Saturday, February 27, 2010

Things to Do In Ogden: Waterfall Canyon in Winter

My wife and I left the kids with a sitter and headed out for a Saturday hike.  We decided to visit Waterfall Canyon just on the edge of town.  You may recall our hike with the kids to this same location last may.  In the winter, the waterfall freezes over into a beautiful ice flow.  Here is a brief video of our adventure:

Kim is much more graceful than I am when it comes to sliding down the mountain.  While we were at the waterfall the sun shined on the ice and the entire structure began to pop and crackle.  After this footage was taken, giant chunks of ice began to break off and cascade down to where we were.  Being hit with one of these could be fatal so if you head up there, be very careful.


It was a beautiful and peaceful hike.  We met a hiker on the trail.  When we talked to him it sounded like he wasn't having fun.   Taking a quick look at his shorts and tennis shoes it was no wonder why.  If you head up, be prepared for slick conditions.  The trail is heavily used and the snow is packed and very slippery in many places as you can see in the video.  Regardless, waterfall canyon is a great escape to clear the head and enjoy nature.  

Friday, February 26, 2010

The Horse Fighting The Reigns

Interesting developments in the foreclosure world as the government tries to "kick the can" of foreclosures down the calendar as far as possible.  Here is an excerpted article from Bloomberg:

The Obama administration may expand efforts to ease the housing crisis by banning all foreclosures on home loans unless they have been screened and rejected by the government’s Home Affordable Modification Program.

The proposal, reviewed by lenders last week on a White House conference call, “prohibits referral to foreclosure until borrower is evaluated and found ineligible for HAMP or reasonable contact efforts have failed,” according to a Treasury Department document outlining the plan.

Meanwhile, investors who own bad mortgages are wanting to rid themselves of non-performing loans as quickly as possible.  The HAMP program is starting to create significant headwinds for investors who want to repossess collateral property and resell it to recoup their investment.  Hence an excerpted article from HousingWire:

... a session called “Loss Mitigation – When HAMP is Not an Option” proved to be extremely popular.
The shift away from the government plan marks a shift in the strategy of servicers as 2009 “was all about HAMP” in terms of allocating time and resources, according to Alanna Brown, director of government programs and new initiatives at Fannie Mae National Servicing Organization.
Rich Rollins, CEO of Infusion Technologies, said servicers are seeing increasing potential in short sales and leaseback options.

He agreed with a general mentality at the conference that 2010 — and even 2011 — looks to be the “year of the short sale,” which he said gives investors “immediate positive cash flow” as a non-retention strategy.

“HAFA gave [the short sale] credibility,” he told HousingWire.

The government zigs, the market zags.  The government's efforts are delay tactics and prolonging the inevitable.  

Wednesday, February 24, 2010

The Lezze-Faire Landlord and Diabolic Duo

Hilarious front page news from the Standard Examiner Tuesday:

Police say they have arrested a father and son after finding large quantities of drugs and drug paraphernalia in the two men’s apartments...In the apartment, they found Michael, along with 1.73 pounds of methamphetamine, a large amount of Ecstasy pills, several firearms and more than $27,000 in what police say was drug proceeds.    Burnett said Michael Martinez was a parole fugitive who had set up several surveillance   cameras to monitor the area and avoid law enforcement’s attempts to arrest him.    Nick Martinez, who lived in the apartment across the hall, interfered with officers as they were investigating his son, Burnett said.    Nick was also on parole and was serving as a security guard in the apartment complex. He was arrested and was found to be in possession of drug paraphernalia. 

There is a saying that any publicity is good publicity.  Well,  I think in this case the folks that own Park Avenue Luxury Apartments at 2433 Adams Ave. probably don't appreciate this publicity any.  This is a lesson in proper tenant screening.  Don't let felons be your security force.  Also, if you can't find tenants to fill your building because none of the applicants pass screening, you need to divest yourself of the building.  Another option would be to tear the building down and build something that would attract respectable tenants.  

2433 Adams was built in the 1950's as a hotel.  They used it temporarily for Olympic housing in 2002.  Then it was converted to apartments.  It has never recovered.  I believe its time to scrap the building and start over.     

