Communism: Not Welcome Here

I just received this document and thought I'd share it today. Sorry it has little to do with real estate, but everything to do with where you may want to live.

Between 1900 and 2000 over one hundred million people were brutally murdered by communist regimes in search of Utopia. From Lenin and Stalin to Mao Tse Tsung, to Pol Pot in Cambodia and the Brutal Regime of North Korea, the quest to create a perfect society where people accept total state domination has been nothing but bloody.

As a system, Communism demands total and complete obedience to the state--just like ISIS (or as Obama calls them ISIL) and HAMAS; anyone who opposes or stands in the way of progress needs to be eliminated. It's as simple as that.

But bringing a society to the point where they will willingly participate in the slaughter of their own countrymen is not an overnight process. It is a gradual conditioning of the population to get them to believe that some people are not as worthy of life as others.  Today we are witnessing this gradual process unfold before our very eyes, you'll see it on TV every night--even here in the USA.

Gregory Stanton has identified an eight-stage process that generally occurs in the conditioning of a people to prepare them for genocide.  The first step is classification. This simply means classifying people into different groups and intentionally dividing people along ideological lines. (Young vs.Old;  Rich vs. Poor, Black vs. White, Citizens vs. Aliens, Democrats vs. Republicans) Once this is accomplished, stark contrasts can be made between different cultural groups and these differences can be used to incite hatred and create discontent. The job of "boots on the ground" community organizers is essential here because one group of people must be convinced they are being oppressed by another.

In the United States we no longer have the traditional “American Citizen,” who grew up understanding America’s values and the virtues of liberty. Today we have the “hyphenated American” who instead of assimilating into American culture has decided to--and in fact is encouraged to--retain their own culture. This does little more than ensure America’s vast population has no common virtue in which they can unite. The best way to explain this is simply saying, “It's us against them..."

The next stage is known as “symbolization.” This is the process of attaching a negative symbol to ideology of  "them" the targeted group. In the United States today, traditional Americans have been classified as potential terrorists because of their willingness to defend their rights under the Constitution. White males have been classified as being “racist simply for being white”. Once these ideas are established, they are nearly impossible to alter or eradicate. This is especially true when aided by the rabble organizers who are targeted at creating discontent.

The next stage is known as “dehumanization.”  By teaching students that white men are privileged and racist, our elite (liberal) universities are dehumanizing nearly every white male in the country, at least in the eyes of the minorities that whites allegedly oppress. This is why traditional Americans are constantly being called racist for opposing new ideas proposed by the progressive Americans.

Think about the narrative concerning the border. Obama invited Guatamalan children to cross our Southern border--and now opposition to this amnesty agenda has the effect of dehumanizing those who want our existing laws enforced, and the border protected. The same holds true for Christians (in Syria and elsewhere) because they stand in the way of the state’s utopia, therefore they must be discredited and dehumanized in order for them to no longer pose a threat. ISIS has targeted Christians who are already facing extermination at the hands of the Islamofascists.

The next stage is “organization.”  Saul Alinsky’s Rules for Radicals is the organizing bible and teaches minorities that they are oppressed by America’s majorities--a.k.a. evil white men. The story told to emerging nations is that America has the schools, the government agencies, the medical organizations, and the message that America’s rich white men are intentionally keeping them down for financial gain is constant and relentless.

We saw in 2010 the formation of the "Occupy Wall Street" movement. This is a testament to how well the Alinsky rules can organize a political movement. These folks should not be underestimated. The kids from Occupy Wall Street drank the Kool Aid and today would likely follow a charismatic leader on a genocidal march across the land if they believed it would bring about the utopian Promised Land.

The next stage is “polarization.”  There is little doubt that the white man in America is being polarized as over the past number of years we have seen a drastic rise in black on white violence. Black people have been so conditioned to believe that the white man is intentionally keeping him down that violence has become the accepted and justified solution. It must be noted that radical blacks are being used by Alinsky followers to carry out a political agenda. When it is accomplished, they too will be targeted. Some say this is where the US is today, pretty far along, but not quite to the tipping point.

This brings us to the final three stages which are “preparation, extermination and denial.”

