How Rude of You to Notice! Gail and I were driving down Route 41 one day and there as a minor fender bender off to one side of the road. The two automobiles involved were off on the turn lane way off to the right. There were two sheriff deputies and their cruisers with lights flashing; one in front of the accident and one behind. None of the cars were a physical hindrance to the flow of traffic. Traffic, however was backed up for at least one half mile in either direction. As I approached the accident site, I was determined not to look. I kept my eyes focused on the car ahead of me, forcing my concentration away from the side of the road; feeling my blood pressure rise every time the guy in front of me turned his head and slowed his car. My mother's admonition of it being "rude to notice was ringing in my ears. My mother was a sweet lady that stood about five feet tall and weighed around 100 pounds. But those 100 pounds packed a sharp wit and ability to cut me down to her size with ease. Now understand that I am 260 pounds and six feet four inches tall and I don't cut down easily. One of things she taught me was, "Gregg, it's rude to notice." I still remember with a smile, when mom, in her later years, her, well, um, sphincter muscles weren't as athletic as they should be. If I dared to exclaim "Oh Ma, pullleeese!" to her as she rather noisily walked around her kitchen, she would, without hesitation, turn and look me in the eyes and say, " How rude of you to notice!". But, it's human nature to notice, it's what we do after we notice that is important. In my business we track the foreclosures. Every Monday I get a complete summary put on my desktop of all the lis pendens and the properties scheduled to go to the court house steps. I will admit to you that when I first get the lists my immediate reaction before organizing the spread sheet by value and then by region or bank so we can best serve our clients that deal in paper; is to scan the list of property owners to see if there is any one I know. (There always is; Sorry mom). We live in such an open society compared to other countries. Did you know that in Germany most sellers of homes don't even allow a sign to be put in their yard? If a broker over there wants to find out the history of a particular home, nothing is on computer, or if it is, the information is protected. They can't look up the owner of an address like we can, they can't get a running total of sales in the district, or indeed see what a house sold for down the street: At least not very easily. We Americans don't think "noticing" is rude. We believe that it is our right. We are accustomed to open information, frank open discussions, and open and free dissemination of information. I shudder to think how tough my residential and commercial business would be if I could not sit here by the riverside in my shorts and tee shirt and do research on property and people on my laptop. For example, right now we are involved in the acquisition of large portfolio of bad paper from a small group of banks. The means we will be acquiring the notes and mortgages from defaulted homes for our client. Some properties in the portfolio have already completed the foreclosure process; some are still in the process. We will be bringing in over 150 single family homes to sell and many vacant lots. Once our final offer is accepted we will have just over TWO WEEKS of due diligence. Imagine inspecting documents and doing physical inspection of over 150 homes in two weeks without all the easy access we have to information, with out court records and liens at our fingertips, without Google Earth for aerial pictures and mapping systems for locating the properties. When I first get the packages, the first thing I look at is the total. Twenty Million dollars; Forty Million dollars: Just numbers right? But all real estate is local and each property has a name, a family, and certainly always a story. This is not a commodity like corn or pork bellies. Foreclosures are everywhere and it would be a rare resident of Lee County that does not know someone that is going through it. When you read in the press about large hedge funds buying up portfolios of loans, remember that there always has to be "feet on the ground"; there has to be a company to manage each individual property and deal with each individual loan. The homes need to be taken care of, lawns need to be mowed, electric bills to be paid, and the home has to be preened for the market. There are personalities involved in every deal. It is certainly hard to not "notice" the foreclosure issue. Foreclosure. Real estate is one of the few things that you buy in life that needs all sorts of documents describing and proving that you indeed own it. Most things you own you can possess, you can move the item and proving ownership is more a matter of acting as an owner. Not so with real estate. In fact having the title does not even prove ownership, according to some court cases. Title insurance, however, will solve most of these situations for the borrower. The lender will require title insurance for just this reason. The insurance protects the lender and you against claims against that