Ebay Real Estate Auctions

I've been thinking about auctioning off my Buffalo property on Ebay Real Estate. It's been for sale for 7 months now. I had one offer for $17k from some woman in NYC but she failed to follow through. Otherwise I have not had many calls on the property for nearly 3 months now. I've been using a flat fee listing service but have found that it is not working. Advertising in the paper brings no calls (true for every property I've tried to sell). Using a full service Realtor will cost a minimum of $3000 commission and my margin is so small that I feel that is a poor choice. So what is there left to do to sell this property? I bought it for $5k but legal fees and closing costs as well as ongoing taxes and utilities have my total cost over $11k now.

I'm not sure Ebay is the right venue to sell, but feel my options are pretty limited at the moment. Do homes sell at a huge discount on Ebay? Don't know at the moment, so I think I will monitor the sales for a week or 2 before I decide. If any one that has used Ebay, I would like to hear comments.

Acadia National Park

I just came back from a week of camping at Acadia National Park in Maine. This is a park located on Mt Desert Island off the coast of Maine. My wife and I are ready to retire and move there we thought it so beautiful. But the necessities of putting 4 teenagers through college will delay that quite a while.

The park is awe-strikingly beautiful in every way. There are oceans, mountains and fresh water lakes as well as the quaint town of Bar Harbor. The park is loaded with great hiking trails which range from easy walks to steep cliff climbs, carriage roads (funded by John D Rockefeller) which are great for biking (even our dog ran nearly 20 miles along side us), the fresh water lakes provide a warm swim though the ocean was a brisk 55 degrees. The views from the tops of the mountains are some of the best I have ever seen.

We road biked quite a bit as well and saw some beautiful homes. There was also the first opportunity for all of us to go kayaking. Saw some seals and osprey during the trip. The weather was perfect all week. Best of all we survived with 4 teenagers.

I've been to few places that I would relocate too. Seattle being the other place with similar geography. The opportunity for outdoor activity really appeals to my wife and I. The hikes and bike trips we took were pretty strenuous for our daughters but my 2 sons enjoyed them. Now we just need to make enough money to afford to buy a home there.

Reflections on real estate ventures

I watched a show called "Property Ladder" this weekend. It was about a young man who was an IT professional. One day he decided to quit his job and become a full time property flipper. His only experience was that he had read some books and course material. He didn't seem to have any experience actually doing "hands-on" work. Needless to say it was a shock to his wife who became the sole wage earner.

He purchased a house and got some advice from a real estate expert (part of the show), which he proceeded to ignore. He was acting as a general contractor but failed to stay at the job site and the subs didn't show up and didn't do the work per code. (Since he wasn't employed, I wonder what the heck he did all day?) He had a time table of 4 weeks that stretched to 12 and he doubled his budget. Finally, he overpriced his home compared to nicer homes on the market.

This was the first of these shows (Like Flip this or that House) which showed how to screw up a job. It was refreshing to say the least and at least allowed me to feel that I wasn't as bad a screw up in the flipping business. But I have made some mistakes this year.

I purchased one house in Buffalo that I thought I could flip wholesale easily. The seller owed $71k and the bank gave it to me for $5k. What a great deal- right? Well, I had taken Don DeRosa's advice and agreed to pay all seller costs - like Title search, back fees, etc. In addition, my attorney way over charged me ($2500) for what services he did. So I ended up spending $10k to acquire the house. I overestimated what houses in the market would sell for and probably got a little too greedy, pricing the house at $25k. We've had one verbal offer of $17 which I accepted but otherwise the house has not been shown for 3 months now and been on the market for 6 months.

Lessons learned: Don't offer to pay seller costs and start off at a lower price.

A second house I purchased was in a nice neighborhood. I had estimated the cost to rehab was only going to be about $10k but I doubled that. After the snow melted, I could see the roof was no good and once the curtains removed saw that the windows needed to be replaced. My wife and I did all of the work (I even learned how to install replacement windows), so we didn't need to bear the expense of contractors. On the downside, all of the work doubled our timeline from 2 to 4 months. The main killer for this house has been the carrying costs. We bought the house subject to the existing mortgage rather than use hard money (otherwise, we'd have gone broke already). Still, at $2k per month, that's $12k of carrying costs eating into any profit we had hoped to make.

Lessons learned: I need to increase my budget for unexpected problems. In the Buffalo market I also need to budget for much longer holding periods. This is not LA.

