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The History Channel has a show called Pawn Stars. Have you seen it?
It's about a family owned pawn shop in Las Vegas.
I find the show fascinating. A guy walks into the store with an item that he feels is worth a lot of money. If the pawn shop owner is familiar with the item, he will rattle off its history from the top of his head, ask the guy how much he wants for it, and the negotiating begins. If its an item he is unfamilar with or perhaps has a signature he needs to authenticate, he will call in a local expert to offer his opinion. So, both the customer and the owner will hear what the expert has to say, and they both will know what the expert feels is the market value of the item.
Will the pawn shop owner offer to pay the customer the "market value"? No, he won't. He will offer something less in order to cover his costs and hopefully, a profit. Sometimes the parties make a deal, sometimes they don't.
John Wilkes Boothe assassinated President Abraham Lincoln. The manhunt for him lasted 12 days and was the biggest in US history. A guy walks into the pawn shop with a Wanted poster, one of the most iconic documents known to exist. He asks for $33,000. The shop owner is excited and knows how extremely rare this poster is. But, is it real? Is it a fraud? Is he being taken by a hustler if he gives up $33k?
He calls an expert, who walks in with 1 of 4 original posters known to exist. Value? $100,000. He examines the poster brought by the customer, points out the differences between the 2, and concludes that the customer has an early reproduction. Value? $100.
Two things fascinate me. The first is that the pawn shop owner never knows who or what will walk into his shop, and yet his experience has given him knowledge about a lot of different items and their true value. He then offers to pay the customer based on this experience and knowledge. Secondly, how easy would it be for him to get hustled ? If a guy brings in an item that the shop owner really wants and it turns out the item is a forgery or a copy - not an original, he stands to lose a bunch of cash. This is where he relies on the expert - not his instincts or emotion. Sometimes both the customer and owner are surprised by what the expert has to say. Maybe the item is worth way more than the customer realized, or as happens too often, the value is nowhere near what the customer thought.
The note business is pretty similar. On the surface the note may seem attractive. But many times, due diligence - an expert opinion, if you will - uncovers that the value of the property is less than what the seller thought, or the payor's credit is worse than anticipated, or the hazard insurance has not been renewed, etc. The expert opinion helps determine a true value for the pawn shop owner just as due diligence determines true value for the note buyer.
Trust but verify.
Why don't you try reading my weekly Blog at www.CaliforniaNoteBuyerLLC.com.
NOTE TRIVIA
1. You just sold a property. You don't know your buyer's background.
You received no downpayment, agreed to a 3% interest rate with
interest only payments for 3 years, then a balloon payment. You are
a:
A. Passionate Conservative
B. Liberal Democrat
C. Fool
2. Your note has an Alienation clause. This means:
A.Your buyer cannot sell the property to an alien from another
planet.
B. You sold your property to a foreigner.
C. Your buyer may not sell or transfer the property without your
written consent.
3. Your note has a balloon payment. This means:
A. After the last payment is made, you and your buyer will have a
party with lots of colorful balloons.
B. After the last payment is made, your note will be
attached to a balloon and released into the wild,
blue yonder.
C. A payment is due you at the end of a partially amortized pay
schedule.
See Note Trivia Answers Below.
We don't see things as they are, we see them as we are. Anais Nin
Media Hype?
The media is pretty relentless about the recovery in housing. I have cited studies in many Newsletters that keep telling us about the gradual price increases occuring throughout the country. For a more sobering and perhaps contrarian viewpoint, you may want to read an interesting real estate blog. Check out www.voiceofthehomebuyer.com. Read the posts from January 18 and January 30. Do we have another bubble in the making?
Humility is not thinking less of yourself. It is thinking of yourself less.
Rick Warren, The Purpose Driven Life.
Corvette and the Batmobile
I was a Corvette owner for 15 years. Polo Green convertible, tan top and interior. Beautiful car. I loved it.
Every year in Scottsdale, Arizona one of the world's largest car auctions is held. The 2013 Barret-Jackson Car Auction held a few weeks ago was one of the most successful in history. The 1st production model of the 2014 Corvette C7 Stingray sold for $1.1 million. The buyer was a NASCAR team owner and the proceeds were donated to a college.
If you are old enough to remember the Batman TV show, you may know that a man by the name of George Barris was the builder and original owner of the 1966 Batmobile, the car driven by Batman in the show. More importantly, he is the only person who has ever owned the car. It fetched him $4.2 million.
Holy Bat Wheels !!!!
Trivia Answers
1. C
2. C
3. C
Did you get them all right?
Negative Equity
CoreLogic is reporting that 26.8% of ALL residential properties in the United States with a mortgage had negative or near negative(less than 5%) equity at the end of the 3rd quarter 2012. The dollar volume equates to $658 billion, down from $689 billion the previous quarter.
Roughly 1/2 of the $658 B represents 1st liens only. The other 1/2 are folks with 1st liens and home equity loans.
Nevada had the highest percentage, 56.9% of all their mortgaged homes, underwater. Wow! Florida was next at 42.1% and Arizona was 3rd at 38.6%.
If you enjoy this Newsletter, maybe a friend would also. Why don't you forward it to him?
Sincerely,
Denny Stanz
CA Broker # 01915404
760-245-5366
760-245-5367 fax
dennystanz@verizon.net
www.CaliforniaNoteBuyerLLC.com
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