Gregg Fous

THE AFFIRMATION: "THAT SUIT LOOKS WONDERFUL ON YOU"

There I am standing in one of those mirrors that as a kid I would play in and stick my head into and look at a zillion of me. You know the ones, tucked in near the fitting rooms at Bamberger's or Macy's. My mother would bring me shopping with her and leave me outside the dressing room as she was in trying on dresses. I think I actually saw the back of my head for the first time in one of those alcove mirrors. I could move my arm over my head and simultaneously see a long line of kids that looked just like me move their arm as well. To this day I can't walk past one of these alcove mirrors and see a kid in there without thinking of my childhood. Today, however, I was sucking my stomach in and only looking at me in the middle mirror. I was test driving a new double breasted blazer. The salesman was behind me brushing off an imaginary piece of lint.

Then he said those important words, "That blazer looks wonderful on you." Then another sales associate "happened" to walk by behind me and she offered, "What a good looking jacket; very slimming on a tall man like you."

"I'll take it" I announced. That little push was all I needed: The affirmation; the expert opinion; the clincher.

In real estate sales we are often reticent to make that affirmation to the client. The sales people that do make that affirmation make the sale and build the relationship. Those that don't, will not.

I was discussing the "That suit looks good on you" technique with my wife Gail. She told me that if she heard this from sales person in real estate, she would automatically recognize it as sales fluff. I then explained more about what I felt was a necessary process from an expert sales person.
The sales person in the men's store sell suits all day long. He dresses well, knows style and recognizes a good fit. In fact, I admire the way he looks. When he tells me it fits well; I believe him. When he tells me it looks good; I believe him. Perhaps he built my trust in him over the time he took to ask me questions about my likes and dislikes. He has picked out a few jackets for me to try and solicited my opinions. Bottom line is: I respect his opinion and I want his opinion.

In real estate, as buyers, we need and rely on our professionals. A professional gets to know his client and his objectives and likes and dislikes. But more importantly, real estate professionals are already given a status as an expert - even on the first meeting.

Let me give you an example; and this is the one I relayed to Gail. A customer came into our Market America Relty and Investments property shop this week. He and his wife were looking for a three bedroom house on a canal with a pool as a second home. They were here visiting from Canada. They had already visited Sarasota and Punta Gorda and now wanted to tour our Fort Myers and Cape Coral. (They, in effect, had tried on two suits and were looking at a third). One of the Market America Real Estate agents spent some time with the couple and then affirmed in a very positive manner, that canal homes in Cape Coral were an excellent opportunity for them and that Cape Coral was a superb choice. She knew this because indeed she went through the same process looking at Punta Gorda and Sarasota and she indeed had settled here and loves it!

Now if the agent were to take the very neutral position of, "Let me show you around and you make the choice, " she would not have been as helpful to the clients as she was in making the affirmation. The clients wanted the affirmation.

By the way, have you ever heard a waiter tell you, "You made a wise choice sir."? This is also an affirmation that we appreciate. After all, the waiter serves this food all the time and should be an expert.
Understand that I am not talking about sales fluff here. I am talking about being confident in your opinion, your expertise and your product. If the customer does not look good in the suit, tell him so.

Also, a sales person should not offer expertise where he does not have it. It would be unwise to say you are really going to love this area within the first minute of meeting someone. After all, you have no idea what they love or do not love. What is fair to say is that YOU love this area, and it is the area that YOU chose. In the commercial arena things are actually quite similar. Selling commercial real estate and investments is an area that I spent a great deal of time on. I also buy investment properties myself. I learned a long time ago not to judge the suitability of an investment for someone else until I know their criteria; but my enthusiasm for an investment property is very apparent to my client. It is easy to share my expertise, but dangerous to impose my investment criteria on my client. What may be good for me may not be good for him. But I can affirm his decision and I can validate his thought process.
Now IS the time to buy. Now is the time to acquire investments and your second home. But be patient. Yes asking prices may go down a bit further in some sectors,, but SELLING prices are at bottom

For Video Version Click Here

Gregg Fous
gfous@marketamericarealty.com
www.marketamericarealty.com
800-439-1580 ext 52

Lease Options and How They May Work For You

It may just be a lease option that will enable a seller to attract a future buyer to their home and enable buyers to afford to buy in this economy.