We have also tried to market these houses either FSBO or through flat fee listing. Neither has worked and now I am listing with full service agents. I'm hoping that will make a difference..

On the plus side, I didn't quit my day job, so I can make the payments and we are not facing foreclosure. Since we know a lot and learned a lot we also have not been ripped off by contractors. I had a boiler replaced in one house and 3 contractors gave me $5k estimates. The fourth finally understood want I wanted done and did the job for $2500. I was also able to get a really good price on the roof by finding a roofing wholesale company that sold me materials as a contractor.

I will probably have to write this year off as a learning experience. I'm not sure I will turn a profit yet. But it could happen.

How Mortgages are funded

Wall Street has been roiling in turmoil due to the "crisis" in the sub-prime market. I ran across this article that describes how mortgage loans are funded and what the underlying problem is.

Seems there are 3 ways for a mortgage to get funded:

1. GSE's - these are government secured enterprises like Fannie Mae and Freddie Mac and Ginnie Mae. These loans are secured by the Federal government and are limited to $417k. Duplexes, tri-plexes and four-plexes have higher limits as does Alaska and Hawaii.
2. Portfolio lending- this is where banks lend money out of their deposits. These are typically ARMs' and have very specific underwriting criteria (i.e. they screen their borrowers very carefully)
3. Securitized mortgage pools - these are made up of a wide variety of loans and sold to Wall Street investors. These loans run the gamut from sub-prime to fixed to ARMs and are assessed for risk. This is where all of the problem area is at the moment. Investors are uncertain about the underlying equity of the real estate in these loan pools at the moment and so are not bidding on the loans. In the end it is what the Wall Street investors bid that determine interest rates of these loans.

So if you qualify under methods 1 or 2 above there is no crisis to speak of. It's when you need to get a loan from category 3 that there is a crisis. For people in expensive real estate markets this is the issue. For us in lower priced markets with good credit there is no problem getting loans. In fact, CountryWide (the largest lender with loads of problems trying to sell their category 3 loans) just approved me for a $200k, 5% down payment no doc loan. It took about 3 hours to approve.'

For many, this might be the best time to buy.

1998 not the hottest year

Global warming proponents have been preaching about how 1998 was the hottest year on record and the past 10 years include 5 of the hottest. Well...it turns out that is not true. 1934 was the hottest year and most of the years during the dust bowl round out the top 5 hottest years.

According to the new data published by NASA, 1998 is no longer the
hottest year ever. 1934 is.

Four of the top 10 years of US CONUS high temperature deviations are now from the 1930s: 1934, 1931, 1938 and 1939, while only 3 of the top 10 are from the last 10 years (1998, 2006, 1999). Several years (2000, 2002, 2003, 2004) fell well down the leaderboard, behind even 1900.
(World rankings of temperature are calculated separately.)

Of course, you won't be hearing about this during the leftest newscasts or in the NY Times any time soon. As a scientist I have been suspicious of the basic data collection that was used to gather the data. Turns out much of the measurement stations are not quite up to standards. Good measurements are the basis of good science and there are lots of examples where we have not started gathering good data to determine if global warming is real or not. Much of the world is relying on urban temperature measurement points that have substantial biases from urban heat.

More here. I didn't realize Mann was not a statistician, though I am not at all surprised based on my analysis of his work.

Real Estate Taxes in NY

I just read this post at pfblog regarding whether he can afford a $1M house in Seattle. He thinks that the Taxes and insurance for his million dollar home will be add $600 a month to his PITI payment.

Meanwhile I sit with a property in Cheektowaga NY with a property assessed at $163k and am paying $8k a year in taxes. Small wonder that it is difficult to sell.

Whatever dumb move you make financially, don't move to NY.

