In the interest of “full disclosure,” let me say, that I’ve known Ed Kerwin since 1985 when we worked together for a local appraisal firm. In fact, he and I studied together to prepare for the test to become a Certified Tax Assessor in 1986, which we both achieved. But, like all busy people with numerous demands for our time and with each of our careers taking different paths, we saw less and less of each other over recent years.

Nonetheless, I can say without hesitation or reservation, that Ed Kerwin is simply one of the good guys.

He’s an honest, honorable man dedicated to his family and his work. Yet, a regional news publication has seen fit to paint him as some sort of a bad person because he works for 9 different towns, earns an aggregate income higher than the average person, and will be rewarded with a state funded pension far higher than most people will achieve.

And, that seems to be the whole thrust of their article; that, Ed Kerwin is a successful achiever and that somehow that’s a bad thing, which is a total perversion of the truth, and contrary to what we teach our children as being the lofty goal of every human being.

Above all else, Ed Kerwin has played by the rules set down by the State of New Jersey; he’s done nothing wrong and has committed no crime.

Ed Kerwin didn’t get hired by 9 different towns just because he’s a nice guy (which he does happen to be). He got hired because he’s good at what he does.

Ed Kerwin got good at what he does because he has invested years of his life making numerous sacrifices, getting extensive advanced education, and undertaking work assignments earlier in his career that paid little (or nothing), but gave him the experience he knew he would need to advance his career.

Ed Kerwin is a tax assessor in 9 different municipalities because of the structure and the policies of the State of New Jersey, not because Ed Kerwin did anything wrong, deceitful, or any other dishonorable act; nor did any of the 9 towns that hired Ed as their municipal assessor.

If there is a “blame” to be placed by those who wrote and published this misguided attack on Mr. Kerwin, it should be directed toward the fact that, unlike many other states that assess real property at the county level, the State of New Jersey has 567 individual real property tax assessing districts; 1 for each municipality.

Each one of those 567 taxing districts is required by the state to adhere to the New Jersey Constitution, particularly as it pertains to its requirements for valuing / assessing real property which necessarily requires each municipality to employ a New Jersey Certified Tax Assessor.

However, due to various factors, including the fact that there are many small municipalities with relatively few properties (line items) and some with very few, if any, complex income properties, many municipalities would suffer an unnecessary financial burden if they were each required to hire a full-time assessor. This financial burden would naturally be borne by their taxpayers.

Consequently, many municipalities hire a part-time assessor at a lower rate of income in order to serve their constitutional requirements and not overburden the taxpayers of their towns.

So, in economic terms, there is absolutely no difference to the taxpaying public as to whether each of the 9 towns in which Mr. Kerwin works hired Mr. Kerwin or if each town hired 9 different tax assessors.

That’s because each town would still have to pay a salary to a Certified Tax Assessor. So, that’s the same as they are paying to Mr. Kerwin.

Each of those 9 Certified Tax Assessors would also each receive a state pension equal to that which will be paid to Mr. Kerwin.

So, where’s the economic difference resulting from Ed Kerwin working for 9 different municipalities, as compared with each of those 9 municipalities if they had hired 9 different assessors?

In fact, there is no economic difference.

So, why does myCentralJersey.com have a problem with Ed Kerwin working for 9 different municipalities?

In my opinion, the only “problem” that MyCentralJersey.com seems to have, is a matter of their jealousy caused by the fact that only one person is earning what they seem to think is too much money . . . which is really none of their damned business.

Finally, in case you’re wondering, I have not had any communication whatsoever with Ed Kerwin since the last time we met in 2006. I also have not spoken with anyone about this opinion piece or even the fact that I was considering writing it.

The most common question I hear when discussing my business is, “Who’s qualified to be an expert witness?” And, the best answer I can give to that question is, “Who ever a judge says is qualified.”

In my experience, most judges will listen to anyone who has anything at all to do with real estate, including real estate agents, property managers, builders, property owners, and even tenants. But, just because the judge says a person is a real estate expert and listens to their testimony doesn’t mean the judge is going to give any credibility to what they say, and that includes well qualified real estate appraisers (including me).

But, over the years, what I see as the more interesting issue regarding expert testimony is the larger question of, “What makes an ‘expert’ an expert?”

