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Sterling, Realtors in the News
S.O.S. Sorting Out Subprime
10-30-07 BY: BLACK ENTERPRISE TREVOR DELANEY
TIMES HAVE CHANGED FOR MIKE TEER. A real estate broker in Riverside, California, Teer's business has fallen off dramatically over the last 18 months. And it's no wonder. In the first half of this year, Riverside posted the highest number of foreclosure filings of any metro area in the country--a total of 41,351, or one for every 33 households, according to data provider Realty Trac Inc.
Not too long ago, Teer says he could place a "For Sale" sign in a yard and offers would start rolling in, often that same day or, at the most, within just a few days. Now he says properties stay on the market an average of 90 to 120 days. As a result, three of eight agents left Teer One Properties, his 18-year-old firm. "Those agents whose only source of income was real estate commission checks and who have gone several months without a closed transaction have been forced to get another job," says Teer.
The housing slowdown has also led to changes in his day-to-day activities. Though Teer has more time to work with clients, he has also taken up blogging and opened an account with Zillow.com. the popular Website that allows users to obtain an estimate of a home's value. "Frankly, these are things that I didn't have to do two years ago," he says. But perhaps the most significant change is that it's been increasingly difficult to get buyers to pay the true value of a house, forcing sellers to become more flexible. Says Teer: "For more of my clients who are selling and can't afford to leave the house empty, I'm helping them find tenants to lease the property, for at least a year, to give them more time for the market to recover."
Even though he says no more than a handful of his deals involve subprime loans--which are higher interest rate loans offered to borrowers with low credit scores or a heavy debt load--it may have been unavoidable for Teer, as a broker in a hard-hit market, not to feel the sting. But it's the more widespread fear of just how far the subprime mess may impact other areas of the economy that has led to increased stock market volatility and caused lenders to tighten their purse strings.
In September the Federal Reserve took action to suppress rising economic anxiety by cutting the fed funds rate--the rate banks charge each other for overnight loans--for the first time in four years, lowering it from 5.25% to 4.75%. How Chairman Ben Bemanke would address the subprime situation was regarded as his first major policy challenge since taking office. The fed funds rate had been 5.25% since June 2006, which marked the end of a string of 17 rate hikes. Whether lowering interest rates will calm investors' nerves and stabilize the market will take time to play out.
To get a handle on how the housing slowdown may continue to ripple through the economy, it's first necessary to look at how the subprime stone was cast. Barring the economy slipping into a recession, it appears that the subprime situation may present a classic half empty/half full scenario for investors.
THE SUBPRIME STONE
It's abundantly clear to many market watchers that maintaining low interest rates for such an extended period naturally fuels speculation and risk-taking. So why did it seem that most of Wall Street was taken off guard when cracks appeared in the subprime foundation?
One key factor is that many of the mortgages offered to sub-prime borrowers were relatively new creations. "The option adjustable rate mortgages and the interest-only mortgages, etc., had never really been rolled out in such volumes," says professor Raphael Bostic, director of the Master of Real Estate Development program at the University of Southern California in Los Angeles. "In particular, we had never seen how they performed in periods of [economic] stress."
These new products were introduced as lower interest rates fueled the housing boom and lenders looked for ways to maximize their participation. As they sought a larger piece of the housing action, many lowered their credit standards. At times, adjustable rate mortgages were made without regard to the borrower's ability to repay once the low introductory teaser rate was reset to a higher level. The reset often resulted in a substantial increase in the monthly mortgage payment, making for an unaffordable burden.
Because their low introductory rates made homeownership more affordable, adjustable rate mortgages increased in market share. Now, many are pointing their fingers at mortgage brokers for pushing these products to subprime borrowers. They claim a number of brokers made assurances that it wouldn't be a problem to refinance before the interest rate reset--typically within two to five years. However, as the market softened, it has become difficult to refinance. The end result: Many face foreclosure.
The rising foreclosure rate will have a significant impact on African American homeownership, which has declined slightly in recent years and remains below 50%. Studies by the Durham, North Carolina-based Center for Responsible Lending and the Washington, D.C.-based National Community Reinvestment Coalition have analyzed mortgage origination data revealing that African American borrowers are more likely to receive high-cost subprime loans. And it's not just a low-income phenomenon. In fact, the NCRC study, Income is No Shield Against Racial Differences in Lending, found that in 159 metro areas across the country, more than 40% of the loans to middle- and upper-income African Americans were high cost. Because "subprime" refers only to the interest rate attached to the loan, it's important to remember that they can be fixed-rate or adjustable-rate mortgages. Similarly, it's important to note that while such disparities must be addressed, it's unwise to speculate as to how much of the difference can be attributed to predatory lending.
