Do I Look Like an Ostrich?

I feel as though I've been digging my head in the sand. I had no idea that, when I wrote my last post about liars and thieves, there was a real market out there for deceiving lenders (unless it's the mortgage brokers and banks who fabricate the proof of income).

Over the last couple of days, my blog has been linked from Google search results that requested fake documentation. Here are some of the requests:

"how to use a fake name to get a loan" (They must be joking!)

"make check stubs" (Maybe they want to know how to make stubs for their personal checking account.)

"free fake check stubs" (There's no excuse for this one.)

"fake paycheck" (Just for entertainment purposes, I'm sure.)

"definition of stated income" (Um, it's how much money you actually made.)

"make a fake paycheck" ( . . . and get a big loan!)

" make pay check stub" (This could be an employer, right?)

"what software can i use to make a paycheck stub" (Would someone besides a business owner have a legitimate reason to do this? But wouldn't a check writing service or program, like Quick Books, make the actual stub?)

At first I seriously considered deleting my post. I don't want to be associated with the underground market of loan fraud. But then I considered it a public service to speak out against this type of thing. Maybe after reading my last post, people have reconsidered doing their evil deeds. After all, we all slip once in a while. If I can help them come to their collective senses, then maybe I've stopped them from doing something that they'd regret.

Or, am I missing the point completely. Do you think the titles of these searches are for something completely unrelated? Or does that question shove my head right back into the beach ground cover? I have to wonder how many more searches there were from people who didn't link to my site. It's probably a very high number.

Besides the obvious, one of the biggest problems with people creating their own pay stubs in order to deceive lenders is that it's perpetuating the trouble in the mortgage arena. If these people obtain loans that they can't afford, then it may take longer for the real estate market to recover because these con artists will be the ones defaulting in one to three years. Maybe they feel that it's safer now to buy homes that cost a larger portion of their take home pay because the government will have a bail out program by the time they need to be rescued from their own stupidity.

Am I reading this right or am I way off base as to the possible intentions of these searches? If you are one of the people who have linked onto my site after looking into creating pay stubs or if you have legitimately (or illegitimately) made a fake pay check or stub, let us know why. Please do us a favor and explain yourselves so that we're able understand the other point of view. Also, let us know if you are doing it for investment purposes. I think not for the majority, and I'm tired of the doom and gloomers pouring their venom on investors, when it's Joe Public whose really the one trying to pull a fast one.

Tomorrow is January 1, 2008. Let's make a resolution to instill our personal and business dealings with a decorum of integrity.

Fake Pay Stubs?!!!

Has anyone seen this web site?

"WELCOME TO (web site deleted by me)

NEED A LOAN, BUT CANT VERIFY A JOB OR INCOME???

Or if you work on commissions and you need to insure the loan CLOSES !!!
IF YOU CANT MAKE IT, NOW YOU CAN FAKE IT!!

FINALLY, A COMPUTER PROGRAM THAT WILL CREATE PERSONALIZED PAYCHECK STUBS INSTANTLY!

We all know that it takes money to make money! But what happens when you "REALLY" dont have any? Dont let that happen to you! Get the home or car you always wanted! Just "fake how much you make"!

This computer program does it all! Input the company name (with company logo if desired), name of employee, hourly salary and press the print button and PRESTO.......INSTANT CUSTOMIZED PAYCHECK STUBS!!!

Buy this computer program and print out personalized instant paycheck stubs for your new or existing business! Verify income to ANYONE! Authentic looking stubs will FOOL EVERYONE!

100% Money Back Guarenteed!

INSTANTLY print out authentic pay check stubs in minutes!

IT IS THAT EASY!!!

Use this program to verify income or to show proof of income!!!!

Once payment is made, an email will be sent to you with the EASY TO USE computer program attatched! Remember....use this computer program not just once, but TIME AND TIME AGAIN!
Get the loan you deserve!!!

I highly suggest you do not use logos from companies that are real on these stubs, I wouldn't use any company trademarks or copyrights either. Remember, these are intended for entertainment purposes only! (that's not what you said above)

ALL SALES ARE FINAL

Click HereTo Order
ONLY $49.95

Please note: Upon completion of this transaction, you will be emailed your computer program within one business day!"

I don't want to give you the name of the site and a link because I don't want anyone going from here to there. I'm sure that you can find it yourselves. However, the page that I copied is the only page there is. I am so utterly disgusted that someone is trying to make a business out of sheer dishonesty! Isn't this illegal?

Not just the pay stubs are fake. This person claims to have had 58,000 hits on his blog. So even the site meter is fake.

So, you can see the the web site touts using a fake stub for loan approval, but this is what the blog says:

"Fake pay check cheque stubs for home auto loans
Thursday, December 27, 2007

Blogger Buzz: You Blog, We Listen

While surfing the internet, I came across a site that offers an interesting concept. Software which can generate fake paycheck stubs. (web site address deleted by me) Before you jump to conclusions, this isnt meant for serious situations - applying for credit cards, talking to prospective employers, or even impressing a girlfriend. You cant get away with it, dont even think of trying. Fake paycheck stubs are good for gag situations, or for situations where you dont want to reveal your salary. (web site address deleted by me)

For instance, if you have a nosy neighbor or friend who just cant get his or her mind off trying to find out how much you make. Or, with April 1 around the corner, you want to play an All Fools day prank. You could even just drop a fake paycheck stub at the bank, restaurant or drugstore - and watch a perfect stranger do a double take on seeing a six-figure monthly pay! (web site address deleted by me) What this site provides is a computer program with a template. Just add a logo, a suitable fake employer name and the details you want to show on the fake stub, and you can print out an authentic looking stub. It comes with complete instructions, and a sample stub for you to use if you wish. Try it out some time. Fake paycheck stubs are great for practical jokes."

So, what is it? Is it for fun or to qualify for a loan? It doesn't matter. I hope it's shut down--and quickly! I have to go now. I suddenly have an overwhelming desire to shower.

On the Third Day of Christmas . . .

The houses that I'm highlighting here are ones which I would buy myself today if I were in a position to invest in more single family homes. If you're interested in either of the Southern California properties, and need an agent, call Jeff Rose. He's not your average agent. He's honest, nice, and smart. Best of all, he puts you in control--never the other way around. He doesn't know that I'm posting this, so I hope he doesn't mind, but you can contact him at (951) 600-1638. I figure that if the bubble bloggers advertise for money for the exact services (real estate and mortgage) that they decry as being harmful to society, then I should advertise for the people who I believe in---for free.

All indications are that prices will continue to fall. However, I'm pointing out homes that are listed below similar ones on the market. That means that they are closer to the bottom than others. If they're priced right, they'll sell no matter what. If you buy to hold, and can cover the mortgage and monthly expenses with the rent, then you won't be affected. Otherwise, I would wait it out---but you have to watch the market daily and carefully because you want to buy at the bottom, of course, not as prices start to correct up.

