Our company is now referring out the sub contractors we use for home renovation. Saul Cortez is one of the people we have relied on for the past couple of years.

Saul Cortez can be reached directly at 206-851-4853.

Since the original post we have put up a web site at www.SaulCortez.com with the domain name www.CortezGeneralContracting.com  

Over this next year we will do all Home Improvement work at a reasonable cost. My feeling is that we are all looking for work, we all have a thing we can do well, and those services can be promoted in one place.

This selling season of 2009 started me thinking about the home buying process. What most agents are missing today is the ability to carry low ball offers. Agents want easy deals. Offering list price for a property seems to be what agents think they should do. No one wants the reputation for being a bottom feeder. Agency seems to have gotten so sophisticated that no one wants to offend any body.

I’ve looked at a lot of properties that sold for more than retail. In checking numbers for the Seattle area 2004 and 2005 pricing seems to be what properties are selling for. In some cases properties bought in 2004 and 2005 are selling for those purchase prices plus 10%. It’s absolutely crazy.

For all the talk this past two years about a Real Estate Bubble people are still paying over inflated prices for properties. What really gets me is that good value properties sit on the market with an over inflated asking prices. No one makes an offer. Agents don’t even look. Agents make up some rational in their heads about a property and avoid it. I had such a listing this year that I will post about more in the future.

My real point was that the web 2.0 experience of having listings and tax information on the internet was supposed to make the process more transparent. Consumers, armed with the sacred Real Estate agent information were supposed to get better “deals.” It looks like with all the information people are paying too much by doing the work themselves. The Real Estate information is still gathered and sent out by the Real Estate community. Where is that a benefit to the consumer? How much experience does the consumer have to interpret that information?

Let me go on to my own personal rant. I have been asked to leave a couple of Real Estate offices because I deal with investors. That’s a nice way to say that I am a bottom feeder. In the world of bottom feeders some people consider me the bottom of the bottom feeder barrel. I have no system, no tapes to sell you, no books for you to read, and no get rich quick scheme to promote. I see a good deal and some one should buy it, or I should buy it. Getting scammed by the FICO scores or what the bank wants is for the rubes. I buy the bones. If I can’t buy it I get some one who will buy it for me.  

The point of this post is that this Spring and Summer selling season, after all the talk on the internet, people paid more than full retail for properties. Even the internet providers of Real Estate information admit there is a lag in data of home prices trending down. Consumers ignore the information, and the data, to believe that the low interest rates, and tax credit will compensate them for paying premium prices for properties.

Just because a property is priced below 2007 levels doesn’t make it a bargain. I’m going to bring in some data for you to look at because in my own way I feel pretty vindicated for my career.

Your real estate holdings will need to be paid down in order to get equity. Paying on the principle balance now will go a long ways in amortizing your loan. Debt, or better put, leveraging to create more debt is getting to be extremely risky. Rents will become more reasonable as more property owners are competing for quality renters. I’ve seen a lot of people with dogs moving into houses. In case you are wondering how that applies, most property owners would rather have non smokers, no kids, no pets.

Now you’re probably wondering where the renters are coming from. Many people who wanted to buy are becoming discouraged. Many of the people who bought are stuck with property they can not afford. Many people in turn will try to rent out their houses, move to a cheaper rented houses, and pay the difference on the house that they still own.

All of the old tricks of keeping property will apply for the next five years. Those who have a problem holding on will let the property go into foreclosure. The foreclosures are the true story of the future.

As more and more foreclosures go back to the banks the banks have more and more of an obligation to deal with the problem. Right now banks are sweeping foreclosures under the rug, keeping them under wraps, holding them off the market. The illusion seems to have plenty of people buying in this Spring of 2009. Banks are making loans and refinancing more loans. The life blood of the mortgage industry seems to have stabilized.

Next year, when the new wave of credit crisis hits, cash will be a much more desirable thing for banks to have. Seriously by next year I think banks will have enough good loans on the books to dump property for pennies. Divesting out of real estate will make sense as the new investment strategies shape up around energy, education, and health care.