What I've learned after buying houses for 28 years

After graduating from college I rented for a year and since then have been buying single family homes with a spattering of duplexes, triplexes and one 6 unit building. My success rate has not been spectacular, more mediocre at best. In my mind my real estate ventures are heavily linked to my career choice. I majored in chemical engineering and was so enamored with working with one particular chemical company that I have intrinsically linked my real estate purchases to locations where my company provides work. And nearly all of those locations are away from growing metropolitan areas. I've also had the ability to watch my brothers (I have 6) locate to growing areas and prosper tremendously in their real estate purchases. So here is what I have learned:

1. Location is everything. If you are not living in a growing metropolitan area the chances of making a lot of money in real estate diminish exponentially. I lived in Parkersburg WV for 20 years and population declined by 25%. What happened to real estate demand? Certainly not the same as my brothers who live - near Boston, near DC, near Philly, near NYC and Charlotte. Values of properties in WV tanked for years and then was flat. I could buy property for $0.50 on the dollar but then couldn't sell it for half of what I'd paid. I'm living outside of Buffalo now and although some suburbs are growing slowly the population of this area is and has been in a steady decline. Admittedly, some suburbs have seen some 4-6% appreciation during my 9 years here as whites have fled the city, but Buffalo and it's closest suburbs are shrinking. I've never lived in one of America's fastest growing Suburbs.
2. Timing is crucial. There have been 2 major real estate booms during my life. In the early 80's interest rates dropped from 16% to ~7% and for most of the country real estate took off. But like the past 6 years, the boom was uneven throughout the country because location is everything. I watched my brother living near NYC rehab houses and make $100k in profit. I tried the same thing in WV and lost $100k. The key to timing in my mind is watching interest rates. During the past 6 years they trended downward towards the lowest on record and real estate boomed. When interest rates are rising real estate will not do well, when there is a long term downward trend, there are large opportunities for even the dumbest investor to make piles of cash.
3. Buying from desperate people is one way to off-set the above 2 trends. Many people make money in poor markets and against the trends. The main skill that they possess is the ability and patience to only buy from people who are facing foreclosure (this doesn't mean they are behind in payments, just that some circumstance in their lives will push them there eventually). This could be people going through divorce, job loss or transfer, heirs of property, medical problems, etc. Locating these people requires lots of patience and a willingness to alienate lots of Realtors and sellers by making low ball offers. Most people buy houses based on emotion and don't have the self-discipline to wait for the right deal. I have purchased 17 properties in my life and I can say that the majority (12) were purchased based on an emotional decision rather than the numbers.

A lot of home owners have made a lot of money buying in the right location and during the right time. I watch Flip This House and Flip That House and notice that they don't do shows in Buffalo, but only in growing areas. See this Forbes article on Best Places to Flip a Home. There is a reason for this - that's where people can make money and don't have to be too smart about how much their budget or timing.

I still am a strong advocate of using real estate as a strong component of building wealth. I just need to buy smarter to offset the location and timing factors. I won't be one of these people on TV flipping a house for $100k profit after going over budget by twice, but I believe I can make small profits that will get me closer to my goals of financial security.

Change in Real Estate Selling Strategy

Well, I've given up on FSBO and flat fee listing services. I'm switching both my properties to full service agents this week I haven't gotten a single call in 3 months for my Buffalo property and not a single agent has brought a client to my Cheektowaga property. I've found a young ambitious agent to sell the later property. I'm hoping that she will have contacts with relocating people as well as get some agents into the house. I'm not sure why the Cheektowaga property hasn't sold yet (except for the $8k tax burden). As one woman said today during the open house "it's to die for".

Maybe in a hot market these other services will work, but in the two areas I have properties population is declining and real estate is not hot.

Credit Card Number Stolen Again

Got a call from my Master Card debit card company yesterday asking about charges I might have made. Seems like my number was pilfered somehow though I still have the card in my possession. This is the second time a number has been stolen from me.

A few years back I was driving through PA and bought gas. While waiting for the attendant to process the card (before the days of DIY at the pump, he motioned for me to come inside the station. The Discover Card agent was on the line and asked about purchased I had made. Seems someone was buying lots of high priced stuff in Chicago for me! Fortunately, Discover cancelled the card immediately and nothing ever showed up on my bill.

This time MC called me and asked if I had purchased anything from a Tent and Awning company for $1.39. (interestingly, I had ordered some camping equipment from another company). However, Tent and Awning was not someone I had dealt with. It turns out that this outfit puts through small, innocuous charges to see if the account is valid and once they confirm that, they make big charges. I might have looked at that $1.39 and never paid attention to it if it showed up on my statement. So, kudos to MC for picking this up.

This must be one heck of an ongoing battle between those creative types trying to steal others money and the CC companies trying to detect new schemes. Unfortunately, its costs us all money.

Real Estate Dilemma

Our real estate purchases have been stagnant since February when we purchased 2 houses on the same day. We spent the better part of 3 months rehabbing one of the houses while trying to flip the other wholesale. Neither house has sold and the nicer home is draining about $2000 a month cash from us.

