Housing

Research Roundup: Homeowner Mobility, Divestitures and the Real Impact of FDI

- Knowledge@Wharton -

How has the housing bust and accompanying recession impacted the mobility of homeowners? Are divestitures always a smart move for companies? Can multinationals create a fact-based case for the real economic impact of their investment in different countries? Professors Joseph Gyourko, Emilie Feldman and Ethan Kapstein, respectively, examined these issues — and what they mean for business and consumers — in recent research papers.

Why ‘Underwater’ Homeowners Are Staying Put

The ability and willingness of Americans to pull up stakes to pursue opportunity in a new hometown is an economic hallmark of the United States. Yet the lingering economic malaise leaves many Americans trapped “underwater” in homes worth less than the mortgage owed, reducing mobility and contributing to the nation’s stubbornly high unemployment rate.

Wharton research shows that mobility drops 30% for homeowners with negative equity in their properties, and each additional $1,000 in mortgage or property tax costs cuts mobility by 10% to 16%. “We looked into the effects on mobility, and they appear to be pretty large,” says Wharton real estate professor Joseph Gyourko, author of the recent paper, “Housing Busts and Household Mobility: An Update,” along withWharton real estate professor Fernando Ferreira and Joseph Tracy of the Federal Reserve Bank of New York.

Building on 2010 research, the authors’ latest work adds data from the most recent American Housing Survey (AHS) conducted by the U.S. Census Bureau for the Department of Housing and Urban Development (HUD). The new data allowed the researchers to study the effects of declines in housing prices between 2005 and 2007 on people relocating between 2007 and 2009, which provided a glimpse of how mobility patterns were impacted by the global economic recession. The latest paper also takes a closer look at whether moves documented in the study were permanent or temporary, and restricts the sample to instances where it was immediately clear that a household stayed put over the long term or owned a home for a time before moving out for good. However, the paper acknowledges that because of uncertainties in tracking home transactions and residency, “we cannot really know for sure how the recent housing bust impacted permanent mobility until a few years into the future when the data will reveal the true nature of those transitions.”

The Census Bureau has released data showing that the number of Americans changing their address is at its lowest point since the government began tracking this statistic in 1948. U.S. mobility peaked in 1951 with about 21.2% of the population moving, the Census Bureau reported. That figure remained stable at around 13% for years, but fell to 11.6% — or 35.1 million people — in the year ending March 2011, according to an Associated Press analysis of Census data.

The Wharton research shows that “people will stay in a house a long time even when they have negative equity,” Gyourko notes. “That’s the problem,” he adds, emphasizing that the reluctance to move is contributing to higher unemployment rates. Gyourko says there are many reasons a homeowner will stay in a house, even if it might make more sense to get out and move on to find a new job in an area where there are more prospects. “Maybe they like the school district or other good things in the community. Or they don’t want to take the hit to their credit if they default.” Moreover, he states, many people feel a “moral or ethical duty” to make good on loans they promised to pay off.

In order to help revive the anemic economy and spur job creation, the Obama administration has announced plans for a new program to aid homeowners who are “underwater” on mortgages. The plan would allow homeowners to refinance at today’s lower rates and reduce monthly payments. The program would be available only to homeowners whose mortgages were made before June 1, 2009, and are owned or guaranteed by Fannie Mae and Freddie Mac. An estimated one million borrowers would be eligible, but housing officials acknowledge the assistance would reach only a tenth of homeowners in trouble.

Gyourko doubts that lower interest rates will be enough to revitalize the market. “When you get overleveraged it’s hard to get out, absent some form of debt forgiveness. It just takes time.”

The Wharton research paper suggests that future work be undertaken to investigate the correlation between housing and employment patterns. “The likelihood that labor markets deteriorate along with housing markets raises the possibility that owners with negative equity are not moving in part because there are no good job opportunities elsewhere for them,” the paper states. “Until we address this issue, we will not know the true social cost of highly leveraged home purchases that are more likely to lead to negative equity situations.”