The first property is the same model in the Lake Elsinore, CA, community of Canyon Hills as the one that I sold on a different street in 2005 for $405,000. This one is currently listed for $265,000. What a deal! We have another one in the development that rents for $1,795, with a long-term tenant. A quick search on the Press Enterprise site pulled up 20 ads right now for rentals in Lake Elsinore, although I didn't identify any in the development. Check it out.

List Price: $265,000
MLS #: T07155024
32033 Poppy Way, Lake Elsinore, CA 92532
Year Built: 2003
House size: 2,284 sq. feet
Lot size: 6,970 sq. feet
Status: Active
Bedrooms: 4
Bathrooms: 3.00
TG#: 867D6
APN: 363472033
Pool: N
Spa: N
View: N
Type: Single Family Residence / detached

Gorgeous Canyon Hills Home combined with a GREAT PRICE! Winning Combination!! Spacious Bright and Open Floor Plan and Landscaped Backyard! A Must See!! Open Kitchen with Kitchen Nook, Pantry, and lots of Cabinet Space. Cozy Family Room with Fireplace and Ceiling Fan. Living Room and Dining Room Combination. Loft Upstairs currently used as a Workout Room can be 4th Bedroom. Spacious Master Bedroom with Ceiling Fan. Master Bath with Dual Sinks and Walk-in Closet. Window Blinds Throughout! Jr. High, Elementary Schools, and Retail Shopping Center conveniently located in the community. Grocery Store to be completed soon.
________________________________

I searched in Apple Valley, CA, (high desert) with the parameters of $150,000 to $300,000 and got 250 listings--too many to go through. So I revised the criteria from $100,000 to $200,000 built in 2000 or after. I got 14 listings. That's amazing--even for the High Desert.

List Price: $199,000 (I would seriously low ball this one because the bank seems eager.)
MLS #: W07177831
13815 Navajo RD, APPLE VALLEY, CA 92307
Year Built: 2004
House size: 1,631 sq. feet
Lot size: 43,560 sq. feet
Status: Active
Bedrooms: 3
Bathrooms: 2.00
TG#: 4387J2
APN: 3112563080000
Pool: N
Spa: N
View: N
Type: Single Family Residence / detached

Bank owned! Acre fenced lot. Circular driveway. Tile roof. Rear covered patio. This home has an open floor plan. Rock fireplace in family room. Kitchen has tile counters, pantry and center island. Breakfast nook. Versatile extra room, could be formal living or dining room. Submit offers! ________________________________

Surprisingly, Beaumont, CA, 92223 are still too high to consider. Can't get anything good for under $200,000 yet. If you're interested in this market, I would wait if I were you.
________________________________

Let's move to Texas. I don't have an agent to recommend because of this, so you're on your own there. But I like Texas because in my research of many areas throughout the country (e.g., Georgia, North Carolina, Florida, Arizona, Utah, Idaho, Washington, Illinois, Oklahoma, New Mexico), the house prices in Texas are very low in comparison to the rent. Part of the reason is that there is no state tax, so the property taxes are very high--up to almost 3% in some areas, but you don't have to file state taxes (double check with your accountant to be sure, though). Also, hazard insurance is on the high side in some areas of Texas because of the hail that they experience. Still, break even, and maybe a small cash flow, are possible here.

I pondered why it was that people still rent in Texas when the property prices are so low. Maybe it's because of the reasons that I listed above. Also, the wages are quite low there, too, in some industries, so I think that people have trouble saving for the down payment (although, a few years ago that didn't matter, did it?).

A search between $75,000 and $150,000 for homes at least 2,000 square feet, and not more than 10 years old, in McKinney, Texas, netted me 13 properties. Other good places to look are in Dallas, Austin, and Plano. Also, I am reasonably happy with our PM, who covers the Dallas-McKinney-Plano areas. E-mail me if you would like his contact info.

List Price: $134,000 (I would guess a rental income of between $1,200 to $1,300/month.)

MLS ID# 10909279
2509 Shady Grove Lane
Mckinney, TX 75071

3 Bed, 2.5 Bath

2,306 Sq. Ft.

Very nice 2 story home with 3 living areas* master suite upstairs* oversized lot* addendums required* please close at allegiance title in mckinney-hannah* no disclosure* no meditation* no option* no survey* download addenda from entries* pre qual letter or proof or funds plus copy of earnest money check required from offer* (Oh, yeah, they seem to be willing to work with the buyer.)

That's all I have time for right now--three properties for the third day of Christmas. If you have any good ones, please post a comment with as much pertinent information as possible, and the approximate rental income (investors should always double check this by looking up rental ads in the classifieds of the local papers and calling PM's in the area--although the latter approach isn't completely reliable because they want your business and may inflate the possible rent amounts).

After Christmas Fire Sale

Christmas Day is over (although the 12 days have just begun), and you know what that means--stores are having huge sales to reduce their inventory so that there's room for the spring and summer items.

Well, as you know, there are some great real estate bargains out there, too. I'm going to spend some time compiling the equivalent of after Christmas fire sales for houses and post it later today. Regardless of the many reasons why the real estate downturn occurred, the key to overcoming these low, low prices is to rid ourselves of the large inventory, especially before it grows with spring and summer listings. Supply and demand dictates value in many economic sectors--and real estate is no different.

Stay tuned . . .

Tidbits

Do any of you have toddlers? Do any of you have toddlers AND a Christmas tree? Have those with the latter decorated said tree with said toddler? We did. And this is what we got:

Is this the same effect as buying all of your rentals in the same development? _____________________________________________

Cartoon

This is a perfect example of a marriage between a bubble blogger and me (if I could even fathom the thought--my good sport of a husband isn't too keen on it, either). I tried to copy and paste it up so you wouldn't have to link, but I couldn't work it.
______________________________________________

Here is an entry from MSNBC's "Best Business Buzzwords or 2007":

"Subprime"
This buzzword isn’t exactly new. But the sheer number of stories in the media about subprime mortgages has changed the word from adjective to verb status — loosely defined as the ability to completely dig one’s self into a hole and then expect a bailout.

Used in a sentence: "I completely subprimed my Algebra test yesterday. Instead of studying, I drank beer and played Xbox, and just hoped the answers would come to me. Can I still have an 'A'?"

Chances we’ll be using this buzzword in the year 2017: Slim to none. But you’ll definitely be using it in 2008.

It seems that the consensus is that I change my on-line name. I'm sorry, folks, but it seems strange to me to suddenly be known as someone else, when I've posted for months on my blog, and left comments on other blogs, as a certain person. Wouldn't it be condescending to people to assume that they will forget my real name and identify me with the "new"one? Maybe one blogger did change his name after having his DUI spread around. I don't have any skeletons in my closet. When blogs refer to him, they use both of his names in mocking fashion. I don't need to give readers any more reasons to mock me, do I ? I'll give it some more thought. ________________________________________________

Silly Questions to Edith Lank

Ms. Lank: When I sell my house, should I be able to get close to the tax appraisal price? Or how should I determine a sale price? — A.S.

