BloodhoundBlog

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Category: Real Estate (page 214 of 266)

February 2, 2007

A line in the sand: Gaius Popillius Laenas and getting the real estate transaction closed against all opposition . . .

by

Suburban Phoenix Real Estate Broker

Author website

Someday soon I’ll write a full-blown Realty Reality post about this transaction. I’ve written about it several times already, but my client is quite right in telling me, “This should be Chapter 14 in your book!”

What am I talking about? It’s a home that finally closed this week — after much back and forth, feint and parry, sturm und drang, threat and counter-threat — all in a day’s work.

I first wrote about this in an Ask the Broker post about a divorcing seller who was reluctant to move.

I talked about my own buyer briefly in a post about the realities of what we suppose to be tech-infused real estate brokerage.

Two weeks ago, I wrote what I thought was the last chapter in the story for the Arizona Republic (permanent link):

Sellers who aren’t motivated can create headaches

When Realtors speak of unmotivated sellers, what they normally mean are sellers who are unwilling to do what’s necessary to make their home appealing to buyers — price to the market, attend to repairs or keep the home show-ready.

I have a home in escrow right now where the seller doesn’t seem to be motivated to do anything.

I represent the buyer. When first we saw the house, it was graced by a great deal of debris. Not trash, necessarily, but not treasure, either, and none of it put away. When we were back in the home for inspections, nothing had changed.

And, to my knowledge, nothing has changed since then.

I have been driving by the home every other day or so, looking for external evidence of changes. Nothing discernible.

We were there on Friday for the final walk-through and we discovered one important change: The key in the listing agent’s lockbox no longer works. The seller had changed the locks.

What does this mean? The home is about to close and, to all evidence, the seller seems unmotivated to move out. There is every reason to suppose that every bit of debris we saw in the house a month ago is still there.

What happens next? We close the transaction, withholding funds in escrow to pay to have the seller’s personal Read more

February 2, 2007

Peeking into Bernanke’s Crystal Ball

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

Do you want to look into the crystal ball through the eyes of Federal Reserve Chairman, Ben Bernanke? Will that help you predict mortgage rates and housing prices for 2007? I try to outguess the Fed all the time and I’ve decided that we’ll see a significant decline in short-term interest rates by YE2007.

The answer is usually buried in paragraph three or four of government reports. The economic benchmark that is oft overlooked is the nominal GDP growth rate. The nominal GDP growth rate includes the effect of inflation. Nominal GDP growth reflects the ability of the US economy to pay our debts. The Fed Funds rate reflects the interest the economy pays on its debt. When the two are imbalanced, runaway inflation or its opposite effect, asset deflation, occurs. When nominal GDP exceeds the Fed Funds rate, we have a capital surplus which leads to inflationary pressures. When nominal GDP is less than the Fed Funds rate, asset deflation occurs. Leveraged assets, notably stocks and houses, decline.

Let’s look at recent history to understand recent Fed activity as it related to nominal GDP. In 1990, 1995, and 2001, The Fed Funds rate exceeded nominal GDP; the economy wasn’t growing fast enough to service its debt. The Fed responded by slashing the Fed Funds rate to just under the nominal GDP to spur economic growth. This caused companies to take their money out of cash reserves (read: the bank) and into capital investment (read: plants, machines, equipment). That capital investment takes time so the Fed’s rate cuts take 12-18 months to have an effect. The Fed fine tunes the economy in a slow and deliberate manner, like the captain of an ocean liner.

The nominal GDP growth rate target for the Fed has been 5%. When it approached 7% in 2004, what do you think they did? They raised the Fed Funds rate 13 times in a two year period from a low of 1.0% to the present day 5.25%. That brought nominal GDP under control but it took 12-18 months for the economy to feel the effect. What happened in late Read more

February 1, 2007

If there is no Realtor monopoly — then what explains the commission structure?

by

Real Estate Investor

Author website

Even though I asked people to humor me, I have been getting a lot of comments on the issue of monopoly.

Brian Brady mentions: “I think you’re losing me a bit Michael. How are 3 million licensees in a nation of 300 million a monopoly?”

