Friday, April 19, 2013

Scary, Scary People Everywhere

On the day of my eighteenth birthday, I received a letter from Lyndon Johnson saying, "The President of the United States of America Sends You Greetings." This had all the resonance of some company's "free gift," presuming recipients know gifts aren't free. The incubated disingenuousness piques your shit detector.

 His thoughtful greeting aside, President Johnson was asking me to die. Now, I'd always known I would die at some point--most people do--but I found it somewhat officious of him to request my death at this particular point in time. Buying the farm is generally not on the agenda of most eighteen-year-olds, especially those who don't live in Florida or Texas.

What got me on this particular roll was an article I found on the falsity of JFK's resolve on the Cuban Missile Crisis. Pop culture has obfuscated the context of the times, with the near-canonization of President Kennedy through many books, adoring press accounts and movies such as Thirteen Days. The reality was different.

The reality was that in the Cold War era, the American government went out of its way to keep everyone scared. Yes, my elementary school classes engaged in "duck for cover" drills and practiced evacuations to bomb shelters. I remember my sister telling me, when I was five or six, that when (not if) the Russian Communists took over America, children would be forced to rat on their parents. We all got similar messages from our primary school teachers, one of whom told my class that the Russians would take all children away from their parents, because that's what they did in Russia.

The draft notice that I and most other males received only served to underscore our assumption that we would soon die, if not In Vietnam (where the Communists had to be stopped before they came to California), then from the coming invasion from someone. This conviction was reflected in the movies of the times--Night of the Living Dead and the entire James Bond series, where all the bad guys were Russian commies, come to mind.

The article cited above reminds that Kennedy, in his presidential campaign, attacked Nixon and the Eisenhower administration as soft on Communism  and allowed a significant missile gap to develop between the U.S. and Russia, with Russia having superiority.  In fact, the opposite was true.

And when the Cuban Missile Crisis occurred, Americans were made to believe their demise was imminent unless the missiles were removed from Cuba. It turns out that Kennedy knew, and his advisors had noted in private memos at the time, the problem for Kennedy wasn't military--it was political. In other words, Kennedy risked a nuclear confrontation for political reasons, not for national security or military purposes.

Sound familiar? Do you hear an echo of the Bush II administration warning Americans (later reiterated by National Security Director Condoleeza Rice) that if we didn't take out Iraq, "the clear evidence of peril--the smoking gun--could come in the form of a mushroom cloud."

The only ethic that seems to cross party lines is keeping Americans scared. Add to this the very strong American value, best characterized in literature, of the individual against the society. Think Huckleberry Finn, here, and its virtual remake in, say, all of Hemingway's novels, all of Steinbeck's, all of Kesey's, Patchett's (at least those I've read) and so-on. And then, our films: Westerns, from John Wayne to Clint Eastwood flicks; Detective and Sci-fi; and even the Lord of the Rings trilogy.

But bring together these two traits of American culture, and it's not surprising that not only do we spend inordinate amounts of money for a huge military, but we also have a society rabid for individual gun ownership. Our elected officials, whether by intent or reflex, try to keep the populace scared. So many huge corporations try to do so as well: Think Big Pharma and their relentless ads for drugs that will keep us alive; think the U.S. Chamber of Commerce saying environmental regulations will harm Americans; or, think of the smaller companies, such as the one peddling Life Alert or home security systems.

As I finish this piece, major television networks are running nonstop coverage of the pursuit of the second bomber suspected in the Boston Marathon bombing. Inevitably, since everyone runs out of stuff to talk about, the chatter has turned to terrorism, sleeper cells, are-we-or-are-we-not safe, and so on. Instead of reporting anything of substance, the guests are former FBI agents, former ATF officers, and various terrorism experts talking about all the horrid things that CAN happen.

It's as though we've become a nation of fearmongers and fearmongees, the former in charge and vastly outnumbers by the latter. To paraphrase H.L. Mencken, no one ever lost money underestimating the intelligence of the American public.

What to do about it? I don't know, but I refuse to be scared anymore. Ideas or thoughts? Let me know.

Monday, April 8, 2013

Revolutionalize Real Estate: A Modest Proposal, in Which We Talk Shop

The question of the what's the Next Big Thing in real estate comes up every now and then, and I pretty much think no one knows what it will be. But then comes a new venture called LessThan6Percent, which takes a big step forward in the home-selling process. It has huge potential for consumers.

