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April 30, 2017

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In Real Estate, Scammers Are Getting Unbelievably Tricky

Speaking of Real Estate - Thu, 03/16/2017 - 11:29

A hip-looking website and a realistic-looking payment invoice. Real estate professionals in Florida were recently hit with a scam in which they were instructed to pay a fee to maintain their membership listing with the Florida Board of REALTORS®, but there is no such organization.

What’s concerning about this latest scam to hit the real estate industry is how much the perpetrators paid attention to details. The website is slick and the invoice is serious. Whoever is behind this attempt to milk fees out of unsuspecting real estate professionals appears to be banking on the idea that the right design can mislead people. Which means it’s not just realistic-looking emails you have to be on guard against; you have to be on guard against realistic-looking invoices and websites.

The scam is a top story in the latest Voice for Real Estate news video from NAR. Other segments look at what’s happening  in Washington. Among other things, the Trump administration has pushed the pause button on a rule that NAR had concerns with, paving the way for REALTORS® to have input into the rule should it be rewritten.

The rule concerns the expansion of bodies of water subject to Clean Water Act restrictions. That’s a topic that seems remote from the everyday practice of buying and selling real estate but it has the potential to slow and even derail development of real estate because property that previously was not subject to environmental review would be subject to it. So, NAR favors reviewing that rule and seeing how it might be changed.

Another Washington story is about flood insurance. The federal flood insurance program is the only realistic game in town for home owners and buyers in many areas and it expires in a few months, so NAR has been pushing hard to get it extended soon, because the last time the program expired, it wreaked havoc on home sales in thousands of communities across the country. The good news is that Congress seems serious about not letting that happen again and the update explains what has to happen over the next few months to keep the insurance flowing.

The video also looks at a report that just came out from NAR that finds Gen Xers—those born between the mid-1960s and the early 1980s—are getting back into the market after enduring a rough ride during the economic crisis a few years ago. Of all the generations, this one was hardest hit, with a fifth of them going underwater on their mortgage and almost 15 percent having to sell under distressed circumstances. But they’re back in the market now, and that’s a good thing. Access the video.

Comment on 5 Winter Home Improvement Projects for Less Than $1,000 by Alexander Skarsgard

Styled, Staged & Sold - Wed, 03/15/2017 - 03:32

I found your information really informative. Yeah, definitely winter is a right time to get home remodel. These ideas are really helpful!

Meet the 2017 30 Under 30 Finalists & Vote

YPN Lounge - Tue, 03/14/2017 - 15:06

Last Wednesday, REALTOR® Magazine announced the 50 finalists vying for a seat in the 30 Under 30 class of 2017. Now, this Friday, March 17 (St. Patrick’s Day!), you’ll have the opportunity to learn more about these young entrepreneurs in profiles that will be published at noon Central Time on REALTOR® Magazine Online.

Edit: Voting is now closed! But please feel free to read the profiles of the 50 finalists.

This group of finalists beat out a strong field of more than 300 applicants in three rounds of tough judging leading up to this point. They represent the diverse landscape of the real estate industry, not just personally, but in business specialty and market location. There’s a former environmentalist turned real estate sustainability expert, a former real estate photographer who was nearly homeless, a mountain region specialist, a few luxury market specialists, even a former professional break dancer who demos his moves at open houses.

But now it’s your turn to help one of the finalist advance to this year’s 30 Under 30. All you have to do is vote in the Web Choice competition starting at noon Central Time on Friday, March 17, until noon Central Time on Friday, March 24. You may vote once every 24 hours for each candidate. The finalist who collects the most votes will be named the Web Choice Award winner, and is guaranteed a spot among this year’s 30 Under 30. Judges will select the other 29 honorees from the field of finalists below.

*Note: Some office networks operate all computers under a single IP address. If this is the case at your company, only one vote from that office will be recognized per day. Please try voting from home or outside of your office network.

The 2017 class of 30 Under 30, and the Web Choice Award winner, will be announced Monday, March 27 at noon Central Time, and their full profiles will be featured in the May/June issue of REALTOR® Magazine. Stay tuned for more information on the 30 Under 30 home page.

Congratulations to the 2017 finalists:

Nikolas Boone
Ascend Real Estate
Bakersfield, Calif.

Brittany Brands
The Loken Group
Houston

Kara Chen
Keller Williams of Central PA East
Hummelstown, Pa.

Ashley Christianson
Berkshire Hathaway HomeServices
Fargo, N.D.

Henry Edelstein
Coldwell Banker Burnet
St. Paul, Minn.

Karen Elmir
Cervera Real Estate Inc.
Miami

Ashton Ernst
Keller Williams Realty Peachtree
Atlanta

Corinne Fales
Redefined Realty Advisors
Delafield, Wis.

Lucy Feicht
Lou Realty Group
St. Louis

Saria Finkelstein
Keller Williams Partners
Plantation, Fla.

Andrew Flachner
RealScout
Sunnyvale, Calif.