The Dos and Don’ts of Divestitures

When it comes to academic research on divestitures, the message has been that they are usually a smart move for companies. But Wharton management professor Emilie Feldman wondered if the story was that simple. How could all divestitures be positive?

While the benefits and costs of acquisitions have been well explored, the downsides of divestitures have received little scrutiny, Feldman notes. So she zeroed in on one type of divestiture — that of a firm’s original “legacy” operation — and set out to examine whether companies that divested their legacy businesses performed worse, due to the historical importance of these units, than firms divesting other businesses. Her findings, contained in a recent paper titled, “Selling Your Heritage: The Causes and Consequences of Legacy Divestitures,” supported this intuition: Firms that divested legacy businesses saw a decline in operational performance, while those that divested non-legacy units did not.

For her research, Feldman studied a group of 300 diversified U.S. firms. Using sources like corporate annual reports, she identified what the legacy business was for each of those 300 firms — the original business the company operated in at the time of its founding. Feldman then gathered data on all the divestitures made by these companies between 1980 and 2000, including which firms had sold their legacy businesses. Of these 300 firms, 56 divested their legacy businesses.

For the companies that divested their legacy businesses, average return on sales (ROS) for the three years following these divestitures was significantly lower than it had been before the divestitures. By contrast, those which shed non-legacy units had no analogous drop in ROS. Relative to firms which held on to their legacy businesses, the companies that shed these units had a 38% lower return on sales in the three years following the divestiture, underscoring the operational challenges of dumping a legacy business.

What is behind this hit to operations? Feldman’s work identifies two culprits. First is the fact that the value of a firm’s legacy business is often underestimated by its management. That value, which includes things like the degree of customer connection to the legacy unit or the way a legacy business helps maintain a company’s reputation, is often intangible. As a result, firms may not clearly understand what they are giving up, she says. At the same time, divesting a legacy unit can disrupt internal synergies or connections within companies, also causing a hit to operations. “Because legacy businesses constitute companies’ historical cores, the synergies between the legacy business and other parts of the company are likely to be particularly strong,” Feldman points out.

These issues are ones that many large U.S. businesses continue to grapple with. Take the case of Netflix, which announced this fall it would split its video streaming and legacy DVD delivery services into two businesses. Customers reacted negatively to the idea, many dropping their subscriptions altogether, and Netflix was ultimately forced to back-peddle on its decision. Then there is the aborted spin-off by Hewlett-Packard of its personal computer business. CEO Leo Apotheker had announced that HP was planning to spin off the low margin operation, but the company reversed course after it hired Meg Whitman to replace Apotheker in October. Among the problems was the degree to which the remaining HP businesses were tied to the PC operation. HP estimated the spinoff would have boosted annual costs by $1 billion due to the loss of procurement and branding opportunities associated with the unit. And shedding the PC business would have triggered a one-time expense of $1.5 billion, as HP would have been forced to create separate IT, support and other functions for the PC spinoff.

Feldman’s work shows that both Netflix and HP may have been wise to cancel their proposed legacy divestitures. “The negative operational consequences [of legacy divestitures] is worse when the legacy unit is more connected to other businesses within the company, when it contains more intangible resources and when it constitutes a larger portion of the parent company’s assets,” she notes.

The research raises some tantalizing questions. A critical one: Is the lag in operating performance among companies which divest their legacy businesses reflected in their stock market performance? In the year after divestiture, market performance is higher for firms which divest legacy units than for those which hold onto their legacy businesses, which Feldman believes may be a favorable response to these companies’ very rational reasons for divesting their legacy businesses. In many cases, firms reallocate resources away from slow-growing legacy industries in favor of faster-growing new business lines. “Often these legacy businesses are not very attractive and may be seen as holding the company back,” she notes.

