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INDUSTRY WATCH
Tom Dooley gives you the industry scoop
Veteran industry observer Tom Dooley is president of TWD Associates, a real estate consulting firm in Arlington Heights, Il., and editor of two monthly newsletters. Contact him at 847/398-6410; tdoo@aol.com.
| Open to interpretation no more
Writing Ads Requires a Fair Shake
Dayton (Ohio) Board of REALTORS®, proactively lists terms to avoid on fair housing grounds. | BY TOM DOOLEY Any real estate salesperson person who has ever written a classified ad knows that words can be interpreted differently by different people. Here are examples of phrases recently deemed a no-no by the Dayton Area Board of REALTORS® and the Miami Valley (Ohio) Fair Housing Center:
“Empty Nester”--Could convey an overt preference for individuals without children and limit families with children.
“Working Singles and Couples”--Might express a preference for families without children.
“The Perfect Retirement Spot”--Could state a tacit preference for families without children.
“Quiet Adult Park”--Might identify an overt limitation on families without children.
Note: The word adult has been specifically restricted from use in advertising since the Fair Housing Amendment Act in 1988.
The Fair Housing Center and the Dayton Area Board of REALTORS®agreed that these terms should be avoided after the board self-reported the inclusion of potentially discriminatory language in some listings on its MLS. The fair housing group praised the Dayton Board for its forthrightness, saying that the action will improve a long-standing partnership that has existed between the organizations.
Security analysts say they wouldn’t be surprised to see Liberty Media, a subsidiary of AT&T, which owns stakes in cable channels, TV Guide, and Time Warner, buy Cendant Corp. Cendant and Liberty declined to comment. But Henry R. Silverman, Cendant chairman, doesn’t get emotional at the thought of selling a piece, or even all, of Cendant. “If somebody wants to make a fair offer, fine,” he says. “But if someone wants to steal the company, we’ll fight fiercely.”
What fueled most of this editorial speculation about a sell offwas a mid-December decision by Liberty Media chairman John C. Malone to establish a co-venture with Cendant to exploit a number of Web-based possibilities, such as delivering broadband services built around Liberty’s cable networks to millions of Cendant customers, especially in the company’s hotel and time-share divisions. In addition, Malone invested $400 million of Liberty Media’s money in Cendant and declared that he personally would buy one million Cendant shares.
Adding to the speculation is the early March announcement that Malone has been named to the Cendant board of directors.
All this sell-off intelligence stems from an extensive Feb. 28 Business Week cover story,
“The Long Road Back”. The story examines Silverman’s attempts to re-establish Cendant’s profitability, reputation, and market evaluation following its April 1998 disclosure of “financial irregularities” in the CUC International unit of the company, which was merged with HFS only a few months earlier to form Cendant.
The most intriguing part of the article may be the concluding paragraph:
“Given the challenges Silverman faces, some Cendant watchers think he may not be done selling. Cendant’s stock hasn’t recovered enough for him to resume a major buying spree, but he clearly wants to redeem himself in shareholders’ eyes. If there are pieces Cendant Corp. can sell for high multiples, I’m sure they’ll consider that,” says (Craig) Bibb at the Jasper Funds.
Brokerage owners who may be considering selling their company may find that acquirers are applying lower values to sale companies. Besides upwardly spiraling mortgage interest rates and a severe decline in listing inventory, major industry acquirers seem to be lowering the highest multiple of a company’s reconstructed EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) to four. During the past year or so, multiples of five weren’t uncommon. In 1997 and 1998, even higher multiples were sometimes used. But today, there’s general conjecture that the real estate market is in for slowdown, hence the lower multiple.
Buyers determine multiples based on the status of the economy, industry, and individual company. They generally purchase companies based on their conjecture about its future earnings. The higher the conjecture, the greater the multiple.
The Federal Housing Administration had a remarkable financial turnaround during the decade of the 1990s, according to an independent report recently issued by the accounting firm Deloitte & Touche.
The FHA insurance fund had an economic value of negative $2.7 billion in 1990. FHA suffered years of mismanagement in the 1980s, and by 1990 it had projected losses from claims on mortgage insurance far in excess of projected revenue. Absent radical restructuring, a costly federal bailout seemed inevitable.
Now, however, FHA is in its strongest financial condition since it was created in 1934, with a record economic value of $16.6 billion in its insurance fund—an increase of $5.3 billion over 1998. The economic value of the fund is defined as the sum of existing capital plus the value of current insurance in force. Because of successful management reforms at FHA and the U.S. Department of Housing and Urban Development (its parent agency), FHA is expected to bring in funds between the years 2002 and 2006 above projections contained in the President's proposed federal budget for fiscal year 2001.
Therefore, Clinton has requested a recommendation on ways to put the excess funds into affordable housing over the next five years.
The Deloitte & Touche study adds that the improvement in the insurance fund will withstand potential economic downturns. The report also states that FHA's capital adequacy ratio is 3.66 percent—far in excess of the Congressional mandated goal of 2 percent. The capital adequacy ratio is the economic value of the fund divided by the total insurance in force.
FHA generates revenue through its Mutual Mortgage Insurance Fund. The fund collects revenue from fees FHA charges for mortgage insurance on loans made through private lenders. It currently insures about 6.7 million mortgages.
From all appearances, mandated requirements for home inspectors will be significantly upgraded. Inspection standards will appear on legislative agendas this year in Arizona, California, Florida, and Ohio. Other states are expected to follow suit.
Currently, 17 states have laws regulating home inspector standards. Six require licensing. The other 11 require registration and a financial bond, which can be used to compensate a customer who’s been unfairly treated, or include inspectors in their trade practices law.
Last year, the American Society of Home Inspectors funded a National Home Inspector Examination Board, which has developed and will administer a standardized test for inspectors. Wisconsin is the only state that requires inspectors to take the board’s test. In New Jersey, inspectors must pass the ASHI exam, part of which includes the National Board’s test.
If you use the Internet regularly, you might think the United States is the world’s leader in cyberspace communications.
You’re partially correct.
Data released recently by the International Assets Advisory Corp. indicates that the United States is first among nations in the number of personal computers and the number of Internet hosts, but, comes in second in terms of telephone mainlines (to Switzerland) and Internet penetration (after Canada). Three countries outpace America in high-tech exports: Singapore, Ireland, and Malaysia.
If you use a speaker phone, you may alienate nearly half of the people you talk to. According to New York City's Accountemps, more than 45 percent of U.S. corporate executives that it surveyed disliked being put on speaker phones.
Fifty percent of the dissatisfied said their dislike stemmed from a “lack of privacy.” Another 34 percent objected to “poor voice quality.” Twelve percent thought they were being patronized and 4 percent were concerned that the other party was being distracted and was paying attention to someone else. |
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