So we have not been too aggressive in trying to buy more houses. We have had a couple of opportunities but just missed making an agreement with the banks. One was in Amherst which is a pretty nice area, so I had some regret that we did not get a better appraisal.

Now it looks like we have an opportunity to get a really nice house in the town that I live in. I know the values very well here and it is a high demand area, unlike the area where we own the other 2 houses. There are a couple of challenges to buying this house. Our financing does not allow us to buy properties over $150k and this house is going to go for about $220k (We have had it appraised at $268k, so that is not a problem). The rehab money we have doesn't allow us to live in the house either. So I will need to get conventional financing. My plan would be to rent out our current house and move into the other house.

The dilemma is that the down payment will use up all of our cash and there will not give us any cushion to pay the mortgages on the houses we are trying to sell. So we will have to exist purely on lines of credit until one of the 3 houses we have for sale is closed. This is a risky strategy but this new opportunity is the best house I have had the chance to buy. So what do I do? Live on faith that one of the houses will sell or pass up an excellent opportunity?

Update question: Why is this different from people that purchase a new home before they sell their old home? (I actually am against this practice, but....)

Harry Potter - The Spiritual Story

I've been traveling on business this week and have had the opportunity to devour the latest Harry Potter book The Deathly Hallows. I have been fortunate that my children were the right age to be interested in this book ( my oldest is Harry's age). I started reading the first book to them at bed time (it seems so long ago) and it's one of my fondest memories as a parent. My oldest (who struggles the most academically) has read each book several times.

I myself have enjoyed the whole series immensely. My favorite movie is the Lord of the Rings series. Although I have not read any of the LOTR books the movies are incredibly well made, but more importantly carry a great message. The triumph of good over evil, the importance of character and is loaded with Christian themes. LOTR replaced my previous favorite movie - The Sound of Music - which carried similar themes.

I categorized this post under "religion" which will surprise my atheistic colleagues who have read the series. After reading the 4th book of the Harry Potter I became convinced that Rowling was secretly creating a series like LOTR and Chronicles of Narnia. However, the crowd I associated with at that time (home shooling families) largely condemned the book as Satanic. After reading Looking for God in Harry Potter I realized the depth of Rowling's Christian themes and it was quite easy to predict how the series would end.

Although the previous 6 books hinted at Christian themes, the Deathly Hallows is the most overtly Christian. Harry is a Christ-like figure who (literally) carries a bit of evil with him. Consider:

• the prophecy of his birth
• the "cross" pulled from the frozen pond (and the baptism there)
  
• the "blood" he gave
• the themes of good Vs evil and the ultimate triumph of good
• the series begins and ends with the giving of ones life for another - a greater good that no man can give (even Dobby gets into the spirit)
  
• the resurrection theme
• the temptations Harry faced (power over death itself) and doubts (lies told about his mentor)
• the disciples that stick with Harry despite the prospect of death and the desertion of one disciple (i.e. Peter/Ron) as death approached
• an Armageddon battle of Good Vs Evil
• multiple quotes from scripture
• the Hallows is a Trinity symbol
• Dumbledore is a "Father" figure
• The place Harry and Dumbledore meet is "Kings Cross" - this is also the place where Harry was "born again" in book 1
  
• Peter, James, John and Harrys mother accompanying him into the forest
  
• the power of Love over death (why good wins and Snape is a good guy)

There are many, many more. In addition, Rowling takes aims at other evils such as Nazism and it was interesting to note that Home Schooling was banned when Voldemort took over. Some people take issue with witch craft but that is really just an allegory for technology which our generation has allowed to take over our lives.

Rowling initially was afraid that if people were aware of her Christian faith, she would give away too much of what's coming in the series. "If I talk too freely about that," she told a Canadian reporter, "I think the intelligent reader — whether ten [years old] or sixty — will be able to guess what is coming
in the books."”

Rowling's brilliance has been in writing a book that allowed millions of young people to be exposed to the basic tenants of Christianity without shoving it down their throat. In an age when the media and liberal elite don't believe in evil this is a heartening accomplishment.

Influencing Apraisals or appraising is a joke

I wrote earlier about how it might work to my advantage that I accompany appraisers when they do a BPO on a foreclosure. I thought I might be able to point out the flaws of a house and help keep the appraised price down. Well, I did it last week. Some commenter's warned that I might get in the appraisers face and it might work against me.

