BILL CHERRY'S GREATEST DALLAS PARK CITIES REAL ESTATE BLOG: September 2010

There is a real estate research reporting service known as Veros Real Estate Solutions, that has been looking at the components that make-up a real estate recovery scenario.

Their recent report shows that the Houston area will probably have the greatest home price appreciation over the next year with Dallas ranking second.  They estimate that Houston's price growth will be about 4 % while Dallas' will be about 3%.

In the case of Houston, in comparison to the rest of the nation, unemployment for August was only 8.7%, and while that is a far cry from the rate just five years ago, it is still encouraging.

It is easy to see that now should be a better time to purchase a home than it will be in within the next few years.  One way or the other, attrition will remove the over supply of homes for sale, and replace it with a tight, price-growing market.

BILL CHERRY, REALTORS

DALLAS - PARK CITIES

SINCE 1964

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There is a report this morning that Zillow Mortgage Company, when it surveyed a sampling of U.S. residents, found that fully one-third did not feel that today they would qualify for a home mortgage.

Studies like this are always suspect in accuracy, but nevertheless, those of us who service the home buyers and sellers know that such a prediction would be true for a significant percentage of the adult population.

The positive side of this equation is that demand for housing can't shrink unless the population does.  And that's not likely to happen.

People are living longer, and those of childbearing age are still having children. 

And whether the mortgage industry, commercial banks and the government mortgage programs like it or not, they are forced to satisfy that need.

So either the strain will show its increase on rental units, on single family homes or both. 

Meanwhile, the foreclosed home unit inventory will be removed from the market by attrition, while home and apartment builders wait for signs that there is demand for their products. 

Values, in general, of the homes standing today will increase to levels that were above their previous high, as demand exceeds supply.  New homes will cost more to build, so they will cost more to buy.

With respect to the government's secondary mortgage programs, what will lie in their future will be the requirement that the originators of the loans keep a portion of the loans themselves.  And that is the obvious way to seriously constrain bad underwriting.

For the home buyer who qualifies for a mortgage today, now is the time to buy, now is the time to trade-up, now is the time to accumulate rental units -- whether single family, apartment units, or both.   The value is there and the demand is on its way.

BILL CHERRY, REALTORS

DALLAS - PARK CITIES

Since 1964

214 503-8563

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BOB FORD DIED LAST WEEK ON GLAVESTON ISLAND.  HE WAS 81.

More than 50 years ago, Bob Ford and his friend, Charley Killebrew decided that there was money to be made as beauticians, so they drove back and forth to a beauty school in Houston to learn the trade and to get licensed.

Then the two of them and their wives bought Jacqueline's, an on going and well-established Island beauty shop that was in downtown Galveston next to the Martini Theater.

They were ready to go full speed ahead in their new venture.

On their first day as owners and as practicing beauticians, my mother and one of our neighbors called for appointments with the former owner.  They learned she was no longer there, but it was then suggested that Mr. Bob had a couple of openings.  My mom and the neighbor, independently of each other, signed up.

Both of them got their usual,The Works, and the tab as 5 bucks a piece. Whether either of them also gave a tip was never discussed.

However, for more than 40 years my mom and our neighbor continued to be customers of Bob Ford. 

The fact that they had been his very first customers wasn't revealed to them until a number of years later. 

Nevertheless, throughout all of those years, the price of The Works for them remained $5.00.  I suppose Bob's personal expression of thanksgiving to his first customers.

BILL CHERRY, REALTORS

DALLAS - PARK CITIES

Now Entering Our 46th Year

214 503-8563

WEB

I have a growing concern about the marketing to investors of an investment called Life Settlements.

Even though they are now regulated by the Viatical Settlement Model Act, in my opinion they represent an inappropriate investment for many who salespeople are prospecting.

While Life Settlements -- formally known as Viatical Settlements -- have been a legal investment since the days when Oliver Wendell Holmes wrote the opinion for the Supreme Court which virtually authorized the transactions. TThey didn't become a popular investment vehicle until recent years.