In 2010 there will be a real estate market correction. By 2012 real estate will be a distant memory as an easy sure thing investment. By that time we will be gearing up for the next Presidential election and either loving or hating Obama. Real Estate will be that hard working man’s way of building a retirement plan and a portion of your portfolio as a hedge against inflation.

My mortgage companies are Wells Fargo and Bank of America. I have had Wells Fargo loans for the past ten years and Bank of America just bought Country Wide. In this economic crisis my banks should have something better to do than to call me or send me letters offering to modify my loan.

I did want to modify my first position loan to get a lower rate and found my loan had a fifteen year balloon payment. When I talked with my lender he said that was correct because I usually refinance or sell within fifteen years. He was right, I forgot, but times have changed. Now I need an exit strategy.

If I could modify I would need to qualify for a new loan. The loan modification, as near as I can tell, would still cost me about 1%. They have a whole lot of conversation around the fees but it adds up to about 1%. So a new loan for about 1% seems kind of like business as usual for banks.

Even though I could, in theory save 2% in interest I have heard that the really good rates take an exceptional set of qualifications.

Let me also outline some of the programs for people who are behind on their mortgages. So you can’t make your regular payment but they will let you get “caught up” on your loan by adding 1/6th of your payment amount per month and get caught up in six months. What a deal. Or you could add an extra payment to the end of your loan, but you have to provide all your financial information, or declare Chapter 13 bankruptcy. Either way it is a little short of an act of the Almighty.

All in all the programs you read about are refinances. The new trick is to have the property appraise for the 80% loan to value ratios. With property prices declining that gets harder to do. In order to get the good rates you need good equity. Most people with good equity don’t need a loan modification.

What I think is a solution to the entire mortgage mess is to make all loans 6% or less, thirty year fixed, and fully assumable. In that way we would have performing loans from any one who wants to make the payments. It would be a choice if, as you go forward, you wanted to take advantage of the program and have six months to implement it, or do it in stages over a year or two.

It could stabilize the market of today. Of course there are problems. There will be fraud and default, but we have that now.

By making loans assumable like they were years ago you would also have to safe guard the transfer of the loan. That’s what was missing before. A regular escrow could cure this with fees for title transfer, escrow, escrow accounts, and lender notification. A sub agency could be set up in Brokerages that for a fee of say $1000 they could facilitate the trasfer with escrow. I can see online search sites with menu services fitting this business model.

The second half of that would also be concerning debt with banks. All consumer credit should be capped at 14% to 16%. Now that the second position loan market is pretty much dead the bank added incentive to get a consolidation loan should go also. By capping fees and interest on consumer credit more money could be applied to mortgage principles or debt payments in general.

If banks want money this is how they can get it. If investors want returns on investment this will generate more cash payments. Banks can do this themselves and if they are smart they will. Otherwise i don’t see a reason to play the credit game at all.

As the number of sales for June 2009 come in it is obvious the price homes sell for is less than a year ago and about 20% less than two years ago. Sales volume was low comparatively speaking, but much higher than I would have thought. The surprise was the number of foreclosures were neck and neck with the number of closed sales. 

In the Wall Street Journal there was an article last week about the correlation between declining or negative equity and people walking away from a mortgage. From thier poll 47% of people who walked away had no or negative equity in the home. In the same week Bank of America anounced it has put into thier short sale addendum that the bank will want to collect defeciencies. The difference between what a bank is owed and what a bank collects in a foreclosure has no recourse in the State of Washington, from what I understand. Second Mortgages are a different thing.

I can see that the banks want to make people pay the mortgages. It makes sense that the more money banks take in on interest payments the less of a loss they will take when they eventually sell the property. The fact is that as prices decline people will be less inclined to pay for an asset that is worth much less than what they paid or borrowed. The lower prices will continue to work through the Real Estate market and in my opinion that will happen more rapidly this next year.

There is a sub section of the Real Estate market after the foreclosure auction called Real Estate Owned, or Bank Owned properties. From what I have heard out of 1600 home sales in King County in June 253 were bank owned. That may be short sales and REOs combined, I don’t really keep track, but the per cent to closed sales is pretty high. Like with the foreclosure auctions there is a limited number of people in that buyer pool. Banks are notorious for letting properties go vacant for extended periods. It takes some imagination to get a buyer to look at REOs. Those properties tend to sell at a discount.

