even on their investment.

A few months later they called again. They had received the supplemental tax bill and wanted to know why it wasn't paid at the closing. I explained how it worked and when I got off the phone I realized that their break even property was now a couple hundred dollars a month negative.

Tonight they called because they are out of money. They have tapped all their credit cards, one of the current tenants has lost his job and they haven't paid for August. Plus the property is worth about $85,000 less than what they owe on it before title, escrow and sales fees. Now they are shopping around for the cheapest agent to sell it.

Of course, I mentioned that most agents have no experience with short sales, that's why only about 32% of them close before the trustee sale. I reminded them that ALL of my short sales had closed and that their loan is a purchase money loan so the bank won't come after them for a deficiency judgment.

"In essence, you're not paying the fees anyway - why not hire the best?!!"

There was a long pause and they told me they'd call me back. I am not holding my breath.

So, did you catch the four lessons?

1) Taking someone's word on the numbers is like handing your money over to your crazy uncle Charlie. You have to learn to check the numbers yourself.
2) Hire a professional property manager. One months worth of vacancy will pay for 10-12 months of property management.
3) Know what the expenses are up front. Include maintenance, vacancy, insurance, the new tax base, etc
4) Hire the Best! You don't have to do it alone. You don't get an extra gold star. Instead you stand to lose a bunch of money and get a foreclosure on your record.

I feel bad for these people. I am a lot like them. I know just enough about something to get me into a lot of trouble! I have to constantly remember my own advice about using my team if you don't have your own. You need a CPA and an Attorney and a great Realtor - at a minimum.

My gut tells me that these folks aren't quite done learning the hard way. Perhaps this example will help you from learning the hard way, too!

More Loan Modifications!!

Before 2007, I had never done a loan modification. Now it is 28% of my business revenue and takes up about three hours/day of my time - so, 37.5% of my time.

Of course, if I had gotten into real estate for the money, I would have put my MBA to better use years ago!

Over this last year or two, I have negotiated some pretty amazing deals for my clients but there needs to be someone willing to negotiate for the bank on the other side. There is nothing more frustrating than having a willing and able client, that has rectified their finances and can show that they can get back into their previous perfect payment history, only to have a bank that is absolutely inflexible to work with.

That's why I was very happy to see this article;

Distressed IndyMac borrowers to get relief - Aug. 20, 2008

IndyMac borrowers to get relief
FDIC offers plan to systematically modify loans for homeowners most at risk of foreclosure. Agency chief hopes program will spur other banks to take similar measures.

Not to mention the 5 or 6 clients in default right now that will also be thrilled to hear the news!

It May Be Time to Sell that Income Property

...if you are looking to pull your $500K worth of 121 exemptions from it, that is.

Yes, I am talking about the IRS code again. Section 121:

Section 121, as amended, provides that a taxpayer may exclude from gross income up to $250,000 of gain on the sale or exchange of a principal residence if certain conditions are met. In certain circumstances, a married individual filing a joint return for the taxable year of the sale or exchange may exclude from gross income up to $500,000 of gain. This exclusion also applies to the sale or exchange of stock held by a tenant-stockholder in a cooperative housing corporation (as defined in § 216) and may apply to the sale or exchange of a remainder interest in a principal residence if the taxpayer so elects. See Code §§ 121(d)(4) and (d)(8).


One of the greatest "get rich quick" schemes of the last decade has been the 1031 coupled with the 121. Add on top of that, the ability to convert an income property to a primary residence just by living there for two years and we've hit the motherload, baby!

Well, if the real estate market hasn't already come to to a screeching halt, this new "Housing and Economic Recovery Act of 2008" will do just that. Or maybe it will jettison all those fence sitters into selling that non-performing property while they can still get $500K out of it.

Either way, if you were planning on converting a second home or investment property into a primary residence so you could pull $500K worth of tax free money out of it, your better get the "pulling" done by the end of 2008. After that, your equity will become pro-rated based on the amount of time you held the property as an investment vs how much time it was a primary residence.

That sucking sound is the IRS sucking the wind out of your profits.

First Time Buyers Win - Second Home Conversions Lose

I've been in real estate for 20 years and I am still confused when new legislation comes out. The bills are so convoluted, I often wonder what it's got to do with me.

If you're like me, you'll like the simplicity of this article on Kiplinger.com.

New Law Adds Tax Breaks for Real Estate - Kiplinger.com

Two noteworthy items: 1) new first time buyer program, 2) second homes may not qualify for the $500K exemption

Good to know!

As always, check with your CPA before making a move.

Barbarism Lives

Greece: Beheading suspect in critical condition - CNN.com

The barbarism exhibited by this 31 year old man - including parading around his village carrying his lover's head - makes me question how many years of "civilization" we really have. Have we had any?

Another one bites the dust

Remember Billy Squier? I was dating a car stereo installer in the 80s. My 1973 Datsun 240z had a stereo so loud that if I left it up full blast for too long, my ears would ring. The 6x9 speakers were mounted in the back and if my baby sister wanted to ride with me she was subjected to the loudest, squirreliest ride of her life. Given that or hanging out in Morgan Hill - she always opted for the ride.

One of my favorite tapes - remember tapes?- was Billy Squire, Emotion in Motion. It sounded great cranking in my tiny car. Like the Billy Squire song, another on bit the dust today.