Ryan Gillen
Irongate Inc., REALTORS®
Waynesville, Ohio

Ryan Glass
Gibson Sotheby’s International
Boston

Paul Haviland
Stark Company, REALTORS®
Madison, Wis.

Jessica Houghton
Coldwell Banker Residential Brokerage
Atlanta

Ryan Jancula
Compass
Los Angeles

Alexandria Kebalo
RE/MAX Edge
South Windsor, Conn.

Wilson Leung
Keller Williams Peninsula Estates
Burlingame, Calif.

Zachary Lombardi
Gibson Sotheby’s International
Charlestown, Mass.

Grant Lopez
RE/MAX Associates
San Antonio

Raymond Lord
Douglas Elliman Real Estate
East Hampton, N.Y.

Sarah Lyons
CENTURY 21 Judge Fite Co.
Springtown, Texas

Shyla Magee
Windermere Prestige Properties
Henderson, Nev.

Anthony Manzon
Keller Williams Realty
Chula Vista, Calif.

Liz Campbell Moore
RE/MAX Alliance Evergreen
Evergreen, Colo. Logan Ormerod
Kentucky Select Properties
Louisville, Ky.

Dustin Parker
Home Team Realty
Laurel, Del.

Abbey Parsons
Coldwell Banker Tomlinson Valley
Spokane Valley, Wash.

Davis Pemstein
Climb Real Estate Group
San Francisco

Dominic Pettruzzelli
Keller Williams Western Realty
Stanwood, Wash.

Eric Pham
John Daugherty, REALTORS®
Houston

Aislinn Phelan
Keller Williams Realty of SETX
Beaumont, Texas

Jessica Randolph
Village Real Estate Services
Nashville, Tenn.

Louis Savinetti IV
RE/MAX Dynamic
Tampa, Fla.

Margaret Scarborough
Burns & Ellis, REALTORS®
Dover, Del.

Melissa Shipley
Berkshire Hathaway HomeService
Pittsburgh

Elizabeth Stone
RE/MAX Allegiance
Falls Church, Va.

Melanie Stone
Coldwell Banker Residential Brokerage
Chicago

Brandon Tabassi
RE/MAX Partners
Andover, Mass.

Farris Tarazi
Century 21 Yarrow & Associates
Lancaster, Calif.

Jessica Thompson
Loxwood Realty
Oklahoma City

Jamie Tian
Rodeo Realty
Beverly Hills, Calif.

Latoya Tolbert
CLJ Realty
Long Beach, Calif.

Maci Umbertis
Merrill & Associates Real Estate
Paso Robles, Calif.

Will Wiard
Weichert, REALTORS®
Alexandria, Va.

Christie Wilbur
The Group Inc.—Mulberry
Fort Collins, Colo.

Ryan Wrathell
Keller Williams Pozek Group
Novi, Mich.

Mary Harmon Young
Pritchett Moore Real Estate
Tuscaloosa, Ala.

Erica Zanni
REALTEAM LLC
Macomb, Mich.

Trent Zimmer
Coldwell Banker Burnet
Apple Valley, Minn.

 

 

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Help Clients Get a Clearer View of Clutter

Weekly Book Scan - Tue, 03/14/2017 - 14:23

OK, it’s confession time: I haven’t even been in my house for a full two years yet, and it’s already time for a decluttering session. Maybe part of it was moving into a place that didn’t need much work (oh I know, poor me!). When we moved in, my husband and I just got unpacked and settled as soon as we could without putting a lot of thought into how to organize our stuff. On the flip side, it could be the boxes we never unpacked in the move before last, which we just trucked along to our next place where storage was much more plentiful than before. But Amanda Sullivan, author of Organized Enough: The Anti-Perfectionist’s Guide to Getting—and Staying—Organized (De Capo, 2017), would probably point to her belief that pretty much everyone needs to incorporate the habit of continually of decluttering into our daily lives.

Photo: Ryan McGuire, Gratisography

“Your home is a living, breathing thing, like a garden. You must constantly weed and winnow items because, with no effort on your part, it will always be growing,” she writes, suggesting readers keep a dedicated bag or box for getting rid of unneeded items.

But what if you’re dealing with sellers who haven’t employed this trick and have years of built-up reservoirs they need to purge before putting their home on the market? Honestly, I’d recommend picking up a copy of this book for them. I was only a few minutes in when I was inspired to go home and tackle my closet.

Despite being the owner of the intimidatingly titled professional organizer/coaching business The Perfect Daughter, Sullivan is exceedingly nonjudgemental and concentrates her advice on making homes livable, rather than immaculate. Indeed, Organized Enough hangs on the principle of FLOW:

  • Forgive yourself. “Having a disorganized home does not mean you’re sick or dysfunctional,” Sullivan assures readers.
  • Let stuff go. She suggests beginning with with the easy stuff (which is why I’m headed to the closet and not those unpacked boxes in the basement) that will make the greatest visual impact.
  • Organize what’s left. Don’t head to the Container Store until you’ve accomplished the above steps! You have to take stock before you know what you need.
  • Weed constantly (addressed above).