The idea is that someone who owns a Whole Life or Universal Life insurance policy (it can either be on his life or that of someone else), who no longer has a need for the coverage, sells the ownership of the policy to someone else.

At that point, the buyer is named the beneficiary and makes all future premium payments on the policy until the insured dies.  At that point, the face value of the policy is paid to the owner of the Life Settlement.

A life insurance contract, say for $250,000, would bring the original owner. in most instances, somewhere between $50,000 and $150,000. 

The actual amount is dependent on the actuarial calculation which would determine the insured's remaining life expectancy.

So let's say you bought a $250,000 Whole Life policy insuring the life of a man who is 65 and in reasonably good health for his age.  You pay him $50,000 for assigning ownership to you.

The actuarial life of the man, let's say, is 77 years.  But that is not the same as a prediction as to how old he will be when he dies.  He could die the day after you purchase his policy, so you would get an immediate profit of $200,000.  However, he could live to, say, age 90. 

Now the situation is entirely different.  Your $50,000 has been tied up for 25 years, and you've had to pay the annual premium on the policy for those 25 years.  Let's assume that annual premium is $7,000.  Without calculating loss of return on investment, you have $225,000 invested and, as beneficiary, you will be paid $250,000 for a net "profit" of only $25,000.

In addition to that real and indeterminable risk, unlike most securities, there is no organized secondary market for Life Settlements.  That means that should you need your $50,000 initial investment before the insured dies, there is no organized way to sell the Life Settlement to someone else.  The best you can expect is to be able to surrender it to the insurance company for the policy's cash value which, in all likelihood, will be substantially lower than your gross investment.

There are a number of "financial advisors" who are marketing Life Settlements to senior citizens.  Of all of the candidates, they are the ones for which this vehicle is the least appropriate.  There is a better than reasonable chance that 1) they will need the money from the investment before the insured dies, and 2) the insured will actually outlive them.

Life Settlements are, at best, a hedge for other life insurance companies to put in their portfolios and for large perpetual trusts, say the University of Texas Alumni Scholarship Fund, to match low risk with reasonably high return.  Even in those cases, the only way the investment makes sense is for the owner to have a number of policies insuring people of different ages and health conditions.

It is my opinion that Life Settlements (Viaticals) are rarely appropriate investments for individals.

We have a unbiased question and answer piece we developed and wrote about Life Settlements.  If you are interested in having a copy, please email QandABooklet@aol.com.  It's free, there is no obligation, and no salesman will call you. I wrote it for use as a public service.

BILL CHERRY, REALTORS

DALLAS - PARK CITIES

Now Entering our 46th Year

214 503-8563

WEB

Often times I'm called by a homeowner who has had his home listed with another agent. The home has gone month after month without being sold. 

The listing is now expired and the homeowner expresses to me his exasperation.  "What did Tiffany do wrong?" he asks me about his former listing agent.  "She's with a big real estate agency.  She came with high recommendations from John and Carol Schmidt."

I've learned that more often than not, that the listing agent did nothing wrong.  In fact as I probe, I usually learn that the homeowner refused to let "Tiffany" do her job by accepting and following her marketing plan.  In essence, he wanted it done his way.

If the truth be known, the homeowner is probably responsible for the lack of a contract, not Tiffany. Nevertheless, Tiffany and her agency take the full brunt of the blame.

I would be quick to criticize Tiffany for keeping the listing of a client who refused to follow her plan, but I can't be.  You see, even after all of these years and the experiences I've had as a Realtor, I'm as likely to fall into that same trap as Tiffany was.

There is an irony.  If a buyer for J.C. Penny's purchases more pairs of a certain style of shoes than the market will buy at $200 a pair, Penny's can still recover all or most of its cost by marking the item down to, say $100 a pair.  Eventually most will sell; those that don't can be donated to a charity.

That's because those shoes are physical inventory, owned by Penny's.

Realtors have mistakenly adopted the term "inventory" to describe their listings.  That is a gross misuse of the word.  A listing is nothing more than the collateral to the listing contract.  If it doesn't sell during the contract period, POOF, there is nothing left but a memory.