I have been working on a long and tedious transaction. The listing agent started off lying to us - I am the lender on the deal - then the title company wouldn't release docs until an extension was executed. My client is in Washington, I am in Campbell, the buyer's agent is in Duncanville, TX, the title company is in Houston and the Seller is in Redding, CA. Executing a document is a major event. Docs were finally delivered to title and the title company halted the close because there was a non-disclosed HOA. After a few days and no HOA, we re-ordered docs. In the meantime the buyer began working in Hawaii. We scheduled a courtesy sign off in Honolulu and the Buyer no showed. That was yesterday.

Today I was working hard to get a mobile notary to track down the buyer when I got a call from the Buyer's agent. United Title of Texas closed their doors today.

Looks like I'll be re-re-drawing docs.

The Land of Fruits and Nuts

California has a certain - um - reputation. While my Texas buddies are loving their chicken fried chicken with gravy and mashed potatoes and cornbread we just made it illegal.

California bans restaurants from using trans fats - Yahoo! News

My family is from the south - where fried chicken was invented. I grew up thinking that the gigantic tub of crisco in the cabinet was a food staple. Now that contraband is relegated to back alley street vendors and grandma's house.

California Contraband

Any Bank That Would Lend Money To Me Is Not Conservative Enough

Federal regulators close 2 more banks - CNN.com

1st National Bank of Arizona - gone.
Quite a different story than IndyMac in that bank margins are relatively narrow and a downturn in the economy was blamed for 1st National's demise vs questionable lending practices with IndyMac.

Still, it reminds me that we the consumer are making choices with our pocket book. I would guess that the average consumer chooses their bank based on which one is on the street corner. What a wake up call if your bank was IndyMac or 1st National.

PS Remember Atlantic Financial? Home Savings? American Savings?

1st National Bids Adieu

Inflation is up but oil is down

Inflation numbers are historical vs current oil prices are just that - current.

Oil drops again as US pump prices slip to near $4: Financial News - Yahoo! Finance

Have we seen the peak? Americans are trading in their SUVs for priuses - what's the plural for prius - thank god, I hate SUVs. Stocks are rallying today, after the media reporting this week has seen a "false rally"

What do you think?

Are We Rebounding?

I think the main engine for our economy is jobs but, consumer perception is a close second. Perception normally lags reality by about 90 days and the Campbell real estate market has seemed to be rebounding for the last 90 days.

Consumer confidence rebounds from 28-year low: Financial News - Yahoo! Finance

When I say rebounding I mean that the sales per day is up from last month and it's up 25% from last year.

The economic stimulus package was signed in yesterday and I believe our current real estate problem is one of liquidity. Once the liquidity crisis is resolved the real estate issues will be resolved. Some say that this stimulus package will resolve the liquidity issues and, while optimistic, I think it's not the "end" but the beginning of the end.

What do you think?

Are Your Property Taxes Too High?

With the drastic change in property values this last year, you may be paying too much in property taxes - and you know how I hate to pay taxes!

Here's the form for you to challenge your assessment:

DeclineInValueRequest

and email me if you need supporting comps!

Just lookin' out for ya!

Say Bye Bye to Mortgage Loans

WASHINGTON (Associated Press) – The Federal Reserve has adopted a new plan intended to curb shady lending practices that sent home foreclosure rates to record highs.

The plan will:
*prevent loans made without documentation of borrower’s income;
*require lenders to escrow money to pay taxes and insurance for risky borrowers;
*limit — and, in some cases, ban — prepayment penalties;
*prohibit lenders from making a loan without considering a borrower's ability to repay a home loan from sources other than the home's value;
*require mortgage advertising to contain information about rates, monthly payments and other features of the loan;
*require that lenders credit a mortgage payment to a homeowner’s account on the day it is received; and
*forbid brokers and others from "coercing or encouraging" an appraiser to misrepresent the value of a home.

Most of the rules take effect Oct. 1. Escrow requirements will take effect April 1, 2010.
More information is available on the Federal Reserve Board’s website.

How I got blood streaked all down the side of my car before 9AM

No, I didn't murder one of my clients :-)

It was a normal day for me. Went for a walk with my dog, Rebel. By 7 I was working from my home office - negotiating loan workouts with Litton Loan Service. Rebel was laying in the hall right outside my door - he likes to keep an eye one me.

I had finished my FRS drink and went into the bathroom to find the toilet bowl bright red with blood. At first blush that may be too gross for you until you realize that Rebel thinks the toilet bowl is his personal water dish.

My brain clicked back through the morning. He eats all the junk at the park and he was munching on a beef rib earlier today. I had also noticed him licking his forearms [do dogs have forearms?]- which he sometimes does when his allergies are bad. He had been licking enough to tell him to stop.

I went back into the hall and realized there were hundreds of little blood drops in the carpet on both sides of his forearms. He hadn't been having an allergy attack, he'd been licking the blood off. Rebel trails behind me for the last block or so before the house so, he was out of my sight for 5 minutes or so. What could have happened in 5 minutes? I got him into the bathroom and, seeing blood all down his chest and forearms, wondered if he could have been hit by a car.

I took a long look at him and wiped him down with a wash rag. He didn't seem to be bleeding other than a steady dripping of bright red blood from the right side of his mouth. Each little drop splashed leaving a one inch puddle on the white linoleum. I got him to open his mouth and I cleaned it up as I looked for a laceration. I couldn't figure out where it was coming from - maybe it's not his mouth.

I got him to lay down, his stomach was not hard or distended. He was bright and happy. And he was dripping; splash, splash, splash.