Each year a certain number of people have to move. As those buyers work through the process they generate a new set of statistics used for Comparative Market Analysis. Those number will show a lower over all sales price. At the same set of statistics the price per square foot went up. That was do to the number of smaller houses being sold this year. The below $500K market was the driving force and a lot of houses below 1200 square feet were sold. Smaller houses have a higher price per square foor than houses over 2600 square feet. It’s a market equalizer.

The trend is unmistakable. The market dynamics are like a car rolling down hill. Banks continue to collect foreclosed properties. Banks selling at a discount to a shrinking buyer pool. Home owners who are trying to collect equity before it’s gone selling at a discount to compete with banks. The process may be slow, but it will pick up speed.

The thing to watch will be rents. Rent trends will show us where the price of property will end up. Mortgage payments compared to what you can rent a similar property for will determine the market mind set. Is owning worth it? Is the cost of taxes, insurance, and maintaining, worth the claim that some day the property will be paid off?

As many of you know I started this blog with an idea that a house can be fixed well as an alternative to buying new. After gutting a house down to the studs and rebuilding it inside and out it sat on the market with a ridiculously low asking price. I was told it needed to be painted and staged. It was white walls with beige carpet. Yuk was the term, but did I mention the low price? Back in the day you wanted people to use their imagination for how the place could look. Today we have stagers.

One of the first with the staging business was a Real Estate marketeer of extraordinary talent. She changed the face of how we promoted ourselves as professionals. Staging was a natural off shoot of making a home look professional.

After spending the last couple of years as a disciple who had seen the light it’s starting to wear on me that people look at furniture more than seeing a house. A house should be the focal point for a buyer. Buyers should be looking at all the flaws and how they will be living. Once you move in your stuff it looks different than the stuff that no one ever sits on. 

I’ll also mention scale. Did you know you have condo and house scaled furniture? How about when a stager brings in the smaller dining room set to make the room look bigger? How about that well placed chair that shows a use for a corner but you would never want to sit there? The best is the blow up bed that is just a bit smaller than normal. When you add in pictures or pottery, things of luxury, in a utilitarian house or put a screen in a questionable corner of a room is that showing a buyer the home or an image?

People may make any conclusions they want from what they see, but in my business we see the house after the staging is gone and the reality sets in. Room dividers are the most deceiving thing to compensate for. Screening can be up and make sense in staging but practical day to day living has those screens in the way and put into a corner.

I’ll never say a stager or agent would deliberately cover a defect with staging. There may be times when the eye is diverted from a draw back, other times the illusion may be a distraction from space use challenges. The purpose of staging is to give the buyer some sense of how to live in a property.

What I have been thinking the past few years is that a house should be able to stand on it’s own merits. A buyer should be able to see the house and the agent should be able to draw the conclusions of what the house has to offer. It bothers me when agents open the door and let the furniture be the conversation. People actually talk about how nicely a place is staged, or refer to a house as the house with the red couch. It’s a sales technique.

People very rarely refer to the systems of a house, or the foundation. More attention is given to the roof rather than what’s underneath it. People talk about counter tops rather than the cabinets. Many houses have cheap fall apart cabinets with granite on top.

The paint part I understand now. People don’t want to do anything other than move into the house. I think money spent on a high quality paint job is money better spent than cheap paint and staging. Actually a lot can be done by concentrating on making the house livable rather than presentable.

The appearance Barrack Obama had on Jay Leno impressed me. He said we need to do more work on education, energy, and health care. It is a point well taken by me as my business shifts. Those three areas of our economy have stagnated for decades while we rely on them more.

I started this blog to talk about buying and selling properties. It has an under current of home renovation. My goal was to consult. My thinking was that people would want to have a forum about their homes. In two very short years that business idea went from hot topic to declining home prices with no money to do repairs let alone remodel.

