patrick.net

Randy H,

Good for you! When we submit lowball offers (especially ones for 50% off asking) what we're effectively communicating is, ahem, the last FIVE YEARS weren't "real". Sellers countering with an ABOVE asking price counter offer is just infantile! What sellers seem to be failing to realize is that almost EVERYTHING in life is negotiable! If I were the sellers agent I would say, "well, at least it's an offer"! "Let's work with this guy and see where it takes us".

Well, asking RE Perma Bulls to actually think like that is like asking a bear to use a toilet (so I don't hold out a lot of help that's going to happen). But it should, and I believe ultimately it will.

The reason your offers have been rejected without any real consideration is b/c sellers have heard about us (or folks like us) and they're not about to capitulate to those "naysayers". They would infinitely prefer to deal with someone that embraces all of the cliches that are the subject of this thread.

George,

And good on you sir!

Look, if you guys can make as much or more working the bottom feeding end just hang out your own "shingle" and let the other agents in the area think what they want to think! I can't see throwing away a perfectly good career for a short lived run but from what you (and others) have described there should be enough "fresh meat" for you guys to work until you're ready to retire!

speedingpullet,

Thanks for the "Greg Swan Lives in a Cloud" link! I just loved it. His 21 point list for why Phoenix won't tank anymore than it already has was laughable (as was his description of "non-believers" as Brown Shirts). Btw, why is it any time someone is having their indefensible "position" assaulted they break out the old "brown shirt" analogy? The very first poster stole my thunder by quickly observing that 2/3rds of his "points" where actually the same thing and even casual perusal boils his position down to about 3 points actually. His rebuttal was equally laughable (and oblivious to some pretty well established facts).

The question in my mind is, how do these RE "professionals" see this defense of the bull market as a service to their clients? You're a professional (or you claim to be) aren't you supposed to advise your clients when other alternatives might make more sense? God forbid you tell them to keep their wallets in their hip pocket!

What an A$$CLOWN!

I’ve partnered up with one of my fellow agents and we are going to start going after pre-foreclosures for flipping.

hmmm, sounds a bit tricky -- maybe you should try shorting them instead....

MA,

I have no doubt about your assesment for Bend. I know a number of people that grew up there (dad worked in a lumber mill etc.) that left the day OF graduation! These folks are aghast at the skyrocketing prices there. They also tend to be the most bearish about the future for RE in that area! It's like this total "equity locust/boomertopia" without equal. It will crash hard.

SFWoman,

I'll have to read that article. Sounds like it may be prevalant in New England but I do know this: I've had a few clients like that over the years. They are a genuine PITA! They have no where to go (and all day to get there) they call everyday, and in the end they bleed the account dry with premature withdrawals and tax penalties. Almost all of them will not go "72t" and begin confronting their lack of employment prospects.

Look, I took a HUGE pay cut to go independent, but in the end it was a necesaary evil and is starting to pay off. I've had it with the guys in "that" crowd!

The first year I "went independent" I felt a whole heck of a lot more like an "unemployed person" than an "independent person". The bank dredged up these vague "non-compete agreements" and held us to the LETTER of the law! We had just gone through a pretty tough bear market and didn't have the resouces to fight it in court.

Since I did manage to sneak a few clients out (best ones first) before they pummeled us I couldn't afford to let them think I had to take a "day job" so I was forced to do what I could out of my home office. I cold called for mortgage companies (that was fun) sold "educational programs" and adirondack chairs to furniture companies for a guy that made them out of his garage (for all I know). In short, it sucked. Massively. Selling is one thing (getting these guys to pay you is another). I literally had to use call waiting and check my voice mail every time I made a call. I was working from 4:30am often until 8:00pm or later. Many, many weekends. Did it suck? Sure. Was it demeaning? No.

Oh and the best one was I sold seminars over the phone for a guy that was a Persuassive Speaker but couldn't seem to be able to perssuade anyone to actually attend his seminars. That really took the cake!

George,

The guy was really nice and very well educated. Surprisingly he actually paid the best and ON TIME! I couldn't help but wonder though (because I was the guy packing them in) if I hadn't missed my calling as a "persuassion guru".

Hey, I wasn't in a position to turn down work! I think it's more in DS's domain but don't the Aussies say, "Any work is good work"?

I know it goes against the grain of this blog, but I once missed the opportunity literally of a lifetime by NOT looking at a listing somewhat like that one.

You have to putt yet harder since it is against the grain.

Some new ones from a Realtor having an open house this weekend:

"it's just business, you have to take the emotion out of it"

and my personal fav. from the diarrhea coming from his mouth:

"everyone makes $500K from flipping these things"

Actually, not new but still currently funny.