So, I called the vet and got an appointment at 9:20. "What time is it?' I asked. It was just after 8. I confirmed and hung up.

I sat there watching him. Happy and smiling, tongue handing out, the right side of his mouth thick with blood and dripping on the linoleum. He then cleared his throat and threw up about a 1/4 cup worth of blood.

I hit redial and told the vet that we were coming.

I grabbed my keys and Rebel bounded out to the car. I put a towel down and as we drove away I looked back at him as he was happily dripping on the leather interior.

Driving the 8 minutes, I began racing scenarios through my head. Maybe the beef ribs had lacerated his stomach and he'd need surgery - friends had spend upwards of $4,000 on emergency surgery for their dogs. Could I spend $4,000 on a dog? Which credit card can I put that on? Maybe they will take payments. Could he be coughing blood out of his lungs?

I was getting scared so I prayed for God to be with me and I called my sister. As I told her what was going on I got all choked up and tears came. She told me that I was doing all I could, the vet would know and to call her when I got done with the vet.

Hanging up the cellphone - which I had been illegally using without my headset - I took a deep breath as the stop light turned green and I jammed on the accelerator.

Check back here tomorrow to hear the rest of Rebel's adventures.

I have a great freelance job for you!

I just had a conversation with a client of mine. She's a first time buyer and she's afraid of her own shadow. She's trying to make the best buying decision and save money. I get it. We all want to make great decisions and save money in the process. She's looking for an agent that needs to be experienced in the market, a top negotiator and super ethical. Her agent needs to place her clients needs before her own, work long and hard for the client and credit the commission on the sale back to the buyer. Hmmmm....

She reminds me of a friend of mine that I thought would never get married. He was looking for a smart career woman that had accomplished a lot - maybe owned her own business - but, wanted to stay home and raise a family. She had to be humble and conservative but be great eye candy on his arm. Lastly, she needed to be blond haired, blue eyed and Assyrian. Those combinations are just never going to work. I believe we all need to get value for our dollar but, you're never going to get excellent representation for nothing.

Let's put this back into the Client's lap. Let's say I had a great freelance job for you. A deal you couldn't pass up. After all, you'll be working with me :-) You only need to work twice as hard as you are working now and I am willing to pay you half of your current salary - although there is no guarantee you'll ever get paid. I may go with another freelancer at the last minute. Would you take that job?

Four things to do NOW if your home is in Default

Todays market is full of uncertainty - exacerbated by the media - and people are ostriching. You know what an ostrich does when it's afraid, right? It puts it's head in the sand.

I'm not sure how great a strategy that really is for an ostrich but I know that for someone in default; that's the way to lose your home.

I had an example of that this morning. I had spoken with this gentleman last week and I'd given him a list of information that I needed from him. I told him I would work on it first thing Monday and I needed it all faxed in by Sunday at noon. This morning I went to work on his file and there was nothing there. This is a man that stands to lose two houses within the next 45 days if he doesn't figure something out and he failed to do ANYTHING. He ostriched.

We humans act irrationally when we are afraid but please, now is not the time to stick your head in the sand. Here are four simple steps that will get you on the path:

1) Analyze the facts. Take a plain piece of paper and fold it down the middle. On the left write "assets" on the right write "liabilities" then write down every asset you have; bank accounts, retirement, your rolex, your SUV, even your furniture. [I had a client sell all her living room furniture. It was over the top Louis XIV and fetched a pretty penny. That and her wedding ring [her husband left her and left a pile of debt] got her out of default.
Now fill in every liability, including loans from mom, cars, lines of credit, that jewelry credit line, everything. Now add up the left, and up the right and subtract the liabilities from the assets. If you come up with a negative number, you are not alone. Now you know the truth of your situation.

2) Consider your options. There could be more options, depending on your situation but, these are the ones I present:

* Bring your loan current; pay back payments + penalties.

* List your home for sale; we can work a quick sale - even without equity, even in this market.

* Sell your home directly to a qualified investor - if you’ve waited too long.

* Refinance or Renegotiate your loan- We have an in-house specialist that rocks!

3)Consult a trusted advisor. And I am not talking about me! :-) Most people have someone to talk things over with. It could be your tax guy, mom/dad, uncle, someone at work... Just make sure this is someone that you trust with your truth. Foreclosure can be very embarassing and it's common to be ashamed. We think we should have been able to see the future. To know that someone could die, or get divorced, have an illness or lose a job. The truth is thing happen and when it's you, you are emotionally involved. Go to your trusted advisor, your neutral third party, and see if there are options you overlooked or other avenues you need to research.

4) Hire a Professional. Once you've done your homework, hire the best you can hire. I just had a guy that wasted 5 weeks with a lender that couldn't do what they promised. When you are in default, you don't have 5 weeks to waste. Hire someone with a proven track record, that's seen a few cycles, that knows how to get the job done with your best interests in mind. I know for me, there are many times that I could have "just sold the house" and made a commission but, instead I helped my client see their options. Maybe they could refinance or pull some money out of an IRA, or sell the big car to get them back on track. So, get a personal referral, google the person, check their references, hire the best. It does cost a little more to hire the best but, if you were getting a heart bypass do you want the intern running a $995 special or do you want the professional that has had a twenty year career and hundreds of healthy happy clients?

Flipping properties now "allowed" to help liquidate mounting foreclosures

Government suspends property-flipping rule - Jun. 13, 2008

I am not a big fan of government control - and here is a perfect example. Legislation was introduced to 'restrict' flipping [a symptom of the fraud occurring in the mortgage markets]. Now the government realizes that it "needs" flipping to liquidate mounting foreclosures.

