Good Landlord Roundup

I attended the bi-annual renewal of my Good Landlord certification.  Paul Smith from the Utah Apartment Association presented. 

Here are a couple interesting tid bits to come out of today's meeting:

Participation -   90% of Ogden rental units are participants in the Good Landlord Program.  Crime among those units is down 30% compared to non-GLP rental units.  Still, 10% of Ogden rental units are available to felons and other high risk tenant groups.  It's good for Ogden to have such a high percentage of participation in the program. 

Collections - Somewhere during last year's legislative session at the capitol, a law was passed that allows landlords to increase their outstanding balances due by the amount that collections agencies typically charge for the collection.  For example, if a tenant absconds and leaves $1000 in damages after the deposit is absorbed, and a collections agency charges 40% of outstanding balance in fees, Utah's new law allows the outstanding balance to be increased to $1,400 to help landlords recoup the majority of their loss.  However, this change needs to be stipulated in your lease agreement.

Daily Late Fees - The UAA is recommending that landlords begin to wean daily late fees from their leases.  Courts have typically frowned on them when challenged but they do smile upon lump sum late fees up to 10% of the monthly rent amount.   

These are some helpful business tips.  I also strongly recommend that you become a member of the UAA.  My membership has been a priceless resource.

Delightful Demographics: Weber County's Coming Population Explosion

Great news today reported by the Standard Examiner.  A report out by the Wasatch Front Regional Council shows population estimates for various cities in Weber County through 2040.  Without further delay, here is the breakdown:

Quite interesting statistics.  There are several important things to take away from this table:

1.  House prices cannot stay flat if the population doubles and no new houses are constructed.  The housing funk we find ourselves in as a nation will ebb locally.  There are two sources of new people: A. We are breeding. B. Folks immigrate to us from other states whose economies are flagging and whose tax rates become oppressive due to mismanaged state finances.  The bottom line: New houses must be built or house prices must increase geometrically.  Look for housing price increases first and then new construction to kick in.  Keep in mind, this is a 30 year outlook.  House prices could be flat for another 5-7 years which means that it's better to buy and hold now rather than in 25 years when everything is expensive.    

2.  Right now, with house prices flat and construction anemic, land prices are at rock bottom.  Where will all the new houses for all this new population be built?  Look at those cities with growth rates over 100%.  They have the most available land.  Land banking for a generation could be a profitable enterprise.  Land prices will not stay at rock bottom in communities that are quadrupling in size.

3.  Notice South Ogden, Washington Terrace, Roy, and Riverdale.  They are mostly built out and so will not have much new construction over the next several decades.  However, their homes are still new enough not to tear down.  That means that these communities will age and atrophy much like Ogden did from 1950 to 2002.  Look for these communities to increase their rental base and decline over the next generation.  Roy is already headed in this direction...especially east of 2700 West.

4.Notice that Ogden's percentage is still low.  Due to the life cycle of Ogden's housing, much of it will either be restored, or torn down for new construction.  Also, some of the spaces will be converted in use from single family housing to high density condos and other more urban friendly uses.  "Mixed Use" is an up and coming zone element in the city.  Since most of Ogden has been built out for decades, most of the population growth that you see there will likely come from renewal and revitalization.  If the numbers used to derive these population figures only include new construction as their base, than I imagine that Ogden's population will increase more than this projection due to the revitalization the city is now undergoing.     

Like Father Like Daughter

I was cleaning up a pile of stuff my girls left on our dining room table.  To my surprise, I found this laying among old homework papers:

My daughter Wynnie seems to be taking after her father and drawing up floorplans in her spare time.  This is supposed to be a blueprint of our home.  It looks like she needs to work on proper proportion (compare "our room" to "Mom and Dad's Room" and you would think we make our kids sleep in closets) and traffic flow but still not a bad start for a 7 year old. 

Good Bye Provo Tabernacle

Utah has lost a fine specimen of Victorian Architecture.

Built in 1883, it was one of Utah's oldest standing structures.  Here it is today:

I doubt the church will be able to save this building although I believe erecting a new replica-like structure would be a worthy pursuit.  It took 15 years to build the original tabernacle.

Real Value Vs. Sticker Price

I was having a discussion with a client the other day and he made this comment to me: "Prices are so low right now why am I buying and flipping houses?  I should be buying and holding everything I can get my hands on."

Intuitively, I agreed.  (And not just because I want to sell this guy a hundred homes.)

House prices are down about 10%-15% from market peaks in 2007.  Distressed sale homes are priced  yet another 20%-50% below today's retail (fixed up and ready for end-user) prices.  The last time we saw such deep discounts in abundance in Weber County was the state wide recession of 2002-2004.

So, lets study a couple homes to determine whether they are a better value today or the last time we had a price trough.

