July 2008

photo credit: lancefisher

It’s not the current market and it’s not a specific transaction that has me in this state of mind. It’s a listing appointment Kris and I were on today. Allow me to set the stage. The very nice couple (married for about 50+ years) is in their 80’s. They are from a small town in the midwest and have lived in their current home in San Diego for 31 years. They have never used a real estate agent, but now they have mobility issues such as trouble answering the door when we arrive.

“Come on in!” says Bill and Marge (not their real names) simultaneously after we ring the door bell. I immediately feel that I’m back in that small midwest town of Kirksville, Missouri where I went to college and started my (original) professional career in City Planning a very long time ago. Small towns and people with small town roots have a “feel” about them that’s just plain different and very hard to describe to urban and suburban dwellers.

It’s time to go to the nursing home, they soon tell us, and they want/need to leave their domicile of several generations. Pictures of these generations abound throughout the home. Pictures of them, much younger than the view we are seeing in real time. Pictures of the children (now adults) at various stages of their young lives. There is no dishwasher in the kitchen (”I could get one, but then I would have to move the refigerator,” says Marge) and only a window AC for those few nights of extreme heat in San Diego. There is no computer to be found in their home, either. I see a few healthy tomato plants out the back window and suggest to Bill that the current crop may need to be part of our compensation. The tomato garden generates the proud claim from Bill, who can now walk only with assistance, that he is the “Tomato Man” of his neighborhood. His crops have been so successful that he is known for driving around the community every summer and giving the fruits of his labor to many neighbors. There is no longer a car in Bill’s garage. My stress levels magnify.

This nice elderly couple now finds themselves in a position where they need to put their complete trust in a total stranger for a transaction that is worth what is probably a significant chunk of their life savings, in the neighborhood of several hundred thousand dollars. I am feeling a sense of purpose. They have met with at least one other agent and we will soon find out the results of their evaluation. Regardless of their decision, I sit here stressed to the max tonight, not because I want or need this listing, but because I sincerely don’t want them to put their trust in anyone else.  

The agent they select, of course, might not be me. If you are that agent and you are reading this, please take very good care of this very good couple. This is the transaction we work and train for, and their success means more than any paycheck ever will.

Even in Scripps Ranch where, relatively speaking, we have been somewhat resilient to the foreclosure and short sale mess, we are starting to be fed a bigger slice of the distress sale pie.

I get asked the question almost daily. How much impact do distress sales have on the market? We are talking, of course, about sales where the bank is controlling the outcome — either because they are in the position of approving a short sale or because they are now the owner outright. The answer is “a lot.” Now that we are seeing a measurable slice of our activity falling into the “subject to lender approval” category, these offerings are putting very real pricing pressure on the traditional sale offerings. And, once they sell, make no mistake; they become a very real “comp.”

Here is how the date breaks down. These numbers were pulled from the Sandicor MLS this morning and is for the 92131 Zip code. Keep in mind that the percentage of distressed properties shown are understated at best, since I relied on the listing agent having checked the box indicating affirmatively that the home is subject to lender approval. As we have discussed before, not every agent accurately reflects that a home is bank-controlled, and not every short-sale starts out that way.

photo credit: biscuitsmlp

April Groves recently reminded me of a post I had written last summer which was originally published on another blog. I had forgotten I had written it and admittedly didn’t even recognize the words at first.

Now, one year later and with benefit of a shiny rear view mirror, I will say that much (most) of the point I was making turned out to be just flat-out wrong. I was accusing agents of rushing to judgement in lowering prices on listings. The slash and burn mentality I was criticizing turned out to be quite enlightened and even prophetic.

As I enjoy my breakfast of crow, however, some of my words are still very relevant. Sellers and their agents are experiencing life in the slow lane. It’s new to so many, and it takes both patience when you are confident in your pricing and the ability to admit when you are wrong and that it is time to regroup and reduce. Here are a couple of out takes from that article:

“The greatest mistake you can make in life is to be continually fearing that you will make one”. Elbert Hubbard

Even veteran agents have seemingly forgotten that markets change, and with that, our approaches to the business need to adapt. Speedy-quick contracts, contracts proffered and negotiated without breaking a sweat, contracts which are all but guaranteed to make their way to the County Recorder’s office in 30 days with nary a hiccup, are a thing of the past. Unlike the new agent, they once lived a time when the hard part wasn’t “winning the listing”, but when the real work ensued once the contract was inked. Many seem to have forgotten.

