In the news this week the talking heads and so-called “experts” are agreeing that a healthy real estate market has returned. It has apparently come to the media's attention that the good homes are now selling quickly while fixer-uppers and overpriced residences continue to populate the for sale market place. On average, homes are selling in about 45 days.
So what is really happening? I would postulate that buyers—with the possible exception of younger first-time buyers--remember the prices we had reached only 5 or 6 years ago. Back then those prices seemed high but fair. After the real estate and economic melt down, to make a sale, everything had to be offered at a give-away price. But that was then—this is now. If we can spend $4 a gallon for gasoline, what’s wrong with a $300K+ house? We’ve heard these asking prices before, and while the days of “bargains” seem to be behind us, the new higher prices for homes seems to be OK. And as you will see as you read on, it is no crime to sell properties for more money than anyone else does. If it were, half my listing customers would have to lower their asking prices or go to jail.
So this week (for those of you who regularly read this column) I had a call and an email from Robert Ehrling. Readers may recall that a few weeks back I wrote a two-part column on New Vista Properties and how they were the reason my wife and I bought a home in Englewood. I went on about a trip they sponsored which brought us from our NH real estate office to see South Gulf Cove and a number of other properties they were offering in Charlotte County. Mr Ehrling is the president of New Vista Homes and New Vista Properties and was formerly with General Development. Company.
He contacted me looking for an apology which I willfully offer. But so you know what I am apologizing for, I offer the following from a Google search (these are not my words):
According to the New York Times, “General Development was considered a reputable housing development company until the mid-80's, when buyers discovered they could not sell their properties for anything near what they had paid. The Government accused the company of defrauding 10,000 home buyers, and taking advantage of potential out-of-state buyers, bringing them to Florida on free, heavily restricted tours led by an aggressive sales staff.
The company eventually pleaded guilty to fraud conspiracy and agreed to set up a $100 million restitution plan.
In 1989 An appeals court reversed the convictions of four former executives of the General Development Corporation. They were jailed for two years after being convicted of cheating home buyers out of $117 million. The ruling by the 11th Circuit Court of Appeals in Atlanta came a year after the Federal panel ordered the four freed pending the appeal.
On appeal, the court ruled that buyers were free at any time to check out other Florida home prices, and therefore, were not defrauded.
“It is doubtful”, Judge J. L. Edmondson wrote in the ruling, "that a person of ordinary prudence, about to enter into an agreement to purchase a G.D.C. home in Florida, would rely on the company's own representations of the value of the houses. "Therefore," Judge Edmondson concluded, "a 'scheme' to defraud' within the meaning of the Federal statutes has not been proved."
In his email to me, Mr Ehrling wrote: “Since you took the liberty to refer to the "lead" in your local paper you were obviously captured by the "imprisonment" part. But you never wrote that (we) were found innocent. There was no crime. (We) have no criminal record.
“Hopefully after you give this some further thought, you will take down your article, print a retraction and an apology.”
Sunday, May 26, 2013
Sunday, May 19, 2013
I probably look at 25 to 30 houses a week, which may not sound like so very many for a long-time Realtor, but honestly, at the end of the week, they pretty much all run together. What makes one different or more memorable than the rest? Sometimes what is the most memorable is some drastic issue, a horrible kitchen or a tiny room, or a strange colors and decorating plan—but these memorable features are really just cosmetic, today I want to approach real estate design.
What is there is design that sets one home or property apart from all others? Why is a ranch house better or worse than a castle? What makes a condo built by the ABC company different and more memorable than one built by the XYZ firm?
I have recently had the good fortune to see (and show) new homes in Venice. And to be fair to the one-at-a-time builders, I've been keeping this search to the multi-unit builders. All of the homes we have looked at have three or almost three bedrooms, a few had more. They are all very nice, with state-of-the-art bathrooms and kitchens, some had crown molding (others would for a fee), some had huge garages, others saved space by keeping the garage small. A few were two-story, with the bedrooms up—shades of New England. But mostly they are all “snorkel homes” (meaning what you see from the street is a smallish front door, and a huge garage) some even come with some unimaginative ankle-buster gutter drains coming down right at the main entry.
With apologies to the various architects involved, the main difference in these homes isn't the plan or layout, they all have the same bedrooms and great rooms. The real difference between them is down the street--it's the included club house, swimming pool and other amenities--and their HOA fees. The homes are all pretty much alike, the lots are tiny and the landscape promises to be trim but boring and maintained by crews whose names you will never know.
There are differences available to the buyer who is willing to pay and explain that he or she wants something out of the ordinary, sometimes it's just an extra door or bathroom, sometimes more. I have seen a (2 family) in-law home built by the folks at Lennar. It's really one of their larger single family plans with a second entry, a second kitchen and an additional garage space making the home into a main house and a private second dwelling area for a lucky family member. Whether this member is mom or dad (or both) or a child who wants to live at home forever is really immaterial, the point is when you want something different, new home builders could accommodate you, so long as the zoning and municipality is willing to go along.
