Tuesday, December 23, 2008

Looking ahead to 2009

I'm looking for things to pick up very soon in the real estate marketplace. Maybe, just maybe, all of this will weed out the "I'll sell only if I can get a high enough price" sellers and have the serious sellers with properties on the market at fair value.

On the mortgage lender side, I see a need for the lenders to increase their role and become more of a consultant or advisor to home owners and first time buyers. Too many lenders, which frankly includes some of my clients around the country, have gone to a "today" mentality and not thinking long term. Whether or not this is really the case, some come across with the attitude of "If I can't do this deal right now, I don't care about later on". And this will hurt them in the long run.

Even as some lenders have closed their doors, there are still plenty out there. Don't ever forget this. The lower mortgage rates are prompting some home owners to check with their previous lender about the possibility of refinancing. However, their home might not currently be worth enough to make a refinance worthwhile, such as when the market value of the home drops to the point where it goes below the current equity. I already know of lenders who make this discovery and then fail to handle it properly.

"Properly" means addressing this head on with the potential client, letting him/her/them know that you will be watching the marketplace and area property values and rates with an eye toward the first available opportunity to make it worthwhile. Make a note to follow up with them every 45 days or so no matter what.

Chances are that homeowner will start watching on his/her/their own. And if you have not indicated a responsible follow up, chances are they won't feel obligated. Do not overlook how today's work can produce benefits months from now instead of thinking it won't help you next week and forgetting a once solid potential deal. Six months from now you could be "that guy who never called back and couldn't do it" OR you could be the "guy who we used before and told us last month this could be the time". Some lenders think that "we get referral business", but a negative referral doesn't count.

If you are a home owner (consumer), you can and should do your homework. You already know what rate you are now paying. A rate lowering even 3/4 of a percentage point could mean a $150 or more per month decrease in your monthly mortgage. If the last mortgage lender you used hasn't been in contact with you, do your homework. Start checking area sales for property values. If your home is still worth close to or more than its original value, you have a great opportunity to shop for the true best deal out there that fits your needs. You do have a choice.

And if you are a realty agent, a consumer interested in a refinance who maybe can't get one just might be a candidate to move to a "better" property for the same or less on their mortgage. You can certainly help to keep your previous clients posted on trends in their area for very much the same purpose. If you are not keeping in contact, you add to the negative beliefs about the current marketplace.

Speaking of which, one more gripe session for this year about how the real estate industry is, unfortunately, helping to fuel the negative publicity about the marketplace. This time with more proof to make my point.

For November, 1100 homes sold in the Columbus OH area. As a stand-alone, that is actually an impressive statistic. Yet, here's how the member based realty association presents it:


In the Pittsburgh PA area, 1,800 homes sold during November, but here is how it was reported:


In Houston, 3,900 properties sold in the one month period, but it comes out like this:


Nearly 1,000 homes sold in Austin TX, yet it is made to look like nothing:


And don't think this is only for bigger cities. Almost 300 properties sold last month in Erie PA. That's an average of 10 a day including weekends in a smaller market, and that is impressive. Until you read it this way:


And I could go on.............

If I were paying dues to any of these (and other) realty associations, I'd be strongly suggesting that some of my dues money go toward a publicity writer.

Have a great holiday !!

Tuesday, December 16, 2008

2 great ideas - same week!!

While the loan rates dip for the 7th consecutive week and my real estate and mortgage lender clients across the country tell me that they are getting more responses, a couple of very good ideas have come across my desk already this week.

One was from an article about a "Micro-Unit" apartment buidling in the Dallas TX suburb of Plano. As much as I have encouraged those with credit struggles to find a "rent to buy" and increasingly desparate sellers to "rent to sell" as an alternative, this "Mirco-Unit" idea has a lot of merit. "Legacy Village" has three of its units measuring 264 square feet. Yet - all three units are rented and the article says "never vacant". Units such as these are usually offset by common areas with amenities ranging from health clubs and/or juice bars to free wireless and playrooms.

The three units profiled rent for $418 per month. Let's look at this from all perspectives.........

For the renter, this represents a low cost way to live in a "better" neighborhood. This amount in rent is too low to be a "rent to buy" but it does give the renter the opportunity to save up for a down payment in the future.

For the "landlord", this could mean higher income compared with one larger unit. Under the aforementioned rent and size, this "landlord" is effectively generating $1,254 per month for about 1,000 sqaure feet (allowing for three 264 square foot units and space for amenities).

If a seller has a multi-bedroom home or townhouse available and is legally allowed to rent, they might consider adding a few locking doors, amenities, and attempt to rent out multiple rooms simultaneously. Sort of an upscale version of what often happens near university campuses.

