It Ain't All Big Hair and Cadillacs

I've come across 2 websites that provide a list of foreclosures. The first list is for properties in Cook as well as additional counties in northern Illinois:

http://cook.il-foreclosure.com/

The site allows you to purchase the actual foreclosure documents which have been filed. It also lists the auction service, location, time and date of the actual property auction.

The second site is a national list of real-time filings in 35 states for forclosures which have been filed, www.foreclosurepoint.com. The site provides real-time listings, including property type, address and estimated value via Zestimates where available, and date of filing. Owners contact information is available for a fee if you subscribe to the site.

While foreclosures are becoming more and more common, I thought I would pass along the following article regarding purchasing foreclosed properties at auction.

Ever try to communicate with a 16 year old? My son - a super kid mind you - is 16 years old. Keeping in touch with Dad isn't his highest priority. So, in the interest of communicating, I decided the best way to at least make contact was Facebook. Why speak to anyone when you have Facebook, right?

Ok - so I reached out to my son - as a Friend and sent an email - now I realize at 16 Dad's aren't friends, they're Dads, but in Facebook ya gotta go with the flow - just checking in with him - just wanted him to know that I was still alive.
I didn't expect much of a response, maybe a "hey", or a "s'up?" Nope - I got, "um - dad, aren't you too old to use this site?" Personally, I was amazed I got a 10 word response - was I offended? YES!

While I wanted to reponse - "Dude, don't diss me bro" I took the far more mature approach and said..er..texted, "son, when I was your age, I played a video game called PONG - it was a black screen with a single cursor and I liked it - I liked it just fine!" Too old - TOO OLD?? Okay - I'm still waiting for a response. In the interim, however, I decided to look up my high school classmates - GEESHHHH! Do they look...old. Never mind.

Sorry - I like the song - and after reading the recent comments by Richard F. Gaylord, 2008 NAR President regarding the recent proposed settlement in the case of the United States of America v. National Association of REALTORS, it somehow has new meaning for me.

The lawsuit addressed the rules for sharing data on the internet via a VOW or virtual office website. NAR established rules that gave brokers who operate VOW's control over whether their listings could appear on the websites of other MLS participants.

Richard's comments struck me as odd. The settlement was a win for both REALTORS and consumers. Is it really a win for consumers? His arguement states that the settlement affirms the rights of consumers. The settlement allows consumers to opt out of having their detailed listing information displayed online. "If sellers choose to be online, they can ask that blogging, automated valuations, and false information about their property on an MLS participant's VOW be removed."

How is it a win for consumers to have their information withheld from potential buyers?

Ok - so I've decided that I want to take my blog in a new direction. While I currently work at a full-service brokerage, I have been intrigued with the possibility of building a new business model - one that is consumer-centric not agent-centric - hence, my new name - real estate Ain't All Big Hair and Cadillacs, best spoken in a slow Texas drawl.

I know the name is silly - maybe stupid, but my intent is entirely serious. I read alot about the real estate industry and I am really trying to be vigilant about learning more about the new and exciting tools, applications and companies that are out to change the way real estate is bought and sold.

I recently read one article quoting an industry veteran's response to the question, "What do you see happening in the real estate market in 2008?" One of his responses was, "Technology will speed change and facilitate more consumer-driven solutions and alternatives for buying and selling homes."
Considering I used to develop marketing strategies for service companies, I thought - hmmm - why can't I develop consumer-driven solutions and alternatives for buying and selling homes? Ok - so I've decided that I am going to develop consumer-driven solutions and alternatives for buying and selling homes but I need consumers' input.

Kevin Seney's interview was perhaps a light bulb moment, but so were my discussions with Redfin, the recent Department of Justice's settlement with the National Association of Realtors regarding internet-based real estate brokerages
, NAR's proposed project of building a national MLS database etc, etc. Needless to say, consumers want to be in control regarding the process and feel that the current business model - I call it agent-centric business model - does not promote transparency.

I believe the traditional "agent-centric" business model of how real estate is bought and sold is evolving exponentially - ie the rise of companies such as Zillow, Redfin, Trulia etc. Consumers have more access to data that allows them to locate their ideal property and better tools to determine the value of properties. Neither Redfin and Zillow have complete solutions - Redfin's technology model is based on the reduction of the cost of the traditional real estate transaction by providing rebates to consumers. They view themselves as a technology company in the real estate business. Zillow's sophisticated Zestimates help provide a technology solution to what most would consider an agent's key role, but often times it still requires the knowledge of an experience agent to completely interpret the data. Trulia is social networking with some valuation and property search capability.