All the while, as housing values climbed, investors sought to participate in any way they could. Wall Street satisfied that demand by churning out mortgage-backed securities. "Increasingly in recent years, mortgage lenders have shifted from lending money and holding the mortgage to lending money and then pooling the mortgage with others to issue securities against it," says Dr. Andrew Brimmer of Brimmer & Co. in Washington, D.C., and a member of the BLACK ENTERPRISE Board of Economists. "Many of those securitized mortgages were rated AAA and AA by the rating agencies." These newly created bonds, called collateralized mortgage obligations (CMOs), are backed by the income stream from the bundled mortgages. Generally, bonds that are backed by debt instruments, including mortgages, are referred to as collateralized debt obligations (CDOs). It was the meltdown of subprime mortgages and the CDOs that they backed that rendered two Bear Stearns billion-dollar hedge funds nearly worthless in July.
As institutional investors sought to maximize their returns through these mortgage-backed securities, somehow the riskiness of lending to borrowers with less-than-stellar credit was downplayed. "Once some organizations started to have problems, all of Wall Street has said, 'Whoa, wait a minute. What have we been doing for the last couple of years?'" says Bostic, a former senior economist for the Federal Reserve Board of Governors. He says the liquidity crunch came about as a result of institutions "taking a step back" and assessing the risks they're taking on. Still, for some it was too late. According to Bloomberg's Subprime Scorecard, more than 100 mortgage companies have ceased operations or sought buyers since the start of last year.
Indeed, it was the rising liquidity crunch that led the Fed to inject billions of dollars into the financial markets through a series of repurchase agreements in August. In a repurchase, the Fed buys securities from dealers, who then deposit the proceeds into commercial banks. This raises the amount of money in the banking system. Ultimately, when the securities mature, they are returned to the dealers, who in turn repay the Fed.
"The Fed took action because the commercial paper market seized," says Cyril Theccanat, managing director of investment management at Smith Graham & Co. Investment Advisors L.P. in Houston (No. 8 on the BE ASSET MANAGERS list with $2.3 billion in assets under management). "They were very concerned that there would be a spillover effect in the real economy." Commercial paper--including CMOs--is short-term debt, with a maturity of 270 days or less, that is primarily used by corporations to finance inventory or manage working capital. "If corporations are unable to fund themselves in the short-term market, then that is going to have negative implications from the standpoint of capital spending and job growth," he says.
THE RIPPLE EFFECT
Subprime loans account for 23% of the mortgage market. Of those loans, the Center for Responsible Lending forecasts that one out of five originated in 2005 and 2006 will end in foreclosure. So far, the delinquencies are concentrated. The Mortgage Bankers Association reported that in the second quarter, the increase in foreclosure filings in four states--Arizona, California, Florida, and Nevada--was largely responsible for an overall rise in the national delinquency rate, which grew to 5.12% of all loans outstanding. In a release, the association's chief economist said that were it not for the increases in foreclosure starts in those states, there would have been a nationwide drop in the rate of foreclosure filings.
But with billions of adjustable-rate subprime debt expected to reset in the next few years, the circle of subprime ripples may continue to grow wider.
The Housing Market
"Surprisingly, the high end of the real estate market has ground to a halt," says Maceo Sloan, chairman and CEO of NCM Capital in Durham, North Carolina (No. 7 on the BE ASSET MANAGERS list with $2.5 billion in assets under management). "The ramifications on this type of slowdown in the upper end of the housing markets will have a spillover effect into purchases of appliances, furniture, and other goods. This was certainly not an area that was expected to have problems."
Jackie Williams, a real estate broker with 31 years of experience and the owner of Sterling Realtors in Middletown, Connecticut, puts it in perspective. "It really is not doomsday," she says. "If we can survive 1988 through 1991--with banks closing, interest rates escalating to 10% and 11%, and a shutdown of lending to people with less worthy credit--we can survive anything." Her agency, which has a roster of 27 agents, sells an average of 300 homes a year. Williams says that roughly 20% of her company's transactions involve subprime mortgages.