So let's say that a new 2000 square foot home is one end of the spectrum, if that's one end, what's at the other? If you are really adventurous, and willing to be different, there are a few homes out there—or at least buildings that could become homes—that are for sale and will set you apart from the rest. What could be more memorable than a lighthouse? Oh the beauty of such a building, and the locale. Remember what we all say, location, location, location—and light houses are almost always waterfront, they can be pretty tall, and usually they are well built. The GSA (Government Services Administration) has quite a few available right now.
My wife discovered these listings at http://realestatesales.gov. I know the average person probably would not consider recycling a government building, but on the other hand, a lighthouse...I mean what is more noble or more memorable than a lighthouse? And there are quite a few of them available. Granted they are not usually near a supermarket or a school, but if you are curious or willing to go afield, these could be for you.
For folks used to ranch style homes, remember most of these homes are 5 story, accessed by spiral stairs, plus you have to appreciate vertical living, with room over room and very few corners. Still the views are spectacular, and your guests would have little issue with finding your home—they could either use a marine GPS or just drive down to the beach and then look out by the rocks...perhaps you could set the big light in the attic to blink a special code to tell them when you are ready for company.
Would a lighthouse work for me? Nah, probably not, although I once knew a family that bought one on the Hudson River—it was quite the place and very memorable. And I have a friend—not particularly outgoing—who took a psychological employment test and found he was best suited to become a lighthouse keeper. The test showed he didn't like people and was happy working alone...that's just not me.
Dane Hahn is a real estate professional, you can reach him at 941-681-0312 or at firstname.lastname@example.org. See him on the net at www.danesellsflorida.com
Sunday, May 12, 2013
For some time the only “flippers” were investors who had a seemingly bottomless pot of money and who were gobbling up all the cheapest homes, with the idea of reselling them at a profit.
Any time you buy and sell a house—is called a flip. And we are seeing flips come back into our market. It’s either a fast flip or a slow flip, but it’s still a flip no matter how you look at it. In cases where an investor bought a property and sold it a short time later is termed in the media as “flipping”. That’s just doing business. It’s legal. And it happens every week.
So when you buy a house, and either fix it up or simply choose to resell it. If you’re buying and rehabbing houses, document all the work you do. Keep a file on what you’ve done and spent to make a case on how you raised the value so quickly. You should also document your work using before and after photos. Good records will help with everyone you deal with from other contractors to bankers to the IRS.
Typically we say that the “market value” of a home is what a willing buyer will pay a willing seller for a particular property, neither of them being under any pressure to buy or sell. Meaning that a home that is sold because a seller can no longer afford the payments, is a home that is selling under duress, and the settlement price may be lower than fair market value and therefore not reflect what the house is actually worth, similarly, if the buyer is under pressure to buy, let’s say for tax reasons, A house might sell for more than the so-called market value.
This week a friend asked about buying a mobile home. In Florida there are plenty of them and there are some very nice “parks” where the homes are parked. Some of them are owned by investors, and the “pads” where the homes are parked are rented out by the month or year. Others are either condo or co-op ownership where the residents manage the entire business, but still pay a monthly fee to a management group—which pays the bills, taxes, road maintenance and so on. If you are planning to involve yourself in one of these parks, do your homework and read the condo or co-op documents.
My friend is living in a park right now and her landlord has offered to sell her the unit she lives in. Recently he has been quite friendly and if she wants to purchase the home he will even offer to hold the mortgage. All of this sounds very good to her, and she was asking my opinion, I think hoping I would say it sounded good.
Not so fast. Mobile homes tend not to appreciate over time. And this one has seen quite a few calendars hung on its walls. This home is 30 years old, and the asking price? What the seller paid for the place.
Mortgages for mobile over 20 and certainly over 25 years tend to be pretty hard to get. Remember the only collateral the bank has is the right to foreclose on the building. And there is something about an older mobile home that scares bankers. The few loan companies that write mortgages for the older homes tend to need 20% down and charge a high rate. Today you can mortgage a house for 2.5% or thereabouts, maybe up to 3%. Mobile homes will likely be in the double digits.
And then there’s the “pad rent”. In this case $675/month. So looking at a project that would cost my friend at least $1,000 (if she has the landlord provide the financing) and possibly a good deal more if she has to use the sharks that finance mobiles. Not to mention the market value of the 30-year old trailer being significantly discounted from the original price—well I just can’t give her a thumbs up on this deal.