The genocide would be carried out with the belief that they are doing something for the betterment of mankind. In the end, it’s nothing but the senseless murder of millions. Then, when it is completed, it is denied. To this day there are many people who view the Old Soviet Block as a paradise on Earth and refuse to believe that Lenin and Stalin together, murdered nearly 60 million of their own countrymen.
Whether or not this happens in America is entirely up to us.

You Are Now What You Were Then

What Makes Us, Us?

We are not born with values, so how do we develop our values? There are 3 periods during which values are developed as we grow. Sociologist Morris Massey has described three major periods during which values are developed.

They are:

1. The Imprint Period - Age 0 to 7
2. The Modelling Period - Age 8 to 13
3. The Socialisation Period - Age 13 to 21

During these periods we develop what many believe to be the 'rudders' of lives; our values. It is our core beliefs that then develop around our values. Beliefs and values have an extremely powerful affect on our lives, because we filter all our information through them and hence develop specific actions as a result, and hence we predetermine our outcomes. Thus if we develop a belief such as "I'm too fat", then our mind begins to only see things that confirm this belief. Bulimia and Anorexia are perfect examples of outcomes from a belief such as the example.

Another example of this is a client who came to our clinic with a belief that she was unattractive. She therefore acted as though she was unattractive. While intelligent, she only went for jobs that she believed were occupied by 'trailer-trash' (her words not mine). While handsome men asked her out on dates, she only went out with men that were unattractive, not consciously, though unconsciously her belief created the outcome. She consciously believed that the attractive men were joking with her. Believing she was unattractive also had her acting unattractively. In 2 sessions we helped her to change her belief after 5 sessions she grew confident enough to divorce her husband who was beating her and she went on an overseas trip on her own. She is now dating attractive men with confidence. Her initial belief was developed at around the age of 6 or 7 when she recalled her father telling her Mother she was ugly. She was also told she looked more like her Mother and therefore believed she was ugly too. Her Father left her Mother which deepened the emotions around the belief.

The Imprint Period

From the day we are born and up until the age of seven, we're like sponges, absorbing everything around us and accepting much of it as true, especially when it comes from our parents. The confusion and blind belief of this period can also lead to the early formation of trauma and other deep neurological problems.

The critical thing here is to learn a sense of right and wrong, good and bad. Here we will often use our feelings or monitor the responses of our parents to determine what is good or bad.

The imprint period is the window of development in which children are all ears. They listen. They see everything and certainly feel the emotion coming from those around them. This is often simply equated to 'Anger' equals 'Bad' and 'Laughter' equals 'Good'. Young children want to know what Mom and Dad think in order to know what they themselves think. Like little ducks, they are eager to line up behind Mum or Dad — accepting without much question of values and beliefs. We must be diligent during this window of opportunity because it passes quickly.

What and how we teach during the imprint period should align with the bent of young children. They love games, stories, songs, memorization and other activities that can be used as powerful tools in the process of teaching them good beliefs and values. 

The most crucial period being from age 2 to 4 when major imprinting occurs. During this period we absorb information without any analysis. So if during this period the child is told they are "bad", they may take this literally without putting it into context. Thus they may think they are a bad person, without taking into account that what was really meant was that their behavior had been deemed bad by a person. Phobias tend to have origins within this period, generally from the years of 3 to 7. (Further events generally just reinforce the original traumatizing event)

The Modeling Period

Between the ages of eight and thirteen, we copy people, that is we 'Model' them. We mostly model our parents, but also other people and particularly people we admire or look up to. Rather than blind acceptance, we are trying on things like suit of clothes, to see how they feel.

We may be impressed with religion or our teachers. You may remember being particularly influenced by Primary School teachers who seemed so knowledgeable,maybe even more so than your parents.

This is when we begin to notice the behavior of friends, family and heroes. The age of ten being highly significant is often when we begin to emulate our heroes. The environment around the person has a powerful effect upon them. It is often said that we become who we most admired at the age of ten.

The Socialization Period

Between 13 and 21, we are very largely influenced by our peers. Here we often form clusters or groups of like-minded or 'like-looking' groups of people. As we develop as individuals and look for ways to get away from the earlier programming, we naturally turn to people who seem more like us.

