Posted by: Timothy Ellis (The Tim)

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

29 responses to “Weekly Twitter Digest (Link Roundup) for 2012-01-14”

  1. Kary L. Krismer

    On Mastro, keep in mind that’s the distribution to general unsecured creditors. Perfected secured creditors would have been paid in full, with interest, to the extent of their security, and then you can also have several classes of priority creditors, such as certain taxes, which also would have been paid in full (without interest) before unsecured creditors see a dime.

    Rate this comment: Thumb up 0

  2. Kary L. Krismer

    Here’s another (Harney): http://seattletimes.nwsource.com/html/realestate/2017205646_harney15.html

    PMI is no longer deductible. It was from 2006 to 2011. I view the fact that it wasn’t deductible as being part of the reason people moved to the disastrous 80/20 loans. People will do stupid things to get a tax advantage.

    Rate this comment: Thumb up 0

  3. Hugh Dominic

    Rigby and his team of lawyers, accountants and consultants has been paid a total of about $6.8 million so far from recovered funds.

    —-

    The lawyers get $6.8M and their clients get $2.8M. Yeah, that sounds fair.

    Rate this comment: Thumb up 0

  4. Scotsman

    Was JLS worried about being sued for misleading statements or did he run out of energy? Spinning is hard work.

    Rate this comment: Thumb up 0

  5. David Losh

    RE: Scotsman @ 4

    I doubt it.

    http://www.johnlscott.com/real-estate-blogs.aspx

    Lennox has worked diligently to bring the consumer the best in Real Estate searches. He does it quietly, without the “game changer” hysteria other venture capitalist corporations do.

    Rate this comment: Thumb up 0

  6. whatsmyname

    Looks like those Mastro investors should have invested in a house.

    Rate this comment: Thumb up 0

  7. Scotsman

    RE: David Losh @ 5

    Sigh . . . My hero!

    Rate this comment: Thumb up 0

  8. Kary L. Krismer

    By Hugh Dominic @ 3:

    Rigby and his team of lawyers, accountants and consultants has been paid a total of about $6.8 million so far from recovered funds.

    —-

    The lawyers get $6.8M and their clients get $2.8M. Yeah, that sounds fair.

    The alternative would be the attorneys and creditors both getting nothing, and Mastro getting his discharge. Also, keep in mind that was an interim distribution.

    If I had to guess, there was probably a time where the attorneys were owed more than $1M without any clear source of payment. That happened years ago in one of the large real estate bankruptcy cases I worked on.

    Rate this comment: Thumb up 0

  9. David Losh

    RE: Scotsman @ 7

    Lennox Scott is a mystery to me. The tools he helped develop are good things. In my opinion John L Scott has missed an opportunity to capitalize on the internet presence they could have more fully exploited.

    Lennox spent the money to set up the search tools, then opened up huge offices, then closed huge offices. Now John L Scott is kind of lost in the shuffle of Windermere remodeling the neighborhood Real Estate office concept.

    It’s just a mess that has allowed redfin to take market share with people who are shopping on the internet.

    Rate this comment: Thumb up 0

  10. Scotsman

    RE: David Losh @ 9

    I do appreciate his search tools. The color coding for listing status is easier and faster to read, and the coverage is superior. I more often than not start with JLS and then switch to Redfin if I want the extra info they offer. That said, I agree he didn’t really see far enough intio the future to capitalize on the lead they had.

    Rate this comment: Thumb up 0

  11. Pegasus

    RE: Scotsman @ 10 – He probably was torn between being a traditional full service, full charge real estate company or becoming a discounted real estate operation that might not support his current office system. He had a very successful business and maybe the risks of changing outweighed the reward. Without the real estate business collapsing like it did he likely would have continued to reap far more profits that come with a raging bull market in real estate by staying with the old business plan.

    Rate this comment: Thumb up 0

  12. leanne

    That Tacoma house has been expensively decorated in taste that is not mine, and probably not a lot of folks–peach bathroom with aqua accents and turquoise bedroom with orange?

    Green and red? Bright yellow? And granite and stainless overdose in the new kitchen is not really period cohesive.

    Rate this comment: Thumb up 0

  13. Omni Chaparala

    If you cant sell a home on the MLS, I dont think you would have much success in an auction.