The longer-term implications of legacy divestitures for stock market performance, beyond the one-year time frame her paper examines, is a subject for future research, though Feldman notes that anecdotal evidence points toward eventual challenges for those firms divesting legacy businesses. At the same time, she also hopes to explore what steps might help firms divesting a legacy unit minimize the operational hit. It may be that certain management tactics, including setting a very clear vision for the company’s future and creating discipline around company strategy, may help firms boost post-divestiture performance.

Corporate Contribution: Measuring the Economic Impact of FDI

When it comes to making the case for how they have helped the nations in which they operate, multinational corporations have typically fallen short. Wharton visiting professor of management Ethan Kapstein argues that instead of touting steps like creating foundations to help alleviate social ills, corporations should make a fact-based case on what their investment has meant to the economy in those nations.

In a recent study titled, “The Socio-Economic Impact of Newmont Ghana Gold Ltd.“, along with a number of similar previous projects for firms like Unilever, Standard Chartered Bank, SabMiller and others, Kapstein used a carefully honed methodology to assess how the firms have impacted local economies. “Governments and NGOs are not satisfied with these [corporate social responsibility reports featuring only] smiling photos of a school or concert supported by a multinational,” says Kapstein, a professor of political economy at INSEAD. “They want data.”

In the case of Newmont, Kapstein himself doubted he would find that the company’s mining operations in Ghana had a major economic impact on the nation. “I said, ‘We can look at this, but there isn’t going to be much impact,’” Kapstein recalls. “It’s a bunch of guys from Denver who come and dig a hole in the ground and leave.” But he found that Newmont’s Ghana operations accounted for nearly 10% of the nation’s exports, 4.5% of its total foreign direct investment and 1.3% of GDP. Even more striking was that directly and through spinoff jobs spawned by its presence, Newmont created 48,000 jobs in Ghana.

The level of Newmont’s impact was not due to good luck. In 2006, the company created a program in conjunction with the International Finance Corporation, an arm of the World Bank, aimed at cultivating a network of local suppliers. Called the Ahafo Linkages Program, it works with businesses in the Ahafo Brong region of Ghana where the mine operates. The area grapples with significant challenges, including high poverty rates and low literacy levels. Prior to opening the mine, Newmont had to relocate and compensate some 1,700 households and build new homes and schools for those that were displaced. The Ahafo Linkages Program was aimed at cultivating not only mining related businesses in the area, but also non-mining enterprises. According to Kapstein, the program has yielded a tangible payoff. “I met one local entrepreneur who showed up at the mine to help clear land [early on],” he notes. “Now he has moving equipment and 100 employees. He’s just a great entrepreneur. It is one thing after another like this. The program has generated huge results.”

To document those impacts, Kapstein and Rene Kim, a partner at Netherlands-based consulting firm Steward Redqueen, came up with an intricate formula. They used the input-output tables published by the government in Ghana to sort out Newmont’s economic contribution. The tables track the economic value of what goes into the economy — labor, materials like steel, etc. — and what comes out in the form of products or services. Then they looked at Newmont’s income statement and traced it through these tables. In the end, the researchers were able to calculate both the firm’s contribution to employment in Ghana and its contribution to the nation’s GDP. The employment numbers include the firm’s direct hiring as well as the spin-off jobs created by suppliers. The GDP contribution includes the consumer spending produced by those jobs, corporate taxes paid and the firm’s profits in the country. “We essentially drive the company through the economic map of the country,” Kapstein says.

Historically, countries and foreign investors have had on-again, off-again relationships, making it critical for firms to understand their impact on local economics, Kapstein notes. “The companies provide investment and technology, and the view was that this would lead to growth. But empirically, it was hard to show that happened…. And in some cases, these companies were bringing labor or environmental practices that weren’t popular. So in one country after the other, the foreign direct investment would be contested, and we would have waves of nationalization. I would say to CEOs, ‘Eventually, this will boomerang, and you will have to make your case.’”