Tuesday, February 23, 2010


I wanted to take a moment to spotlight a property that is currently for sale at 2011 Orchard Ave.  I wanted to share this for a couple reasons:

1.  Listed at $87,500 its an excellent value.
2.  Being restored and rehabilitated by an investor, its an excellent example of quality work.

For your consideration, here is the property tour:

For investors wanting to know what kind of work to do to a home, this is an excellent example.  This Victorian home is 120 years old and yet appears and feels like new now.  If you are wondering what your project Victorian should look like when you are done, this is a good example. 

For those of you shopping for an extremely affordable historic grade home in an up-and-coming neighborhood.  This one is for you.  I just closed another Victorian a couple houses down that will enhance the neighborhood when finished.  If you are interested in taking a look at the house in this video in person, give me a call.

Monday, February 22, 2010

Devilish Default: Owner Bulldozes Home

Add this to the "things not to do" pile.  The guy portrays himself as a victim but he didn't pay his taxes and got liens put on his home.  The bank moves to foreclose so he bulldozes the place.  He sounds like a real honest player to me...

Saturday, February 20, 2010

Rebirth: Ogden Temple To Be Rebuilt!

In yet another loud vote of confidence in the future of Downtown Ogden, the LDS church announced Wednesday its plan to completely renovate the Ogden temple and tabernacle.  I have not been shy about my thoughts on the current edifice that exists there today.  In my mind it conjures up images of George Jetson and Spacely Sprockets...not quite its intent.

The church has provided elevations to show what the new structure will look like:




Isn't that a much more dignified design?  I believe so.  I can see the temple out my back window, I look forward to the better view.  The church's desire to bring the Temple into line with more traditional architectural design reflects its commitment to seeing Downtown Ogden rejuvenate.  The church has already completed Ensign Plaza to the south of the temple lot and recently completed building Colonial Court II to the north.  This announcement is VERY exciting news.  Construction will begin in late 2010 or early 2011 and be completed in 12-18 months.  

For fun, lets rewind the clock to 1968 and see what used to be on the temple lot...The old Ogden Tabernacle:

This photo was taken just prior to demolition of this formerly beautiful Victorian building.  During the 1960's the church went through a weird phase of demolishing pioneer landmarks in the spirit of "New is Better".  The Old Tabernacle was an unfortunate victim of this trend.  Prior to being white washed like it is in this photo, it boasted ornate finials and multiple tones of color.  It was demolished to accommodate the temple there currently.  Fortunately for historic landmarks, the church reversed the demolition trend and now tries to preserve its architectural treasures.  

Lets look forward to more rejuvenation in Downtown Ogden as the LDS Church invests in our urban center!

Posted by Jeremy Peterson
Ogden, Utah Real Estate Broker
Mountain Real Estate Companies

Friday, February 19, 2010

Bowling for Short Sales

One of the interesting developments coming up in the distressed property scene is the new HAFA part of the HAMP program issued by the Department of Treasury.  HAFA regulations are supposed to help banks minimize losses by providing incentives for homeowners to either short sale thier property or deed it back to the bank in an orderly fashion.

As things stand now, owners default, live in the home payment free for a few months, then ding the place up on the way out.  The bank usually takes significant losses because the home is damaged, they incur legal costs to do a foreclosure, and they don't get to recover the lost payments while the homeowner lived there.

HAFA is supposed to encourage owners to short sale their property rather than squatting for the long haul. How does it provide encouragement?  Well, for starters, they will provide the homeowner a $1,500 stipend at closing to move on to another property.  The same goes for deed-in-lieu of foreclosure.  The catch is the homeowner must pay the mortgage company up to 31% of their monthly gross income as compensation while the process is in play. 

Another interesting caveat is that while this process may encourage homeowners to do short sales, there is a rule that prevents total commissions for a transaction from being greater than 6% of the sales price.  This 6% INCLUDES any short sale facilitators or other intermediaries.  Many of the mortgage servicing companies out there are creating their own "Facilitator Departments" to take advantage of this rule which will leave Realtors with about 4% or less to divide amongst themselves after the transactions are done.  Unfortunately, given the headache that short sales are, this reduced compensation will likely push many Realtors away from doing them.  Our government at work: one step forward; one step back. 