Over the past decade or so, there seems to be a growing division between those who value real-world expertise (meaning people who have extensive hands-on experience at something) and those who place greater value on the perception of knowledge, which is almost exclusively based on a level of academic achievement.

There’s no doubt that a college degree in economics or business may be of value in getting a head start on the learning curve by gaining a basic understanding of markets and concepts of value. But, academic achievement merely minimizes the duration of acquiring basic practical experience in order to achieve the same level of understanding.

An example of this divide between practical experience and academic achievement came in a recent conversation I had with an attorney for a prospective client.

It seems this attorney had a concern about my credibility as an expert merely because I do not hold a college degree.

It didn’t seem to matter to him that I have 40 years of professional experience in the particular field of expertise relative to the issue in question. It also didn’t seem to matter that I had written and instructed several seminars accredited by several state boards of real estate appraisers, written articles, and testified in numerous cases about the very topic at issue. You see, it was more important to that attorney that I have a college degree in anything, rather than having no degree at all.

In my discussion with this attorney, I provided him a few examples of the flaw in his thinking.

I pointed out, that according to his thinking, he wouldn’t put Bill Gates on the stand as an expert witness to discuss issues of software design, or international business, nor Thomas Edison as an expert on the topic of audio recording, nor Henry Ford as an expert in automotive manufacturing and production, nor Steve Jobs as an expert in computer design, product development, manufacturing, or marketing . . . because none of these people has a college degree in anything.

In fact, Edison never finished the 2nd grade of elementary school, Ford never completed high school, and both Gates and Jobs quit college after completing only 1 semester.

In the end, I posed theses questions:

What makes an expert an expert?

Is it merely reaching an academic level of accomplishment?

Or, is it having acquired knowledge through a combination of professional training and decades of experience?

As for me, when I’m flying in a plane through a severe thunderstorm, I want to be flying with a pilot that’s actually flow through many a real thunderstorm; not one who’s primary “experience” is from simulator training. Let’s face it, folks. No airline passenger ever died in a simulator.

In the end, there’s no substitute for EXPERIENCE!

Generally speaking, while real estate industry experience is certainly essential to being able to understand the basics of how value is both created and viewed in the market, especially experience with the type of property being valued, to say there’s a need for an advanced education to appraise any type of real estate is nothing more than a self-aggrandizing farce.

Most types of real estate uses are very uncomplicated; this is particularly true of virtually all residential uses and most commercial / industrial uses.

Let’s face it, if you want to get a realistic estimate of what a house is worth, just look around at the most recent sales of similar houses and compare it to the house you’re trying to estimate. In fact, most home buyers and sellers do this “comparison” shopping method every day.

Likewise, if you want to know how much an income producing property (like an apartment building, or an office building, or a shopping mall) is worth, you simply estimate how much net income the property will generate (before paying the mortgage, if any), and either apply a multiplier (e.g. “x” times the net income), or divide it by a rate that satisfies both your desired investment return (the interest rate on the money you’re going to invest), combined with the interest rate on your mortgage. This, too, is done every day by every day people, many of whom have little, if any advanced education.

For an example, when I first started selling real estate back in 1971, one of my very first listings was a building with 11 residential apartments, plus a retail convenience store. Here I was, a high school graduate, with no college education dealing with a 12-unit mixed use income property.

Looking for guidance, I turned to an older man I’ll call, Pete, who became a real estate agent after many years as a builder who, among other things, built and owned several apartment buildings in the same area as my listing. It was Pete who explained the concept and different methods of valuing income property, the concept of cash-on-cash and how to consider the cost of financing.

It should interest you to know, that Pete came from a poor immigrant family. And, because he had to go to work at an early age to help his family survive, he never completed elementary school. Although Pete didn’t have even a basic elementary school education, what he did have was common sense. And, over the years, he acquired an understanding of cash flows and estimating profit which he gained through his experiences as a builder. By the way, in 1970, Pete had a net worth of more than $3 million (which is about $12 million in 2011 dollars).

There are many people just like my old friend, Pete, who buy and sell real estate everyday. And, (sadly) most of these people are generally better able to understand the nuances of value of a given type of property in their market than most so-called real estate appraisal experts.

Moreover, what’s so humorously ironic about all of this (at least to me), is the fact that, according to sound real estate appraisal practice teachings, real estate appraisers are actually supposed to emulate the actions, thought process and methods of those typical buyers and sellers in the same market as the property they’re appraising.

