PROPERTY SPOTLIGHT: 2011 Orchard Ave.

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.

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...

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:

BEFORE

 

AFTER 

 

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

801-390-1480

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.

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.  

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.     

Things to Do In Ogden: WinterFest

Lots of fun at WinterFest this weekend in Downtown Ogden:

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!

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.