When the appraiser came last week I met him at the property and casually asked about how he was going to do comps and politely pointed out some flaws. As he left I told him I was not looking to re-finance and would like to see a lower price. He said simple that it was much easier to get a lower price and left it at that. I don't think I offended him at all or "got in his face".

I talked to the investor today and found out that the appraisal came in with a value of $104,000! I have estimated that this property was worth $250k after repair and offered $202k "as is". The appraisal cited replacing new cabinets for $30k(they were just installed 4 years ago) and $15k in electrical work (the basement lights don't work) as flaws. I don't know how he came up with but it didn't work to my favor (or his). The investor ordered another appraisal and they did a "drive-by" and came up with a value of $268k.

So the investor threw out the initial appraisal and will not pay them (can't say I blame them). Neither appraisal is correct in my estimate of what the house is really worth. The investor is going to put together a counter offer (I only offered him $2k for his $20k loan), but at least it may have put some doubt into his mind.

As for now the legal action has stopped on this house again (for the second time). The homeowner is determined to live there as long as possible without paying anything and is quite clever in delaying the auction.

Whether the commenter's were correct in telling me not to interfere is not really important here. The lesson is that appraising property is heavily influenced and so far from reality that it defies logic in many situations. Many blame the banks for the sub-prime mess, some blame the borrowers, but few have blamed the appraisers. Maybe it is time to focus on them.

Foreclosure Time Frames

Here's an interesting article that discusses the length of time it typically takes for a bank to foreclose on a property. I happen to live in New York which takes 12-19 months for a bank to foreclose. Add to that the time it takes to re-sell the property (especially here in the Buffalo market) and I think this would give me an advantage to getting more foreclosures. The New York Home Equity Theft Law probably doesn't hurt either. Knowing this, I may be able to get more leverage when negotiating short sales with banks.

Some states, like Alabama give owners only 30 days before they can lose their property. However, homeowners are given a long time to re-purchase the property with the buyer losing any money that was made in improvements. That would be a big loss for the investor. So I guess New York has at least one advantage over other states. On the other hand, lots of people in foreclosure here don't act on the foreclosure because they know that it takes so long.

Home Buying Strategies

There's a good post at DebtFree about buying a home. I've used purchasing at pre-foreclosure, submitting low-ball offers on houses that have been on the market for a long time, buying "as is" as my main strategies. I also look for other "don't wanters' - estates, divorces, vacant homes, etc. HUD homes have never appealed to me. Usually they are full of problems (mold) and over priced.

I was watching a show on HGTV called "My First House" and saw a Realtor give a client terribly bad advice. A young woman was buying her first home and the house had been on the market for a while with the owner already reducing price once. For some reason, the woman felt that she had to give the seller a "win-win" offer. So she offered the asking price. Unless you are in a hot market with multiple offers coming to sellers, I think that this advice is almost bordering in negligent if not malpractice. Maybe she was using the sellers agent which carries a huge conflict of interest.

Here's my rules of buying:

• never use a sellers agent
• never offer asking price
• always ask for concessions (closing costs, upgrades, etc.)
• never buy on emotions, buy on value

I always buy "as is" now so that I can reduce price, but for a first timer you probably want the option to get an inspection.

Secondary Mortgage Market

I've often read stories that banks sell their mortgages on the secondary market but not appreciated the magnitude of this. Recently I have been dealing with a seller in foreclosure and been trying to do a short sale with his loans. He had two loans on the property and when I first talked to him he told me he didn't know who the banks were.

Initially I wrote this off to his disorganization and drinking but now I appreciate that he was telling me the truth. I have been talking to the banks in order to find out where to send a short sale package and I'll be darned if I can figure out who owns what loan. Each of the original loans has been sold multiple times. Sometimes the originator of the loan has sold and re-bought the same loan! So far I have found 3 changes on the first loan and 4 on the HELOC.

I'm not sure what the game is for these banks but it sure gets confusing since they change loan numbers each time the loan is sold. It's also costing these banks money since this seller has been in foreclosure since May of 2006 and there still is no auction date set on his house.

For all of the criticism that banks get for pushing loans on people that can't afford it (as if the banks were some all powerful oppressor), the truth is that banks (and big corporations in general) are not all that organized. The paranoid that attribute all sorts of evil intentions to big business overestimate the reality of how companies operate.