Unfortunately, many in the appraisal industry portray the very basic and easy methods used by people in the market everyday as some kind of mystical or complicated processes and procedures that only they are capable of creating and understanding. Yet, nothing could be further from the truth.

It’s inevitable. A buyer contracts to buy a home, and one of the first things they do is hire a home inspector. Now, I’ve got nothing against any home inspector, or the industry as a whole. I just think, that if I want a professional opinion on the condition of my eyes, I’m going to an ophthalmologist, not an MD general practitioner. And, if I want a skin condition checked, I’m going to a dermatologist, not a cosmetician. You get my drift; the right professional for the job at hand.

In theory, hiring a home inspector is a great idea since the buyer wants to know in advance of buying a property if there are any significant problems that will make the place a money pit. More importantly, the buyer wants to know if the home is safe to live in. In fact, when a buyer pays someone who holds themself out as a professional home inspector, the buyer DESERVES to know all there is to know about the physical condition of the property.

But, the problem that a large number of buyers face, is that their home inspector misses significant problems, which cause the buyer substantial financial consequences, not to mention the physical dangers they may face.

If you doubt me, you MUST SEE a terrific show on HGTV called Holmes Inspection that airs in the US on Sundays at 9:PM Eastern, and in Canada on Thursdays at 8:PM Eastern & Pacific time. The show is hosted by a Canadian building contractor named, Mike Holmes who goes into people’s homes to correct problems that were totally missed by a home inspector. And, these are some pretty serious problems; problems you would think aren’t possible to be missed by a competent professional home inspector. And, there lies the key word: competent.

Now, I’m sure there are some competent professional home inspectors running around the country side. But, based upon things that I’ve personally observed, as well as circumstances I’ve learned of in my career, I’m inclined to believe there are many more borderline competent and substantially incompetent people out there calling themselves home inspectors than there are truly competent home inspectors.

And, if the lack of competence isn’t enough to shake your tree, then take a few minutes to read the typical home inspection contract and report.

If you don’t have the time or the desire to read one, let me give you the short summary: The home inspection contract and report contains so many loopholes, that the home inspector and the inspection company are generally not responsible for anything they miss. This raises the question: Why hire someone who isn’t responsible for anything they tell you or anything they FAIL to tell you?

So, let me repeat myself: The best home inspection solution is to hire individual professionals from each field they want inspected. Such as, hire a licensed electrician to inspect the electrical system; hire a plumber to inspect the plumbing; hire an HVAC contractor to inspect the heating and air conditioning system; hire a roofing contractor to inspect the roof, and so on.

In addition to the probability of getting the best possible inspection from a professional who specializes in the field of the system they are inspecting, these people are typically more easily held accountable for their inspection.

So, when you hire an electrician or a plumber or an HVAC contractor, make a written agreement that says, 1) they will tell you every unsafe condition and code violation they see, and 2) they will make recommendations on how to correct the problem. That’s a pretty simple agreement that any reputable professional would agree to sign. If they refuse, get somebody else.

Don’t forget to watch Holmes Inspection on HGTV. (And, No, I don’t have an interest, financial or otherwise, in the show or HGTV.)

Yesterday, November 2, 2010, the American voter spat in the face of the Obama socialist agenda throughout the country. And, as sweet as that may be, there’s really no cause for celebration.

It’s now time to hold the feet of the GOP winners to the fire to ensure they live up to the requirements of WE THE PEOPLE.

There is never a time to compromise with socialism, and today is no exception.

The voters do not want compromise; they want RESULTS.

As I see it, the American people voted to STOP the Obama socialist agenda cold.

The American people voted to REPEAL the so-called HEALTHCARE bill.

They voted to cut the size of the federal government.

They voted to constrain the out-of-control power of the federal government to its Constitutional parameters.

They voted to STOP THE BAILOUTS.

They voted to STOP THE OUT OF CONTROL AND IRRESPONSIBLE FEDERAL SPENDING.

They voted to CUT THE BUDGET AND DEFICIT.

They voted to EXTEND CURRENT INCOME TAX LEVELS.

They voted to STOP THE NATIONALIZATION OF AMERICA’S INDUSTRIES.

They voted to CREATE A POSITIVE BUSINESS ENVIRONMENT to allow private business CREATE JOBS get our citizens back to work.