The issue is how 3 million people are managing to keep the price stable. It’s hard enough for 3 people to collude, let alone three million, which makes this pricing phenomenon even more surprising. The issue here is with the National Association of Realtors and their practices. The Justice Department has stepped in because of this reason. Much like Microsoft and Windows, the NAR has employed many practices (some fair, others not so fair) to keep outside competition from competing for their services. The articles I linked to addressed this specifically.

Norm Fisher writes: “Suggesting that Realtors have a monopoly on real estate is like saying that accountants have a monopoly on accounting, or car dealers have a monopoly on cars.”

This is not quite the case. The market for selling personal vehicles is very active. There is no barrier to entry for me or anyone working against me when I try to sell my car to another person or even the dealer, who creates a very active market by buying these goods for no fee. Additionally, accounting fees are by no means fixed. I can go to H&R Block and get my taxes done for $19.95 or I can go to a private account and pay $200. The difference between all of these things is choice.

Brian Brady mentions: “You can list your home and have it entered into the MLS for $299 nowadays. Redfin, Zip Realty, Help U sell, iPayOne, et al have been offering a consumer discount real estate brokerage for over 30 years.”

Greg also mentions the variety of pricing. The issue is that the NAR is working to pass legislation preventing Realtors from working with these services. I agree there are more options, but the disagreement comes in the access that people who pursue these Read more

February 1, 2007

A Different Perspective on the Value of Realtors

by

Real Estate Investor

Author website

Has anyone ever wondered why the price of real estate agents has been 5-7% for what seems like an eternity? I know I run a serious risk of stepping on a lot of people’s toes out there since this is a site run by realtors, but I really have been thinking about this a lot lately (particularly this morning after I read Greg’s articles). Additionally, several other articles got my attention (CNN Money, Business News, and The Wall Street Journal). If you stop to really think about this, you will realize that real estate agents have created one of the longest standing monopolies out there. Let me dust off my economics text book and delve a bit deeper into this subject. [Please note this is intended to spark discussion and not personally attack anyone’s profession. As I said before, I love a GOOD real estate agent].

What is a monopoly? Let’s simply define a monopoly as providing a good or service with very little competition. While this may be debated, humor me when I say that real estate agents have been providing their service with very little competition. This is evident in the fact that the price has stayed fixed for so long. One could argue that by using a percentage method, agents are simply hedging themselves against inflation. While that would partially explain this pricing phenomenon, the fact that the percentage has stayed the same despite significant changes in information control speaks of something else. In other arenas, when a significant technological advancement hits the market, prices typically drop accordingly or the level of service increase dramatically. Look at cars for example. As technology has improved cars have become much cheaper (in real dollars) than 70 or even 30 years ago. Additionally, an owner now gets many more standard services.

So do Realtors do more now than say 30 years ago? Of course they do. With the advent of new technologies, they provide marketing over the Internet, in newspapers, and perhaps even their own website. The more important question, however, is does the consumer get a higher value for the services they Read more

February 1, 2007

Whatever it takes: A determined Realtor is a bargain . . .

by

Suburban Phoenix Real Estate Broker

Author website

Jeff Turner wrote this in a comment, but I think my answer to him justifies a post of its own:

Greg, what percentage of transactions fall into the category of “requires great skill,” as a result of the kind of title issues you speak of in this post, and what percentage fall into the “no problems” category?

Four out of five, at least, seem very routine to me, but that’s misleading. There is no transaction we are involved in to which we don’t bring a great deal of non-obvious value. Frankly, if I just talk with you, or visit you at home, I’m going to shed a lot of information gleaned from experience. I’ve seen thousands of houses. I’ve worked with hundreds of buyers and sellers. I’ve been directly involved in dozens of escrows from start to finish. You might be a lot smarter man than me, but I have seen everything, big and small, that can go wrong in the sale of a home. I’m not just there for the paperwork, which any title company can do in Arizona, and I’m not just taking your order, sink or swim. My job is to make sure you get everything you want — as, when and in the amount you want. So even on transactions that seem routine to me, I will be doing many, many things for you that you would not know to do for yourself. It’s not razzle-dazzle salesmanship, and it’s not some vast brilliance. More than anything else, it’s the knowledge that comes from having done it so many times before.