Be Carefull about 0% Balance Transfers

I got an offer from Capital One a couple of months ago to make some one year 0% interest transfers to my Cap 1 card. I had some expiring 0% balances from a Lowes card and a 9.9% balance on an AmEx, so I decided to take advantage of the offer.

This past weekend I perusing my statement and noticed the interest rates on my Cap One card were the same for the entire balance. So I looked back at the last couple of statements and sure enough they had not applied the zero percent to the new balance transfers. I called Capital One and they told me there was a glitch in their system and they would take care of it. It sounded like a large glitch, not just for me.

So if you have transferred money to Capital One recently expecting to get a zero percent interest rate - better double check your statements!

Why Not Borrow Against 401k?

I have never read of any financial planner that advocated borrowing against your 401k. In fact, 100% of everything that I read says to never do this. I do not understand this at all and wonder why.

I have borrowed against my 401k since this was allowed. In my 401k I have two options for investing. One is a fixed income fund that currently is paying ~5.75% interest. This is the closest option I have to a bond fund. The second option is some mutual fund or my company stock.

When I borrow against my 401k I am paying (currently) about 8% interest on the loan. Essentially, I have created a fixed income investment for my 401k that pays 8%. It seems to me that this is a better return than the fixed income fund that is my alternative choice. Since every financial planner is advocating that I have 30% of my 401k in a fixed income fund, why is the loan fund not a better deal than the fixed income fund offered by my company?

Now, you can argue about the merits of borrowing money, but if you need to borrow money anyway, why not pay yourself rather than a bank? It just makes more sense to me that the first place you should borrow is your own bank. And that is what my 401k is - a bank that makes investments.

The major risk is that you will change or lose your job before the loan is paid. For me that has not been an issue, but for young people who feel the need to switch jobs or people in unstable industries, I can see that point. The risk of having to repay the loan with a 10% penalty is steep.

For me this program has worked out great. I've borrowed to buy houses as well as other short term needs (usually for investing). I wouldn't think that borrowing to buy an HDTV is the thing to do here (but that is a completely different issue), but it is an option that can pay dividends.

So, am I missing something or does this make sense?

See part 2 here
Also see this webpage Using 401k Loans for Real Estate Purchase

Zero Population Growth - The Scarcity Crowd

I read an excellent paper with lots of data and charts showing the effect of the tremendous population growth of the past century titled Too Many People? (pdf). It's an interesting look at how the scarcity crowd (e.g Al Gore and Earth in the Balance, Paul Ehrlich and Population Bomb, Club of Rome, etc.) are way off base in their constant predictions of gloom and doom.

Some interesting information from the report:

• world population went from 1.6 billion to 6 billion during the 20th century
• population growth hasn't really come from increased births, but from massive reduction in death rates, especially infant mortality
• birth rates have dropped throughout the world (even third world countries have seen birth rates drop in half) during the last century
• GDP has risen throughout the world despite more people (or maybe because of more people)
• prices for food have dropped inversely with population growth (by 70% for basic grains) - exact opposite trend that Ehrlich and scarcity mongers predict (supply is up and hunger down as well)
• prices for scarce commodities has dropped 80% with population growth. If we are consuming so much more of these "scarce" resources, why is this? Price indicators are showing that these resources are becoming less scarce as we consume more.
• Population density is no predictor of standard of living

Here's the conclusion of the report:

"The tremendous and continuing spread of health and prosperity around the planet betokens a powerful and historically new dynamic that anti-natalists today only dimly apprehend. This is the shift on a global scale from the reliance on “natural resources” to the reliance on “human resources” as fuel for economic growth. The worldwide surge in health levels has not been an isolated phenomenon. To the contrary: it has been accompanied by, and is inextricably linked to, pervasive
and dramatic (albeit highly uneven) increases in nutrition levels, literacy levels, and levels of general educational attainment (figure 13, tables 3 and 4).

These interlocked trends speak to a profound and continuing worldwide augmentation of what some have called “human capital” and others term “human resources” – the human potential to generate a prosperity based upon knowledge, skills, organisation and other innately human capabilities.

In a physical sense, the natural resources of the planet are clearly finite and therefore limited. But the planet is now experiencing a monumental expansion of a different type of resource: human resources. Unlike natural resources, human resources are in practice always renewable and in theory entirely inexhaustible – indeed, it is not at all self-evident that there are any “natural” limits to the build-up of such potentially productive human-based capabilities.