This home located at 487 Doxey sold this year for $25,000 cash.  It is a 2 bed 1 bath home.  In May of 2007, the market peak, it sold for $62,000.  This same home sold for $32,000 in March of 2002, our previous market trough. 

The home is cheaper today than it was in 2002 but due to inflation over that time the difference is even grater.  $25,000 today is the same as $20,000 in 2002.  So, in REAL TERMS, the lucky buyer of this home purchased it at a 37.5% discount below the previous bottom-of-the-barrel 2002 trough price!  What a steal!

Lets take a look at another example, 2815 Nordic Valley Way in Ogden Valley.  This home was sold in June 2003 for $187,500.  In December 2009 the home sold for $118,000 cash.  That amount today was the same as $99,000 in 2003.  So, in REAL TERMS, the lucky buyer of this home purchased it at 47.2% discount below its low 2003 price! 

Over the past 7 years not only have distressed home prices declined, but the value of the dollar has done so as well.  This makes real estate an extreme bargain.

If you want to see the charts, see Oil Press: Living Through the Big Squeeze.  The bottom line: NOW IS THE TIME TO BUY REAL ESTATE.   

JUST LISTED! Seller Finance Brick Triplex

I just listed this awesome property located at 570 23rd St. Ogden.  It sits less than two blocks from The Junction.  It is a brick triplex built in the early 20's.  Lots of style and charm in this building. List price $159,500.  The seller will finance.

The property consists of a side by side duplex which sits street side.  The units are 1 bedroom 1 bath but a 2nd bedroom is possible in the basement.  The other building is a 2 bedroom single family brick bungalow which is accessed via a right of way off of Jefferson Ave behind the Japanese Christian Church. Another bedroom is possible in the basement as well. Rents are currently $850 per month in the duplex building and the bungalow home will fetch about $600-$650/mo.

Again, the seller is willing to finance.  If you are interested in this property, give me a call at 801-390-1480 or email me. 

Shameless Self (ish) Interest

Today I had an amusing experience.  I had called an investor acquaintance who had complained about having money but no worth while projects to invest in.  I had been working with some other investors who had shown interest in a particular home but not been willing to move forward.  Since the home was just the type of project I am used to handling, I proposed that the acquaintance and I partner on the home.  He would provide the capital and I would provide the project management.  He called me back agreed that this would work.  Today I gave him the address and set up an appointment with the seller so he could make sure he was comfortable with the project.  When I called back this evening to see how the appointment went, he said it went great and that he had offered to buy the property for himself from the seller.  Whoa?!

He then said that he negotiated the price down so he wouldn't have to pay any realtor fees and told me "he knew I gave him the property address and connected him with this property because I knew he was an investor with capital that needed a property." Did you hear about my new investor charity program?

He then offered to partner with me on any OTHER property that I found.  Uh, right.  He then said he felt bad and thought that he might offer a finder's fee.  When I suggested the commission amount he had the poor taste to say "Well why don't I give that to you as a credit so you will just owe me back the next deal we do together." 

Unbelievable.  Needless to say, this person is now on the short list of folks I don't do business with.  

Fool me once shame on you, fool me twice....

Christmas Miracle! Ogden Lodge to Be Torn Down

The Standard Examiner reports this morning that the Ogden Lodge is being purchased by Property Reserve Inc., the real estate arm of the Church of Jesus Christ of Latter-Day-Saints.

This is a giant step forward for Downtown Ogden.  Frankly, I am speechless and I will try to do my best to explain why this is such great news.

For starters, there is a pecking order of housing in Ogden City.  As the quality of available housing stock decreases, the quality of tenants that demand such housing also decreases.

For instance, a renovated home with a garage usually attracts someone with a good job and a car.  A home that hasn't been fixed in 30 years will attract someone of less affluence than our previous example.  Then you have small apartments of varying conditions and then finally the Ogden Lodge.  It is a seedy motel. 

The Ogden Lodge has historically been a catch basin for those who won't or can't live in even the lowest income housing arrangements.  One of my properties had a pimp living in it.  He was evicted and I was there for the lockout.  Where did he go?  He walked down the street to the Ogden Lodge and set up camp there.  His story is not an exception.

The seedy-motel business is also a key profiteer in the Poverty Trap cycle.  The tenants are typically those who can afford the least kind of stable housing.  That transient nature comes with a price penalty in the marketplace.  A "studio" unit at the Ogden Lodge rents for about $650 per month.  That is the equivalent to a 3 bedroom apartment in a quiet part of the city.  Yet because tenants can rent it on a weekly basis rather than a monthly one, they pay week after week hoping to save up for a deposit to rent another place.  However, the rents are just sufficiently high enough to keep them from doing so and thus they stay trapped in an over priced housing predicament.  It's also worth mentioning that substance abuse is often the issue that perpetuates this Poverty Trap cycle.  