They voted for all of these things, all of which can only enhance the desire for responsible real estate ownership that will certainly significantly improve the real estate markets.

And, if these newly elected people do not do what they were elected to do, THEY MUST BE VOTED OUT in the NEXT ELECTION!

It’s also up to WE THE PEOPLE to stay in CONSTANT CONTACT with their US Congressional Reps and US Senators. Let them know they were NOT elected to compromise. They were elected to REPRESENT OUR DESIRES AND INTERESTS, AND TO LEAD!

As I see it, this group of “undecided” voters are probably not affiliated with a political party, and don’t have a particular political ideology.

And, while I’m not going to tell or even suggest the name or political party to select, I am going to suggest a test that voters can apply to each candidate in their particular district that will help them decide which candidate to vote for on Nov 2nd.

You should note, that this “test” assumes that the voter desires to maintain a free, capitalist economic system absent of government bailouts, ownership, and/or ownership control. It also assumes, that the voter either is, has been, or wishes to become a productive member of our society, and believes in individual liberty, as well as in the US Constitution as written by the founding fathers.

So, based on these assumptions, here are a few things to consider when selecting a candidate to vote for:

QUESTION 1.
Which candidate in your voting district actually voted in favor of the Obama administration’s $787 Billion Stimulus program in February 2009? If neither candidate was in the Congress at the time of this vote, which candidate has stated support for that Stimulus program?

SUGGESTION 1:
If one candidate did vote for the Stimulus, it’s likely that this person in favor of substantial income tax increases now and in the future (regardless of what they might be saying just to get elected). Keep in mind, that tax increases reduce the purchase power of citizens which hurts businesses and tends to cause higher unemployment.

QUESTION 2.
Which candidate in your voting district actually voted in favor of the Obama Healthcare bill? If neither candidate was in the Congress at the time of this vote, which candidate has stated support for so-called “ObamaCare”?

SUGGESTION 2:
A person who voted for this so-called healthcare bill is likely never to have read it before voting for it. This is a particularly troubling situation, especially when that bill appears to be UNCONSTITUTIONAL in that it FORCES citizens to purchase health insurance WHETHER THEY WANT IT OR NOT; and if they don’t buy it, the government has the power to FINE the citizen and collect that fine through the IRS.

Additionally, the healthcare law also has provisions which allow non-elected government workers to decide matters of life and death of every citizen by being able to deny payment of healthcare services to those in need. AND, THERE IS NO PRIVATE MEDICAL SERVICE THAT IS ALLOWED AS AN ALTERNATIVE.

QUESTION 3.
Which candidate in your voting district has actually held public meetings (commonly called Town Hall Meetings), listened to their citizens, and voted in the Congress based upon the wishes of their citizens?

SUGGESTION 3:
We live in a REPRESENTATIVE REPUBLIC. This means, that the people elected from both Congressional Districts and as US Senators, are supposed to be the REPRESENTATIVES OF THE PEOPLE in their respective Congressional District and state.

If the people elected do not heed the will of the majority of the people who vote for them, they are NOT representing those people and should not be re-elected.
———–

I could go on, but I believe that these 3 are substantially important issues upon which a voter would be well advised to consider before making their choice about who they are going to vote for on November 2, 2010.

But, MOST important, is that YOU SHOULD VOTE!

1. I have been falsely accused of ethical violations during a trial while giving testimony without the benefit of due process to defend myself;

2. I have been the subject of a newspaper article that contained baseless statements about my character; and

3. I have been accused of ethical violations by a fellow appraiser based on nothing more than that newspaper article.

In the end, after many months of investigation by my professional appraisal organization, I was ultimately exonerated of those ethical charges, although the damage to my good name lingers.

As you may know, my valuation practice concentrates on appraising mines, quarries and other complex real estate uses and it further specializes in the area of litigation. The matter of the eminent domain “taking” of a 107± acre parcel of vacant land in the town of Brookfield, Connecticut that was used as the site of a quarry was one such a litigation case.

Should you take the time to read this post and all of the linked exhibits, you will begin to understand the serious professional, legal and financial dangers to which those in this area of practice expose themselves.