I always use an attorney to draw up a lease option agreement. I usually pay under $500.00. There are three components to the lease option:

•1. The Option Agreement

•2. A Buy Sell Agreement

•3. The Lease.

In most situations the option agreement and the lease are executed (signed) by both parties, and the option agreement will refer to an attached buy/sell agreement and it's agreed upon terms. The essence of this transaction is that the buyer agrees to buy an option to purchase the home at some future date at either an agreed upon price or an agreed upon formula to arrive at a price. This agreement is executed along with a lease for the property.

Let's look at a real life example:

Seller Bob is retiring and wants to move from Fort Myers and sell his waterfront home and move to a smaller, less expensive retirement home. Bob has two mortgages on his home totaling $600,000 that cost $7500 a month including PITI. (Principal, Insurance, Taxes, and Insurance) His home has been on the market for almost a year and was originally priced at over one million dollars. He is current on his payments, but his income is well below the $7500/month cost and he is eating away at his retirement nest egg every month he owns the house.

Buyer Ralph and his wife have a large home that has $200,000 more in debt that the house could reasonably be sold for. Ralph and his wife own their own business, have children and have good income. They have stopped making their mortgage payments. Their credit is bad but their income is strong and steady.

Ralph agreed to lease Bob's house for $7500/month and pay $20,000 to buy an option to purchase the home in two years. $2000 of each monthly rental payment will be applied to the purchase price as will the option monies.

What do Bob and family get? First of all, they get to move into a house, on the water, for very little down payment. They now have locked in the price that they will have to pay in two years (Keep in mind this is an OPTION, if prices continue to plummet, they do not have to buy - it's their OPTION). (Note - I am not disclosing the price, and will not until it is sold, but it was well less than the $1,000,000)

Bob gets a tenant in his home that will treat the home as his own, he breaks even on his monthly payments - and gets some tax advantages as well at tax return time.

I was able to negotiate for these folks that the amount of the lease payments would be the interest payments on the two notes (the rates are fixed) plus insurance costs and taxes. We all expect these costs to go down over the next two years, and the monthly payments by Ralph will adjust accordingly.

The option money, by the way, was split between the owner and the broker. When the home eventually sells the commission will be the same as per the listing agreement, less the commission paid from the option money to the broker at the inception of the lease. There was no lease commission.

I love a deal where all parties are happy. Bob was happy because he got out from under the drain of cash flow loss. Ralph and his wife are thrilled because they were able to negotiate a good price at today's depressed market values, and lock in a home they love.

(This was an actual lease option we negotiated on behalf of our clients; some of the details were changed to protect privacy).

If you are thinking or buying or selling on a lease option, talk to us, we can help. Here are some caveats that you must keep in mind and have your attorney address in the agreements:

•· Potential default by the owner/lessor on the underlying mortgage.

•· Maintenance Items - who is responsible for what.

•· Amount or rent applied to Purchase Price - if any.

•· Remedies for default by Lessee.

•· Insurance and tax issues.

Gregg Fous

239-851-5464

GFous@MarketAmericaRealty.com

Figure out what the real estate wholesaler's "Value Add" is and you too can make money in Real Estate.

I'm not sure where I first heard the expression "Value Add" - I think it was when I was a consultant for the Corporate New Ventures Team at Proctor and Gamble. We were big on buzz words back then like; "ideation", " key take-aways"; "peel back the onion" and "30,000 foot view";- all sorts of insider expressions that let others know we really knew what we were talking about and we were, well, consultants. I have to admit I still use these expressions in planning meetings today, although my planning meetings are much more informal these days and are more likely than not to be held with a few small confidants like my wife and close business friends. But I still love to use a white board and dry erase markers. When I can write ideas down they become more concrete - and approachable.

The concept of "value- add" requires us to define not just our right to succeed in a project, but just what we are bringing to the table to justify a margin contribution. At P and G, I was taught that the conglomerates vast size and marketing muscle was not a right to succeed, nor was being first to market a right to succeed. A "value add" had to be present and sustainable, scalable and offer a benefit to each customer - not just to the market or to the companies bottom line. The soap, for example, had to actually clean better or last longer. This over riding concept has served the company well.