So keep this one in your back pocket for clients, but I’d also suggest real estate pros read this book on their own. The chapter on seeing one’s home as a stranger is particularly helpful for industry insiders such as yourselves. Sullivan also includes tips to motivate specific types of people (photo journaling or Pinterest boards for the visual learners, using a notebook to craft a narrative of change for the storytellers, questions to ask for those who prefer to talk it out interpersonally, etc.).

Here are three ideas from Organized Enough you can use to help your sellers who need some organizational assistance.

  1. Ask sellers to take you on a tour, pointing out where they see systems as working and where they aren’t. Meanwhile, take note of places where random things are being squirreled away, spaces aren’t being used to their full potential, or where dust might be gathering. These are spots that can easily be targeted first. Sullivan also suggests looking at spaces through mirrors and photography to help bring a fresh perspective.
  2. Connect clients with practical solutions for letting go. Put together a handout or resource page on your website that includes contact information, drop-off times, and details about what kinds of donations different charities in your area will accept. Some may even offer free curbside pick-up. Gather a list of links to local groups where neighbors give away or sell used goods (Nextdoor, Freecycle, Facebook parent groups, etc.). Also, find out what the rules are in your area for how to dispose of certain items such as electronics or paint.
  3. Help them recognize the source of their clutter. Sullivan notes that most overstuffed homes can be traced back to fear. She goes over the different anxieties that feed into this in detail, which can be very helpful to getting to the root of the problem and closer to a lasting solution. In fact, some your clients might be highly organized people who let the ideal of perfection become the enemy of “good enough.”

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Styled, Staged & Sold - Mon, 03/13/2017 - 00:53

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Comment on 7 Ways to Decorate A Shabby Chic Shed by Jim Garcia

Styled, Staged & Sold - Sun, 03/12/2017 - 09:15

Emily, great ideas for re-purposing a shed. I’ve also seen sheds converted into excellent man caves using a few simple materials. Keep up the great work.

Comment on What Home Buyers Want Most in Their New Homes by Pooja

Styled, Staged & Sold - Fri, 03/10/2017 - 01:07

Great post.. it’s very useful to all of us. This article is so important for me. I agree with Larry that buyers search energy, efficient home at stated with rising cost. Thanks a lot for the posting such a nice article.

How to Use Co-Promote in Your Real Estate Marketing

YPN Lounge - Wed, 03/08/2017 - 18:44

Anita Clark

By Anita Clark

Building a website, posting content, then hoping consumers find you online is a bit like putting a sign in a yard, performing no marketing, and hoping a bunch of potential buyers stop by or call for a preview. Getting your content found online by real estate consumers takes work.

If you have created a masterpiece you know buyers and sellers will love, used killer graphics to convey your message, have shared the article all over the web, yet traffic is still lagging, there is an easy way to help increase both exposure and traffic. Promote your content on CoPromote. It is a social sharing site well suited for both novice and advanced real estate bloggers.

They have both a free service and paid options. The free version allows you to promote (they call it boost) one piece of content at a time. The three pay plans are Pro, Premium, and Max, which all allow you to promote as many pieces of content concurrently as you wish. You also get an extra 200,000 to 1.5 million points per month (depending on your plan).

Basically, you share your article via social media then boost that content so others on CoPromote can see your article and share it with their online audiences. In-turn, you need to share content created by others to keep your “points” high enough so others can share your content. You gain points each time you share content with your followers on Facebook, Instagram, Tumblr, Twitter, and YouTube. The number of points you receive is based on the number of followers you have on the social media site you share to.

Image courtesy of Anita Clark

What’s the value of this approach? Let’s say you live in a military community. You know our servicemen and women periodically move to bases in other locales. If you have created an article about military relocation tips that is shared on CoPromote by another agent in another locale to their followers, it could result in a future buyer if that consumer happens to be moving to your military community and sees your content on that agents Facebook feed, Instagram page, YouTube channel, etc. Even if the share does not result in future biz, you get a whole lot more brand exposure, with minimal effort expended.

You have the options of following other co-promoters (so you know when they have shared new content that you can share), sending invites to friends and colleagues, and can choose from a wide range of topics you want to see on a regular basis. It is a give-and-take system that rewards and encourages you to share quality articles.

It works! Give the free option a spin. You have nothing to lose. Watch your articles gain traction via shares that help push your content to the far reaches of the Web. If that does not sell you on giving it a spin, the links are currently do-follow for all the link junkies out there.

Anita Clark is a residential real estate agent with Coldwell Banker SSK, REALTORSÆ, in Houston County, Georgia. She is from Coventry, England, is a retired military spouse, and has been assisting buyers, investors, and sellers in middle GA since 2007. Connect with Anita on Facebook, Google+, LinkedIn, Twitter, Pinterest, YouTube, or on her Warner Robins Real Estate Blog.