These dangers lurk in many forms, ranging from hit-piece newspaper articles, to becoming the scapegoat for ambitious politicians seeking to avoid responsibility for their own short-comings, such as Connecticut Attorney General Richard Blumenthal, who, rather than hiring an experienced legal team to defend the relatively complex Brookfield Quarry condemnation case, opted instead for one part-time, over-burdened staff lawyer (Assistant Attorney General) with no prior experience with or understanding of mineral property valuation to handle this matter. (PLEASE NOTE: A second Assistant Attorney General was provided at the last minute; literally on the first day of the trial).

Regardless of whether it was the lack of attention or a failure to understand and recognize the seriousness of this very complex case, I believe Attorney General Blumenthal unnecessarily exposed, and ultimately subjected the taxpayers of Connecticut to a $20+ million judgement (an amount that, in my opinion, is completely unjustified).

However, when questioned by the Hartford Courant about the outcome of the trial, instead of accepting responsibility for the state’s miserable handling of the case, Attorney General Blumenthal is reported to have pointed his finger at me and claimed that the untrue and unproven allegations of my alleged past professional improprieties made by the property owner’s attorneys during the trial in their “shoot the messenger” strategy, was the reason for the state’s ultimate failure in this important case.

The following is a brief overview of the facts of this matter:

———-
On Sunday, December 6, 2009, more than 14 months after the conclusion of the trial and 6 months after the publication of the judge’s decision, the Hartford Courant newspaper published an article questioning my ethics with regard to my involvement in the matter of the condemnation of the Brookfield Quarry by the Connecticut Department of Transportation.

On Friday, December 11, 2009, armed with nothing more than the previously referenced article, a fellow member of the American Society of Appraisers, wrote a letter referenced, “Ethics Complaint” to the American Society of Appraisers. In addition to providing the ASA with a copy of the article, this fellow appraiser also added his own unfounded and baseless allegations.

On January 11, 2010, I received a letter from the Ethics Committee of the American Society of Appraisers advising me of the complaint against me, which included a copy of the letter of complaint and a copy of the article.

I submitted a cover letter dated January 29, 2010 to the Ethics Committee as part of my response to the complaint against me. I also submitted copies of numerous documents related to this case, including my own appraisal report of the Brookfield Quarry property and my appraisal reports of the numerous other quarries I’ve appraised that were subpoenaed and provided to the property owner during this case.

To assist the Ethics Committee gain a more thorough understanding of this case, I developed and submitted a chronology of events regarding my involvement in this matter.

In a letter from the ASA Ethics Committee dated May 5, 2010, they state, “Based upon our review of the complaint, your response, and the materials provided to us by the parties involved, it is the judgment of this committee that the aforementioned complaint be dismissed.”
———-

Although no one will ever know the underlying or “behind the scenes” influences that may or may not have occurred in the case of the Brookfield Quarry, there are a few things about this matter that should be clearly understood:

1. Both the state and the property owner engaged a number of appraisers at various points in time, all of whom were engaged significantly prior to me being engaged in October 2007.

2. Of the many appraisers involved in this case that were hired by both the property owner and the State of Connecticut, there were only 2 appraisers in this case that are recognized as professionally competent experts in the appraisal of quarry land; they are me and Arthur C. Pincomb.

Of significant importance, is the fact that only Mr. Pincomb and I have been subjected to professional review and testing of our knowledge and experience by the American Society of Appraisers, a highly credible international appraisal society created in 1936, which is both a founding and present member of the Appraisal Foundation, which is the sole organization authorized by the US Congress as the “source of appraisal standards and appraiser qualification” in the United States.

Based upon our tested knowledge and proven experience, Mr. Pincomb and I have earned an Accredited Senior Appraiser designation from the American Society of Appraisers (ASA) in the specialized discipline, Machinery and Technical Specialties: Mines & Quarries. I earned this designation in 1991.

I also hold an Accredited Senior Appraiser designation from ASA in the discipline of Real Property / Urban which I earned in 1990.

3. My appraisal employed the exact same valuation methodology and technique used by all professionally competent mineral land appraisers, and the exact same valuation methodology and technique I’ve used in every mineral real property appraisal I have ever made, including all of the many appraisal reports I provided to the property owner’s attorneys at their request during discovery.

As it turned out, Mr. Pitcomb’s appraisal (which he co-signed with another appraiser, a Mr. Dean C. Amadon) also employed the same valuation methodology and technique as I used in my appraisal.