(To that point, MortgageMarketInfo.com has information about a new Re-Hab Loan Program available in about 40 states so far.)

To those that are realty agents and lenders, this concept may or may not pay immediate dividends, but I certainly suggest using this idea as a building block of your own. Helping a potential future client find a good rental or a good tenant will win you good favor for when the time comes.

The other sharp idea comes from an article in the suburban Chicago Daily Herald about a realty agent (not a client) who found a niche with helping people to find the best contractor for their present home. Whether for an upgrade or repair. I like this idea for very much the same reason as the above one. When this agent helps a homeowner make their home more valuable, it helps both the eventual seller and the agent in the long run.

If you wish to read this article, there is a link to it via the Powerhouse Real Estate blog in the column to the right.

It's nice to see some true innovation come into the marketplace. Please let me know if you have any such innovations to share. The publicity about the real estate market can be positive, if we all work at it.

Wednesday, December 10, 2008

Getting The Dirt On Your Local Real Estate Market

All this concern about the environment and "going green" continues to increase in our daily lives, yet I am not seeing it reflected in the local real estate community. I'm not talking about throwing soda cans into the recycle bin at the real estate office. I'm talking about the history of both commercial and residential properties.

If you are considering a purchase, lease, or rental of new construction, shouldn't you know what used to be there?

Last week I happened to be driving through the neighborhood in Chicago that I grew up in. I noticed a recently built condo building that appeared to be almost if not completely full within a short period of time for this market. That's fine and dandy. Until my mind raced back about 20 years and I remembered the number of years that location was a gas station.

What I don't know is if or to what extent that information was disclosed to the buyers within this condo building. Did they know that they could (emphasis on "could") be living directly above pipes and coil which used to carry gasoline before buying? Maybe they did not, since a number of years have passed since that usage was taking place on a daily basis. Or maybe they did, but looked an excellent deal in the eye at the same time and chose to overlook the underground.

Perhaps 20 years is enough time for unused gasoline pipes to clear out or even be removed. This still brings up the point that with the change and growth in big cities and further reaching suburbs, we often don't know, don't recall, or aren't told what is and was underneath the home we now live in.

This doesn't always mean that potentially unhealthy chemicals lurk just below. I recall the time many years ago I was taken to look at some undeveloped land near Cape Coral FL. This was before that community had become much more than a few houses. I was being shown several residential lots that were available at the time, while I could see patches of standing water in several places. No way, Jose!

How could they expect someone to buy property when we don't know how much and how easily there could be standing water nearby. How solid is the ground in the surrounding area? I didn't hang around long enough to see if there was any wildlife on the property. However, years later when I returned to that area, it was a city with houses and stores everywhere.

You are probably asking - What does this have to do with real estate marketing?

My answer is - PLENTY.

Speaking as a consumer, the real estate agent should KNOW the answer about what is or was underneath when selling a property, whether commerical or residential. As it so happens, I happen to know what used to be in the new construction townhome I presently live in, but I'm happy to say that the builder told me anyway before making the purchase. And since then, I have made a positive personal recommendation of that builder. It's these "little things" that make a huge difference with me as a consumer.

Believe it or not, our government actually has a helpful resource available. You truly can get "the dirt" on a property online.


That is for the USDA Natural Resource Conservation Service's Web Soil Survey.

This is a big part of why I constantly tell consumers (friends, family, acquaintances) to do as much research as you can before making a real estate or big ticket purchase. The realty agent (or whomever) doesn't know how much or how little you know. You should ask these questions anyway, even if you know the answer. I'm disappointed to report that 2 of the first 3 realty agents I asked did NOT know the above site exists.

When you are considering a realty agent and/or a mortgage lender, test their knowledge before proceeding.

Since this blog is just as much for those realty agents and mortgage lenders within the industry, the message should be clear. A property you are representing or assisting with is a big ticket item for the buyer and seller. You can't treat it like another brick in the wall.

My best advice is to treat a listing appointment or loan application like a job interview. In addition to making sure the needed paperwork is on hand and accurate, you should use every opportunity to reinforce that you are the person to handle this transaction. Even AFTER the papers are signed.

I don't know the person who wrote this about job interviews, and will mention that the comments which follow present just as many interesting views, but this will hopefully bring out the importance of my "job interview" theory:


During the course of my personally contacting more than 1,000 lenders and realty agents every month about a variety of advertising and marketing concepts, I have several of them each day tell me that "I work by referral".

