Archives February, 2009

A Short Story

Until recently, most of us thought a “short sale” was some sort of end-of-season clothing event at Tommy Bahama. Now, however, the term “short sale” is one of the most tossed-around terms in the real estate lexicon; if not one of it most misunderstood.

A short sale — in short — is a real estate transaction in which the proceeds from the sale fall short of satisfying the balance owed on the mortgage. In such a sale, the lender agrees to discount the loan balance due to financial hardship on the part of the seller/mortgage holder; with negotiations typically conducted between the beleaguered property owner and the lender’s loss mitigation department. For homeowners who can no longer afford to keep their mortgage payments current, a short sale is often far more palatable than the stain of bankruptcy or foreclosure. Likewise, many homebuyers find the idea of purchasing a short sale property far more palatable than paying fair market value for a non short-sale property.

One thing is certain. If you don’t have nerves of steel and the patience of Job; or are seeking immediate gratification, then a “short sale” is the last thing you want to dabble in. In other words, if you need a home right now—as in a month from now, or even three months from now—this is probably your least viable alternative. Rarely does a short sale happen in the reasonable time frame that most homebuyers expect. Sometimes it doesn’t happen at all. Frustration at the huge amount of time it takes to move the transaction forward often morphs into heartbreak when the deal—through no fault of yours—fails to materialize.

Still, many buyers regard short sales as a practical strategy for paying less than fair market value; and assume that one of these draconian transactions is the best way to snag the best deal. Sometimes they’re right, but only if they’re willing to risk a huge amount of time and emotion on a transaction that may never transpire.

How many ways can a short sale bring out the gray in your hair? The “cons” definitely outweigh the “pros.” Among the most common are:

  • If the seller is obligated to more than one lender, each must agree to the sale; or no deal.
  • A buyer can wait months and the lender may simply say no.
  • It is possible that the seller will not work diligently with their lender(s); thus delaying the mere possibility of a sale.
  • If you wish to check the status of a short sale, you must be authorized to communicate with the lender(s). Even then you can expect to make repeated phone calls and not get the correct answers. Sometimes, you will get conflicting information about the same sale on the same day.
  • When you purchase a short sale, you purchase the property “as-is.” While sellers must provide appropriate disclosures, they will likely not have the wherewithal to make repairs—or offer just compensation—as a buyer would expect in a conventional sale.
  • It is possible to submit an offer, wait months for approval; then have the lender finally counter at a price at or above fair market value.
  • While the lender usually takes steps to determine the property’s fair market value, they may not share with you what they know; which forces you to play the game of “guess and check;” resulting in months of additional negotiations.
  • If the lender does approve the short sale, they usually want to close immediately, forcing you to be prepared to close at any time.
  • Because short sales are a foreclosure avoidance tool, many sellers frequently stop maintaining the property. In condominiums, they often stop paying association fees. Therefore, it is common for code enforcement liens, tax liens, and other types of negative title issues to pile up. These, of course, must be cleared-up before closing.
  • Depending on the size of the lender, your case file may wind up in the hands of several different people; which makes it all the more difficult to track down the right person for the right answers.
  • Finally, just because a property is labeled a short sale, it is not always the best deal. Some lenders will only approve an offer when it exactly matches the home’s fair market value.

And now, the pros:

  • The lender may agree to accept less than the property’s fair market value because they would rather not waste time and money slogging through the foreclosure process.
  • The lender may agree to absorb some closing costs from its net proceeds.

One of the simplest truths about today’s market is that all serious-minded sellers—not just those facing short sales or foreclosures—are required to compete for the same pool of value-obsessed buyers. For better or worse, with short sales and foreclosures helping to set today’s fair market value on all comparable properties, non-distressed sellers must take this into consideration when pricing their homes.

You can submit yourself to the process of buying a short sale property, provided you have infinite patience and top-notch guidance. You can also use the same competently-trained agent to help find non short-sale properties of equal quality and value; and be certain of closing on your own terms and in your own time frame. In the meantime we implore the powers that be in big government and lending to come together and streamline this frustrating process. End the agony for sellers by making it a more dignified and compassionate process; then help everyone on both sides of the sale—buyers, sellers, their real estate agents and attorneys—by making the process shorter, easier to navigate and much less of a dead-end proposition.

End of story.

Skill Sets

At first blush, it sounded a bit bizarre to hear a woman on the radio remark that now is an excellent time to be a Realtor. If you heard it too you may have wondered if the poor woman has been in a deep coma for the past year.