If I am adding value, then flipping is legit. If I am just inflating prices and paying an appraiser to bring the value in - that's fraud - and legislating "flipping" will never be able to legislate morality.

Inventory Continues to Drop - Two Weeks in a Row - Is the worst over?

Square Feet: Santa Clara County inventory drops for a second week: Fluke or trend?

MLS-generated stats, as sent to me by a couple of sources:
Total number of single-family houses for sale today in Santa Clara County: 5,468
Last Tuesday: 5,551
Condos for sale today: 1,821
Last Tuesday: 1,827

There were 338 new sales of houses and condos in the week ending May 30, down from 420 in the previous week. But last week had Memorial Day in it, so there would naturally be fewer sales initiated in a week with a holiday.



I keep hearing about the worst being over - and the numbers seem to be verifying that.

What do you think? Have we hit bottom?

Why use an Agent? I'm pretty smart and I can find stuff on the internet.

I love this question because it's an opportunity to teach folks that they don't even know what they don't know.

Here's a great example that came up for me this week; I am also a writer and I was reading a fellow writer's blog. She just got a movie deal for one of her books and she was so excited. Here's what she wrote:


So we gave them two months. About a month later, I get a call from my lit-agent saying, really, more squeeing, that we're expecting an offer from The Weinstein Company! This was huge news because, beyond the obvious, Meryl was once Harvey Weinstein's right-hand gal, and the fact that they were reteaming on something meant they really wanted to get this done.

So I squeeed and squeeed and waited by my email for more details...and waited....and waited....and finally, like a week and a half later or something, we got the offer. I jumped up and down and squeeed some more and would have immediately accepted (because I am a writer, not an agent) but my agent is savvier than I am and prepared a counter-offer. (See, this is why agents are good things. Very good things. Because I would have squeeed forever and happily cashed whatever sum of money they shoved at me and called it a day.)

When you find the right property, you, my client, get so excited - dreaming about where you're going to put your cute little armoire - that the details of the deal become secondary - at least that's my experience in the last 20 years of helping people.

I am the same way! I remember when I had an accident on an outside terrace. The table we were sitting at blew over and my left hand was crushed. I required emergency surgery and had pins in my fingers then physical therapy. When I went to get re-imbursement, I had no idea what to ask for. So, I hired an attorney who charges 30% of the settlement. I thought, I am smart, I negotiate all day long, maybe I can save myself 30% of something. I thought about it overnight and hired him the next day. I had thought maybe I could get my expenses plus $20K ish for the hassle. My attorney negotiated a settlement of expenses plus $75K. After all was said and done - I more than doubled my money by hiring the attorney.

Now, I am not saying I'll make you double what your property is worth when I sell it but, I know that the value I bring to the table - in all areas of the deal, not just the money - far outweighs the fee I receive.

April Home Sales Up

Interesting article about the uptick in the nation wide market.
Locally, things are changing. The sales per day is increasing and the inventories are being reduced.

Mortgage rates have been ticking up since the first of the year with inflation worries.

All in all, property values are down - we've been buying $350K houses in San Jose! and $160K houses in Merced - that actually break even.

Also, still got investors in DallasForeclosureFinder.com - there is competition between bidders! So, the saavy investors are still there.

Treasury Chief Says Worst May Be Over - AOL Money & Finance

<cite>Treasury Chief Says Worst May Be Over - AOL Money & Finance</cite>: "

Treasury Chief Says Worst May Be OverBy JEANNINE AVERSA and MARTIN CRUTSINGER,APPosted: 2008-05-07 15:47:35Filed Under: Recession WatchWASHINGTON (May 7) - The worst of the credit crisis may have passed, Treasury Secretary Henry Paulson said Wednesday, while acknowledging that rising gas prices will blunt the effect of 130 million economic stimulus checks. He ruled out a second stimulus package for now.

"

Square Feet: California builders squinting at a market bottom, trade group says

<cite>Square Feet: California builders squinting at a market bottom, trade group says</cite>: "

California builders squinting at a market bottom, trade group saysSue McAllister01:49 PM on Thu, May 15, 2008topic: Economy Home buying Homebuildingrecent related posts: � Housing construction permits dwindled in March � California building industry has 'cautious optimism' for 2008; Bay Area prices 'dead flat,' perhaps masking marble upgrades galore � A home builder that saves your hand from scaldingSales of new homes in California dropped 49 percent in March compared to the same month in 2007, the California Building Industry Association reported today. But that decline was not as bad as February's year-over-year decline of 57 percent, which the trade group said provides 'mounting evidence that the bottom of the current housing cycle is near.'

"

PMI is getting harder and harder to find

Got this notice this morning:

May Mortgage Insurance Changes

Due to rapid changes with the availability of Mortgage Insurance coverage, we have added a summary starting on page 5 of Private Mortgage Insurance (Doc 6102). This document has been updated to reflect the changes outlined below.

It's getting harder and harder to get PMI and most lenders have limited/eliminated their second mortgages.

There are still ways to make it happen but, if you are in the middle of a transaction, make sure your lender is on top of the (often) daily changes.

Have you lost a deposit or had a transaction fall through due to last minute underwriting changes?

Location Location Location

I was in a meeting this week when a friend came up and, in that hushed conspiratorial tone asked "How's Real Estate?"

"Gosh, I am busy!" I replied

She didn't know what to do. She literally just stared at me for about 3-4 seconds.

