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Month: October 2008 (page 5 of 7)

October 13, 2008

Opt-Out of the Recession

by

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

Author website

I won’t be participating in the recession.  I’ve opted out.

The whole thing started when Chris Johnson slapped everyone for whining.  That was an important message.  Essentially, Chris has been saying, “I know it’s tough and it’s gonna be work but that’s why they call it WORK”.  If you’re a loan originator facing extinction, buy Chris’ Loan Officer Survival Guide, do the homework, and start implementing.  It costs about fifty bucks.

Folks who attended BloodhoundBlog Unchained Phoenix heard me talk about how to hunt for prospects using social media.  I discussed how to “find a herd” through social media and “building a fence around that herd” through the system outlined in the Millionaire Real Estate Agent.  If you’re in “my herd” you’ll recognize my e-mails, radio shows, blog posts, and postcards as the various slats of the fence I’m trying to build around you.

I recognized that transactions per agent were going to drop, about a year ago. I used to count on real estate agents for 3 loan referrals annually.  Today, I budget for one per year.  How then, can I close 100 loans annually with only one loan from each agent?  Increase the agent count, or size of the herd. It’s really that simple if you understand fourth grade math.

My refinance business has all but dried up.  When Hope For Homeowners was announced, I pounced.  While the particulars of the programs are still unclear, I figured that stressed out homeowners would be happy to have SOMEBODY who tried to help them.   These borrowers are a starving crowd.  While I don’t have steak to serve them, a few might get by on the rice I do have to offer them.  Commenters on Zillow’s Mortgages Undressed criticized me for outhustling them but I decided that serving needy homeowners was more important than being popular with a bunch of originators.

Jenna Jameson, actress and entrepreneur, defines courage as never letting anyone define you.  Don’t let the criticism of the competitors you’re crushing ruin your career.

Do you have the courage to change your business?   I suggested that the old saw “listers last” would be usurped by Read more

October 13, 2008

Trulia hires (Lobbyists?) while others contract and layoff…hmmm

by

The Real Estate Group, Virginia Beach and Chesapeake VA

Author website

I have been pondering something all weekend and now Greg’s post about Redfin’s layoff has changed my focus even further. Please allow me to explain:

Saturday morning: I get an email from a blogger and friend telling me to check my email. In it comes a link to this post. The post indicates that Trulia just hired some pretty heavy hitting folks to help them “connect” with MLSs and NAR. Liasons we will call them. Ah, hell…let’s just use the REAL word-grin. Lobbyists. I even posted my own editorial on the subject of the dangers of Lobbyists on my E & O page on my own real estate blog.

After muttering to myself for a couple of minutes, conversing with my blogger friend, and thinking through it, I came to TWO opinions:

1) They don’t hire a TEAM of new folks to connect with people without expecting to get a SOLID return on that investment. Especially not whilst everyone else is shrinking and laying off.

2) What is the ONLY thing that they would want to get from MLS’s and NAR, pray tell? My opinion?Listings.All of them. Texas tea to wildcatter third party types with limited funds to keep drilling prospecting wells. It is Trump for Chumps. Without it, they are just Joe Home Depots. (grin-still savoring that post, Geno) Listings are the black gold that generates traffic that generates ads that generates revenue that generates more investment as burn rates eat at bank accounts.

Am I waiting with baited breath for the flatline beeeeep of a failed bot? Nope, but I have been stewing on it a bit…and given the difficulties that Redfin (and real estate in general ) is undergoing, can the bots be far behind? Methinks not. They will bleed slower with their advertising revenue model, but they may well bleed out. Is the only reason that they are not laying off because they were the most recent VC funded startups in the real estate space to get funded, so they still have coin (for now) in the account?

I have no way of answering that, but I can predict one thing from Read more

October 13, 2008

Citing market downturn, Redfin.com cuts headcount by twenty heads

by

Suburban Phoenix Real Estate Broker

Author website

Via intrepid startup blogger John Cook from his new weblog Where are John and Todd?:

Redfin today said it is cutting 20 percent of its staff as the Seattle online real estate broker prepares for what Chief Executive Glenn Kelman described as a “big dip.”

About 20 employees were let go, bringing total staff at the company to about 75 people.