As she explained herself, however, it all began to make perfect sense. Times are indeed tough; but pros are pros in any field because they can always be counted on to come through in the stretch. This woman clearly isn’t letting a sour economy—or the thick haze of media negativity surrounding it—roadblock her from doing her best. It’s always a great time to be a real estate agent, she posits with no shortage of conviction, provided one continually functions at the top of their game, stays committed to excellence; and is always flexible enough to change with the times.

“Right now it’s a great time to be a Realtor,” said Carmen Mazzia, the voice on the other end of the radio. “Because people who weren’t serious about real estate have left the business; and only the true professionals have stayed on.” Mazzia, it turns out, is a broker of high-end new homes in Portland, Oregon who tunes-out the media’s incessant doomsday chatter; preferring instead to squeeze lemonade from a lemon market.

“Has the market gone down,” Ms. Mazzia asks rhetorically before answering her own question. “Well, some things certainly were overpriced. I mean, I’m not going to lie. But the media has caused a lot of this frenzy and so a lot of buyers are fearful. But people who weren’t able to get into a home before, can get into one now. Do they take their time? Yes. Do we negotiate? Yes. Do we make sure we’re getting them the best deal? Yes. So it’s just a different market. It takes more patience. It takes more skill.”

That real estate agents need extra patience and some brand new skill sets to address today’s market is a gigantic understatement. As a critical first step in achieving their clients’ goals, agents must maintain deeper-than-usual reservoirs of patience as they guide buyers and sellers to an understanding of the changed dynamics and new realities of today’s market. Beyond all the expected skill sets, agents at the top-of-their-game must now possess a complete mastery of such heretofore arcane specialties as foreclosures and short sales.

At the Michael Saunders & Company Career Development Center on South Tamiami Trail, Sarasota real estate attorney Anne Weintraub—along with Ann Stickel, the company’s vice-president of affiliated services—have just wrapped-up another session instructing some 60 of the company’s agents on the intricacies of transactions involving foreclosures and short sales. It’s the 30th such interactive session on the same theme and there isn’t an empty seat in the house.

Why so many sessions on the same topic with less than 500 real estate agents in the company? To stay abreast of the foreclosure process frequent refresher training is a must.

“You wake up tomorrow and I guarantee you there will be something new you’ll need to know,” said Stickel, who just co-anchored a session on foreclosures before a packed house at a national real estate conference in New York City. “Throughout your training you also become fully networked with local real estate attorneys, CPAs, asset protection attorneys and other professionals involved in the foreclosure process,” she adds. “These days you need to work with a real estate agent who is just a phone call away from any of these resources.”

Beyond the issue of foreclosures and short sales, there are other new horizons where the most experienced and best trained agents will agree with Ms. Mazzia that now is an excellent time to be in the business. With the huge number of Baby Boomers edging into retirement, some of the most forward-thinking agents are becoming specialists in the real estate needs of active seniors. They’re learning the key differences between housing options for seniors of all ages; from age-restricted communities to age-in-place designs, to assisted living options. They understand the ins and outs of reverse mortgages and know how to use pensions, 401k accounts, and IRAs to fund real estate transactions. As well, they learn how to recognize and protect their clients from scams that target aging homebuyers and borrowers.

You may never need any specialized real estate service beyond the traditional goals of buying or selling a home. Even then, if you’re a seller you need an agent who is so familiar with the market on a daily basis that he or she can price your home correctly from the get-go. If you’re a buyer, you need someone who can immediately spot the difference between an over-priced listing and a best opportunity. These best opportunities include numerous properties in all price ranges not facing foreclosure or short sale that are just as aggressively priced as the ones that are. Their sellers have shrewdly accepted the market for what it is and are ready to move on without delay. Often these homes are even greater values because they have been lived in continuously and are better maintained.

Regrettably there are still many over-priced homes languishing on the market whose sellers are apparently hoping for a miracle. Hope is not a strategy if you must sell.

Regardless of your real estate needs, the most important duty we can perform is to provide the most experienced and continuously-trained professionals in the business; agents like Ms. Mazzia who routinely stare down adversity, believing that tough times are when true professionals redouble their skills and become an even greater resource for their clients and customers.

Psychologist-In-Chief

Irrespective of one’s political persuasion, it’s hard not to feel utterly swept up in the palpable atmosphere of extreme optimism that has largely characterized Barack Obama’s historic ascent into the Oval Office. This is one of those seminal instances in American history when you’ll never forget where you were the moment everything changed.