A few months ago I was approached by an old friend in the real estate business. He was suddenly gung-ho on a multilevel market concept. He invited me to a presentation at a local hotel. I went because of our past friendship. At the meeting he talked about leveraging people, not money, and selling to friends various products that they were already buying anyway: like satellite TV service, cell phone service, and vitamins.

I asked him simple questions; "What's your value ad?"

"What are you contributing to this process?"

He did not quite understand that not having a value add would ensure that his business was not sustainable. He stressed I did not really have to DO anything. Sales people down my stream would sell. I did not need a value add.

But I understand that in order for my customers to use me, the must need me for the added value I bring to the proposition.

Ok. Let's talk real estate,

Market America Realty and Investments Inc. is selling homes to wholesalers, end users, and landlords. The expression wholesalers is perhaps not the proper term, but if you wish you can call these folks flippers, dealers, or money men. The foreclosure deals we now handle bring in multiple offers in wide price ranges. (To the lower left there are links to our newest offerings - some before they are listed on the MLS - because we do not have final pricing). I can usually tell when the buyer will be an occupant by where the price of the offer is in relationship to other offers- but not always. The investors that are going to resell the property know they need to add value to the property, and they know well where their margins and therefore offering prices, need to be.

The "value add" the wholesalers offer is this:

1. Inventory. Just like you would rather go to one store to buy clothes than a few dozen manufacturers, so you would rather go one seller for homes. They know how to buy the home that consumers will occupy.
2. Renovation. Many of the homes they buy require sprucing up - some just paint and cleaning, some more extensive renovation.
3. Repackaging. This is a big one. The wholesaler buys for cash and will sell to someone who needs to borrow money. He "repackages" the home to better sell it.
4. Patience. When the wholesaler buys he has to move very quickly. He inspects in mere days and closes in as little as a week. When he sells his home to the end user, he adds patience - he will wait for the buyer to inspect, insure, probe, and finance.
5. Knowledge. Just like the store that only buys items for his shelves that he knows his customers want, so goes the real estate wholesaler. He buys the homes that are in demand, he has studied the market and knows what to buy, where the quality is and how to identify these homes. He also knows what his customers needs are regarding financing, closing, insurance, and warranties.

The reputable wholesalers use their knowledge of the market, and strong agencies like Market America Realty and Investments, Inc. to help them find their properties. They pay for this service by making sure the agencies get paid commissions or fees for their work. Smart buyers these days are offering their buyers fees to their agents to locate the best homes over and above commissions paid by the sellers.

Here are some techniques we use to locate homes for our investor buyers:

1. Statistical analysis. We divide our market into ZIP codes + four. In each plus four zone we review closings over the last three months. We do this on a trailing basis daily then compare this average price per square foot with daily new offerings that we get either on the MLS or from the banks lists we receive in that plus four zone. By 10 AM every morning this gives us the homes we need to look at personally. For example if the average sold price per square foot for that zone over the past three months is $60, and the new home on the market that day is $44 - we need to look closely at that offering.
2. Up Close and Personal. Once we have our prospective homes we need to figure out if the statistics are swayed by pools, age, or other factors not readily apparent. One of our agents familiar with that territory visits the home. Where ever possible we do an initial inspection for things like Chinese drywall, presence of appliances, and other salient factors like vandalism or mold.
3. Short Sales. We know the short sale process, do in-house loan modifications and deal directly with the banks to affect the sales and closing process. We make offers for our clients and work the bank, the property, and the seller during the long process. Our client's money is patient; the investor does not need quick answers. When we approach the bank with a short sale offer, we have compiled every document and the answer to every question the bank will have. In the package presented to the bank is a BPO, complete financial statements, a hardship letter, listing agreement and marketing history, and a solid cash offer with no contingencies along with proof of funds. We like the short sale part of the business very much, because often these are homes that have struggled for months to be sold. We can make the sale happen.
4. BFB. We prepare a one page summary of what the investor is looking to buy. What his exit strategy is, what locations he wants, perhaps what ages, size, or style of houses he is most interested in. This BFB (Basis for a Buy) document becomes our template in our search. But it is also a living document that can be changed as market conditions change. I can't tell you how many people call me up and tell me to just find them a "good deal"; " You know", they will say, "One I can make a lot of money on" This is not good enough for me or anyone on our team. We need to come to a meeting of the minds before a search is conducted and properties offered.
5. Kiss a lot of Frogs. Early in the process we may have to present many properties and indeed many offers to zero in on the targets. Often is it through "kissing a lot of Frogs' that we are able to make the most accurate BFB sheet.
6. Know the whole journey. You have heard it before and I will tell you again: You make your money when you buy not when you sell. Smart investors know their exit strategy and every step along the way to the exit. They know their costs of holding, of improving, of taxes, insurance, etc. They give us a margin they are targeting and we will ADVISE them of our opinion of the exit sales prices. Our customers set these parameters, we do not.
7. Network. One of my clients used the expression, "Target Rich Environment" to describe the real estate opportunities out there. What he meant is that there are many many properties to look at. In order to weed out the gems from the fools gold, we need to use all the tools at our disposal. I have mentioned some of them above. The most important tool in my arsenal, however, is the network of sellers, brokers, agents, and investors that my team and I have developed mutual trust and respect with over the years. For me its about relationships and enjoying the trust that has taken years to develop.