title that may occur after you close. Florida is a lien theory state. Here in Florida the property acts as collateral for the note. When you borrow money to buy a home you sign two very important documents. The first is a note to the bank that says something like, "I promise to pay you X dollars under the following terms". The second piece of paper is a mortgage. In effect, you give a signed mortgage to the lender that says if I DON"T pay you, you can take my house instead. When you fail to perform to the terms of your note, the bank will file a lis pendens, in effect a public notice that the property is being foreclosed upon. Full foreclosure proceedings can take six months to a year for an uncontested foreclosure. Once the home is foreclosed upon, the bank may be entitled to a deficiency judgment that will allow the bank to seek damages that they may incur if the amount of money they get for the foreclosed property at auction is short of the amount owed. In addition, any amount of loan that is forgiven by the bank may have adverse tax consequences as well and may be treated as taxable income to the borrower. Should you find yourself in the unfortunate position of being foreclosed upon, please seek the advice of a competent attorney and tax advisor. This is not a matter to be treated lightly and there are ramifications of taking no action at all. Do not hide your head in the sand and hope the situation goes away. That being said there are a large number of homes that have been foreclosed upon or are in the process of being foreclosed upon that will find their way back to the buyers at market prices that in many cases are less than half or what was owed to the bank. ( This will be the case on the properties we will bring to market shortly) A good real estate agent can work with you to find these bargains. Do not fool yourself that just because the house sold for $400,000 three years ago it is a bargain at $200,000. This may or may not be the case. Get competent advice here. Once you decide to spend a certain amount of money, look at all your alternatives. Real Estate, like Politics, is Local Lee County real estate may be affected by the national trends; heck we may have even influenced the national trend, but we are not, in any shape or form, just like the national trend. Real Estate prices are a very local thing. Prices for an identical home can vary from place to base based on location, orientation to the sun, closeness to a bus line or shopping, and who or what is next door. Let's not be fooled by media reports discussing national trends. They are meaningless to the guy that wants to sell his canal front lot. All he needs is one qualified buyer to walk up to his door with a checkbook. But let's take a look at some of these media trends regarding the housing market. There are seven states that have a "situation" regarding foreclosures The Midwest states of Ohio, Michigan, and Indiana have been the states hardest hit with the number of foreclosures, but these foreclosures were caused by the loss of jobs and a trend that started years ago.The heavy investor states of California, Nevada, Arizona and Florida were affected by investor glee. The job losses followed by the downturn in the construction industry. Locally Lehigh was hit harder than Cape Coral, the North Cape harder than the South West Cape, and single family homes harder than condos. What really brought on the current over supply situation locally was affordability. A few years ago I was attending meetings and conferences about the affordable housing crisis. The new buzzword was "workforce" housing. Where were our teachers, policemen and the people that worked for a living going to be able to afford to live? One of the reasons Florida grew so fast over the years was the ready availability of affordable housing. Heck it was cheap to move here and it was cheap to live. When that no longer became the case, people stopped buying. They stopped buying but the problem is builders failed to notice this and were slow to react or were unable to act because of the long supply chain between land acquisition, permitting, building, and getting a certificate of occupancy. Or indeed they noticed it, but failed to tell their "investors" that the exit strategy the investor was counting on was locked shut by lack of demand.What is going to get us out of the housing crisis, at least locally, is the return of affordability. It's happening now. Buyers are returning to scoop up the bargains left in the path of the foreclosure steam roller. Banks are taking it on the chin an average of 60% on the unpaid balances. Buyers, and these are the end users that left in August of 2005, are realizing great savings on their purchases compared to prices of late 2005 and early 2006. Don't take my word for it , get a reliable Realtor and get the facts. Remember, you make your money when you buy, not when you sell. Only you decide how much you will pay for something, but when you sell, you need to let the buyer make the decision on what he will pay. Come on back to the housing market. It is affordable again.

Gregg.Fous@engelvoelkers.com

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