As things are now, the 21st Century home-selling model--find an agent who will put your home on MLS and likely sell it at some point--isn't too terribly different from how it worked fifty years ago. Differences can be traced to the advent of the internet. Perhaps the biggest change is that brokerage firms are no longer gatekeepers to information. 

Until the internet matured sometime after 2000, anyone who wanted to buy a house had to contact a real estate broker and look through a periodically-updated book of multiple listings. Now, Redfin (who has the most useful website) and other sites such as Zillow and Trulia make information widely available.

One effect of the internet dynamic is that the needle of real estate transactions has moved from Brokerage-centered towards Client-centered, stopping midway around Agent-centered. The buyer/seller still pretty much needs to use an agent's services and isn't really in control of what he or she needs, but the brokerage house is less important than an agent: You care who Smilin' Sue the Agent is, but not what firm she works under.

Think of it this way. If you want to sue someone for a personal injury, you can pretty well determine your own issues and contact an attorney who specializes in your personal injury theater. A lawyer's quality brands her or him. While you know the branding difference between JC Penney and Nordstrom, you know nothing of the difference between, say Remax and Coldwell Banker.

When you want to sell your house, though, "branding" evaporates. You get offers of "free CMA's," which says something about the CMA's actual value. You get declarative statements of "neighborhood expertise," with no objective correlation. You get representations of dollar volume--"Million Dollar Club Member," for example--which has the value of "We're Number One." So what?

Agents' self-created branding is often something you have to take on faith. As my father used to say, "Joe is a helluva guy, and if you don't believe me, just ask him." Is your  agent any good? Just ask him or her.

Quality, by which I mean agent expertise, fees, services and transparency, is not readily obvious or even available, as it pretty much is with an attorney. Worse, no one thinks much about these metrics. Most people go with someone they know or with whom someone referred him or her to. When you want to sell your house, you have a dizzying array of choices from For Sale By Owner to hiring your broker father-in-law.

Browse a real estate website, and you'll be directed to a broker. Zillow, Trulia, Realtytrac and most others sell zip codes to local brokers so that the broker's name pops up when you perform your search (Redfin and similar sites do not, since they're licensed brokerages). Trouble is, how do you know if that popup agent is someone you want to work with?

I can't tell you how many times long-time real estate brokers have told me, "This business is a relationships business." Well, so is everything else. You don't retain lawyers who behave dismissively to you and you don't leave generous tips for waiters who ignore you. Those kinds of transactions are centered around you and what you want, relationship concerns notwithstanding. 

With a personal injury lawyer, you pretty well know what you're getting when you select a $500-per-hour firm over a $200-per-hour firm. With a real estate broker whose compensation depends on the close of your transaction and not its conduct, you have no idea. Her advice to lower your price or accept an offer is always a bit suspect, no matter how much you like her, no matter how nice the relationship is.

With LessThan6Percent, a seller enters certain criteria, anonymously, and a local broker will make a proposal, including fees, marketing plan details, and so on. In other words, a client may see, in detail, what she's getting and what it costs. This is really cool. Sadly, the service is only available in the San Francisco Bay area, but it's a sign of where things are headed, in my view.

I have some issues with it. Only brokers who it sells subscriptions to can respond to client Request For Proposals (RFPs). LessThan6Percent has determined its own criteria for broker-subscribers, and their metrics exclude newbies and others with low volume, for whatever reason. It still has a top-down factor, which is anti-consumer. Excuse me, but new, young brokers without much of a track record and hundreds of past and future clients on a drip mail system can often do far more for you than Mr. Spin and Grin on the shopping cart. Number Two might try harder.

To me, the ideal consumer website would allow sellers to post their homes for sale, with free, unfettered access to the site for buyers. Brokers, title companies, lawyers, home inspectors and brokers could advertise on the site. Sellers would have the option of paying for whatever services by tendering RFPs, and buyers could likewise receive offers for representation and, in the process, learn that buyer-brokers are not "free" after all.

