Tuesday, December 29, 2009

How to Be Happy in this Economy

December 28th, 2008
How to Be Happy in this Economy

Economics is the study of choice.

A Professor studied sets of 4 college students completing a group
assignment. In some groups he planted an actor with a negative attitude. The
assignment scores for the group with the actor were lower than the others,
proving that one bad apple can spoil the whole bunch. Do you have any bad
apples in your life? Choosing avoidance is not always practical. So how do
you insulate your self from a negative environment and choose to be happy?

Think of yourself in a boat and our current Minnesota real estate market is
a lake you need to cross. You are in this economy, and since its global,
choosing a different lake may not work this time. So you are on this lake,
but if the water (the bad apples of the world) comes into your boat, you
sink. How can you choose to be in the economy without letting it sink you?

The answer is in my new favorite opera, Thais by Massenet.

Thais is a high priced courtesan in Greece. This Christian Monk is convinced
Thais is the source of sin in the town and sets out to rescue her from her
lifestyle choices. The Monk gets a private audience with Thais and she tries
to seduce him (he is a very hunky monk). He runs out and says he'll meet her
in the morning. Thais, who is in high demand, rarely has time alone for
contemplation. So left alone, she realizes that once her beauty fades she
has nothing. So she agrees to burn her home and all her stuff and go with
the Hunky Monk. After an exhausting desert trek, he dumps her at the convent
and goes back to his monk buddies. After three months of praying, fasting
and whipping himself, he realizes he made a huge mistake. This total
contemplative life doesn't work: he is in love with Thais. So he goes back
to the convent to declare his love for her. Meanwhile, she has totally taken
to the nun thing. As the Hunky Monk declares his earthly love for Thais and
tries to persuade her to leave the convent with him, Thais sees a vision of
God in heaven and dies.

Great story-what does it have to do with Minnesota real estate? What I took
from this story is that you can't be at peace in extremes-being totally in
the world all the time, like Thais, or in alone in the desert all the time,
like the monk. To be happy you need both the world and contemplation.

The answer to making the right choices and thriving in our current economy
is found in the most famous music from Thais: a beautiful violin solo called

Meditation teaches you how to be in the world without the world being in
you. How to avoid taking on water that sinks your ship.

The ultimate purpose of Meditation is to achieve bliss. But there are many
other benefits:

* Reduces your health care costs. Meditation has been proven to lower blood
pressure and improve digestion. And headaches melt away like ice cream in

*Meditation helps to turn down your emotional reactions and increase your
powers of concentration and efficiency.

*Meditation helps see past the negative news and recognize the opportunities
in our economy.

*Meditation does not eliminate all of life's problem, but it allows us to
view them from a the right perspective, not get overwhelmed by them.

Even my cat meditates with me-and Brewster used to be an irritating hyper
kitty but now he's calm and happy. The simple method I study works with all
religions and you don't need to sit like a pretzel. But you do need a
teacher/coach. My teacher offers FREE meditation classes in Eagan,
Minneapolis and Maple Grove. Let me know if you want his contact info.

Economics is the study of choice. Meditation helps you make better choices.
Choose to be happy in 2009.

New I-94 Interchange NOT a "Stones Throw" away

November 5th, 2007
New I-94 Interchange NOT a "Stones Throw" away

You may recall in February that Beard Group, who are proposing "Stone's
Throw", a 634 acre mixed use development in Hassan Township, led the way to
lobby for a new TIF district and interchange at I-94 and Brockton Lane
between Maple Grove and Rogers. While the State Legislature turned it down,
the Cities of Dayton and Rogers, Hassan Township and The Beard Group funded
a transportation study for the interchange.
The study was not all favorable to the new interchange, as it found a new
ramp would likely INCREASE traffic on I-94 with more short local trips.

Back in February the Beard Group said they have secured $2 million in
funding for the intersection IF a new Tax Increment Financing (TIF) district
is approved by the Minnesota Legislature
Eight months later, when asked to put even more money towards moving forward
with the interchange, the Beard Group representative said "To be honest with
you, as the developer we put $350,000 into this so far. Our lenders cut off
our spending of any kind of studies but transportation. We're in bad shape
here. The reality is we're in a situation where we may not be able to go
forward with this project. We've been working on this for two years. We
can't get our plat approved or assurance to actually do all the

The Stones Throw project has never made sense to me. It was been advertised
and promoted like the plat was a done deal, including a series of articles
by the developer in Real Estate Journal with the theme "this is the right
way to get a major development approved." 183 acres are being promoted by
their commercial real estate broker as Commercial land, like someone would
built a "HassonDale" at that location. Even IF they were successful at
getting the new interchange built, what realtors would build stores in
"HassonDale" that aren't already in nearby Maple Grove, including the newest
shopping center by the new Hospital, less than 2 miles from Stones Throw. To
the west of the site new strip centers sit vacant in Rogers for small
stores, and for Big Boxes Rogers already has Target, Kohls, Cub, Best Buy
and Cabelas.

What about residential? The idea of Stones Throw calls for 1,361 units of
life cycle housing, consisting of starter homes to high end custom homes. As
far as schools, Stones Throw is just a couple miles from both Maple Grove
and Rogers High School. Problem is, most of Stones Throw is in the Buffalo
School District. While Buffalo schools are well regarded, its a long drive
for Johnny's hockey practice-about 1/2 hour each way. However, at the right
price housing could work there. Not Maple Grove prices, St. Michael/Otsego

When the Beard Group said " we're in bad shape here" he was probably
thinking of his debt service. Because they have already closed on 365 acres
of the land to the tune of $31 million dollars. At the aggregate number of
$85,000 an acre for a corn field that seems high but not stupid high-even
the site had an approved plat. And some of it was commercial in the comp
plan, but its all Residential. But you need to look beyond the aggregate
numbers to each of the 4 parcel purchases.

Parcel #1 as 21.07 acres closed in July 2006 for $1,700,000 or $80,600/acre.
This is in the Hassan Comp plan as residential, 2001-2005 sewer phasing. A
nearby parcel sold for around $75,000 an acre in 2006 that has been platted
and has houses on it now.

Parcel #2 is 253 acres in the 2016-2020 phasing plan for $16 million or
$64,000/acre closed in April of 2006.

Parcel #3 is 38 acres in th e 2001-2005 phasing plan that sold for $5
million in April of 2006.

Parcel #4 closed in April of 2006 was nearly $8 million for 52 acres for
$153,144. Here's where it really gets stupid. No frontage on I-94,
residential land use-and most of this phasing plan 2016-2020! Without an
approved plat I would need to appraise this AS IS. And the highest
comparable sale I'm aware of in the area is 35 acres purchased in 2005 in
St. Michael for $38,000/acre that is 2012+ in the phasing plan. I don't
understand how this land appraised!

Opposing Forces in Water Quality

October 25th, 2007
Opposing Forces in Water Quality

Water Quality is one of the most complex issues facing not only developers
but our society as a whole. Some examples:

1) Farmers versus Developers

While many farming practices are a known source of water pollution the
strong farming lobbies have resulted in little regulation on farmers so more
is put on developers.

2) The Minnesota Pollution Control Agency (MPCA) versus the Minnesota DNR

Shallow water lakes, defined as 15' deep or less, have a lower standard to
meet for water clarity than deeper water lakes, as defined by the MPCA.
However, the DNR imposes much stricter development standards on
Environmental Lakes, which tend to be shallow water, versus recreational
lakes, which tend to be deeper water. Yet both agencies must be satisfied.

3) Biological Functions versus Recreation. Clarity in Shallow water is
unhealthy for the lakes. While many homeowners on Shallow water lakes seek
clairity, fish and motor boats, these are unhealthy and unnatural for
shallow lakes. A weed kill, much like natural forest fires, are essential
for the health of shallow lakes, fish don't thrive well, and motor boats
stir up the weeds that are needed to keep the lake functioning properly in
the whole system.

4) Flood Control versus Clean Water. Shingle Creek, for example, was
designed 100 years ago for flood control and functions well in that role, as
do ditches for agriculture to move water away and prevent flooding. Now the
MPCA is proposing standards to make Shingle Creek las clear as an
undisturbed stream in northern Minnesota. How would this impact its role in
flood control?

5) Aesthetics versus Function. In constructed storm water ponds many
neighbors want fountains. Yet fountains disturb the sentiment that the ponds
are designed to settle.

6) Snow Removal versus Healthy Waters. It was common practice to put a
sand/salt mix on the roads in winter weather. Then it was determined that
the sand clogged the stormwater ponds when it washed off the roads. But then
the salt rusted the cars. So phosphorus, which has been banned from
fertilizer (though its still legal to buy it-you just can't use it on your
lawn) was added to the salt which works its way into the lakes anyway.

7) Cost versus Benefit. The estimated cost to clean up just the lakes in the
Shingle Creek Water Shed is $40 to $50 million dollars. With all of the
other needs, such as transportation and education, is the benefit worth the
costs? Should all water be treated equally in clean up efforts?

Confused? Join the crowd.

Tales of a Mortgage Fraud Investigator

October 16th, 2007
Tales of a Mortgage Fraud Investigator

The Story of the Greedy Widow

A woman shows up the the closing of an upper end house. Says her husband,
who is the designated buyer, cannot attend the closing. She presents a power
of attorney to the closer from the title company.

Legally, that power of attorney should have been signed by the HUSBAND
giving the power of attorney to his much younger wife. But the WIFE signed
the power of attorney for the husband and the closer accepted the document.
The closing proceeded and the wife walked out with a buyer refund check of
$20,000 and the keys to a beautiful new house in her husband's name. That
was six months ago and the husband has never made one payment on the house.