Understanding the full range of impacts a firm is having in a market can and should impact decisions on where companies source their raw materials and other inputs, Kapstein states. “Right now, executives typically go to the Internet and find the cheapest supplier. But they need to think about the value of local support and the cost of that lost support,” he says. “If you want to build a factory or launch a new product, you need a constituency to support that. And those local suppliers are critical constituents. The fact is that local sourcing may be more valuable.”

A close look at the economic impact of a company’s operations in international markets can also shed light on some previously unknown opportunities. In 2009, Kapstein helped Standard Chartered Bank assess its impact in Ghana. The bank was taking heat from the business press, as well as some local groups, which contended that the institution was financing only global companies and big projects like the country’s offshore oil fields. Kapstein’s work, however, showed that the bank was also providing key funding to Ghana’s small- and medium-sized business sector. The study also revealed that the small-and medium-sized business sector was very efficient in Ghana, a fact that prompted Standard Chartered to redouble its efforts there. “This was counterintuitive and a surprise to all of us,” Kapstein notes.

Kapstein’s analysis does not factor in the negative impacts that corporations may have in some of these countries, such as pollution or issues with occupational safety. But Kapstein notes that many of those impacts are well documented, while less light has been shed on positive contributions. “Of course there are negative impacts,” he says. “But most of the reporting on FDI tends to be negative. This information shows the tradeoffs and enables meaningful debate to occur. You need to have that debate in light of the facts.”

FBI Works to Reverse Reverse Mortgage Fraud Schemes

By Florence Klein

Reverse mortgage programs, like the Federal Housing Administrations HECM (Home Equity Conversion Mortgage), enable owners aged 62 or older to withdraw some of the equity in their home to fund retirement. They are one way to enjoy the fruits of your labor and age in place in the home you love and cherish.

Beware however because when money gets involved there are un-ethical individuals looking to get at it any way they can. Reverse mortgage fraud looks to take advantage of owner equity as a way to get some quick money and leave the owner at a loss or just out the cash scammed for filling out and filing fake application forms.

Last July the United States Southern District of Florida Attorney’s General Office charged three loan officers and a title agent in a $2.5 million reverse mortgage and loan modification fraud case following an FBI investigation. In August, two of the loan officers (Louis Gendason, 42, of Delray Beach and John Incandela, 24, Palm Beach, FL) and the title agent (Kimberly Mackey, 46, of Pittsburgh, Pennsylvania) plead guilty. Sentencing is scheduled in Novemberwith the defendants facing imprisonment of up to 30 years.

The scam involved defrauding borrowers (home owners), Genworth Financial Home Equity Access, Inc. and the Federal Housing Administration (FHA). The loan officers, working for 1st Continental Mortgage, solicited individuals, ages 62 and older, from around the country to refinance their existing mortgages with a reverse mortgage loan financed by Genworth. None of the borrowers had sufficient equity to qualify for reverse mortgages but with fraudulent, altered real estate appraisals and other fake documentation the reverse mortgages were approved.

The licensed title agent and proprietor of Real Estate One Land Services, Inc. (Pittsburgh, Pennsylvania) fraudulently closed the Genworth loans without paying off the borrowers’ existing mortgage loans. The reverse mortgage money was diverted to a bank account controlled by the loan officers involved it the case.

Are there more cases like this one? I fear so. I also hope they are discovered. Should we fear reverse mortgages and avoid them at all costs? Not at all! Should we take care and seek advice when looking into a reverse mortgage? By all means yes.

Here is what you should look for to spot a possible fraud or scam:

    • Reverse mortgages that look too good to be true, if you see a sizable discrepancy between the terms a lender or broker offers and the terms typically offered, consider it a warning sign of possible deception and check things out
    • Broad and unqualified claims that sound false, misleading, or not clearly and prominently defined such as:
      • “reverse mortgages provide income for life”
      • “consumers can never lose their homes”
    • Consider the names, seals, logos, and other representations of the lenders and brokers as some may look and sound like those of government agencies to create the impression that the lender or broker is part of or affiliated with a government program rather than an organization offering a loan that the client must pay back
    • Pressure in any way by the reverse mortgage seller to use the reverse mortgage to buy products or services (long-term care insurance, annuities, investments, home repair, or travel)

Seek outside help if you encounter any of these warning signs.

