S.E.C. Real Estate Observer

When a bank loan goes 30 days delinquent in payments or past the due date, it becomes a scheduled item with the auditors. They may or may not require any reserves be put aside for loan losses. As default status continues, the loan will be written down based on borrower financial strength, appraisal, strength of the bank, etc.

Utilizing IRS Code Section 1031 Tax Deferred Exchanges is one of the most effective ways to create wealth in real estate. However, over time, a real estate investor may end up with valuable property and a low adjusted tax basis.

Yesterday I met with a Senior VP of a community bank. He has been in banking for 40 years. When I asked how he was doing, he said, “I’ve never seen it this bad, even during the RTC days in the 90s.” Do you have empathy for your local banker or disdain for their inability to make you a loan?

The world of investment real estate has changed. In the 12 short months since the economic recession finally hit Wichita, everything about our commercial real estate market has changed, and those who do not recognize the new environment are destined for frustration and failure.

I was thinking the other day. …Has today’s challenging and volatile real estate market taken the wind out of your sails? Do you know of someone involved with a “Problem Property”? Are you not making any money and starting to tap into your reserves? Are you starting to wonder why your bank might be calling every other day to check up on you and how you are feeling? Remember the loan you took out a couple of years ago with a “Lender’s Insecurity” provision that says that any time the lender feels insecure it may call the loan due?

For some of us old-timers it is déjà vu. The commercial real estate market is sliding or crashing, depending on your perspective. Many brokers have been through a few minor downturns but this could get really serious so what do we learn from those that experienced the 1980s? Here is what I learned from the 1980s crash in real estate values…

Some of us remember quite clearly the economic collapse of the 1980s. We all need to recognize that we are facing a similar time. Some of our clients, friends and maybe we personally could face some huge financial issues. What knowledge might be timely?

Jim Keller, a fellow S.E.C. Member, and I read western lore avidly, and have been doing so for more years then we care to remember. We both agree that the Western world of old, which we have grown to love, accurately depicts the true meaning of Americana.

With the recent dislocations in the financial marketplace of our country, it seems appropriate to consider how to market real estate during this period of economic uncertainty. One of the important goals for either an owner wishing to sell or exchange, or for a broker seeking to perform brokerage services for a client is to clearly establish what a client’s true needs are versus what they say they want. Often the wants are quite different from the needs. For example, a client who will only accept all cash for his property is going to be at a severe disadvantage in trying to sell his real property.

In difficult economic times, when the economic news is mostly negative, different skill sets are necessary for commercial real estate brokers to successfully market commercial properties to users and investors [...]