Monday, October 27, 2008

To be or not to be? That is the question

Those in the industry need to work a lot harder these days in order to succeed, rather than just to "survive". I get the feeling that some experienced professionals would rather give it up than pick up the pace.

First, let me ask you (the realty agent and mortgage broker) this. If you are looking at closing up shop based on the current economic state, what do you plan to do from this point? What looks like a better opportunity to you?

I contact an average of 300 mortgage lenders per week around the country that I am not currently doing business with. Over the past two months, I find an average of higher than one per day that I had contacted previously that how has or is shutting down or is already disconnected. Yet, I haven't read or heard about another industry that is aggressively growing via sales.

On the realty agent side, my feeling is that the final two months of the year will see a reduction in the number of realty professionals out there. I was working in Southern California in the early 1990's when the joke going around was "If stopped by the police, you can show either your Real Estate License or your Driver's License, whichever is handy". Agents were part-time, full-time, any time, and all the time.

As we come toward the end of the year, it will be association dues time for hundreds of thousands of agents. My gut feeling is that a sizeable percentage will look at spending hundreds of dollars (and thousands in the case of numerous association memberships) in an uncertain marketplace and decide not to renew their license. They may take the "when the market picks up I'll get back to it" approach.

I think everyone loses if that happens. Consumers will lose out if there are way fewer realty agents to choose from. The remainder will figure they won't have to work as hard and consumers will receive even less information and need to track down agents instead of being courted.

Agents and lenders will collectively throw away years of exerience and expertise, perhaps to embark into an industry they are inexperienced in and have to start at the bottom of.

Meanwhile, for those who know that thousands of home sell every month in any market, it is time to develop a creative plan of attack for the coming holiday season and to start 2009.

For example, the "rent to own" market continues to be underserved. I can't believe how very few ads I see about this concept.

Let's say you have already moved out of a house or condo and are stuck with a monthly mortgage payment in addition to the payment on your current home. If nobody is buying right now, then you need to get something toward your payment. If it were me, I would be all over my realty agent to bring me a potential buyer looking in my area who hasn't been able to qualify for what they need. (And these days, that shouldn't take more than an hour!) I would make them an offer to "rent to buy", starting off at a rent below comparable market value for a rental.

I would get them in at a very reasonable rental price for 3 to 6 months. Even if I am not making enough to cover the mortgage, it is far better than having it sit empty and getting nothing for it. Have a provision that after 6 months (or the pre-determined time frame) they can buy it from you for only a slightly increased monthly payment. This increase would bring their monthly fee up to the amount of the mortgage on this property or slightly higher. For example, if your mortgage payment is $1,644 per month, make their "rent to buy" fee $1,700 per month.

You are, in effect, providing them will seller financing. The "renters" will take good care of the place if they may own the place, along with handling some of the maintenance for you.

When the time comes and they want to "rent to buy" you can accept their down payment and go from there. If they do not wish to stay, several months will have past, giving you the chance to assess the local marketplace. You can try to sell again, find another "rent to buy" possibility, or somewhere in between.

Yet, I don't recall the most recent time I saw any advertising for "rent to own". The marketplace demands this and other options.

So if you are an industry professional and are about to pay your association dues for the coming year, now is the time to plan your approach. There is no shortage of elbow grease.

Tuesday, October 14, 2008

where the money is not.........

The more realty agents and lenders I talk with each week recently, the more I still wonder if people outside of the industry understand the magnitude of the real estate and mortgage fallout on the overall economy.

We are all impacted by the home sales that are not happening. Think about it. On average, with commissions, closing costs, home inspection, title search, legal, and other related services to a home transaction, you can figure that an average of 7% of the purchase price goes to the aforementioned. That provides individuals and companies with revenue. Revenue that normally goes right back out into the economy in the form of small, every day, and big ticket purchases.

Let's look at the figures. Say 1,000 homes with an average sale price of $250,000 each are sold in your community this month. The 7% in fees that go "into the economy" based on those 1,000 homes totals $17,500,000. If that figure maintains for 3 consecutive months, it would add a total of $52,500,000 to just the local economy. And that is just for your community.

Now, let's look at today's market. In many of the nation's larger cities, the percentage drop in home sales over the course of a month is DOWN by more than 1,000 homes compared with as recently as 2 years ago.

Based on the last two paragraphs, let's look at the results. Ouch. Put those together and you see the size of the impact on the overall economy. Cities, counties, and states losing upwards of $52,000,000+ during one quarter of the year compared with what used to be there.

There is no easy solution.

Meanwhile, the public continues to be swamped with mostly negative publicity about the industry. They don't want to sell at what they perceive as too low of a price in order to attract buyers more quickly.

Personally, I am not showing these links each week as an insult to the industry. My point is that there is far too little positive publicity geared toward generating buyer and seller activity.

Friday, October 10, 2008

Don't Stop Short

I've been hearing it all week from realty agents and mortgage lenders. Now it seems the banks are, understandably, waiting for their government money to help bail out the mortgage crisis. However, this is not without short term effects.

Some of the investors ready to cash in on a bargain have lost out to even lower offers on homes entering foreclosure. Now that it appears the banks will receive additional funding, some of these banks are rejecting the "even lower" offers because they will soon be able to sell for even more with government funding.

This means that for right now, the "short sale" is again a thing of the past in many instances.

Thursday, October 9, 2008

Regaining the public's trust

Finally, this week not all of the home sales publicity has been a total negative. But it is more than just the news that needs to be addressed.

In my position of working with realty agents and mortgage lenders around the country on a variety of advertising and marketing campaigns, I also hear my fair share from consumers, and do my best to apply their input and feedback to my clients and via this blog.

Frankly, if the mortgage rates and home prices both dropped tomorrow and the stock market went back to normal, the realty agents would still face an image challenge from potential buyers and sellers. The trust still isn't there like it should be.

Let me illustrate my point. After I read this recent article about the Denver housing market, I read the reader comments below. I have no idea who these people are and had not seen this publication in recent memory, but those commenting echo what I have been hearing even more in recent weeks.

Those of you who are realty agents should take note of the comment about how they don't believe that a Realtor will find them a bargain deal because it would net him or her a lower commission.

This week, the problem is that everyone is "waiting to see what happens". With everyone waiting, nothing is going to happen.

If you are a potential home buyer, whether looking for a bargain or with a serious need to move ASAP, you shouldn't be waiting for anything. If I was looking for a bargain or for an investment right now, I would put a reasonable offer on the table with a deadline of one week to accept or to negotiate. I would want to get my "bargain" before the majority finds out "what happens".

If you are a realty agent, I'd be all over my buyers and contacting buyer agents about my fairly priced and most motivated listings. I would be asking potential buyers about moving their money from the stock market to real estate ASAP. A 3 bedroom Colonial style house with a yard and basement is going to be there for years to come. The company they own stock in that plummeted by 25% in the past week may not be there in six months. Waiting to see "what happens" could cost them a lot more than the downpayment on a "permanent" piece of real estate.

If you are a mortgage lender, you should be advertising to have local home owners contact you to review their current status. Get them help, whether showing them about downsizing to a smaller home to maintain affordable payments, referring them to a credit restoral service, or possible refinancing to consolidate expenses.

The longer you wait to see what will happen, the longer nothing happens for you. Here's hoping that changes............