Kelman said it was a difficult decision, but the right move given how the economic slow down is impacting the residential real estate market.

“Redfin’s whole business will struggle and fight and may yet fail,” Kelman wrote in a message to employees. “But the only way it is possible for us to succeed – and, even today, I believe we will – is if we adapt.”

In an interview, Kelman said that the company had been performing well up until about three weeks ago. Last month, he said executives even felt strong enough about the business to raise revenue projections for next year.

But once the economic meltdown hit Wall Street, Kelman said “deals started to fall apart.” And while October and November may still prove to be solid months at Redfin, Kelman said beyond that the outlook is dismal.

“As the stock market wiped out prospective down-payments, tours and offers dropped 30 percent,” said Kelman in his message to employees. “Transactions that were done came undone.”

More from CEO Glenn Kelman at Redfin’s weblog:

Today Redfin laid off roughly 20% of our employees.

Unlike other startups, our industry’s recession started a year ago, when home prices first plunged.

Since then, we’ve fought like starving animals, and with some success: while industry-wide transaction volumes dropped 33%, we grew revenues by nearly 50%. Traffic grew more than 300%.

Even a month ago, we were raising 2009 revenue projections. All our markets, now including Chicago, contributed profits.

But the past few weeks have seen a major reversal. As the stock market wiped out prospective down-payments, tours and offers dropped 30%. Transactions that were done came undone. October will still be pretty good, then we’re headed for a big dip.

Hence the layoff. Layoffs are painful for any company, but especially for a startup and especially, I Read more

October 13, 2008

Obama ups the stakes in his contest with McCain over who can do more enduring damage to the crippled economy

by

Suburban Phoenix Real Estate Broker

Author website

Witness:

Democrat Barack Obama is calling for a 90-day moratorium on foreclosures and a two-year tax break for businesses that create jobs as part of a plan to heal the nation’s ailing economy.

The presidential candidate says banks that participate in the federal bailout should temporarily postpone foreclosures for families making good-faith efforts to pay their mortgage.

He also called for a $3,000 tax credit for each additional full-time job a business creates. The tax break would end after 2010.

Obama also is proposing letting people withdraw up to $10,000 from their retirement accounts without any penalty this year and next.

The Obama campaign emphasizes that these ideas can be done quickly, either through executive order or legislation.

Here’s a question that no presidential candidate, apparently, can answer: Where does investment capital come from?

A ninety-day moratorium to “temporarily postpone foreclosures for families making good-faith efforts to pay their mortgage” is stupid. A loan is either performing or it isn’t. The lender is never going to foreclose on a performing loan, although the threat or foreclosure may not be withdrawn for quite a while.

The corollary? If you want out of your mortgage, you have to stop making payments.

The tax credit is also pretty dumb. If $3,000 is the margin of profitability for a new hire, a few people might get hired.

But “letting people withdraw up to $10,000 from their retirement accounts without any penalty this year and next” will bleed the economy of lendable capital just when the economy is already bled white of lendable capital.

I can’t even think of all the ways this is perilously damaging. It encourages a run on retirement accounts, which will probably drive securities values lower over time. Individuals probably shouldn’t reduce their retirement investment stake just when it has suffered a terrible hit. Freeing up that money encourages still more spending on consumer goods — depreciating assets — where it is now invested in future growth.

But here is the worst feature of this insane proposal: Not only won’t that money be committed to future economic growth, but the people whose job it is to invest that money productively will have to think Read more

October 13, 2008

You Don’t Always Get What You Want, But If You Try Sometime, You Might Find, You Get What You Need

by

Real Estate Renaissance Man

Author website

If you are a mortgage holder who is either struggling with crushing payments, bitter for having overpaid for your home during the bubble, or who has extravagantly refinanced when prices were rising, the government’s landmark $700 billion bailout package has an important message for you: stop making your mortgage payments.

So says Peter Schiff, president of Euro Pacific Captital and author of “The Little Book of Bull Moves in Bear Markets” in his op/ed piece entitled, Just Stop Paying Your Mortgage.  You may or may not read it with tongue in cheek, but read it you should.

When a financial institution holds a mortgage, homeowners must live with the fear of foreclosure. Private institutions only have obligations to shareholders. In the case of a defaulting borrower, they will look to recover as much of their principal as possible. If foreclosure is their best option, they will take it in a heartbeat.