    Rate this comment: Thumb up 0

  14. Jonness

    By David Losh @ 9:


    It’s just a mess that has allowed redfin to take market share with people who are shopping on the internet.

    The Scotts can easily get back in. All they have to do is cut the price they charge by at least 50% in order to remain competitive. :)

    Rate this comment: Thumb up 0

  15. Jonness

    By leanne @ 12:

    That Tacoma house has been expensively decorated in taste that is not mine, and probably not a lot of folks–peach bathroom with aqua accents and turquoise bedroom with orange?

    Green and red? Bright yellow? And granite and stainless overdose in the new kitchen is not really period cohesive.

    To me the most interesting part of the article is, “They bought it in 1997 for $265,000.”

    That’s $373,526 adjusted for inflation, and wages have probably not kept up with inflation over this period. Add to that, we are amidst the worst economic downturn since the Great Depression, and I’d have a difficult time giving the “Buy it now” price for this house.

    It looks great from the outside! But the downside risks are extraordinary. :)

    Rate this comment: Thumb up 0

  16. Hugh Dominic

    RE: Kary L. Krismer @ 8 – Ok, what do you think the lawyers billed their clients on an hourly basis? Partners at $800/hr? Junior help at $250/hr? Do you accept that a rate like that is not at all unheard of for lawyers?

    Our system rewards lawyers too richly, it should not cost a client 25-50% of the stake of the case to have it vetted fairly. We have some of the most talented people in our economy entering the legal profession for the sake of these large rewards, which adds little to our economy and is a tremendous waste of resources.

    All would be fair in a free market, but this is not a free market case. The lawyers are generally the architects of the system; they write the laws, interpret the laws, and often enter politics and pass the laws. Naturally the lawyers are the winners. It is like a football league where the referees are the highest paid members of the game.

    Your attempts to defend the rates and fees of lawyers will win no sympathetic ear with me.

    Rate this comment: Thumb up 0

  17. Hugh Dominic

    By Pegasus @ 11:

    RE: Scotsman @ 10 – He probably was torn between being a traditional full service, full charge real estate company or becoming a discounted real estate operation that might not support his current office system. He had a very successful business and maybe the risks of changing outweighed the reward. Without the real estate business collapsing like it did he likely would have continued to reap far more profits that come with a raging bull market in real estate by staying with the old business plan.

    Well said. In the face of disruption, an established company would have to undermine its own model, its own people, and sometimes its own customers to remain competitive. You will almost never see an established company with the fortitude to do that, until the crisis is upon them and it is too late. (Also see: Nokia and RIM. Their failure to adjust is a victory for American innovation; they are midway through the process of losing the mobile phone software business to US companies.)

    Although early in the process, the future is clear for RE brokers. The Redfin model is going to capture a large share of the buyer/seller services market. The Scott’s and Windermere’s will need to retrench into smaller shares and niches and will be forced to change their models. That means more, higher quality services for full price customers and/or lower cost packages to compete for the lower end share.

    Redfin and even Ray are doing a great thing for the American consumer and I hope they are well rewarded when they succeed.

    Rate this comment: Thumb up 0

  18. Kary L. Krismer

    By Hugh Dominic @ 16:

    RE: Kary L. Krismer @ 8 – Ok, what do you think the lawyers billed their clients on an hourly basis? Partners at $800/hr? Junior help at $250/hr? Do you accept that a rate like that is not at all unheard of for lawyers?

    . . .

    Your attempts to defend the rates and fees of lawyers will win no sympathetic ear with me.

    I don’t remember any discussion at all of rates above, only the total amount. I, in response, was only addressing the priority of their payment, and the likelihood that for a time the payment was effectively contingent. Rates are an entirely different matter. I don’t think I’ve ever commented on them in a web forum.

    There was a bankruptcy case years ago where the main players were Seafirst, Rainier Bank, a trustee and the debtor. The alliances kept changing depending on the issue. The only issue that they ever agreed was when the judge approved the trustee’s attorney’s fees, but delayed their payment. Everyone objected to the delay, because they didn’t want the trustee’s decisions to be based on speeding up the payment.

    BTW, the reason why attorney fees are so high is most state bar associations can restrict not only admission, but typically the approved schools for gaining admission. Restrictions in supply lead to higher prices. Basic economics.

