Photo of the Day: Signzilla

I found this while cruising down the 23rd block of Madison Ave today. If the sign gets any bigger they will need to get a larger building to hang it on.

Real Estate Sharks: Two New Indictments

Like Warren Buffet says: When the tide goes out, you see who is swimming naked.

Its easy to cover up accounting malfeasance in the real estate business when values are climbing. Its not so easy when they are declining.

Enter Shark #1: Rick Koerber of Franklin Squires



Rick is an interesting character. Here is his site.

Rick seems to have gotten tangled in his own web. He was indicted on federal charges this week. They include, according to the paper, taking over $100 million in investor money and then using $50 million of that money to pay "interest" to those who invested first. Whoops!

Lets see what happens to Rick. Most sheisters aren't as vocal or as open as Rick seems to be. His business machine seems complex enough that he may have lost control of it and is now is being held responsible for that loss of control. I will keep an eye on this case. The devil is in the details.

Enter Shark #2: Jonathan Reyes of Real Estate Investment Network and Hard Money Vault


Jonathan is another interesting, and perhaps more sinister, character. He has a reputation going back to 1999 that is very colorful. I won't go into details here though. This time, according to the paper, it appears he used investor money for personal expenses and failed to repay other investors. Let me say that if Jonathan is guilty, it will be a good thing for him to be taken out of the marketplace. Unlike, Rick Koerber above, Jonathan and his attorney have declined to comment.

Today's lesson is BUYER BEWARE!

X-Ray Vision: The Magic of Title Abstracts

Real Estate is an industry that is heavily dependent on information. The more someone knows about a property, the better able they are to make a decision about its value.

In the stock market, stock prices fluctuate based on information about that stock. The price reflects the knowledge of analysts, fund managers, brokers, bankers, traders, and everyone else who touches or has a stake in the stock. In other words, the price at any point in time is accurate because it reflects the information had by so many people involved in evaluating the stocks value.

Unfortunately, real estate is not nearly such a transparent asset. Utah lawmakers understand this and the division of real estate recently adjusted our standard purchase contract to emphasise the "As-Is" nature of real property. We are a "buyer beware" state.

This lack of transparency can create opportunity for some and pitfalls for others. I know individuals who make a living out of hoodwinking other less suspecting folks. I know other folks who tell a good story just to sound like the king of the hill.

For this reason, I have made it center part of my business to base my professional advice on facts and figures. Numbers don't lie, but storytellers often do.

The tool of choice in deciphering the truth behind a property's story is the title abstract.

Here is a copy of the abstract (click to enlarge) from one of my former investment properties - 2670 Jefferson Ave:


This abstract tells the story of who owned the property and who owed how much against it. The information on this abstract reads like this: In September 2001 Daniel Stuart purchased the property and got a loan for $90,000 from US Bank. In April 2002, Daniel deeded his property into his LLC name. In October 2003, Shalom Rubanowitz, the trustee for US Bank filed a Notice of Default against Mr. Stuart for non-payment. The auction at the court steps occured in March 2004 and, with no other bids on the property, US Bank took it back for at a sale price of $52,700. I purchased the property in June 2004 with cash from a hard money lender. (Note: The trust deed for this purchase isn't recorded on the abstract because of an error made at title). The amount I borrowed was $54,000 - $45k for the purchase plus 9K for rehab. In August 2004 I refinanced the home out of hard money at $59,500. We finished our rehab after getting a HELOC with America first in October 2004 for $7K. Finally, in May of 2006, we sold the property to a nice guy named Scott Miller who borrowed $70k toward the purchase. (We sold it for $88.5K) Scott still owns and manages the property today.

The title abstract is the key to unlocking this history. There are many properties with much more colorful stories than this. You can find federal tax liens, lis pendes, certificates of non-compliance, and other boogey-men on the title abstract. If you are looking to purchase a property, find a realtor that can get the title abstracts for you before you submit an offer. Its another tool to give you a better understanding of the property and an edge on negotiating your next transaction.

Things To Do In Ogden: Waterfall Canyon

We decided to stay in town for the Memorial Day weekend. We wanted to do something fun with the kids so we decided to go hiking. My wife and I had not hiked up to Waterfall Canyon since before we had children and we thought it would be a fun hike since its just on the edge of town.


Kim had Esther in the backpack and I kept Sophie on my shoulders most of the way up.



The trail to Waterfall Canyon is just a detour off the normal Bonneville Shoreline trail system. You can start at the 29th Street trailhead at the top of 29th Street (I highly recommend this) or you can start at 36th Street or 27th Street like we did. Waterfall Canyon is between the 29th St. and 36th St. trailheads. (Note: The turn up Waterfall Canyon is unmarked so keep your eyes peeled for where the trail jack-knifes east and turns rocky in a hurry.) We learned that the 27th Street leg is not very kid friendly. There is a steep brush-choked section of the trail that is adjacent to a private residence with dogs that love to bark. Here I am looking down the trail wondering what our next move was.


We pushed on...with minor lacerations.


The kids were having a fun time. Once you turn to head up Waterfall Canyon, the trail gets more rocky and steeper the further you go. There are some old concrete irrigation ducts that signal that you are on the right path. The final obstacle is the makeshift bridge that you can see above. Below you can see our first view of the waterfall. It was an amazing place to visit. There was a brisk 20mph wind coming off the waterfall. The temperature was probably 20-25 degrees cooler as well. I didn't mind but the kids complained about wanting hot chocolate.