Other influences at these ages include the media, especially those parts which seem to resonate with our the values of our peer groups.

This is where we develop relationship and social values. After the age of 21 , core values do not change unless a significant emotional event occurs or effective coaching.Normal values change and grow over time.

HOA rules

My HOA adopted new rules on house painting that I was unaware of as I live up North most of the year. I painted my house a color that many houses in the community have similar darker and lighter.

I was sent a violation advising me of the new rule that I would now have to pick one of their colors and then they would have to approve. Long story short, the only notice I got was the violation after the fact. What can I do about it?

Homeowner associations are usually run by poorly educated retired folks.  They are the "chosen ones" and are sure  the world is being populated by idiots who need rules.  As "directors" of an HOA, they are willing to provide the rules, often with little thought as to whether the rules they make are wise or even legal, and often with no thought as to how they will legally enforce
the regulations once they are in place. (Other than by sending a letter of violation)

There are several answers to your questions. I will try to be clear about them and let you pick the answer you like best. I should start by saying I am not a lawyer, and if you are being urged to repaint your brand new paint job, you will have real or potential financial damages and therefore may want to call a lawyer and ask him or her some questions regarding who should pay for you to make
your home a new color.

Color is absolutely subjective and unless you are in a bonafide Historical District, there are very few color schemes that are without some merit. When I lived in New Hampshire, the favorite house colors were tints of the primaries, here in Florida we start with pink and then experiment.

I assume the new paint color rule was effective some time ago but you did not know about it in time, so this is an honest mistake.  It is possible that the HOA made the rule effective immediately, which would give you wiggle room because they have to give all the members fair and realistic notice.
Apparently you were not given appropriate notice. What I mean is they can't honestly expect that people who are planning to paint their homes in the Fall have not already bought
the paint--so there needs to be a period of time between when the rule is passed and when the rule goes into effect, but during which the board must alert members of the the upcoming new regulation. Different HOA's alert their members in different ways, some by letter, some by
email, some by newsletter.  Some require that any exterior work be approved in advance by a committee. Some don't do anything.

I assume that while this home is not your year 'round legal residence, you would prefer to be a good neighbor, and not raise a stink. I am thinking of a person known to me who had a similar issue, and after being alerted to the color problem decided to change his colors to ones acceptable to the HOA, so painted the home one approved color and used a second approved color to paint polka dots all over the home. I was a good paint job and very tidy.  He also made his point, and made the board members the laughing stock of the neighborhood.

Then there is the financial side of this issue.  If there is only a small fine for breaking the rule, it could be worth paying the fine. (And keeping the color)

Nobody wants to get sued--particularly a retired volunteer board of directors of an HOA. That becomes very upsetting, I speak as a former HOA director. If your HOA has any funds in their treasury, you can sue them. That will get their attention.  Their effort to preserve the treasury,
might cause a quick settlement and make the whole thing go away.  Conversely, if the HOA does not have any money in the treasury they won't be able to make you do anything because they can't afford to sue you (when faced with the potential of losing).

My honest opinion is to have your new lawyer write a STRONG letter, suggesting that the HOA was derelict in sharing the information regarding the color rule, (which should have been shared with all the unit owners, any new owners, as well as all the local painters and paint stores.) and while you are anxious to be a good neighbor, you are not willing to repaint your home at this time--however the next time it needs paint you agree to choose one of the approved colors they like. Maybe that will make it go away, but if they are insistent, and not open to your plan, consider looking for satisfaction through the courts. 

Small claims court is limited to a $5,000 suit, but you can bring several counts, meaning you could sue them for $10,000 by making one suit for $5000 for demanding the color change, and perhaps $5000 more for not communicating with the HOA members in a timely fashion.
The judge will probably throw out one of these, but it should get you some action from the HOA

Good luck with all this.
 
Dane Hahn is a real estate professional serving the Suncoast of Florida from Sarasota Realty Associates. You can reach him at 941-681-0312, or by email at dane.hahn@gmail.com

Buyer Turn Offs

Buyer Turn Offs

As Realtors like to say, the three most important things in real estate are location, location and location. Normally buyers will have an idea about why they are looking in your location, but even so, your agent should have information on schools, distance to shopping and good accurate comments on the neighborhood.