Answer: You don't determine sale price and neither does the tax assessor or a real estate agent. Value is set by the buying public. No matter how skillful and how carefully updated, assessed value is not a reliable guide to probable sale price. To judge the right asking price, you must think like a buyer. Find out what people have paid recently for similar nearby properties. Find out what failed to sell. Find out what's currently on the market near you and how it compares with your place. Any nearby real estate broker can bring you those figures, and most will do it at no obligation.

Dear Edith: Is there any way that I can refinance my existing mortgage without going through a broker or agent? If not, then am I correct in assuming that I would have to pay only 3 percent, not the normal 6 percent in commission that a buyer's and seller's agents would get on the sale of the house because there is no seller involved? — J.S.

Answer: There wouldn't be a buyer involved either, so you'd have no need for a real estate agent's services at all.

Borrowing that money is simply a matter between you and the lending institution, though sometimes people do consult a mortgage broker to find out what's available.

Start by talking with your present lender to see what they have to offer. Your expenses all will be concerned with the mortgage itself.

Dear Edith: We were talking at work, and one of the girls was telling us what happened to her mother's house. Liens were put on the house for nonpayment of medical bills. Is this true? Can doctors and hospitals put liens on houses if we are unable to pay?

My house is my only asset. My husband is on Social Security, and I am going on Social Security next year. What protection do we have, or what can be done to prevent this from happening?

We worked hard for everything we have, and this bothers me that someone could come along and do this. Maybe we should sell the house and buy a condo and put the condo in my son's name. But I really don't want to sell my house. Ever since I heard about liens, I don't know what to do. — E.M.

Answer: Not only health care providers but also others to whom you owe unpaid bills can go to court and ask for a lien (a financial claim) against your property. That's always been true. But putting your home in your son's name could lead to some unexpected problems. For one thing, if he had unpaid bills, the house could be hit with liens placed by his creditors.

None of this is anything new, and nothing has changed in your situation. You might as well just relax and enjoy your home as you always have.

Merry Christmas, Everyone!

Inside the Loss

I don't know what it's like to foreclose on a property, and I hope that I never do. But the stress that we experienced this year over our finances and failed apartments was worse than anything that we had faced before.

One of our rules for investing, and that we taught others when giving presentations or personal counseling, was that you should never borrow more equity from your home to buy rental properties than you can afford with your current salary. So, if the market dropped or you had a vacancy, you wouldn't have a fear of losing your primary residence. We followed that rule, and, because of it, we didn't lose one night's sleep over our rental properties.

That is, until this year, anyway. The problem wasn't that we had borrowed too much from our home (that eventually became an undesirable consequence, though). It was that all of our money was used to pay for the overages on the apartments every month. In the beginning of 2007, we could see when our money would run out if things didn't change at the properties.

My husband would speak to the property managers and travel out (probably not often enough) to visit each apartment complex. He would detail for each manager what their expenses should be and review every tenant and their payment history--or, for us, the lack thereof. He would give the PM instructions for each tenant, the landscaping, the utilities, etc., and return home confident that the managers understood what they were to do and that the properties would be slowly turning around. We would have hope and excitement that all of our money and patience and risk would pay off. But, then the same old patterns would repeat themselves and we'd be asked for more money to cover the expenses. Every single month. Never fail.

By February, we had both properties on the market. We had had them for sale on and off for a year. Even then, we would question whether or not we should sell them and definitively lose all of our money, or if we should wait just a bit more to see if things would turn around and we could recoup a portion or all of our losses. One day we would be convinced to keep one complex, then the next day, it was the other. We just couldn't see letting go of both and forfeiting a majority of our down payments and operating expenses.

We started living as frugally as possible and changed many of our activities in order to save money. Sometimes the panic would envelope me to the point that I'd get dizzy, and only a prayer would serve to calm my nerves. As we would receive the monthly statements, we couldn't pay the managers what we owed. I would tell them that we were trying to sell the apartments and they would be made whole through title at the close. But we didn't have any buyers. Or, in the case of our OH property, we had too many buyers.

As we foresaw our finances shrinking, I would constantly ask my husband, "What are we going to do?" He was taking consulting jobs to try to get us through, but it just wasn't enough to float two apartment buildings. Our PITI payment alone on the OH one was $20,000/month. It seemed that there were unusual expenses every month, combined with the fact that our PM didn't collect all of the rent. He could explain to us in detail why each tenant hadn't paid, but he would give them ample opportunities to anty up.

For me the panic grew. My husband had a hard time accepting the fact that we would sell at a great loss. On and off for the previous year, he had refused offers for less than what we paid. I could understand his hesitancy. We put a lot of money into both properties and we thought that made them more valuable as an asset. I could see, though, that, if we kept holding out, we'd lose everything, even our CA rental that we used as collateral on the recourse loan and, possibly, our primary residence. So, I asked my husband if I could take over as liaison with the agents and PM's. That would afford him time to focus on our new business, too. He agreed.

For the first time since we started investing, I would wake up at night and wonder, "What are we going to do?" I'd sit at the edge of the bed with my head in my hands, rocking back and forth, heart pounding, unable to sleep. My husband and I had been making our own way since we were 19 years old, but this time, our challenges were out of our hands and it was frustrating not to see another option. This type of stress stayed with me all day. It seeped into the interaction with my children. I would look at other people and think, "At least they don't have to worry about paying for apartments they can't afford." I would wonder what we'd do when we ran out of toilet paper and diapers.

I'm not telling you this so that you'll feel sorry for me. I don't dig sympathy one bit, and I don't deserve it. My point is to show you that the suffering involved with financial desperation is extreme. It's all encompassing. I was so distracted with our financial problems that it was hard to mutter any intelligible prayer. All I could muster at times was a weak, "Help" and a few other words. This did give me comfort. I also held on to the thought that, no matter what happened financially, I still had my faith, and my family was healthy and intact, so we could survive anything. I also knew that there were great lessons to be learned and I was grateful for that. However, our circumstances were not ideal and it was not an experience to relish.

Although our friends knew that our apartments weren't performing and that our finances were very tight, they didn't know the extent of it until a few months before we closed on the first property. We finally sent around an e-mail asking for close friends and relatives to pray that the apartments sell. It wasn't until then that we were able to escape our financial mud slide by closing on the properties at the last conceivable minute and saving all of our other real estate.

Unfortunately, it's not a happy ending these days for many others who have had to foreclose on their own homes and/or their investment properties. The stress of being overwhelmed by your finances can be a very dangerous emotion. I'm surprised that the media hasn't worked the angle of more suicides or domestic violence as a result of the real estate down turn. Placing the facts about fraudulent lending or poorly thought out loans aside, these are people's lives. Children's lives. Stressful existences. Stress weighing so heavy that it's hard to walk upright. Can't hold up your head. Desperation. Panic. Dread. Anger. Resentment. Embarrassment. Humiliation. Resignation.

Yep, I'm glad that this year is almost over. We still carry the scars of our losses, but we have hope. The New Year promises many exciting possibilities for us and our family.

I wish that I could say the same for others.

Do You Really Want to Know?