While it's true the money markets are off and it's a bit harder to get a loan than it used to be, It has been SO MUCH worse! It wasn't that long ago that you couldn't get a loan without excellent credit and a decent down payment that you worked really hard to earn.

Of course, that's before the speculators came into the market and took advantage of other people's cheap money. We only have ourselves to blame.

That being said, there are still some great markets in Silicon Valley. This week a friend made and offer on a $1.2M home in Santa Clara with Cupertino schools. They came in $50K over asking price and were out bid by $250K!

What's the market like in your neck of the world?

Yes on 98, No on 99

Today is my birthday - thank you - and I got a call from an old client first thing this morning. I am thinking, "what a great person to call me on my birthday". I pick up the phone and hear, "I have a voting question". Hmm, guess it's not all about me.

There are two eminent domain issues on the ballot. Both restrict eminent domain but there are a few differences. First, Prop 99 only "protects" owner occupied single family homes while 98 covers all property.

I live in a duplex and rent out the front unit. I own and occupy the place but my SFR neighbor would have more rights than me. That just doesn't make sense to me.

Second, Prop 98 doesn't allow "price setting" while 99 does.

Third, Prop 98 protects renters while 99 ignores them.

Property rights are property rights. It shouldn't matter whether it's a shopping center or a single family home. Property rights are one of the guiding tenets that make America great.

Master of None?

I've been doing this crazy real estate thing for 20 years now [am I that old? :-) ]
and I remember being told to find my "niche". The general argument was that you pick one thing and you do it well.

Today I am questioning that philosophy.

My business started off being a loan officer for my friends' brothers' company. I was 25 and married and had a 6 year old to take care of and the flexibility was wonderful. I could take care of my high maintenance child and take very good care of my clients.

After 5 years, the brother changed his business model and eliminated my job - so, I went out on my own [I was a broker by then]. My clients followed me and referred me to all their friends and I found I could make it on my own.

Along the way, I became friends with my clients and they felt comfortable enough to come to me when they had financial or real estate questions. The next thing I knew, they were asking me to represent them on their buys and sells. Then they wanted to buy a bar or their business needed more warehouse space or they needed to buy a office building.

Our kids grew up and moved away and we were all looking for cash flow for retirement. So, we started moving our equity into investments that had a monthly return that we could count on. It's been a joint venture all along the way and it's made for a wonderful life.

So, perhaps you can say I found my "niche". I specialize in people. Good people that I take good care of. Good people that I like and that like me right back.

Yesterday I called a client and got the machine. "hey nutball how you doing?, this is Rebekah" when I heard him pick up the line and say "I knew it was you at Nutball"

Hug Your Realtor Today

I woke up this morning to a voice mail from a Realtor friend that is getting out of the business and moving away. It's almost like, there is so much invested in looking good that when things aren't good they have to move away to save their delicate self worth.

It's tough out there. Most Realtors are feeling the effects of this market. The scary part of that is I remember the Realtors that killed themselves during the dot bomb. So, reach out and touch someone.

The greatest of these is love.

New Tenants

I have a vacancy right now so I was showing a rental to perspective renters this week.

As we wandered through the house, we chatted about the house and what was going on in their lives. Turns out, they had purchased a house a couple years ago. They loved the house, put all their money into updating it and landscaping. They figured they would be there forever.

A year or so in, they were visiting friends in Tahoe and wondered if they could buy a second home. It was at this time that they pulled out their mortgage papers to figure out what they owed on their home. After reviewing the loan statements, they realized they were in a negatively amortized loan AND it would re-adjust within the next few months - raising their monthly payments to over $4000/mo.

These are very responsible parents of teenagers. They have perfect credit and have stable long term jobs. It took them a few months to reconcile their disappointment and consider their options but, they were able to put their home on the market and are currently in contract with expectations of closing by the end of May.

These people relied on their Realtor and Lender and didn't know enough about the process to know the questions to ask.

Frankly, it pissed me off. I have been to signoffs where I read and explained the loan to my clients, they weren't getting what they thought, and we extended escrow to work it out. I've also been to signings where I explained, it wasn't what they thought and they chose to close anyway. Either way it's the clients' decision but, it pisses me off that someone that is working as my agent sells me a book of goods so that they get paid.

I understand that I don't get paid unless we close but, I need to feel like I am helping my clients - first and foremost. I have been in this profession for 20 years and I have clients from 20 years ago. What I don't have is clients that are losing their homes because I didn't review their loan docs.

Before this I thought these people in crappy loans were just stupid or lazy or deserved their fate, somehow. I believe in caveat emptor and personal responsibility. I also believe in full disclosure and taking care of your clients.

Do you know someone that is in a crappy loan? How did they get there and where did the system break down?

Why The Worst May Be Over

I found this article interesting because it has some compelling arguments for economic recovery.

Also because, just like a depressed Seattle-ite in March that hasn't seen the sun for 8.67 months, I am dying for a little sunlight and cheer to break through all the grey economic overcast.

Change = Opportunity

I love times of change. I've watched my clients leverage themselves into some amazing deals.

If you make the right decisions now, you'll reap the rewards within the next 5 years. Two years ago a buyer couldn't buy anything because they were outbid on everything that looked attractive. I had clients with 30% down, excellent financials and Letters of Credit from SIVB - that couldn't buy anything!!

Today, the buyer with the cash is queen.

What are the chances that San Jose Home Prices Will Be Lower In Two Years?