With the help of an on line business networking site I saw that many people have started in business for themselves. Being in business is far different from what we learn in school. Some of the new business people worked in a corporate structure where money was no object. There has been some resistance to the down and dirty grit of small business.

Other people who I am talking with are slow to find that the world of Real Estate will never go back to normal, for them. Real Estate has had it’s ups and downs, but nothing like what we have seen lately. In that way the Real Estate Industry is like education, energy, and health care. It is an industry that has been doing business the same way for decades.

The computer has changed things but most of our core business still operates the same. We’ve added tools. Innovation seems to stop at the monitor screen. The tools are more sophisticated yet we try to make them work according to a tired business plan. Real Estate is a good example.

Real Estate agents, now web sites, give a potential buyer a list of properties, the buyer picks one, and the agent tells them what they want to hear. Sellers get a whole set of great pictures to put on line, stage the house for showings, but they need to list the property at a price that is below market value to make it a hot deal. The tools change, but the technique is the same.

There are a lot of examples that I could use, but the point is business needs innovation for future development. Connecting the consumer with products like Amazon did was a huge step forward. I was against it at the beginning because the things I ordered were crap for a full retail price. Nordstrom’s then started selling crap at a higher price. In the end it made more sense to just shop on line and take your chances.

We look at profits as a given right to having a business. We have heard less about business failure and more about profit potential. There are a thousand slick business formulas for sale. If you want you can buy a franchise as an investment. Everything you need to know is there is a package like assembling a bicycle.

The stock market made corporations invincible. People day traded, hedge funds plopped down billions of dollars, and when the profits came rolling in venture capital funds threw money at what looked good. How fancy is your website? Do you have all the charts and graphs to prove you make money? By golly, if you do there was a very willing public to throw money your way.

Today people are watching their money. There are questions about some very major American Institutions. My thinking is that if you want to stay in business you will need to produce that better mouse trap. Staying ahead of the curve is more than a catch phrase. Your product and service will need to match the scrutiny of a skeptical consumer.

I want this to be as generic as possible, but charter schools are a great example. Having school age children was an eye opener for me. Both public and private schools are run down, have tired teachers, there is a lack of motivation in students, and it all stays the same year after year. I saw a charter school profiled and it made good financial sense that for the same money, with less bureaucracy, students and teachers could have an adventure in learning.

In that regard I think small business will have to be the innovators. Small business will also have to fund themselves in this process. The days of hoping to sell your innovation to the highest bidder are over. As much as corporate America needs the next big idea they will be less willing to gamble. Corporations answer to stock holders. Stock holders want a sure thing even though they pretend to be risk takers.

So fixer fixer will take on a new direction. I have been in business my entire life. Many of the things written here on this blog are about my businesses. It’s all a matter of making money. some of the best business owners are confused by today’s market place. There is a lot of fear.

Maybe if we share some ideas on promoting business, management style, and ideas for future business needs, we can get rid of some of the fear.

Real Estate changed in that time dramatically.

A Real Estate professional lives by the numbers. A property is worth what it will rent for. There is a return on investment. Dollars go in to make a profit. Investment in Real Estate can off set regular income by tax advatage. By tax advatage I mean deducting mortgage payments as business expenses.

Real Estate is a business. Real Estate is a multi trillion dollar business. I would venture it is the biggest business in the world, because I think every inch of the world is owned by somebody.

By now some of you must have figured that I’m a lousy real estate agent. I have opinions and express them freely. Yes, the price of Real Estate was unsustainable in 2006 and I told everybody to sell. By 2007 it was beyond comprehension. People held out, wanted more money, but I sold, and investors sold. Lot’s of investors unloaded in 2005, 2006, 2007.

The amazing part is that Real Estate Professionals didn’t hammer at the basics of Real Estate. There were good purchases in all of those years.

We forget that at the time if a property was on the market more than a month it was a “dog” listing. It was over looked by agents who were making comments about not looking at anything over a week old, or was it a day on the market. Two investor I know got very good deals by making low, low, low offers that were accepted. One guy was offer 50% of asking price. Today he doesn’t seem so stupid because some people needed to sell for a variety of reasons.