The husband could not have signed the power of attorney or made the payments
because he died the day before the closing.

So much of the rampant foreclosure crises could have been prevented if
someone was paying attention along the way.

Another common problem seen by this mortgage fraud investigator is stated
income totally out of line with a given profession. Range of incomes for
professions, say beauticians for example, are readily available on websites.
Plus, when an underwriter reviews thousands of applications with income tax
forms you would think that they would build a knowledge base that, say,
beauticians make X and if all the sudden a beautician is making 4X maybe
there's a problem?

The investigator also studies the appraisals in every one of her files. She
has noted in neighborhoods throughout the country where there has clearly
been a decline in value she has NEVER seen even one appraiser check the box
for "neighborhood is in decline".

Based on this investigator, one of the most significant causes of the
increase in mortgage foreclosure is inertia in those underwriters,
appraisers and closers that should have caught the problems before the deals

What Can Go Wrong with a Contract For Deed?

July 28th, 2007
What Can Go Wrong with a Contract For Deed?

A Contract for Deed is when the Seller finances the sale yet retains title
to the property until the contract is paid in full. As mortgage lending
standards tighten I believe Contract for Deeds will become more popular.

What are the risks to the Seller? I speak from experience.

1) The Buyer stops making payments. That's a simple remedy, you just cancel
the contract, which typically takes 60 days and no court action. You, as the
Seller, keep the down payment and whatever funds you have received from the
Buyer. Then you still own the property to sell to someone else. All in all,
a good deal.

2) The Buyer stops making payments and leaves a huge houseboat on your land
that got there by trespassing on the neighbors land, who has since built a
fence. Cost to Seller: $2,000 to have someone saw the boat in pieces and
haul to the landfill. Then resold the land to someone else at a higher
price. Still ahead of the game.

3) The Buyer stops making payments and incurred mechanics liens on your
property. Your contract for deed may specify the Buyer doesn't have the
right to do this, but it happens. And if the lien happened to improve your
property than no big deal.

4) The Buyer gave you a nice down payment, pays well for 18 months, then you
start getting notice they missed the homeowners insurance payment-which you
quickly pay because its still your house if it burns down. Then they stop
making payments. Then you get a notice that the Buyer has declared
bankruptcy. The 60 notice cancellation no longer cuts it-time to find a
lawyer well versed in both real estate and bankruptcy-harder than I thought
it would be, but I found one. Bankruptcy Court lifted the stay on
foreclosure and I got the house back.

5) Market Risk-see above-market had slowed and it took a while to resell the
house-still came out ahead with the prior Buyers down payment and 18 months
of interest, taxes and insurance.

6) Buyer trashes your property. Not much risk on land-and I've never had
that happen to a house as I've been very careful about selecting buyers. Its
been my experience that if the Buyer really wants to own that home they will
take care of it..

What risk is there in a Contract for Deed for the BUYER?

I always believed the only risk to the Buyer was if they didn't have the
money to be current on the contract they would have lost all the funds
previously paid and lost the right to buy the property.

Until I got an appraisal job with an interesting story.

The Seller had a larger farm on a highway and intended to break the farm
into several lots. The Buyer buys the first lot with highway frontage in the
middle of the property. He purchased this on a Contract For Deed which he
paid off over 20 years. Then the Seller refused to give the Buyer the deed.
This should be a simple case of Specific Performance. But it gets worse.

The legal description for his "lot" was a metes and bounds description.
Problem is, none of the other lots were sold and the Seller never divided
the property. So the buyer has a paid for interest in a parcel that does not
have a property ID number, making it difficult to pass title.

More time goes buy, the Seller still refusing to sign over the deed to the
land the buyer has paid for.

Meanwhile, the community has grown around the parcel, zoning rules have
changed, and the highway frontage on the buyers property is not permitted as
an access. Essentially the buyer has a landlocked parcel and the seller
needs to plat the property and build a road to this parcel.

So now you have much more than a Specific Performance case, as the City must
be involved in any legal action as they must approve how to subdivide and
access the property.

And the Seller still refuses to do anything to remedy the situation.

So, what can go wrong with a Contract for Deed? Let me know your stories.

Are Appraisers Responsible for the Recent Land Foreclosures?

July 5th, 2007
Are Appraisers Responsible for the Recent Land Foreclosures?

A banker told me about a large group of finished townhome lots that he had
recently foreclosed on. I asked him about the initial appraisal when they
did the loan in 2005.

Townhome lots are one of the toughest properties to appraise because many of
the townhome builders develop the land themselves and build the townhomes.
So when an appraiser goes to find sales of other townhome lots they can't
any, which was the case for these foreclosed townhome lots.

So the appraiser only used the Cost Approach. The Cost Approach to
appraising is typically reserved for unique properties that there are no
comparable sales-like a baseball stadium.

The Cost Approach is used in new construction as a reality check on the
costs provided by the borrower. Are these costs in line with the market or
are they higher, perhaps indicating the borrower is lining his pocket with
the difference?

The problem with this method is that COST does NOT always equal VALUE.

If it cost you $1,000,000 to build a house in a neighborhood of $200,000
houses would someone else pay you $1,000,000 for that house? If the
appraiser had only used the cost approach without asking this question the
lender is at a much higher risk in taking on the loan.

Back to the foreclosed townhome lots: how could the appraiser have done a
better job at estimating the value when there were no other finished
townhome lots sold in the community?

Lots of things. To name a few:

1) Ask what the sale price will be for the finished townhomes. How does this
compare with the other finished townhome sales in the community? If your
project is priced higher than what's on the market now, why will the buyer
pay more for yours? The developer better have solid answers to this

2) Ask the builder/developers of the other finished townhome projects that
their lots costs are.

3) Look up the land sale for the other similar townhome projects and compute
the price per unit, add in your development costs from your cost approach
and see how they compare.

4) Ask the most important question, the question that I suspect was not
asked in the bulk of the lot foreclosures that we're seeing right now:

Who's going to be these homes?

How old are they? Where to they live now? What is their income? Are they
first time homebuyers or do they need to sell a backup home?

How many of these buyers exist? How many choices do they have (supply
analysis)? And what percent of these buyers do I need to make my project

So, Are Appraisers Responsible for the Recent Land Foreclosures? Yes, as are
the bankers that accepted appraisals that only included the cost approach
and omitted the analysis outlined above.

A Tale of Two Otsegos

June 16th, 2007
A Tale of Two Otsegos

Otsego is located northwest of the Twin Cities on the I-94 Corridor in
Wright County. But there are really TWO Otsegos.

EAST Otsego is accessed by 101 just north of Rogers, south of Elk River.
This is a great corridor. Yet another Target is being built in Otsego (plus
the Target in Rogers and Elk River). Lots of other retail between Rogers and
Elk River. And by next year 101 will be a full freeway with stop lights
eliminated from Rogers to Elk River.

There is so little lot inventory left in East Otsego that two major builders
are bringing on new projects this summer: Rottlund Homes with the 254 unit
Wildflower Meadows, just east of 101. And Boulder Creek by Hans Hagen Homes
with 183 units.

West Otsego is a different story. Access is tough, having to navigate the
maze by the Albertville Outlot mall to even get to West Otsego. Developments
under or around $200,000 are doing well. Over $250,000 hardly any activity
at all.

Two developments in West Otsego SEEMED like they were booming: Otsego
Preserve and Sunray Farms. SEEMED like is the operative word.

I was engaged by a client to do a new housing inventory study in Otsego. So
a got a list of active subdivisions and then examined the tax records for
each one to determine the sales. I tossed out sales to builders because
these lots are still out there in inventory. I also tossed out any sales to
builder finance companies because these aren't true sales either.

I considered a property "sold" when the completed home was sold to the
family that would live there.

When you buy a house and go to a closing the closing agent always asks you
"What address do you want your property tax statements to go to?" If its
your residence you're going to tell them the address of the house you just
bought. If you're buying the house for investment you tell the closer your
business or home address for the tax statements.

So that's the data I examine to determine if a house is really "sold". I did
see some sales in West Otsego to investors and saw some of these houses show
up in a website of Homes For Rent. The advertised rents were $1,300-$1,700
per month. I question the viability of the market supporting over a hundred
rental houses in Otsego in this rent range. I believe almost all of these
sales will be either resold or foreclosed and then resold. Especially when I
saw multiple sales by the same buyers. So these sales I excluded from my
"sold" count.

Two developments by the same developer in West Otsego really caught my eye:

Sunray Farms had 65 recorded homes sales from November 2004 to now. I could
only confirm that 52 were actual home buyers.

The real shocker was Otsego Preserve! 70 recorded home sales from April 27th
, 2005 till now in the $300,000 range. Way outperforming similar
developments in this price range in West Otsego.

Otsego Preserve must be a lonely neighborhood to live in:

I could only confirm 5 sales of the 70 were actual residents.

Does it Pay to Give Away Land?

May 30th, 2007
Does it Pay to Give Away Land?

A developer asked me to appraise a 6 acre wetland that is adjacent to ane
existing bike path. The City "suggested" he donate the land to them, along
with his cash park dedication fee. So he needed the appraisal for the IRS,
who now requests appraisals for donated property exceeding $500.

So I looked at the land, which was situated behind several lots and realized
he had 3 options for this property:

1) Split it up and incorporate it into the adjacent lots.

While this option may have made the lots larger, it would not increase their
usable land.