Although Americans still harbor a profound sense of apprehension over the economy, confidence in the new president’s ability to mend its deep fissures is extraordinarily high; with seven-in-ten Americans voicing confidence that his proposals will get the job done. As well, consumer confidence—which had fallen dramatically since September 2008—began to trend upward again in November; in concert, apparently, with Obama’s election. It has continued to rise steadily throughout the transition. These high expectations suggest the public has enough confidence in Obama’s intellect and bipartisan instincts to give him wide berth in crafting solutions to the intertwined housing, banking and credit crises.

“Confidence,” is definitely the watchword of the day. Psychology matters in the markets. Most economists believe the economy won’t reverse its downward trajectory until Americans regain confidence in their financial institutions. As much as any economic stimulus package can reverse the slide, Obama knows instinctively—just as Franklin Roosevelt did back in 1933—that overcoming fear and restoring confidence is the crucial first step to restoring America’s pre-eminence as an economic superpower.

Moreover, the experts predict the broader recovery won’t begin until money resumes flowing into the credit markets and the housing market stabilizes; which Obama has pledged as first priorities of his new administration. With congressional authority to allocate the next round of TARP funds already granted, the new president plans to immediately press the banks into doing much more to help homeowners avert foreclosure. He also intends to send a strong and unequivocal message to these rescued institutions that TARP dollars must flow freely into the hands of creditworthy borrowers. One can almost feel the bottom forming with Obama’s focus now firmly fixed on hastening it.

Today’s real estate market still favors buyers like no other in history. It has everything you could possibly hope for as a buyer: Median prices approaching half what they were during the boom, an unprecedented selection of homes in every price range and the lowest interest rates on record. Theoretically, the market should be percolating with activity. Instead, the opposite is true. Even though the opportunities to buy have never been better, buyer resolve is at an all-time low. They are allowing fear and negativity to dictate their next move—which is to do nothing.

Gary Keller, a real estate trend watcher, has made some shrewd observations about how today’s negative psychology causes buyers to act contrary to their best interests. “Their reluctance (to buy) is ironic,” Keller says, “since not so long ago buyers were incredibly excited about buying—and it was a sellers’ market. Prices were escalating and it was perhaps one of the most difficult times to find value; and yet people were buying like there was no tomorrow. Buyers were afraid of losing out by not buying, even though the advantage was all to the seller. Now a shift has occurred. Fear is still in the driver’s seat, but the tables are turned—the fear of paying too much seems to stop most buyers in their tracks and immobilizes them. When they should have been afraid of paying too much they weren’t; and now that they shouldn’t be afraid of paying too much, they are. It’s one of the great paradoxical moments of any market; and the herd instinct at its most pure.”

So in addition to being our new commander-in-chief, Obama must fulfill the role of psychologist-in-chief. He must instill confidence where fear has caused paralysis. In his inaugural address, even as he ticked off the list of tangible challenges that face his fledgling administration—including war on two fronts, a badly weakened economy, a health care system that fails most and schools that fail too many—he also cited that big intangible, fear.

“Less measureable, but no less profound, is a sapping of confidence across our land,” he said, “a nagging fear that America’s decline is inevitable; and that the next generation must lower its sights.”

He promptly debunked that notion with an upbeat reality check. “We remain the most prosperous, powerful nation on Earth,” he said. “Our workers are no less productive than when this crisis began. Our minds are no less inventive, our goods and services no less needed than they were last week or last month or last year. Our capacity remains undiminished. But our time of standing pat, of protecting narrow interests and putting off unpleasant decisions—that time has surely passed. Starting today, we must pick ourselves up, dust ourselves off and begin again the work of remaking America.”

Time waits for no one; and it appears Obama will waste none forging the shortest path to recovery. With his focus trained on resolving the housing crisis as a means to solving the larger crisis, serious homebuyers should heighten their determination to strike while the iron is still hot. Time may be running out on the lowest ebb of the best buyers’ market ever.

“Once the market settles or shows any sign of improvement,” Keller concludes, “Opportunities begin to slip away. The very moment sellers no longer have to make concessions, they won’t. And since there is almost always “group think” at play with respect to fence-sitting buyers, the pent-up demand will eventually break out and buyers may suddenly be faced with mounting competition for the best homes available.”