I remember in 2006 as the market began to run up, I had a short sale where the total compensation was 2% of the purchase price.  The selling agent and I basically were paid enough to purchase groceries for the week.  Given the fact that I put over 80 hours into the sale, it was a loosing proposition to focus my efforts on short sales after that.

Perhaps we may see a repeat of that experience as HAFA moves full steam ahead starting April 5, 2010.  Keep your eyes peeled.

Thursday, February 18, 2010

Analysis of a Bargain: 2035 Orchard Ave.

I recently helped a client purchase an investment property located at 2035 Orchard Ave.  This was an interesting property since it actually involved two separate clients.  The first client completed his inspections and discovered required repairs that were beyond his desire to fix.  We terminated the contract.  I then contacted another client, told them the story about the property, and we placed an offer and finally closed. 

Here is a video of the property prior to our initial offer:

The purchase was a long time in the making.  The property was originally listed for $77,500 on September 25th of 2009.  On October 8th it was reduced to $63,900.  On October 26th it was reduced to $54,900.  On November 27, it was reduced to $50,900.  That is when I started to take notice of the property.  We placed our offer in at $50,900 and then canceled after inspections.  The bank reduced the price to $45,900 and my next clients placed an offer of $42,000.  After inspections, we were able to get the bank to reduce the price another $1,900.  We closed at $40,100.  Here are the price points in time line chart form:


We estimate that post fix-up value on this property will be somewhere around $85K-$90K.  Stay tuned for before and after videos when my clients are done.  

Wednesday, February 17, 2010

Forecosure Rescue Clampdown

Yesterday evening I had the privilege of attending a political dinner. I chatted with Rob Bishop, shook hands with Governor Herbert, and was able to chat with some state legislators extensively. One of the topics that came up was mortgage fraud and new legislation to crack down on unscrupulous behavior involving "Foreclosure Rescue" and loan modifications.

I was very surprised to find out that the legislation that has been passed was in direct response to activities by someone with whom I am well acquainted.

The new law makes it illegal for anyone to participate in "foreclosure rescue" and loan modification activies without being licensed by the state. It also puts teeth into the law when it comes to disciplining wayward players in the market.

Lets take a look at some interesting points about the new law.

Here is the State definition of foreclosure rescue:

            61          (12) "Foreclosure rescue" means, for compensation or with the expectation of receiving
             62      valuable consideration, to:
             63          (a) engage, or offer to engage, in an act that:
             64          (i) the person represents will assist a borrower in preventing a foreclosure; and
             65          (ii) relates to a transaction involving the transfer of title to residential real property; or
             66          (b) as an employee or agent of another person:
             67          (i) solicit, or offer that the other person will engage in an act described in Subsection
             68      (12)(a); or
             69          (ii) negotiate terms in relationship to an act described in Subsection (12)(a).

Strait forward enough.  So what is and is not allowed for foreclosure rescue?  Here are the grounds for disciplinary action by the State:

362          (23) (a) engaging in a foreclosure rescue if not licensed under this chapter;
             363          (b) engaging in an act of loan modification assistance that requires licensure as a
             364      mortgage officer under Chapter 2c, Utah Residential Mortgage Practices and Licensing Act,
             365      without being licensed under that chapter;
             366          (c) requesting or requiring a person to pay a fee if:

             367          (i) the person is required to pay the fee before entering into a written agreement
             368      specifying what one or more acts of foreclosure rescue will be completed if the fee is paid; or
             369          (ii) in a case when the financing that is the subject of the foreclosure rescue is
             370      foreclosed within one year from the day on which the person enters into a written agreement,
             371      the person is required to forfeit the fee for any reason;

             372          (d) inducing a person who is at risk of foreclosure to hire the licensee to engage in an
             373      act of foreclosure rescue by:
             374          (i) suggesting to the person that the licensee has a special relationship with the person's
             375      lender or loan servicer; or
             376          (ii) falsely representing or advertising that the licensee is acting on behalf of:
             377          (A) a government agency;
             378          (B) the person's lender or loan servicer; or
             379          (C) a nonprofit or charitable institution; or
             380          (e) recommending or participating in a foreclosure rescue that requires a person to:
             381          (i) transfer title to real property to the licensee or to a third party with whom the
             382      licensee has a business relationship or financial interest;
             383          (ii) make a mortgage payment to a person other than the person's loan servicer; or