Ok, so you are just one person looking to buy one house at today's bargain prices.. What do you do? Number one; hook up with an experienced broker like us. (Call me and I will suggest one or two!)

Number two, sit down with your advisor and work on the BFB - build on your objectives and your exit strategy.

Then be prepared to compete with the big guys. Short inspection periods, strong offers, completed paperwork, and patience. Examine your worst case scenarios. If you can still sleep with the worst case - your probably are on the right track. Get a handle on and define your expectations and be sure to share those expectations with your advisors.

Making money is real estate was never easy - although it may at one time have seemed that way. Remember, people don't make money without adding value.

What's your value add?

Chinese Drywall - Behind the scenes

I was at a family gathering many years ago and my sister Julie's mother-in-law, Ruth, was trying to use a new instamatic camera and was being "advised" on how to use it by Julie's father-in-law Ed. Ed was an interesting guy, he retired as a professional photographer. Ed spent his entire career taking pictures for Sear's catalogues but could never seem to take a decent home photo with actual people in it. I'm certain he knew his way around sophisticated studio cameras and pictures of crock pots, but the instamatic camera might as well have been a microwave oven as Ruth tried to "point and click".

As the argument escalated between Ruth and Ed on how to utilize the simple features of this new camera, my father chimed in; "Let me help, I don't know what I am doing either."

"I don't know what I am doing either" might as well be the mantra lately for all the "experts" that are chiming in on the defective Chinese drywall issue. The problem with these well meaning "experts" is that they are applying knowledge gained from unrelated experiences to how to fix a problem that has yet to be totally quantified. We all love an easy solution. There isn't one.

The first solution was to fix the first symptom - failing air-conditioner coils. The coils were just replaced. This proved to be a costly solution to the symptom and did nothing for the problem. The coils went bad again. Other attempts were made ranging from repainting the houses inside to gassing the house as if for mold, de-humidifying the house, and finally replacing all the drywall.

The interesting thing is that in some of these homes each of these "fixes" worked. In many they did not. The final solution that many contractors were trying to avoid was gutting the home of all the drywall and starting from bare studs. I have indeed solicited bids from contractors for some houses I was thinking of buying. (Bids range from $10/sf to $20 to replace all drywall and re-install cabinets and fixtures- depending on the house and intricacies of the finishes)

Then the unthinkable happened. A house was gutted AND the copper replaced. The drywall free house was tested for the off-gassing and corrosive air that was turning copper black- and the "problem" still existed without any dry wall present!

Some experts say the problem can be fixed.

Other Experts say the problem can't be fixed.

They can't both be right.

I am reminded of a classic scene from the Broadway musical; Fiddler on the Roof:

Avram: (gestures at Perchik and Mordcha) He's right, and he's right? They can't both be right.

Tevye: You know... you are also right.