The waterfall site has a very surreal feeling about it. The waterfall itself keeps you looking up, and its so tall and mesmerizing that you start to forget you are standing on a 45 degree slope of loose dirt and rock. The site has an ampetheater type feel as you are enshouded on three sides by very rough and beautifully chaotic rock strata.
The trip was great until the kids realized they were tired. I will definitely take the kids up again, however. Next time I will park at 29th Street though and make sure the kids have all had potty breaks before we walk out the door. Otherwise, its a worthwhile trip and I recommend that you go. Finally, we were rewarded with a picturesque scene of Ogden and Ben Lommond on the way back.

Weber County Tax Sale Results

This year's tax sale was pretty interesting. Quite a few homes up for sale this year. The room was filled which isn't normally the case. There were about 6 well prepared bidders and the rest were spectators. I went to bid on some property for a client but the owner paid the taxes owed right before the auction.

Randy Layton's property at 2710 Monroe was probably the most talked about. It was mostly rehabbed but had $3,800 in taxes owing. For some reason, he couldn't scrounge up the cash. I talked to him at the auction about it and he seemed complacent.

The nice thing about the auction is that abutting owners get first dibs on the property before it is opened up to the general public for bidding. Many of the parcels went to these abutting neighbors. If nobody bid on it, the county "struck" it to records and took ownership.

Here are the results:


Note: 10-46-0004 is 176 Acres of land in West Warren. 12-128-0024 is a single family home on west 17th Street.

Photo of the Day: Inconvenient Inclines

This arrived in my Inbox yesterday. Judging from the use of brick and abundant greenery, this subdivision is likely somewhere in The South.

The contractor's tires were found flattened shortly after this photo was taken.

Zombie 4-Plex Haunts Jefferson Ave.

I had a rare opportunity yesterday to explore the deep bowels of the County Building in search of old historic photographs.

I particularly wanted to see what 2210 Jefferson looked like before its hideous roof job. Take a look for yourself:

BEFORE

AFTER

It's sad to see. The building had a fire in 2001 and rather than raze the building, or put it back like it was, the owner opted to stitch the building back together in this Frankenstein-type fashion. The building has had a 75% vacancy rate since.

Signs of Life at the Earnshaw Building

While driving around today I saw crews working on the Earnshaw building. It seems like all activity there stopped sometime last fall with the market crash and all the apocalyptic anxiety going on at the time.

Since March I have noticed work going on and now it looks like they have secured their first tenant:


I am excited to see the building finished and filled. It will be an excellent addition to the downtown scene when complete.

Ogden Rising: Colonial Court II - Now Leasing

Property Reserve Inc., the real estate arm of the Church of Jesus Christ of Latter Day Saints, is near completion of Colonial Court II. The building is now being leased as landscaping and and construction are wrapped-up. This is another shot in the arm to downtown Ogden. Units will rent for $750 for a 2-bed 2 bath unit. At 200+ units, that is a lot of disposable income that will be moving in with the tenants that occupy the buildling. This complex will be a good thing for local restaurants and other services in the area.

Photo of the Day: Please Euthanize this House

Sometimes I take back-roads and different routes home just to mix up the drive and keep me familiar with changes in different neighborhoods. Sometimes I come across interesting property like this:


This little beauty is listed for sale and can be yours for only $70,000! At 725 Square Feet, you can't go wrong. The MLS comments read: "Tenant Occupied give sufficient notice for showings or make offers subject to inspection." Whoa?!

Video of the Day: SNL Bank Parody

For those of you following the banking mess...here is hilarious video from SNL:

Blacklisted at 10%: Betting Against the Seller

A wrote a few days ago about the dynamics at work behind negotiating an offer on property. Today I wanted to share some numbers with you just to prove the point and establish some real expectations for what is possible in the market.

Here is today's very interesting looking chart:


This chart represents 851 of the most recent transactions in Davis County. It shows you for each transaction point, how much (%) of a discount or premium related to LIST PRICE the home closed at.

Its important to keep in mind that list prices are arbitrary. They are not necessarily an indication of actual value. They represent what the seller or agent think a home is worth. List prices can also change as the seller and agent change their views about the relative value of a home as market conditions change. So, its important to keep in mind that this chart shows only the difference between what a home sold for and the price it was ADVERTISED at at the time an offer was accepted.

If you are a buyer thinking of low-balling an offer, here is how your chances of success break down:


Most sellers will rebuff an offer lower than 10% of thier list price. Most will pair some expletives with their counteroffer to you as well. If the home is overpriced relative to its true value, the seller will let the home sit for a while until they lower the list price and test the new price point. Eventually, if the seller is motivated enough, the price will come down to a range that is necessary for buyer to move on the home. The ironic part is that the list price in the end may be exactly what the low-ball offer was in the beginning. The only difference is time and the changed perceptions of the seller.

For these reasons, I recommend looking for properties that are listed at a price point that has value in it already. REO, bank owned, short sale, and estate sale property, are the best places to look for these values. Asking $300,000 on a $500,000 list price is just kicking against the bricks.

Choppy Waters: April Sales Volume

The preliminary numbers are in for sales in Davis and Weber County. It looks like April was a tough month. Weather and increasing unemployment can likely be attributed to the lacklust sales figures.

Here are the charts for Davis County:


And Weber County:

Perils of Landlording: Beer-Belly Bonanza

Some of you may have heard of this story a while ago. These town homes are on the 13th block of Lincoln. Hilarious and unbelievable.



Moral of the story: Check on your property and tenants more than once every 8 years.

America West Bank: CLOSED

In a move anticipated in early March, the FDIC placed America West Bank into receivership yesterday. You can read the FDIC announcement here. This closure shouldn't be a surprise. I wrote previously about a brief experience I had with them.