For those who are currently looking to buy a home, she encourages people to try to identify all possible sources of funding and to exercise caution to fully understand the terms of the loan. Borrowers should be sure not to overlook smaller lending institutions such as local banks that often set aside funds for community lending programs. And as a buyer: "Now is the time to negotiate," she says. "Everything in the world is negotiable." Along those lines, Teer says he tells buyers not to get too caught up in cosmetic issues that they might be able to correct themselves, but to instead prioritize "health and safety" issues such as plumbing, heating, and the condition of the roof.
In Middletown, Williams says that housing inventory is up 30% to 40% over last year, making it much more competitive for sellers to get the attention of buyers. Like Teer in Riverside, she says sellers in her market have to "price to sell" and be willing to negotiate, or risk having the house sit on the market for an extended period. What's more, because of channels like HGTV and the plethora of interior design programs on television, she says buyers often have high expectations. Sellers also should work with their realtors and tap in to their expertise in terms of setting a price and determining what steps may need to be taken before putting a house on the market. (to read more click here).
Real estate survival guide
Choose the right location for your business in an uncertain marketplace.
By Anne Field, FSB contributor
October 18 2007
(FSB) -- When Jared Heyman's market research firm, Infosurv, grew from two to seven employees, the CEO knew he needed more space. So, two years ago, he leased a 1,300-square-foot office in Atlanta for Infosurv (infosurv.com), adding 300 square feet. As business took off, Heyman hired ten more people, and the company's once-roomy digs quickly became crowded. Heyman branched out to the floor below, assigning salespeople to one area and operations to another.
Infosurv kept growing, and Heyman now plans to move his nine-year-old venture to more expansive quarters in the same building. In retrospect, he wishes he had taken more time to forecast where his business would be in five or ten years. Looking back at the costs of decorating and rewiring both floors, he figures he spent about $5,000 more than he would have had he moved to the right place the first go around. "When you get office space, you have to think strategically," Heyman says.
Whether you are starting a new business or already running a fast-growing firm, choosing the right home for your company can be tough - especially in an uncertain real estate market. You don't want to pay for space you may not use for years, but you don't want to be forced to move before your lease is up either. The trick is to estimate the growth of your business during the duration of your lease, a task that can be tough even for veteran entrepreneurs.
Giving careful thought to the goals in your business plan can make it easier to get the space you need, say real estate experts and entrepreneurs. What goals do you hope to achieve in the next few years? Will you be adding new products or services? Do you plan to hire employees with skills you don't have on your staff now? Will you seek bigger-ticket customers who will expect to meet you in a fancy boardroom? And how much revenue do you realistically expect to generate? The answers to such questions will help you find a space that meets your needs without leaving you in the red.
Here are some ideas from veteran entrepreneurs on how to select the right location, whether you intend to lease or take advantage of the tax breaks that come with buying your own space.
1. Stay on the beaten path. The old cliché about "location, location, location" is one that you can't afford to ignore. Rather than assume that you know your customers' preferences, ask them where they would like to do business with you. When Jacqueline Williams noticed sales slowing at Sterling Realtors, her firm in Middletown, Conn., she surveyed her clients to find out how she could serve them better. It turned out that many considered her office inconvenient. She had set up shop near the Wesleyan University campus, where she had started out finding homes for professors. In her research off-campus clients said it would be easier to drop by her office if it was in the downtown business district. She ended up moving to a building in that area.
The result: Revenue picked up, not only because many potential clients noticed her shingle while driving by, but also thanks to an increase in client referrals. Recently, Williams renovated the space after buying out her partner's share of both the 17-year-old company and the building. She re-opened her offices with a ribbon cutting ceremony hosted by the mayor.
2. Consider rush hour. If you do business in a densely populated area, choosing a location right off a major highway or near public transportation may have a big effect on your team's productivity, says Matthew Adler, executive vice president of the Adler Group, a Miami-based commercial real estate firm. It is tough to schedule morning meetings if key employees are continually getting stuck in traffic. "You need to be in a place that your workforce can get to easily," says Adler.
How best to figure out whether the location you're considering fits the bill? Jason Weissman, principal in Boston Realty Advisors in Boston, suggests you pinpoint your office location on a map, then draw a circle around the spot to see just what communities in the area would be no more than an hour's commute. Or, try MapQuest (mapquest.com), to see how long the estimated commute time is for a few likely nearby towns.
