Wednesday, August 27, 2008

How I would save residential real estate

This week I had a mortgage lender that has been a client for more than a year decide to cancel an advertising campaign I helped him to secure. He told me that he wasn't drawing enough business from it. Some people just don't get it.

Lately, consumers are bombarded day after day with negative news about the real estate industry, ranging from mortgage loan problems, foreclosures, fewer sales, and the illegal actions by people trusted within the industry.

As I have done in recent weeks, here are a few stories about people in the industry I have found as part of my daily reading.........,0,4322966.story?track=rss

But that's not important now.

I told my client that this is the worst possible time for him to stop his campaign. Consumers used to seeing his campaign every week in the same place will "figure" this lender has also closed its doors. He will lose the "recognition by repetition" factor he built up over the past year. Those consumers who are looking at options today for what they want to do when conditions get better will see his competition instead.

No, I'm not complaining because I lost a sale. Truth is I am complaining because I could lose a quality client forever because he wasn't getting enough instant gratification.

Consumers know it is a buyers' market at the moment. When they are poised to jump on an opportunity, they will jump with whoever is there at the moment to jump with them.

This morning I was talking with a Realtor in the business for over 25 years. She told me about a colleague who showed a first-time buyer more than 50 different houses. Her client made several "low ball" offers, but none of them were accepted. The potential buyer was upset with the Realtor for taking him to all of those houses and not being able to buy. The lady I talked to expressed her frustration with the potential client.

From my corner, I'm going to side with the potential buyer that his time was basically wasted. That realty agent should have stopped after no later than the second "low ball" offer. If the offer was for $200,000 on a home listed at $230,000 and it was rejected, it is up to the agent to step it up. Find that potential buyer a similar home that he could get right away for $200,000. Don't keep taking him to homes he isn't going to get.

Instead, the sellers are still sitting there upset that veteran realty agents aren't bringing them a good enough offer to sell. These "low ball" buyers get upset that their agents aren't finding them these good deals in a "buyers' market".

It is up to people in the industry to make a possible transaction work for all concerned. No agent should be showing a buyer 50 houses and not have an offer accepted - in any market.

Meanwhile, a thumbs up for Forbes for their recent story about using real estate investing to put off tax bills. That is what I call creative financing. I regular contact some mortgage lenders who are also CPA's or also have a tax service in order to diversify. Yet, I wind up reading about this years old concept in Forbes.

(If you didn't see that story, please contact me and I'll send it to you.)

And then.....

I read that the NAR admitted to spending more than $3,000,000 in just the 2nd quarter of this year to lobby for measures related to the housing market. And I'm upset about that.

Give me the chance. I'm not the brightest bulb on the planet, but I would have done things way differently than the Association has. For next quarter, give my company the $3,000,000 to work with.

Let me work with a P R expert on changing the negative reporting. No more of the "sales are down 22% from a year ago" stories. Those should be billed as "more than 26,000 homes sold during July....." and forget the negative comparisons. A $100,000 public relations campaign blitzing the media with only positive facts and happy homeowners would be a solid start.

Next, I would implement an Association promotion. As of a pre-determined date, the first 10 homes sold in each of the 50 states will receive a $1,000 closing rebate from a fund started in conjunction with the Association. That would total $500,000 in rebates. I'll allot $400,000 in legal and administrative costs to make that happen. No advertising or P R costs because I would expect aggressive agents to get their buyer clients in gear.

This promotion would be a major score. Buyers and sellers not going through an agent would not be able to partake. It creates much needed urgency in a starving marketplace.

And, I just showed how it could be done and benefit people in all 50 states on a budget.

Of course, doing all of the above with a budget as large as $1,000,000 will pay off for the industry.

My next step after that? Take the $2,000,000 profit I would have made and buy a $2,000,000 mansion and live happily ever after.


Let's watch the Kolter Group, based in West Palm Beach, FL. Commercial Property News reports that they have become the second large commercial real estate company to announce a financial commitment into residential. To the tune of a $1 billion joint venture including residential developments within Florida.

Later that same day, I read the story from Hawaii about how the number of inactive licensed agents in that state has increased to 6,254 (as of July 30) from 4,702 last year, according to the Department of Commerce and Consumer Affairs' professional licensing division. Try that on for size. More than 1,400 licensed agents not even paying dues to remain active in local real estate.

Shows what can happen if you, as an industry professional, stop advertising.

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