About 51%, according to the PMI group report.

I found it interesting that Dallas Fort Worth had a less than 1% risk while Riverside came in at the top with a 93% probability of lower home values in two years.

Profiting From The Market Misery

I love a down market. All this uncertainty has property values dropping faster than a womanizer drops a date that says the "L" word.

The statistical figures are starting to show some significant drops - in the 20-30%ranges - and I don't see daylight yet.

I like this NNN leased investment. It's got a lease guaranteed by CVS corporate. It's 2.3M and returns a 12.58 cap rate. Unheard of only 2 years ago!

Or 48 units in Los Gatos for $12.22M, net income of $568,277 and 4.61 cap. based on actual rents. Just a year ago we were seeing 3-4 caps based on proforma rents.

So, there are a lot of investment opportunities in the market. It hasn't been this great a time to buy since 1993-1994! If I only would have kept the house I bought in 1993, in willow glen, for $172K.....

Talk Like a Physicist Day

Happy Albert Einstein's birthday!

It is all relative you know :-)

The Glamorous Landlord Life

People think that since I own income property, I live the rich and luxurious life. So, let me just give you a glimpse into this cushy job.

First off, I am a professional, have been doing this more than 20 years, and I ought to know better than to manage my own property.

The first issue is that whenever you see a tenant you think it's a problem - when normally it's just a great friendly tenant that wants to say "hi" and catch up.

Second, there is always something that needs fixing.

Third, I hate evicting people.

So, this trip to Dallas was a quick four day jaunt. I had two tenants that were behind and it was an opportunity to touch base with my Dallas contacts.

Thursday I flew in. Met with my handyman about the work done this last month and went to dinner with clients.

Friday, I filed eviction on one tenant and a judgment against another, I broke into the abandoned property, assessed the damages, hauled all his junk out to the garbage can - including melted fudgesicles in the freezer, put out the "for rent" sign, made calls for bids and had dinner with colleagues.

Saturday, I chatted with tenants. Got some bids, shopped materials. Got new keys and a lockbox on the door, collected rents and went to the bank.

Sunday, after church, I checked on a NNN Investment that looks VERY promising, I cleaned my apartment, did the laundry, replaced a key, changed a mailbox lock, got new blinds and a mercury vapor light bulb for the security light and chatted with tenants before I hit the airport.

Sure, I love the weather in Dallas. I went running two out of four days, ate at some great local restaurants, read, worked with clients in San Jose and enjoyed the heck out of my time. I wouldn't change one bit of my glamorous life.

The Four Investment Profiles

Today I was reading about the Four Investment Profiles - and I found it interesting when thinking about the current market.

The four profiles are :

1) Investor
Loves Opportunity
Buys the right thing
2) Collector
Loves Ownership
Buys Something
3) Speculator
Loves the Action
Buys Anything
4) Observer
Loves Ideas
Buys Nothing

I think we've had a bunch of speculators. Folks that love the idea and the action and really do just buy anything. And frankly, this works for a while. As long as the market was going up - everyone gained.

Now that we are having a correction, the speculators are getting caught. The wave of speculation has gone out and now we are finding who had their pants down.

The unfortunate thing is 1) most of these folks won't take responsibility for their actions. They will blame it on banks or realtors or sellers - and they'll lose. They'll blame their irresponsible speculation on anyone else and not get the lesson. There are fundamentals of investment.
2) 3% of the mortgage market has affected the world monetary market. The responsible investors that only buy sustainable value - and have strong portfolios - are now paying more for their money. The speculators have made it more difficult for the rest of the market to buy.

I watched this last wave of speculators and I sometimes felt bad that I wasn't working a bunch of crazy deals for speculators. It was hard not to jump on that bandwagon. But, that's probably why I've been in the business for so long, I have a hard time selling what I don't believe in. And I don't believe in an investment that's not sustainable.

Mortgage Rates Rise

I get asked about rates a lot. The public's perception is that; if the Feds are lowering rates then mortgage rates should be dropping also.

Mortgage rates follow the TBill - not the inter bank offer rate - and the TBill is rising fueled by inflation worries.

I really like Mark Dotzour's explanation below:


MORTGAGE RATES RISING
COLLEGE STATION (Real Estate Center, Reuters) – In the Feb. 8 edition of RECON, Real Estate Center Chief Economist Dr. Mark Dotzour proclaimed that there will likely be no better time than the present for home refinancing for years to come. Turns out he was right on the money — less than two weeks later, mortgage rates were on the rise again.
“We’ve seen almost a three-quarter percent jump in rates on 15-year mortgages since I made that call,” Dotzour said.
Rates for fixed 15-year mortgages now average 5.55 percent, while rates for fixed 30-year mortgages are averaging 6.09 percent, up 0.37 percent from the previous week. Rates on one-year adjustable-rate mortgages (ARMs) remain at 5.72 percent.
According to the Mortgage Bankers Association, the seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ending Feb. 15 fell 22.6 percent to 822.8, the lowest level since the week ending Jan. 4.
“I think we’re in one of those weird situations where the Federal Reserve is likely to cut the one-day interest rate to banks, which will lower short-term treasuries, but the ten-year treasury, which is what mortgages are priced on, is going to go up because of the continued fear of inflation,” Dotzour said.
“Commodity prices are going through the roof and bringing back big-time fear of inflation, and that’s starting to get priced into the ten-year treasury, which is going to mean mortgage rates are likely going to continue to go up,” he said.