For what it’s worth, the house that closed yesterday didn’t require great skill, just bulldozer persistence. A dozen phone calls a day for weeks, not letting up. Yesterday, I spent half the day in my car moving documents myself to avoid courier delays. This is dumb work, perhaps demeaning to some. My attitude: Whatever it takes. Last Friday I looked at a hopeless situation and bet everything I had that we could get the job done by the end of the month. At two-thirty yesterday afternoon, the movers were waiting Read more

January 31, 2007

Overcharging? A dedicated Realtor is a bargain . . .

by

Suburban Phoenix Real Estate Broker

Author website

Attorney Craig Blackmon issues a testy remark in a comment today, but the truth is, I could not be happier to discuss the underlying issue.

Sez Craig:

Well, it appears that even the “full service” agents are overcharging just a wee bit. It turns out that a successful agent must rebate nearly $69,000 a year to clients in order to charge a “fair” fee for the service. With this sort of transparency, I’m not sure Redfin has such a poor business model — at least they overcharge less.

I rebated more than half that amount in Q4 ’06 alone, so the number is not impressive to me.

Here is a number that has a very high priority for me today: Three.

That is the number of attorneys in two different states who tried with all their might — and failed — to kill one of my transactions.

They weren’t really trying to kill the deal — they were just being lawyers: Clumsy, stupid, ham-handed and — most particularly — slow. It took more than two weeks for the three of them to work out how to remove a bogus lis pendens that should never have been a cloud on the title in the first place.

I’m pretty sure each one of them made more on the house than I did.

But the important thing is, we closed the deal. A real estate attorney would have either killed the deal or bled the buyer white — for months. Lazy-for-less Redfin would have killed the deal. We closed today and my buyer moved in because I refused to let the transaction die.

I get paid for results, not ergs of energy expended nor drops of sweat spilled nor towering piles of paperwork. Results — not my time, not information, not obsequious service. I only get paid when I actually do the job I was hired to do.

Erg for erg, hour for hour, I lost my ass on this deal. But I don’t measure my life that way. I don’t have a job. I don’t get to eat one sesame seed every time I press the big red button. I work for days Read more

January 31, 2007

Bank Relationships vs. Mortgage Brokers

by

Real Estate Investor

Author website

Every property I have ever purchased has been with the help of a mortgage broker. After my recent trip, I have started to wonder why this is the case. The obvious answer is simply their access to cheaper capital. Brokers can secure rates 50 to 100 basis points (.5%-1%) lower than most local and national banks. Additionally, the terms tend to be more investor friendly, with longer amortization and no recourse. With all of these benefits, why would anyone consider going anywhere else?

The answers lie in two things: Technology and Relationships. The easiest explanation is simple disintermediation through technology. The Internet has opened the mortgage world to investors by allowing them to search many national and local bank rates, as well as, look across the country for the most aggressive mortgage lenders. The time will come (probably very soon, if not already) when some forward thinking investor will provide a site that connects investors and lenders in the same way mortgage brokers do now (think Lending Tree for Commercial Loans).

Additionally, looking at Brian Brady’s recent post, Interview: The XBroker, the industry seems poised for positive transparent change. This change will further allow disintermediation and provide investors unparalleled access lenders. Furthermore, increases in information will drive down pricing. I have consistently been quoted prices in the 1% (of loan value) range for broker services, which can be fairly steep as a percentage of closing cost when purchasing properties in the $500,000 to $1,000,000 range. I would love to see this come down to 50 to 75 basis points (sorry to the brokers out there, but business is business).