    Rate this comment: Thumb up 0

  19. Hugh Dominic

    By Kary L. Krismer @ 18:

    I don’t remember any discussion at all of rates above, only the total amount. I, in response, was only addressing the priority of their payment, and the likelihood that for a time the payment was effectively contingent. Rates are an entirely different matter.

    Kary, you are parsing this argument myopically, like a lawyer. Are you doing this ironically? The total amount and the rate are directly related. To argue for one is to argue for the other, you cannot separate them. When you say that the total amount is fair, you argue also that the rate to compute it was fair, whether you say so explicitly or not.

    Based on this I gather that you do believe that $800/hr is fair. I do not.

    BTW, the reason why attorney fees are so high is most state bar associations can restrict not only admission, but typically the approved schools for gaining admission. Restrictions in supply lead to higher prices. Basic economics.

    This is a fine example of lawyers rigging the system for the lawyers, thank you for raising it. Another would be the entire patent system.

    In our legal system, the chance of a favorable ruling is biased toward an entity with far greater financial resources that its opponent. A small company or individual will know from the outset that they can be pushed to bankruptcy by the cost of a case, and this will make them more… compliant. The courts, unfortunately, recognize and favor the efforts of a better funded legal team and so the extra money works.

    I’d challenge the architects of our legal system to come up with a way to equalize it. To make justice blind. But, there would be no interest in that, since the architects themselves benefit from the inequality.

    Rate this comment: Thumb up 0

  20. David Losh

    RE: Hugh Dominic @ 17

    redfin has always been a business model, as has Ray Pepper. Consumers have always had that choice. My license is at SkyLine Properties which is a low desk fee office. I can charge whatever I want, any of the 600+ agents in SkyLine can do the same.

    SkyLine Properties has the most complete support system I’ve ever seen. I’ve worked at a couple of Windermere’s, and Coldwell Banker.

    I also recommend people to John Wagner Escrow if they have a deal that requires an attorney, or they have an easy transaction between Principles. It costs about $600 plus the escrow fee.

    Ray, redfin, and even Findwell are extremely expensive. They won’t last the same as the thousands before them didn’t last. The advantage John L Scott, and Windermere have is they also provide property management, and commercial real estate services.

    In order to survive in the Real Estate industry you need multiple streams of income.

    Rate this comment: Thumb up 0

  21. Hugh Dominic

    RE: David Losh @ 20 – Redfin’s rebate pricing model may have existed for a long time, I don’t know so I’ll give you the benefit of the doubt.

    But the collection of services that Redfin supplies for that price have not. Redfin’s use of scale, information, and Internet tools will make the model work. It will work for consumers, who will realize they are getting enough of what they need for their money. It will work for Redfin, who I think can profit at that price.

    An independent Skyline agent could offer a discounted rate 10 years ago. Bt they could not have streamlined so much of the advertising, search, scheduling, and offer process to make the model work. That is new, and I think consumers will realize it faster than industry insiders, such as yourself.

    Rate this comment: Thumb up 0

  22. Pegasus

    RE: Hugh Dominic @ 21 – Oh those industry insiders recognize the threat from Redfin. That is why for years many of the agents posting here would not mention Redfin by name. They would twist the name to something like Red Fun or something similar. You only do this to avoid empowering your competition.

    Rate this comment: Thumb up 0

  23. Ray Pepper

    RE: David Losh @ 20

    “In order to survive in the Real Estate industry you need multiple streams of income. ”

    wrong wrong wrong..

    Companies can survive in ANY industry if they have ZERO debt and ZERO expenses. The companies will continue to exist as long as their is a need and DESIRE for their services.

    Companies with VC like Red Fin or public traded like Zipr, Ledr will struggle until getting absorbed into another entity or the cash is gone.

    Findwell, also has very low overhead and should be a survivor along with all the other 500 Realty “type” companies that will come along from independent Brokers that want to be on their own. Skyline is great as long as the Buyer finds a rebating Agent giving 75-80% or able to list for 200-500..

    It is for this reason you will see these type companies until the MLS collapses and then we will finally have a better way for buying and selling real estate..A brick and mortar estate agent today is as valuable to the consumer as flooz.com was back in 2000.

    Rate this comment: Thumb up 0

  24. Kary L. Krismer

    By Hugh Dominic @ 19:

    By Kary L. Krismer @ 18:

    I don’t remember any discussion at all of rates above, only the total amount. I, in response, was only addressing the priority of their payment, and the likelihood that for a time the payment was effectively contingent. Rates are an entirely different matter.