I found the Standard Examiner article particularly amusing as it tries to paint the church as a heartless Scrooge forcing helpless people into the streets:

Residents of the Ogden Lodge were scrambling to find a new place to live Thursday as The Church of Jesus Christ of Latter-day Saints finalized the purchase of it and plans to demolish the motel to pave the way for future development.

snip

"I don't think they treated us fairly," said Janes, adding he learned only last week that the Ogden Lodge would be closing. "They just dropped it on us."

Keep in mind that the lodge charges weekly and nightly rents.  A week's notice should be sufficient.  If anyone is worried about these tenants not having a place to stay, there are two other low-income hotels less than three blocks away.  I am sure the owners of those institutions will be glad to have the new business. 

Oil Press: Living Through the Big Squeeze

It has been some time since I updated the charts and graphs so I thought I would spend some time and do that for everyone's benefit.

The charts are a bag of mixed news.  If you are worried about your house depreciating in value, you don't have too much more to worry about.  However, if you are a Realtor, there is plenty more hand-wringing to do.

Let's talk good news first: 

The biggest question I get asked by folks is "How are home prices?"  This chart answers that question.  This data comes from FHFA and shows price appreciation year over year (per quarter) for the Weber-Davis market, the Salt Lake City market, and Utah County market.  When the line is above zero, house prices are going up, when they are below they are sinking.  As you can see, our appreciation rates exploded in 2005 and then collapsed in 2008.  It appears we have troughed out in 2010 and will come back to flat appreciation (zero) sometime in early 2011.  This is good news for home buyers and investors.  It is much easier to buy with confidence when you know your home or your investment will be worth what you paid for it moving forward.


To understand why house prices collapsed and retreated in price, lets look at our next chart:

This chart shows % unemployment in Weber County.  As you can see, there is a pretty tight correlation between people loosing their jobs and house prices decreasing.  Keep in mind that a high unemployment figure doesn't mean people are loosing their jobs, it means that have already lost them.  It's the relative change from a low to high unemployment number that affects house prices.  This chart shows that we are stabilizing at a high unemployment figure which jives with our previous chart showing that house prices are stabilizing toward neutral appreciation.

If you are an investor or a homeowner, you might be interested to see how our current downturn in the market compares to real estate values over the last 30 years:

If you purchased a home for $100,000 in 1979 (which would have been a nice home back then), that home today would be worth about $220,000.  You can see that it wasn't a straight line of appreciation that got us here but rather a series of valley's, dips, and surges that got us to this point.  With depreciation ending very soon, we will likely go through a valley period and then on to another surge sometime in the future.  NOTE:  You want to be buying investment real estate during dips and valleys (NOW) and not during surges. 

Now lets take a look at some very sobering news for Realtors:

This chart shows transaction volume, the barometer of Realtor health and wealth.  Focus your attention on the last couple of years.  The trendline shows a turn upward toward the last half of 2009.  Unfortunately, this was all artificial demand created by the Federal Tax Credit.  Real demand showed up in the last 5 months with anemic sales performance.  Our trendline is about the break below the 200 transaction per month barrier which hasn't happened since  early 1999.  Since peaking in 2006, we have wiped 12 years of sales growth off the table.  In January, I will do an update on my Starv-O-Meter for NWAOR members.  

And finally, here is a breakdown of sales per month as comparred to previous years.  As you can see, our sales peaked this year in April and quickly stagnated below 200 sales per month.  Typically sales only fall below the 200 mark during winter months like January and February.  So you could say that we are experiencing a Nuclear Winter of sorts after the Federal Tax Credit fireworks.

Adapting to survive in this marketplace is the key to success for Realtors. 

Vacancy: 6.6%

After two of my tenants decided not to renew their leases and left me with two surprise vacancies, I finally was able to get my last vacant unit rented last week.  The rental market still is busy with people looking for places to rent.  It's just more proof that the housing market is stressed by foreclosure and economic uncertainty.  Everyone needs a roof over their head, they are just less confident when buying a home and so they rent instead.  Regardless, I am grateful to have the tenants.

I wanted to know my annual vacancy rate for 2010...and then I got curious and ran the numbers for the last seven years that I have been tracking rents.  Here is my vacancy record:

As you can see, when you have one rental and you have one vacancy a year (which is normal and what you would expect with tenant turnover) it can put your vacancy rates pretty high.  However, if you can add units to your portfolio and manage your lease lengths appropriately, it is possible to keep that number down.  I had a large number of my tenants renew their leases this last year.  That helps keep your vacancy rate down significantly.