This contradiction is easier to understand and perhaps agree on if we could better understand what the "problem" is and what the "fix" is.

Some of the problems have been claimed are:

• Sulfur like smell
• Copper turning black
• Copper Air-conditioning coils clogging and failing
• Chromed fixtures pitting and/or turning green
• Mirrors delaminating

Do these symptoms have contributing causes like

• Humidity
• Temperature
• Air tightness of the home
• Presence of copper
• Type of paint

The ultimate fix would be when all the above symptoms no longer happens in the home. Ever again.

There are degrees of the problem. Some homes don't have the smell, but the copper is turning black. Some copper turns dark, not black. Some air-conditioning units have not failed, but the odor is present. Some homes have Chinese drywall (as evidenced by the label) but exhibit none of the symptoms. Some have no Chinese Drywall (Again - the label ) but have all the symptoms. Some homes have no visible copper in the home - all plastic pipe - so if we do not smell it and we see no black copper - do we have a problem?

Some easy fixes may work on homes with a minor problem but not on other homes.

I sell foreclosed homes for Chase and Washington Mutual. One of the homes they asked me to sell we later identified as having the symptoms of having defective Chinese drywall. (Odor and blackened ground wire in the electric switch boxes). They asked me to get a bid to "fix the problem". I got a bid to tear out all the drywall and replace it. Will this be a fix? I don't know. No one does.

What if the solution fixes it for a year and then comes back because the toxin was in the concrete floor and grew back? What then? Is this problem akin to taking out a cancerous tumor after the caner has spread systemically throughout the body?

Some houses just have SOME defective drywall and not in all rooms. Does the toxin then infiltrate the good drywall?

Those of you with experience in statistical sampling know that we cannot determine of all the drywall if infected with out destroying the entire home.. We have to take samples.. How many do we need to take? Some say a hole cut every 48 inches will suffice. Some say if the symptoms are present we have to assume all the drywall is bad.

Let's assume that with thorough testing we have determined that removing drywall from houses with metal studs, replacing all insulation and sealing the concrete permanently fixes the problem. If this homeowner was ever to sell the home again he would have to disclose that it once had defective drywall? Is this house worth the same as one that never had the problem?

Let's further assume that the testing and some hefty insurance premiums to an underwriter convinced an insurance carrier to guarantee that this home was toxin free. Is that the ultimate "fix"? ( I would say YES to this question)

I would compare the problem of disclosure and guarantee to a water intrusion problem that a homeowner has and then fixed. If, for example, the intrusion was caused by the grading around the foundation and the fix required digging around the entire house and putting in a drainage system and then the problem disappeared for five years and the home owner then sold the house - would he be required to disclose this fact to a potential buyer? What if the drainage tiles failed in the sixth year, one year after he sold the home?

Gary Aubuchon of Aubuchon homes has been a reputable builder in Lee County for years. He build excellent homes and has an excellent reputation. There was an article in the Fort Myers News Press today (Article Here) about one of the homes he built having the problem - apparently in a major way. The home owner is quite justified in demanding a fix from Aubuchon, but the builder is hesitant to do anything that would fall short of a total cure - and so far one has not been embraced enough for insurance companies to get behind.

The home owner is right, the builder is right.

They both can't be right.

That's right too!

By the way - we are watching this "fix" very closely (Click Here) Gross Point developers and BBL both have excellent reputations and have teamed up to tackle this issue.

Foreclosures, Chinese Drywall, Commercial Real Estate


"Because it was made that way"

I grew up in a suburb of New York City, in a town where we knew all the kids in school and especially knew the when a "new kid" moved in. But it is was suburbia, not a farming town, so when one of our neighbors decided to house a pony in a small fenced area in their back yard, they caused quite a stir. Harrington Park's shady streets and wide variety of stately homes and blue collar asbestos tiled modest houses were more a place for black labs and poodles than for ponies. But this era was unburdened by a bunch of town ordinances while there was no exact law against ponies, there was a law against farm animals. Brooklyn raised Seymour Russo and his concentration camp survivor wife Carmen were just as determined to keep "Sandy" as they were determined to love their cherished young son Alan and Carmen's aging mother who survived the camps with her daughter Carmen.