In the past few days, I've tried to respond to some of your comments shortly after I published them, but many had escaped before I could post. So, please bear with me as I play catch up today. I suspect that most of what was written was rhetorical, but I'll give it a shot anyway.

Did any of the properties cash flow? From what I could gather from your posts even the 5 core properties appeared to rent at a level that covered their costs but did not produce a return beyond paying down the debt. Did that even beat the opportunity cost of investing the down payment elsewhere?

At that time, most of our five properties were breaking even (with the full PI payment), which aligned with our initial goal of paying them off in 30 years in order to garner a retirement income. However, with the glut of rentals shooting into the market, we had to lower the rents by as much as $100 when it was time to find new renters. So we were in the red on some of them by the time we sold them.

I'm assuming you're in California, and if you are why did you invest so far away? In an area you knew nothing about (again an assumption on my part). I still don't get from your Reader's Digest version how you lost. How big was the building or should I ask how many units, what was the LTV, what was the vacancy factor in the area.I mean understand from my stand point that's very hard to do... too lose that amount of money on an apartment complex.

CASH FLOW!! I don't know how properties in CA are performing now, but when we were looking, multi-families had negative CAP rates! The numbers out of state looked so much better, unless we were willing to put more than 20% down in CA. On our KY property, we had a recourse loan with 20% down because it was a rehab. On our OH property, we assumed the non-recourse loans for a little less than 20% (I'm sorry, without a bit of research, I can't give you the exact LTV on that one). We had the vacancy factors down--checked it all out. Both properties looked good.

I've known others to lose money on apartments after segueing from SFRs, except a friend of mine who was happy to accept a lower ROI. If you have any secrets on how to flow with an 80/20 LTV in combo with poor management, I think we can all learn from that.

Some people were probably assuming similarity between you and fraudsters like Casey Serin . . . . .Casey committed mortgage fraud like lying about his residence or his income on a stated income loan and then justified it by claiming that everybody did it.

I stumbled onto the IAmFacingForeclosure blog (don't bother trying to link, it's now owned by a stop foreclosures business) by accident a long time ago. My first reaction was, "What?" I felt really sorry for him because, although he knew what he was doing, he was victimized twice. Once by the "advisers" who steered him wrong, and a second time by the people who attacked him. I thought he might go out of his mind at one point. The last post I read was written by someone claiming to be his publisher. Do you remember that one? It was crazy. The "publisher" was vulgar, couldn't put two words together coherently, and seemed to be victimizing Casey for a third time. I was so disgusted that I didn't read the entire post, and I didn't go on it again.

Speculators like yourself were the egg NOT the chicken.

Huh?

I would humbly suggest you start writing about managing your family more, than about this . . . I mean my parents failed at their businesses, lost money and property. But they had the drive in the soul quality it seems you and your husband do, he sounds great by the way.And just as you can give us insight on business, which again I think is very childish, you might want to move and gives us advice on how to have such a great family.Come on, you start a blog for your biggest failure? Start one for your biggest success, don't be shy now!

Yes, shy. I'm known around here as the shrinking violet. But, seriously, I really don't try to give anyone an insight on business, no matter how childish my acumen may be. That may be the effect, but it's not the intent. All I have is my experience to lay out on the table and let people learn what they will so that they don't make the same mistakes. Hey, my education cost closer to a million dollars than I'd like to think about. Why let it go to waste or keep it all to myself?

As for starting a blog on family life--I'd like nothing more. With five boys and two girls ranging in age from 1 to 21 (with the same husband, no less!), I have much to write about. There's just one problemo. Those blogs abound on the Internet. Have you ever heard of uber-popular mom Dawn Meehan of "Because I Said So" fame? Some of them are semi-entertaining and others, well, aren't. Whine Country Real Estate is in a smaller niche right now because I'm one of the few (if any) investors willing to stick my neck out for the benefit of others. But when I finally run out of material, who knows.

Why do you have 7 children?

Why wouldn't I?

Your blog is interesting but it almost seems like it is written by 2 different people. Some commentary is very level headed, but other statements seem to come from way out in left field.

I disagree. I agree. I disagree. I agree . . . . .

The way I see it and maybe you could have seen it too, is that when you are cash flowing as a prerequisite, who cares if properties drop 10, 15, or even 20 percent. Money is coming in to cover your payment. In fact, a slower market creates more buying opportunities.~Dr. Housing Bubble

Amen! That was our philosophy for buying in other states that have a history of extremely low appreciation rates (like 3% annually). Oh, and, by the way, I really like your blog.

It's people like you that cause people like me to take drastic measures like move out of state and away from family just to secure their future.

Wow! I did all that? I didn't know that I wielded so much power. I'll be careful how I wave my arms around from now on. Gosh, with that victim attitude, your family must be missing you plenty.

I'm an active investor... in bonds/stocks. I've looked at RE before, but I admit I don't know RE investing well enough. By 2004-5, what I did see in the market looked like a bubble... and having lost a cool mil in the .com bubble... I'm shy of them. I mention this because there are always risks in investing. Most of us who are responsible investors take risks.. responsible risks. I've since recovered my dot-bomb losses. This year, I will finally not have any carry over capitol losses... and I have net unrealized gains several times larger than my original loss.

Thank you so much for your comment. You're the type of person who I would take advice from any day of the week. Not because you lost money and misery loves company, but because experience is a great educator. I, also, am a risk-taker (file that under "tell me something that I don't know"), but I am not a gambler. I despise gambling! It's a game of chance with no information available to help you make decisions. Risk (the calculated kind), on the other hand, is the unknown outcome to an action taken after performing research, due diligence, and all possible analysis in order to predict the end result. But, most of the time, you never really know what will happen until you try. If someone has such an aversion to risk that they never swing the bat at the ball, then they'll never hit a home run. I'll keep swinging like you did. Only, each time I do, I learn something from the time before.

Ah, you must be "DOPES" on Housing Panic!

Um, I'll take that as a compliment, but, no, I'm "Carol, " as in "Stupid Enough to Use My Own Name." But this "DOPES" sounds like a fascinating person.

Are you or were you, by chance, a realtor?

Well, you've finally done it! Now I'm insulted! This oughta answer your question.

T-I-C, Anyone?

(Tomorrow's post will respond to some of the questions and statements that have been published as comments over the last few days. Stay tuned . . . )

For some unknown reason, I've been thinking a lot about T-I-C's today. No, it's not because all of the activity on my blog has left me with involuntary facial spasms. It's because, if we had ended up with any profits from selling those albatross apartments, we were thinking of trading into one. I had been researching them since before we bought the commercial properties (I probably would have fared better in a T-I-C). I had investigated several stock brokers who offered the services and called client references who had invested substantially in T-I-C's. We even received disclosures on properties that we were considering. But, alas, it was not meant to be. I'm still curious, though. What happens to large commercial properties when the market for SFR's is in the toilet?