3. Follow the talent. Will your company need to hire employees with specialized skills or a high level of education? If so, setting up shop near an existing talent pool will make your job easier, says Weissman. For instance, if you anticipate that you will need to hire IT workers, picking an office near a university with a strong tech program will put you at an advantage in winning top employees. To locate metropolitan areas with large concentrations of whatever skills you need, try the Bureau of Labor Statistics site (www.bls.gov).
4. Keep your competitors close. Doing business down the street - or hallway - from your rivals may seem like a roadmap to bankruptcy, but it can be a smart choice. In New York City's fashion industry, for instance, many accessories makers run showrooms in the same building, because it is more convenient for buyers from other cities to visit. "When customers come in from out of town, this makes it easy for them," says David Levy, principal of Adams & Co. Real Estate in New York City. "They just spend the day going from office to office." If you have a slightly different niche from other firms in your area, you will probably be able to pick up clients from each other. "Companies need to be close to their competitors," says Chad Bermingham, a vice president with CBIZ-Gibraltar Real Estate Services in Chicago. Commercial realtors can tell you if there are such buildings in your area. Or, try trade publications for your industry or local business journals; they sometimes include real estate listings.
5. Know when to spring for pricey digs. Not every company needs to invest in Class A space. In some fields, starting up in the garage is a badge of honor. But if you work with big-name corporate clients who will visit you frequently - or you are selling your expertise in creating the right image - you can't afford to scrimp on your office for long.
Just ask Peter Madden, president of AgileCat, who just moved his seven-year old Philadelphia branding and corporate identity-consulting firm to high-rent Center City. He left behind a smaller place in a less-desirable neighborhood. Although he is now paying six times more to do business from his new headquarters, he expects to be able to attract enough high-profile clients to make his investment pay off. "In this region, if you're not in this part of town, you're not looked at as a major player," he says.
The key of course, is making sure you generate enough sales to pay the tab. Rule of thumb: Manufacturing companies should generally pay no more than 20 percent of gross sales for rent, according to Levy. Service businesses, which have lower overhead, can go up to 30 percent.
6. Push for flexibility. If the real estate market in your area is soft, your landlord may be willing to negotiate. Ask for both the right to cancel your lease with a specified amount of notice and the freedom to sub-lease the space.
If you're not sure how well a location will work for your company, there's also another solution: Rent space from a business that specializes in providing short-term quarters. Some of these firms will allow you to lease just a few cubicles for a month or two at a time. "You can get more flexibility without making a major commitment," says Weissman. Of course, it's also a way to cut costs.
Have you raised funding from venture capitalists or angel investors? If so, you may have another option. It's not uncommon for these deep pockets to rent space in their offices to startups in their portfolios. Entrepreneurs usually like these deals. Their space is likely to be better equipped than, say, your spare bedroom.
A heavenly home?
Its definition sometimes depends on a buyer's religion
By Pamela Dittmer McKuen | Special to the Tribune
August 26, 2007
Ramesh Krishnan and his son Chandrashekar, with real estate agent T.R. Viswanathan, at the Krishnan house in Aurora. In keeping with Krishnan's beliefs, the house is situated far from neighboring homes so as not to obstruct the energy flow.
For more people, buying a home is becoming an act of faith.
Not because of the turmoil in the mortgage market. But rather the increasing diversity of the population and the effort to meet their spiritual needs
On the North Shore, a sizable portion of our population is Asian," said Haley Hwang of Coldwell Banker Residential Brokerage in Glenview and a corporate diversity trainer. "Many of the Asians are Indians, and Indians can be Hindu or Muslim. And there is a huge Jewish population."
"These [different religious] practices create a different kind of buying evaluation," added Jackie Williams, who owns Sterling Realtors in Middletown, Conn.
Some buyers will pay more for a front door that faces a certain direction to bring good fortune or for a second kitchen for kosher food preparation, she said.
"Religious consumers will spend more than non-religious consumers to make sure they have what they need," Williams said. "Or they won't buy the house." (to read more click here).
THE NEXT CHAPTER OF STERLING BEGINS
05/19/07 Middletown Press Real Estate Notes 05/25/07 Hartford Courant
After more than 22 years of leading the local real estate market, Sterling, Realtors is rededicating themselves to the community in a new advertising and marketing campaign, which focuses on the needs and experiences of their clients. With a strong foundation of professionalism and commitment to service, Sterling invests in mondern technologies and experience to fulfill, and often exceed, client expectaions. their new logo and positioning line reflect this ecact dedication. Of course, for the truest reflection of the Sterling way of doing business, Broker/Owner Jacqueline Williams suggests we simply look to the people.