George,

At least Sonny Page had "some" humility about his predicament. It was really funny to hear that like a lot of RE "couples" they were getting a "swirlie" in adjoining stalls.

I have a good RE attorney who gave me a template and showed me how to write legal offers on-demand. So my marginal cost is 0; and my emotional cost is 0. Just getting any response at all to a 50% off asking offer is positively satisfying.

Randy,

Would you consider sharing that template and/or general knowledge with us? I would love to start doing the same in my area (L.A. County).

So my marginal cost is 0; and my emotional cost is 0.

The problem is that I only want to deal with sellers who have good energy. I definitely do not want to harm them emotionally by giving them insulting offers. So I can only lowball a little.

Peter P,

I wouldn't expect to be taking advantage of a seller but in many cases the home is actually the "bank's asset". Mr. Homedebtor came in with nothing down (and in some cases borrowed more than the damn place is worth) then made non-amoritizing payments and may even be in arrears on his property taxes (as often is the case in Orange County).

Why am I even having to deal with this person? How are they still even in the equation? WHY are they still in the equation? There may be a whole lotta "bad ju-ju" goin' on but I didn't start it as a lowball buyer. For sellers that actually have equity (trust me, they've already "spent" the money)!

*NEW ADJUSTED COST BASIS*

(Just take over payments) Good Credit, Bad Credit, NO CREDIT!

We have a lender right there at the unfinished "model home" inside the sub-division! We can get you approved on the spot!

If you have a job and a checking account $1 gets you started on your path to home ownership! That's right! One Dollar down (it's a dollar more than we got from the last FB).

MA,

You're doing harm by NOT making a 50% offer!

I didn't necessarily mean to take things to that extreme it's just frustrating that b/c of our reverence for RE we treat FB's that should be dumped out on their ear with the dignity of a deposed prince. It's over already! Especially where flippers are concerned. You somehow got a loan claiming this was your primary res. so that makes what, FOUR "primary" residences for you? We need to figure out a way to get these clowns blown out so we can all move forward!

Like a margin call? I DO understand people go through difficulties in life and if this were truly their primary res. they should be given the FULL benefit of the law! But flippers? Aw c'mon, let's get this over with! The longer we treat specuvestor properties like a "homestead" the more unhealthy the situation is for everyone. Isn't there some kind of "acceleration clause" the lenders can exercise to get this thing on a more sane path?

SQT,

It's a whole new breed of desperation. In the past ARM's were intended for newlyweds etc. Now it seems as if they're being marketed to anyone and everyone. Not cool.

SQT,

For some FB's serial re-financing may put off the inevitable on a personal level but I really don't believe that it will in any way help support prices. Most won't have any wiggle room with low or no equity and we'll likely begin to see this type of activity reflected by the credit reporting agencies as "risky/shaky finances" (as it should be). Unlike some folks here I really do not believe this will be strictly a middle/lower middle class impact. Since they've been so widely used across all income levels the pain will be more evenly spread than most of us would like to think.

SFWoman,

Well, my feeling is that if the government offers a free lunch, a lot of people will take advantage of the offer. However, if they deplete their retirement savings to pursue their life, they can't expect me to be sympathetic when they run out of money and are forced to work as Walmart greeters.

This is OT, but just when I thought I understood most of the loopholes and market-distoring effects of Prop. 13, I realize there's another angle being exploited that I hadn't even considered. I can now add the term "Santa Monica teardown" to my CA bubble lexicon.

From 'Tipping Point' thread on Ben's blog:

------------------------------
Comment by Robert Cote

Indeed. They are even called “Santa Monica teardowns.” The general rule is to leave a washbasin and tub on one timber frame wall to “qualify.” The usual event is to build around the two and then rip them out after the inspection. The house immediately next door is one such. About 1200 sf that was recorded as like 1800 sf bumped up to 2600 sf per permits but really comes out to about 3200 sf. A “patio” turned into a two story high family room and a cement work pad turned into an attached office. House is sitting empty as some “anonymous” source tipped off the county who won’t issue occupancy. Geeeee. Sniffff.
------------------------------

A couple years ago I saw them tear down and rebuild an old supermarket in my neighborhood –everything except the rear wall, which they took great care to preserve (used lateral bracing to hold it up). I couldn’t comprehend why they would rip out everything else but go to such trouble to preserve one bare wall. Now it all makes sense.

Yeat another example of how Prop. 13 distorts incentives and should be abolished.

SP,

To me, a buyer's market is when my PITI is lower than rent. Until that happens, greedy sellers can blame themselves for the slow moving RE market.