The amount of money she will have to pay for this mobile today could put her in a free-standing home that will not depreciate over time. Or, having done the math, she can show the landlord that his chance to sell the home 30 years after he purchased it for the same amount of money is probably no realistic, and so he needs to ask much less for the unit.
Saturday, May 4, 2013
If you missed last week’s column, in November 2003, my wife and I traveled from NH to Port Charlotte to see land that was for sale by the New Vista Company, and meet the management team to learn how to sell Florida land.
As we drove around North Port and South Gulf Cove, the marketing manager pointed out lots that were apparently available for sale and gave selling prices of the land. All the prices seemed so cheap—at the time I was selling lots in NH for from $100,000 to $3 million. The lots—and some were nice waterfront lots—were selling in the $25-$35,000 range.
We had been there since Friday, but on Sunday morning we were sequestered in a room at the hotel. We watched a presentation and met with the principals and the marketing guy, and we sat through a sales pitch program, the idea being that we would be more successful if we knew the company line.
I had bought a newspaper the evening before during one of the very few moments we had to ourselves, and I had read the classifieds when we got back to the room Saturday night—so I knew that the land New Vista was offering could be bought for much less than they were asking. And so I asked that very question during the meeting. “What’s the difference,” I asked, “between the land New Vista has for sale and all these lots for sale in the paper?”
I soon found out that was not the right question to ask. “This program may not be for everyone, Mr. Hahn, and it might not be right for you. It’s a program for agents who want to make money, who will offer these lots to people regardless of their economic situation—because we handle the financing. And our agents will sleep well knowing that they have helped other Americas achieve the American dream of owning land they can retire to.”
I began to see the other people in the room moving away from me, and I could see I was going to be the person they would point to and say, “He doesn’t get it.”
This was a three-hour meeting, but it seemed like a full day. Finally the meeting broke and it was time for lunch. I thought I had become a “persona non grata”, that is an unwelcome visitor—but surprisingly the marketing guy joined me for lunch and said he thought I made some good points, that the lots were expensive, but they needed to get the higher price to cover the costs of bringing people down to Florida to see the land, that he himself had bought a couple of lots, and expected to build a home on one of them and sell the other when he was ready. He was a good guy, and I could see the sales costs were significant, but I didn't agree to sign up. And so I was worried that we would need a cab to the airport—since we had not signed up to sell the lots—but they were good enough to take us back—as originally promised and that afternoon we flew back to NH.
Back in my office the next day—and with Google—I looked up the principals of New Vista and found they had sold more than thousands of vacant lots in mostly rural areas of Florida to buyers from such places as the Caribbean, Switzerland and France. The properties were sold at prices far exceeding their assessed value. The mostly standard, quarter-acre properties in North Port, Charlotte County and elsewhere ranged from $18,000 to $72,000 -- though the taxable value averaged about $3,000 per lot. In Citrus County, lots valued at roughly the same price were sold by the company for $30,000
Twenty years ago, the principals, Ehrling and Reizen were accused of fleecing more than 10,000 homebuyers in North Port and Port Charlotte while employed by the former General Development Corp. At a 1993 trial, Ehrling was convicted of 39 counts, including mail fraud and conspiracy, while Reizen was convicted of a single count of conspiracy. The pair served two years in prison, but their convictions were overturned on appeal in 1996. The 11th U.S. Circuit Court of Appeals ruled buyers were free at any time to check out other Florida home prices, and were therefore not defrauded by the GDC executives.
New Vista seeks out customers who are unfamiliar with Florida real es tate. Using tactics perfected at GDC, it depicts undeveloped areas of inland Florida to buyers as sandy resort destinations via sales seminars, brochures and guided tours of the Sunshine State. New Vista has sold 1,556 lots in Charlotte County, more than 2,100 in Sarasota County, 824 in Citrus County and another 290 in Marion County, among other counties around the state. Since the depths of the Florida housing crash in 2009, New Vista has sold 458 vacant lots in North Port alone, collecting $16.45 million, or an average of $35,917 per lot, according to court data.
The company finances many of its deals, a move that further boosts profits and allows New Vista to sidestep the appraisal process required for most traditional real estate loans. About one-third of New Vista customers eventually lose their properties to foreclosure after falling behind on monthly payments, and New Vista simply takes the lots back and resells them.
Although they are still in business today, their sales style at New Vista still mimics that which was employed at GDC. Today Ehrling and Reizen are occasionally in the news, but are not charged with any crimes.
So how did this event cause me and my wife to ultimately move here? We liked what we saw on that November weekend, even though we didn’t like New Vista program or the people who were affiliated with them. So we came back the following March and after a whirlwind tour of the area, with bona fide Realtors, we found a home in Englewood—simple as that.
Dane Hahn is a real estate professional serving Charlotte and Sarasota County. You can reach him at email@example.com or by phone at 941-681-0312. See him on the web at www.danesellsflorida.com.