Carmen didn't make it out of the horrors of a death camp to be told what pet she was allowed to have, and Seymour, well, Seymour was a horse lover and he loved his Carmen. I became a frequent visitor to the Russo home, first drawn by the pony, then more to sit down with Carmen and Seymour and their stories and unique outlook on life. Carmen was always feeding me; not just with the steady onslaught of leftovers and freshly prepared cakes and snacks, but with her philosophies molded by her experiences. Experiences to me that was exciting as they were frightening. Seymour was city raised in Brooklyn, worked shoeing horses and his rough and tumble outlook and lack of schooling were just as foreign to me as Carmen's Jewishness and Nazi experiences were. As a young kid their differences from each other where not obvious to me; it was how different they were from me that made them the same.

Carmen worked in Manhattan, spoke German, and sold dental equipment. Seymour spoke Brooklyn-ese, never went to high school and was a blacksmith. Carmen quoted philosophers, Seymour knew how to make things. Carmen cooked, Seymour ate. Carmen planned, Seymour reacted.

Carmen taught me many lessons, but her overriding obsession with her own rights were the most prominent. Perhaps born from the fact that the Nazi's took all of her rights, she was determined not to let the town of Harrington Park infringe on her right to let her son have a pet pony. She and Seymour eventually prevailed, by the way, and Sandy lived a long life in Harrington Park, becoming a star attraction for many kids growing up in the area.

It was from Carmen's influence that I built my strong stance on individual rights and indeed private property rights, and it was from Seymour that I took a few kernels of street born wisdom that stick with me today. I remember Seymour teaching me how to make a bridle with a rope. (Seymour was to later help me buy my first and only horse when I was 14 - without my parents' knowledge or permission I might add, but I will leave that for a chapter in the book).

I was looking at the rope, made of three twisted braids of intertwined strands. I took the three strands apart at the end of the rope and was left with curly cue coils of hemp in my hand. If I wound them back together they stayed together. It was like they wanted to be wound together as rope.

"Why does this hemp stay curled like this?" perhaps forgetting I was talking to Seymour and not Carmen.

Seymour, intent on some other task at hand, quickly responded, "Because it was made that way. Hand me that brass buckle."

I was to learn years later when I was a manufacturer's rep that there is indeed a principle if not in engineering, certainly in manufacturing, that "things" actually "remember" how they were made. It was explained to me by a scientist at one of my suppliers that molecules actually can be oriented and "remember" that orientation, and properly motivated by heat or some other influence will return to that state. Seymour didn't need to learn this, he already knew it.

So next time one of your kids or grandkids asks a question that can be answered with "Because that's the way it was made", don't feel guilty about not taking the time for a long explanation. You might be giving him a basis for his future outlook on life!

Foreclosures

Talk to any real estate agent here in Lee County and they will tell you that they are swamped with buyers of foreclosed properties. We handle two to three a week here at Market America Realty and Investments, Inc. (If you want to get on my notification list and bid on the bank owned homes before they hit the MLS, email me at GFous@MarketAmericaRealty.com).

But how long will this continue? The low interest rates lately have been forestalling a train wreck that some believe is inevitable. That train wreck is the maturing of the famed "Option ARMS". The last adjustment did not cause much a problem seeing the interest rates are still low (MBA FORECAST HERE), but most of the Option ARMS were made in the markets with the greatest decrease in housing values, the sub-prime Option ARMS adjusted in two years - and this adjustment greatly contributed to the current foreclosure in lower priced homes. But the prime ARMS were mostly five year adjustments. This means that beginning as early as late this year we will see another surge in foreclosures - peaking in perhaps late 2010. (A good article about this HERE)

Chinese Drywall

In my years a manufactures rep I tried to get plastic film produced for me in China. I spent one month traveling to manufacturing towns in China looking for sources for plastic film for the Christmas tree industry. I learned a thing of two about manufacturing specifications, and product liability. I'll give you my conclusion first - the Chinese manufacturer is not to blame and I believe the attorneys will have a very tough time finding a "deep pocket" to recover money from. Sure there will be a lot of people to file claims against, but expect this one to be tied up in courts for the next few decades. Meanwhile home owners and builders scramble repair the problem.