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Comment on 5 Staging Props You Need to Stop Using … Now! by Kerry

Styled, Staged & Sold - Sat, 03/04/2017 - 22:27

As a buyer I have walked out of for sales with dead animal heads on the walls. Hey, some of us respect all of God’s creatures and find it horrendous.

Comment on Meet Our Bloggers by Jen

Styled, Staged & Sold - Tue, 02/28/2017 - 06:26

Very interested to be a guest blogger so I can write about how eco-conscious condos are making a big splash in Singapore’s real estate market today. Maybe you guys can also feature some of these “green” condos found at http://www.propertyreview.sg to have a glimpse of how amazing these properties are.

Dream Team

Weekly Book Scan - Fri, 02/24/2017 - 16:31

Despite (or maybe due to) the solitary nature of real estate, it’s one of those industries that runs best when the lines of communication are open. That’s why you see so many mentor-mentee arrangements and cross-professional relationships. But what if you’re new to the business, or if you don’t know which broker, real estate attorney, or home inspector you can trust in your local area?

Image: Rawpixel.com, via Unsplash

Allow me to recommend Dear Real Estate Agent, There Are Answers: Six Industry Professionals Share Their Knowledge as a start. It’s an e-book featuring straightforward chapters on what agents need to know from a broker, real estate lawyer, business attorney, home inspector, mortgage advisor, and insurance professional.

Each chapter is different because they’re written by different people. The book (smartly) begins with Katherine Scarim, broker-owner of Island Bridge Realty. It’s a meaty chapter, filled with scripts, sample disclaimers, and checklists of what to do before you start working with clients. Scarim goes beyond the typical pipeline filling advice to lay out the basics not everyone thinks of immediately, but that will bite agents in the you-know-where if they don’t get it down (ensuring they understand every document they ask their clients to sign, red flags to watch for when writing an offer, how to set a marketing budget). She even covers rarer circumstances such as how to represent renters and buyers looking at new construction.

I particularly like how she lays out her brand of common sense in a way with which you just can’t argue, as in this choice quote: “Early on, I kept a cleaning caddy in my car so I could tackle anything too horrible before showings. By doing this, I avoided having to have an uncomfortable conversation, but I also devalued my time by becoming a cleaning lady instead of an agent.”

In chapter two, real estate lawyer Gregory Cohen spends a fair amount of time working to convince real estate professionals that his colleagues aren’t just there to be deal-killers. However, he does include helpful anecdotes and specific examples of deals gone awry that could really only be put back on track by attorneys. He also includes red flags to look for to ensure the lawyers in your transactions are drafting contracts that are accurate and fair to your clients. Much of his advice could be helpful to folks who have been in the business for awhile, such as this gem: “Preprinted language in contracts is a bit like background music. At a certain point you don’t hear it anymore.”

He’s also a straight shooter. I love his reply to clients who say they don’t want to pay for title insurance: “I reply I would have to charge them far more for my time to prepare a disclosure document explaining how ridiculously stupid the idea of forgoing title insurance is, than it would cost them to obtain the actual title insurance.”

Gerald Pumphrey, senior mortgage advisor for Waterstone Mortgage Corporation, tends to overuse italics, bold type, and punctuation, but he also offers concrete questions to help real estate agents qualify a prequalification (“You should never just accept a pre-approval letter and assume the loan officer did their job… A pre-approval is only as good as the loan officer issuing the letter.”) He walks readers through basic loan types and explains each step clients will typically have to follow to get from the pre-approval process all the way to closing time.

In chapter four Guy Hartman, owner of Your Inspector Guy, goes through all the elements that are typically examined in a home inspection. He offers insider tips that both buyer’s agents and listing agents can pass on to their clients to make the inspection go more smoothly. He also includes a multitude of case studies that will be helpful to read no matter where you are in the transaction. His comprehensive checklist of traits to look for in a home inspector could prove quite helpful for any real estate pro looking to create a list of recommended providers, but in general, he advises readers to “look for an inspector who can help put the inspection and inspection process in context, who can confidently explain what they are doing, why they are doing it, and how to interpret the results.”

Mark Shanz, broker-owner of Seegott Shanz Insurance, leads readers through the many types of insurance homeowners might choose, explains ways they can save on their insurance, and details possible deal killers in the binder period before the deal closes. He goes into what may very well be more detail than a real estate professional will require in day-to-day work. But just as readers might be tempted to skip forward to the last section, he addresses the considerations agents and brokers should keep in mind when shopping for E&O, auto, general liability, and umbrella insurance.

Finally, business attorney Kelly Sturmthal talks through the common the legal structures for real estate businesses and outlines the questions that should be resolved if you’re looking at creating a real estate team, for example.