The transaction would be completely Client-centered, because brokers, and others, would compete for your business in a totally transparent way. People who don't like hondling (excuse me, haggling, or who like working with an objective, structured and (initially) anonymous process--which includes most millennials and many Gen X'rs and Y'rs prefer doing business this way.

The Next Big Thing? Maybe.


I was going to write a few lines on why Redfin is so terrific for both buyers and sellers, but this post has gone on too long. If you're interested, ask me in the comments section. I've been thinking of doing an advice section anyway, and this might be a good way to kick things off.

I can't always write about LIfe and my sometimes cynical, hopefully humorous, approach to it. Real estate, where I've worked more than 35 years in various capacities, needs to count for something.

Friday, April 5, 2013

My Father's Kerfuffle With the IRS

Every now and then, I get on a roll with my old man's stories, and the IRS' sortie against him was a good one.

He owned a sawmill in the Sierras, not far from Truckee, which he'd bought for nothing down from some estate in Chicago who'd abandoned the facility and was thrilled to find any taker. Though the equipment was old, he managed to make it work. In the late 1960s, the federal government was buying all the lumber it could and shipping it off to Vietnam.

A small annoyance, though, was the number of ranchers and locals who would come to the mill to buy lumber. Selling to jobbers and wholesalers by the railcar load was one thing, but a few boards and two-by-fours in the back of a guy's pickup was a nuisance. Still, he did it to stay in good graces.

But they had to pay cash, and over the years, several thousand dollars had built up. He split the proceeds with the mill GM and the bookkeeper.

How the IRS found out I do not know. One of my father's business aphorisms was, "Don't bullshit the banker and don't fire the bookkeeper," so a violation of the latter was suspect. But the bookkeeper was my cousin, hadn't been fired and also got his cut.

In any event, my father was suspected of concealing income, and a huge audit commenced. 

The more the IRS got into things, the more rabid it became. In the IRS' defense, my father was never one to shy away from claiming a business expense. In 1959, he took a first class trip to Europe on the Queen Mary and wrote the whole thing off. I've no doubt that much of our house was actually part of the company's fixed asset account.

In any event, the IRS agent leading the charge thought he'd found a gold mine. I remember my mother crying, saying how the company would have to be shut down, leaving my father to hit the employment lines when he was  little past sixty.

Meanwhile, my father had taken his stash--now converted to a bunch of hundred dollar bills, and hid it in the freezer.

About that time, his childhood friend from Lakeview, OR, was coming to visit. My father hadn't seen Willard in many years, since their early years when both their families were dirt poor in the first two decades of the twentieth century.

Meanwhile, the freezer broke, and the water saturated the boodle of hundred dollar bills. They were dutifully unwrapped and placed on the kitchen table to dry. About the time Willard came through the front door, someone flipped on the swamp cooler in the window by the table. As Willard came into the kitchen, hundred dollar bills were floating all over the place.'"Kenneth, you seem to have done very well," Willard said.

And so the IRS audit ultimately went. It thought it had a case, but in the end, nearly two years later, after examining thousands of transactions and conducting a dozen or more interviews, the Service concluded that it couldn't prove it's case.

The investigating agent's parting shot was something to the effect of, "We know damn well you did something, but we can't prove it. This time."

I never did learn how my father explained the floating C-notes to Willard. He probably said, "How the hell do you explain something like that?"

Which, I guess, was what he'd been telling the IRS all along. It had to have been something like that.

Wednesday, April 3, 2013

Me 'n Uncle Sam: I Fought the Law

You're a grand old flag, you're a high-flying flag, and forever in peace may you wave. Okay, I admit to falling short of Jack Armstrong, the All-American Boy, but I try.
Or, more to the point, I have tried, past and pluperfect. I'm running out of scenes, and though the final curtain hasn't fallen, I can tell its stage hand is thinking about it. Maybe it's the AARP junk mail that's been showing up.

My first real encounter with my government occurred when the President of the United States sent me Greetings, on the occasion of my eighteenth birthday. Suffice it to say that a birthday Greetings from Lyndon Johnson was suspicious, to say the least, even though all eighteen-year-old males in those days knew these letters wold be coming. 

More on this at another time. Getting drafted, or the threat thereof, was no small matter.

But then, neither is an IRS audit for 2010, my second in two years, which has come to an end, or so it's reported.