If only it were as simple as they make it seem. There are a number of times I ask a realty agent or lender a specific question about a property or a loan, and the answer I get is not the correct one. He/she figures I won't know the difference. They probably get away with sounding like an expert most of the time because consumers don't do their research. My point is that a BAD referral is going to cost them additional business.

Yet, they didn't need to spend more for advertising or marketing, as much as that would help. They did need to have done their homework in order to clinch the sale.

Wednesday, December 3, 2008

Rent To Buy - and How It Can Create Business !

It is always good to see a positive slant on the real estate market, and the San Antonio Board of Realtors has finally done just that. They have issued a report about the increase in local homes being rented and the positive impact on the market. The report claims that “the number of sales of rented homes jumped 8.6 percent in August and September from the same two-month period last year.”. It goes on to say that the number of sales of rented homes jumped more than 8% in August AND September compared with the same two-month period in 2007.

First of all, this is what a realty board SHOULD have been doing all along over the past year or two. Finding the positive statistics and putting them out there. I have already voiced my opinion about member dues going toward stories being published about the comparative drops in home sales and how much that has contributed to the public’s negative perception about the marketplace.

Second, this proves that what I call “true creative financing” is starting to take hold. This report (at least what I saw of it) does not have details about the number of people who executed a “rent to buy” situation went on to purchase, but I have to believe it is a major factor toward this new trend. An empty home is a tougher sell, especially when there is so much inventory out there. Sellers need to see the value of renting or simply doing what they can to have their home for sale occupied if and when they need to vacate.

By the way, that same report shows that the average rental rate for single family homes in the San Antonio region was up nearly 5% for the month of September when compared with one year ago. Some seller/landlords (to coin what should be an often used title!!) realize that many who are renting houses are doing so because they may have enough for a down payment to purchase a home, but do not have the credit.

Even with mortgage rates dropping to their lowest in 4 years this past week, I am seeing the initial crunch of responses from consumers geared more toward refinance rather than purchase. This is certainly good news for mortgage lenders. And my real estate agent clients are going to be reminded about touching base with some of their lender contacts. A candidate to refinance might be ripe to listen to a pitch about a comparable home available at a bargain price. The agent and lender work with the client to rent or sell their current property to, while finding a bargain on an even better comparable property. This is what will kick start the industry back toward where it should and will be. That scenario results in anywhere from one to three commissionable transactions. Compared with zero if the client has no idea they could do this and benefit.

However, I still hear lenders complaining that they can’t refinance some of their clients because the value of the home has dropped to the point that a refi doesn’t make sense. They feel as though the “short sales” going on are knocking them out of the box on refi’s. Taking into account the scenarios such as I have just described opens up additional possibilities of making them happen. Granted, not every possible refinance will be willing to pursue another property and move, but if one out of twenty such possibilities comes to fruition, that is one more commission than would otherwise have been. This is a time of great opportunity.

This reminded me of a story I saw in the early 90’s when I was in the Los Angeles area during the California real estate boom of that period. I was attending an agent and broker meeting as an affiliate member of the (then) San Fernando Valley Board of Realtors when it was already among the top 5 largest membership bases in the entire country. While the market was hot, this was during the period when home prices were inflating in excess of 20% over the course of a single year.

A broker/owner went up before a group of agents to pitch a property and explained that he has the most motivated seller in the area. To the point that he offered an ADDITIONAL $10,000 commission (above and beyond the contracted percentage) to the buyer’s agent who brings him a qualified and eventual purchaser by the end of that day. I remember that to this day because he is the only agent I have seen or heard do that in my 20 years of advertising and marketing for agents and lenders. And I remember the buzz going around the room for the rest of that meeting as agents were making note of that.

Later that month, I asked him if he had been able to make good on that bonus offer. He told me that he wasn’t, but did manage to sell that property just a couple of weeks later. Then he went on to tell me that a couple of the other agents in attendance that day had brought buyers to a couple of his other (lower priced) listings who had not come his way before.

My point here is that agents and lenders do have a choice this minute. I would rather hear about creativity toward making deals than hear complaints about today’s market. You do have a choice.

For consumers participating in this blog, you can heed that advice on your own. If you already know that your home isn't worth what it was a couple of years back and thus would have a challenge to refinance, do your homework about bargains in your area of comparable or better houses. You just might be able to get yourself into a home originally valued at $50,000 to $100,000 more than yours was for the same or perhaps less money each month. If you can find a sharp enough realty agent and lender to work with you on this, you could go for a "rent to buy" as a form of seller financing and try and get a steal on a "better" property in your same area. One that will be worth even more when the market bounces back.