4. During my cross-examination, I was surprised with a copy of an appraisal report I made of a NJ quarry in 1988; an appraisal report I hadn’t seen in most of the 20 years since I made it. Using that 20-year-old report, which I explained was made before becoming associated with the American Society of Appraisers and learning the proper way to identify various component values, the property owner’s legal team successfully convinced the judge that my opinion of value of the business going concern ($34.5 million) was the value of the land.

Although I pointed out the fact that my land value estimate stated in that 20-year-old appraisal report was $13 million and was developed using the exact same valuation method and technique as I used in my Brookfield valuation, the judge chose to ignore that indisputable truth and elected to believe the mischaracterization of property owner’s counsel.

5. Mr. Edward F. Heberger, one of the numerous appraisers hired by the property owner and the appraiser upon whom the judge in this case is said to have relied in making her decision, is a member of yet another appraisal organization, the Appraisal Institute; an organization that does not provide any professional education, nor any professional testing, nor any professional recognition in any form specific to appraising mineral property, such as the Brookfield Quarry.

6. Mr. Heberger appraised the Brookfield Quarry land for this case at $29.1 million in his appraisal report dated April 3, 2006. It’s important to note, that he also appraised this same property in 1988 (some 18 years prior his appraisal in this case) for the amount of $10 million, 1/3 the amount he appraised it for in this case.

This is a significant fact, considering that it is generally accepted that mineral property (such as the Brookfield Quarry land) is a wasting, or “disappearing” asset which, by it’s very nature, becomes less valuable over time as the mineral deposit is depleted.

However, the judge preferred to ignore the entire issue of Mr. Heberger’s 20-year-old appraisal report, as well as the significant value implications between his two appraisals of the same property.

7. Mr. Heberger co-signed his 2006 report with a Timothy B. Mitchell, an appraiser who stated in deposition testimony that he had virtually no experience appraising land used for quarry mining; Mr. Mitchell was conspicuously absent during the entire trial.

8. Also, in his 2006 appraisal report, Mr. Heberger stated, “Mr. Robert J. Mulready of the J.F. Mulready Comany, Inc., provided review, expert and technical assistance in the preparation of the following report.”

Prior to trial, it was discovered that Mr. Mulready, who has no obvious professional expertise with regard to the appraisal of mining property, was found guilty of violating appraiser licensing rules by the Maine Board of Real Estate Appraisers. This may, at least, partially explain why Mr. Mulready was also conspicuously absent during the entire trial.

9. In his court testimony, when questioned as to why he failed to calculate and include a reversion value (the return “of” the investment at the conclusion of the investment) in his 2006 appraisal of the Brookfield Quarry land valuation, Mr. Heberger stated, that he didn’t believe it was necessary / appropriate.

On it’s face, this statement should raise serious questions about the professional competence of an appraiser making an appraisal of any type of income property since it is an essential requirement to any such valuation to account for BOTH the return “on” the investment (e.g. rent, or interest), as well as the return “of” the investment (e.g. in the form of the actual or estimated sale price at the end of an investment, or the return of principal in the case of a bond, etc.); the sum of these 2 components IS the final value estimate.

——–
ANOTHER INTERESTING FACT regarding this case, is that, in addition to appraising the 107± acre parcel of vacant land used as a quarry, I was also engaged to make an appraisal of a 9± acre parcel of land across the street from the 107± acre parcel used as a quarry.

The 9± acre parcel was owned by the same entity (being owned & controlled by the same person, a Mr. Robert Parker) who owned the 107± acre parcel.

Interestingly enough, my appraised value of this 9± acre parcel was so much higher than the appraised value reached by any of the other appraisers, including the appraiser for the property owner, that the property owner agreed, on the record in open court, to accept the amount stated in my appraisal as being “Just Compensation” for the 9± acre parcel.
——–

I could go on citing numerous factual issues that would cause any reasonable person to wonder why the outcome this case was as it was. But, this post is already becoming rather lengthy. (Perhaps, I’ll write a book about this case and provide copies of the relevant documents and testimony transcripts.)

But for now, I’ll just end with this:

Many people have speculated about the reason(s) for the seemingly irrational outcome of this case; asking questions, like:

1. Was the judge biased against the state?

2. Was the part-time lawyer for the state and her last minute assistant out lawyered by a team of prominent hired guns?

3. Why didn’t the Connecticut Attorney General take this case more seriously?

I don’t know the answer to any of these questions. But, suffice to say, this case should serve as a warning to those who get involved in such a matter.