Just in case you aren't familiar with Tenant-In-Common offerings, here's a snapshot that I'm quoting from one of the gazillion TIC sites out there:

"Tenant-in-Common real estate investments offer investors the opportunity to share in the ownership of large properties such as shopping malls, office buildings, and housing developments, as well as multi-million dollar industrial complexes. This investment structure is designed to allow you to invest in institutional quality real estate without having to buy the entire property . . . . .

According to IRS guidelines, no more than 35 investors may take part in a T-I-C property. T-I-C investors have a fractional deeded interest in a larger property which is professionally managed. Monthly payments are made to each investor according to his initial equity along with regular reports as to the performance of the property."

Here's more:

"Each can leave his or her interest upon death to beneficiaries of his choosing instead of to the other owners, as is required with joint tenancy."

When we were initially looking at T-I-C's in 2004-2005, the return rate was around 7-8%, with DBSI guaranteeing a 6.5% return. In the beginning of this year, the spread was more like 5.5%-7.5%, with the occasional 10% return on an assisted living facility for a short (18-24 months) period of time before the seller had the right to purchase the property back. I can't find my notes (we must have accidentally used them for fireplace tinder), but I think DBSI is down to 6%. I'm sure you'll be happy to correct me if I'm mistaken. Please do.

I had mentioned in an earlier post that my biggest problem with T-I-C's, besides abdicating all control over your investment, is that the front end costs are extreme, depending on the sponsoring company and the property. They are so high that you need to hold on to the property for a while in order to recoup the charges. But, if you're only interested in bottom line cash flow and totally passive real estate ownership, T-I-C's could be an answer. Plus, the due diligence performed on these properties was quite impressive.

I had chosen a company called Alexander-Partners. It took us a long time to decide between them and another financial firm in La Jolla, Aubrey Morrow's. Meeting Aubrey in person didn't impress me (he liked to watch the TV in his office over my shoulder---Yuck!), but the broker who we were assigned to seemed extremely competent. We checked the securities broker licenses of everyone and chose Alexander-Partners. But my husband and I were never totally convinced that a T-I-C was the right move. Now, it's a moot subject.

Last night, I visited the property offerings for Alexander-Partners. I haven't been on in a long time because, well, we have no money to invest. It seems that the first year ROI has fallen. The first year cash flow on most of their offerings is between 5.2% and 7.5%, with a majority falling in the 6% range. There are a few hotels that are in the 7.5%-8% range.

Surprisingly, there are two properties in the development stages with returns the first year. I've never figured out how that worked (not that I've ever looked into it). How do you make a return on your investment while the project is being built? One is a 10% return on a senior housing facility in Salem, OR. The other is a condo development in NY, NY, with an 8% first year cash flow. (Yes, I know that ROI and cash flow aren't exactly the same, but, I am using them interchangeably here. Sue me.)

Wait! There's just one existing senior living facility offered at 8% first year cash flow. When we were seriously considering a T-I-C, the list was wrought with assisted living facilities offering 10%, with the option of the seller to buy it back after a certain amount of time (not enough time to recoup those front-end costs). It seemed that the seller on all of them was the same company or person. That was odd. Did assisted living facilities fall out of favor? I thought the return was commiserate with the risk. If unfavorable legislation passed in the health-related field, it had the potential of closing down the facility. Then there's the risk of lawsuits. How about the vacancy rate? Code violations? You would hope that it would be managed well enough so that you don't have to worry about these matters, but, then again, you know my track record with property managers.

So, do any of you have any new information on the T-I-C market? Are the ones purchased a few years ago still performing as projected? I've been away from it for so long that I don't have much to contribute.

Let's Recap

Well, wasn't yesterday an adventure for us all? I have to say, I don't know what was worse, dealing with all the mean and vulgar comments or shoveling up the dead chickens. But it's a new day!

Thank you to everyone who took the time to comment and confirm what I said about bubble blogs. It was a bit disconcerting to field comments from people who, obviously, had not read my blog. I published them anyway. I try my best to be clear and concise when I write and speak. So, maybe I'm to blame that readers didn't understand my situation. To remedy this, Keith from HousingPANIC, suggested:

Carol - if people are confused with how you lost all that money then write more about it on this blog.

I know I'd have a tough time losing $70, let alone $700,000. Tell us how one goes about doing that.

I'm sorry if this is redundant to my loyal readers who have been with me since the beginning, or close to it, but there are thousands of others who seem to have some serious misconceptions about my investment strategies.

PLEASE NOTE: I don't, in any way, intend to try to "explain" or "defend" myself, as I don't feel that I have anything to explain or defend. Also, I have no interest, whatsoever, in "changing" people's minds, as I don't care what they think of me. However, if my goal is to make my personal experience an educational tool for others, then it's in the best interest of everyone to understand how I came to lose so much money.

Here's the Reader's Digest version:

In 2000, my husband (and high school sweetheart) and I decided to buy some rentals with a little of the equity from our primary residence in San Diego. He worked for a non-profit and had no retirement account, so we had to do something. We figured that having renters pay for our retirement account while we provided them with a nice place to live was a win-win situation (I know I'm going to catch heck for that statement). We intended to buy all the real estate we owned with 20% down and hold it until after it was paid off in 30 years--hence, retirement income.

It took us about two years to accumulate five homes. We refinanced the first two we bought in order to buy others, but still had plenty of equity in each one. (Later on, we did buy one house with nothing down, but refinanced it shortly after it closed--yes, with that bubble equity.) We noticed how much the homes were appreciating, so we bought more with 5-10% down. We couldn't rent them all in a timely manner because it seemed that A) Everyone was buying a house to live in and B) Rentals were cropping up everywhere. So we had to sell a few before we had a chance to rent them out. We lost money, broke even, or made a bit on those. We topped out at 12 houses, but sold many.

Our first five rentals were the core of our portfolio. They had more than doubled in value. We needed some cash flow, so we decided to trade (1031 in the tax code) four of them into commercial properties and chose apartments in other states because we were priced out of everything in California. We wanted to sell all five SFRs, but one long-term renter would cry every time I brought it up, so we let her stay and used our personal funds instead. She's still with us.

We sold the houses in 2005 and realized a gain of over $600,000, which we used to buy a well-operating (HA!) apartment building in OH and a rehab in KY. We had very poor management (over and over) and had to sink our own funds into floating the messes until we could sell them for a loss to us. My prior posts in September and the early part of October, especially this one and this one, provide all of the horrifying details, with settlement amounts.

WE DID NOT SELL THEM FOR A LOSS TO THE BANK. We paid off the loans. We were able to settle for enough cash to pay most of the debt that we incurred during the nightmare, but we sold the apartments for less than what we paid plus all the money that we put into them. Hence, we won't have the exact amount until tax time, but it will be more than $700,000 that we lost. We had the money in our hands (more technically, for a 1031, the intermediary's hands) when we sold our rentals, then we lost it and so much more.

We came very close to not being able to make a payment on the apartments and our primary residence, but closed right in the nick of time to save everything. We are not now, nor have we ever been, in foreclosure or near it. Our credit ratings are once again in the mid to high 700's. That was one reason why we could qualify (and I mean QUALIFY) for so many loans.