The government has no such obligations. Its only goal is to keep voters happy. After supposedly bailing out the fat cats on Wall Street, no politician wants to be accused of evicting struggling families. Once you understand this, all of your anxiety should melt away.

The law of unintended consequences is never so manifest, or insidious, as when politicians correct the free market with legislation.  (Except, perhaps, when they do so because they are …from the government and … here to help.)

October 13, 2008

The Glass IS Half Full

by

Real Estate Renaissance Man

Author website

The “new, post-bail-out era of real estate” is how Cheryl Johnson describes things going forward amidst the “collapsing global financial markets” in Back At The Ranch. In a comment to Friday’s edition of the Bloodhound Blog Radio Mortgage program Brian Brady and I co-host, the optimistic view I have for real estate practitioners was gently questioned.  I believe the exact quote was “I thought you were starting to sound like NAR spokesmen”… a particularly disheartening comparison on a number of levels.  The truth of the matter is this: I believe we are entering one of the greatest real estate opportunities in years – maybe decades.

The idea is two-fold:

  • Consumer credit has collapsed and will not be coming back any time soon.  That means store credit, car loans, credit cards, home equity and so on have stopped flowing.  The bailout package did not make a dent in this secondary level of credit.  Financial institutions (those that are left) are hoarding cash; when they finally do trust enough to poke their heads out, consumer credit will not top their list of “things to finance.”
  • Real estate mortgages have gone vanilla.  Similar to Henry Ford‘s sentiment when he said: Any customer can have a car painted any color that he wants… so long as it is black.  We have Fannies, Freddies, FHAs and VAs – you can have any mortgage you like… so long as it is a conforming government loan.  BUT, these vanilla loans are being served with gusto.  Money for these loans is flowing though the pipeline and the valves are wide open.

So, what does this mean?  It means the government wants to see real estate serve a function it has come to perform so well: propping up a sagging economy.  The government is pumping money down this pipeline and will continue to do so.  Combine that with the lack of consumer debt and you only have one place where people can spend: real estate.  The demand created by cheap money and even cheaper homes is causing volume to increase in many of the hardest hit areas.  According to the NAR (I know, I know), Read more

October 12, 2008

Meanwhile, back at the ranch…. (Or Creating a local, independent, powerhouse brokerage)

by

Real Estate Broker, Investor

Author website

Bob and I opened our own office, Bob Taylor Properties, Inc. in 2000.  Good friend and friendly competitor Dan Jordinelli had already opened his own office, Jordinelli and Associates,  in 1986.   I like to think that over the years both offices have built up some recognition and respect.

A few weeks ago, Dan approached us with a proposal.  Dan wants to close his office and join us. He wants to get back in the field and do what he loves: Sell real estate. Oh, and some of his agents want to come along.

So, as the global financial markets are collapsing, amidst this ruin of all space, shattered glass and toppling masonry,  I’ve been rather preoccupied with the notion of creating a local, independent, powerhouse brokerage in Northeast Los Angeles, in this new, post-bail-out era of real estate.

I’ve read all Sean Purcell’s posts here, here, here, and here all Mike Farmer’s posts here, here, here, here, here, and here.  But, in the end, while the new models and structures suggested are very intriguing,  I decided on a simple, basic, traditional commission split model.  Agent gets XX%.  Company gets XX%.

Branding? I have no concern over agents designing their own logos, their own business cards with their color schemes, and running their own businesses in a way that works for them.  I want only core concept associated with my company:  Excellence.  I want our people recognized as the most knowledgeable and most competent.

However, there is one area where I do want to impose some structure:  The taking and marketing of listings.  Marketing a listing as Greg demonstrates in http://www.abetterlisting.com is a definable, perfectible praxis.  No matter which agent in the company they list with, I want sellers to know they can expect proper pricing, good preparation and presentation, good photography, a custom web-site, custom signage.