2) Take the City's suggestion and give the land to them. This was his best
move, because he know as "premium lots that back parkland". I noted the lots
backing the donated wetland were his highest priced lots. Plus he got the
tax deduction to offset the higher prices of the premium lots.

3) Keep to his original plan and incorporate the wetland into a homeowners
association. I don't believe this was the right move.

When I asked the developer if he had any properties that he was interested
in having me help with a property tax appeals he looked to his other
"remnant pieces". Land he was paying taxes on until the development sold out
and a homeowners association could take it over.

Which begs the question: are you better setting up a homeowners association
or turning over the land and/or amenities to the city?

A front page article in Tuesdays' Star Tribune was about private homeowners
associations for development amenities. What the article did not address is
the question: do they sell?

My observation is, sometimes. For example, I brokered some land for a 100+
all townhome development is Plymouth that has a community pool. They project
sold out quickly. I see that for an all townhome community or a large (over
300 units) master planned community that includes townhome this can make
sense, as townhome owners don't have the land to build their own pool or

Yet I'm familiar with an all single family development that built a pool
with a homeowners association. The improvements were in Fall of 2004 with
the models completed spring 2005. Other developments in this community were
doing well during this time period. The development with the community pool
has sold only 3 homes in 3 years. People familiar with the area tell me that
potential buyers were turned off by the association fees. And the lots were
more expenseive. Not everyone swims. For those serious swimmers community
pools are too small and crowded and there is a YMCA a mile away for those
that want that amenity.

Looking at the private development amenities from a developer's pocketbook
they have to upfront the cost and give up at least one lot to build it.
Then, until all of the homes are sold the developer carries the association
costs for the unsold lots.

Is the cost of the private amenities more than made up for in increased lot
prices? Not a quick question to answer-needs some serious study and

Does it pay to give away land? Sometimes it does.

Its Spring, and a young man's thoughts turn to.....

May 23rd, 2007
1) Its Spring, and a young man's thoughts turn to.....

a) Romance

b) Fishing

c) Golf

d) Wetlands

Answer: d)-if he wants to get his development in the ground...

2) Wetlands can be delineated

a) anytime

b) only after it rains

c) during the "growing season" (typically late April through late September
or the first frost)

Answer: c) Wetlands delineations conductedother than the "growing season"
are typically not approved by wetland regulators.

3) You, too, can be a wetland delineator!

a) True

b) False

Answer: a) True. Unlike Appraisers or hair stylists, wetland delineators are
not licensed in Minnesota.

4)Name the three characteristics that are used to determine a wetland:

a) mosquitoes

b) open water

c) soil

d) cattails or other vegetation

e) water within the top 12" of soil at least 10 days during the growing

Answer: c, d & e: All 3 of these must be present to have a wetland: hydric
soils, wetland vegetation and water within the top 12" of soil at least 10
days during the growing season. Open water is NOT required for wetlands and
mosquitoes are optional.

5) An LGU stands for:

a) Large Government Unit

b) Lake Group Unity

c) Local Government Unit

Answer: c) The LGU is the local government unit that is responsible for
regulating wetlands for your development. It may be the City, or the
WaterShed. Every place is different.

6) Once the LGU approves your wetland delineation and grading plan your
wetland approval process is complete:

a) True

b) False

Answer: b: False. You can have approval from one agency, such as the local
watershed, and another, such as the Army Corps of Engineers, denies approval
and stops your development from going forward.

7) How many government agencies regulate wetlands in Minnesota?

a) 10

b) 38

c) 72

d) hundreds,too many to list

Answer: d) Too many to count including cities, watersheds, the state of
Minnesota, the Army Corps of Engineers, the EPA. And they each have their
own rules.

8) Wetland delineators determine how many acres are wetland.

a) True

b) False

Answer: b) False. The wetland delineators mark the wetland boundaries. Then
a surveyor must come out to map out the wetlands and determine their size.

9) A psiometer is:

a) a video game

b) a parking meter

c) a specially designed well used to measure the water table

Answer: c). Sometimes wetlands are hard to determine, especially if standing
water is not apparent. So psiometers are installed to monitor the water
table. Readings are especially important after its rains to see if the water
drains away or stays.

A New Interchange for Interstate I-94?

February 20th, 2007
A New Interchange for Interstate I-94?

The City of Dayton and Hassan Township (near Rogers) are working on a joint
powers agreement towards a new interchange in 2010 at I-94 and Brockton Lane
(Hennepin County Road 101).

The Beard Group are proposing "Stone's Throw", a 634 acre mixed use
development at this intersection in Hassan Township. The Beard Group says
they have secured $2 million in funding for the intersection IF a new Tax
Increment Financing (TIF) district is approved by the Minnesota Legislature
this year. The total cost for the interchange is estimated between $15 - $25

MNDOT'S response? According to MNDOT Area Manger Chris Roy: "We have about
$27 billion worth of needs and with only about $2 billion worth coming in,
we have no official plans on major infrastructure all the way though Rogers
up to 2030."

And the last word goes to Hassen Town Board Member Bob Ivey: "I think you're
twisting our arm here, saying if we don't make these TIF districts, we don't
have no stinking Stones Throw. There's no way I'm going to vote for tax
increment financing in a cornfield. That's just the way it is."

New Rogers Flyover Ramp

December 21st, 2009
The New Rogers Flyover Ramp

Have you ever gone West on I-94 past Maple Grove and the interstate turns
into a parking lot? The I-94 Coalition is advocating for a 3rd lane on I-94
from Maple Grove to Monticello and this is just in the conversation stage.
However, help is on the way next year the when the new Rogers "Flyover Ramp"
will be constructed. If you see U.S. Congressman Erik Paulsen thank him for
his help on securing this funding.

The I-94 west parking lot problem is caused by the narrowing of I-94 from 3
lanes to 2 at the 101 exit in Rogers. Aggravating the problem is the stop
light at the top of the ramp, causing a backup on the Rogers exit lane of
westbound I-94. The flyover will divert Highway 101 traffic on a ramp over
the South Diamond Lake Road intersection.

Drivers will now be given a choice either to bypass the main retail area of
Rogers or go to the retail area, but an additional stop light will be
required to do this.

The cost of the flyover ramp is estimated to be $10.7 million. Funding
sources includes $3.78 million in federal stimulus funds, another $4.98
million from federal funding and $1.645 million by the City of Rogers.

Who benefits from the new flyover ramp? Residents and business in St.
Michael, Albertville Monticello, Otsego, Elk River, and Zimmerman should all
have a shorter commute. In my opinion those that may see a negative result
from this is the businesses in Rogers because the new flyover ramp will
bypass them. When I questioned a MNDOT engineer about this he responded that
those who choose the flyover option aren't patronizing the businesses in
Rogers now. And that if they want to go to the businesses in Rogers, even
with the additional stoplight, it will be quicker without the delay sitting
on the exit ramp.

Osseo has never quite recovered from the reroute of 169 from their downtown.
Long Lake has suffered greatly from the new Highway 12 bypass. Such as it
goes with highway improvements of this nature. While they can benefit many
people everyday, local businesses can suffer. Its part of what makes
transportation decisions so challenging and political.

Embrace Open Space Study is Flawed

December 14th, 2009
"Embrace Open Space" Study" is Flawed.

Embrace Open Space claims that their study proves that in Washington County
there was a $16,570 per home open space premium for their 2007 study and in
Hennepin County for the 2009 there was a $16,300 per home open space
premium. They claim that this open space premium is true of homes as far
away as 500' from the open space.

In evaluating any study you need to put on your critical thinking hat and
ask these 4 questions:

1) Who paid for the study and what is their addenda?

2) Who conducted the study and what are their qualifications?

3) What was the data used and the methodology?

4) Does the data support the conclusions?

1) Who paid for the study and what is their addenda?

"Embrace Open Space" is a collaborative among Twin Cities organizations
concerned about protecting open space in our region.

2) Who conducted the study and what are their qualifications?

Was it the University of Minnesota? The real estate department at the
University of St. Thomas? No. It was Edward Moscovitch , a private economist
from Massachusetts with no stated experience in real estate, let alone real
estate in Minnesota.

3) What was the data used and the methodology? Data was collected from the
county assessors. A regression analysis was conducted to isolate open space
as the factor. Sounds impressive, right? But this is the BIG flaw: the data
simply measured the assessed value versus the sales price.

First of all, the study data doesn't indicate whether this economist dude
from Massachusetts understands that assessed valued in Minnesota lags the
market by two years. These studies were conducted using data from 2001
through 2006: most of those years saw home price inflation. If he didn't
adjust for the time lag on the assessed value it could easily account for
the total difference.

Second, even if he accounted for the time lag, all his study shows is that
the assessors undervalued properties-which was fairly common during this
time frame. When it comes to valuing a 3 bedroom 1950s rambler in Richfield
the assessors are typically dead on with their values. When you get to the
custom homes that typically back golf courses or lakes or parks --valuation
becomes more subjective for both county assessors and private appraisers.
But this ratio of sold value to assessed value says NOTHING about the value
of open space.

3rd. Washington and Hennepin Counties are on the higher end of values for
Twin City homes. Yet the conclusions are expressed in dollars, not
percentages. $16,000 on a $500,000 home is only 3.2%.

4th. The study did NOT isolate city versus suburbs or new construction. Yet
they use the data to advocate for changes to new construction suburban
development patterns.