Keep in mind that every time a tenant moves out you have one-time expenses.  Re-keying, cleaning, maintenance, touch-up paint, and other tasks need to be performed to make sure your unit is ready for the marketplace.  These expenses need to be considered when putting together your rental strategy.

Archeology Dig: Treasure In My Basement

 
The wife had me on task with a honey-do list this weekend.  One of my chores was to reorganize the basement space of our home.

For those of you who are unfamiliar with our home, it was built in 1908 by Henry H. Hudman.  He was the Vice President of Pingree National Bank.  He was also the Treasurer for the Blackman Griffin Co. which was a produce and ag-business wholesale located at 25th St. and Ogden Ave.

An interesting feature of our homes is that we have 1000 SQFT in our basement with rock walls, 8 foot ceilings, and dirt floors.  It's been an awkward space to use since none of us like tracking dirt back up into the rest of the house.  Up until Saturday, we used it as a dumping ground for things we didn't want to see or worry about. 

While cleaning up some debris I found this card in the dirt:

It's a business card from the early 1900's.  It's fascinating to think that its been sitting there for 100 years in the dirt and is still in this great shape.  I also found a bunch of itinerary cards for train travel too.    

If you are careful and lucky, you can find some interesting historical gems in your old home.

Note:  $100,000 capital in 1908 is the same as $2.35M capital today.  It was quite a big business.

JUST SOLD! Art Deco Cottage

I just closed on this home that was renovated by an investor and purchased by a great young couple from Salt Lake City.  This 3 bed 1 bath home was originally purchased as a bank owned property for $48,000.  It was dead on arrival.  After some major upgrades, the home was resold for $104,000.  Here is the before and after video for your enjoyment:

I have a couple more historic restoration homes coming on line soon. If you are in the market for an affordable home with architectural appeal and fine finishes send me an email.

JUST LISTED! Vintage Craftsman Bungalow

This is an exciting listing at 2044 Jefferson Ave. in Ogden.  It has been in the same family since it was built in 1926.  Interestingly, it has been a rental property its entire existence.  This home is also a sister home the one next door which the owner/builder lived in as a primary residence.  I sold that home last year to a young couple from Salt Lake City.

This property will need a complete restoration (i.e. new kitchen, bath, flooring, electrical, plumbing, furnace, paint) and it will doll up beautifully when finished.  Lots of original woodwork, hardware and Art Deco features.  Two bedrooms and 1 bath with 1100 SQFT on the main level and 350 SQFT in the basement.  List price is $55,000.

If you are interested, email me for further details and a link to an interior video tour.

New Hotel Coming to Downtown Ogden

The Standard Examiner reports today that Western States Lodging had entered a development agreement with the city to construct a $13 million 120-bed hotel on the corner of 23rd Street and Washington Blvd..  The crews should begin construction in June 2011 with completion sometime in Fall 2012.  The construction will include a below ground parking garage that will be owned by the city.

This is more good news for the Junction Project and this should help reduce vacancy as other businesses move in to accommodate the additional bedroom guests that will be arriving.

JUST SOLD! North Ogden Condo

I listed this condo back in July and we finally closed this week on a sale.  The buyer's were a young couple looking for a starter property.  We closed at a sale price of $89,000.  I have more of these 2 Bed 1 Bath condos available so if you are interested, please let me know.

WHOOPS! 350ft. Chimney BooBoo

When demolishing giant chimneys, make sure your charges are placed and time right.

AAH! Bed Bugs In Weber County!

After work today I visited someone I know who has tenants in their basement.  These tenants are highly educated and work in respectable professions.  This evening they notified their landlord that they discovered bed bugs in their basement apartment.  Yikes!  Bed bugs have arrived in Weber County!

Apparently the tenant noticed a "rash" this morning on his arm.  He dismissed it until he came home and noticed that his sheets were spotted with blood...a common indicator of bed bugs.  He also noticed black dots on the headboards and the sheets.  This was evidence of bed bug eggs.  Then they caught a live one.  I looked at the critter and sure enough it looks like a bed bug that you would see online somewhere.

The tenant today thew away his mattress and bedding.  What an expensive problem these insects create! Interestingly, he is unsure where he made first contact with the bugs but somewhere between public transportation, a hotel stay a while ago, and public buildings, they hitched a ride home with him.

For a quick review of the facts on the problem, click here.

So, sleep tight and don't let the bed bugs bite!