To me, a buyer’s market is when my PITI is lower than rent.

I don't know if this will ever be the case in CA --even at the bottom of the market-- but PITI should at least be close to equalling rent. Perhaps a more precise benchmark would be PITI + HOA + est. monthly maintenance - est. monthly tax deduction.

I'm worth with George on this one;

If the seller ain't cryin' I ain't buyin'!

HARM,

Coincidentally, I also came to know about the tear-down rule. Someone I know in BA reconstructed his house, and kept just the one wall. He casually mentioned it, as if it is a safe and sound legal practice - which it very well may be.

July 31, 2006

Men Not Working, and Not Wanting Just Any Job
By LOUIS UCHITELLE and DAVID LEONHARDT

ROCK FALLS, Ill. — Alan Beggerow has stopped looking for work. Laid off as a steelworker at 48, he taught math for a while at a community college. But when that ended, he could not find a job that, in his view, was neither demeaning nor underpaid.

Millions of men like Mr. Beggerow — men in the prime of their lives, between 30 and 55 — have dropped out of regular work. They are turning down jobs they think beneath them or are unable to find work for which they are qualified, even as an expanding economy offers opportunities to work.

About 13 percent of American men in this age group are not working, up from 5 percent in the late 1960’s. The difference represents 4 million men who would be working today if the employment rate had remained where it was in the 1950’s and 60’s.

“These are men forced to compete to get back into the work force, and even then they cannot easily reconstruct what many lost in a former job,” said Thomas A. Kochan, a labor and management expert at the Sloan School of Management at Massachusetts Institute of Technology. “So they stop trying.”

Many of these men could find work if they had to, but with lower pay and fewer benefits than they once earned, and they have decided they prefer the alternative. It is a significant cultural shift from three decades ago, when men almost invariably went back into the work force after losing a job and were more often able to find a new one that met their needs.

“To be honest, I’m kind of looking for the home run,” said Christopher Priga, who is 54 and has not had steady work since he lost a job with a six-figure income as an electrical engineer at Xerox in 2002. “There’s no point in hitting for base hits,” he explained. “I’ve been down the road where I did all the things I was supposed to do, and the end result of that is nil.”

Instead, Mr. Priga supports himself by borrowing against the rising value of his Los Angeles home. Other men fall back on wives or family members...
_____

We are royally screwed!

See, we should demolish the welfare system before it is too late!

Astrid,

That PITI is rarely less than rent. In fact, since WWII PITI always exceeds rent except for very short periods of sharp adjustments/recessions or for longer periods in severely depressed labor market areas.

In case #1 ownership is not facilitated by the reversal of PITI and Rent because such periods are also accompanied by credit-crunches. The primary reason that homes become cheaper than equivalent rents is because the cost of credit goes so high that it forces home prices down. And, prices only stay below rent during the brief period of "overshooting", then they go back up to equilibrium, which is above rent equivalent. (Of course there are a few micro-markets with true supply constraints on rental stock--though not many, and in these cases rent may exceed ownership longer, but still usually not for very long, mainly because these places are usually urban and people just move to the 'burbs to buy a home or rent given such economic pressures).

In case #2 you don't want to live there anyway; nor does anyone else, thus the reason homes are cheaper than rent.

Michael Holliday,

I'd prefer to think that "they" are royally screwed!

What happens to Mr. Priga when his home no longer appreciates? And what kind of sleaze bag mortgage broker and his scumbag underwriter are extending credit to this prima donna? Life sucks, now get back to work.

MH,

There is always another side to articles like that.

Firstly, there is a big difference between a male steelworker who drops out, an engineer, and a VP-level director. I contend that the telling correlations are to be found in the socio-economic strata, not in some broad-brush "men between 30-55".

Secondly, there is a very real age-"discrimination" (I use that word in quotes to signal my uneasiness with victim-izaiton) issue. Many studies have show that along with rising turnover rates in corporate America, there has been a strong downward movement in replacement age averages. What you are seeing is middle management or supervisors turned out only to find increasingly fewer jobs for professionals over 40.

Lastly, there is a very real fine line between "dropping out" and "holding out". Anyone over 35 who's lost a professional job knows the routine. You have to be very careful about marking yourself down too early. Often, you can find equivalent work if you are patient and determined. This is the "competition" part. You have to fight for those jobs. However, if you take that McJob McManagement position you may find that you have effectively downgraded yourself from that point forward. Of course, for some folks holding out 3 months is too long; for others 3 years isn't.