First Impressions

The best way to see other people's first impressions of you house is with a camera. If you take photos of the front, the entry, the yard, and the rooms—and place them on a table under good light, you will see what strangers see. Residents are used to looking past problem areas, and simply don't see the or notice the “blemishes”. But photos don't lie.

Deal with every "negative" from the street to the front door and beyond. Fix the negative issues. Paint is your friend, paint the front door. Buyers will spend a few minutes waiting to get into the house as the Realtor fumbles with the keys. Do not have the potential buyer thinking negative thoughts before they even get in the front door. This is where you have your first chance to show off. Gardens and “road appeal” are what buyers see first on arrival. Sellers must realize that they are selling the the entire plot that the house stands on including the improvements and boundary walls between neighbors.

Overpricing your home

Pricing the property correctly at the beginning is crucial in order to attract the right buyer and to make the selling process as painless as possible. In Real Estate everything sells... BUT at the right price.

Homes listed at a higher price than the market recommended, will get some negative feedback from buyers. The worst feedback, of course, is silence. That could include no showings and no offers.

The problem with overpricing your home is that the buyers who are qualified to buy your home won't see it because they're shopping in a lower price range. The buyers who do it will quickly realize that there are other homes in the same price range that offer more value.

Smells

Smells can come from a number of sources - pets, lack of cleanliness, stale air, water damage, and much more. You may not even notice it, but your real estate agent may have hinted to you that something needs to be done.

There's not a buyer in the world that will buy a home that smells bad to them unless they're investors looking for a bargain. Even so, they'll get a forensic inspection to find out the source of the smells. If they find anything like undisclosed water damage, or pet urine under the "new" carpet, then they will either severely discount their offer or walk away. And don't forget about the pets in an around the home. NO ONE likes your dogs as much as you do. Get them out of there and clean up after them prior to anyone coming to see the home. Having them on a chain or in a dog pen is not sufficient if they are barkers. I had a city family come back for the 3^rd visit to a country home in a ritzy horse community, and ask me what the terrible smell was in the neighborhood. When I told them it was the neighbors horses, they said they couldn't stand that smell. (And so we moved on to a different area).

As to "smells", nothing is worse than a house where cats have been kept and allowed to pee. If that is your house, no one will want it – period. While pet odors send buyers heading for the door, smoking odors stop them before they cross the threshold! Sellers have no idea how many tens of thousands of dollars smoking costs them in property value.

Clutter

If your tables are full to the edges with photos, figurines, mail, and drinking glasses, buyers' attention is going to more focused on running the gauntlet of your living room without breaking any Hummels than in considering your home for purchase.

Too much furniture confuses the eye - it makes it really difficult for buyers to see the proportions of rooms. If they can't see what they need to know, they move on to the next home.

Deferred maintenance

Deferred maintenance is a polite euphemism for letting your home fall apart. Just like people age due to the effects of the sun, wind and gravity, so do structures like your home. Things wear out, break and weather, and it's your job as a homeowner to keep your home repaired. If there are signs of water damage/intrusion and mold/mildew, get them fixed.

Your buyers really want a home that's been well-maintained. They don't want to wonder what needs to fixed next or how much it will cost. All buyers should get a professional home inspection. There are way too many things that a professional home inspector should find that the typical buyer would not. To save around $400 and not get an inspection could cost you many thousands in repairs. A seller should want a buyer to have an inspection unless they are hiding something.

One suggestion is to have the seller do all inspection before he puts the house on the market. Then tell the buyer to base their purchase price on the inspection report. If they choose to do an inspection and find something my inspector has not we will discuss it.

Dated decor

The reason people are looking at your home instead of buying brand new is because of cost and location. They want your neighborhood, but that doesn't mean they want a dated-looking home. Just like they want a home in good repair, they want a home that looks updated, even if it's from a different era.