Fed Survey On Lending

The Fed published a report on lending standards and surveyed banks on their lending practices.  Here is an interesting excerpt on residential loans:

Questions on residential real estate lending. On net, small fractions of domestic banks reported having tightened standards on both prime and nontraditional mortgage loans, marking a reversal from the slight net easing reported in the July survey for prime loans. The tightening of standards on prime mortgage loans was largely accounted for by smaller banks; large banks, on net, left standards about unchanged. Both large and other banks reported a net tightening of standards on nontraditional mortgage loans. Continuing a pattern seen since the start of the financial crisis, fewer than half of the respondents reported having made such loans. Modest net fractions of banks reported weakening demand for both prime and nontraditional mortgage loans to purchase homes.A modest net fraction of banks reported that standards for approving HELOCs hadtightened over the past three months. As with prime residential mortgage loans, that tightening in standards was largely accounted for by smaller banks. A small net fraction of respondents also reported having reduced the size of HELOCs for existing customers. On net, banks reported a slight weakening in demand for HELOCs.

So it looks like the banks are betting on more economic stagnation.  I do think the last comment on demand for HELOCs weakening is funny.  The banks have arbitrarily reduced the size of their client's HELOCs.  Is it any surprise their customers don't want more of that kind of loan product? Duh.   

Real Estate Wisdom From George Washington

I recently finished reading George Washington's Sacred Fire by Peter A. Lillback.  It was an excellent book.

I found a quote from Washington about landlords which I thought was insightful:

"From long experience I have laid it down as an unerring maxim that to exact rents with punctuality is not only the right of the Landlord, but that it is also for the benefit of the Tenant, that it should be so; unless by uncontroulable events, and providential strokes the latter is rendered unable to pay them; in such cases he should not only meet with indulgence, but, in some instances with a remittal of the rent.  But, in the ordinary course of these transactions, the rents ought to be collected with the most rigid exactness."

Our Founding Father makes the case for collecting rent from your tenants on time.

JUST SOLD! Renovated Victorian Cottage

I listed this home in September and a buyer finally closed on the purchase last week.  The seller of the home purchased it as a fixer-upper with cash for approximately $45K.  Our resale price: $94,000.  We also threw in $2,600 in closing costs for they buyer.  The home is 3 beds, 1 bath, and about 1200 SQFT.

VICTORY! Utah House District 9

In one of the most hotly contested races in the state last night, I was elected to serve downtown Ogden in the Utah House of Representatives.  The final vote was 53.4% in our favor.  I am honored to serve and I am excited to bring Ogden into the spotlight.  If you need to contact me about any legislative issues, please don't hesitate to email or call me.  I am ready to get to work.  Let's make Ogden great!      

Time Machine: House Price Rollback

If you live in a big city in the United States, you may have noticed that today's home prices are reminiscent of yesteryear. What year specifically depends on what city you live in.  Calculated Risk presents this interesting chart for us (click to enlarge):

Go Detroit!

Photo of the Day: Scenic Seasons

I took this photos at the top of Washington Blvd this week.  Click to enlarge.

JUST SOLD! Ultra Bargain Duplex

For those of you watching for the low water mark on pricing, this one sets a new market cycle low. 

This bank owned duplex was listed at $35,500 in a residential neighborhood east of Washington Blvd.  Obviously, it was priced to sell.  We offered $40,500 and won the bidding between us and other contending buyers. 

Thats when all the fun began.  It then took 50 (not a typo) days for the bank to get signatures back to us so we could proceed to closing.  We also had earnest money confusion on this file as well.  Then, when the bank did get the signatures back to us they counter offered us at $35,500....$5,000 LESS than our original offer.  Interesting.  Note: The last time a duplex in Ogden sold for under $36,000 was back in 2003!

Anyhow, we closed on this property today and it should be a cash cow for the buyers.

Click here and email me if you are interested in opportunities like these and want to be notified when they are available.

Happy Investing!
 

The Real Estate Horror Show

Interesting and creepy article out of California today:

A former real estate agent drove with the partially mummified body of a homeless woman in the passenger seat of her car for several months, according to a report. 
-snip-
"This person was somewhat used to the smell," Costa Mesa Police Sgt. Ed Everett said. The 57-year-old former real estate agent said she had been too afraid to call the police after she found the body of the woman, the Register reported. 

So does one of those pine tree odor things you hang from your rear view mirror actually cover up the smell of death?  If so, I have some new marketing ideas for them.  And speaking of scary, is it less scary to drive around with a dead body in your car than to call the authorities the moment you find it?  Hmmm....

The body of the woman, who is believed to have been between 50 and 60 when she died, had been reduced to about 30 pounds when it was found, with the lack of air and weather conditions at the time helping to preserve it.
-snip-
The Register said officials believed the woman had been dead for three to 10 months, based on the state of the body.

Yikes. Anyone want to go drive around and look at houses with this realtor?  

Zoning Zoo: North Ogden McMansion Melee

The Standard Examiner this weekend had a very interesting story about a North Ogden resident wanting to use his suburban home as an auto shop. 