There. That should catch you up somewhat, but then you miss all the interesting (and sometimes funny) stuff I wrote in between. I would like to hear from other investors in the same boat. You can post anonymously, so you won't feel the heat.

Do you really think that average people like me bought investment properties in order to artificially inflate the value of real estate, intended not to make the payments, and then just easily walked away? Do you have any idea what those people and their families must be going through? But it's so easy to sit "anonymously" (I'm sure you all know that nothing is really anonymous on the Internet) behind your computer and attack them--and me. I would bet that, if any of you were face to face with someone in their position, you would probably show more compassion. Or, maybe it's the fact that I have seven children that makes me more empathetic to others.

My husband and I didn't realize until late 2004 that the market was too hot and on the cusp of cooling. That's why we listed our properties in 2005. We wanted to liquidate in the California market and move to investments that would probably never appreciate in order to glean a cash flow. But that's just our story. I'm sure there are many more interesting personal experiences out there.

I have to say that your comments have kept my husband and older sons very entertained here. I would like to respond to each and every one, but I have the feeling that you don't really care. You just needed to vent. My absolute favorite comments were the ones (some may be on HousinPANIC) that said that they would call the FBI and couldn't wait until I got hauled off to jail. Uh, OK. I'd be happy send the FBI my loan applications myself because I have nothing to hide. Maybe, if you call them, the conversation can go something like this:

Bubble Blog Reader: Hi, FBI? I want to report fraud in someone's investment practices.
FBI: Yes, thank you for calling. Can you give me the details of the fraud perpetrated?
BBR: Huh?
FBI: Can you tell me what happened?
BBR: Well, this lady . . . it's all on her blog . . . she bought properties legally . . . never lied on a loan application . . . kept a refrigerator from a home that belonged to her (because you know how the buyer is supposed to keep everything they see in homes that they buy) . . . then she made a bad investment move and lost $700,000!
FBI: Oh my! Did she lose your money or that of other investors?
BBR: Uh, no, just hers and her husband's.
FBI: Well, then, I don't understand where the fraud comes in.
BBR: You must be an idiot then! Someone who doesn't deserve to live another minute! Please don't spawn any children because they will be a burden to this society. If you don't see things my way then @#%& &*$#@ *^$%&. And you're a $%&# *^#@. It's as plain as day. SHE drove up property values. SHE has caused the foreclosure fiasco. SHE has ruined the economic forecast of this country for the next decade or longer. SHE is greedy! SHE wants to buy more real estate! SHE must go to jail!
FBI: Well, how exactly were YOU harmed?
BBR: Me? Well, I don't intend to ever buy real estate. Actually I can't because my credit rating stinks and I'm in debt up to my eyeballs. But, if I could, I wouldn't because only idiots, miscreants of society, buy real estate. It says that on all the bubble blogs.
FBI: Bubba who?
BBR: Rrrgh! Never mind. Could you just go out and arrest her and throw her into debtor's prison. Plus isn't it illegal to have more than 2 children in this country? This lady is a loser in every sense of the word!
FBI: Okaaayy. Why don't you give me your address so we can send someone out to, uh, take a report?
BBR: (Click)

Shoulda Stayed in Bed

I dragged myself out of bed this morning--no choice of my own. The baby was up and, try as I might, she wasn't going back to sleep. She and I have been dealing with head colds and it hasn't been a walk in the park. I usually write my posts the night before, but I was too tired to do it yesterday. I woke up wondering what I'd write about today. It seems that all the Advent events that we've been attending have distracted me from the real estate scene a bit. So, here I thought it would be an average nose-blowing-first-day-of-Christmas-vacation morning without a post. Then I turned on my computer.

Boy, have people been busy. Thank you all for taking the time to give me your opinions. I post all comments, positive or negative, sent to this blog---unless they are vulgar or have bad words in the text. I hate to do it, but those are rejected. If you'd like to clean up your comments, I'm more than happy to publish them. You see, I know that everything that I write and publish, whether here or on other blogs, will last as close to an eternity as one can get. In a year or two or five, I may not feel that same about many things, so I don't want someone to think poorly of me because of a way that I chose to portray myself in the past. Also, that kind of vulgarity is offensive to God. I really do think it's funny that the people who are calling me trailer trash are the ones who talk like it.

I'd like to respond to each and every comment, but I'd feel like I'm wasting my time. Having SEVEN kids (uh, no, I'm not Mormon) has taught me when someone is open to listening and when they are not. The overall feeling I get from reading the comments on HousingPANIC (beware of the language on the comments) is that no one is really reading my blog. They're reading my one post about blogs, which I used to advertise those very blogs. Do any of the angry people know how I lost money? It doesn't appear so. When I took the scraps from the homes that we owned, we were renting them out at the time and NOT selling them. Either the readers can't read, are "overcome" by anger (and not optimism, obviously), or just gave my posts a glance. Who knows. That's OK. The bottom line is that the comments show that they don't know my story at all.

The saddest part for me is that I developed this blog as a support community for other investors who have lost money, property, and hope. Most investors won't put themselves out there like I have because of the very people who have attacked me. It doesn't bother me, but it may add insult to injury for others, who would rather just stay in bed with the covers over their head than face the world and their crumbling finances. I would assume that none of the bubble bloggers intended to harm anyone. I actually like and read the blogs--I don't have to agree with them to be entertained. I know this helps them because they generate revenue from their blogs and I don't--my choice because I wouldn't be able to have total control over some of the ads on the site. Now, I hope that I still have a chance in creating that community of investors.

I have made a ton of mistakes--in RE and life, in general--and I was hoping that others would be able to learn from them. I, also, wanted to hear and grow from other investors' experiences.

I know that it's easy for angry people to point to investors like me and blame us for all the evils in the real estate world (or the world as a whole--why not?). I didn't cause the downturn and I'm not at risk for foreclosing on anything. After ridding ourselves of those albatross apartments, our finances look better than they have in two years. I'm a responsible investor, for the most part--but, then again, I don't have to explain myself to anyone.

(This just in--after I wrote and published this post, my son came in to tell me that the crows had broken into our totally enclosed coop and killed or injured a majority of our chickens. How sad and apropos!)

Predictions

Not one to be pessimistic (after all, "optimism" is in the subtitle of my blog), I just have to comment on this article about NAR (the National Association of Realtors). I think their outlook is a bit more than optimistic. For the NAR to say the the market is on the verge of stabilizing, is a desperate attempt to speak it into being. Do they really think that saying it will make everyone believe it? "Oh, the National Association of Realtors raised their predictions for 2008 so we'd better run out and by that house now." I don't think so.

Asking NAR how it feels about the future of real estate is like asking the tobacco companies if smoking causes cancer. Or the pharmaceuticals if their drugs have dangerous side effects. All we get is spin. That's why associations like NAR exist. The leaders of that organization will never admit that agents should be looking for real jobs for a while and that real estate is bound to fall a bit more until things shake out. I don't know why the papers bother to report what NAR has to say. It's almost embarrassing to the professionals who work in the industry. While prices continue to fall and owners continue to run from their homes in droves, NAR is saying that, soon, everything will be fine again.