We have no inventory.  So we shouldn't use that word because it tends to give us a sense of false security.  The "inventory" belongs to the homeowner.  In most cases, the real estate inventory on his personal balance sheet is one home for sale.

The problem is that the time and money that are spent by the agent to market a home is a 100% bad investment if the property doesn't sell.  There is no way to mark down the listing contract so that the agent can recover so much as a fraction of the actual costs he incurs. 

So I forgive less experienced agent for allowing themselves and their personal investments to be put at risk by their listing client.  But it is totally unforgivable that I would continue to fall into this trap from time to time. 

 And you know what?  I just did it again.

Patty said, "Are you mad?"  I said, "Only at myself," then couldn't keep from falling into a belly laugh.

BILL CHERRY, REALTORS

DALLAS - PARK CITIES

Now Entering Our 46th Year

214 503-8563

WEB

I admit that several times I started reading Catch-22 by Joseph Heller.  Each time I was unable to get interested in the World War II story, so I put the book down.

Nevertheless, I know what people mean when they say, "It's a Catch-22." 

One of the most disheartening "Catch-22s" of real estate begins when what is normally an owner occupied home is rented to someone else.  It's a logical way for the owner to not be burdened with day to day maintenance, and to get significant assistance in paying the monthly mortgage payments.

The fly in the ointment is the understandable lack of interest the renter often has in seeing the home sold.  After all, none of the preliminaries of showing, selling or the outcome -- him having to move elsewhere -- is anything more than a bother and inconvenience for him.

And he easily rationalizes and forgives himself for all of that.  "After all, I'm paying rent," he says to himself and anyone else who questions his motivations.

Often times this means the home may not always be in pristine showing condition.  The renter may refuse to allow a showing because it will present a minor inconvenience for him.  And then there are those renters who refuse to leave during a showing, and then make it a point to tell the prospect and the agent things he doesn't like about the house.

We can't ignore the additional drama that will come when the house sells - trying to meet the demands of the buyer's move-in date with the tenant's move-out date.

It's no wonder that many agents, when selecting a group of homes to show a client, will not include homes that have a tenant.  There are too many things that can go wrong, he reasons.  Why subject himself and his client to any of that if he doesn't have to? 

Showing homes to clients always must be as close to a 100% positive experience as the agent can make it.

Nevertheless, it's no wonder that many homeowners who have moved elsewhere themselves find it necessary to rent out their last home if it didn't sell before their move.  And I've never known a listing agent or a buyer's agent, for that matter, who wasn't totally sympathetic.

So let's lay out the "Catch-22."  Every party to the process - including the tenant - wishes the house were either occupied by the owner or able to be left vacant.  Understandably, it can't be.

Nevertheless, in most cases the fact there is a tenant, a tenant who will have to move when the house is sold, means marketing the home will carry with it a significant cloud.

My good fortune is that one of my listings, although occupied by tenants, is leased to a fellow-Realtor.  She and her family are the made-in-heaven match for my client and for me. 

BILL CHERRY, REALTOS

DALLAS - PARK CITIES

Now Entering Our 46th Year

214 503-8563

WEB

My introduction to the real estate business was as a loan officer for a large Texas mutual savings and loan association.

I think because I was the low man on the totem pole, I was in charge of trying to work out pending foreclosures, and if I couldn't, going with the attorney to the appropriate courthouse to hold the trustee sale.

About ten days before the dreaded First Tuesday, the attorney would come pick me up in his big Lincoln, and we'd drive to the front door of every one of the houses that would be sold to satisfy the home loan.  Occasionally it was a mansion; more often than not, it was the small home of a family who was down on its luck.

The attorney would compassionately ask the homeowner why he hadn't paid, and then would quietly listen to the story.  Then he'd say, "If we can get you through this month, will you be able to catch up and begin paying next month?"

More often than not, the homeowner would sincerely say he thought he could. 