Harvest gold and avocado green from the seventies; soft blues and mauve from the eighties, jewel tones from the nineties, and onyx and pewter from the oughts are all colorways that can date your home. Textures like popcorn ceilings, shag or berber carpet, and wallpaper of all stripes. Think about an estate that has wallpaper on all walls, even bath, kitchen and hallway ceilings and buyers know they can't get anyone to remove it.

Working with a stager is often money well spent. Most buyers see a house in the internet first. A well staged property improves the online pictures and showing experience. They can redesign with what you have and/or bring in furnishings and decor. Stagers will sometime offer scent services or suggestions too. Lavender and vanilla are go-to scents. Vacant homes may benefit from being aired-out. The aroma of fresh baked cookies or a pie is an oldie but goodie.

Decor comments are driven by current market conditions. To sell in a tight market you need to standout but—for example--putting granite in and new flooring just to sell it. As markets change other buyers may be looking for deals and today some pretty tired properties are offered for very good money, because buyers don't have much to choose from and decor can be fixed, other things not.

The market is a brutal mirror. if you're guilty of not putting money into your home because you believe it's an investment and that others should pay you a profit, you're in for a rude awakening. You'll be stuck with an asset that isn't selling.

Dane Hahn is a Florida based real estate professional affiliated with Sarasota Realty Associates. Reach him at 941-681-0312 or by email at dane.hahn@gmail.com

Don't Give It Away!

I can't tell you how many times a client has said to me, “I want to sell, but I'm not going to give the house away. If it doesn't sell for the money I'm asking, I'll just cancel the listing and rent it.” When your current home no longer suits you, the most popular option is to sell and move on, but in some cases, turning the old home into a rental unit might make pretty good sense.

Among the factors to consider:

Your financial situation
Local market conditions for rental homes
Your future housing plans
Your tolerance for being a landlord
State and federal income taxes
Current and projected home prices

Renting a home is a job and it can become a full time job when you factor in collecting rents, repairing damage, attending to general wear and tear, pool and lawn maintenance, and stuff that breaks....most people have no idea what's involved. There are management firms who will do much of the heavy lifting, but their efforts are not free. When all is said and done, very few owners-turned-landlords manage a rental home over the long term.

Unless your plan is to amass a number of rentals, and leave them all to your kids—or sell them one at a time during retirement, you still have the old family home and will want to sell sooner or later...remember, the reason we're in this situation is the house didn't sell for the money you wanted--so you have to hope the market improves so you can actually sell at a later date.

Before you decide to rent the old home, determine if your financial situation can support hanging onto to the house. Sure, you own it now, so keeping it comes with known expenses, but you should talk to a financial professional who will go over your savings, your credit, and your equity in your existing home. This way you'll know if you have the money for a down payment on the new home you want without using the equity in your present home.

If you don't need all the equity in your home for your down payment, you might be able to take out a home equity loan or refinance into an investor loan and use the loan proceeds as your down payment, and still make your home a rental.

Of course, if you go this route, make sure the new house payment on the old house is still low enough that it can be covered by your renter, and then some. Here's a rule of thumb: take the actual value of the home in today's dollars, and multiply by .01. One percent of the value of the house should give you a monthly rental target. So a $200,000 house rental target should be $2,000/month. If the neighborhood you live in won't support that amount, then renting may not be a good plan. This formula may also demonstrate why homes that rent for $500 a month are such dumps.

If you have a mortgage payment to contend with and the home is in a marketplace that offers tough competition, you may be only be able to generate a profit of $200 to $400 per month on a property. The name of this game is cash flow, and obviously the more cash flow the better. Awesome cash flow properties don't grow on trees. It really is a personal decision on how high of returns are needed to justify spending a lot of cash on a rental property. Some people would be happy with 15 percent, 10 percent or even five percent returns on their investment.

If your goal is to buy a different home, one drawback with renting is obtaining a loan on the next house. Once you claim the property as an investment, lenders want to see two (2) years rental history for that property, including a Lease and separate Escrow account for the security. The income will not be credited as income to you so you will have to evidence ability to carry both mortgages.

But if your main goal is to hold onto the home as a family legacy or wait until it's value has grown to help pay for retirement, lower monthly cash flow might be OK - as long as you can cover your mortgage and monthly expenses. This might also be true if you are in an area where projected growth over the next several years is expected to positively impact home prices.