To understand this situation you have to understand how manufacturing is brought to China. I know, because I did it.

Manufacturers probably began to look for lower cost production over seas. They went to China, sold some older rebuilt equipment or in some cases a new turn key factory to a communist village and helped that village build a plant. Some other entrepreneurs (or the same ones) gave that plant a specification to which they should make the product they would buy. The specification listed all the parameters that the product needed to meet - color, hardness, particle size, tensile strength, shear, maybe even printability. They may have even listed potential suppliers of raw material (along with the comment - or equivalent). In many cases the buyers of the finished product needed to send in quality control equipment or the very least testing standards against which these standards were measured.

For example; "white" is not a specification. How do you measure white? Is there a range? How broad is it? How much product will you accept outside that range? Can you afford zero tolerance for defect? Even simple things like length of a drywall board is subject to interpretation.

Eight feet long: measured how? Is eight feet plus or minus ¼ inch okay? At what humidity level to we measure the board? (Boards grow with moisture content) If we measure at 50% relative humidity and we ship to Florida with 100% relative humidity will the board grow?

I'm betting that no where in the specification was there a sulfur content or odor spec for drywall boards. It simply never turned up before. I am also guessing that the plant that manufactured the board was full of employees that had never seen or used a gypsum drywall board. If there was an odor in the manufacturing plant these employees would have no idea if this was normal or not. (It has also been reported that the odor does not show up until the boards get into high humidity areas like Florida)

If a purchaser was to return boards and want a credit for them because the boards were out of specification, the first thing that the manufacturer would do is QC the product and determine if the product met the specification signed off on by the purchaser.

On the off chance there was a violation of specification we are presented with another problem: the manufacturer's responsibility is limited to the replacing the out of spec material. This is why there is an incoming Quality Control department testing "to spec" of incoming materials. Because once the manufacturer adds value to the item, it is HIS responsibility.

I have seen homes built with drywall that is somehow contaminating the air, turning the copper air-conditioning coils black, harming the chrome on the faucets, and making an unsavory odor in the home.

To rebuild these homes - tear the drywall out and replace it - will cost about $35/square foot. For perspective on this cost, there are 1500 square foot homes in Lehigh and Cape Coral that cost less than $100/square foot to build new. There is a theory that is being tested now that the sulfur out-gasing is caused by bacteria, and that by killing the bacteria it will permanently stop the problem. This will cost about $14/square foot and require emptying the house for 30 days. I expect to hear about the results of these tests by the end of July. The $14/square foot, by the way, includes an underwriting fee by a national insurance agency guaranteeing the fix to be permanent.

I believe the Chinese drywall problem is fixable, for a price, and I have put together a team buying these homes, mostly already owned by banks that are ill equipped to deal with them and need to unload them.

What's a home owner to do that has a home with the effected drywall? Work with the builder to fix the problem. The large reputable builders that have reputations to uphold are standing by their work - they figure that they will sort the economics out later. The folks that are in trouble are the ones who can't find the builder of their home or he is too small to be able to back up his work.

(For background on the Chinese drywall problem click here)


Commercial Real Estate

The commercial real estate market is just beginning to see banks take back properties promised in mortgages. This lag in commercial foreclosures is the lull before the storm. Commercial borrowers are often required to have interest reserves to carry them through the project construction and subsequent lease out time. In some cases interest payments are made years in advance.

These periods are now over and banks, as reluctant as they are to own property are have become unwilling owners of vacant commercial buildings with carrying costs for taxes, utilities, and insurance.

Here folks are the opportunities. But it takes what I call patient money. Buildings are not leasing - either retail or office. The strategy however, is to be the low cost landlord when the tenants do return. There is also the opportunity to take these tenants from higher cost buildings that need to charge higher rents and put hem in your buildings at a great savings to them.

If we can buy commercial buildings low enough, we can rent them out at lower rents and fill them first.

I am also seeing commercial land available at prices that are only 20 to 40% what they were three years ago. For example, I just listed a prime corner across from Walmart on Route 41 at $8.00 per square foot. This was $20/sf just a few years ago