It's been going on for more than a year. Let me state at the outset that the whole catastrophe was my fault.

Something happened with my computer that caused file path/save errors. I have no idea what happened, but one day, all my documents disappeared. After a lot of trial and error stuff, they came back, but I noticed that some of the data in some of my files, including Quicken, was gone. 

The disappeared data had no consistency. Some transactions in some files were gone, while their counterparts in other files were intact. To learn what data had been zapped, I would have had to review each and every transaction in multiple programs and files, including a sentence-by-sentence read in all of my Word files and a transaction-by-transaction review in Quicken, Quickbooks and Excel.

Through all this, I'd been working on my tax return with Turbo Tax. It all took a long time, since I tend to check and double-check entries. In any event, the return I filed with the IRS was not the return I thought I'd saved. When I received the Notice of Deficiency and looked at the return I actually filed versus the one I'd saved in pdf, I was really stunned.

In the course of adjustments to our retirement account, Wells Fargo sold some securities and bought some others (this makes it sound like a Donald Trumpish thing, which it isn't; we're very middle class and have managed to save something over the years, but nowhere near as much as we should have). However, the gross sales were reported to the IRS, but with no cost basis, which was the part that didn't get saved.

The IRS thought--reasonably--that I underreported thousands of dollars that I never imagined we even had, and would we please send a check for, as I recall, $20,000.

Right. And the Pope's a Jew.

No problem, I thought. I'll just file an amended return. I did, and because of some expenses and deductions I'd neglected to claim, the amended return requested a refund of $800 or so.

It was bound to get someone's attention.

The way this stuff works is that you never communicate with the same person more than once. Moreover, the IRS gives you a phone number, but it's the kind that you know is Voice Mail Purgatory. Besides, I like keeping a paper trail with any Nameless Man who has all my stuff from time immemorial, including the time when Someone in Authority told me that my fingerprints were on file with the FBI (this really happened to many of us of a certain generation and proclivity).

The effect was to drag the audit on and on. And on. And on.

However, I had received a formal Notice of Deficiency. This document has legal protocols and deadlines that make a typical You-payup Notice from the IRS look like Yo Gabba Gabba. I had to file a reply to formal Notice with the Tax Court, as in a formal case filing called "The United States vs. William Metzker." This is very scary.

Compounding things was that by the time all this shit came to a head, we sold our Hillsboro home in less than three weeks and moved to an apartment for three months, subsequently moving to a Denver Metro corporate apartment for a month, and then to our new home. Three moves, three different contact info places and, despite my best efforts, records and documents scattered all over the place.

The IRS demanded I prove stuff, and I couldn't find, much less provide, all the records, save those for the securities sales--which amounted to 99.5% of the claim against me.

Short story long: Two days ago, the Ogden, UT (scary in its own right) IRS guy called and, first off, conceded the big banana claim, but went on to challenge all my business expenses. "How do I have any way of knowing if a charge to, say, Realtytrac is dues or marketing?" he said, forcefully.

Who cares, thought I, but let him play his script. Note: I charged as many business expenses as I could to my credit cards, for rebate reasons, and had to send the IRS all my credit card and checking account statements.

"I've talked to our attorney in this matter," the guy said, "and if you want to claim all this stuff, you're gonna have to go to tax court."

Right. I'm going to go to court for, maybe, $800, with missing records, and a $400-per-hour tax lawyer. This did not compute. "Make me an offer," says I, claiming a lack of resources.

The IRS had already waived the entire $20k claim against me, he said, but it looked to him like I could still owe, maybe, $18 or $20. But he might see his way through to waiving that if I'd sign documents which, in essence, forgot the whole thing. Would I sign?

Excuse me, is the Pope a Catholic?

I do have to say this: With the exception of the latest guy I had, I have always found the IRS to be enormously respectful and patient. It gets a bad rap, unfairly, in my view. Staffers tend to be very well educated and vetted for keeping professionalism in the face of idiocy.

Still, my battle had gone on for thirteen months. Proof of my position, in the form of brokerage statements and 1099 copies, were provided early on, yet the whole thing persisted, wasting not so much my time, but the time and effort of some very talented IRS employees.

But still, all's well that end's week, I guess.

Next post: My father's near-bankruptcy over tax issues.