It is in ignoring these very human resources that so many contemporary surveyors of the global prospect have so signally misjudged the demographic and environmental constraints upon development today – and equally misjudged the possibilities for tomorrow."

This is a theme I have written about often. Paul Zane Pilzer wrote about it in Unlimited Wealth 20 years ago. The pie is growing all the time, the sky is not falling and the Gore's and Ehrlich's of the world are preaching their religious Apocalypse into face of overwhelming evidence to the contrary. For what purpose? Their Stalinist views that only government can save us from ourselves.

Short Sales - Banks and Sellers

I've had about 10 short sale opportunities this year and decided to do a look back at the results (name is street name). None of these sellers had any equity in their homes (although the Tiffany owner thought he did until I got the payoff from his bank):

• Nicholson - three loans against this property. A perfect setup for a short sale. The third lien holder (owed $16k) would not do a discount. The first 2 were foreclosing and the third did not have a clue since the seller continued to pay them all throughout the foreclosure. The third bought the property and has it for sale. Exterior looked good on this property and BPO appraiser only did a drive-by. Interior was a wreck.
• Warwick - seller owed $40k, property worth less than $15k and but bank wouldn't accept less than $30k.
• Roslyn - two loans $67k and $5k from same bank. The bank just wanted to walk away from this, but when they found a buyer they decided they were going to get some money. Bought for $5k from bank. For sale for $19k with no offers after 5 months.
• Hunting - two loans $146k and $40k. Second bank took $2500 for their $40k and I paid first $15k in fees to reinstate the first. Rehabbed and for sale at $219k.
• Knox - One loan of $64k. Offered bank $47k but they would not take less than $52K. On market by bank at $74k with no interest per Realtor
• Monroe - one loan of $179k. BPO came in at $154 and bank was willing to take $142k. I offered $135k but bank wouldn't budge. Just went at auction. BPO showed house did not need repairs but appraiser missed lots of stuff. Maybe could have gotten BPO lower if I had been there. Negotiations went down literally the last hours before the auction.
• Randall#1 - One loan of $117k property worth less than $80k. Seller backed out after wife refused to sign papers
• Randall#2 (interestingly 2 foreclosures next door to each other). One loan of $150k. Property is worth about $125k. Seller stalled for 3 months claiming husband wouldn't let her do sale (despite her saying husband is not on deed??). She just received notice of court date and now wants to proceed.
• Tiffany - great house in my area. Two mortgages - ideal for a short sale. Seller has stalled for several months. Not sure if drinking or depression is to blame but he suffers from both. This is an interesting property because seller stopped paying mortgage March 2006!. He paid $1800 to stop foreclosure and the company did, but the bank re-filed this year. Seller was under the delusion that he had lots of equity in his house but he owes over $40k in back interest and fees so he is upside down.
• Stockbridge - one mortgage of $45k. Property is trash and worth less than $10k. Bank won't go below $45k.

It's been an interesting process to learn so far, but I haven't seen any logic in how banks decide when to accept an offer or not. Some loan mitigation personnel are much more helpful while others are very hard nosed. I've got the process down to a "T" and feel pretty good when negotiating with a bank. But to make a living at this would be pretty hard in this location based on my response and success rate.

FDR and Scarcity Consciousness

It's impossible to have much perspective when living through events. Many people once called Ronald Reagan the worst president ever (and now call Bush the same) while 30 years after he left office Reagan is hailed as one of the top 5 Presidents.

That is why Amity Shlaes new book - "The Forgotten Man - A New History of the Great Depression" is quite fascinating. Many people are aware of how Hoover really set the economy in a tailspin by signing trying to isolate the US from world trade with the Smoot-Hawley Act. But few are aware of the bumbling that FDR did, which extended the Great Depression for nearly a decade.

Shlaes account of how FDR decided to set the price of gold is amusing (a lucky number). His constant need to create sub-groups of people that became dependant on the Federal Government had immediate and long lasting results (and defines the Democratic Party to this day).

Wendle Wilke - presidential candidate in 1940, called on Roosevelt to give up this philosophy of "distributed scarcity". Since 1930 this is what the Democratic Party has offered the country. The theory that there is only so much pie (whether this pie is money, food, or the environment) and we need to re-distribute it.

My own beliefs have to do with prosperity consciousness, which I've written about many times.