Anyways, most people like this aren't sitting at home or on welfare. They're doing "independent consulting" or something else "self employed". Sometimes they might find they actually like that better and make just as much money, only with a lot more freedom and a lot less BS.

Oh, did we forget to mention that Mr. Priga no longer has a job or any investments to speak of with which to re-pay the loan?

People, that's the whole misconception of "home equity loans". They really are "job loans". First, true it helps to have a home to pull off this little scherade but another pivotal factor is having a freaking job with which to make the payments.

Or is it just assumed that when his little juggling act runs out of juice that it will have appreciated enough to play the whole shell game over again?

Good responses to my post.

DinOR Says:

"...Life sucks, now get back to work."

Ha, haa! I love that line. I'm goint to steal it.

Randy H,

In ways I hear what you're saying. In fact I pretty much counted on it! Let's face facts here, if you're in your late 30's early 40's and you haven't been invited into the "inner circle" it's probably not going to happen. No matter where you work. Randy, you and I have discussed before just how important it is to develop a "moonlight" activity. As far as I can see these guys made absolutely no provision whatsoever.

Overpaid, arrogant demanding Boomer a$$hat thinks accepting a job offered at market wages is "demeaning" or "underpaying".

Oh, Boo-hoo! Time to throw a tantrum, I guess (that always worked on mom & dad, didn't it?). This a perfectly predictable reaction to be expected of anyone from the Entitlement Generation, whenever anyone tells them they can't have absolutely everything they want.

Want to try "demeaning" and "underpaying"? Try busting your ass supporting yourself through college, while trying to maintain a high GPA to qualify for student loans, only to graduate into high unemployment and recession. Then working a succession of crappy $5.75/hr jobs because that's all that's being offered at the time. Gee, that sounds familiar... oh, that's right --it happened to me.

Or how about reliving what my old man went through: cutting lumber with hand axes and saws with the CCC in upstate Maine during the Great Depression. At least the CCC was nice enough to provide tents and food. Then his "payoff" was getting sent to Burma to fight off the Japs in WWII.

This fuck doesn't know a thing about "demeaning", but I suspect the market will be stepping in to give him an education real soon. I'll be looking forward to it.

It is the specialization conundrum.

In order to rise in most professions one is forced into increasing specialization. The classic example is the defense industry engineer. Then, when things change these workers find themselves competing at a disadvantage.

Nothing new about this; been going on for decades. What is different today is that previously generalist manger type roles have become ultra-specialized and tracked. Basically, if you didn't follow a certain exact path in career development you find yourself unable to compete with usually younger workers who did follow the cookie-cutter track. This is true even after people return to school, earn advanced degrees, or have far superior total experience.

It is an effect of the increasing fungibilization of all workers at all levels except for the 1-3 layers at the very top...the "club". Everyone else is just meat. It's no longer about increasing the value of these workers' contributions, but instead about reducing the variability of their performance.

"I don't care that you have 15 years of great experience in otherindustry, nor that you went back to school to earn anothergreatdegree. I want someone with 8 years of experience who went to oneofthese schools, worked for oneofthese6companies afterwards and achieved thistitle. We'd love to talk about hiring you as a contractor to help fill the gaps though".

By the way, I know men who took 2 or more years off after losing a job, usually around 2000/2001. Some went back to school, some became stay-at-home dads, some did odds&ends consulting. In most cases they ended up eventually finding something equal or better than they lost. In all cases they considered the time they got to spend with their kids beyond value. This is something our fathers never had the chance to do. The added benefit is their wives got a chance to reengage their careers if they so wished also; something their mothers never got the chance to do without turning their kids into latchkey kids.

It is the specialization conundrum.

In order to rise in most professions one is forced into increasing specialization. The classic example is the defense industry engineer. Then, when things change these workers find themselves competing at a disadvantage.

Again, it is about being in the right place at the right time, always.

newsfreak Says:
Oh, and thanks for sending that heatwave East–the dogs and cats are melting.

Yeah, sorry 'bout that.
My cats spent most of last week scrapping with each other to lie in the PRIME spot under the AC vent. Well, scrapping may be a too strenuous term for it....the odd wave of a paw in the other's general direction before falling asleep on their backs.
Poor old furries.

Appropos of nothing....does anyone know if there's a way to use the Tax Assessed Value to figure out a 'fair' price for a house? If you don't know the year bought - as Zillow only goes back about 10 years - can you use it to extrapolate a price?
Also - what's the skinny on 'non/un-permitted' square footage? Is that legal? I've seen lots of properties here in LA where they say something along the lines of 'square footage does not tally with floorplans', or something like that.
If I was to buy one of these places, wouldn't umpermitted square footage be a problem?