             384          (iii) refrain from contacting the person's:
             385          (A) lender;
             386          (B) loan servicer;
             387          (C) attorney;
             388          (D) credit counselor; or
             389          (E) housing counselor; or
             390          (24) for an agreement for foreclosure rescue entered into on or after May 11, 2010,
             391      engaging in an act of foreclosure rescue without offering in writing to the person entering into
             392      the agreement for foreclosure rescue a right to cancel the agreement within three business days
             393      after the day on which the person enters the agreement.

These are some pretty hard hitting changes to the law.  I know several investors who will be affected by this.  The foreclosure rescue process was so legally complex that there was plenty of room for unscrupulous players to take advantage of unwitting home owners in a legal (though unethical) way.  The "rescuers" just needed some good attorneys to write up the paperwork.  This legislation closes almost all those loopholes.  It should add much needed transparency and supervision to an otherwise cloudy part of the market.     

Monday, February 15, 2010

Things to Do In Ogden: WinterFest

Lots of fun at WinterFest this weekend in Downtown Ogden:

Saturday, February 13, 2010

The 30 Year Project: Ogden's Rebirth

 Old Mansion Formerly located at 469 24th Street, Ogden Utah

Many folks have asked me the question: Where is Ogden headed?

To know where Ogden is headed you need to know where it has been.  Starting in the 1880's, it's an exciting story of barons of industry, agricultural development, and railroads that makes a tragic turn in the 1950's toward debauchery and economic obsolescence.  Everyone has heard of cities across the West described as "old railroad towns."  That phrase isn't normally used as a term of endearment.  It's usually an apologetic way to say "it used to be something and now it isn't."

For many of these "railroad towns", finding a new economic purpose has meant the difference between rebirth and renewal or entrapment in a death spiral.  Fortunately for Ogden, a new direction and economic purpose was formulated by community leaders back in 2000.  The new economic direction of the city, while focusing on local assets, would encompass a recreation and outdoor sport theme.  Since 2000, here is a list of things that have happened that coincide with that new direction:

  • The Ogden Mall was demolished and replaced with indoor skydiving, rock climbing, surfing and recreation facility.  The remaining space was redeveloped into mixed use entertainment, restaurant, retail and residential space.
  • Solomon moved its North American HQ to Ogden
  • The river project area (which encompased 2 city blocks of blighted housing) was demolished and prepared for development
  • Bike lanes were added to Washington Blvd in Downtown
  • The Jefferson Historic District was created and restored
  • The Eccles Historic District was created and restored
  • FrontRunner Commuter rail made Downtown Ogden a major stop.
  • Time Square and Union Square were construction on Historic 25th Street
  • QBP moves a major bicycle part distribution center to Ogden
  • The Weber trail system is enhanced with tunnels and bridges connecting most of the county trail system
  • The good landlord program is instituted reducing crime by 25% among rental properties. 
This is by no means an exhaustive list.  However, it shows just what kind of improvements have been made in Ogden in the past 10 years.  If you count investment in improving residential property as well, the amount of money dumped into the Downtown Ogden area easily reaches the hundreds of millions.  I have not checked the numbers; but, based on what I know about Ogden history, I believe this investment is more than the previous 50 years combined.  

Our good friend Adam Smith has this to share which I believe resonates with those of us interested in revitalizing our city:

The increase of stock (capital in today's English) and the improvement of land are two events which must go hand in hand, and of which the one can no-where much outrun the other.  Without some increase of stock, there can be scarce any improvement of land, but there can be no considerable increase of stock but in consequence of a considerable improvement of land; because otherwise the land could not maintain it.  These natural obstructions to the establishment of a better system, cannot be removed but by a long course of frugality and industry; and half a century or a century more, perhaps, must pass away before the old system, which is wearing out gradually, can be completely abolished through all the different parts of the country.
  This is exactly what is happening in Ogden.  The "old system" of disinvestment, neglect, and abandonment is being abolished for the "better system" of pride in ownership, business investment, and historic restoration. 