While the group does its best to generalize, this book will be more useful to real estate pros working in Florida, as all of the writers work in that state. It’s not that they exclusively talk about the laws and regulations governing Florida, but that many examples the writers cite originate there. However, Shanz betrays some serious geographical blind spots when he writes that “a home 30 years or older will be a tougher sell to insurance carriers… Finding affordable coverage for an older home is one example when having an experienced, local agent that represents multiple carriers will prove crucial.” As the owner of a home that is more than 100 years old, I can tell you that when shopping for home insurance no one blinked once when I told them the age of my home (likely because I bought in the practically geriatric city of Chicago).

Aside from being your built-in business advisors, this self-published book boasts another helpful feature in that it’s easily updated to reflect the ever-changing world of real estate. Scarim noted when she sent a copy my way that since they initially published, the FHA’s national conforming loan limit rose, meaning they needed to update the text. “A publishing house would never allow for biannual changes, as it would be far too costly for them. It would be silly to be preaching to agents that they have to keep up-to-date with the industry in a stagnant book,” she wrote. “Once revised, I have the ability to have Amazon push the update to the customers who already purchased the e-book, so their version will be replaced with the new one. You have to love technology!”

Build Better L.A.: Los Angeles Votes In New Requirements For Developers, Affordable Housing

Commercial Source Blog Feed - Tue, 11/15/2016 - 04:47

A significant initiative with commercial real estate effects was passed on last week’s ballot in Los Angeles. Expected to take effect this month, the measure changes, almost overnight, the labor and affordable housing requirements for developers building in the city, affecting multifamily projects with ten or more units, as well as other projects.

Measure JJJ, also known as the Build Better L.A. initiative, was sent to the voters in the general election of Nov. 8.  In Los Angeles City, JJJ passed with 64% of the vote at over 461,000 votes and according to JDSupra law blog, takes effect within ten days of the certification of vote results, or, on November 19, 2016.

Affecting projects that ask for a zoning exemption, a plan amendment, a height change or a authorization of residential use of land where previously not permitted, JJJ requires developers of projects with ten residential units or above to provide a percentage of affordable housing units on-site. Depending on the exemption sought, the percentage will fall between 5% and 40% affordable units.

Some alternatives to compliance are available.  Per JDSupra:

[T]he Initiative offers alternatives to compliance, including providing affordable housing units off-site, acquisition of “at-risk” affordable housing properties and converting the units into non-profit or other similar type of housing, or payment of an in‑lieu fee into the City’s new Affordable Housing Trust Fund. The in-lieu fee will be determined by a formula using an “Affordability Gap” multiplier as defined in the Initiative.  Additionally, projects that opt to provide off-site housing will be required to provide additional affordable units based on a formula that increases the number of required units based on the distance from the primary project.

Further, the Initiative requires that residential housing projects seeking discretionary approval be constructed by licensed contractors, with good faith effort to ensure that 30% of whom are permanent Los Angeles residents and at least 10% of whom are “transitional workers”—single parents, veterans, on public assistance, or chronically unemployed—whose primary place of residence is within a 5‑mile radius of the project.  Projects subject to the Initiative will be required to pay “prevailing wage”—an average of area wages based on a formula created by the state government—to all construction workers on the project.

(Photo credit: Wikipedia)

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Third Party Logistics (3PL): Video Refresher

Commercial Source Blog Feed - Tue, 11/01/2016 - 08:55

The industrial property subcategory 3PL, or third party logistics, is a rapidly expanding market across the US.  Steady growth in e-commerce has created a growing dependency upon these warehousing and logistics properties thanks to their effect of reducing delivery time on goods shipped to customers. With e-commerce sales worldwide set to pass $2 trillion in 2017 in pursuit of double-digit annual growth, knowledge of the 3PL industry will pay off for the commercial real estate professional patrolling this piece of the national supply chain. What follows in this post are two helpful sources of quick information about the 3PL as it lives and breathes today.

 

Video: Dynamic 3PL Logistics

If you’re in need of a rapid refresher on the global supply chain and need a helpful glimpse at the shape and vocabulary of 3PL, check out this short video by 3PL provider Dynamic 3PL Logistics.  To the point, short, yet packed with illuminating info, this clip will get the point across about 3PL — fast.

Fifty Most Successful 3PLs

While far from a comprehensive or updated list, the article “North America’s 50 Most Successful 3PLs” from SupplyChainBrain.com collects an excellent top-down view of North America’s top 50 3PL operators, including some depth on the operations, local and global. Researchers arriving to this market will find a useful bookmark here.

 

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New Supermarket Arrival Lidl Promises To Be Big

Commercial Source Blog Feed - Fri, 10/28/2016 - 09:37
Embed from Getty Images

Retailing industry analyst Kantar Retail this month released an impact study on the US supermarket sector that highlights a new entry from Europe. Lidl, a no-frills grocery chain headquartered in Germany, is in business in 28 countries in Europe, is expected to enter the US market in 2018.

Similar to Aldi, another German supermarket competitor who have long since set up shop in the US, Lidl stores take a low-staff, no-frills approach to supermarket operation, displaying skids of product in aisles, letting customers take product from opened cartons. A lack of specialty areas, preferred by some other supermarket chains, creates store floor plans that are streamlined and configurations that demand less of basic space than does the average US supermarket.