Listings are becoming a dime a dozen, and it’s what you do with the listing and the trust the client has placed in you that now separates the men from the boys, the “salesmen” from the “professionals”. What does it take for an agent to successfully represent a seller today? Hard work, time (a lot), money (a boatload), and patience…

Granted, our market has more than its share of overpriced listings, but panic seems to be the new pink for Spring. It is time to buck the trend and dust off the classic suit, the one that never goes out of style. Stop seeing yourself as a salesperson, know your market, check your self-doubt at the door, and do what you were hired to do - Advise and represent your client and assist them in achieving the best price the market, not you, will allow.

Market times are long, the “fake” average hovering around 70 days for detached homes and closer to 120 days for attached properties in Scripps Ranch (fake, because this does not reflect the effect of listings that are refreshed with an odometer magically rolled back to zero). Actual market times are longer yet. If you are a seller, the idea of marketing a home for sale being a process and not an event has never been so true. If you are an agent, you know all too well that the costs associated with marketing a home for sale have increased dramatically and in large part due to longer market times. And, as with any dynamic environment, it is rare that you will hit that sweet spot of pricing out of the shoot. Predicting human behavior, and market value, is an art form at best. It becomes infinitely more difficult when the canvas keeps moving.

photo credit: sooperkuh

I had fully intended to quickly bury yesterday’s “What day is it?” stream of consciousness post with something a little more relevant to real estate, but I got sidetracked.  I had an unscheduled crisis on my hands. Consequently, I found myself spending the better part of the day appealing the appraisal of a seller client’s home, an appraisal which missed by not a few Benjamin’s but by a whole bunch and threatened to derail an otherwise fine escrow.

In the case of my low appraisal yesterday, there were so many things wrong, I didn’t know where to start. It marked only the second time in eleven years that I have had an appraisal come in low on one of our transactions, and the other not so coincidentally was just a couple of months ago. So, it seems like a good time to post a cautionary note to sellers. Just because you have a buyer who is willing to pay “X,” “X” being a palatable price to you, this doesn’t mean you are going to be cashing that check. And if you are unrealistic about pricing yet happen to hit pay dirt with that one buyer who is willing to pay more for your home than the market would suggest he should, you will still have a very large appraisal hurdle to overcome.

I often fret the appraisal these days for many reasons. A slower market and fewer sales means fewer “comps” on which the appraiser can base their estimate of market value. And, lenders who are paying for their blank check-writing practices of the past several years are skittish, with the result being that appraisers are under more pressure to make a defensible and even conservative determination of value.

I didn’t see this one coming. It was a no-brainer, as they say. In an area of few sales over the past six months, we were lucky enough to have a carbon copy, a model match, around the corner which sold just one month ago. Well, there was one difference — our model match enjoyed a location which, in technical appraisal speak, would be considered inferior. In this case, inferior means it backed to a very busy four-lane road. For all but the most devoted NASCAR enthusiasts, this would be considered a negative. 

Our appraisal made no adjustment for location. Our appraisal was also fraught with errors in the areas of features, amenities and even views. More surprising though was that our appraisal factored in a time diminution of value. More recent sales were dinged at a rate of almost 1.5% a month to reflect a declining market. It was the whole declining market argument that had me scratching my head.

What a strange and different market we are dealing with. Five years ago, anyone could get a loan for any amount. Today, even the most qualified buyers are having to undergo a lengthy interrogation process to secure financing. When we were in the throes of a rapidly appreciating housing market, one where offers routinely exceeded asking price and always exceeded the price of the last comparable sale, we still had to sweat the appraisal, but we did so because appraisers were reluctant to give consideration to market trends. Today, the rules are apparently different.

Past performance may not be indicative of future results. Then why is it OK for an appraiser to assume as much? And if every appraisal used this declining market logic in determining value, how would our market or any market reverse course? I understand, from the lender’s perspective, the need for caution in this market. And I understand the need for appraisals to confirm that a contract price is reasonable, in the ball park. But, if a transaction is found to be legitimate, arms length, and absent fraud, shouldn’t appraisers be recognizing that the biggest determiner of value is what a buyer is willing to pay?

I suppose not. One last side note. Short-sales and bank-owned sales do matter. They are “comps” today and, at least in our case, no adjustment was made for the distress nature of these sales. Fortunately, we were successful in getting our appraisal overturned, but Seller beware. Your home is not sold until the Fat Lady closes escrow. And this requires that the property appraise at contract price, which is no small feat in our current market.

It’s been just another Monday. Yeah, I know it’s Tuesday, but it feels like a Monday. They all do lately.