Conforming Loan lLimits

The economic stimulus package passed and everyone is asking when the conforming loan limits will increase. Well, the latest answer is July 1. But remember, the Fannie Mae and Freddie Mac conforming loan limits of $729,750 are temporary measure available 7/1/08 - 12/31/08 while it appears the Federal Housing Administration loan limit is a permanent measure.

More on this as I hear more.

Economic Stimulus Package - Loans at $729K

Besides the $729K loan limit - there are some great incentives for businesses, from the IRS Newswire:

2008 Economic Stimulus Act Provides Tax Benefits to Businesses
WASHINGTON — In addition to providing stimulus payments to individuals, the Economic Stimulus Act of 2008 provides incentives to businesses. These incentives include a special 50-percent depreciation allowance for 2008 purchases and an increase in the small business expensing limitation for tax years beginning in 2008.

Be Patriotic - Get out and spend some money!

Mortgage Workout Relief

Here's the info from the IRS website regarding Short Sale Workouts and the tax consequences:

Mortgage Workouts, Now Tax-Free for Many Homeowners;
Claim Relief on Newly-Revised IRS Form

WASHINGTON — Homeowners whose mortgage debt was partly or entirely forgiven during 2007 may be able to claim special tax relief by filling out newly-revised Form 982 and attaching it to their 2007 federal income tax return, according to the Internal Revenue Service.

Normally, debt forgiveness results in taxable income. But under the Mortgage Forgiveness Debt Relief Act of 2007, enacted Dec. 20, taxpayers may exclude debt forgiven on their principal residence if the balance of their loan was less than $2 million. The limit is $1 million for a married person filing a separate return. Details are on Form 982 and its instructions, available now on IRS.gov.

Economic Stimulus Package - Loans at $729K

Subject: Economic Stimulus Package Passes
Date: Thu, 07 Feb 2008 15:12:31 -0800

The bill finally passed, there was some concern it would fail because
Senate Republicans were opposed to adding an extension of unemployment
insurance, additional funds for low-income home heating assistance
programs known as LIHEAP, an energy tax package and expanded incentives
for small business investment as requested by Senate Democrats. The bill
also raises the conforming loan limit to $729,750 for high cost areas.



Article from Roll Call...




Senate Adds Seniors and Vets to Stimulus Package; Plan Headed Back to
House


Thursday, Feb. 7, 2008; 5:18 pm
By Emily Pierce,
Roll Call Staff


________________________________

After a tense week of partisan bickering over an economic stimulus plan,
Senate Democrats and Republicans quickly maneuvered today to give senior
citizens and disabled veterans tax rebate checks and passed a bill that
appeared likely to receive swift House concurrence.

By a 91-6 vote, the Senate agreed to add seniors, veterans and the
widows of veterans to a House-passed bill to provide tax rebate checks
to low- and middle-income tax filers and also added limited tax
incentives to small businesses. The vote on final passage of the bill
was 81-16.

The House was expected to quickly pass the Senate deal later today,
according to Democratic aides. House Democratic and Republican leaders
earlier had agreed to back additional benefits for seniors and veterans
and additional restrictions aimed at preventing illegal immigrants from
receiving rebate checks.

The bipartisan movement in the Senate came after Democrats failed by one
vote on Wednesday evening to get the 60 votes needed to beat back a
filibuster of a larger Senate Finance Committee package that included
seniors and veterans as well as an extension of unemployment insurance,
additional funds for low-income home heating assistance programs known
as LIHEAP, an energy tax package and expanded incentives for small
business investment.

Even though their victory was muddied by their shifting strategies over
the past week and a half, Democrats touted their ability to "improve"
the House measure in the face of stiff resistance from the White House,
Congressional Republicans and even their own party's leadership in the
House.

"Most Senate Republicans were quick to endorse the House stimulus bill
with no revisions, even though we pointed out initially that we thought
it was inadequate and we had to add to that," said Senate Majority
Leader Harry Reid (D-Nev.) of the GOP's position two weeks ago. "If we
had listened to the advice of our Republican colleagues ... 21.5 million
seniors would have no part of this stimulus package. If we had listened
to them, 250,000 wounded Americans would have had no benefit from this."


Reid had attempted during the Wednesday vote to convince Republicans
that they would have only one shot - through the Finance package - to
provide rebates to seniors and veterans, even though he said last week
he would hold a separate vote on the seniors and veterans question.

On Tuesday, Reid said he was "not much of a bluffer" and dared
Republicans to vote against the Finance package. But most Republicans
called Reid's bluff on Wednesday evening and blocked the Finance package
from moving forward.

"I feel very strongly we did the right thing," Reid said of his
take-it-or-leave-it gambit. "As a result of that, I feel very confident
we picked up two votes more. I thought we'd pick up one more. Someone
who was going to vote with us didn't."

Democrats persuaded eight Republicans to vote with them on Wednesday,
but they need nine to prevail.

The relatively modest changes the Senate was able to achieve Thursday
were portrayed by some Republicans as a "cave-in" to their more recent
demands to add only seniors and veterans to the House bill.

Publicly, however, Republicans lauded the deal as a win for the American
people.

Senate Minority Leader Mitch McConnell (R-Ky.) called it "an important
bipartisan accomplishment."

McConnell said the final deal "demonstrates that we are once in a while
able to come together for the country."

Despite earlier objecting to any changes to the House bill, McConnell
said Republicans felt the simple modifications the Senate made were good
ones, and added that regardless of how the package ultimately came
together, "the news today is that we got there."