[The resident] lost his job approximately two years ago and started to do small car repairs in his home garage to make ends meet.

-snip-

Soon word spread and [the resident] was fixing more and more cars, but minimum repairs such as brakes and oil changes...

Just as a reference, here is a photo of the home and neighborhood in question.

Obviously, this is not quite what you think of when you think of a neighborhood appropriate for an auto shop.

There are two interesting things to take away from this story.  The first is on how to behave as a good neighbor.  Rather than talking to the offending neighbor, the other neighbors simply reported him to the city.  And yet, the offending neighbor tells the paper "he had worked on nearly all of the complainers cars on the last year."  Beautiful. So much for friendly neighborly relations.

Secondly, and even more surprisingly, the North Ogden City council seems to have no clear direction on this issue.  In the face of public pressure in support of the offending resident, they created a compromise of allowing him to run his auto shop business but with OSHA standard ventilation and more insulation to prevent noise.  Councilman Carl Tanner states: "This is a hard issue and it's awful hard for us as a city council to tell someone they can't have a business."  Really?  The city council shouldn't be telling him he can't have a business, but what they should be telling him is where he can have a business.  That is exactly why we have zoning laws so as to prevent this type of craziness from occurring where it is not supposed to.

The camel might get his nose under the tent on this issue and you may see more suburban neighborhoods declining because of it.  Look for more auto shops springing up in a cul-de-sac near you. 

Demolition Day: Ogden River Project

Finally, dozens of homes sitting vacant and rotting along the Ogden River have been torn down.  This area can now breath easy since all the empty homes were an attractive nuisance to vagrants and transients.  These tear downs might explain recent events where squatters have been trying to occupy vacant homes in other more populated neighborhoods.  The ones that lived in these homes need to find new housing.  We recently chased two squatters out of vacant homes on our block.   

JUST SOLD! South Ogden Bungalow

I just closed with some buyers who moved to the Ogden area from Tennessee.  In our pursuit of the right home, we stumbled upon this property near 40th South.  The home was listed for $98,000 and had been on the market just over two months at the time of our offer.  At the time, market sentiment was down so we decided to press our luck and see what kind of price concession we could obtain.  We offered $90,000 and asked for $2,700 in closing costs.

The next day we got a call that our offer was accepted.  Wow! It appears that the sellers were more motivated than we had anticipated.  I had prepared my clients for a counteroffer somewhere in the $95K range.

Initially, we believed the home was owner-occupied due to the nature of the furnishings and the condition of the property.  However, it turned out that the occupants were tenants and the owner was living in Mexico.  They were motivated to clear the home from their books.  Hence our accepted offer.

After that the transaction went fairly smoothly except for a couple inspection hiccups and some minor paperwork hassles at the very end of the process.  Overall, it should be a great home and some some upside when it's time to sell in the future.  

Car Conundrums and Parking Pickles

One of the issues that faces landlords and investors wanting to rent and/or flip properties is trying to grapple with the function and amenities that are often missing in many of the old homes in Ogden.  I purchased a fourplex once that lacked any laundry services in any of the units.  I have purchased properties where we had to deal with gray water issues and obsolete boiler systems. 

However, one of the most notorious problems (and likely the most overlooked) is the importance of parking for automobiles.

This problem manifests itself in several different ways in Ogden:

1.  The Common Driveway

The common driveway, a driveway shared by two homes, can be a hit and miss problem.  For instance lets take this home as an example.

I showed this recently to some buyers.  On a scale of 1 to 10 the home's condition and style is a 9.5.  Its very impressive.  However, as we walked around the property here is what we found.

Uh oh, this looks like quite a tight space.  The big SUV might have a tight squeeze in this space.

When going to the back we discover that the neighbor has a pad to park on but the home we are looking at does not.  In order to shorten market time and maximize the sales price, the seller of this home will likely need to install a parking pad.  My buyers loved the home but could not see themselves putting the effort into pouring a parking pad.

On the other hand, common drives can work well if there is ample room to move and to park.  Here are a couple of examples:

2.  The Abuttars Alley

The abuttars alley was a commonly used method for accessing property from the rear of the lot some 90 years ago.  Often, homes were built so closely together that abuttars alleys were necessary so parking could occur in the back yard.  Often times garages would exit immediately into the alley rather than trying to exit into the back yard to reach the front of the property.  The problem with alleys is that maintenance needs to be done to keep them up.  There are three homes that I am aware of that could utilize this alley since they have no driveways or parking off street.  However, it looks like no one has taken advantage of this opportunity.  There are probably all kinds of hidden surprises lurking in the overgrowth.

3.  Former Driveways

Finally, many homes once had driveways but have since been sodded over.  Here is a photo of a home I sold several years ago that was impeded by the lack of a driveway.