Soft Landing in Paradise

No one seems to agree exactly when this latest recession began, precisely how long it will last; or how painful it will be in the final analysis. But there’s plenty of evidence that as a community we can do much to control our own destiny when it comes to cushioning ourselves from its more predictable consequences. Do we, therefore, opt for a soft landing? Or settle for a resounding thud?

Study after study shows that money spent in independent, locally-owned stores, boutiques and restaurants will generate more positive economic impact per square foot than the same amount spent inside a national chain; 70 percent more, in fact, according to one retail study conducted in 2004. In economic times as perilous as these, every dollar of income and tax-producing revenue that isn’t allowed to escape the area can spell the difference between mild fiscal discomfort and major economic disaster. Although we’re all looking for new ways to control spending, stretch our budgets and live within our means, it just makes sense to spend what we must where it will do the most good.

The study found that spending $100 in an independent neighborhood business creates $68 in additional local economic activity; while spending $100 in a chain store produces only $43 worth of local impact. A second study—from 2003—found that nearly 45 percent of the revenue collected by local independent merchants stays within the community; while another nine percent stays within the state. The four largest components of local spending are: Wages and benefits paid to local employees; goods and services purchased from other local businesses; profits that accrue to local owners; and taxes paid to local and state government. The study also estimated that a national retailer re-circulates only 14.1 percent of its revenue back into the local economy.

While “big-box” retailers typically serve up big savings thanks to their national buying clout, there are several compelling reasons to spread your spending as judiciously as possible to include local merchants and independent restaurateurs. You might pay a little extra for the experience; but as they say, “what goes around comes around.” In this case, what comes around—hopefully again and again—will be the dollars you spend in these businesses being re-circulated through other local businesses; and so on. Plus, for an area that prides itself on its philanthropic activities, its well worth noting that local businesses contribute more money to local causes—per each dollar of revenue earned—than does the average national retailer.

Happily, shopping our locally-owned stores is as much a treat as it is an act of municipal patriotism. After all, our brand of open-air shopping on palm-lined esplanades is one of the big reasons why people travel here from all over the world. Its part of the Sarasota experience. From the stores, boutiques, galleries and restaurants of Main Street, Palm Avenue, Burns and Towles Courts to the labyrinth of stores that line the streets of Gulf Gate; and from Lakewood Ranch’s Main Street to the arcades of Venice Avenue and the quirky ambiance of Bradenton’s Village of the Arts, shopping and gallery crawls just don’t get more beautiful, more relaxed or more diversified. As the promos for St. Armands Circle so aptly advise, its time to “get out of ‘the box’ and into the circle.”

Nowhere is the sense of independence, quality, local identity and regional pride more in evidence than on the Sarasota-Manatee culinary scene, which is especially worth patronizing and preserving in these hardest of times. Within a twenty-mile radius of downtown Sarasota, there are more Florida Trend Award and Zagat top-scoring restaurants than any other area of the state.

A group of 24 independently owned restaurants in the Sarasota-Manatee County region own the distinction of being Florida’s first chapter of the Council of Independent Restaurants of America (CIRA). CIRA has established chapters in 18 other cities around the US; and the Sarasota-Manatee “Originals,” as they call themselves, now boast more than 50 active members—including longtime local classics, trendy new arrivals and dependable neighborhood favorites. Every one of these award-winning eateries is independently owned and operated; and dependent on far more than three-months of seasonal patronage to shoulder leaner times and the annual off-season lull. Best of all, a thriving restaurant scene will attract more tourism and encourage new restaurateurs to fearlessly test the waters. Visit FreshOriginals.com for a full listing of the member restaurants and their individual Web sites. Bon appétit!

Then there’s the arts and cultural scene, arguably the region’s number-one calling card and claim to fame; typically mentioned in the same breath as our spectacular climate and world-class beaches. Few enterprises suffer more at the hands of economic malaise than those that depend heavily on federal, state and municipal arts grants—and all manner of private funding in between; line items that are typically first to feel the budget axe in challenging economic times. There’s never been a time when our cultural scene—so important to our economy and the world’s view of Sarasota—was more vulnerable.

The list of cultural venues, art galleries and museums is far too lengthy for this piece, but a visit to SarasotaArts.org is a great place to find out the whats, whens, and wheres. Buy a ticket (or two) and support one of the region’s most remarkable and reliable tourist draws. It’s a fabulous night out and the money stays in the community to presumably nurture future productions.

If the laws of economics say recessions are a necessary part of the normal cycle, can you think of a better place to cycle through one? Please do as much as you possibly can to keep “Paradise” from becoming Paradise lost.



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