As an appraiser, the methodology I would use to test this hypothesis is a
"paired sales analysis". Take two homes or lots where everything is the same
except the open space and extract the difference. This methodology takes
time to thoroughly study each property to discern all other factors are
really equal. And it also takes knowledge to know what you're looking at. A
study of thousands of properties that was lead by an out of state economist
with no real estate experience is not the same as a local appraiser familiar
with the market and product type.

4) Does the data support the conclusions? A basic conclusion and
recommendation for the Embrace Open Space study is that open space values
have more impact on smaller lots-so we should have smaller lots with more
open space. And they also claim that the open space premium is valid for
homes that were as much as 200' -500' from the open space amenity. But
higher values on smaller lots and open space premiums as far as 200' to 500'
away are NOT supported by this study. NOTHING is supported by this study
because the researcher is unqualified to conduct it and the methodology is

Its inappropriate to include urban areas like the Lake Calhoun neighborhood
in Minneapolis and extrapolate these findings to new suburban development in
Medina. Its not the same real estate buyer.

What is important on size in suburban lots is the lot WIDTH. My appraisal
experience shows a significant drop in suburban single family lot value when
the lot is less than 80' wide, which affords a 3 car garage as well as some
elbow room from your neighbor. The Embrace Open Space study is trying to
convince you that size doesn't matter - it does.

As an appraiser market data has shown me that lots that back open space
typically do have a premium. But I have NOT seen data that supports this
premium extends 200'-500' feet from the open space. For example, a lake lot
sold in Maple Grove at a LOT price that was more than double the HOUSE value
across the street.

The Embrace Open Space study promotes a development pattern of small lots
adjacent to large open space, like Jackson Meadow. But this study only takes
into account homes that have SOLD so their Washington County study missed
most of Jackson Meadow. Jackson Meadow in Marine on St. Croix is a
development built in 1999 that has all the principals this study claims to
prove will increase property values--small lots in the suburbs surrounded by
large open space. Jackson Meadow had a lot of press and won awards for its
design. Coming on the market in 1999 it was there for the real estate boom
where almost anything sold. Except Jackson Meadow. Of the 30 lots, only 15
have sold since 1999. An absorption rate of 1.36 lots per year does not
spell success.

I see that Embrace Open Space recently presented their study to the Medina
City Council. If they make their way to your community ask them about
Jackson Meadow.

Assessor Banned from being Expert Witnesses in Tax Court

December 4th, 20o9
Assessors Banned from Being Expets in Tax Court

Assessors and Appraisers have different education and regulatory agencies.
Your initial property tax value is determined by the Mass Appraisal method,
which is a statistical model that lumps similar properties together for
valuation. Appraising is based on a thorough analysis of a particular
property. When you file a property tax appeal the valuation is done by an
individual appraisal valuation.

A November 12th ruling by the Tax Court agreed that Assessors cannot be
considered "expert witnesses" by the Minnesota Property Tax Court. They can,
however, testify as lay witnesses.

The case was "The Shoppes at Woodbury". Attorney Larry Martin for the
property owner did some clever research and analysis and convinced the tax
court that statutes prohibit Assessors from acting as appraisers. Minnesota
Statute 270.41 prohibits a licensed assessor from preparing an appraisal
report for property in their jurisdiction.

And what impact did tossing out the testimony of the Washington County
Assessor have on the case result?

The original assessed value for tax year 2008 was $4,870,300.

The property owner's appraiser said the strip center was worth $3,465,000.

The Washington County Assessor said for tax court the value was $5,000,000.

The Tax Court affirmed the original value of $4,870,300.

I belive a more global impact of this is to increase the cost of the
Counties for going to tax court as they will now have to engage an outside

Being Stubbon Hurts Everyone

November 25th, 2009
Being Stubborn Hurts Everyone.

My GPS has a sick sense of humor. "Make a U-Turn". "Make another U-Turn".

So when it kept sending me to bike path when I was searching for some lots I
was appraising I was pretty skeptical. But after an hour+ of driving around
and not finding the lots, I parked the car and walked down the bike path. I
met on woman on the path who directed me to the lots. Turns out the bike
path WAS the road to reach the lots but the City closed it 2 years ago.

The closed road was just one of the reasons only 1 lot had sold in the
subdivision I was appraising. Some are beautiful lots-if you can find them.
And once you do - its a low traffic neighborhood.

The developer had petitioned the city to install the roads and utilities.
And the park fees, for whatever reason, were not collected at the recording
of the final plat like most cities require. The development agreement was
backed by a Letter of Credit.

With only 1 lot sale, the developer did not make his tax payments, which
included the assessments to pay for the improvements. Couple years go by and
the City sues the bank to collect on the Letter of Credit. But that Bank
went under and the Letter of Credit is wiped out.

So now the City is taking the position that all assessments and park fees
must be paid on ALL lots before issuing ANY building permits. Its kind of
hard to market lots you can't build on.

About 2/3s of these lots really nice and have value beyond the assessments
and park fees. But the City won't accept partial payment for the
development. The remaining 1/3 are maybe worth what's owned on them and it
makes sense for the bank to just let those go tax forfeit.

If the City would work with the succeeding bank these lots can get sold, the
cities debt can be paid, and houses can be built to generate additional tax
revenue. Otherwise they will likely all go tax forfeit and be sold for less
than the city's debt.

About a year and ½ ago Mr. Dustbunny (the rabbit that does NOT go to school)
was chasing Brewster the Cat. They got in a big fight and Brewster bit Mr.
Dustbunny's long ear. That infection from the cat bite never healed and Mr.
Dustbunny, sadly, is in Bunny Hospice. Mr. Dustbunny and Brewster have
forgiven each other.

Being stubborn hurts everyone.

Jumping Through Hoops

November 19th, 2009
Jumping Through Hoops

My bunny goes to school. Rosie Rabbit is enrolled in her 3rd term of Rabbit
Agility class. Having successfully tested out of the first two levels, she
is now a "Green Belt Agility Bunny". While the "Hoppy Hour" is playtime,
Agility Class is hard work. "Rosie right. Rosie left. Rosie Hop. Stop. JUMP".
I feel like I'm living in a Dr. Seuss book, but Rosie really gets into it.

I figured if my little bunny can learn how to jump through hoops on command,
I could figure out how to buy a house in foreclosure.

My client John called me in May to see a house that was listed in Grey Cloud
Island Township in Washington County. Grey Cloud is a place that time
forgot, yet its only 15 minutes from Minneapolis/St Paul Airport, where John
works. The house was bank owned. The listing agent didn't return calls and,
when I finally reached his assistant, she lied when telling me there were no
other offers. All the time and effort to put the offer together was for
naught, and it took weeks to be told another other had been accepted.

Not wanting to go through that nightmare again, I looked on Washington
County's website and found a little cottage on Grey Cloud Island that was
still in the redemption period with the mortgage amount only $75,000. So I
did some detective work and found the attorney for Ricky's estate, the fee
owner of the house. The attorney was thrilled to hear from me. Ricky's
hunting buddy had a pending purchase agreement but couldn't get financing.
Banks are reluctant to lend money on houses that don't have electricity,
flushing toilets and front steps. I called my banker at Private Bank and he
wouldn't touch the deal either. But he suggested I just use my credit line
and I buy it then finance it for John.

I submitted an offer for the property believing the seller would land up
with about $5,000. And didn't hear back. When I finally reached the attorney
he told me the $75,000 mortgage was just the start. There was a 2nd
mortgage, fees, penalties, judgments. So my best alternative was to buy it
directly from the bank when it came out of redemption on August 26th.

John renews his apartment lease through the end of August.

Well-its a Minnesota property owned by a Minnesota Bank, U.S. Bank. How hard
could this be? So I called my US Bank banker and he provided me with the 800
number for foreclosures-which are handled in Kentucky! Surprisingly quick I
reached someone who looked up the property and said "its not ours, we're
just service the loan -you need to talk to Freddie Mac." So I told Freddie
Mac I want to submit an offer contingent upon the expiration of the
redemption period. And they said "No"-all properties must be listed on the
MLS for at least 48 hours before any offers are accepted.

John renews his apartment lease through the end of September.

Everyday we check the web for the listing of the little cottage in Grey
Cloud Island Township.

October 2nd, 6 weeks after the redemption period expires, the property is
listed. We go visit again. The old propane furnace was stolen, along with
what was left of the electrical box after Ricky messed with it, and even the
metal gate to the property entrance was gone!

I submit an offer that day with a closing date of October 16th.

Brian the Broker tells me a neighbor also submitted an offer and gave me the
chance to submit "My best offer". I upped the price $2,000. He said the
house was mine.

October 9th, a week after I submitted my offer, I get Freddie Mac's
addendum. The terms were totally to their side, such as if I close late I
pay a $50 a day penalty. They pay none. They changed my October 16th closing
date to "on or before November 6th." They return the sign documents on
October 14th.

We're starting to get concerned about the approaching winter, as the house
has no electricity or heat and the septic may need attention prior to the
ground freezing. Freddie Mac is in Austin, Texas-they don't get the winter
thing. Plus, this was before the Tax Credit was extended and we were up
against the November 30th date for that.

John extends his apartment lease one more month.

On November 6th, our scheduled day of closing, US Bank, who told me "they
don't own the property", sends the deed to their closer. My closer at Old
Republic is given figures on Monday, November 9th and told if she can get
the closing statement done THAT DAY we can close on Friday, the 13th.
Freddie Mac requires 72 hours to review the HUD and Veterans Day was
Wednesday. So Old Republic came through for me. I wasn't notified until1:00
on Thursday the 12th that Friday the 13th was our lucky day--a month after
the closing date on the original purchase agreement.