But, since I'm not one to focus on the negative side of things, I don't want to dwell on this too much. Unlike the naysayers out there, I, too, believe that the market will stabilize and rise again. Not in 2008, though. Probably not 2009 (although, most of the predictions fall on this year). I think it may take longer, only because it's harder for some buyers to obtain financing. So there may be a whole slew of people out there trying to buy some of the inventory, but not being able to because of the state of the lending market. Until new creative financing is developed, we may not see the light of day.

Many people are now scared--shell-shocked, so to speak--because they have either lost their homes or know someone who has. Just as we walked around in a daze after 9/11, this sickening feeling that many are experiencing now will pass. That's not a good thing. I'm sure that many have sworn to now live within their means. To save for a down payment on their next house. To buy something that they can easily afford. To cut up all of their credit cards. The intentions are good and pure. However, as a credit nation, we'll never learn the lessons taught by buying that which we can't afford.

And Realtors fuel this for a big commission check. You inquire with an agent about a $400,000 house and the next thing you know you're looking at those costing $600,000. Do we like the house for $600K better than the one for $400K? Heck, yeah! But why look at something and desire something that you know you can't afford? It's torturous. You just have to have it. And so it goes.

I would be grateful for this time in our nation, if I knew that a lesson will be learned by all. But I know just the opposite. People will waste this valuable experience by allowing history to repeat itself. That's why we can guarantee yet another bubble and another fall in the market. This country is so predictable.

Doom and Gloom Bubble Blogs

I recently found the underbelly of the real estate market downturn. No, it's not fraudulent lenders. As I've said before, I've been reading these doom and gloom bubble blogs. One is even written by a renter! This niche is new to me--really. The sad thing about these blogs is the joy in reporting how bad the market is right now. I guess they've been predicting it for quite some time and feel vindicated that it has come to fruition--which, if they had waited long enough, will always work that way. Real estate is a predictable market. But, sometimes, it's like predicting an earthquake in California. We all know it'll happen, but we don't know when and we're not certain of the amount of damage. Just that there will be damage.

So I have my bubble blogs that I read. They're all very similar. I have to say, though, that these people are very educated in real estate investment and most of the niches in the market, even the renter guy. They can write an intellectual blog about interest rates and stuff that makes my head spin. I wonder if they suffer from analysis paralysis and that's why they don't invest, if any of them do--or did. Maybe I would be a better investor if I knew the names of the CEO's for all the banks and lending institutions. Maybe I should have done a rent analysis for every location in the US when taking into consideration the rate of inflation and deflation. Do you think that I wouldn't have lost so much money in apartments if I did? Probably. Only because I wouldn't have bought anything. I'd rather take an educated (as much as possible) risk and lose, than not take a chance at all.

I am learning quite a bit by reading these blogs, but you'd have to have a die hard interest in all things real estate to get through some of them. And they are so negative. Negative, negative, negative! Ugh. What a life--to sit there in glee of others' misfortune. Oh, and, by the way, they seem to hate investors--just as much as mainstream media, if not more. Bummer. I'm so hurt. NOT! I guess their attitudes make them lots of money because they have ads all over their fancy sites. It's odd because there are ads for real estate and loans. Wait, didn't they just knock buying property, agents, lenders, and everything real estate? Yet they're promoting those things, too. Huh? Anything for a buck, I guess.

I even post comments on these blogs. Sometimes, the writer hits the nail on the head. I don't care if they hate me. I can contribute, too, you know. I can charitably disagree, or I can tell them how much I liked the post.

Here are my favorites, if you're interested:

Southern California Real Estate Bubble Crash Blog (this guy doesn't reveal his real identity)
Dr. Housing Bubble Blog
Housing Doom
The Housing Bubble Blog (this blog is HUGE)
HousingPANIC
(Beware of some of the language in the posts and comments!)

I do worry about their fate when the market recovers, however. Maybe they can use some of their really old posts that warned of the impending crash, and start all over again with their predictions. Some of them act as if real estate will crumble, become worthless and never appreciate again. That no one in their right mind would buy another property--ever. Well, well, well, I guess I do know something they don't (or at least refuse to acknowledge). Unlike these bloggers, I know that it will recover. History tells me that it always has--loan fiasco or no loan fiasco. As long as there are buyers, real estate will have value.

And my personal story is so much more fascinating than the analysis of the economic impact of a 25 basis point cut in the interest rate.

Who's The Idiot This Time?

If you've read some of my earlier posts, where I explain my disappointment (to put it lightly) in our choices of property managers, you'd know that I don't think too highly of them. Frankly, most have no brains or just don't use them.

Our first apartment PM in KY was also the agent who sold us the slum. She was referred to us by another agent, who was trying to sell us a different shanty, as a good manager with lots of experience in big companies. Her professional demeanor was actually a front for her Sybil personality. She was a scary witch and dealing with her, when we were able to find her in the office, which was rare, was one of the least enjoyable episodes of my (and my husband's) life.

Two months before I fired her I received this e-mail out of the blue:

"honsetyly who cares. we did the dealit over who cares anymore, theygot stuck with them let them deal with them. whatever"

I'm not making this up. I wouldn't be capable of making it up. So, with all the sensitivity that I could muster (and those of you who know me know how sensitive I am), I wrote, "What are you talking about?"

Her reply? Forced to think quickly, she explained, "I dont have a clue. Sorry about that." Maybe it was the ole' "someone hacked into my e-mail account and sent my client an unintelligible message." Or maybe she was just drunk.

And so it went, until I released her from her contract five months early (I kept her on-site manager because he was a hard, honest worker). She was a Kentucky train wreck. A head-on collision at the derby. A horrible rotten PM. An idiot!

I currently have a PM for our Texas SFR who does a reasonably good job for us. The checks come like clockwork and I don't get dinged for silly charges too often. We have a tenant in the house whose lease expired in October, or so I thought. Last week, we received a lease extension from the PM until December.

Being the responsible investor, I e-mailed him and asked him what his strategy was to advertise the house and how much he thought the rent should be this time (we've been getting $1,550/month GSI). He never responded. It so annoys me when they do that. PM's seem to dread communicating with owners.

So, yesterday, I e-mailed him a harsher message saying that I didn't receive a response to my first inquiry and I want to know what he intends to do to rent out the place because I need to decide whether or not to retain his management company. I figured that would garner his attention.

Also, I had received the rent check for October, but my husband said that it didn't go into the account for the LLC we have for that property. Uh-oh. I don't know where the check went. Does he expect me to remember all the way back to mid-October? So, I needed to ask my PM if the check had been cashed and to what account.

This was his reply:

"Carol,

I'm not sure where you got the idea that the tenants were not renewing. They have in fact renewed and we have mailed the renewal to you for your signature. the (sic) market did not warrant an increase at this time but we are noticing an increase in demand and that our inventory level is about as low as any of us can remember. That usually translates into gradually increasing of leasing rates.

