Saturday, October 31, 2009

Would you rather be Appreciated or Depreciated?

Here are some interesting numbers for you to contemplate if you own a home or are considering owning a home. These come to me from a subscription to Trends, compiled by Mr. Don Pickett. He describes the numbers as ballpark however they ring pretty true by my reckoning.

First off let me say that the ownership of real property as an investment has traditionally been built around the principle of equity. You establish equity in two ways. 1) You pay down your mortgage. 2) You hope that your property increases in value over time or appreciates.

Following are numbers reflecting the principle of appreciation over the last 10 years. You will note that the numbers will reflect a % of the year increase in value over the previous year and the average price of a typical home in Leon County in that year.

YEAR............... % CHANGE...................... AVERAGE PRICE

1999...................... 3%
2000...................... 6
2001.......................8........................... $153,664
2002...................... 4............................. 159,481
2003.................... 14............................. 181,191
2004.................... 12 .............................202,835
2005.................... 15 .............................233,826
2006...................... 8 .............................253,546
2007...................... 2............................. 257,874
2008.................... (6)............................ 242,603
2009 (thru Sep) (10.5)......................... 217,214

Once again, we see the application of the law of gravity. What goes up must surely come down. Look at the average price for a home in Leon County 2001 vs 2006. What you bought '01 was worth approximately $100k more 5 years down the road in 2006. What a run.

It has now changed. In my opinion it has changed forever.

Contact me on the web at

Sunday, October 11, 2009

Humility in a Waiting room

I worked for a pharmaceutical company for 30 years, 1972 to 2002. For pretty close to 20 years I carried a bag as a detail man. I called on physicians in their offices. Accessing physicians in 1972 was much less challenging than 2002. That is why I moved to the Public Affairs sector of the company as a Government Affairs Manager along the way. Anyway as you can imagine I spent a lot of time in physicians waiting rooms hoping for access to the prescriber. I facetiously used to tell people that I was a professional waiter.

I was waiting to see Dr. Rick Damron at what became Medical Group of North Florida. It was 1986 in October. The fall baseball classic was underway. It was right around 5:30 in the PM. I had been waiting about an hour. There was an old man sitting across from me so I struck up a conversation with him. He seemed old to me. I was 40 years of age back then.

The subject quickly turned to baseball. The Mets and the Red Sox were in the Series. The night before a Red Sox player, Bill Buckner, had allowed a ball to roll between his legs allowing the series to go to the 7th game. The Mets would ultimately win the Series. Buckner has been the subject of derision and vilification ever since that night. I was a Winthrop Park Little League head coach at that time. I was careful not to draw the old man too tightly into analyzing the elements of the previous night. He was out of his league. After all I was a head coach. What was he? I was soon to find out.

The old man had been sort of quiet as I shot my baseball accumen across the room to him. He was responsive and seemed to be interested in my observations. I could also tell that he has preoccupied with his wife being back in an exam room. As I continued to blather on, the door to the hallway aligning the exam rooms opens and out comes Dr. Damron.

I thought he was coming out to give me a couple of minutes to pitch my latest product. Instead he moved directly to the old man. This is what he said: " Mr. Barber, I read your column all the time. I have even listened to games you have broadcast back in my youth. Could you possibly give me your autograph for my father? He is a big fan."

Dr. Damron then headed back to the exam rooms. As he exited he turned to me and said,
" Sorry I can't see you today. I am running behind." I bid farewell to the old man and in a complete state of embarrassment I was happy to get out of that medical complex. I am not the quickest study on earth but it dawned on me finally who the old man was.

He was Red Barber. He was one of the most respected baseball minds in America. He had been the broadcaster for the New York Yankees for a little better than 10 years. He also did the same job for the Phillies and I think the Dodgers. He wrote a weekly column from right here in Tallahassee called From the Cat bird Seat. That column was syndicated and appeared weekly in major newspapers all over the country. Some 6-7 years later as I was working in my front yard an ESPN news crew stopped in front of my house, while I was doing some edging, and asked how to get to a particular address. I asked them where they were heading and they told me to Red Barber's house. Red Barber had just passed away.

I reflected back on my earlier experience with Mr. Barber. He had been so kind and patient with my infantile observations about the baseball game. Had I been in his shoes I would have curtly dismissed someone like myself. Imagine the restraint I would have had to have suppressed were I him speaking with someone like me. " Do you have any idea who I am? Do you think that I am intrested in your weak opinion about the World Series? Why I have been the play by play announcer in several World Series games."

I was humbled and he was a perfect example of humility. That lesson taught by example has stayed with me to this day.

Friday, October 2, 2009

One In Four

Do me a favor. Go outside and stand across the street from your home. Weather is nice should not be too strenuous. Now look at your house and the three other ones adjacent to yours. Got that picture? OK, now think about this. One of those three neighbors next to you is a financially distressed property. They are in some phase of Lis Pendens. They are headed to foreclosure. Perhaps you, yourself are one of them. Takeaway message is that there are a lot of people hurting out there.

Statistics are that 1 in 4 are in trouble. They have somewhere in their past had a mortgage broker or banking official sign them up for an interest only loan, an adjustable rate mortgage or refinanced them at 125% loan to value (ltv). Your house was worth $200,000. Some mortgage company, perhaps by e-mail, said to you we are going to refinance you at 125% LTV. Going to give you a great rate and send you a $50k check to do with whatever you want. It just sounded too good to pass up. You did it and now the value of your house has eroded to $125k. You owe $250k on a house worth half that much. What are you going to do? You cannot refinance. You have no equity. You cannot sell it because people can buy houses all around you for $100 to 150k.

Now throw in the loss of a job. You put in a call to your lender. What can we do? Can we sell it short? Well we will assign a mitigator of some kind to your case and see what shakes out. In the mean time send us all your recent bank statements, three years of tax returns and find a Realtor who will work for 1% because no way are we, the bank, paying them the going rate for commission. And, oh by the way, whatever loss we take on the sale of your house you are going to sign a note for at 12% interest.

Now put yourself on the other side of this scenario. You are a buyer. You have a little money and a decent job and credit rating. You may even have a loan commitment letter from the lender. You are licking your chops to go buy a foreclosed property and/or a short sale. You find one. You have a Realtor who has asked you to sign an agreement that you will pay thier side of the commission when and if the bank refuses to pay them. You find a property you love. You sign a contract offer and your Realtor delivers it to the Sellers agent who in turn delivers it to the lender. Then the dance begins. The other Realtor puts in a call to the lender asking them to consider the offer. 1-2-3-4-5-6 weeks go by the lender has not returned anyone's call. Why? Because they are inundated with similar requests. Oh they have also cut their staff to the bone. You forgot that the recession was all across the board. Six weeks has turned into 6 months. You have tired of the dance, however, you signed a legitimate contract that binds you to the will of the lender.

Short sale turns into Long-Long sale. It is most likely going to cost you extra money because, guess what, the bank ain't gonna repair ANYTHING. Your Realtor gets out of the business because all they are doing is spending money driving you around, paying MLS fees and all the other operational costs. The bank is probably going to refuse to pay them their commission anyway. They have to find a job waiting tables, driving a cab, something that can provide them some cash flow. So you are left on your own trying to figure out this nightmare you have started.

Choose your battles wisely. Affiliate with a Realtor who has the experience and staying power you need. These are troubled times we operate in. Is it going to get better soon? Who knows that it is not going to get worse? The Feds cannot bail us out ad infinitim. You might want to reconsider chasing the foreclosure or short sale. There is a lot of risk associated with the bulk of them.

Visit me on the web at