Be sure to read up on reverse mortgages and visit NewRetirement for a whole suit of tools and information on financing retirement.

File complaints in connection to HECM loans with the U.S. Department of Housing and Urban Development online or call the department toll-free at 1-800-CALL-FHA.

To file a complaint with non-HECM loans contact the FTC at 1-877-FTC-HELP or visit the FTC; TTY: 1-866-653-4261. Watch a FTC video, How to File a Complaint.

The Family Estate & Heirlooms: What is Their Value?

What it is NOT: a price.

By Julie Hall

Let’s start by addressing what it is not. you see on the internet or in a store. That is only a numerical figure someone conjured up, very often based on their personal sentiment towards the item, or a price they once saw in a book. The economy pretty much tossed that out the window. It’s not the story the family handed down for generations that a particular piece is “very valuable.” Maybe it is, but most likely, it’s not. Sure it’s old, but that alone doesn’t guarantee value. It may just be old.

Value is a very personal thing. People want to believe what they have (or what grandma has) is valuable. Price is determined by supply and demand, as well as the collector market. As I have often said, there must be a demand for what you have. You might have an antique china set from grandma – so does everyone else. The supply is bountiful, but the demand simply isn’t there and this means the price is not going to meet your expectations, regardless of what they paid for it. Those days are long gone.

If you have something rare (and most people think they do), you will need a professional personal property appraiser to confirm that, and also recommend where it should be sold. For the record, “rare” means extraordinary, like a flawless diamond, and most of us do not have that. What we have, and what we inherited, is a lot of stuff that is good and useable, but not necessarily valuable.

When in doubt, bring in someone like myself so that you can move forward and make good, solid decisions for your personal property. Set your expectations accordingly so you will not be disappointed, and may, in fact, be pleasantly surprised.

How to Behave as an Heir

More on Estate Etiquette

By Julie Hall

Recently, I did a podcast for Moving Forward Matters in Ottawa, Canada. (There’s the link below to my 10 minute discussion on Estate Etiquette.)

Here are several suggestions for how to behave as an heir in the estate of your parent or close loved one.

 

  1. Sit down and say what’s on your mind. Beating around the bush confuses everyone. Confrontation is not necessarily a bad thing. My father always said that the day after a thunderstorm is usually clean, bright, and beautiful. It clears the air and so does a confrontation that is more about sharing than finger pointing.
  2. It’s vital to do everything you can to keep the peace. To avoid heartache and resentment, do your best to take the “high road.” It feels good to do so, though it’s not always easy.
  3. Validate the other person’s feelings if they share them with you. At least, listen. Repeat what they said to you so they feel you heard them. Both should agree to simply do the best you can to smooth it over somehow. A photo of Mom and Dad sitting in front of you wouldn’t hurt. After all, this is about honoring them and not about the heirs.
  4. Encourage others to be a part of the healing process, if they would like to be. It is not about taking sides. It is about encouraging both parties to do what they can to heal the hurt. Always remain objective and try very hard to see the other side.

Dividing heirlooms can be one of the most contentious experiences of our adult lives. There is no way to completely eliminate family squabbles. But, you can learn to put them out when they are smoldering, instead of when they grow into a full-blown forest fire.

 

Link address: http://www.movingforwardmatters.com/2011/06/08/estate-etiquette-know-what-to-do/

Cash for Clutter

Clutter in Your Closets can equal Cash in Your Pockets

By Julie Hall

The Estate Lady® is well-known for her quote on keeping stuff. “If you don’t see it or use it for 2 years (maximum), statistically speaking you’ll never use it, so get rid of it!” Why allow your home to be cluttered up when life is hard enough? SIMPLIFY and make some cash too!