The less obvious answer is relationship building. I probably mention that real estate is a relationship business in 90% of my post because I really believe this. This concept is no different when working with banks. The value of the relationship, however, is not apparent right away. Most banks have specific lending criteria and will only be able to offer certain terms based on their risk assessment model. This fact alone keeps mortgage brokers employed. What investors fail to realize, Read more

January 30, 2007

Redfin and the antics of the INTx crowd . . .

by

Suburban Phoenix Real Estate Broker

Author website

By my lights, one of the most interesting bits of news to come out of Inman Connect was Redfin’s announcement that they plan to swim into Boston Harbor. Washington State has reasonably normal wild-West real estate laws, as does California. The natural leap, in terms of maintaining a decent level of sanity over legal compliance, would be to migrate to nearby states — Nevada and Arizona leap to mind.

There is a problem with this idea, though. The median home price in Phoenix is around $260,000. In Las Vegas, the median is around $300,000. If Redfin proposes to give back two-thirds of a $9,000 commission, there is a word for what’s left: Doodly.

Unlike a true bottom-feeder, Redfin has encysted itself with a boatload of dead-heading barnacles. This is why it keeps trying to grow into luxury markets: The company needs one third of a bigger commission bite even to make a pretense at covering its inflated payroll.

Kris Berg points out today that this is a less than brilliant strategy, inasmuch as buyers and sellers of luxury homes are busy people who have the money to pay for the kind of roll-out-the-red-carpet service they have come to expect. “We do nothing for less” is not a winning value proposition, generally speaking, among prosperous people.

There is an exception to this rule, however. Kris hints at it by suggesting that younger people might be attracted to Redfin. They might, but few of them are buying or selling at the $500,000 level and above. Redfin actually sends a stronger hint by announcing their plans to jump to Boston.

A couple of months ago, I was on the phone with Galen Ward. He suggested to me that, while Redfin’s approach to the marketplace was only popular with hi-tech Seattlites for now, eventually they would be seen as early-adopters and the business model would meet broad acceptance in the marketplace. This is a colorable proposition, I suppose.

Just after Inman, I mentioned on Rain City Guide that I thought Move, Inc’s. Alan Dalton had mopped up Redfin’s Glenn Kelman in their debate. The example I offered was this: If you Read more

January 30, 2007

Ladies and Gentlemen – Meet the Flintstones

by

Realtor, Associate Broker

Author website

In the evolutionary chain of technology, I am somewhere between the Greg Swanns and Dustin Luthers of this world and, well, the Flintstones. Let’s just call me the missing link.

My generation wasn’t born into a world where computers, much less websites and blogs and mash-ups and code, existed. With each new technological advancement, we boomers learned to adapt or face extinction. The majority of us have learned just enough to be dangerous; given enough interest and perceived benefit, we have watched those around us and learned to apply the tools as they were introduced into our society. As for our parents and grandparents, meet the Flintstones. For many (most) of this segment, information technology was introduced too late in their era. My grandmother loves her computer to play Solitaire, but you will never find her converting a PDF to a JPEG or hanging out in a chat room. For all practical purposes, she is a dinosaur. Then there are our children. They have never know a world without personal computers, digital cameras, scanning and faxing. They will not remember a time without YouTube or MySpace except when these things are replaced with more advanced applications.

So, here comes the Redfin segue. Steve and I have been having some lengthy discussions lately about the Redfin model and its potential for broad success. Sure, we are a little short in the recreational-life category, but it has been a topic of discussion because I was recently invited to meet with Redfin CEO Glenn Kelman to “chat”. This being the eve of that meeting, it seemed apropos to reflect on the topic.

From my vantage point, this is the $64 question: How will Redfin succeed where so many others have failed? Or, rather, who is their audience? HelpUSell, Zip Realty and other discount business models have had a limited audience at best; they are not, nor do I believe they will ever be, setting the world on fire and achieving significant market share. Of course, Redfin is approaching the issue from a standing-on-their-head perspective. While they pay lip service to the listing side of the equation, their Read more

January 30, 2007

To the attention of Mr. John and Ms. Jane Sucker, taxpayers: You’ve been had . . .

by

Suburban Phoenix Real Estate Broker

Author website

Sorry you were the last to know…

From the Las Vegas Review Journal:

The Las Vegas Monorail saw ridership collapse by more than 30 percent in 2006, capping a disappointing year with its worst ridership month ever in December, according to monorail statistics.[…]

Nonetheless, monorail officials Monday took an optimistic view.

