Letter From Motley Fool in response to Lehman Brothers collapse

Because I think we all need this reminder….I am posting an email I recieved from Motley Fool…to stay calm.

 

Dear Fellow Fools,
This morning, markets around the globe dropped further, due in no small part to the collapse of Lehman Brothers. Fools, we understand that the current state of the financial markets and industry can be disconcerting. But please know that we, your advisors, are paying close attention to these events, and we spent much of the weekend analyzing the potential impact on our recommended companies. We encourage you to come to the discussion boards for your services for updates on the credit crisis and its effect on our companies.
More important, we ask you to remain calm. You may be tempted to act rashly, but please remember, this too shall pass.
Like every other financial crisis our markets have faced, this situation is part of the cycle that has allowed so many investors to generate great wealth in the markets. Warren Buffett and his teacher, Benjamin Graham, are right: Over time, the market is a weighing machine. Companies cannot make poor financial decisions without eventually having to deal with the consequences. By allowing the collapse of Lehman Brothers to happen, the federal government and industry giants have indirectly decided to allow the capitalist system to do its work. We believe this is a good thing; it is a statement of hope, and we believe you should embrace it.
During the next few days and weeks, the markets promise to be extremely volatile. The response from Wall Street and the financial press will range from euphoric to despondent, and much of the advice you hear will be emotional and short-term in focus.
We also recognize the very real risks in the market today. More companies are sure to struggle. But at the same time, we urge you not to panic or react in haste. If we retain our wits, we can’t help but make better decisions than the majority of investors.
History has shown that after virtually every sudden drop the market has experienced, it recovered within a few years. Case in point: Six months after the 1995 Oklahoma City bombing, the S&P 500 had gained 17%, and six months after the lows of September 2001, it was up nearly 19%. Even if the rewards aren’t immediately obvious, in the long term, objective analysis of the opportunities and risks will prove superior to an emotional reaction.
Thank you for continuing to put your faith in us and The Motley Fool during these volatile times. We will continue to monitor these events and keep you apprised of our thinking in our issues and updates, on our websites, and most immediately on our discussion boards. To read our latest opinions on the situation and the impact on the companies on our scorecards, go to the Discuss tab of your newsletter website. We also encourage you to check Fool.com for regular commentary as the situation develops.
Foolish best,
David Gardner, Tom Gardner, Bill Mann, Seth Jayson, Jim Gillies, Andy Cross, James Early, Philip Durell, Ron Gross, Robert Brokamp, Amanda Kish, and Shannon Zimmerman

Panic versus Crisis

I just read a great article by Todd Wenning called the Wall Street Panic of 2008.  http://www.fool.com/investing/general/2008/09/04/the-wall-street-panic-of-2008.aspx

There is so much truth in his article.  But the part I want to emphasize is this.  There is a difference between Crisis  & Panic, and yes, we have a crisis on our hands, but it is definitely be exaggerated by panic.

 

“Don’t panic
Of course, no one wants to call this a market “panic.” Instead, in most places it’s been labeled a “crisis.” In fact, the term “panic” hasn’t been widely used to describe a market since the Panic of 1907 — which is unfortunate, because understanding this as a panic has something to teach us.

In the 19th century (the high time for market panics), Yale professor William Graham Sumner defined a panic as “a wave of emotion, apprehension, alarm. It is more or less irrational. It is superinduced upon a crisis, which is real and inevitable, but it exaggerates, conjures up possibilities, takes away courage and energy.”

In other words, the subprime and credit mess is the “crisis” and the “panic” is the exaggerations and doom-and-gloom language that comes with it. We’ve seen plenty of that in recent months. The major news networks have likened our current economy to the Great Depression more than 70 times in the first six months of 2008. So, please, let’s call this market by its proper name: the Panic of 2008.

Fortunately, “A panic,” Sumner continued, “can be partly overcome by judicious reflection, by realization of the truth, and by measurement of facts.” 

….

It’s still scary
Don’t get me wrong, some of the financial headlines we’ve seen over the past few months are downright frightening. But it’s important to not join the panic and to keep a long-term perspective on market panics, booms, crises, and everything in between.”   – Todd Wenning

What NOT to do when Staging a Home

I had heard stories before, but I saw it with my own eyes today.  Luckily for me I wasn’t the first one up the stairs.  I was there with an inspector so he got the scare first & gave me a warning.  I’m afraid if I had been the first up the stairs I would have screamed uncontrollably.

Here is what I saw

Yes – that’s right…. Mannequins’!!!

I don’t know who on earth thinks it is a good idea to put mannequins in a staged home…but in my opinion it is wrong on so many levels. 

1.  Scares the hell out of me, the inspector & every other person I’ve talked to who has encountered a home staged with mannequins.  Even after I knew they were there it was startling each time I saw them out of my peripheral view

2.  In small spaces, it makes the space seem even more crowded

3.  Just plain creepy

4.  And did I mention Scares The Hell Out of Me?!!

If they had been two adult mannequin I would have undressed them & stuck them in bed together for payback. 