Real Estate is a business, not a sales job. You’re either addicted to the business or not. I can tell you what most Real estate addicts will tell you that Real Estate is a great business except you have to deal with real estate agents.

Yes you need an agent and the agent should be working in your best interest. I am a pit bull. When you hire me I work for you. I take my job very seriously. My analysis is complete. i refuse to write bad deals for my clients, Writing bad deals is what radfun is for.

When I market a home it is a serious business of getting it to look like a bargain. I only list properties i personally believe in. it has to have value. If you have trouble seeing the value I can explain it to you in depth. It’s more than statistics or data. In many cases it’s an intangible.

A buyer or seller, for the money paid in commisions should get value from an agent. A commision is really pretty cheap for what a good agent can probvide you in negotiating skills. There are many good agents. You would need to look for them and get them to agree to work with you. Most good agents are interviewing you as much as you are interviewing them.

I’m sorry things got so far out of whack. They never should have by all that is the basics of Real Estate. There are rules that got broken, but it was a time of mass hysteria.

It’s been a long cold winter here in Seattle. Lot’s of snow has the streets covered with sand. Dust will be a major factor this year.

Usually our company A Spring Cleaning would be lining up work for home owners preparing for the Spring Home Selling Season, but the phone is silent. My thought is that every one is waiting to see what change a new president brings.

In the mean time let me share with you what we would typically do at this time of the year. First we would bleach a house. We have a large orchard sprayer, but a hand held sprayer can work or even a bucket and roller. We mix a bleach with water and a little, very little, detergent to spray onto a house, patio, deck, or any place there maybe moss or mildew. You can add a commercial mildew killer if you like.

We mix between 25% to 50% bleach to water with maybe a quarter cup of detergent. I like the orange cleaning solution myself. It smells good and has a great wetting agent. We spray down the whole house on a cold winter day without rain. We let it sit for at least thirty minutes or reapply. I usually go around a house twice and it takes me about an hour. Some times I leave it over night depending on the plant life around the house. Then I rinse.

Some people pressure wash after bleaching. This is a good time to do that. The basis of pressure washing is the gallons per minute. Some people think it’s the pounds per square inch of pressure, but gallons per minute is what get the job done. In terms of the bleaching you can just leave it. It will turn to salt water. I rinse to keep the soil around the house diluted. I also just use a spray nozzle to get some crud off the house and “sweep” the patio or deck.

This is the time to get some clean up done, like old weeding, or pick up around the house. January is best for this or after your snow season ends. It’s to early for pruning, but dead stuff can be removed. This also means around the exterior of the house so you can get to the windows and siding. Without leaves on the trees or bushes in a dormant state it’s easier to get in close to the house for cleaning siding. You should do the whole house and get all the nooks and crannies.

The plant life being less impacted is one reason to do this now and the second is that moss and mildew are in a weakened state. The cold has these spores hunkered down for the winter. In the Spring the more you kill or remove today means less that will “blossum” in the Spring.

This is the first day of a new year. Many of the problems we faced in 2008 had to do with credit. Some of the things I’ve written about during the course of the year had to do with our travels to Spain and Peru. When you see other countries deal with credit by comparison to the United states it makes things much more clear. We live a life style based on buying today and paying tomorrow.

Here in the United States we can afford anything. If you work hard and pay your bills you can have everything, and anything. In most other countries you need to be a politician, doctor, or lawyer to drive a Subaru and live in a big house. In the United States a two income family can do that. If you have a good job you can have almost anything. This has been especially true in the past five years. Credit ran like water to every household in America. The bigger problem is that this financial system was exported and readily adopted elsewhere in the world. The people in Peru have Visa Cards and don’t leave home without American Express.

You may recall news reports in 2001 talking about people in Peru living on a $1.35 per day, about $400 per month. In China it’s about the same. These are the “emerging market” that our financial markets have been leaning on. The theory was that if each of the over a billion people in China spent $1 a day that was over a billion dollars a day to tap into. This theory was promoted at a tech seminar that Bill Gates attended and he’s the one that made the comment about wages being about $1 a day.