While there are other solutions gaining traction, the three I mentioned have take the information traditionally locked up in local MLS' and provide real data solutions to consumers and consumers are eating it up and demanding more - but what is the more?

While consumers have more data, they may not necessarily have the experience to best assimilate the information. In the current environment, almost 80% of consumers who are searching for a new home are using the internet to search for their ideal property. However, not all consumers have the knowledge of local customs and experience to negotiate the best price and terms to purchase their property.

Many need education not only about the buying and selling process, but the financing part, the legal part, the actual market conditions part, the title insurance and title data part, the escrow management part, the property tax part, the transfer fees part etc. Surely there are enormous opportunities in and around any of the issues I've stated - or perhaps a total solution that encompasses all of those "parts", a collaborative real estate environment - sounds sort of consulting-ish.

What kind of solutions and alternatives do consumers want to in order facilitate the process of buying and selling a home? What is critical to making the process work for you? Buehler?

Yep - it's true - The long anticipated project The Rotunda is well under construction at 2741/3 N Sheffield in Lincoln Park - and is slated to delivery in late October, 2008.

The project is an intimate 8 unit elevator building - six 2 bed / 2 bath simplexes all 1,570 sq ft. The additional 2 units are townhomes - one 3 bed / 3.5 bath (2,331 sq ft) and one 4 bed / 3.5 bath (2,896 sq ft). Prices are $499,000, $509,000 & $575,000 for the simplexes - $725,000 for the 3 bed townhome and $750,000 for the 4 bed townhome. All included 1 car garage space.

Click on the title and go to the project webpage for more details.

Ok, ok, ok - so you want to make money in real estate but you don't want to buy - er - real estate. Hmm - I think I understand your dilemma. Everywhere you read someone comments that waiting to buy - or actually buying real estate - is like catching a falling knife. Ouch! But people in real estate keep saying to buy - there's no better time to buy!

Honestly - I'm still on the fence regarding whether or not now is the perfect time to buy. For some properties in some neighborhoods, I agree - there are well priced properties. Not all properties are created equal, however, so I don't believe it is ideal for everyone to buy. If you do buy, make sure you buy smart. Foreclosures and short sales may represent a fairly high percentage of sales in the near term, but not all represent the best deal. Some sellers who are not in financial distress have priced their properties to sell and may be better deals.
Ok - so you still want to make money in real estate, but you still don't want to buy real estate. I think most would people respond by saying - Um - have you taken your meds? I - however - would respond - of course you do! Let's make money in real estate without actually buying real estate.

Ok - I am not Carlton Sheets, nor do I play him on TV. There are ways to actually make money in real estate without outright purchasing a property. Needless to say, this is a tough market in a majority of cities currently. In light of the flood of foreclosures, there are many people in dire financial straights, unable to meet their monthly mortgage obligation, hence forcing a short sale or foreclosure. The deluge of foreclosures is having a significant impact not only on real estate values, it is also putting a strain on local governments in terms of unpaid property tax revenues. Not only are people having difficultly paying their mortgages, in many cases, their property taxes are also in arrears.

This presents an interesting opportunity. While unpaid real estate taxes is not a new phenomenon, the magnitude of unpaid tax bills will have an impact on local government - some bills may go unpaid for a longer than normal period. In order for local governments to generate revenue from unpaid tax bills, state laws allow local entities to sell unpaid taxes at auction.

http://thomasjhall.com/links.php?url=http://www.cookcountytreasurer.com/default.aspx
So - you want to make money in real estate, but you don't want to actually buy real estate? Hmmm - how 'bout buying someone's outstanding tax bill? While this may not make you rich, it may allow you to generate some income while not being fully exposed to the issues related to the purchase of a foreclosure.

Each year the county has an auction for all outstanding tax bills where any qualified individual can bid on the balance due on the available properties with delinquencies. You bid on a rate of return you wish to be paid on the balance of the outstanding tax bill - to be paid as interest. If you win the auction, you pay the outstanding balance. When the property owner pays off the balance, you are paid interest on the balance plus the outstanding balance.

Understand that the owner of the property will in all probability pay the outstanding balance due - if so, you will be paid the balance due plus interest. Here are the details:

http://thomasjhall.com/links.php?url=http://www.cookcountytreasurer.com/default.aspx

Again, this is not a get rich quick investment opportunity - it represents a way to potential make a better than market return on your money in real estate without a full exposure to holding a property that may continue to decline in value.