You would think these banks would be anxious to unload these troubled
assets. And somewhat sensitive to a vacant home in winter.

After going through all of this craziness to buy one little house, its
actually easier and quicker to teach Rosie Rabbit how to jump through hoops!

Can a Ghost Buy a 10 acre lot?

November 12th, 2009
Can a Ghost Buy a 10 Acre Lot?

A 10 acre lot is a weird animal more driven by zoning rules than market

A 2-3 acre lot on paved cul-du-sac often sells for more than a 10 acre lot
in the same area.

For example, look at Hennepin County acreage lots.

There are currently 84 rural non Lake Minnetonka lots from 3-10 acres listed
on the MLS from $99,900 - $1,295,000. This year 11 to date have sold with
prices ranging from $90,000- $350,000.

In the 10-20 acre range there are 29 lots on MLS listed between $110,000 and
$3 million. There has only been one lot sold in this range in Hennepin
County so far this year,

There appears to be a pending sale for a 10 acre lot-but I believe it a
"phantom sale" The buyer is a ghost and may have trouble with the photo ID
part at the closing. The listing agent said the developer just handed him
some paper work, said his buddy was buying a lot, and told him to put up a
"sold sign". The closing date has passed. Its an old developer trick to
drive demand, with the belief that people are sheep and will buy once
someone else makes the first move.

Inspecting the lot, I see why the lots haven't sold in "The Development". I
call these "bowling alley" lots. Someone just chopped up a corn field using
existing road frontage on a poorly maintained gravel road. No effort was
made to create value.

Who is the buyer? I'm currently marketing 4 acreage waterfront parcels for
sale (3 near Victoria, 1 in Maple Grove) and have sold acreage residential
pieces in the past. This is what I have found these buyers are looking for.

1) Privacy. A 10 acre bowling lot that is an open corn field has less
privacy than a wooded 1/3 acre suburban lot. What these buyers really want
is 2 acres surrounded by 80 they don't own, don't pay taxes on and can't be

2) Agricultural. They want horses or other animals. These folks typically
want more than 10 acres.

3) They want outbuildings for car collections and repair or small business
or hobby storage.

4) They are willing to drive farther to pay less.

5) To be able to hike and hunt and play privately in their own backyard.

6) They just want some elbow room yet still live in a neighborhood. That is
why the 2-3 lots are far more popular than the 10 acre ones.

Alice in Greenfield

November 4th, 2009
Alice in Greenfield

Alice had this traumatic childhood, what with going Through the Looking
Glass and falling down the rabbit hole to Wonderland. So when Alice grew up
she longed to live in the peaceful quiet countryside, but not too far from
the city. So she bought a home in Greenfield in western Hennepin County.

Little did Alice know that the Queen of Hearts, the "off with their head"
monarch from Wonderland, also moved to Greenfield. She changed her name to
Jill Krout and got herself elected Mayor on the false pretense (after all,
she was a fictional character) that Greenfield would be saner under Mayor
Krout than the former Mayor, Larry Plack. Yes, that Larry Plack that
illegally planted a GPS locator on the car of a former employee.

Even though she changed her name and her wardrobe, Queen Jill still has that
"off with your head" thing going. I believe Greenfield has been through 5
City Managers and is on its 3rd City Attorney in 2 years. And Queen Jill
shouted "Off with their head" three times at the October 15th special
Greenfield City Council meeting.

She accused a City Council member, one of 2 sane votes on the Council, of
"stalking her". But she lacked the authority for "off with his head".

After announcing she had to leave at 7:45 for a meeting that she called at
7:00, Queen Jill refused to take public comment from any of the 50 residents
that attended the meeting. When a resident protested Queen Jill said "off
with his head" and requested a Hennepin County sheriff's deputy to remove
the resident from the meeting. The deputy refused. Queen Jill lacks the
authority to fire the deputy-there are some sane rules outside of

The point of the meeting was to discuss the job description for hiring yet
another City Manager (presuming that anyone qualified would actually want to
work for Queen Jill). When we last visited Greenfield the League of
Minnesota Cities was on the verge of raising the insurance deductible for
Greenfield to $500,000, about ½ their annual budget, due to so many
employment claims. The league said they would give Greenfield a chance if
they hired a qualified City Administrator who would whip Greenfield into

So Jim Willis was hired as an interim City Administrator to help hire his
replacement. And when Mr. Willis carefully crafted the job description and
presented it at the prior City Council meeting, it was quickly rejected by
Queen Jill and her 2 cronies. What was all this fuss about requiring
experience at running a city? Private sector experience is essential-and
doesn't Queen Jill's description fit nicely with her buddy that she wants to
hire for the job?

Jim Willis had enough of this and submitted his resignation with a 2 week
notice on October 9th effective October 26th. But that wasn't soon enough
for Queen Jill to dispose of someone who disagreed with her. "Off with his
head" and the council voted 3-2 (the council ALWAYS votes 3-2) and
terminated Jim Willis effective October 16th.

Poor Alice. She would really like to sell her house in Greenfield and move
someplace saner. How will Queen Jill affect the property value and marketing
time for Alice to sell her house? I wouldn't want to be that appraiser and
have to figure out how to make an adjustment for a "crazy city council".

Walk-ability and Property Values

October 26th, 2009
Walk-ability and Property Values

I checked out my house on www.walkscore.com

Walk Score helps people find walkable places to live. Walk Score calculates
the walkability of an address by locating nearby stores, restaurants,
schools, parks, etc. Walk Score measures how easy it is to live a car-lite
lifestyle-not how pretty the area is for walking. In Googles ongoing effort
to take over the world, Walkscore is a tool to evaluate how "walkable" a
particular property is on a score of 1-100. And Google is trying to get real
estate websites to integrate WalkScore.

For my Maple Grove home I scored a "38". My friends house just off Lake
Cahloun Parkway near Uptown Minneapolis also scored "38".

That looked a little odd that we would score the same. Until I started
looking at the data. A pharmacy they claim is only .81 miles from house is a
45 minute walk. Then I figured it out-they assume I can walk across
Interstate 94! They neglected the to add the 2 miles to pick up the bridge
over the freeway. The local grocery they cited has been a fitness studio for
a while now. And the Pizza Hut they say is .39 miles? I have no clue where
that came from.

What Walkscore ignored is the beautiful trail that is in my backyard that
leads directly to 3 parks, a major office park and a preschool. And it
didn't take into account that Maple Grove Transit stops a 5 minutes walk
from my house, which should influence the "car dependent" label it gave me
with the 38 score.

The Urban Land Institute economist Joe Cartwright from Ceos For Ciities
presented a studying showing how walkability increases property values. The
study was done of 15 US cities, with Chicago being the only colder climate.
13 of the 15 cities demonstrated more walkable areas had higher property
values after accounting for a number of other factors. The only city that
had a negative relationship between walkability and property values was Las

The study was based on a huge data pool: all of the home sales in each of
the 15 cities in a 12 month period. The average suburban score is 42. The
study claims in increase of value ranging from $700 to $3,000 (depending on
the city) for each point increse in Walkscore.

How valid is the study when the data is so poor? Or if the data is
consistantly bad all over does that make it OK when you have enough of it?
His overall conclusion though, I do agree with:

For those communities where walkability is highly valued (like San
Fransisco) the higher the walkability the higher the impact of walkability
on property values.

The speaker said his next project is to evaluate the impact of transit
accessiblity on property values. Last week I took Maple Grove Transit for
the first time, as I was downtown all day. It was awesome, and I wish the
buses ran more frequently and during the evenings. Enroute to I-94 it goes
down a couple residential collector streets and picks up/drops off people
right at their house! (Just try that with suburban light rail!) It made me
wonder about property values on these higher traffic roads which I presumed
had lower property values due to the traffic. But if the residents take the
bus to work everyday, is the property actually worth a premium to them?

I won't hold my breath about this economists study fleshing this out if he
is again relying on Google Maps.

How do Lawsuits Impact Land Values?

October 19th, 2009
How do Lawsuits Impact Land Values?

I'm consulting on a property tax appeal of a parcel that has an approved
Preliminary Plat for single family lots. Its beautiful property in a
community where new homes are selling. However, the current lot prices
barely exceed the development costs. As indicated by the data I studied, I
valued the land at $20,000/acre.

The next day I get an assignment to consult on a property tax appeal for the
parcel adjacent to the one I just valued at $20,000 an acre. Its identical
in character with one difference: the Preliminary Plat application resulted
in a lawsuit that is still ongoing.

The Preliminary Plat was denied with a one page memo turning it down because
the Environmental Advisory Committee didn't like the wetland mitigation
plan. Minnesota development applications are impacted by "The 60 Day Rule".
If a development application has not been denied within 60 days, its
automatically approved. The governing body can request a 60 day extension.
While the 60 day extension was provided by the developer for the Preliminary
Plat application, a request was not signed by the developer for the Wetland
Mitigation plan.

The developer then submitted an application for Final Plat approval-which
was denied with a 25 page finding. The primary reason for the Final Plat
denial was the previous denial of the Preliminary Plat.

So the developer sues-wins the first battle with a Summary Judgment from
District Court. The lawsuit, more than 2 years later, is very much alive and
headed toward hearings at the Minnesota Court of Appeals.

So I had to decide how much, if, any, this lawsuit impacts the value of the
property. Accounting for the uncertainty of the lawsuit outcome, the expense
of pursing the lawsuit and the time factor, I discounted the land 25% to

How would you account for the lawsuit when valuing the land?