Since January 2009, the Obama economic plan has resulted in the loss of millions of jobs. And, no amount of so-called “stimulus” has even made a dent in the continual increase in unemployment. In addition, the uncontrolled and thoughtless spending of the Obama administration and the Democrat majorities in both houses of Congress have resulted in the nationalization of the banking, auto, and healthcare industries, resulting in the explosion of our national debt into the never-before-seen multi-trillion dollar level.

As of this writing, for the month of August 2010, 16 of the 51 reporting districts (50 states and the District of Columbia) have unemployment rates above the terribly high national average of 9.6%; of those 16, 13 have double-digit unemployment rates. As for the trend of unemployment, 26 of the 51 reporting districts have shown a continued increase in unemployment for the year, while only 21 showed a very slight (under 1%) improvement.

Last week, RealtyTrac reported over 95,000 actual foreclosures for the month of August 2010, the highest on record.

And, although prices for all classes of real estate continued drop, many lenders (particularly commercial lenders) seem unwilling to agree to accept fair value for their collateral from those few buyers who are still willing and able to buy.

Real estate professionals that I speak with regularly in various major markets around the country indicate to me that they are emotionally worn out from the daily bombardment from an array of sources.

There are the real estate agents whose seller clients want to know when their property is going to be sold. These sellers, themselves, are under tremendous pressure to sell property that will wipe out their entire investment and place them in further financial jeopardy to IRS debt when they receive a 1099 from their lender, assuming the lender will even agree to accepting less than their principal.

Then, there are those real estate agents who go into the homes of prospective sellers and have to look into the faces of the owners who are about to lose their home and the agent has to explain that there’s nothing that can be done to save them from the inevitable fate of foreclosure and financial loss.

One such agent recently told me, he feels like a doctor telling a family that a loved one has a terminal disease and there’s no hope for their survival.

Then, there area real property appraisers (at least those that have work) whose lender clients are unwilling to accept the fact that the property that they hold for collateral on a $4 million loan is only worth $2.2 million, and others whose property owner clients are reluctant to accept the fact that their property isn’t worth enough to get the refi they need to stay afloat.

And, on top of all of this daily staple of negativism that’s been worsening for nearly 3 years with no end in sight, is the unpleasant state of their own personal reality, with many of them being in very serious financial trouble of their own, having insufficient income to pay their own bills, much less fund the marketing expenses to sell their clients’ property.

Combine these realities with the arrogance and unwillingness of the federal government to do anything to improve the economy while actually depressing economic growth as a result of its relentless pursuit of it’s quest for ideological “change,” and we now see something I’ve personally never seen in my 40 years in the ever-optimistic the real estate industry: despair.

While most real estate people will never openly admit their feelings of despair and depression to their clients or most of their peers, I assure you, those feelings are there and are spreading exponentially throughout the virtual entirety of the real estate industry.

The answer? An improving national economy, although there doesn’t seem to be any sign of that happening at any time in the foreseeable future.

As I recently half-jokingly told one depressed colleague, just keep in mind, that nothing lasts forever; even Russian communism collapsed after 80 years. (LOL)

Oh! Don’t forget to vote on Tuesday, Nov 2.

So, if I’m generating so much concern and potential negative effects by being involved in political discussion, why do I do it?

It’s very simple: Because, virtually everything that government does has a direct and a substantial impact on the economy and the real estate industry. Consequently, one cannot possibly have an intelligent discussion about the state of any facet of the real estate industry without involving the influence of government, particularly the federal government, in that discussion.

As just one example, the present rate of the unprecedented and tremendous level of borrowing by the federal government directly influences:
1. The reduced availability of credit due to the lower volume of available liquidity (actual dollars in the system available for use); and
2. The cost of credit (interest rates) due to the increasing rate of interest that must be paid by the US government to continually attract buyers of US Treasury Notes & Bonds.

These 2 factors alone prevent private business from both expanding and modernizing; 2 major factors in sustaining existing jobs and creating new, permanent jobs (rather than temp positions, like government Census workers that will be let go in a few months).

These 2 factors also have a direct negative impact on both the ability and willingness of people to buy real estate. Let’s face it; most people have a limited financial ability to pay. So, the higher the interest rates go, the less they’re able to borrow. Then, there’s the matter of “buyer confidence.” When people are fearful for the security of their job, they tend not to make big-ticket purchases, such as a home. Thus, demand for real estate drops, and so do the prices to attract buyers.