While still a low probability, you still could actually end up with the property by simply paying for only a portion of an outstanding tax bill. If the balance of any outstanding tax bill is unpaid for a period of 3 years, you can obtain the property as default. Again, a large majority of property owners pay their outstanding balances off, however, in light of the current flood of foreclosures, there may be a slightly greater possibility of actually obtaining a property by simply paying the back taxes.

So - it's not your meds - you actually can make money in real estate without having to actually buy it.

Often times I've seen the Case-Shiller index quoted as an unbiased benchmark regarding the housing market in the US. I read an interesting article written by Blanche Evans, editor of Realty Times, questioning whether the index is truly unbiased. I don't abdicate that the housing market isn't in decline, I am merely adding this info as a balance to the claims that only NAR is biased.

There is a large discrepancy between the Office of Federal Housing Enterprise Oversight, NAR and Case-Shiller percentage declines - the article raises some very interesting questions.

Robert Shiller a Yale economist and Karl Case a professor of economics at Wellesley are the co-creators of the index. It was launched to provide information originally to hedge funds but has now become the defacto index used by many investors and analysts as the "best gage" for real estate values.

What Blanche writes is interesting - the index is licensed exclusively to Macromarkets LLC for "developing, structuring and trading financial instruments". This is very interesting - Macromarkets' products is the Housing Futures and Options index. According to Blanche's article, this index forms the basis for "directly investing in and hedging US housing on the Chicago Mercantile Exchange, where futures and options on the index are traded.

According to Lawrence Yun, NAR's chief economist., when a CME hedge is made, revenues flow to Macromarkets LLC - people hedge when prices are viewed to be volatile.

The icing on the cake - Shiller is founder and chief economist of Macromarkets LLC.

Could it be construed as a conflict of interest? OFHEO and NAR do not have relationships with hedge funds.

I often read and post to a question and answer forum on Trulia - a great site for people interested in real estate, whether you're searching for property or if you simply want to learn more about the process, real estate issues etc.

One question that has generated an enormous amount of interest, postings etc. is "Why Should Someone Buy in this Market?" It's a good question - one that I believe is better answered from a client advocacy perspective. Many of the individuals who have posted are real estate professionals - others are active buyers and sellers in their specific marketplaces.

What I have found is that there is a general tone or sense of distrust of the real estate community from many buyers and sellers - often blatant, rarely subtle. Real estate agents/brokers cannot be unbiased in their responses due to their vested interest in selling real estate - if buyers don't buy / sellers don't sell, agents don't get paid. Hence the dilemma in answering the question, if the market is in decline, why should someone buy?

State real estate license law requires that when acting as an agent I have a fiduciary responsibility to my client. In providing sound council, I must keep my client's best interest forefront in my mind. Regardless of what the law states, buyers and sellers aren't always convinced that their agent isn't necessarily focused on their commission.

The fact remains, some agents consider the cooperating commission in the MLS prior to showing particular properties to a client - even if they know the property may be a perfect fit - if the co-op commission is less than ideal, it may simply not be shown. It happens.

I recently attended an office meeting where the discussion focused heavily on the current state of the market - and even more specifically, how to handle short sales. As we discussed the process of negotiating a potential offer with a lender, the discussion turned to fact that in some cases, banks may not agree to compensation in a short sale, i.e. the cooperating commission that may have been stated in the MLS prior to the presentation of an offer may not be honored. The question was raised - "If there is a chance I won't get paid, why would I want to sell a short sale?"

I think it was a fair question, but again, one that is answered from a client advocacy perspective. If a client asks his/her agent to write an offer for a short sale, the agent should write the offer. Client advocacy is at the center of what we do as agents. We have a responsibility to understand the needs of our clients; We are obligated to work in our client's best interests.

The key to being a client advocate however is to ensure that our clients understand that we are not altruistic. Agents are compensated due to the value of the knowledge and services they provide. Some clients don't need the guidance and knowledge of an experienced agent - that's okay. Not every potential buyer has the same level of risk tolerance regarding an investment. To some buyers and/or sellers, the current market conditions may create ideal circumstances for them based upon their own investment objectives. Advising a potential client to buy in today's market may be based upon their client's own objectives, hence fulfilling our role as an advocate - our compensation should reflect our knowledge and experience to identify the best alternatives for an investment.