 You can clearly see where a driveway existed at one time.  We had multiple offers on this property but the driveway problem kept us from receiving many more. 

The bottom line is that parking is a big issue for buyers and renters.  Market times are shortened and prices and rents are increased when parking is adequately addressed.  Keep that in mind while shopping in the market for a property. 

COMING SOON: Exciting New Regulations

The Division issued its quarterly news letter and I found the message from Deanna Sabey quite sobering.  Here is a breakdown of changes that are coming to the real estate industry due to laws passed by our ever benevolent Federal government:

• TILA and RESPA disclosures will be changing again sometime in the next 12 months.  Look for more mortgage officers to be pulling whatever hair they have left out of their heads. 
• Yield Spread Premiums will be banned.  Any loan officer receiving a YSP will be fined treble damages (3 times damages) plus court costs.
• Communication between mortgage originators, underwriters, and processors will be stymied in an effort to make it appear underwriters are doing a good job.  
• New additional disclosure requirements, anti-steering provisions, restrictions on high-cost mortgages, a ban on pre-payment penalties...and more!
• BPO's are banned for use as a valuation tool on new loans.
• HVCC will sunset for appraisers. Hooray!
• Appraisal Management Companies will be required to pay "reasonable and fair" fees to appraisers.  So who determines what is reasonable and fair? The market?  The government?
• Agents, Loan Officers and Appraisers will all be put into an honor code system of being required to report bad players when they know about them.

Looks like we have lots of fun coming down the pipeline.  The only good thing I can see in all this is the sunseting of the HVCC program which made appraisals a nightmare for the last two years.  Lets hope they don't replace it with something even more ridiculous.

FOR SALE: North Ogden Fixer Upper

Bring your tools, your buddies, and some paint for this one.  Post market fixup is around $230,000.  Lots of sweat equity here.  The home is on a half acre lot.  It has 3 car garage, pool house, almost 3000 SQFT, 6 bed and 3 bath.  It can be a show home but needs your love.  Fix this one and make some money.

Downtown Restoration: Denver Rio Grande Building

In a win-win for Downtown Ogden and the IRS, it was announced recently that the Denver Rio Grande Buildings at the corner of 24th St. and Wall Ave will be purchased by the IRS for use as office space.

The IRS will restore the exterior of the buildings, reinforce the structures to comply with current seismic code, and remodel the interiors of the buildings according to LEED certification.  The site is already adjacent to existing IRS buildings and makes sense as move to consolidate operations from other locations.  Construction should be begin soon.

Death of a Short Sale: Not With A Bang But A Whimper

This week I concluded negotiations with the first mortgage servicer on a short sale transaction.  I have been working on this short sale for over 6 months. Due to my clients' bankruptcy proceedings, we were unable to work with the bank on a short sale until the release-of-stay was issued by the court.  It took us two months to get the court to issue the release but then it took the mortgage company another two months to process the paperwork.

In the meantime, my clients' phone numbers were disconnected.  By a fluke, my clients contacted me via email and we able to delay the foreclosure auction just two hours before the scheduled sale by getting all of our paperwork turned in as requested.  However, due to the long delays the bank kept having us resubmit our file for review.

Finally they reviewed it.  I got a call on Thursday last week:

"Mr. Peterson, we have received your file and we are counter-offering your $80,000 offer at $95,000.  Please respond with an acceptance no later than Tuesday next week.  The foreclosure auction is scheduled for Friday next week."

I went back to the buyer and several back-up buyers and they all balked at the bank's counteroffer.

The bank proceeded to the foreclosure auction and it went up for sale today.  Let's watch and see what the bank lists the home at when it comes back as an REO property.

JUST SOLD! Ogden Valley Enclave

I just recently closed on a home for some clients moving into the area.  What is interesting about this transaction is how it's an example of home prices moving to an equilibrium point for buyers and sellers. 

This home was for sale by owners who lived in the home.  In May of this year they listed it for $539,000.   After two months, the listing was expired and the home was relisted for $459,900.  Our initial offer on the home was $420,000 and we ultimately came to an agreement with the seller's at $440,000.  That is quite a dramatic drop in price from the seller's perspective. 

It took some hard work to bring this transaction together; but, in the end our buyer was satisfied and they now have a great property in a great part of Utah.  Welcome to Ogden Valley!   

FOR SALE: Victorian Era Cottage

I present to you a very cute 3 bed 1 bath Victorian Cottage located just blocks to everything fun in Ogden.  Views the of the Ogden LDS Temple from the front porch.  It will have even better views when the Temple is rebuilt later next year.  If you are interested in seeing this property in person, give me a call or email me.