As ridiculous and sad as the financial markets are it’s even harder to believe that the stock market went along with it. We are seeing that there are many people who have pushed the stock market to incredible heights with lies, false data, and extremely wishful thinking. Some of those stock market mavens are going to jail. Even more sad is the number of people who bought into the stock market through IRAs, 401Ks,  and company directed pension plans. There are a lot of examples that I could use today because I talk with people two of three times a week who made these risky investments believing they were safe.

Most of the investors I talk with regularly are cash people. They buy things with cash. They are all land owners and own the land free and clear or as close to free and clear as makes sense. A gentleman I was talking with the other day has a hundred thousand dollar loan at an adjustable rate of I think he said 4%. He said he couldn’t pass up the money and he was looking at a property to buy, but decided not to. He’ll travel instead, and yes he has a hundred thousand dollars in the bank to pay off the debt or else he would have never taken the money.

All that being said let’s talk about you. Maybe you have consumer credit debt or a mortgage. Many people are talking about foreclosure or bankruptcy because they are losing jobs. God Bless those people and my hope is our system works the way it’s supposed to. We are supposed to be able to walk away from most debt and start over. That’s what makes America great. We can risk, lose, and start again. Risk is what makes profit. If you are afraid of the risk you remain forever in a holding pattern. I talk about owning your own business and making financial investments on tangibles. Those things are high risk. Leveraging properties is high risk. What makes America great is that you can take those risks without physical consequence.

It’s only money. You borrowed and now it’s time to pay it back. Some people take a second job and dedicate that job’s income to debt. Many people I talk with who are in that situations share rent or rent rooms. You’re not home anyway so why not. A couple with children can work a schedule with an in house sitter, or make arrangements for shared child care. If you have one child you can handle six, it might even be fun. Stop spending money and start making it.

It’s a simple economic principle to make more than you spend. A woman I know started knitting while she watched TV in the evening. During the day she waited tables and in the evening she knitted. She started knitting with silk ribbon one time, I think, I don’t remember why. Knitting is not what I do, but remembering she sold her ribbon knits to a store struck me as a bold move. It’s an example of hope that I will clarify was easier for her than it may be for you. She made enough to save money. She lived with a boy friend, she was always frugal, and when she started she was just passing the time. Your situation may be far different, but there is hope.

The income is the first thing. Getting to where you can live well is an important step. By well we each have a different point of view. I love to work. The day to day problems are a challenge. Owning a business for me is a great reward. That gives me fun and joy. Being out with a team of workers, laughing about nothing, doing the best job possible, and getting paid for it, it’s unbelievable to me. Even when I had a job, which I look at as a vacation, it’s a great thing to go in, do the very best possible, do more than anyone ever expected, and get paid. You may get tired, bored, or discouraged, but what else are you going to do unless you have the money to do it.

Second is to live within your means and save money. We all look at Wal Mart, or Costco as some experience in our lives. It’s very hard for me to see the saving at those big stores. I go in for a gallon of milk and spend fifty bucks on stuff I don’t need. For a long while I went to a restaurant supply store once a month and bought pasta, tomato product, cheese, spices, and oil at wholesale. I would pay cash and no one ever questioned me. During the week I bought fresh every day on my way home from work. I went to the local grocery and bought meat and vegetables. It seems like a lot of bother but I bought what was on sale that day. You’re spending the time waiting to go to work anyway, so why not?

Shared rent and buying cheap stuff sounds kind of boring. As Americans we find this reprehensible. Just living to work and working to live seems horrible. We are programmed to think this way. Let me ask you this, because it occurred to me when I was in my twenties, where do you have fun? Drinking in the bar, going to car shows, or maybe seeing a sports event people have told me are fun. Spending time with friends or maybe being alone doing things you enjoy like reading a book. We all have an answer. Money isn’t everything. …… The truth is that no matter what you like it costs money…….

Getting to a system of cash is imperative if you ever want to have money. Getting rid of debt is tough, but getting to pay cash for everything is pretty much impossible. Our entire system has been geared toward higher and higher prices. In the coming years prices will be coming down. At the same time the demand for wage earners will increase. That’s a post for another time, but take heart, getting to cash will be easier from now on.