Let me know if you do not receive the renewal in the next few days and we will send another out. We sent you the original so hopefully you will get that and sign and send it back.

Thanks,"

Huh? I pulled the file and, this time, I looked closely at the expiration date on our copy of the lease extension that we just signed. Gulp! It's December, 2008. Plus, the lease doesn't expire until the end of this month. I don't know why I thought it was in October. Also, he was able to tell me that the check was cashed and gave me the account number that it was deposited into. I apologized profusely because here I was attacking this guy, when he was doing his job by the book. I'm not used to my PM's being on the ball. I'm also thrilled that we have the tenant locked in for another year!

Who do you think felt like the idiot this time around?

Our Secret's Out!

Part of the reason that I'm so optimistic after such a catastrophic financial loss is the hope that our new business brings us. I told you in an earlier post that we were designing a hot new product that the retailers are excited about. We've been marketing and selling it for a few weeks now, so I thought that it was time to let you in on it, too.

First, I want you to guess. What type of merchandise do you think the following pictures are?
No, this is not a cheap bottle of wine at an out-of-way Italian restaurant with tacky table cloth and ratty window coverings.
No, this is not a real champagne bottle. The plastic shrink wrap gives it away.
No, this is not a designer oil can.
No, this is not a fancy light bulb.

Can you guess now? Do you give up yet?




Maybe if you had some perspective on their size.

Here is the hot air balloon next to a standard computer mouse. Yes, these products are small, but there's more to them than meets the eye.

They are actually full-size adult T-shirts! Nice, thick, beefy tees. They're compressed with 50,000 pounds of pressure into virtually any shape. Each shirt has the image on the back and our "Temecula, California" logo on the front left breast. They're our best sellers. Not only do we carry what we have designed, but companies can special order anything they want in a compressed tee. They are a unique novelty (is that redundant?) item. When unwrapped they are completely wrinkled. But, just one wash cycle smooths the fabric and readies the shirt for wear.

This is a patented process and these products are not accessible to just anyone off the street, or even any business owner. We sell them to retailers, wineries, and many other companies. The nicest feature about these particular shirts is that they are easy to store and stack. So the smaller retailers, who have avoided carrying apparel in the past because of the constant mess, refolding, and display cases, are eager to sell these products. We are already expanding to other areas.

I'm glad to be able to share something besides my take on interest rates today.

They're Selling For What?!

My husband and I went out to dinner last night with some friends who are moving to the Washinton, D.C. area. Big bummer for us. But the real estate situation here is a bigger bummer for them.

They live in a very nice area of Temecula called Harveston and paid $635,000 for their house a few years ago. Currently, the development is experiencing a slew of foreclosures. There was one right behind their house that is the same model as theirs (3600 square feet). It was for sale for the better part of a year or longer. There was an auction, but nobody bought it. Then the agent attached a banner to the front of the house that read "$425,000."

Wow! Talk about a fire sale! My friend had e-mailed me last week that the house sold, but she wanted to tell me the price in person so she could see the look on my face. At the restaurant, her husband blurted it out before she had a chance to build the suspense. However, this didn't compromise the shock value at all. The house sold for $395,000. She wasn't disapponted when she saw my expression. She heard that another foreclosed house is going for the low $300's.

Luckily, our friends are real estate investors, so they plan to hold on to their house after they move. They'll be fine, but it would be comforting to have better comparable sales in the area. So, for all you hardy investors out there, come and pick up these super cheap foreclosures to clear them out of the system, so prices can become steady again and then rise. (I know it's not so simple, but it's an optimisitc theory, nonetheless.)

Clarification

Here is a quick excerpt from an excellent post on http://www.doctorhousingbubble.com/. OK, so I'm far from qualifying for the "Bush Plan" (see my post below). It's better that way because I think it's a stinky idea to begin with.

This will only apply to owner occupied properties with at least a 36 month ARM reset period or less. (Mine is a 60 month reset.)

Loans must be originated between 1/1/2005 and 7/31/07. These loans must have reset dates between 1/1/08 and 7/31/10 (Nope, not this one, either.)

The loan must be current (Check)

LTV must be greater than 97 percent (Check)

The borrower must have a FICO score less than 660 (Not in my lifetime!)

The borrower’s FICO score cannot be higher than 10% since the loan's origination date (What does this mean exactly? Maybe "10% higher than at the time of loan origination.")

Each servicer must determine the owner cannot afford higher payments (Would this be the "moral suasion" part mentioned in my previous post?)

Here They Come To Save The Day

I can't let the week end without discussing this Bush deal, where he is asking lenders to work with borrowers to freeze interest rates. What is a Republican president doing by sticking the government into the private responsibility of borrowers? I don't get this. He doesn't have to worry about reelection. Maybe he thinks it will look good for the party during the primaries. I have to stress, yet again, that this is a really bad idea!

My 5-year ARM expires next year. Since when is it the duty of the federal government to pay my mortgage? Will they actually make my payment? No. However, the plan to force note holders to "modify" my loan docs will save me from having a higher payment, and will poorly impact some securities investors. They bought these loans under the provisions by which they were signed. For the government to come in and "save the day" by asking lenders to change the rules of the game midstream will wreak havoc on the investment market. And for those loans that have been chopped up and sold off, who makes the decisions? Not the servicing company who collects the payments.

I should have bought a bigger home with a loan that I could never hope to afford when the fixed period was over, so that I could sit back and let the government swoop in and try to force lenders to keep my payments down to the introductory rate. So, who will this plan help? Definitely not investors--they're excluded. Those rotten speculators must be punished!

The deal is to freeze interest rates for "distressed" borrowers living in the home as a primary residence. But, according to the CNN article, the government has defined homeowners who sound anything but distressed:

"It excludes anyone more than 30 days late at the time the mortgage would be modified or anyone who has been more than 60 days late at any time within the previous 12 months.
It also only covers borrowers with adjustable rate mortgages (ARMs) resetting beginning in 2008 and leaves out any who are judged capable of continuing to make mortgage payments at the higher reset rates.

Borrowers who can't afford the loan even at low introductory rates also will be ineligible . . "

Hey, what do you know? I qualify. Only, I'm not in fear of losing my house when my rate adjusts. However, I think that it will be a burden to have a larger mortgage payment--even if it's only $278 more. After all, we lost about $700,000 this year, and our new business is just getting started. Come to think of it, I'm SURE it will be a burden.

I don't believe that the government has a right to "bail" anyone out when it comes to the consumer's choice in buying a home and selecting a mortgage (unless fraud can be proven in the transaction) and I think the economy will suffer for it in the long run. But, if this is a plan to "save" people's homes, who are they really helping?

The best part of the "deal" is that it doesn't appear to have any teeth to it--"moral suasion," as the article calls it. However, it is the precursor to "an opportunity to call on Congress to act more expeditiously on passing mortgage relief legislation." Hopefully, like everything else in Congress, this will be stuck in committee until the market rebounds.