Meanwhile, there are practical and pragmatic issues to address.  I usually identify myself as a “high-functioning hoarder” so the process of making room for several new people in the office has been interesting.   My Ebay/Etsy photo Read more

October 11, 2008

Boringly functional artwork in the service of marketing homes: If people can’t figure out what you’re selling, they won’t buy it

by

Suburban Phoenix Real Estate Broker

Author website

I wrote about the back side of that card last week. It’s the Open House invitation for 56 West Willetta Street in Downtown Phoenix, a home we listed for sale yesterday. This is a full-bore Bloodhound launch, but the card itself is kinda boring, wouldn’t you say?

That’s not an accident. I could wish I were more talented as a graphic designer, but I’m a firm believer that, if something is so cool looking that no one knows what it is, you’ve wasted your money. As radical as our real estate signs are, they still look like real estate signs. And the most profoundly valuable graphic element on our signs was suggested by marketing-provocateur Richard Riccelli: The snipe in the upper left hand corner that says “For sale.” In the uncivil war between obvious and obtuse, obtuse wins all the glamorous awards and obvious wins all the money.

Which brings us to our directionals. I’ve been writing about custom directional signs for more than a year. In that time, we’ve gone through many designs, and we’ve never done the same thing twice. For this house, I think I’ve finally hit on something I like and will use again:

Could not possibly be more obvious, yes?

That “Buy me” call to action is swiped from Redfin.com. Their signs do nothing for me otherwise, but those two words are the essence of good copywriting, in my opinion.

In our own small way, we launch a house in the same we someone else might launch a new car or a new kind of dishwasher or a new magazine. Those business-card-sized Open House cards will be distributed to 6,000 homes. We’ll get a 1% or at most 2% response on that effort — extremely direct mail — but the chances are excellent that the ultimate buyer will be among the parties who come to the first open house.

And: The signs, the directionals, the web site, everything else we do to market our listings — these techniques sell houses. This is not rocket science. Drawing more attention — and more-positive attention — to a house will make it sell faster and Read more

October 11, 2008

If you have cash or can qualify for a mortgage, this could be the ideal time to grab a bargain-priced home in the Phoenix area

by

Suburban Phoenix Real Estate Broker

Author website

This is my column for this week from the Arizona Republic (permanent link).

 
If you have cash or can qualify for a mortgage, this could be the ideal time to grab a bargain-priced home in the Phoenix area

The Phoenix area is hosting a wave of real estate investors like we haven’t seen since 2005. Unlike the novices who came here during the boom, these are experienced landlords. They’re here now because lender-owned homes are selling for bargain-basement prices.

They’re not alone. Savvy home-buyers are scooping up bargains, too, especially first-time homeowners. Interest rates are still attractive — even if the homes themselves are less appealing.

Interestingly, over the last couple of weeks, many of the lowest priced homes have seemed to evaporate. I’m guessing that October is going to be a banner month for closed transactions. Yes, most of these will be foreclosed homes, but buyers are performing the liquidator function, restoring the value of underperforming assets.

With so many homes selling, are we nearing a bottom in the Phoenix market? It’s plausible, if the number of sales meets or exceeds the number of newly-listed homes to be sold. But, even now, around 7,500 homes a month are entering the foreclosure process.

It could be a long time before that inventory is absorbed. And if it comes onto the market faster than buyers can snap it up, prices will continue to decline.

Visualize the real estate market as a pipeline. The home that gets a foreclosure notice today won’t hit the lender-owned market for three to six months. Are there enough investors and other buyers to snap up record numbers of homes, month-after-month, for the next two years — or longer?

The answer to that question is yes — if the price is right. If the demand for low-priced homes already exceeds the supply in the pipeline, prices will stabilize or even start to rise. If not, lenders will be forced to cut prices until buyers find them impossible to resist.

It’s an awful time if you have lost your home, and it’s not great if you are living in a home you cannot sell profitably. But if you Read more

October 10, 2008

Bloodhound Blog Radio: Free Falling (But We Keep Hope Alive)

by

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

Author website

Sean Purcell and I recorded a 15 minute episode this afternoon about what the stock market crash means for working REALTORs.  We may come across as a couple of polyannas but we think the stock market might get some respite from…Columbus Day.

We talk about the great opportunities for investors and how REALTORs can court them.

Listen to the episode here

October 9, 2008

Should Walmart Sell Real Estate?

by

Realtor, Rabble-Rouser

Author website

It appears that Coldwell Banker may be following the Walmart approach to real estate pricing – recommending that sellers cut their home prices 10% across the board – not locally, but nationwide.  I can’t help but find the similarity to the McCain approach to cut government spending – simply freeze spending across the board.