There is so much to do that it all simply can't happen overnight.  Yet, it is being done with planning and perseverance.  Let us be frugal and industrious as we continue to make Ogden a great place to live!

Friday, February 12, 2010

A Dead Cat Bounce?

Interesting charts today from Weber County:


And Davis County:

Several months ago I trumpeted the end of the downward slide in sales in Weber and Davis Counties.  Now, looking at January's data, I am a bit concerned for what 2010 may have in store for us.  It appears that sales Y-o-Y were down for January.  We experienced a run up in October/November/December as folks took advantage of tax credits only to belly flop in sales in January.  March and April this year should have a boost due to the a final push to take advantage of tax credits.  However, after that, who knows how sales will go.

With FHA expected to increase down payment requirements, higher rates, and the expiration of the tax credit in April, the rest of 2010 should be very interesting to watch.  Perhaps we will enter a final leg down in sales volume as more buyers save up down payment money.

One thing that is interesting to note is that our sales volume is well below the natural growth curve when correlated to population.  In other words, we have pent up demand for housing but it is unable to release due to a damaged mortgage market.  When the banking sector regains its footing, expect to see an explosion in buyers as nature takes sales volume back to the levels it would be at otherwise.     

Making it Stick...or Not

The market for investment property is extremely hot right now.  Supply is down and investors are waiting in the bushes to ambush any distressed sale that comes down the road.  This competition has become extremely fierce the last several months.  What makes the competition so heated is that so many wholesale buyers are prepared, experienced, and play to "win".

I took a look back in my books and the offers I have submitted for clients where we did not win the bidding war.  Here is a look back at the last four months:

The forces of supply and demand are making it difficult to acquire property in a manner that makes sense to maximize profit for resale.  This is a case of too many dollars chasing to few assets.  The guy that is willing to take the least amount of profit will win everytime.

But don't think that it will be this way forever.  The paltry inventories that we see out there are going to change.  Banks have tons of "shadow" inventory in which they are holding but have not yet put back on the market for sale.  This is by no accident. If the banks released all their inventory for liquidation the market would be overwhelmed.  So, they are gaming the market by letting REO homes into the marketplace at a trickle.  It seems like a smart strategy.  However, the number of homes the banks own is growing much faster than the rate they are liquidating them in the marketplace.  This trend can't continue uninterrupted and I expect to see the banks let more homes out into the marketplace once their books start stressing from the overload of homes they own.  I don't know an exact date but I will speculate that it starts happening by summer.

Thursday, February 11, 2010

Photo of the Day: Bouncing Boulders of Bedlam

A 30-foot boulder dislodged from a cliff in Rockville, UT (just outside the gates to Zions National Park) and found its way onto someones property today. 

The boulder hit a large rock outcroping and broke into several large pieces before rolling into someone's chicken coop.  Big Rock 1 - Chicken Coop 0.  Mother Nature always wins.  She has a good offense.

Wednesday, February 10, 2010

Skin and Bones: Realtor Sales Update

I called the Northern Wasatch Association of Realtors to get the latest figures on membership. After running those figures against sales volume for the past year we can finally update our chart cheerfully titled The Weber County Starv-O-Meter.

Before I post the chart, here is a picture from an NWAOR Luncheon of the near future:

Hey guys!  Where are your Realtor lapel pins?

Perhaps I am being a bit too sarcastic.  Perhaps not. Either way, the habitability of the marketplace for Realtors has not improved much.  Last year, I talked about a coming mass exodus of Realtors out of the business.  That event has not manifested itself yet.   I guess we are a stubborn bunch.  Time will tell what happens.  For today, lets take a look at how adverse conditions really are:

As you can see, there are, on average, just under three sales per agent per year in Weber County right now.  These are very adverse conditions.  Here is our agent count chart:


It appears that the agent numbers have not dropped off as dramatically as you might expect.  Perhaps the trend will continue down for a few years until equilibrium is reached.  If so, expect more complaining by agents and shoe leather soup at the NWAOR Luncheons. Yummy! 