The Predictions

Kantar sees Lidl as opening over 100 stores a year in the US, with a total of 400 up and down the east coast by 2020.  The chain’s operating efficiency is touted, as a single, fully mature store could generate $14 million, or , “a lot of volume packed into a 36KSF box”. Other highlights from Kantar:

  • Lidl could surpass USD2 billion in volume by the end of its second full year of operations
  • By 2023, we believe Lidl could approach USD 9 billion in sales, which is more than what Wegmans does today
  • Expect Lidl to have over 400 stores up and down the East Coast by the start of the next decade

East Coast Rollout Locations To Watch

The chain’s US corporate headquarters is announced as being located in Arlington County, VA. European press has put a location of the first wave of Lidl stores as Virginia Beach.  Its logistics network has already put down roots with two regional distribution centers, one in Alamance County, NC and Arlington County.

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Embattled Wells Fargo: What’s The Commercial Lending Impact?

Commercial Source Blog Feed - Thu, 10/27/2016 - 08:50

Funding commercial mortgages with customer deposits is a central purpose for any huge bank. But when a big bank plays fast and loose with its reputation to the degree Wells Fargo has, it creates a special risk to the entire commercial lending ecosystem that should be understood.

Wells Fargo’s recent scandal is the living definition of “fast and loose”. The bank was outed as an identity thief and slapped with a $185 million fine for the fraud of signing up millions of its customers for programs without their knowledge or consent. But that’s a mere traffic ticket compared to what may be coming from market recrimination.

A recent study by consulting firm CG42 spoke to 1,000 of Wells Fargo’s customers and found, unsurprisingly, that people don’t like doing business with a bank they can’t trust. The study identified a potential loss of deposits totaling $99 billion as customers head for the door.  From the CG42 study:

Our findings show significant damage has already been inflicted on the bank’s reputation. Over 85% of consumers surveyed are aware of the scandal, and positive perceptions of the brand sunk from 60% before the scandal to 24% post-scandal. More tellingly, negative perceptions of the brand increased from 15% before the scandal to 52% post-scandal. This blow to Wells Fargo’s reputation will hamstring the bank’s ability to retain customers and attract new ones, as our study reveals.

While only 3% of Wells Fargo’s customers report being affected by the scandal, a full 30% claim they are actively exploring alternatives and 14% have already made the decision to switch banks as a result of the scandal. This represents $212B of deposits and $8B of revenues at risk. Our projections indicate Wells Fargo will lose $99B in deposits and $4B in revenues over the next 12-18 months as a direct result of the scandal, dealing a hard blow to the bank’s finances.

Consistent with findings from our past Retail Banking Vulnerability Studies, community and regional banks stand to gain the most from the fallout of the scandal, with a projected $38.7B in gained deposits and $1.6B in gained revenues over the next 12-18 months. Chase and Bank of America will also profit from the fallout, largely due to their national presence which makes them a viable alternative for customers who seek the convenience of a bank with branches across the U.S.

The chain of cause and effect goes like this: $99 billion of deposits walk out the door, depriving Wells of its least expensive capital, leading to higher capital costs for its borrowers financing new commercial mortgages.  Add to this the (unknown at press time) potential for angry commercial borrowers currently financed through the bank to re-finance and take their business elsewhere.

Is there a mass exodus of commercial customers through refinance in the cards for Wells Fargo?  Some believe not, with one Wall Street analyst referring to Wells’ customer base as “incredibly sticky”, meaning the overhead cost of changing lenders is too steep for customers.

But that perspective may fade as the scandal continues to expand from the retail side and into the commercial side of the bank’s business. Coming to light now are tales of Wells’ shabby treatment of its business customers.  In other words, Wells appears to have been just as abusive in the cultural and economic space where commercial financing lives. From Reuters:

Reuters also spoke to a former Wells employee, and a lawyer representing former employees and a former and current Wells customer, who described abusive sales practices with multiple business accounts. Jose Maldonado, a restaurant owner in Southern California who banked with Wells Fargo for 15 years, said he discovered seven accounts after enlisting the help of his accountant. He initially closed extraneous ones, and ultimately moved his remaining business to Bank of America Corp and JPMorgan Chase & Co.

“I don’t like Wells Fargo anymore. I don’t feel comfortable,” Maldonado said in an interview. “In the past, there were sometimes crazy accounts without my permission.”

Langan declined to comment on Maldonado’s accounts.

An ex-Wells Fargo business banker, who declined to be identified, said employees at his former branch were required to sell products to small business customers such as hair-salon owners and carpet cleaners in packages of three – regardless of whether they needed them.

Those typically included accounts for checking, credit card processing and payroll, and were often linked to additional savings accounts, said the former Wells banker. Bankers also tacked on business credit cards and were pressured to call a Wells insurance unit, with the customer present, to push business liability policies. 