How to Sell to Minnesotans

October 14th, 2009
How to Sell to Minnesotans

I'm not a native Minnesotan: I've only been here 26 years. Some things took
me a long time to get. Like when a Minnesotan says "not now", I used to pull
out my day planner and ask "when?". I finally figured out " not now" is
Minnesotan for "not interested."

So when the Realtors Association offered a class on "How to Sell to
Minnesotans" I signed up. And this is what I learned:

*The city with the largest per capita of age 65+ in the country is Edina.

*Minnesota has the highest per capita in the country of golfers, boat owners
and attorneys.

*Minnesota has 90,000 miles of shore land: more than Florida, California and
Hawaii combined!

Beyond the statistics the highlights were:

*Your Minnesotan customers don't want to chit-chat. They don't need you for
a friend as they are still hanging with their friends from High School.

*Minnesotans make quick decisions-they just take a long time to inform you
they have decided.

*Minnesotans are much more into public policy and local government
involvement than others in the country. (Which isn't always a good thing
when your development proposal is at planning commission.) Minnesotans pride
themselves on being educated and well informed. So a good way to reach them
is to teach a class.

*Whoever designed the "Sane Lane" must not have been a Minnesotan:
Minnesotans don't like to car pool-they are too independent and want to keep
their options open. Not into trends and not into flash.

*When a Minnesotan tells you to "call me next week" they are blowing you
off. But when they say "call me next Tuesday"-they are interested in doing
business with you.

*Your Minnesotan customers don't want to know about your personal business
and don't ask about theirs. They like to keep a wall between you and them.

*Minnesotans expect full honesty from you and will walk the minute they
sense insincerity. Yet Minnesotans will often lie to you about who the
decision maker really is.

*True Minnesotans who grew up with this culture can't see these things in

How much of this bodes true with your experience?

Who's Responsible?

October 26th, 2009
Who's Responsible?

A 17 lot single family subdivision was built by an established developer in
2005 as an additional phase to an adjacent development with a National
Builder. There is no homeowners association. National Builder buys 7 lots
and walks on their option for the remaining 10 lots.

January 2007 the Developer and their Original Bank record Restrictive
Covenants for the remaining 10 lots. Five lots are purchased, built on and

Fall of 2008, burdened by others developments and the weak market, Developer
deeds the 5 remaining lots to the Original Bank. As often happens, there was
a Participating Bank in the deal and its the Participating Bank that lands
up with ownership in the 5 lots.

With the Developer gone and the Original Bank out of the picture, Who's
Responsible to enforce the Restrictive Covenants? An attorney I consulted
said the homeowners were-which makes sense. Because once any development is
built out the developer is typically out of the picture. But this next
situation isn't so clear.

When the lots were platted the signed development agreement included a
Letter of Credit from the Original Bank, which has since expired. And a time
limit on a "punch list" which is soon to expire. So the City's consulting
engineer inspects the streets. And he finds little stuff so minor, like
tubes left in the catch basin, and debris in a ditch, that it would have
been quicker to correct them when he was out there than to write them up.
But write them up he did. So, who is responsible to fix them? The City
contacts the Participating Bank-who was never a party to the Developer's
Agreement. In my view, the Participating Bank is no different than the other
12 lot owners in the subdivision and has no liability for the punch lists.

So who is responsible for the punch list items?

The Edgewater Development in Rogers has 173 finished lots with 50 owned
occupied homes, 5 builder owned spec houses and 118 vacant lots. The Rogers
City Council, on September 22nd, voted to obtain bids for an estimated
construction cost of $470,125 to finish the paving, install mailboxes, fix
the defective curb and sidewalks, etc. However, the council hasn't
determined exactly who to asses for the improvements that were supposed to
be completed by the developer, Heritage Development, in 2006. Heritage
defaulted in 2007. The council and property owners all want to go after
Heritage Development for the $470,125 dollars. And if they can't get the
money from Heritage, then who pays? If you spread the estimated construction
costs equally it comes out to $2,717 per lot. However, many of the vacant
lots owe multiple years of property taxes-including the handful that
Heritage still owns.

Even as our housing market recovers, I believe we'll see more situations
like these.

P.S. Thanks to Kriss Griebenow at Venture Bank for his comment on last
week's column on the Real Estate Cycle: "Real Estate is a 10-year cycle with
a 5-year memory.".

The Real Estate Life Cycle

September 30th, 2009

The Real Estate Life Cycle

The Appraisal Institute defines four life cycle stages of a market area:

1. GROWTH. Example: Maple Grove. While growth has slowed some relative to past performance, building permits 2005-2008 have averaged 340 per year.

2. STABILITY. Example: Roseville.

3. DECLINE. Example: Downtown Long Lake. Decline is often caused by an external circumstance. In the case of downtown Long Lake its the rerouting of Highway 12. The lady at the apple stand said her business is way down.

4. REVITILIZATION: Example: St. Louis Park, with new housing and commercial development.

Appraisal school wasn't the first time I encountered this life cycle. I learned it years ago in MBA school in studying product life cycles: the same thing applies to cake mixes.

Do the Appraisal Institute and the marketing gurus understand that this life cycle concept actually came from the Hindus? 10,000 years ago?

In Hinduism, time is not linear: its circular and guided by three main deities: Brahma is the Creator, Vishnu is the Preserver and Shiva is the Destroyer. This pattern works for real estate, cake mixes, relationships, houses, cars, human and animals bodies. I challenge you to name anything that doesn't follow this pattern.

At the Hindu Temple in Maple Grove, opened in 2006, Creation is still taking place. 61,320 hours of labor went into constructing the 21 mini-temples. While at yoga class, its a familiar site to see these skinny little guys fill a gallon jug of water and grab a bag of pre-mix concrete and set to work. And, 2 years later, they have completed an intricately carved 64' tall Divine Gateway tower. Along with the mini temples, wall carvings, and I just noticed a new cow statue.

Listing Agents Dilemma

September 23rd, 2009
Listing Agents Dilemma

I don't typically list houses. But when Mrs. Seller called me about selling
her home on 40+ beautiful lakefront acres, I said OK. Its one of the
prettiest parcels I've seen, fronting a 242 acre recreational lake. And one
of the unique features is there are only 2 other houses on the entire lake,
as much of the lake is within Carver Park Reserve.

The other unique feature is, in addition to the well maintained main house,
is a 4 bedroom, 2 bath lake front guest house. And, while it feels
completely rural, a brand new grocery store and Target are just a few
minutes away.

The Sellers are really nice people. But homeowners, especially long time
homeowners who built the house, are typically emotional about selling. I so
wanted to tell them to remove the rugs that are covering the pretty pine
floors throughout the house. But I'm sure they have memories attached to
every rug. I tried to be subtle, rolling up the rug to take a photo of the
floor. But I chickened out at suggesting they lose the rugs.

And the old fashioned curtains covering the most amazing views from all
sides of the house! I just wanted to rip them down! When I strongly
suggested they open all the window treatments for showing appointments she
said she would. That they keep them closed to keep out the heat.

While its a nice house, its the land that will sell the property. Which is
why I took the listing.

The Listing Agents Dilemma-keeping your client happy while having time to
market their property.

Mrs. Seller calls me at least once a day and I'm getting frustrated. I told
her homes in this price range typically don't sell quickly-and its only been
a week! (Though I did get an inquiry from another agent already). How can
she expect me to have time to market her property when I'm spending my time
talking to her on the phone? But she's so nice. My friend, a veterinarian
with many frantic pet parents (including me, between the parrot, 3 cats and
2 bunnies), had an excellent suggestion for dealing with the phone calls. To
set up a weekly phone call time to deal with all of her issues. I'll try
that next time she calls-which will probably be today!

FHA Time bomb is ticking.

September 14th, 2009
FHA Time bomb is ticking...

What do you envision when you hear the word "condominium"? A highrise in
Downtown Minneapolis with underground parking? An older apartment building
in Uptown converted to condos? How about a new construction townhouse in the

17083 72nd Avenue N , Maple Grove, MN 55311 is in the K. Hovnanian Homes
Timbres of Elm Creek development. It looks like a townhome, a two story row
house building with 6 units. It feels like a townhome with a private entry
two car garages. And its listed as a "Townhome Side by Side" on the MLS.

Only the legal description tells you this is a condominium. The typical
reason to condo a townhome development is that you only need one sewer and
water hookup for the building, thus saving both on the infrastructure costs
and the building permit fees. Sounded like a good idea at the time. Until
the FHA Concentration Time Bomb started ticking in June of 2009. FHA insured
mortgages for condominiums will be limited as follows :

"FHA Concentration:

1.. Projects consisting of three or less units will have no more than one
unit encumbered with FHA insurance.

2.. Projects consisting of four or more units will have no more than 30
percent of the total units encumbered with FHA insurance."

Thanks to Randi Livon of RMG Mortgage for the update on the delay of this
time bomb: "HUD's new condo guidelines that were to go into effective for
all case numbers assigned on or after October 1, 2009 have been delayed to
all case numbers assigned on or after November 2, 2009"

Why do we care about this? Because the down payment requirements for
condominium mortgages is 3.5% down for FHA and 10% down for Conventional. If
this" looks like a townhouse" really was townhouse and not a condominium--
the down payment requirements for conventional would be 5% instead of 10%.

So far for the Twin Cities in 2009, according to the MLS, 169 of 461
townhomes built 2008+ and sold in 2009 to date, or 37%., were financed with
FHA loans. The price range is $109,000 to $320,000 with the average
$175,000. Typically, buyers of the entry level homes may not have the 10%
down payment if the unit is a legal condominium.