Shouldn’t price cutting be done with a scalpel-ly machete?   Pardon the pun, but in many cases 10% doesn’t cut it.

I had a very difficult discussion today with the developer whom I represent regarding a new and very aggressive pricing strategy for their condominium project slated to deliver just about when the snow flies.

New lending guidelines regarding new construction could potentially crush them – even with units under contract, no potential buyer can close without at least 51% of the units being under contract – we’re not even close.  While Chicago may be a stable market per Fannie Mae guidelines, in light of the recent Wall Street meltdowns, I suspect the we may be in a declining market faster than you can say bailout.

If they don’t get aggressive quickly, we as taxpayers may just be owning 8 stunning, uniquely contemporary condos.  My recommendation was a bit more dramatic – depending upon the units, as much as a 15% price cut.  They didn’t take it well.  They “hoped” to get the prices we had established – they forgot the second half of the word  – “less”.  The good new is – we have time to thoughtfully approach the pricing strategy.

If we aren’t having the tough conversation with our sellers regarding pricing – okay, I’m going to go there – aren’t we like Congress, complicit in extending this housing market nightmare by not doing what we’re paid to do – provide knowledge, expertise and guidance?  While I can’t completely fault the strategy that Coldwell Banker wants to deploy, where did 10% come from exactly?

As far as I’m concerned regarding my own client’s situation, the comps matter significantly less than current lending guidelines do.  If mortgage money for conforming loans is still relatively plentiful to the well-qualified buyer, my client’s units need Read more

October 8, 2008

Camp Pendleton/Oceanside Fires News On Twitter

by

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

Author website

It’s fall in San Diego, right?

Here we go again:

More than 1000 acres of land on Camp Pendleton goes up in flames, after a wildfire breaks out on the base Wednesday.

If you want to follow the action, check out this Twitter feed and this blog.  Social media are the 21 century version of the ham radio operators. Twitter played a big role during the 2007 San Diego Wildfires; it should be even more useful this year.

Think good thoughts for and send out prayers to Unchained graduate Don Reedy tonight. He’s in the eastern path of the fire.

October 8, 2008

Will Mortgage Brokers Be the Hope For Homeowners?

by

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

Author website

The FHA Hope For Homeowners program was designed for existing homeowners, struggling with mortgage payments and an “upside-down” equity position in their primary residence.  It is a new program with lots of misinformation.  Some believe it can only be offered by existing loan servicers, some think only participating lender/servicers can offer the program, and few are certain if the program will be offered through mortgage brokers.

I discussed the key components of the FHA Hope For Homeowners loan program on Mortgages Unzipped.  They are are not limited to but include:

  • An appraisal will be performed and the maximum loan amount will be 90% of that appraised value.  All subordinate liens will be extinguished and the exiting lienholder will have to agree to a loss of principal.
  • The current housing payment must be more than 31% of the homeowner’s gross monthly income.
  • The homeowner must not have misrepresented his/her income on the original loan application.
  • The homeowner must get a new 30-year fixed rate loan and qualify based upon documented income.
  • The homeowner must agree to an declining equity sharing agreement (for the existing equity), with the FHA, for a specified period of time.
  • The homeowner will share in future appreciation with the FHA.
  • The program is completely voluntary; existing lienholders don’t have to participate.

This article isn’t about whether the Hope for Homeowners program is a “good” idea.  I believe that the future of mortgage refinancing lies in the immediate reality that lenders will accept short payoffs for refinance loans in addition to resale transactions.  Robert Kerr made a comment, about a year ago, about the morality of loan modifications and suggested that lenders should “mark-to-the market”and accept lower balances to be commensurate with declined valuations.  That comment inspired my semi-satirical recommendation of short payoffs, cross-collateralized against the net present value of government retirement entitlements. Robert made me think that the moral is the practical.

Will the investors play ball? One lender, acquired at the tail of the sub-prime boom, sold its entire loan portfolio for about 22 cents on the dollar this past summer.  This means that a $300,000, 100% financing home loan, made in 2005, was bought for $75,000.  Read more

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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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