News of Wells Fargo’s business practices isn’t done doing damage. The question is: will the commercial mortgage finance marketplace hold Wells alone responsible, or will all too-big-to-fail banks be looked at skeptically in the future?

With the expected flight to community banking, and with so many alternative financing options arriving every quarter, it wouldn’t be a surprise.

(Photo credit: Wikipedia)

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Boo Diligence: Evaluating The Halloween Industry

Commercial Source Blog Feed - Fri, 10/21/2016 - 11:32
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With over 4,000 haunted houses and horror attractions running across the United States, chances are there’s one serving your scarea. Ever wonder what goes into site selection for these specialty properties? Plenty of boo diligence.

The holiday’s economic impact is spooktacular: according to the National Retail Federation, Americans spent over $8 billion on Halloween in 2012. October brings not only p-eek foot traffic for haunted attractions, but also a wave of retail pop-ups to sell costumes and party supplies. Chopping center managers know: these seasonal pop-ups can produce a distinct upward pressure on NOI (net op-boo-rating income) for the fourth quarter balance sheet.

And why not?  Vacant commercial space screams out for an inexpensive solution, one without capit-owl expenditure. Landlords can cash in on the holiday, but must be careful to not leave themselves exposed on costs for CAM (cauldron area maintenance), especially for properties financed with steep groan-to-value terms or that that depend on high IRR, (interment rate of return). As always, sound business principles should win over witchful thinking.

List of haunted commercial sites

The haunting industry — yes, it’s actually called that — appears to have a nerve center online called Hauntworld.com.  There you can find a North American directory of haunted house operations, suitable for a quick dip of real estate market research as we find ourselves in the trick-or-REIT season. Use it to spot an opportunity: maybe you can put some of your vacant invent-eerie to work next year.

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Fed: Commercial Real Estate, Employment Improved

Commercial Source Blog Feed - Thu, 10/20/2016 - 06:55
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The Federal Reserve Beige Book, the eight-times-yearly published compendium of anecdotal information about current national economic conditions, has once again arrived.  This time around, the national story on commercial real estate is about modest growth, improvement and expansion. Based on information collected before October 7 of this year, the Fed states:

Home price appreciation continued at a modest pace in general, and commercial real estate activity and construction improved since the last report. Demand for business and consumer loans increased, aside from some seasonal slowing, and credit quality remained strong or improved. Agricultural conditions were mixed, as low commodity prices pressured farm revenues despite generally strong crop yields. There were signs of stabilization in the oil and natural gas sector, while reports of coal production were mixed.

[…]

Commercial real estate leasing activity generally improved, and outlooks were mostly optimistic, although contacts in a few Districts expressed concern about economic uncertainty surrounding the upcoming presidential elections. Commercial rents were flat to up, and vacancy rates were generally low and/or declined in reporting Districts, except in the Houston metro area where office vacancies increased further. Sales of commercial properties were characterized as robust in the Chicago, Minneapolis, and San Francisco Districts but softened in the greater Boston area. Commercial construction increased on net, with contacts in the Cleveland and Atlanta Districts reporting increased or high backlogs. Shortages of skilled labor remained a constraint on construction activity in some Districts, such as Cleveland and San Francisco.

On employment:

Employment expanded at a modest pace over the reporting period. Reports of hiring were strongest in the Richmond, Chicago, St. Louis, and San Francisco Districts. Layoffs in the manufacturing sector were noted in the New York, Philadelphia, Cleveland, and Richmond Districts. The Dallas District reported that energy-sector layoffs had abated, and manufacturing employment was stable following payroll reductions in recent months. Labor market conditions remained tight across most Districts. While reports of labor shortages varied across skill levels and industries, there were multiple mentions of difficulty hiring in manufacturing, hospitality, health care, truck transportation, and sales. The Richmond, Dallas, and San Francisco Districts noted a lack of construction workers with some contacts noting these shortages were constraining construction activity.

While the color beige may be popularly known as the color people use when they don’t want to use color, this report’s findings do point to our industry’s recent health — and to the green of dollars.

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2,200 Year Old Lease Literally Written In Stone

Commercial Source Blog Feed - Mon, 10/17/2016 - 08:21

2,000 years ago on the western coast of Turkey, the ancient Greek city of Teos stood. A Mediterranean port and center for regional commerce, Teos’s two harbors brought people and goods throughout the Anatolian region of modern Turkey. The commerce brought with it law and paperwork, although a great deal of the “paper” twenty centuries ago was actually stone.  Teos is today an archaeological goldmine thanks to so many written — or chiseled — words.  Discovered this year: a 1.5 meter-long inscribed stone tablet containing a detailed 58-line commercial lease complete with a few disturbing clauses. From the Ars Technica piece on the discovery:

Carved into a 1.5 meter-long marble stele, the document goes into great detail about the property and its amenities. We learn that it’s a tract of land that was given to the Neos, a group of men aged 20-30 associated with the city’s gymnasium. In ancient Greece, a gymnasium wasn’t just a place for exercise and public games—it was a combination of university and professional training school for well-off citizens. Neos were newbie citizens who often had internship-like jobs in city administration or politics. The land described in the lease was given to the Neos by a wealthy citizen of Teos, in a gift that was likely half-generosity, half-tax writeoff. Because the land contained a shrine, it was classified as a “holy” place that couldn’t be taxed. Along with the land, the donor gave the Neos all the property on it, including several slaves.