The attorney would say, "What have you got of value that I can take back to the lender to show that you're sincere in your promise?"  Often it wasn't much.  Maybe a watch or ring.  Sometimes it was a bunch of fresh collards from his garden.

The attorney would give him a receipt for the item, then the past due payments would be added to the back of the loan...in other words, that missed payments would be due at the loans maturity date.

If the homeowner made his next payment on time, the item he had given to the attorney to prove the owner's sincerity would be sent back to him.  If he didn't, and his house were foreclosed, the item would also be sent back to him, unless, of course, it had been a bunch of collards.

Did it work?  Of course it did.  People want to honor those who have honored them.  Appropriately, later the attorney was elected as a district judge.

BILL CHERRY, REALTORS

DALLAS - PARK CITIES

Now Entering Our 46th Year

214 503-8563

WEB

I had never thought much about Barack Obama before a neighbor put up a yard sign supporting Mr. Obama's nomination and subsequent election.

I did think, though, that the names were odd for a person who would be considered as a United States presidential candidate of a national party.  I looked up Barack since I'd never heard the name before.  Be darned if it wasn't the name of one of the characters of the Old Testament.  Obama turned out to be kind of the "Smith" of Muslim names. 

So the fellow's given and surnames are an amusing contradiction.

And then all of a sudden my neighbor down the street added some more Obama yard signs, and within moments Mr. Obama was being sworn in as the President.  What happened?  I wondered.  Even for those who didn't like him John McCain was a tried and proven quantity.  Mr. Obama was but a vision as to what he could be, might be.

Last week as I turned the corner onto our street, there was a new sign in my neighbor's yard.  It said, "Tired of this mess?  Vote Republican."  Good grief, I mused.  Make up your mind, already.

Most people, including me, despise what appears to be vacillation and unpredictable solutions to problems more than they do the problems themselves.  Almost everyone is formally taught, or figures it out for himself, that maintaining the status quo trumps change unless those advocating change can 1) prove that change is necessary and 2) prove that their proposed solution will be the most efficient way to make the change.  And those advocating change must prove both parts; one without the other looses.

Today many want to say to Mr. Obama, "Stop!  Leave things alone.  You haven't shown or proven the voracity of "the problem" much less proven to us that your solution is the most efficient way to make the change."  That is the social and cultural void in his administration that, I believe, caused my neighbor to put up a Republican yard sign.  And it's the primary reason for the birth and growth of the Tea Party Movement.

However, I believe that no matter the outcome of the November elections, prospects for the future of the economy will get better.  They will primarily because the lack of uncertainty will be resolved.  The voters will either support the manner in which the Obama administration is identifying and approaching the solutions to national problems, or they won't.  

In either case, the feeling will be that it's time to move forward.  The markets will begin to recover.  Whichever side has won will claim the victory.

BLL CHERRY, REALTORS

DALLAS - PARK CITIES

Now entering our 46th year

214 503-8563

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Education, mine in particular, has always been among those things at the top of my List of Zillions for which I'm grateful.

I'll admit that it has only been recently that I haven't been pursuing one avenue of formal education or another.  My wife, a retired school counselor, says it was because I am gifted - interested in many subjects and, in the main, not restricted in the natural ability it takes to learn them.

I don't agree with her, quite frankly.  I think her reasoning is entirely too serious.  I chalk the whole thing up to my being a Gemini, a Gemini with a curiosity that even today remains impossible to satisfy.

Like a child's love for his grandma who makes sure he gets special love and tops it with rewards of candy and ice cream, I love those who have shared their knowledge with me; taught me about those things which, at the time, were profoundly important to me.

As the cycle of life goes in the universe, so it goes with that special list, the list of teachers and professors who taught me.  And it would be entirely wrong to overlook including my parents, grandparents, the parents of my friends, and the telephone repair man, and Hans Gouldman who was a chemist who owned a paint store, and who taught me to use a slide rule.

To the best of my knowledge, none of those who taught me before my college days is still alive.  The last one, Coach Richard Schiebel passed away within the past six weeks. 