Easier said than done, believe me. As I write this, I feel like Mighty Mouse zipping through our entire home, closets, garage, etc. because I’ve grown tired of all the STUFF! My husband probably thinks I’m nuts, but to his credit he says nothing and lends his muscle. Call it an occupational hazard of being in homes every day and seeing everyone else’s stuff. Then I come home to my own cabinets and closets, eek! So I decided to do something about it and so can you.

Did you know that 80% of what we own we never use? We use the same 20% of things every day because we are creatures of habit – our favorite clothes, shoes, purses, kitchen ware, etc. So that leaves a healthy percentage of things we don’t really need and as I say, “put some cash in your pocket instead of clutter in your closets!”

From kitchen items to books, costume jewelry to tools, there is a buyer out there who wants them. Here are some tried and true options; which is right for you?

  1. Yard sale – Utilitarian items are selling better than ever. Pyrex, pots and pans, used paint remnants, rugs, tools – anything someone really needs – are selling very well at yard sales. Just know these items won’t sell for retail, but try 25% of the value for these kinds of items. Make sure you don’t sell anything of significant value. If uncertain, hire a personal property appraiser to be certain, or it could be a costly mistake on your part.
  2. Consignment shops – For designer clothing, higher quality purses and shoes, nice quality furnishings and home decor, physically go into different stores to talk with the manager and get a feel for their percentage/fees and how they work. Some will negotiate on their percentage a little bit. You can expect to pay them 35%-50% commission, plus a possible pick-up fee. Remember: location, location, location
  3. Auction company – If you have a lot of household items, nice quality furnishings, and decorative items, consider a local auction house with a good reputation. Their percentages range from 15%-25% and may also have additional pick-up fees. Remember to ask for auction estimates for some of the better pieces, as the auctioneer should be able to offer you a range that he/she feels it will sell for. There are two kinds of auctions: absolute and reserve. Reserve means it will not sell until the reserve price (minimum) has been met. But many auctioneers will not place reserves on numerous items. They will sell for what the public decides; that is an absolute auction. When that hammer comes down and it’s only $20.00, that is what the item sells for.
  4. Higher-end auction galleries – For higher end items, find higher end auction galleries and contact their consignment director to ask them if these items are of interest to them. Large auction houses have extensive lists of buyers and often sell to multiple countries. This is what you want for high-end items that are small enough to ship.
  5. Selling gold? – A jeweler may not get you the most “bang for your buck” but it’s worth asking. Don’t be too hasty when wanting to melt down items. Many people are selling gold pieces with gemstones in them and not getting paid for anything other than the gold. Think twice and compare offers: Can I get more for this piece as it is, a ring or pendant, or should it be melted down? Do research in your area. Find the gold buyers that are one or two steps from the refinery itself, as they will generally pay you higher $$ than others. Call around; visit different places. Get the gold weighed and let them make you an offer. Go with the highest offer. Note: There are those who are sitting on their gold, thinking it will go higher still. Watch the gold prices closely.
  6. Do-It-Yourself – You can try Ebay, Craigslist, local advertising in your newspaper. These are time-consuming and often frustrating if you don’t know the proper way to describe the items, people never show up at the appointed times, money can be wasted in fees (especially Ebay’s, which are not cheap, but at times are worth it). For antiques, collectibles, jewelry, vehicles, larger collections: If you are determined to save the percentage you would ordinarily pay a professional, that’s ok. But keep in mind that professionals have the knowledge and skills to sell these items for the highest amount they can. If you are paying them a commission, they want it to sell for as much as possible too.
  7. BEFORE you sell or give away anything you perceive has value, make sure a professional appraiser takes a look at it. A professional who is paid for an opinion of value and not one that will offer to buy it, which to many is a conflict of interest, but you be the best judge. I have uncovered items worth tens of thousands of dollars that were slated for donation. The fee my client paid me was well worth having me come over, because my experience and skills uncovered what they thought was give-away junk. For example, they were very happy when I discovered in their basement a vase that was sold for $57,500.
  8. To sell or donate? – Should it just be donated, or can I try to sell it first? If it doesn’t sell, I’ll pack it up for donation. Whichever you prefer. If it is banged up and in horrible condition, recycle it or throw it away. If you would feel better giving your items to those less fortunate – there are many who are these days please find a worthwhile charity or organization. By all means, give, give, give. You will receive a donation receipt you can use for this year’s taxes.
  9. Scrap it – If it’s metal and you don’t want it, or it’s broken or bent, don’t throw it away; scrap it! Find out the location of your local scrap yard and haul it there to get cash. It is not unusual for a truck load to be $100-$150 depending on the type of metals you have. They are looking for insulated copper wire, copper tubing, auto radiators, air conditioning coils, brass, aluminum, bronze, cast iron, stainless steel, and other high temperature alloys.