First, there is the little matter of my entire family being absentee. Once the initial euphoria of flying solo wore off (an initial euphoria involving images of wild, unsupervised parties with a bottomless Bag O’ Take-Out, the People magazine all to myself and, perhaps, dancing bears), reality set in. Being the first and last line of defense will wear on you. I’m pooped.

Steve has been away at college. I know what you’re thinking; it’s not that. He’s smart enough, and even went to (and graduated from) college – in the Pleistocene Era. This trip was with Daughter No. 1 to attend Summer Welcome program for her Mizzou Journalism program. Meanwhile, Daughter No. 2 has been having the time of her life at a UCLA Comedy Improv Camp (for credit — go figure). Put the four X chromosomes together, and you just might have the makings for a real estate agent.

Steve will, no doubt, return professing to have been on the short receiving end of the proverbial stick, but trust me. He had it easy. Sure, he had to attend two days of parent orientation sessions and put his best (fake) foot forward for Daugher No. 1’s roommate’s parents. And Daughter No. 2 will no doubt return with combat stories of homework and having to conquer a coin-operated laundering device unassisted. Oh, the humanity! Then, they will all return home with crazy ideas about a stocked refrigerator and even a premeditated dinner. Good luck with that.

Pop Quiz: How many consecutive days can one sustain oneself on pizza alone? (Answer: Three. Or, maybe four. Today I haven’t eaten yet. The results are still coming in. It is too early to call.)

Our real estate market, or as I affectionately call it, my only visible means of self-support, is random at best right now. It is running along in fits and starts. This week was no different. One day the phone just wouldn’t cease and desist, not even long enough for me to a) eat; b) blog; c) buy groceries; or d) all of the above. Other days, I found myself spending more time in a Vulcan mind-meld stare with Simon the Dumb Dog (who is missing his “people”) than on productive and potentially debt-relief activities. The randomness of the market is making me a bit unfocused.

Sadly, the most notable result of my big, solo adventure has been a propagation of the to-do list species. I currently have to-do lists in every room of my house, in the cup holder of my car, and stuffed up the sleeves and in the pockets of every garment I own. I think this may have something to do with over-reaching in the goal setting arena, or maybe I just need a vacation. Whatever it is, this market is just so unpredictable. Just when I am planning on spending my day in my Big Girl Realtor Clothes, I hear crickets; on a day I am planning on putting my head down and doing boring yet necessary business-management stuff until my eyes glaze over, the phone rings. I have learned to be a quick-change artist.

So, it really is Tuesday. I know this because I have a headache from the little Bluetooth thingy I have been wearing all day in my now hands-free state. Sure, it’s a good thing, but after eleven hours of continuous wear, it hurts, kind of like clip-on earrings. I know it is Tuesday because it was trash day in Scripps Ranch. (Note to Steve: I got it out on time.) I know it is Tuesday because everyone is talking about a 4th of July day off, and I am hoping I can cash in on some of that discretionary time stuff.

But, back to the to-do lists. There are the mandatory A-list items, and then there are important yet not so food-on-the-table focused B-listers. I have dispensed with the A-list today, escrows in progress, listing appointments, showings and offers, but the B-list chores are hovering like playful Poltergeists threatening to slime me with anonymity. The B-list is self-inflicted.

That B-list is really starting to cramp my style. The two B-list biggies for the on-line agent this week are Video and Social Networking. Video is the new Realtor must-do. I know this because everyone tells me it is so. “Video is the next frontier,” they say. “If you don’t have video on your web site or blog by noon, you will be living in the desert out of a refrigerator carton,” they warn. But video takes time, and I still have this day job. Today I will cling to the notion that the sun will rise on my business tomorrow if I haven’t completed my first neighborhood spotlight docudrama before the pizza arrives.

And then there is that social networking can of worms. It is fashionable now (essential, even, if you believe the experts) to have links on your site to your Facebook page, your Twitter feeds, your Flickr masterpieces and your LinkedIn profile, to name a few. I am in a conundrum. Do I add these links today and expose myself as the relatively friendless, linkless, fair-weather networker I am, hoping that this will serve to build by cyber-sphere? Or, do I dash off to beef up my connections and profiles in advance of my coming out party so I show up dressed to impress?

I really hate the B-list. Today was our office meeting, the one I had to miss to get a listing agreement signed. It must be Tuesday.

(Editor’s Note: It is very clearly Wednesday, but the arrival of the pizza was a distraction, and the author failed to hit the “publish” button.)