“The monorail’s current daily ridership of approximately 20,000 riders still far exceeds most rail systems throughout the country,” said Ingrid Reisman, a spokeswoman for the Las Vegas Monorail Co.

The good news for taxpayers in Nevada is that they haven’t — yet — been stuck with the bill for this white elephant. Don’t you wish you had good news where you live?

Tell the truth: Wouldn’t you be willing to settle for an accurate accounting of the taxpayer subsidized losses of your local mass transit system…?

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January 30, 2007

The Savvy Investor: Watchouts for New Market Investing

by

Real Estate Investor

Author website

You may have noticed my absence Thursday and Friday, while I was in sunny Greensboro, North Carolina (sunny as oppose to Ithaca, NY). While the trip was a short four days, I met tons of contacts and had a very interesting introduction to the market. There are so many things to talk about, I am going to break them up by topic and try to write them up over the next couple of days. Today, I want to talk about the savvy investor.

I began the journey meeting my agent at the airport. I worked very hard in selecting an agent that I thought would offer me a good look at the market, with an objective opinion on pricing. My goal is to always try to choose an agent, who has experience in the market and is hopefully equally savvy (or more so).

The first problem I encountered right away was a language barrier. I thought cap rates were the universal language, so I assumed that all commercial pricing would be based on local cap rates. Wrong! My agent informed me that the pricing assumptions in Greensboro were based on an assumed appreciation rate of 1-2.5% a year. Interesting… As I stretched my mind to try to understand this concept, I made an assumption that rents would be increasing by at least that or that despite what I saw with my eyes there was a rush on small apartments in Greensboro. Of course, neither was the case.

Interestingly enough, when I made some calculations based on my own models most of the properties I looked at were in the 6.5-7.5% cap range. Although the rates seemed very aggressive for the Greensboro area, every property I looked at fell into this range. My next stop was a commercial mortgage lender. As I sat down in his office, I wondered if everything I had learned in life and in school did not apply in the town of Greensboro or if other investors were just plain crazy. I say this specifically because of all the properties I looked at only one of them was actually Read more

January 30, 2007

Transparency And The Wizard Of Oz

by

Real Estate Marketing Executive

Author website

OZ’S VOICE: Do not arouse the wrath of the Great and Powerful Oz! I said — come back tomorrow!

I bought my first house in 1984 when I was 22 years old. It was in Speedway, IN. I do not remember much about the detail of the transaction, but I do remember sifting through the classifieds of the newspaper, trying to get a feel for what I might be able to afford. I remember feeling lost. I didn’t know anyone in the real estate industry or where to begin, so I began calling around for someone to assist me. I had no clue what to look for. If someone had said, “come back tomorrow,” if I wanted the information, I would have had to come back tomorrow. How else was I going to get what I wanted?

When I look back, I’m amazed at how little control we as consumers had over what we were shown. I don’t remember giving it a second thought at the time. The real estate agent was like the Great and Powerful Oz. I was just happy to have a sitting.

DOROTHY: If you were really great and powerful, you’d keep your promises!

OZ’S VOICE: Do you presume to criticize the Great Oz?

[Toto pulls back the curtain to reveal the Wizard at the controls. The Wizard is unaware]

OZ’S VOICE: You ungrateful creatures! Think yourselves lucky that I’m giving you audience tomorrow, instead of twenty years from now!

[He turns, looks and sees that the curtain is gone — reacts and turns back to the controls]

OZ’S VOICE: Oh — oh oh! The Great Oz has spoken! Oh — Oh…

[The Wizard pulls back the curtain]

I get it. The Wizard had a great gig. Who’d want to give up being the Great and Powerful Oz? I know why he’d want to pull back the curtain. I know why he’d try to pretend no one saw him. Wouldn’t you do the same thing?

And I can understand why real estate agents were reluctant to move boldly to the Internet, to give up the information. I mean, for goodness sakes, they were Read more

January 29, 2007

A Selfish Case for National Originator Licensing

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

There is a movement to create a national licensing platform for loan originators similar to the one the National Association of Securities Dealers (NASD) requires for registered representatives.