<<== Lt. Col. Richard Schiebel

And then there are those who taught me in college.  Take Leon Breeden.  He was the professor of jazz music at University of North Texas.  Although I never took a course under him, through our friendship of more than fifty years, he taught me nevertheless.  Dr. Breeden passed away a few days after Coach Schiebel did.

Dr. Leon Breeden ==>>

I am confident that there are only two remaining alive who taught me.  One is Dr. Ted D. Colson, a professor of speech, who trained me so that I could express to audiences as small as one, as big as millions, what I knew and thought.  And I met my wife Patty in one of his classes.  That was important, too, because I'm certain I used the skills Dr. Colson had taught me when I convinced Patty to marry me.

Dr. Ted Colson ==>>

The other professor is Dr. Chester Newland, who taught, and continues to teach, government - some call it civics.  He's been at the University of Southern California since 1966.  I heard from him the other day.  He's 80.  His research, writing and lectures have been devoted to public administration research.  His teaching has focused on public executives, federal and local government management, the American presidency, public law, business and government, human resources, and labor management relations.

But what Dr. Newland taught me that I found profound was the meaning of the Bill of Rights.  You will recall that the founding fathers attempted to sell their draft of the Constitution to the People.  There was a very loud outcry, and a resounding "No!" 

<<== Dr. Chester Newland

The Constitution was solely made up of what rights the government had.  No where did it address what rights the people retained over it.  That was when the Bill of Rights was added, and the documents were ratified.

Dr. Newland taught that the Bill of Rights "equally guarantees the Dignity of All Man."  For the past fifty years, I have weighed the merits of one argument after another by testing the argument by asking myself, does it challenge the equality of the Dignity of All Man granted by the Bill of Rights?

Make it a point to thanks those who gave you the tools that came with education.  Pray a prayer of thanksgiving for those who are no longer able to hear your voice.

BILL CHERRY, REALTORS

DALLAS - PARK CITIES

Our 45th Year

214 503-8563

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The Famous Portrait of the Little Girl Named Judy 

By Bill Cherry

It hasn't been that long ago, really, since a major portion of physicians, dentists and attorneys had their offices in their city's downtown. The prestigious ones were in big bank and major office buildings; the lessers sprinkled in here and there.

And ladies wore their nicest dresses with big hats and gloved hands whenever they went downtown, even if they got there by a city bus rather than in the backseat of a chauffer driven Cadillac limousine.  

In fact the only way you knew they weren't on their way to church was because it wasn't Sunday and they didn't have a Bible under their arm. 

During the war years, Edolia (Ed) Rees and her daughter, Joyce Crainer, drove into downtown Houston for Miss Joyce's appointment with the doctor.  His office was there on Main Street above a very famous portrait photographer's studio. 

Miss Joyce and Miss Ed were taken when they saw the portrait in the studio's window of a pretty young girl.  She was sitting on a stool, looking at herself in a hand mirror. Miss Joyce said to her mom, "If someday I have a girl, I want to have her photographed just like that."

Wouldn't you know it wasn't long until Miss Joyce had her first baby and it was a girl?  She and her husband, Cecil, named her Judith; Judy for short.

When Judy reached four, for Christmas her grandmother gave Judy's mother a gift certificate so that Galveston photographer, Tommy Witwer, could pose Judy just like the little girl had been in the portrait that they had seen in the Houston photographer's show window.

When Mr. Tommy had the pose ready to shoot, he put his head under the black cloth hood of the big wooden camera.  That's when he noticed something that he hadn't posed.  The camera was also seeing the reflection of Judy looking at herself in the mirror.  That nuance had been missing in the other photographer's work.

"Perfect artistry sent by God," Mr. Tommy said to himself, and then he pushed the plunger that flicked the shutter.  God and Mr. Tommy's picture of Judy won national awards. 

Sixty years later, a copy of that portrait of Judy Crainer Damiani is among my collection of favorite Galveston memories.

Copyright 2010 - William S. Cherry
The Galveston County Daily News