Surprise! Downtown Streetcar Shocker

Today's Standard Examiner has some exciting news about newly-discovered possible source of federal funding for a proposed streetcar system in the Downtown section of Ogden. 

The route would take the trolley through the commercial section of Ogden:

The proposed route would begin at the Intermodal Hub at 23rd Street and Wall Avenue   . It would then run up 23rd Street to Lincoln Avenue, along 25th Street to Washington Boulevard and then back along 20th Street, said Godfrey.    It would take about 12 minutes to complete the entire route. The system would be served by vintage streetcars that would run on biodiesel fuel similar to those that are successfully being used in Savannah, Ga., Godfrey said.
I looked at a map and here is what I believe the proposed route looks like:

Lets keep our fingers crossed that we get the grant and this thing is built in the next four years.  Great news!

Friday, February 5, 2010

Multi-Unit Market Update

The numbers for January are in and clocking in at only six sales. The multi-unit market for Weber County continues its anemic performance.

Here is our chart showing the market share of the different kinds of financing tools used to accomplish the transactions:

So far, cash and seller financing are king.  Interestingly, cash and seller financing price points are at the opposite ends of the pricing spectrum.  Cash buyers tend to pay wholesale prices while seller financing buyers tend to pay full retail price.

Thursday, February 4, 2010

FHA Clamps Down on Multi-Unit Loans

It appears that bad underwriting isn't just a problem for FHA and single family houses. The mortgage bankers association today relates a story about how HUD is changing its guidelines to tighten up on loans for multi-unit properties.

Here is what the article has to say about whats coming down the line:

The proposed changes include a debt service coverage increase for FHA's 221 (d)(4) product from 1.11 to 1.20, increased escrows and reserves to four months principal, interest and mortgage insurance premium and disclosure requirements on lender premiums.

What does this mean to the market? Well, for multi-unit properties, remember that FHA is 20% of the marketplace right now. Making it more prohibitive to obtain these loans will just put further pressure on an already stressed market for multi-unit property. More owners will seek alternatives to sell which I believe will include seller financing.

HUD indicated that high vacancy rates were hurting loan performance and thus the reason for the change. It seems that too many people are moving into their parent's basements. This shows how unemployment drives demand destruction. Keep in mind also that the units that go vacant first are the lowest on the value curve: They are either way too expensive to afford or way too ghastly to inhabit.

Look for more seller financing opportunity ahead.

Monday, February 1, 2010

It's a Relationship Business...

I have had a couple experiences recently that have caused me to pause and reflect on the nature of the real estate business and the mechanisms that make it work.  The one thing that I keep coming back to in my mind is that this is a relationship business.  Regardless of the MLS, yard signes, IDX, flyers, websites, databases and guru CDs, the only way that anyone thrives in this business is by the relationships they have with their fellow men and the inherent quality of those relationships.

Which brings me ask:  How are our relationships?  What are they based on?  How do we nurture and sustain them?

For me, I found my relationships on trust and common interest.  My career has taught me to get a pretty good read on people and when I find folks who share a common interest and value system I tend to gravitate toward fostering a relationship with them.  I think we all do this in our own way.  The trick I think is sustaining and nurturing our relationships.  Do the tools we use today do that?  Does twitter help us deal with the needs of others?  Will facebook help you genuinely pickup somebody who is down?  Does our email communication solve or make a misunderstanding worse?

When I look back at these questions I would have to say that the majority of the time, the answer is no. Unfortunately, the tools we use today to get "to-do" items done do nothing to foster rich and sustainable relationships.  On the contrary, they can detract from them. Oswald Spangler in 1918 writes in Decline of the West regarding how communication indicates the lifestage that a particular society is in.  He states that a society is in decline when the value of the people's communication with one another is in its quantity, not in its quality.

The clients that I work with, and with whom I have the best relationships, are the ones that I talk to on the phone, or when possible, visit with in person.

If you find your relationships strained, a phone call or a visit is often the best remedy.   

Let us heed the immortal words of Conan O'Brian regarding this subject: