In the make-believe world that Hollywood builds, real estate agents are almost always broad brushed as people to regard with disdain, distrust or contempt -- or all of the above.
Motion pictures' bigger-than-life art form presents those who practice real estate as myopic, slaves of the sale -- an end justified by any means necessary.
Also, often poking pointed fun, the silver screen's rendition of a realty professional is typically in the form of a caricature -- an insufferable, money-grubbing wretch who would sell their soul to close the deal.
This summer's movie fare is no different.
For example, a tight, bright and funny little independent film "You Kill Me" stars Ben Kingsley as alcoholic hit man, "Frank Falenczyk," whose drinking habits are getting in the way of him getting the job done in Buffalo.
His forced penance is a stint in San Francisco where he's enrolled in Alcoholic Anonymous to dry out under the watchful eye of his handler known only as "Dave."
Dave also lands Frank a job assisting a mortician at a local funeral home, and because he's a real estate agent, Dave also puts a roof over Frank's head.
It's not long before Frank discovers his handler is also a mob spy with lots of keys who "looks in on" the hitman from time to time.
"You roll your socks. You floss. You don't hide liquor in the toilet. You live like a Mormon," Dave tells Frank, reminding him who is handling whom.
Bill Pullman plays Dave as a sleazy, disheveled and bespectacled home sales agent with an untamed cowlick. His appearance alone would get him kicked out of the local trade group.
It's not by chance Dave chose the funeral home job for Frank.
This morbid agent farms for listings in the mortuary, not the least bit remorseful about his deplorable strategy.
Bodies emptied of life often leave empty homes behind.
Even Frank, once a Grim Reaper who now makes dead bodies pretty instead of making pretty bodies dead, thinks Dave is a motherless opportunist. Frank recoils at the thought that not only is the unscrupulous Dave his handler now, but he'll also have to share the fiery afterworld with him.
Unmoved by Frank's disgust, but tempting a fate of fire and brimstone forever, Dave replies as only his character could, "In a town with a 2 percent vacancy rate, the real estate agent is God. That's what I am."
On a lighter note, Saturday Night Live's Molly Shannon is the aptly named real estate agent "Eve Adams" (Because even the original fig leaf wearing consumers had to live somewhere.) in "Evan Almighty", a Bible story-twisting movie about a modern day Ark (in the movie, an acronym for Acts of Random Kindness).
But the reason for the Ark is a hot button shot at urban sprawl, environmental rape, defective building and other development ills -- a crooked Congressman used shoddy engineering to dam up a previously pristine valley near Washington, D.C. to allow developers to fill the valley floor with McMansions.
Eve is the syrupy sweet, caffeine-fueled agent who skips to work and sells Evan Baxter (Steve Carell) and family their monster home, sight-unseen, located in the exclusive Prestige Crest, and in the path of destruction.
She later sells Evan additional undeveloped parcels to build the Ark -- which ironically looks like a house dropped on a boat built for animals, two-by-two. They'll need the accommodations when the shoddy dam bursts.
It's not clear what the humans are supposed to do when the dam goes. Buy a boat house?
Eve is there to greet the Baxters when they arrive, but quickly hops off to sell more homes, oblivious (by choice or not) to the watery conditions homeowners will face.
Compared to the single-minded cynical Dave in San Francisco, Eve, on the other coast, is blissfully boneheaded.
They do, however, both agree it's always a good time to buy, come hell or high water.
Thursday, August 2, 2007
Sunday, July 22, 2007
Housing Counsel: Understanding the Terms of Your Mortgage
What's a point? What is a margin? What does "due on sale" mean? Did you review the APR and do comparison shopping? What's APR anyway?
When you obtain a mortgage loan, you will be required to sign a large number of documents, all of which contain terms which are a mystery to many potential homebuyers. You will have to sign such papers as "the good faith estimate," the "truth in lending statement," the financial information form, a promissory note, a deed of trust and the HUD-1 (the settlement statement). Your lender will also have you sign other documents, most of which are designed to protect the lender against future claims that you did not fully understand the terms and conditions of the loan you are getting.
And to make matters worse, you will be asked to sign a "power of attorney" authorizing the lender (or the title company) to make corrections should errors be found at a later date.
But did you understand what you signed? Do you comprehend the terms of that adjustable rate mortgage? If you sell your house or win the Maryland lottery and want to pay off your loan, will you have to pay a prepayment penalty?
Foreclosures are rising rapidly. To a large extent, this is being blamed on the subprime lender that made high-interest, risky loans to consumers who could not afford them in the first place.
But foreclosures are taking place with other kinds of loans as well. According to one commentator, "subprime ARMs have 50 percent higher serious delinquencies than subprime fixed-rate loans (9 percent vs. 6 percent), subprime ARM's have six times the serious delinquencies of prime ARMs (9 percent vs 1.45 percent) and prime ARMs have twice the serious delinquencies of prime fixed-rate loans (1.45 percent vs. 0.7 percent)."
Alex Pollock is a resident fellow at the American Enterprise Institute (AEI) and a former president and chief executive officer of the Federal Home Loan Bank of Chicago.
He recently testified before the Subcommittee on Financial Institutions and Consumer Credit of the U.S. House Committee on Financial Services. His message was disclosure:
A good lender wants the borrower to understand what the loan agreement is. In particular, it is essential to disclose simply and clearly any prepayment penalties and the pattern of interest rate changes, if any, to which the loan is subject.
Mr. Pollock lamented the fact that the mortgage loan documents currently being used by most lenders do not meet this objective. "Most of us have had the experience of being overwhelmed and befuddled by the huge stack of documents full of confusing language in small print presented to us for signature at a mortgage closing. The complexity results from legal and compliance requirements. Ironically, past regulatory attempts to insure full disclosure have made the problem worse."
Accordingly, Mr. Pollock has proposed a simple, one-page disclosure document, which he calls "the Pollock prototype." This document states, in simple English, the "essentials" of the loan.
For example:
• if you are considering an Adjustable Rate Mortgage (ARM) the disclosure form will tell you what your beginning interest rate is, how long it will stay in effect, and (more importantly) what the maximum possible rate will be;
• you will be told the loan to value ratio (LTV); this will show you the percentage of your mortgage to the appraised value of the property. Why is this important? When property values are increasing, no one seems to care. But as we have seen recently, property values are decreasing in many parts of the country. If you obtained a 95 percent LTV, and you now want to sell the house, even if the value has decreased by only 5 percent, when you consider real estate commissions, government transfer tax and other closing costs, you will have to pay money when you go to settlement;
• can you afford the loan? Mr. Pollock uses the term "fully-indexed housing expense ratio," which he calls a "key measure of whether you can afford this loan." What percentage of your monthly income will go to pay your mortgage -- which includes taxes and insurance? "The time-tested market standard for this ration is 28 percent; the greater your ratio is, the riskier the loan is for you."
Disclosure will not solve all problems. Predatory lenders must be put out of business, but subprime loans must not be completely eliminated. According to Pollack, although the American home ownership rate has moved up to 69 percent, which he calls "a good thing," the United States only ranks tenth among all advanced economies in the world.
Subprime loans have enabled many people who could not otherwise qualify for a conventional mortgage to own their own home. Clearly, this is also a "good thing."
But all consumers -- regardless of income or race -- must fully understand all of the terms and conditions -- and consequences -- of the loan they are going to get. Concepts like "APR" – annual percentage rate -- which are required to be disclosed in the truth in lending statement are not only meaningless but confusing. Lenders are required to factor in all costs of the loan so that consumers will be able to fairly compare one lender to another. From my experience in conducting real estate closings for many years, not one homebuyer truly understood -- or used -- the APR in their mortgage loan search.
Many years ago, I won a lawsuit in the DC Federal District Court where the Judge ruled that the Truth in Lending statement -- to be meaningful and to give consumers the opportunity to shop and compare mortgage loans -- must be disclosed at least ten days before the settlement. Unfortunately, the ruling was reversed for technical reasons when the case was appealed.
Mr. Pollock suggests that his one-page disclosure form be given to every mortgage borrower a week before the closing. I concur.
When you obtain a mortgage loan, you will be required to sign a large number of documents, all of which contain terms which are a mystery to many potential homebuyers. You will have to sign such papers as "the good faith estimate," the "truth in lending statement," the financial information form, a promissory note, a deed of trust and the HUD-1 (the settlement statement). Your lender will also have you sign other documents, most of which are designed to protect the lender against future claims that you did not fully understand the terms and conditions of the loan you are getting.
And to make matters worse, you will be asked to sign a "power of attorney" authorizing the lender (or the title company) to make corrections should errors be found at a later date.
But did you understand what you signed? Do you comprehend the terms of that adjustable rate mortgage? If you sell your house or win the Maryland lottery and want to pay off your loan, will you have to pay a prepayment penalty?
Foreclosures are rising rapidly. To a large extent, this is being blamed on the subprime lender that made high-interest, risky loans to consumers who could not afford them in the first place.
But foreclosures are taking place with other kinds of loans as well. According to one commentator, "subprime ARMs have 50 percent higher serious delinquencies than subprime fixed-rate loans (9 percent vs. 6 percent), subprime ARM's have six times the serious delinquencies of prime ARMs (9 percent vs 1.45 percent) and prime ARMs have twice the serious delinquencies of prime fixed-rate loans (1.45 percent vs. 0.7 percent)."
Alex Pollock is a resident fellow at the American Enterprise Institute (AEI) and a former president and chief executive officer of the Federal Home Loan Bank of Chicago.
He recently testified before the Subcommittee on Financial Institutions and Consumer Credit of the U.S. House Committee on Financial Services. His message was disclosure:
A good lender wants the borrower to understand what the loan agreement is. In particular, it is essential to disclose simply and clearly any prepayment penalties and the pattern of interest rate changes, if any, to which the loan is subject.
Mr. Pollock lamented the fact that the mortgage loan documents currently being used by most lenders do not meet this objective. "Most of us have had the experience of being overwhelmed and befuddled by the huge stack of documents full of confusing language in small print presented to us for signature at a mortgage closing. The complexity results from legal and compliance requirements. Ironically, past regulatory attempts to insure full disclosure have made the problem worse."
Accordingly, Mr. Pollock has proposed a simple, one-page disclosure document, which he calls "the Pollock prototype." This document states, in simple English, the "essentials" of the loan.
For example:
• if you are considering an Adjustable Rate Mortgage (ARM) the disclosure form will tell you what your beginning interest rate is, how long it will stay in effect, and (more importantly) what the maximum possible rate will be;
• you will be told the loan to value ratio (LTV); this will show you the percentage of your mortgage to the appraised value of the property. Why is this important? When property values are increasing, no one seems to care. But as we have seen recently, property values are decreasing in many parts of the country. If you obtained a 95 percent LTV, and you now want to sell the house, even if the value has decreased by only 5 percent, when you consider real estate commissions, government transfer tax and other closing costs, you will have to pay money when you go to settlement;
• can you afford the loan? Mr. Pollock uses the term "fully-indexed housing expense ratio," which he calls a "key measure of whether you can afford this loan." What percentage of your monthly income will go to pay your mortgage -- which includes taxes and insurance? "The time-tested market standard for this ration is 28 percent; the greater your ratio is, the riskier the loan is for you."
Disclosure will not solve all problems. Predatory lenders must be put out of business, but subprime loans must not be completely eliminated. According to Pollack, although the American home ownership rate has moved up to 69 percent, which he calls "a good thing," the United States only ranks tenth among all advanced economies in the world.
Subprime loans have enabled many people who could not otherwise qualify for a conventional mortgage to own their own home. Clearly, this is also a "good thing."
But all consumers -- regardless of income or race -- must fully understand all of the terms and conditions -- and consequences -- of the loan they are going to get. Concepts like "APR" – annual percentage rate -- which are required to be disclosed in the truth in lending statement are not only meaningless but confusing. Lenders are required to factor in all costs of the loan so that consumers will be able to fairly compare one lender to another. From my experience in conducting real estate closings for many years, not one homebuyer truly understood -- or used -- the APR in their mortgage loan search.
Many years ago, I won a lawsuit in the DC Federal District Court where the Judge ruled that the Truth in Lending statement -- to be meaningful and to give consumers the opportunity to shop and compare mortgage loans -- must be disclosed at least ten days before the settlement. Unfortunately, the ruling was reversed for technical reasons when the case was appealed.
Mr. Pollock suggests that his one-page disclosure form be given to every mortgage borrower a week before the closing. I concur.
Saturday, July 14, 2007
Real Estate
The real estate story in India is growing bigger by the day. Industry experts believe that Indian real estate has huge demand potential in almost every sector -- especially commercial, residential and retail.
Growth in commercial office space requirement is led by the burgeoning outsourcing and information technology (IT) industry. By 2010, the IT sector alone is expected to require 150 million sq.ft. of space across major cities. It is estimated that in the residential sector there is a housing shortage of 19.4 million units out of which 6.7 million are in urban India. The increase in purchasing power and exposure to organised retail formats has redefined the consumption pattern. As a result, retail projects have been mushrooming across even B-grade cities. The retail market is expected to grow at around 35 per cent. Industry observers feel that this growth is facilitated by favourable demographics, increasing purchasing power, existence of customer-friendly banks and housing finance companies, professionalism in real estate and reforms initiated by the Government to attract global investors.