Supporters of this movement claim that originators must be licensed because the quality of advice given to the consumer is woefully inadequate. Those supporters cite a need for background checks, testing for professional competency, and continuing education to protect the consumer against predatory lending and unsuitable loan recommendations.

Opponents of this movement,, most notably, the National Association of Mortgage Brokers (NAMB), claim that a national licensing platform is “fatally flawed” because federally-chartered banks and their subsidiaries are exempt from any regulation other than the Office of Thrift Supervision (OTS). They argue that while they support it in principle, unless the banks “level the playing field” , licensing is unfair to the independent originator.

I’m all for the national licensing, in spite of the controversy, but not for the reasons you might think.

Will national licensing reduce the number of originators out there? Sure it will. You can’t swing a dead cat without hitting an originator in Southern California today. Everybody has a business card with “mortgage” or “financial” in the company title. The consumer has never had the number of loan choices as she has today. Consumers know at least 2-3 people “in the biz” and that gives them choices. I support the effort to nationalize licensed originators because it will dramatically reduce my competition.

Will licensing protect the consumer? Everybody complains that predatory lending is driving up foreclosure rates. Foreclosure rates are well below that average (although they have significantly spiked from the historical lows of two years ago). The fact is that over 95% of the mortgagors are doing just fine. Should the consumer be denied choices and face rising costs to subsidize the fringe borrower in trouble?

Will educational standards increase the service offering to the consumer? Lending is becoming a specialized business with originators defining certain niches. The era of “generalists” is coming to an end due to the sheer magnitude Read more

January 29, 2007

Googling for Pizza

by

Realtor, Associate Broker

Author website

We had the extended family over for dinner last night. Being as it was (a Sunday), and being as I am (a real estate agent), this wasn’t a home-cooked foodfest, but Pizza Night. I always dread these gatherings, not because I don’t enjoy the company, but rather because I always suspect the “company” would rather be in pre-op than at my house knee-deep in take-out food and dog hair.

During the course of the evening, one of our cousins who we shall call “Barry” (we shall call him that because that is his name), was explaining how he had Googled me prior to his arrival because he couldn’t remember how to get to our house. Now, keeping in mind that Cousin Barry in a technical graphic designer and has some serious background in all things internet, my initial reaction was along the lines of exactly why he thought the keywords “Kris Berg” would return a link to the Mapquest driving directions to my home. Like much in life, we will just take that one on faith.

It is what Cousin Barry did find on his search for the pepperoni that I found amusing. He said, “I found your Blog”. Before I could fully puff my plumage with pride, he asked, “What’s up with the dog?”. (Insert image of befuddlement followed by getting-a-clue head bob). Ah! He found the Bloodhound Blog.

I consider this a victory of monumental proportions. When I started my own blog last April, I set baby-step goals, the first being to achieve search engine recognition. In the past eight years or so of having a fairly popular (locally), static website, searching for my name produced nothing at all related to me. Curses to those other imitators who share my name! Within a mere eight months, due entirely to blogging, the outcome is much different. Plug my name into Google this morning and four of the seven first page links are to me in some fashion (my blog, my website, the Bloodhound Blog, and Technorati). The other three spots sadly belong to some jazz music writer/arranger by the same name. Go to Read more

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Inventing Real Estate 2.0

Welcome to BloodhoundBlog, the national real estate industry marketing and technology weblog written by, for and about real estate professionals. Better yet, welcome to the wired world of real estate. We are busily inventing Real Estate 2.0 – technology, marketing, service and salesmanship. Like all Bloodhounds, we are smart, frisky and fiercely independent. We've built a spot on the earth – beloved over all – where each one of us can be who we are, no matter who that might be. We are committed to an idea of excellence that will flush the bums, the con-men and the crybabies out of the real estate industry. If you yearn to have your failures excused, your moral lapses absolved or your boo-boos kissed, seek elsewhere. But if you are sick to death of mediocrity – welcome home. Read all about us, subscribe to our feed and steel yourself for the hunt. We work hard, we play hard, we learn everything we can – and we bow to no one.

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