China gets tough over America’s ballooning debt. But in Colorado, the sheriff has already announced that criminal charges will be filed against Balloon Boy’s father. What more does China want?
Daily Archives: October 17, 2009
Moscow Mayor declares he will stop snow from falling on city this winter. The mayor would fit in nicely over here.
I wrote last year about this young man from Riverside (his mother, Bonnie, served with Pal Nancy years ago on the PTA) who promised, in response to my complaint about finding firewood dealers who would deliver an honest cord of fully-dried hardwood, that he always did exactly that. I didn’t need wood at the time but now I do and yesterday ordered a couple of cords, one for my house and one for Pal Nancy. It arrived today and its everything Bryan said it would be – good wood, dry, and a honest-to-God cord. I paid $245 a cord because of buying two with delivery just two doors apart, but one cord will cost you $275, plus extra for stacking (I prefer the exercise).
So if you need wood, Bryan’s your man: (203) 496-1241, or Bkrois@optonline.net. He also does masonry, excavating, paving and lots of other things so you should consider him for those jobs too. A good honest local man – and you can always call his mom Bonnie if you want to complain (kidding).
The Times reports on a new program that, for 1 – 2.5%, guarantees against losing money on a house you buy. Pay $1 million for a house, sell it two years later at a loss, you get the difference.
With the product, Equity Protection, a homeowner is charged a one-time fee of 1 percent to 2.5 percent of a home’s value, which is determined by the company. (The fee can be paid in monthly increments.)
Homeowners in quickly declining real estate markets, like Phoenix, will pay on the higher end of that range. In most ZIP codes in Manhattan, the charge is 1.5 percent.
Homeowners are essentially guaranteed that when they sell their home, they will not lose money because of a market downturn, even if the sale price falls below the home’s value at the start of the contract.
When a customer buys a contract at equityprotection.com, the company takes a snapshot of the average home price in a customer’s ZIP code, as tracked by First American CoreLogic of Santa Ana, Calif., a consulting firm that compiles a local housing index.
Take, for instance, a $500,000 co-op apartment in Midtown Manhattan. If, after two years, the average property value in that homeowner’s ZIP code, as measured by the index, has declined by 10 percent, and the homeowner sells the property for 10 percent less than its value at the start of the Equity Protection contract, Working Equity would reimburse that amount, or $50,000, to the homeowner.
Taking into account the 1.5 percent, or $7,500, fee at the start of the contract, the homeowner keeps $42,500 of a possible $50,000 loss.
But the coverage doesn’t end here. Even if the homeowners sell the property for 5 percent less than what it was worth at the start of the contract, Working Equity still promises to pay them the 10 percent, because that was the average loss in value in the homeowners’ ZIP code.
I haven’t checked out the website – yet – but this strikes me as an excellent selling tool to overcome a buyer’s reluctance and cheaper, probably, than whacking huge sums off your asking price. And: this is heresy, maybe you can persuade the agents involved – buyer’s and seller’s to kick in a portion of that premium. Or a buyer could buy it himself. Either way, I think I’ll recommend all my buyers t look into it. The article comes with caveats from financial experts that there can be some downsides with this program but n the whole, I think it’s promising.
UPDATE: Don’t miss the comments section to this post where a number of very smart readers pick the proposal apart. They all make excellent points and their judgment is that this in NOT the good idea I thought it could be. Which is why writing this blog is so much fun and so educational for me. Ny the way,I particularly like reader Martha’s comment that, if everyone is panicking about stop losses, that’s a good contrarian indicator because when “everybody” knows something, it’s usually time to head the other way.
How (and why) banks are prospering. The big get bigger. Just don’t forget to buy a big, expensive home in Greenwich to celebrate your good fortune, gentlemen. There are several available on Round Hill Road, if I may make a suggestion.
Pulled Up in OG sends along this link to a Greenwich Time article on Patriot’s woes. It’s a discussion of the same law suit seeking to wrest control of the bank that reader Pan alerted us to earlier this week but this article comes with an interesting quote from Patriot’s chief, Charlie Howell.
While Howell couldn’t discuss the lawsuits, he did explain why the bank was trying to raise money from a private equity group.
Simply put, it needs the infusion to remain well above regulatory standards for capitalization.
The bank does meet regulatory standards now, he said, but in the summer, part of its lending portfolio came under pressure because of problems in the real estate market and Wall Street.
He said about 35 percent of the company’s construction loans are in Greenwich, and when the real estate market and Wall Street fell apart last year, it jeopardized some of those loans.
Normally, the bank carries loans like these for 15 months, but in this market, the period has been extended beyond 24 months, he said. That’s because the homes the builders constructed haven’t sold.
Howell said some of the loans are late, but the bank is confident the market has bottomed in Greenwich, and Wall Street pay is going to be back on track, allowing for better times in the first quarter of 2010.
But he said the bank does not think it wise to try to ride out the rest of year and forego the private equity infusion, which is why the board of directors is still weighing Carrazza’s and the other offer.
Well, if Charlie says that the bank meets all applicable capitalization standards, he should know; I’d heard different, which just goes to show you how often I’m wrong. The article (and the linked-to SEC disclosure report) does shed a little light on what happened last summer, when Patriot’s chief lending officer, Marty Nobel, was desperately flogging the woods to find someone to buy their loan portfolio – it would appear that Nobel was covering his bases and seeking loan portfolio purchasers in case this bid from Michael Carrazza fell through. Marty’s sales efforts caused a lot of people to waste a lot of time and money for naught but when the poor man’s survival is at stake, I suppose that’s understandable.