Growth in commercial office space requirement is led by the burgeoning outsourcing and information technology (IT) industry. By 2010, the IT sector alone is expected to require 150 million sq.ft. of space across major cities. It is estimated that in the residential sector there is a housing shortage of 19.4 million units out of which 6.7 million are in urban India. The increase in purchasing power and exposure to organised retail formats has redefined the consumption pattern. As a result, retail projects have been mushrooming across even B-grade cities. The retail market is expected to grow at around 35 per cent. Industry observers feel that this growth is facilitated by favourable demographics, increasing purchasing power, existence of customer-friendly banks and housing finance companies, professionalism in real estate and reforms initiated by the Government to attract global investors.
Global majors in Indian real estate
Policy changes introduced by the Government in February 2005 allowed 100 per cent foreign investments in construction projects with fast-track approvals. But the real attraction for foreign investors is potential investment returns of 25 per cent and more in Indian projects that might be hard to come by in the US and in Western Europe today. A report by property consultants Jones Lang LaSalle estimates that US$ 10 billion foreign investment will be injected into the Indian real estate sector in the next 12-18 months. International companies like Ayala of the Philippines, Signature from Dubai, Och-Ziff Capital, EurIndia and Old Lane have indicated their interest in entering the Indian real estate market soon. On the cards is sizeable FDI inflow from Malaysia, followed by the UK, US, Israel and Singapore.
Industry sources say over 90 foreign investors are already in the country tapping investment avenues. Nearly two dozen US funds are raising US$ 3.5 billion for investments in Indian realty. Those raising the funds include Wall Street powerhouses such as the Blackstone Group (US$ 1 billion) Goldman Sachs (US$ 1 billion), Citigroup Property Investors (US$ 125 million), Morgan Stanley (US$ 70 million) and GE Commercial Finance Real Estate (US$ 63 million). Others raising funds are JP Morgan, Warburg Pincus, Merrill Lynch, Lehman Brothers, Warren Buffett’s Berkshire Hathaway, Colony Capital and Starwood Capital.
In mid-2007, Morgan Stanley closed a deal worth about US$ 150 million with Oberoi Constructions in Mumbai. The Nakheel Group in Dubai entered into a US$ 10 billion deal with DLF for residential projects in Tier I and II cities. This was followed by three financial institutions -- Khaleej Finance and Investment (KFI) from Bahrain, Kuwait Investment Company (KIC) and Kuwait Finance House (KFH) -- from the Middle East promoting a US$ 200 million fund for investing in India. Called the 'Indian Private Equity Fund', it targets activities with controlled risks in growing sectors like real estate. Close on its heels, California Public Employees’ Retirement System entered India, investing US$ 100 million in a US$ 400-million real estate fund promoted by IL&FS. Ascendas, Asia’s leading business space provider is launching the first property trust of Indian assets worth US$ 500 million in Singapore in July 2007 with the renowned real estate developer Embassy Group.
Industry sources say over 90 foreign investors are already in the country tapping investment avenues. Nearly two dozen US funds are raising US$ 3.5 billion for investments in Indian realty. Those raising the funds include Wall Street powerhouses such as the Blackstone Group (US$ 1 billion) Goldman Sachs (US$ 1 billion), Citigroup Property Investors (US$ 125 million), Morgan Stanley (US$ 70 million) and GE Commercial Finance Real Estate (US$ 63 million). Others raising funds are JP Morgan, Warburg Pincus, Merrill Lynch, Lehman Brothers, Warren Buffett’s Berkshire Hathaway, Colony Capital and Starwood Capital.
In mid-2007, Morgan Stanley closed a deal worth about US$ 150 million with Oberoi Constructions in Mumbai. The Nakheel Group in Dubai entered into a US$ 10 billion deal with DLF for residential projects in Tier I and II cities. This was followed by three financial institutions -- Khaleej Finance and Investment (KFI) from Bahrain, Kuwait Investment Company (KIC) and Kuwait Finance House (KFH) -- from the Middle East promoting a US$ 200 million fund for investing in India. Called the 'Indian Private Equity Fund', it targets activities with controlled risks in growing sectors like real estate. Close on its heels, California Public Employees’ Retirement System entered India, investing US$ 100 million in a US$ 400-million real estate fund promoted by IL&FS. Ascendas, Asia’s leading business space provider is launching the first property trust of Indian assets worth US$ 500 million in Singapore in July 2007 with the renowned real estate developer Embassy Group.
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