Use Of Premises Clauses

Beyond enshrining the brutal custom of slavery, the lease agreement also describes a tax-deductible donation of property and numerous clauses concerning punishments if the property was misused.  From the Hurriyet Daily News:

In order to meet the expenses of this land and to get income, the Neos rented the land. The inscription tells us who owned the land in the past and what it includes. It also mentions a holy altar. The Neos express in the agreement that they want to use this holy place three days a year. In this period, the state collected tax from lands. But since the land was defined ‘holy,’ it was exempted from tax. It is understood that the land was rented at an auction and the name of the renter is written on the inscription,” [Archeology professor Mustafa] Adak said.

[…]

Almost half of the inscription is filled with punishment forms. If the renter gives damage to the land, does not pay the annual rent or does not repair the buildings, he will be punished. The [property-owning] Neos also vow to inspect the land every year,” said the Akdeniz University professor. 
 “There are two particularly interesting legal terms used in the inscription, which large dictionaries have not up to now included. Ancient writers and legal documents should be examined in order to understand these words mean,” Adak said.

As I’ve written here before, the ancient world’s commercial property business was a fascinating and sometimes depressing thing. So the next time you’re convinced the commercial lease on your desk is difficult to understand as well as being hard to break, think of  the landlords of Teos, their human property and their stone lease.  Today’s tenant has it relatively easy under that comparison.

Photo credit: Ars Technica

 

Fed: Foreign Lending For Commercial Real Estate Highest since 2010

Commercial Source Blog Feed - Fri, 10/14/2016 - 13:02

It’s an old argument, and it goes something like this: the newest federal regulations on commercial real estate lending standards in the wake of the 2008 financial crisis are too onerous for US banks to adapt to. Sarbanes-Oxley and Dodd-Frank regulatory packages taken together, the line of thinking goes, are strangling US banking and threatening efficient capital allocation by introducing piles of red tape. Too many commercial deals slow down and die waiting for capital, and it’s all thanks to these regulations, say many.

An equally old argument is its opposite:  that the culture of banking, from too-big-to-fail banks down to community banks, is terrible at self-regulation. That systemic risk in lending and repackaging is a real thing that came astonishingly close to burning down the world eight years ago. That evidence is plentiful for this side — from Wells Fargo’s recent sham-account fraud and criminality to the total fines levied on big banks breaking the $200B mark.

No matter what side you find yourself on, a fact remains: to get commercial real estate deals financed, an increasing number of players are looking beyond the regulatory footprint of the US. The winners this are foreign lenders, who are enjoying eye-popping growth over the past six years of commercial mortgage lending.

Foreign Lenders Growth in CRE Outstrips CRE Growth Rates US-Chartered Banks 

The Federal Reserve’s Financial Accounts of the United States includes a subsection called “L.220 Commercial Mortgages”.  And on line 13 of the table that illustrates that since 2010, foreign lenders have increased their amount of money lent to commercial mortgages by a little over 80%. Second quarter 2016 has this number at $55.8 billion.

Meanwhile, US-chartered institutions increased their business in commercial mortgages by 15% on a portfolio of over $1.4 trillion.  Note the two lines highlighted next to each other in the table above (click to expand).

So while the US banks lead foreign lenders by more than 30-1, the steepest commercial mortgage business growth volume by far is non-US lenders.

The Why And The What

While there’s no Fed data that puts the cause of the sharply increased foreign lending at the feet of recent regulatory attempts, that won’t stop market-ideologues from claiming that regulation is the reason.

But when they do, we have to remember that on a volume basis, under current regulation, the growth increase alone in commercial mortgage lending by US banks absolutely dwarfs the entire total foreign lending commercial mortgage market by almost 4-1.

So recent regulation is by no means fatal to commercial mortgage lending in the US. Even if we assume regulation explains the sharp rise in foreign lending, the period in question has merely eroded the huge lead US lenders have, by moving the ratio of foreign commercial mortgage lending vs US commercial mortgage lending from its 2010 level near 50-1 favoring US lenders vs. a 30-1 ratio today.

When capital markets change, it’s certainly something to keep an eye on. But rushes to judgement about cause and effect just aren’t in the Fed’s own numbers about commercial mortgage lending.

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Refi Roundup: Ten Notable Refinance Deals This Month

Commercial Source Blog Feed - Tue, 10/11/2016 - 10:40
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As long as the Federal Reserve continues to hold down the cost of borrowed capital, the market to trade in old financing for better terms on commercial property remains hot. Nationally, here are ten notable refinance deals in commercial real estate. Some went to fixed-rate, some went to floating-rate, but all went to the closi one more time.