    Kary, you are parsing this argument myopically, like a lawyer. Are you doing this ironically? The total amount and the rate are directly related. To argue for one is to argue for the other, you cannot separate them. When you say that the total amount is fair, you argue also that the rate to compute it was fair, whether you say so explicitly or not.

    Based on this I gather that you do believe that $800/hr is fair. I do not.

    Attorney fees requested are based on hourly rates, number of hours spent, time written off, results obtained and multipliers. Having not reviewed any of the fee applications filed with the court I’ve not made any assessments of any of those things. Doing so without having reviewed the applications would require making a number of assumptions which I don’t care to make.

    As to the rate of $800 an hour, it’s been several years since I’ve reviewed bankruptcy fee applications, but I would suspect that if there is such a fee it’s not a Seattle lawyer, or they are in some very specific specialty.

    But again to be clear, I’m not trying to defend any particular hourly rate, especially when I first responded I wasn’t aware of any of the hourly rates. And to give you a bit more ammunition (in addition to the law school argument I raised above), lawyers tend to have this habit of raising their rates every January 1st, and that tends to lead to a lot of rate inflation.

    Finally, you might be happy to know I kept my rate at $200 or less while I was practicing, because I did not raise my rate every year, and also because I was trying to deal with the fact that I did not have lower priced associates or paralegals to hand projects off to. And even then, if something were more of a paralegal task, I would typically bill it at a lower rate.

    So to be clear, I’m not saying attorney fee rates are not a problem. I’m saying I have no opinion of the rates charged in the Mastro bankruptcy.

    Rate this comment: Thumb up 0

  25. Kary L. Krismer

    By Hugh Dominic @ 19:

    BTW, the reason why attorney fees are so high is most state bar associations can restrict not only admission, but typically the approved schools for gaining admission. Restrictions in supply lead to higher prices. Basic economics.

    This is a fine example of lawyers rigging the system for the lawyers, thank you for raising it. Another would be the entire patent system.

    One of the reasons I went to law school after business school was I didn’t like the liability concerns of being an accountant. In effect, in 1981 I was worried about what happened to Arthur Anderson in 2002.

    Liability concerns for lawyers are much less, because as you note, lawyers make the rules!

    Rate this comment: Thumb up 0

  26. David Losh

    RE: Hugh Dominic @ 21

    John L Scott provided the tools, in conjuction with Google, and Microsoft. I also like Zillow for what it could be. Data search from goverment has had fantastic strides.

    The technology is there, it will remain the focal point of the Real Estate Industry.

    The rebate is new. I remembered the rebate after I made my comment. Real Estate companies have wanted, and tried to get the rebate since 1984. The Department of Commerce blocked it then as being detrimental to the consumer, and now embraces it, go figure.

    My business model of providing Real Estate services could benefit from the rebate programs. I just don’t market it, but some one will.

    My point is that redfin will be sold, it will be absorbed, they just need to increase a revenue stream.

    Rate this comment: Thumb up 0

  27. David Losh

    RE: Ray Pepper @ 23

    Ray, you’re at the auctions looking for cash flow.

    You make a ton of money with the brokerage, but I know it costs less to have a license at SkyLine than open my own Brokerage.

    Rate this comment: Thumb up 0

  28. David Losh

    RE: Pegasus @ 22

    And that would be rodfun, because whenever I mentioned these hucksters online Matt? or some other refin minion would show up to make a quip.

    It’s done by Google search? I guess, but twisting the name helped me make my points without counter point.

    Rate this comment: Thumb up 0

  29. wreckingbull

    By Kary L. Krismer @ 18>

    BTW, the reason why attorney fees are so high is most state bar associations can restrict not only admission, but typically the approved schools for gaining admission. Restrictions in supply lead to higher prices. Basic economics.

    Right, because we have an attorney shortage.

    http://economix.blogs.nytimes.com/2011/06/27/the-lawyer-surplus-state-by-state/

    Rate this comment: Thumb up 0

Leave a Reply

Do you want a nifty avatar picture next to your name, instead of a photograph of Tim's dog? Just sign up with Gravatar, and make sure to use the same email address in the form below. It's that easy!

Please read the rules before posting a comment.

You have 5 comments remaining on this post.

Archives

Find us on Google+