A Change in Your Health Can Mean a Change in Your Will

By Julie Hall

An estimated 50% of us have a will or trust! This is not good news!

Most people have not yet comprehended (or accepted) that dying without a will is a very costly mistake that will negatively impact all you leave behind. It’s not just about the hassles and frustrations your heirs will go through potentially for years, but the expenses involved. Ultimately, the state you live in will make decisions regarding your estate that will not distribute it the way you would have chosen. In a nutshell, get it done now and leave a legacy of respect, instead of resentment.

For those who do have a will, it is important to consider any changes in mental and physical health, as these could greatly impact the outcome of someone’s wishes. For example, let’s say mom’s healthcare power of attorney states that dad makes all decisions for mom in the event she is incapacitated, vegetative state, etc. Suddenly dad is exhibiting odd behavior and is diagnosed with Alzheimer’s, which is progressing rapidly. Can he now make sound decisions for mom? Orgen, mom may not think about these details and this is the time for the children to talk with her about it.

So many Boomer children do not know how to talk with their parents about these delicate issues, so permit me to offer some very sound advice. It has to be done; it has to be discussed, as painful as it is. If left “under the carpet,” no answers will be available to you should they become infirm or die. Get the answers now, and do so with love and compassion.

Here’s one example: “Mom, we were thinking about yours and dad’s situation. Now that dad is showing a decline in health, new decisions have to be made and documented so your wishes are fulfilled the way you would like them to be. Dad is no longer capable of understanding complex issues, and you will need to choose a new healthcare power of attorney, so we can ensure the correct decisions will be made. Can you please give this some thought? Can we make an appointment with your attorney to have this changed soon?”

This one example really gets you thinking. Anytime there is a significant change in your life or a parent’s life, consider discussing with an elder law or estate planning attorney. Being proactive is not always easy or pleasant, but it can head off gut-wrenching issues that will occur at some point, especially if you have elderly loved ones. Making sound decisions in the midst of crisis is not the optimal time to think clearly.

Lead with love, and start communicating while you can!

A Slice of Birthday Cake with Roses on Top

By Julie Hall

Remember when we were little kids and our eyes were bigger than our stomachs, when we saw the thick, sugary icing and special colored roses on our birthday cake? Everyone fought over those colorful, sugary roses that contained enough fuel to shoot us to the moon and back, or at least until midnight when the sugar buzz finally wore off. We were probably 5 or 6 years old, but already we had learned a lesson that would follow us throughout our lives.

The voice in our heads beckoned us to eat as much as possible including all of those coveted roses – after all, it’s my cake, my birthday. Why shouldn’t I have it all to myself? Mother’s quiet, yet serious tone forced me to share, and share equally among the other children at the party. “You have to be fair to everyone,” she would say. It isn’t fair, I thought to myself. That’s my cake! I should have all of the slices of cake with the roses on them. (The roses were, and still are, my favorite.)

So it is with much of life. We all want the “roses” in life and that includes our loved one’s estates. You’ve had your eye on that grandfather clock, or mom’s diamond ring, or dad’s fishing lure collection for years. And you believe you are entitled to them, or perhaps they were promised to you long ago, so you just assume they will be yours one day. Then that “one day” comes, and your sibling claims the same thing … the trouble begins.