Another negative impact from these 2 factors is an increased level of unemployment which creates 2 more subsequent negative events: 1) Higher state taxes to meet the demand for unemployment insurance, and 2) Increased levels of mortgage and other credit defaults.

The 2nd of these 2 subsequent negative events (mortgage defaults) then manifests into yet another major negative event; increased numbers of foreclosed properties due to the inability to pay the mortgage debt due to the lack of employment and lack of employment opportunity.

The increased number of foreclosures results in banks dumping property on the market creating an even greater over-supply than previously existed, which further erodes (water’s down) prices of other properties, which, in turn results in the inability to sell and create liquidity (get cash money) to either pay one’s bills or move on to another place or venture.

As you can see from this little snippet example, the actions and/or inactions of the US federal government play a direct role and cause a major influence on every facet of the real estate industry. Whether it’s single-family residential sales, commercial retail or office leasing, or industrial development; the US federal government is THE major influence.

In the end, I believe it is critically important to inform and to discuss political / economic issues with anyone who wishes to understand them. I also believe, that the better informed and the more they are able to understand the unvarnished political / economic facts that exist, the better prepared they are to make the best financial decisions for themselves.

As for where I fall in the political / economic spectrum, I’ll address that in a future post.

As always, your comments and opinions are welcomed.

As the numbers of sold units, both residential and commercial, have dropped, so have the number of real estate agents; by and large, most of those who have left the industry were primarily the inexperienced and the hangers on. However, those of us who live and breathe real estate have remained; yet, most are not earning at the levels they’re accustomed to, and most are encountering continual and extraordinary frustrations from virtually everywhere – from the incompetent bank asset managers whose average age is 23 years old without a clue as to what the real estate industry is about, to the regulators who pile on requirement after requirement and change them in mid-stream, to the pressures of dealing with sellers who are either so emotionally stressed out that they can’t seem to make any decision (much less a rational one), to the buyers who are trying to see a thousand houses in hopes of saving another $2, and so on.

With the state of the economy, plus all of these pressures, many real estate agents are, themselves, stressed out beyond the normal high level of stress associated with this way of making a living.

Just this week, I closed a transaction in which I was the Buyer’s Agent. Although I’d never had any prior dealing with the Seller’s Agent, he seemed to be a well informed and experienced person, and was quite cooperative throughout the transaction. However, subsequent to the actual closing, he discovered there was an acknowledgement that should have been made by the buyer which was overlooked. So, he sent me an email along with the document for the buyer to sign; this document was required by his company before they would issue his commission check.

Anyway. Upon receiving his email, I read the document (which was perfectly fine). But, instead of assuring him I would obtain the buyer’s signature, and without realizing the possibility that this agent may be pretty stressed out from all of the things we all suffer under, I thought it would be prudent to advise him, that the buyer may not be willing to sign it since the closing had already taken place and there was no benefit to the buyer.

BAD MOVE!!!

Needless to say, and without going into detail, the Seller’s Agent let loose on me in a follow-up email. And, in all fairness, almost immediately after receiving that email, I received another from him apologizing for blasting me.

After thinking about this for a moment, knowing the nature of this person from my dealing with him during the course of this transaction, I realized that this fellow must be under some tremendous stress. I also realized, I should have been more aware of the probability of his emotional state before thoughtlessly blurting out something that may have been true, but not necessarily important to state regarding the potential for the buyer to ignore signing the post-closing acknowledgement.

So, rather than getting all puffed up and insulted, frankly, I felt terrible that I caused this fellow additional and unnecessary stress. So, I sent him back an email and assured him I would see the buyer immediately and would probably be able to get his signature on the document. I also told him, there was no need for him to apologize, because I totally understood his anxiety. I also suggested that he might want to go home early, kick off his shoes, sit back and have a cold one to help him relax.

I can’t tell you how good I felt the next morning when I received an email from this agent, thanking me for understanding. I’m very glad my stupidity didn’t cause permanent damage to our professional relationship; that’s the last thing any of us needs or wants.

The moral of this factual event?

Show compassion for your fellow agent; he/she is under tremendous stress, and neither you nor I should be adding to that stress when there’s probably no need to do so.