Archive for the 'Think Big' Category
Vultures as Angels
There was an interesting article in last week’s Wall Street Journal about the success a hedge fund is having in modifying mortgages and keeping homeowners in their homes. The point of the article was to highlight a successful private market example of mortgage modifications, in this case a distressed investment fund, as compared to the highly publicized Federal programs like the Home Affordable Modification Program (HAMP).
A key difference between the hedge fund’s strategy and HAMP seems to be the willingness to reduce the principal owed on the loans. The hedge fund forgives a portion of the principal in 90% of their modifications. Federally regulated banks subject to HAMP, according to the article, are more likely to lower interest rates, give homeowners time to catch up on late payments, and extend the length of the loan. They only forgive a portion of the principal in 2% of their modifications.
Despite the strong case that the article makes for the private market strategy over government involvement, it identifies two critical factors that limit the hedge fund’s effectiveness:
1. Many mortgages have thousands of owners. Because mortgages were packaged into securities for resale, the infamous Residential Mortgage Backed Securities (RMBS) that were part of the credit crisis, it is often impossible to buy (and therefore modify) individual mortgages – they have thousands of owners.
2. Banks don’t want to recognize losses. If a mortgage does have a single owner, like a bank, then that owner has to be willing to sell the loan at a steep discount in order for it to be attractive to the hedge fund. After all, they’re doing this to make money. The strategy banks currently employ of lowering rates and extending the term allows them to push any losses into the future.
In the end there is no suggested way forward, though presumably the author would hold up the private market model as the ideal. Reports from the government itself seem to show that the Federal programs are not working for everyone either. For many homeowners, the end result is likely to be foreclosure unless the economy and housing markets bounce back quickly.
Check out the full article for an interesting story, and by all accounts a successful mortgage modification strategy for certain homeowners.
Update: I’m Not At Home
Many people are using social media these days. Facebook, Twitter, Foursquare and many others that aren’t even on my radar.
These applications are great for staying in touch with people near and far, people that you know personally and even some that you don’t but have found because of common interests. Depending on your online habits, you may use the applications differently. Some people feel the need to update others on every aspect of their life like “Today I ate oatmeal for breakfast, am wearing striped socks, and my dog just sneezed.” Others use their accounts more sparingly and post news items that are of interest to them or an occasional update on their life.
This summer I’ve noticed that lots of my friends on Facebook and those that I follow on Twitter are posting updates about trips that they’re taking. Some are going to the shore for a week or weekend. Others are visiting family across the country. And others are leaving the country for European excursions. Foursquare updates let me know that someone just checked in at Tapas on Ann or the Starbucks in West Hartford Center.
I’m glad people are out enjoying themselves; relaxing, traveling, supporting the economy. But what I’m concerned about in the back of my mind is that they are announcing that they are not at their home. That they are gone for a few days or a week or longer. Do we really have a good control over who views this information and can they use it in a bad way? Will the wrong person get this information and break-in into your home? Once you know someone’s name, it’s really easy to find out where they live thanks to the Internet.
Who views this information is only as good as your Privacy Settings on Facebook. Or how good you are at controlling who follows you on Twitter. And what if you’ve posted something on Twitter and then someone else re-Tweets it so that whoever follows them can see what you’re up to?
I understand the social nature of these websites, but I also see some information sharing as an unnecessary risk. Kyle and I recently went away for two days. I talked about that trip on Facebook when we got back. The only people that knew we were away were a few people in our neighborhood that I contacted privately through email.
I’m not trying to be the social media police here. You may just want to think about who really has access to all of the information you post online before you announce that you’re leaving for vacation.
I’m assuming that many of the people that follow this blog use some form of social media. Am I overreacting here or do you also think about these types of issues?
PS- I am at home, so don’t try to break-in to my house!
Being a Real Estate Agent: A Fresh Start
Kyle and I have a lot of fun as real estate agents. Meeting new and interesting people is a big part of it. And it’s also very rewarding to help buyers and sellers through a large and important transaction.
But real estate isn’t always as glamorous as it may seem. We not only have to find our clients, but we also have to demonstrate the expertise and provide the level of service that we advertise. Most agents work on their own. They have to follow the activity in the markets, keep track of numerous dates for each transaction, and make sure all their paperwork is in order. At the same time, they have to be available to show houses to buyers and market their listings. There’s a lot of grunt work involved to make the overall experience seem effortless.
We feel we have an advantage in working together, and think we’ve done a pretty good job building the operations of our business. However, it can always be better. This summer, Kyle and I are going to make a fresh start. We’re going to keep everything that is working well, and we’re going to improve everything else. Most of the changes will be behind-the-scenes, and not visible to our clients.
For example, one task is to make our home office workspace more efficient. Right now we’re a little cluttered with files and marketing materials that have built up over the years. Do we need folders for deals that closed three years ago next to our desk? No, they can move to the basement. Do we need 37 copies of a glossy marketing sheet from a sold listing? No, those can be recycled. What about all of these blank contracts and forms? Let’s go electronic and get rid of them all. We can get our workspace set up so that we have exactly what we need, and only what we need, close at hand. I know, yet another example of us being dorks. But the faster we can get our paperwork done, the more time we can spend with clients.
Another task is to take a close look at the expense side of the equation. Are we getting the support services we need for the best possible price? This leads to a change that will be visible to clients. As of today, July 1, we’ve switched to a different broker, RE/MAX Premier, REALTORS based in West Hartford Center. Because we think of ourselves as entrepreneurs, we end up doing a lot of things differently than other agents. We don’t rely on our broker in the same way that many agents do. RE/MAX is more supportive of the specific ways we run our business and a better fit for us.
Contrary to common perception, brokers work for agents, not the other way around. They provide office space in which we can work and hold meetings. They provide legal and business support so that we don’t have to launch and run our own company. They provide educational opportunities. They sometimes generate leads based on their brand. Some brokers offer more services than others. In all cases, the agents pay for these services.
By moving to a different broker, we’re getting only what we need and not paying for extras that we don’t use. We’ll still be providing the same level of service that we have since we started in the business. The change really doesn’t impact our buyer clients at all. And the only difference our seller clients will see is a different color sign in their front yard – our marketing program for listings does not change at all. It may seem like a big deal, but it’s really not.
The final phase of the Fresh Start is looking for new opportunities. As we go through the summer, we’re going to be searching for ways to work smarter and better. Are there new technologies or techniques to advertise our listings so that our seller clients get more offers and better offers? Are there different ways to communicate with our buyer clients so that they have a better understanding, and more confidence, in the search process? What can we do to improve this blog so that the general public understands more about the local residential real estate markets?
We’re going to wipe the slate clean and take a fresh look at how best to be a residential real estate agent in Greater Hartford. Every now and then it feels good to press the reset button.