There are pluses in renting instead of selling. You can depreciate the building, and you might be able to get out of doing expensive renovations. If you were considering updates like a new kitchen to get your house ready to sell, you may be able to put them off and do only what is necessary to make the place clean and livable.

Depending on the rent you charge, tenants are willing to overlook outdated home fixtures because they're just short-term residents, not owning it. For years I owned rental homes near a state university, I rented to grad students generally, and they both paid the rent on time and didn't mind the worn kitchen floors and single bathroom off the kitchen.

Renters who offer up to three apartments in their home for rent fall into a protected category, but if you don't live there, you must obey equal housing opportunity laws.

Don't forget insurance. As a landlord you will pay more for insurance on a home you're renting out, despite the fact that you're not insuring the contents, only the structure. And remember to get credit checks on the potential tenants, these are people you'll be entrusting your home (and your own credit score) to.

If you use a rental management company ask them to help determine a rental price for you, and to find tenants (to comply with fair housing laws) and to manage the building once the renter is in place. Management companies will usually take a portion of each month's rent in exchange for handling the screening, rent collection, repairs and other day-to-day landlord management aspects. So be sure you can afford to have their services.

Dane Hahn is a real estate professional with Sarasota Realty Associates. He can be reached at dane.hahn@gmail.com or by phone at 941-681-0312.

Bite the Bullet with a CO

Has everyone noticed that the market has slowed a bit – some might call it a return to normal. And cash offers are less popular as more buyers try to get mortgages. And contingency offers are more common today than they have been during the past few years.

So what is a contingency offer? It's an offer to purchase property from a buyer who still has to sell his “other” house (or perhaps experience some other known contingency) in order to perform. I once had a contingency offer which stated that the buyer would go to closing as soon as he received a large insurance award—which did happen, although it took longer than we all thought.

There are many other types of contingencies, and in that sense just about every purchase offer is contingent. Some are contingent on the close of escrow on a property already sold. Most offers are contingent on the buyer receiving full loan approval. Most are also contingent on inspections yielding satisfactory results, or having the seller fix things that need to be fixed. Nonetheless, in the business, a contingency offer usually means one where the buyer has not yet sold his property.

There are many situations where it makes sense for a buyer to make such an offer and for the seller to entertain and perhaps accept a contingency offer. It certainly makes sense when the number of potential buyers is not large. This could be because of general market conditions, or it could be attributed to the fact that the property you want to sell has limited appeal, or maybe it is just in a price range out of reach to most. In any of those conditions it makes sense to try to work with the proverbial bird in hand.

Naturally there are many factors to take into consideration. A primary concern is the salability of the buyer's property. What I especially want to know is the contingency property's condition, location and whether it is priced right. If the property is local, usually I can get a good fix on this. If it is out of the area it may be necessary to get a BPO (broker's price opinion) froma knowledgeable broker in that locale. Agressive sale techniques like reducing the price every 2-3 weeks if a sale has not occurred may at least give the seller confidence.

I have been successful in asking for a larger deposit than usual with a contingency offer, and then converting the deposit to “Non-refundable” after a certain time period (say 2 months) has passed. The seller is more confident under these circumstances, and a buyer who is financially committed to the purchase is a most appealing buyer.

Sellers are usually adament that they don't want to lose potential market exposure while waiting for the buyer to try to sell his house. Some contracts allow for the seller to keep his property on the market, with the provision that, should he receive another acceptable offer, he will notify the the contingency buyer who then has a specified amount of time (usually 72 hours) to remove his contingency. Usually this means demonstrating that he, the contingency buyer, has the ability to close, in spite of his “desire” to have the aforementiond contingency.

Frequently this condition is characterized as a 72-hour kick-out clause. This clause allows the contingency buyer 3-days to, as it were, fish or cut bait.