More Credit Crunch - FYI

Banks Make it Tougher to Get a Loan

http://www.bloomberg.com/apps/news?pid=20601087&sid=aBVR4W34oDrY&refer=home

It got tougher for U.S. companies and consumers to get loans in the last three months, a survey released by the Federal Reserve on Monday shows.

The survey, conducted in January, was available to Fed policymakers last week and helps explain its total 1.25 percentage point rate cut in the last month.

The survey showed that 80 percent of banks raised standards on commercial-property loans — a record. About 55 percent of banks toughened terms for prime home loans, up from 40 percent in October, while 85 percent of respondents made it tougher to get nontraditional loans, up from 60 percent, the survey said.

"It's definitely a broader-based tightening than we've seen before," says Edward McKelvey, senior U.S. economist at Goldman Sachs Group Inc. in New York. "The economy is weakening, and weakening in a pretty substantial way."

Source: Bloomberg News (02/05/08)

Credit Crunch

I was talking with a client this morning - it looks like I am going to be refinancing his investment property. The lender that he is currently with sent him a statement saying they will not extend his loan - it's a 5/1 - because they no longer do investor loans!

Additionally, I got a statement from American Express. I've had a business credit line with them for the last 20 years in the amount of $25K. The notice said that due to credit risk in my line of business they were reducing my credit line to $1K!

The market is really nuts right now. Lenders are scared and the money markets are contracting.
There is an economic stimulus package that could raise conforming loan limits as high as $725K - more probably to the $625K range - and that would help us here in California. We are still going gangbusters in Dallas - where 92% of the loans are conforming!!

$422 Million - Where does it all go?

Countrywide posts $422M quarterly loss
Dallas Business Journal - by Chad Eric Watt Staff Writer

Countrywide Financial Corp. reported a loss in both its fourth-quarter and fiscal year because of further problems in the mortgage industry, the company said Tuesday.

Calabasas, Calif.-based Countrywide (NYSE: CFC) reported a fourth-quarter loss of $422 million, or 79 cents per diluted share. Total revenue for the latest quarter fell 58 percent to $1.16 billion. In the year-ago period, the mortgage company posted net income of $622 million, or $1.01 per diluted share.

Also, ran across this blog about the Top 5 Most Ridiculous Mortgage Borrower Stories. Everyone blames everyone but, who would buy a house with a payment higher than their monthly income? Ridiculous!

Fed Cuts Prime

Fed slashes key rate to 3.5%
Citing weakening economic outlook, Federal Reserve makes biggest cut in nearly 24 years - three quarters of a point.

January 22 2008: 12:02 PM EST

Fed's Emergency Action

* Key rates cut 75 basis points

* Biggest cuts since Oct. 1984

* More cuts expected Jan. 30

NEW YORK (CNNMoney.com) -- The Federal Reserve slashed two key interest rates by three-quarters of a percentage point Tuesday following an unscheduled meeting, citing continued concerns about a weakening economy and turmoil in the financial markets.

What do you think? Will this balance the market, stop the bleeding in Asia and return stability?
As far as mortgage rates go, there is usually an upward tick - counter to consumer's expectations - followed by a bond climb and a rate reduction.

Stay tuned.

Report: Dallas-Fort Worth home prices least likely to drop | Dallas Morning News | News for Dallas, Texas | Dallas Business News

<cite>Report: Dallas-Fort Worth home prices least likely to drop | Dallas Morning News | News for Dallas, Texas | Dallas Business News</cite>: "

DallasNews.comReport: Dallas-Fort Worth home prices least likely to drop10:40 PM CST on Tuesday, January 15, 2008 By STEVE BROWN / The Dallas Morning News stevebrown@dallasnews.com

Dallas-Fort Worth's housing market is the least likely of any in the country to see a decrease in home values, a new report confirms.

At the same time, the chances of a house price decline rose in almost four out of five U.S. markets, according to a report released Tuesday by mortgage insurance firm PMI Group.

"

Another way to make money with your self directed IRA

Was chatting w an investor at church. He's using his self directed IRA to provide second deeds of trust to purchase money buyers that are credit worthy but don't have a full 20% down payment. There's a real need in the market right now - since subprime went away. He's also making a much higher return than your standard savings account without riding the wild fluctuations of the stock market.

Don't have a self directed IRA? Never heard of one? Well, if you're happy with your current 3% return from your money market account, don't call me. If you have a bunch of lazy assets that could be making 8% or more, let's talk.

Hmmm - your first simple money making idea of the year!

Dallas Leads Nation in Inbound Moves

According to the Atlas Van Lines Migration Study:

"Texas was the top state in the country for the number of inbound moves in 2007, according to the Atlas Van Lines migration study."

"For the first time since 2001, California had more inbound moves than outbound moves, according to Atlas Van Lines."

Changes

It's the new year and the shuffle is happening. Agents are jumping to other offices, managers are making promises, the bottom 5% are trying to be invisible. Even the managers are being recruited to new offices. The residential market is struggling, agents are scrambling and the stock market is in the tank. I just love real estate.

Happy New Year

New Years in San Jose. It's cold, at 57 degrees, but beautiful out. The sky is bright and clear.

It was a great 2007. Especially good because my girlfriend got married, my family is well and I only gained 7 pounds this holiday.

I am also grateful for you, my reader and my client. It was a year of being flexible, finding value and taking advantage of a correcting market. Business as usual.

Here's to 2008. May it be a year of love, health and wealth.