Density Destruction and the Economy of Rents

Unless you have lived on a different planet for the last three years, it is very apparent that we are in a period of economic contraction/stagnation/malaise.  This has created uncertainty about the future in the minds of many people and this attitude change has had a direct impact on the rental market.  However, the results of this change may surprise you.

Before I get started, lets queue today's visual of a plat map of my street (click to enlarge):

When people think of hard economic times they think of things going down: Property values go down, incomes go down, vacation time and spare time go down.  At least that is the general mind set.

With that expectation many people expect rents and occupancy rates to go down as well.  However, a survey of the market reveals that this is not happening.  In fact, in some cases, rents are going up!  What is going on here? 

To help us understand what is happening we need to look at rentals with an eye toward supply and demand.  Lets review the basics of demand for housing in general:

1.  Everyone needs a place to live
2.  People typically pay 30%-40% of their income to pay for shelter
3.  An increase in jobs increases demand for all housing and vice versa
4.  Population growth increases demand for housing.
5.  Obsolescence decreases demand for housing.

What we are seeing in the market is a very interesting increase in demand for most rentals.  The extra demand is coming from individuals who are losing their homes to foreclosure or otherwise needing to consolidate their housing expenses. Also, many qualified people do not want to buy a home due to the uncertainty of their future employment.  However, they are willing and able to rent and do so.  Our state population continues to grow which pushes demand upwards.

Also, at the same time, the supply of available rental housing is being constricted.  Many rentals, shaded red in the graphic above, are vacant due to poor condition or obsolescence.  Many of these buildings have foreclosed. Once the bank owns them, they are taken out of the supply pool until a landlord can buy them and restore them to tenable condition.  The financial barriers to purchasing these kinds of rental units are many and therefore most of these units are sitting vacant while the banks wait for market conditions to improve.

Another factor affecting the Ogden rental market in particular is the drive to consolidate sub-divided houses and demolish unsavory property.  In the last several months, I have watched 12 rental units in my area be eliminated through demolition.  Last year, the condo complex at 23rd and Quincy burned and that removed 30 units from the market.  Also, last summer, 5 units burned behind my home and eliminated those from the marketplace.  I am aware of two separate fourplexes in my neighborhood that lost their non-conforming use certificates and now must be restored to single family homes.  That is eight units turned into two.
 
Lets look at the figures for my neighborhood.  Under ideal circumstances, 84 of the 89 available units on my street would be rented.  The ambient vacancy rate even during good times is around 5%.  However, today 14 of the units are bank owned and unavailable to rent.  The supply pool is reduced 15% to just 75 units because of market distress.  With potential demolitions looming over the horizon for some of these homes, that rental pool will be reduced much more.   
   
The bottom line is that rents are maintaining their pre-recession levels in the Ogden market.  I have raised my rents quite a bit over the last year.  So, if you are nervous about rents, don't be.  The dynamics that are in place will be here for quite some time.  When the economy improves, rents will increase again as wages increase.  But, it's better to own your rentals before that happens because prices tend to go up then too.     

JUST SOLD! North Ogden Giant

I worked with a buyer recently who needed to find a home that had architectural appeal but also was a good value.  After previewing many homes and hours of screening, we finally were able to view the inside of this home in North Ogden.  The home was listed at $448,000.  We pulled the trigger and our final purchase price: $400,000. 

Not a bad deal for 4860 fully finished SQFT built in 2007.  I particularly like the use of clipped gables and staggered roof lines on this home.  The interior was finished excellently with 10 foot ceilings in the basement.

Things to Do In Utah: The Heber Creeper

Our family spends a lot of time in Heber Valley.  It's been a rendezvous spot for my family for quite some time now.   Yet, despite the time we spend there, I am always finding new things to do.

This year's Labor Day experience took us to the Heber Creeper.  What is the Heber Creeper you say?  Well, its a train that runs on the rails that traverse Wasatch County and Deer Creek Reservoir to Provo Canyon.

We took the kids because we thought an old fashioned train ride would be fun for them.  The Heber Valley Railroad is supposed to be a nostalgic experience since the cars are vintage and very well maintained.  Its kind of like a working museum.

I was very impressed with the condition of the old cars and the attention to detail.

 To understand why they call the train a "Creeper", you simply need to watch the scenery pass by.  I don't think we exceeded 25mph the entire 20 minute trip.

The kids had a great time however.  They were full of excitement and wanted to share that with us.  On one part of the trip, the rail runs right through a brand new subdivision of large homes.

My oldest daughter, who is eight, leans over to me and says in a very excited yet sincere tone:

"Dad, these people are the luckiest people in the world.  They get to see a train full of people go by everyday and they can see it right from their very own back porches!"

Ah, yes.  A railroad passing through the back yard is a big bonus in the eyes of the scrutinizing mind of an eight year old home buyer.

I love my kids.