"Our real strength is in our relationship with our clients, and with each other. We are committed to keeping the needs of the clients top of mind, and to provide exceptional service 100% of the time."
On the new Sterling, Realtors website, you will find stories from actual clients who have found Sterling Service, and have enjoyed the unique experience of working with a Sterling agent. Here, you too can begin your own Sterling experience by browsing over 50,000 statewide properties for sale, learning up-to-date mortgage information, accessing tips on moving with children and so much more.
Discover your own Sterling story at the new www.Sterling-Realtors.com. Be sure to keep an eye out in your neighborhood for the new signs, listing and ads featuring the new logo and message. Sterling, Realtors it's more than our name, it's the way we do business.
Sterling, Realtors welcomes
Vas Mazzotta, Jennie Wygant and Frank Silva to their Team
[Middletown CT] 04/14/07 Jacqueline S. Williams, President and Broker/Owner of Sterling, Realtors announces the addition of Vas Mazzotta, Jennie Wygant and Frank Silva to its team of real estate sales professionals serving consumers in the Middlesex and Hartford counties.
VAS MAZZOTTA is a life long area resident, with deep local roots. She has enjoyed a long successful real estate career. Prior to joining Sterling, Realtors, Vas held the position of Sales Manager for the Bristol office of the former ERA Innovative Realty. Vas is a certified HOUSE STAGER who pssesses a degree in interior design. Vas is quoted as saying, "Sterling, Realtors reflects my personal business philosophy of providing buyer and sellers with exceptional customer service."
JENNIE WYGANT is a Middletown resident. Jennie earned her real estate certification from the National Real Estate Institute. Jennie will be working with Frank Silva as a team. Jennie is a dedicated professional who takes pride in her attention to detail with every transaction.
FRANK SILVA, also a Middletown resident, and a local business owner. Frank is quoted as saying, "This company has all the character and charm of a small company while being highly competive with the larger ones. I was drawn to the personal service and attention that was offered me. These are feelings that I would like to pass onto my clients."
"We are delighted to have these exemplary agents join our team," said Sterling, Realtors broker, Jaqueline Williams. "Sterling is more than a name. It is a reputation. It is a standard that we not only exect our clients to hold us to, but one we hold to ourselves. It's how we do business. Vas, Jennie and Frank, bring tremendous experience and unending dedication that will certainly benefit our company and our customers."
Sterling, Realtors welcomes
Karen Johnson, Amina Blake and Alicia Deperry to their Team
[Middletown CT] 03/14/07 — Jacqueline S. Williams, President and Broker /Owner of Sterling, Realtors announced the addition of Karen Johnson, Alicia Deperry and Amina Blake to its team of real estate sales professionals serving consumers in the Middlesex and Hartford counties.
Karen Johnson is an area resident, who began her real estate career in Florida as an investment and residential agent. In 1997, Karen Phoenix Real Estate Group, a Connecticut real estate company. She later joined Coldwell Banker, where she remained until her move to the Middletown area, and joining ERA Innovative Realty. Karen is quoted as saying, “Sterling, Realtors reflects my personal business philosophy of providing buyer and sellers the best customer service available.”
Alicia Deperry, formally of ERA Innovative Realty is Cromwell resident. She earned her BS in Psychology from the University of Hartford, and her master in Elementary Education from The University of New Haven. Alicia is a dedicated professional who takes pride in her attention to detail, with every transaction.
Amina Blake, a Meriden resident, is also formally of ERA Innovative Realty. Amina is an accomplished agent with an impressive track record. Amina is quoted as saying, “This company has all the character and charm of a small company while being highly competitive with the larger ones. I was drawn to the personal service and attention that was offered me. These are feelings that I like to pass onto my clients”.
"We're delighted to these exemplary agents join our team,” said Sterling, Realtors broker, Jacqueline Williams. "Sterling is more than a name. It is a reputation. It is a standard that we not only expect our clients to hold us to, but one we also hold to ourselves. Karen, Alicia and Amina, bring tremendous experience and unending dedication that will certainly benefit our company and our customers.”
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