To look at some specific communities for townhome sales to date in 2009,
existing and new construction:

* Maple Grove 98 of 229 sales or 43% were FHA.

* Woodbury of 105 of 244 sales or 43% were FHA

* Hugo 54 of 91 or 59% were FHA

FHA percentages may be under reported on the MLS as all agents don't
properly complete the sold data.

Another advantage of FHA besides the lower down payment is that FHA is NOT
implementing the new HVCC appraisal code. However, banks issuing FHA
mortgages can still choose to implement the HVCC appraisal code-especially
if they own appraisal management companies and have a profit motive to use
this program.

A follow up to the problems experienced with the HVCC. At the request of the
National Association of Realtors, Congresswoman Michele Bachmann has
co-sponsored a bill to impose an 18 month moratorium on implementing the
HVCC. Please contract your US Congressperson and Senators to urge their
support of this moratorium.

Issues in Land Appraisals

September 11th, 2009
Issues in Land Appraisals

I get this call yesterday from an appraiser with questions on some lots I
have listed. He was a commercial appraiser doing a job for a Big Bank and
land falls under commercial appraising. I told him the lots were on MLS with
all the relevant data. He told me he didn't have access to MLS.

How could this appraiser accept an assignment to value residential lots when
he has no access to residential data? An appraisal is about more than what
has sold-you need to understand the immediate market where the property is.
What other options people have. Often by studying active listings I find
they may provide more information about the current market than older sold
properties if there are no recent sales.

Laziness when it comes to research is another problem I'm seeing. I reveiwed
an appraisal of a large townhome development. The appraiser claimed there
were no comparable sales of townhome lots. Not true-it took some work to
find it, but I found a townhome lot sale in the very next town.

Ignoring the homeowners association is something I see. In a partially
completed development this can be a real issue. It affects holding costs and
appeal of the property to the end consumer. A well run and well funded
association keeps the property looking spiffy! But an underfunding or poorly
run one can result even in the nicest developments looking tired and worn. I
think winter will help those as the snow covers the weeds.

Using boiler plate market data for the Twin Cities is a common problem-- as
opposed to really taking the time to analyze, define, and understand what is
happening in the particular market the property is loctated in. To ask the
question: if a buyer were interested in buying in THIS development, what are
their other options?

This generalization of the housing market is resulting in some appraisers
being overly aggressive in assuming longer absorption times than may be
appropriate for a particular development. The end result is developers and
banks need to tie up additional capital because the appraiser was lazy.

Should you save the best for last?

September 2nd, 2009
Should you save the best for last?

I bought my lot during the last big housing crises when a 13.5% interest
rate looked good. The neighborhood was built out by a production builder who
had held back 8 lake view lots that backed a park trail. I bought the first
of the 8 and was hesitant to build a house twice the value of neighborhood.
I'm glad I did because I love living here. But the neighborhood, though its
aged well and is nicer than when I bought, still depresses the home value of
the lakeview lots.

The developer held the lake lots of the market because a) they didn't build
custom homes; and b) he believed it made the lots across the street more
appealing because their front view was the lake without obstruction from
houses. Is this a good strategy?

I visited a development this week with a similar strategy. But the sales
were slow on the non lake front lots so the lake lots landed up going back
to the bank.

Some developments have a few premium lots. I would argue you should offer
these lots for sale right away. You get your money quicker. You get activity
going. And nice homes may encourage other nice homes-as opposed to the
hesitancy of overbuilding that I had to battle.

Say you lots are all similar-which do you sell first? Another issue I've
encountered will touring subdivisions this week is interior versus exterior
lots. I saw a nice development with a couple dozen lots that were the victim
of speculation and had gone back to the bank. The problem I had is
everything had built up around them and these lots were tucked way in. So I
didn't show this development to my builder client because I thought he would
struggle with exposure when trying to market his homes. Granted, I have a
horrible sense of direction. But if I had trouble finding the lots,
prospective homebuyers may as well.

The best strategy in this case is to place your model/sale center at the
edge of the development, closest to the highest traffic road. Then start
selling lots from the the farthest point and work your way to the busiest
road. This strategy also makes sense because the interior lots are likely
the ones homebuyers want-when they can find them.

Are we on the Wrong Track with Rail?

August 21st, 2009
Are we on the Wrong Track with Rail?

Elected officials along the Highway 55 Corridor were invited to the 55
Corridor meeting last Friday. Sadly, President Obama, on a collision course
with Minnesota Congressman Oberstar (head of the transportation committee),
is urging Congress to DELAY the critical Highway Funding Authorization bill
for 18 months. So there wasn't much to update on Highway 55. But we did get
into a spirited conversation on rail.

Light rail, like the Hiawatha line, requires building dedicated tracks.
While the start up cost is really high, the trains can run often. Commuter
Rail, like the soon to be starting Northstar from Big Lake to Minneapolis,
uses existing track. Can have lower start up costs if the tracks are in
excellent condition but the number and times of the train are limited
because they are sharing the tracks with freight trains.

Senator Terry Bonoff from Plymouth is promoting commuter rail from
Minneapolis to Wilmer. She said the tracks are in excellent shape and there
are only 9 trains a day. A Wright County Commissioner countered that he
lives near those tracks and that sometimes the trains run 4 times an hour! I
asked Senator Bonoff if the rail takes away money from Highways. She said
no. State Representative Sarah Anderson, also from Plymouth, countered and
said rail DOES shift money from highways.

I then asked, for whoever could answer, why we are looking to spend so much
money on the southwest rail line from Minneapolis to Eden Prairie when
Southwest Transit runs such an excellent and well used bus system. How could
we possibly get a return on investment in the many millions that rail line
would cost? And buses are more flexible than rail. Hennepin County
Commissioner Jeff Johnson, also from Plymouth, said he gets told that rail
is about "Economic Development". I wasn't aware that the St. Louis
Park/Minnetonka/Eden Prairie corridor needed subsidy for Economic

As to the Hiawatha Line, Commissioner Johnson said that lines has been so
"successful" that the subsidy for the train paid by Hennepin County of $12
million a year will likely go up to $15 million a year for 2010. And Senator
Gen Olson from Minnetrista added that before the train went in Hiawatha
Avenue was a good alternative to the freeway. But now the trains control the
stoplights. Gen Olson was talking to a driver from the Jefferson Bus Lines
and he said he has had to wait as long as 14 ½ minutes to make a left turn
into their garage!

Deb from Michele Bachman's office commented that there has been a commuter
bus running from the Northstar Station in Elk River to downtown Minneapolis
that will end when the train starts. Now she is fielding calls from people
who take the early bus because the train won't be able to run at that time.
These folks who are relying on that bus to get to work on time will be left
hanging without transportation.

And remember that Constitutional Amendment that was passed which allocated
the sales tax on car purchases to go 100% toward transportation? Problem is,
it specified auto PURCHASES when half the car deals are actually
LEASES-which were NOT included in the amendment. So the funding is running
way below expectations.

And all that Stimulus money for highway funding. Just a shell game. MNDOT's
District Three in St. Cloud, for example, received $15 million of Stimulus
Funding. But had their state budget cut by $15 million.

How can you help? Urge your US Congressperson and Senators to work with
Congressman Oberstar to keep the highway funding moving forward.

The Lady with the White Pants

August 20th, 2009
The Lady with the White Pants

I'm assisting a client with developing 2 lakefront acreage lots in Carver
County. The Carver County planners are wonderful to work with.

Once you get outside the incorporated cities in Carver County the permitted
density for residential is only 1 house in 40 acres. If you have 80 acres
you can, say, split off two 1.5 acre lots and keep 77 acres for agriculture
with no building rights. Because of this policy rural lots are really rural
lots, unlike other counties or cities that may permit whole subdivisions of
one acre lots with well and septic.

The planner asked had thought about covenants? When we said we hadn't gotten
that far he told us the story of the Lady with the White Pants.

A couple moves out from the City to build their dream home on 3 acres in
Carver County out amongst the cows and corn. The lady comes home from work
dressed in brand new white pants and lets out her two golden retrievers. The
farmer had just spread manure on the adjacent fields.

Well, dogs do what dogs do and rolled in the doo. Then came home and jumped
all over the lady and her brand new white pants. She was FURIOUS, and
complained to the county! So the county planner suggested this covenant
should be recorded with the lot split:

"The area is rural and that commercial agriculture and other rural land use
activities will likely be occurring in the area. There may be "odors, dirt,
dust, noises, long hours of operation and other factors associated with
agriculture and feedlot activities". Com­plaints relating to these
activities shall be considered unwarranted so long as such activities are
being conducted in accordance with existing standards."

The covenant did not include wardrobe advise.

Whose on FIrst?

August 10th, 2009

Premier Bank, in September 2005, issues a $3.2 million development loan to
Becker Development LLC for site work on a 40 acre residential development.
In October 2005 Kuechle Underground started excavation on the site for
street and sewer work. WHOSE ON FIRST? Premier Bank for the entire 40 acres.

In February 2006 Premier Bank issued construction loans to Boone Builders to
build 3 model homes on the site, each secured by a separate mortgage. In
October 2006 Premier Bank released these three lots from the mortgage for
the $3.2 million development loan with Becker.

In February 2007 Kuechle Underground files a mechanics lien for the unpaid
balance of $266,633 on the 3 lots with the model homes. WHO'S ON FIRST?
Premier Bank is still on first for all but the 3 model lots. However,
Kuechle Underground is now on first for these lots.