Sellers or their agents have often been reluctant accept a contingency offer, because they felt that no other agent would show their property. Part of the reason for this concern was that the property would no longer be listed in "active" status in the multiple listing system (MLS), hence buyer's agents would not even see it when they did a computer search. In Florida's MLS system there is a "middle ground" known as a back-up status which means the property is still on the active market and the seller is soliciting further offers. Good agents who are looking for property will not ignore such listings, but will call the listing agent to find out what the situation is. Many would be willing to write a back-up offer, knowing of the contingency situation.

Needless to say, there are other factors to be considered when entertaining a contingency offer, but you get the drift. One thing is for certain, everything is negotiable and there can certainly be worse things for all parties than a contingency offer – think for a moment about no offer at all.

Dane Hahn is a real estate professional affiliated with Sarasota Realty Associates. He can be reached at 941-681-0312 or by email at dane.hahn@gmail.com

New Law: (H.R. 2847) aka FATCA Starts July 1.

A new law will go into effect on July 1, this one—called FATCA--may cause all of us headaches at the very least, and has the potential to blow away whatever minor recovery we have been seeing, even causing the mortgage rates for buying a new home to skyrocket to 15%. FATCA was passed 4 years ago, but was passed with a delayed start date--it's slated to go into effect July 1. It's another one of those laws that Congress had to pass to find out what's in it, so we'll all learn about it together.

 

Stansbury Research, known as a rampant "Chicken Little" has released a white paper indicating that FATCA (also known as H.R. 2847) will lead to the collapse of the American financial system. While at first their "hair on fire" warnings seem pretty harsh, the more you read about this new law, the worse it seems.

The concept of FATCA is to catch Americans thought to be evading taxes by hiding their wealth in foreign bank accounts. The way FATCA does this is by requiring that all non-U.S. financial institutions pass along detailed information about American account holders, or potentially face steep penalties. Doesn't sound like it will affect you and me so far, does it.  And yet, read on.

Casting such a wide net is already producing unintended consequences. Banks around the world are suddenly rejecting Americans as clients or customers, because foreign banks don't want the reporting and bureaucratic hassles, plus the potential exposure to draconian IRS penalties.

One of the under-reported but major risks to the U.S. economy stemming from FATCA is the potential for wide-scale disinvestment from the United States by foreign institutions seeking to avoid the IRS, (related penalties, and huge compliance costs). The 30-percent FATCA "withholding tax' represents a powerful incentive to drive investors out of U.S. markets entirely. The implications for the stock market, bonds, the dollar, and more could be monumental.

There is currently more than $21 trillion of foreign capital invested in American assets and markets, with about $10 trillion of that in our stock market. That could change as FATCA enforcement begins later this year — possibly dramatically. As this money is withdrawn, and foreign institutions start fleeing U.S. markets, the economic damage would be massive — potentially apocalyptic, especially considering the massive U.S. trade deficits and America’s outsized reliance on foreign investment and outside credit just to function.

Stansbury's position is that the dollar has been the defacto international currency, but that kicking foreign investment out of the US will be the straw that breaks the camel's back. And at that point, the dollar will no longer have international standing. Further they believe that absent the right to print money to pay our bills, the dollar would rapidly devalue. You can decide if this is plausable, but if it is...read on.

A rapid devaluation would collapse the stock market by an estimated 40%, and it would drive mortgage rates up to 15%. This would—Sansbury believes—lead to a 25% reduction in the American standard of living.

Multiple reports suggest that small and medium-sized (foreign) firms, unable to bear the compliance costs or the IRS's crippling withholding taxes, would be especially likely to ditch American markets. After all, there are plenty of promising new markets in which to invest.

Even if the decimation of our financial system is not probable, FATCA has been the subject of a number of a number of criticisms which include allegations that the costs of implementing it may outstrip the additional revenues it will bring in, that it may prompt "capital flight" in the form of foreign financial institutions divesting themselves of U.S. assets, and that foreign relations may be strained by the U.S. requiring foreign governments to gather and report (at their own expense) information on U.S. Citizens. The full implementation of FATCA may, as some critics have maintained, ultimately prove more harmful to U.S. business interests and U.S. citizens than its benefits will merit.

Dane Hahn is a real estate professional at Sarasota Realty Associates, serving Sarasota and Charlotte Counties. You can reach him at 941-681-0312 or by email at dane.hahn@gmail.com.