Have any of you run into this new staging idea?

OFHEO Just Announced New Conforming Loan Limits

OFHEO just announced that the new conforming loan limits have been set & that they will be in effect until the end of the year per the stimulus package that was passed.  http://www.ofheo.gov/newsroom.aspx?ID=418&q1=0&q2=0

In my opinion this is a great thing for our area as so many homes are above the standard limit of $417,000.00   A comment was made by a user saying it will only help if the lenders lighten up & for some that is true.  However if you have a credit score above 720 and the income & debt ratio to bear the purchase you should be golden for taking advantage of these temporary limits set till the end of this year.

FHA King County Temporary Jumbo Loan Limits Are Set

The FHA limits have now been set.  For King County they are as follows:

 Single Family – $567,500

Two Family – $726,500

Three Family – $878,150

Four Family – $1,091,350

https://entp.hud.gov/idapp/html/hicost1.cfm

Will the Raise to the Conforming Loan Limit happen?

I am sure everyone heard that the stimulus package passed included raising the the conforming loan limit for 2008 only.   It was suppose to go into effect sometime in March, however it seems like it has hit a snag.  The OFHEO (Office of Federal Housing Enterprise Oversight) has come out against it. 

I’m not sure how this will play out, but as I hear more I will let you know.  To see the statement by the OFHEO click this link.      http://www.ofheo.gov/newsroom.aspx?ID=410&q1=1&q2=None

Remodeling Cost to Sale Value Comparison

Realtor magazine printed an article on what the percentage of return for different remodeling cost.  In Seattle there were 4 types that gave 100% or more return.  Siding Replacement (upscale), Deck Addition, Window Replacement (wood), Kitchen Remodel (minor – they defined minor by $22,000). 

There were many other’s that came close to 100%,  but not quite.  To see the source of the data detail check out this website.  Click the button for local info, the graph is of the Pacific region as a whole.  Seattle had better returns than the Pacific Region as a whole.

http://www.costvsvalue.com/seattle.html

A question about the real estate market

I got this question from a friend about the real estate market today

 “How is the real estate market around here lately? We aren’t thinking of selling this year of course but at
the earliest right around the 2-year mark so we can avoid that extra tax. But it will be interesting to
see what happens to the market this year – that will help us determine how many improvements we will do”

Real Estate is going better than the news makes it sound, but it still is interesting.  For real estate professionals who have been in the business a long time they say it’s more like “regular real estate business”.  There are more homes on the market, but if the house is priced right then it sells quick.  A lot of the homes out on the market aren’t that great either.  So having a truly nice home with good curb appeal etc is important now.  There is a lot of mediocre out there, so buyers are really picky when it comes to mediocre.  And buyers definitely feel like they should be able to get a deal right now because of all the media press saying everything is so bad.  So mediocre & not priced well is definitely sitting.

I am really interested to see what happens this spring.  I sold a place last week & when we called for the inspection, the inspection guy said that he was really busy that week.  So if that keeps up then I would say things are picking up, but I’ll just keep watching.  Really I still feel that the only things that are going to hurt is fear & buyers deciding they just won’t pay more for a home due to all the negative media.  I’ll keep you posted.

wow

  ok – i have definitely sucked at keeping up with my blogging.  My new years resolution is to stay more current.

 I think since the last time I wrote I have sold 2 homes, made major progress on our house.  4 weeks before Christmas we started framing our basement.  By the time Christmas rolled around we had framed the basement, wired, plumbed, insulated, earthquake proofed, drywalled, painted, put in new oak stairs & started installing trim.  It was insane.  Many many late hours. 

Now that the holidays are over I’m back to work.

Have a Happy New Year & I’ll talk to you soon.

 Jenn

Disclosures

When a person sells a home they fill out a form called a Form 17 which is a several paged document disclosure form that is suppose to transfer knowledge about the home from the seller to the buyer.  It should include things like “the plumbing backs up on a regular basis & I have to have Roto Rooter out once a year to clean out the sewer main.”  Things that a buyer definitely should have a right to know to make an educated buying decision on such a large purchase.

Recently I had a buyer make an offer on the house.  We read over the disclosure agreement & there was no “warnings” or issues disclosed in the Form 17.  However in the process of getting insurance for the home she found out that there were two water claims against the house from the insurance company.   When the seller was asked about what the water claims were for, they said that the radiant heating in the slab floor had leaked in a bedroom & that it was repaired in that bedroom only.  The second water claim was for a spicket that the galvanized pipe in the wall leaked.

My buyer then called 7 different plumbing & radiant heat companies only to be told that you can’t just do a repair in one area, that the life expectancy of the pipes were over due & that the rest of the heating could fail at any time.  My buyer felt that that the initial leak should have been disclosed on the Form 17 and wondered how the seller could have been told that it was ok to just repair one section of the radiant heating when she couldn’t find a company to say that it was ok too.  And the estimated to either replace or completely repair ranged from 30,000 – 40,000.

What do you think?  Should that have been disclosed on the Form 17?