Between January and September 2007 both Becker Development and Boone
Builders defaulted on their loans to Premier Bank. Premier initiates
foreclosure on both Becker's $3.2 million development as well as Boone
Builder's construction loan for the 3 models.

The District Court denied Kuechle Underground's claim on the 40 acres less
the 3 model homes because Premier Bank's mortgage was recorded prior to the
start of the site work, thus Premier was on first. However, the District
Court allowed Kuechle to foreclose its entire lien claim of $266,633 against
the 3 three models because Kuechle Underground was on first for these lots.

Premier Bank appealed, claiming that the District Court erred in permitting
Kuechle to foreclose its entire blanket lien against the 40 acres without
apportioning their costs for labor and material for the 3 models. Minnesota
Statute 514.09 is silent on a lienholders ability to grab all their money
for the whole project on just part of it. There is no precendential case law
for this situation.

On June 30th, 2009 the Minnesota Court of Appeals (A09-1252, A08-1700) ruled
in FAVOR of Kuechle Underground.

Do you agree with the Court of Appeals decision to get the entire $266,633
lien from the three model lots?

How will the new appraisal rules impact you?

August 4th, 2009
How will the new appraisal rules impact you?

A home buyer decides to purchase a new townhome from A National Builder. The
base price is $200,000 and this buyer wants granite counters, the $30,000 in
add on options. "I'm sorry," the agent tells them, "you can only buy $15,000
in options. Any more options than $15,000 and you have to pay cash for the

A builder turning away a willing customer? Its because its been the builders
recent experience that the $230,000 home will only appraise for $215,000. So
he's left with a customer pleading for him to just throw in the other
$15,000. And if the builder refuses than the customer walks-and he likely
has the same problem with the next buyer.

The new HVCC (Home Valuation Code of Conduct) is sort of like the
governments proposed health plan: revamp the entire system because 10%
either can't get insurance or choose not to. Its correcting a problem that
wasn't that wide spread in the first place. The HVCC applies to all 1-4
family homes that are financed by Fannie Mae and does not impact commercial

The problem the HVCC attempts to fix is pressure for appraisers by lenders
to "hit the number". So an appraisal management company is placed between
the lender and the appraiser. This is a program intended to help appraisers
and homeowners. So what do appraisers think of the HVCC? A recent survey of
2,250 appraisers found this:

*92% say have seen instances where the appraisal fee on the Closing
Statement is higher than what the appraiser was paid.

*50% say the selection of the particular appraiser by the management company
is always based on the lowest fee.

*85% say the fees offered by the management company are Always or Often

*63% say it least sometimes the low fees affect the quality of their work.

*96% of appraisers have experienced pressure on turn around times and 75% of
say this time pressure affects the quality of their work at least sometimes.

Remember, the HVCC was intended to HELP appraisers - yet 92% of those
appraisers surveyed are unhappy with the HVCC. It seems the only ones
benefiting from these new rules are the Appraisal Management Companies.

A bill that would impose an 18-month moratorium on the HVCC (H.R. 3044) was
forwarded to the U.S. House of Representatives in June. So contact your
congressperson if the HVCC is hurting your business.

Retail in Rogers

July 27th, 2009
Retail in Rogers

I was waiting in line at the Cartridge World store in Maple Grove with my
one little ink cartridge and Mary, the woman ahead of me, hadt his huge
order. I asked Mary if she had some special project and she said no, she
lives in St. Michael so when she comes to shop in Maple Grove she stocks up.

After Mary left I asked the clerk where their other stores were. He replied
Plymouth, Coon Rapids and Ostego. He said they get a lot of customers from
St. Michael/Albertville in their Maple Grove store. I asked why they didn't
have a store in Rogers and he replied "Rogers is kind of a no man's land".
Apparently other small retailers feel the same way.

There is over 100,000 square feet of vacant retail space in Rogers on the
I-94/Highway 101 corridor, most in the $18-$22 per square foot rent range.
You can find space in that same rent range in Maple Grove in older strip
centers near the high fashion retail corridor. While both communities are on
the I-94 Corridor with retail at major freeway exits, Rogers has an
estimated population of 7,200, versus 60,000 for Maple Grove.

While the demographics for Maple Grove are healthy for retail, Maple Grove
has become a regional shopping area, second only to the Mall of America for
total square foot retail. So the Maple Grove retail draws from a wide
region. Just try to find a parking space in Maple Grove before Christmas and
you'll wonder why anyone claims we're in a recession.

Driving around Rogers I can observe a retail strip center built in 2002 that
appears to be about 90% leased with small local businesses. But within a
block of that, across from a newer Cub, is a new center that is empty except
for a Jimmy Johns sub shop. And adjacent to the newer Rogers Movie theater
is a strip center that is 100% vacant. What were these developers thinking?

I suspect they were looking at their graphs and charts and believed that
Rogers retail was also a regional center because of Cabelas, the giant
outdoor store. Other national retailers have flocked to Rogers: Target,
Kohls, Best Buy, lots of fast food places. And a new Sleep Inn is under

The appeal for Rogers to Cabelas, along with the generous TIF package, was
to capture the 38,000 average cars per day going north on Highway 101, many
to their cabins. How well does this spill over to the smaller higher rent
retailers that would fill those empty strip centers? Are you going to pick
up your dry cleaning, buy a printer cartridge and get a pedicure on your way
to your cabin?

Now that Otsego has a huge Target store Rogers is unlikely to capture much
of that audience. St Michael/Albertville have smaller grocery stores and
limited retail (excluding the Albertville Outlot Mall which does not offer
printer cartridges and pedicures). Though I suspect most people from this
area, if they are going to get on I-94 to shop, just drive 10 minutes more
to shop in Maple Grove, bypassing Rogers if they want more than Target or
Kohls. And when they get to Maple Grove, like Mary, they stock up.

Unlike Mary who had a pile of cartridges, I was just buying one because its
a quick bike to the cartridge store for me. When I go to Trader Joes in
Maple Grove I just buy a couple things because its right off the highway
ramp on my home. But when I go to The Wedge Food Coop in Minneapolis I can
spend $200 because they have items I can't get in Maple Grove. So I stock up
because I don't get to the Wedge very often.

Looking at it from this perspective, I understand why Cartridge World, and
other small retailers, avoid Rogers because it doesn't have the regional
pull that results in customers buying more stuff on each trip. And, at
7,200, its not a large enough population to support the extra 100,000 square
feet of empty space.


July 15th, 2009

Forrest Harstad of Better Living Homes spoke at the Maple Grove Critical
Thinking Club last week and made this comment: "Its easy to talk someone OUT
of buying something. But you really can't talk someone INTO buying something
they don't really want."

I thought about this later as I plucked down $250 to buy 3 new golf clubs I
had no idea I needed or wanted. How did I come to buy these clubs?

#1) Judy, the golf course owner, understands her customers. Judy had put
aside her only Lady Lefty Demo Ping Iron for me. So Judy knows I'm a lefty
(and, as far as I know, the only lady lefty on the course, as lady lefties
make up less than 2% of golfers).

#2) Judy minimized my risk. She offered to sell me the club for $10-she said
it was an amazing price for a Ping. I wasn't convinced-I didn't know a Ping
from a Pong. I gave up reading golf magazines years ago because I got tired
of holding them up to the mirror-as the pictures are all backwards for a
left handed player. So Judy handed me a bucket of balls and said to try out
the club on the range. After 5 beautiful hits in a row-I bought the club.

#3) It was an excellent product. After 2 weeks of wanting more opportunities
to use my new 6 Iron, I went back and custom ordered 3 more Ping irons, thus
the $250 on something I had know I idea I needed 2 weeks before.

Which do you think is a more "complex sale": The 3 golf clubs or one $15
restaurant meal?

Are you making your determination on price? Price alone, doesn't make a sale
complex. Product sometimes does. But the biggest determination of a complex
sale is the Buyer and their situation.

Back to the $15 dinner. Recall in my New Year's column I wrote about the
opera, Thais. Thais was a high class call girl played by soprano Renee
Flemming who was persuaded to give up the fast life and become a nun by
baritone Thomas Hampson, who played the "Hunky Monk". When I heard the Hunky
Monk was giving a recital in Winona I bought 3 front row seats and called my
friends Rae and Kay, who had seen Thais with me at the movie theater.

Rae suggested we stop in Wabasha for dinner and found two restaurants that I
could get a vegetarian meal: fine dining or Chinese. I knew Rae's choice was
the fine dining place. But as soon as I glanced at the menu, which was
dominated by fish and seafood, I ran out of the restaurant. My fish and
seafood allergy is so sensitive that I can't even smell fish and seafood
without getting a severe reaction.

So, even though Rae wanted to eat in that restaurant, she put her WANT over
my health. Plus, if I had landed up in the Wabasha Emergency Room we would
have missed the Hunky Monk-the whole point of the trip.

Academic research on Buyer Behavior indicates that most humans are hard
wired to be risk adverse. Buying those Ping clubs reduced risk-it helps
lower my score so I can beat Rae and Kay. Settling for her second restaurant
choice minimized Rae's risk that she would miss the Hunky Monk. But what
about real estate?

Having been in the thick of the crazy pre-2006 market I would assert that
buyer behavior in that market was Risk Adverse. I worked with developers and
builders who were so concerned that if they didn't buy land they would miss
out on the boom. They perceived it was a higher risk to NOT buy land. Banks,
some with little real estate experience, also felt they would miss out to
not jump into land development.

So, if your balance sheet is unbalanced, and you're feeling really crappy
right now, take some solace in acknowledging you were just being human.