Until they are gifted to you in person prior to infirmity or death, or until there is a written plan for those heirlooms upon a loved one’s passing, you are entitled to nothing unless it is given to you. Even if you don’t end up with your beloved “rose,” we must remember that while we would like to have the majority of the cake, it is good and appropriate to share equally.

You taught me well, Mom!

How to Hire an Estate Liquidator

Questions to ask before you really need one

By Julie Hall

How to Find a Liquidator:

Check your phone book under Estate Liquidators, Appraisers, Auctions, or Antiques.

Check online using your favorite search tool. Search for “Your City” and the words: Estate Liquidator. Any professional liquidator is going to have a website these days.

Go online to www.ASELonline.com for nationwide assistance.

Call an estate planning lawyer in your city and ask the secretary or assistant for a referral.

Questions to ask a prospective liquidator:

  • How long have you been in business?
  • Can you provide professional references for sales you have conducted?
  • How do you charge, by flat fee or commission?
  • What must I do to prepare for you to begin?
  • Can I remain on-site while I prepare?
  • Are there any additional fees?
  • Do you charge extra to clean up prior to the sale, as well as post-sale?
  • How many days will it take you to set up for the sale?
  • Do you price every item?
  • How do you keep track of what items sell for?
  • How many days do you hold the sale?
  • Can the family be present? (generally, not a good idea)
  • How do you handle discounts or negotiations?
  • May I see a copy of your contract?
  • How much do you charge to clean out the estate, leaving it empty?
  • Do you ever buy from your sales or pre-sell to dealers?

In Search of Sanity

We have way too much stuff!

By Julie Hall

Everybody collects something.

It’s exciting when you find a special piece you’ve been seeking for years. When the word gets out that you collect cats, suddenly everyone buys you cats. Metal, porcelain, plastic – it doesn’t matter – you get tons of them whether you want them or not.

Let us not forget that we inherit items along the way too, tripling (or more) what we already have. Next thing you know, our homes are busting at the seams, our spouses are griping because of all the clutter. Our children have let us know, in no uncertain terms, that they want nothing other than a ride to IKEA or cash, so they can buy what they want.

We’re facing a major problem in this country as our seniors and boomers age and pass away. We just have too much stuff. More is finding its’ way to the market everyday as boomers are getting the message to simplify their lives and let go of things that bog them down.

This simplification process has brought to the marketplace experts such as professional organizers, senior move managers, stagers, and estate experts. Look for professionals who are trained, have credentials, belong to professional organizations, and have experience.

As we make our way through our parents’ belongings, we also have to contend with our stuff at the same time. Learn to let go, and keep the next generation in mind as you are doing so. They certainly don’t want much and they won’t change their minds. As a client recently told me, “I’ll take photos of the items before I sell them. The photos take up less space!”

The Bottom Line on Greed

Bottom Line is: You can’t take it with you!

By Julie Hall

There’s a reason why greed is one of the Seven Deadly Sins. It eats people alive whether they realize it or not. The battle between good and evil has been around since the dawn of man. The Bible is filled with verses about such things.

It’s all about the desire to “possess.” Possess money, things, people, etc. It is natural for humans to want more. But, when is enough, enough? For some people, there can never be enough.

We see greed at every turn when settling estates. It is far more common than you realize. Our smaller homes aren’t good enough so we tear them down and build bigger ones, so we can fill them with more stuff. When a loved one dies, we are the first to take things from the estate, justifying that these things are a memento or sentimental.

Then we look at our own homes, and if our eyes are open, we realize we have too much, while there are those out there who have nothing.

Bottom line is: you can’t take it with you!

Start now by giving away things you don’t need, don’t want, or haven’t used in a while. So many people need your help and generosity, especially in economic times like these. Your gift can bring a smile to someone you may never see, but you will feel in your heart.

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